"International Monetary FundFrom Wikipedia, the free encyclopedia
International Monetary Fund
Type International organization
Location Washington DC
Membership 187 countries
Managing Director John Lipsky (acting)
Website http://www.imf.org
"The International Monetary Fund (IMF) is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. Its objectives are to stabilize international exchange rates and facilitate development through the encouragement of liberalising economic policies in other countries as a condition of loans, debt relief, and aid.[2] It also offers loans with varying levels of conditionality, mainly to poorer countries. Its headquarters are in Washington, D.C. The IMF’s relatively high influence in world affairs and development has drawn heavy criticism from some sources.
IMF "Headquarters 1"
in Washington, D.C.
The International Monetary Fund was conceived in July 1944 originally with 45 members and came into existence in December 1945 when 29 countries signed the agreement,[5] with a goal to stabilize exchange rates and assist the reconstruction of the world’s international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. The IMF was important when it was first created because it helped the world stabilize the economic system. The IMF works to improve the economies of its member countries.[6] The IMF describes itself as “an organization of 187 countries (as of July 2010), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.”
"Membership
"IMF member states
"IMF member states not accepting the obligations of Article VIII, Sections 2, 3, and 4 The members of the IMF are the 187 members of the UN and Kosovo.
"Former members are Cuba (which left in 1964) and [10] Taiwan (which was expelled in 1980 for political reasons).[11]
"The other nonmembers are North Korea, Andorra, Monaco, Liechtenstein, Nauru, Cook Islands, Niue, Vatican City, and the rest of the states with limited recognition.
"All member states participate directly in the IMF. Member states are represented on a 24-member executive board (five executive directors are appointed by the five members with the largest quotas, nineteen executive directors are elected by the remaining members), and all members appoint a governor to the IMF's board of governors.
"All members of the IMF are also IBRD members and vice versa.[citation needed]
"History
"IMF "Headquarters 2" in Washington, D.C.
"The International Monetary Fund was conceived in July 1944 during the United Nations Monetary and Financial Conference. The representatives of 45 governments met in the Mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with the delegates to the conference agreeing on a framework for international economic cooperation.[13] The IMF was formally organized on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The statutory purposes of the IMF today are the same as when they were formulated in 1943 (see #Assistance and reforms).
"The IMF’s influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the Soviet bloc. The expansion of the IMF’s membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively.
"In 2008, faced with a shortfall in revenue, the International Monetary Fund’s executive board agreed to sell part of the IMF’s gold reserves. On April 27, 2008, IMF Managing Director Dominique Strauss-Kahn welcomed the board’s decision of April 7, 2008, to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.
"At the 2009 G-20 London summit, it was decided that the IMF would require additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMF’s supplemental cash tenfold to $500 billion, and to allocate to member countries another $250 billion via Special Drawing Rights.
"On October 23, 2010, the ministers of finance of G-20, governing most of the IMF member quotas, agreed to reform IMF and shift about 6 percent of the voting shares to major developing nations and countries with emerging markets.[17] As of August 2010 Romania ($13.9 billion), Ukraine ($12.66 billion), Hungary ($11.7 billion), and Greece ($30 billion) are the largest borrowers of the fund.
"Data dissemination systems
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"Members' quotas and voting power, and board of governorsMajor decisions require an 85 percent supermajority.[23] The United States has always been the only country able to block a supermajority on its own. The following table shows the top 20 member states in terms of voting power (2,220,817 votes in total). The 27 member states of the European Union have a combined vote of 710,786 (32.07 percent).
"On October 23, 2010, the ministers of finance of G-20, governing most of the IMF member quotas, agreed to reform IMF and shift about 6 percent of the voting shares to major developing nations and countries with emerging markets.[17]
"Members' quotas and voting power, and board of governors
IMF member country Quota: millions of SDRs Quota: percentage of total Governor Alternate Governor Votes: number Votes: percentage of total
United States 37,149.3 17.09 Timothy F. Geithner Ben Bernanke 371,743 16.74
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"Assistance and reforms
"Main articles: Washington consensus and Structural adjustment program
"
The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution’s 187 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including to cover the cost of importing basic goods and services. In return, countries are usually required to launch certain reforms, which have often been dubbed the Washington Consensus. These reforms are thought to be beneficial to countries with fixed exchange rate policies that may engage in fiscal, monetary, and political practices that may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly overvalued or undervalued currencies run the risk of facing balance-of-payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.
"Following the recent economic crisis, the IMF has attempted to help emerging economies deal with large capital outflows.
"Criticism
Two criticisms from economists have been that financial aid is always bound to so-called Conditionalities, including Structural Adjustment Programs (SAP). It is claimed that conditionalities (economic performance targets established as a precondition for IMF loans) retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an increase in poverty in recipient countries.The IMF sometimes advocates “austerity programmes,” increasing taxes even when the economy is weak, in order to generate government revenue and bring budgets closer to a balance, thus reducing budget deficits. Countries are often advised to lower their corporate tax rate. These policies were criticized by Joseph E. Stiglitz, former chief economist and senior vice president at the World Bank, in his book Globalization and Its Discontents.[27] He argued that by converting to a more Monetarist approach, the fund no longer had a valid purpose, as it was designed to provide funds for countries to carry out Keynesian reflations, and that the IMF “was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community.”Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001,[29] which some believe to have been caused by IMF-induced budget restrictions—which undercut the government’s ability to sustain national infrastructure even in crucial areas such as health, education, and security—and privatization of strategically vital national resources. Others attribute the crisis to Argentina’s misdesigned fiscal federalism, which caused subnational spending to increase rapidly.
The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region’s economic problems. The current—as of early 2006—trend toward moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis.In an interview, the former Romanian Prime Minister Tăriceanu claimed that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances".
"The delay in the IMF’s response to any crisis, and the fact that it tends to only respond to them rather than prevent them, has led many economists to argue for reform. In 2006 an IMF reform agenda called the Medium Term Strategy was widely endorsed by the institution’s member countries. The agenda includes changes in IMF governance to enhance the role of developing countries in the institution’s decision-making process and steps to deepen the effectiveness of its core mandate, which is known as economic surveillance or helping member countries adopt macroeconomic policies that will sustain global growth and reduce poverty. On June 15, 2007, the executive board of the IMF adopted the 2007 Decision on Bilateral Surveillance, a landmark measure that replaced a 30-year-old decision of the Fund’s member countries on how the IMF should analyze economic outcomes at the country level.
"Impact on access to food
A number of civil society organizations[34] have criticized the IMF’s policies for their impact on people’s access to food, particularly in developing countries. In October 2008, former U.S. president Bill Clinton presented a speech to the United Nations World Food Day, which criticized the World Bank and IMF for their policies on food and agriculture:
We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was president. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture.
—Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October 16, 2008[35]
Impact on public healthIn 2008 a study by analysts from Cambridge and Yale universities published on the open-access Public Library of Science concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%.In 2009 a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the IMF has Undermined Public Health and the Fight Against Aids, claimed that the IMF’s monetarist approach towards prioritizing price stability (low inflation) and fiscal restraint (low budget deficits) was unnecessarily restrictive and has prevented developing countries from being able to scale up long-term public investment as a percent of GDP in the underlying public health infrastructure. The book claimed the consequences have been chronically underfunded public health systems, leading to dilapidated health infrastructure, inadequate numbers of health personnel, and demoralizing working conditions that have fueled the “push factors” driving the brain drain of nurses migrating from poor countries to rich ones, all of which has undermined public health systems and the fight against HIV/AIDS in developing countries."Impact on environment
IMF policies have been repeatedly criticized for making it difficult for indebted countries to avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal, and forest-destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice repeatedly in order to pursue the protection of its rain forests, though paradoxically this need was cited in IMF argument to support that country. The IMF acknowledged this paradox in a March 2010 staff position report [38] which proposed the IMF Green Fund, a mechanism to issue Special Drawing Rights directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other environmental finance.While the response to these moves was generally positive possibly because ecological protection and energy and infrastructure transformation are more politically neutral than pressures to change social policy. Some experts voiced concern that the IMF was not representative, and that the IMF proposals to generate only 200 billion dollars a year by 2020 with the SDRs as seed funds, did not go far enough to undo the general incentive to pursue destructive projects inherent in the world commodity trading and banking systems—criticisms often leveled at the WTO and large global banking institutions.
"In the context of the May 2010 European banking crisis, some observers also noted that Spain and California, two troubled economies within Europe and the United States respectively, and also Germany, the primary and politically most fragile supporter of a Euro currency bailout would benefit from IMF recognition of their leadership in green technology, and directly from Green Fund–generated demand for their exports, which might also improve their credit standing with international bankers.
Criticism from free-market advocates
Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF. The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary. Second, they link higher taxes under "austerity programmes" with economic contraction."Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity."Kenneth Stepp says it is time for the United States to withdraw from the International Monetary Fund and the World Bank! Should we increase our Debt Ceiling to finance those expensive overseas boondoggles? No! It is time to quit dumping money and the lives of American soldiers, sailors and Marines overseas. Bring 'em home. Withdraw from the International Monetary Fund. Withdraw from the World Bank. Withdraw from Iraq! Withdraw from Afghanistan. Let the rest of the world solve their own money problems--we have enough money problems of our own.
