Mission of the IMF Essay Example for Free

Mission of the IMF Essay The primary and most important mission of the IMF is declared to be provision of monetary assistance to countries facing serious economic and financial troubles from the accumulated funds of the IMF from the deposits of the organizations 185 member nations. Although the stated goal of the provided aid is therefore to help the distressed nation sail through their difficulties, simply the fact that these aids are associated with certain conditionalities which essentially make them tied aids, do make the veracity of such an assumption dubious. Although the conditions that are attached with the provided aids are justified as being necessary amendments that the receiving nation has to make to ensure that such distress does not revisit the nation, often the structural adjustments that are suggested and actually imposed seem to have more potential benefits for nations other than the recipient. The fact that the IMF’s judgements and decisions are made through voting in which the members with higher shares of subscription receive higher weightage casts further shadows of doubt on the proper motivations for the Fund’s actions. Therefore, there is reason to believe that the IMF’s true goals are actually masked with justificatory reasoning which attempt to establish it in glorious roles but are actually in line with those of certain economic powers that dominate the IMF’s decision making and reap the benefits of enforcing changes upon nations weakened enough to have no other choice but to accept the conditions and thereby actually cause greater benefit to those economies rather than themselves. When one sees these aids in light of such motives, in spite of the stated motives, the term aid certainly becomes a misnomer. The so called Austerity programs of the IMF which by definition seek to restore a distressed nation to a state so that it is able to repay its debts by advocating reduced government spending and increased taxes have been subject to a lot of controversy. Currency devaluation is often a recommendation of the IMF to distressed countries in these programmes. But, neo-classical supply-side economists claim, to the governments of poor nations with struggling economies which are force to seek foreign aid, such pro-Keynesian policies which are actually tailor made for advanced capitalist economies undergoing depression are destructive to economic prosperity. The IMF also advocates increased taxes as part of these programmes to ensure increased government revenue. But critics point out that such increased taxation implicitly implies recessionary pressure on the economy, some thing it is certainly not in a state to handle being in a distressed enough state to seek foreign aid. The potential economic contraction that is likely to follow has more chances of damaging the economy rather than working in its advantage. In fact Stiglitz (2002) argues that in converting to a rather Monetarist approach, the IMF had lost all valid purpose, of its existence as provision of funds for nations to enable them to carry out Keynesian reflations was what it was designed for. The IMF’s success has been considerably limited in light of the very significant number of failures it has faced. The fact that it has been able to increase overall international cooperation and promote trade openness is a largely highlighted success of the institution. It is also posited that since its inception and more since the Second World War, the IMF’s active intervention has led to enhanced global macroeconomic stability and growth. However, since the 1980s critics claim that more than 100 of the member countries have faced banking collapses which have led to reductions in GDP by four percent or more, a precedent by far since post depression history (Stiglitz, 2002). It is often pointed out that the IMF actually responds to or often causes crises rather than prevent them. The long lag in the response time to any crisis is also noted to be one of the very significant failures of the institution. As direct examples of the IMF’s intervention worsening the situation of a nation we can cite the instance of Argentina, which had been previously considered as a model country by the IMF for its compliance to the Fund’s policy proposals. This nation experienced a severe crisis in 2001, an event mostly attributed to budget restrictions induced by the IMF which significantly reduced the governments ability to maintain infrastructural expenses and it failed to provide even in very crucial and basic areas like health, education, and security. Another example of IMF Structural Adjustment Programmes actually aggravating a problem was the Goldenberg scandal in Kenya. The IMF imposed mandatory regulations on the Kenyan central bank which till then oversaw all currency in and out flows, which required it to permit easier currency movements through reduced regulations in the market for foreign exchange and the capital market. Although this adjustment failed to deliver miserably on its promise of increased foreign investment it allowed, it certainly allowed billions of Kenyan shillings to be siphoned off thereby actually leaving the country far worse off than before the implementation of the IMF reforms (Axel, 2003). References: Dreher, Axel (2003). The Influence of Elections on IMF Programme Interruptions. The Journal of Development Studies 39 (6): 101–120 Stiglitz, J. , (2002) Globalization and its Discontents, New York: WW Norton Company