The Role of the IMF in Helping Poor Countries of the affiliation The Role of the IMF in Helping Poor Countries The IMF was formed, flowing a conference in 1944 in New Hampshire and is currently based in Washington, D.C. In this light, the initial goals of the institution were aimed at promoting international cooperation for the member countries and extend loans that would help poor countries to eliminate their trading deficits in terms of financial crises. With this objective, the IMF offered loans in many countries until the 1980’s when the debt crisis forced the institution to rethink its policies (McQuillan & Montgomery, 1999).
In this light, the loans extended to many countries were tied with some strict conditions and requirements(Copelovitch, 2010). IMF helps poor countries in order to contribute to the international obligations on relief efforts to help poor countries. Further, it helps poor countries in order to ensure the sustenance of better world economies (Bradford & Lim, 2011). Although the IMF’s original intentions were good, it is plausible to state that its continued operations have undermined its role of helping the troubled nations. The IMF’S dedication to help poor countries stems from the need to bridge the economic gap that is evident between the rich and poor countries.
It aims at working in collaboration with governments to enhance sustainable growth patterns in the poor countries and extends emergency loans to the poor countries(Drabek, 2009). Most recently, the IMF has taken initiatives that help countries meet the millennium goals of development through extending debts to spur sustainable economic activities and self-reliance. There are minimum conditions that countries must meet in order to qualify for the loans.
The loans extended by the institution do not need any collateral, but are tied to conditions that require reforms in macroeconomic policies of the country. It requires that countries enforce better structural economic policies that will help the country to increase economic stability, reduce corruption and cutting the spending habits(McQuillan & Montgomery, 1999). Finally, the institution requires that the funds be used for the intended purpose and can further loans can only be extended to countries with a good repayment status of their previous loans. The ethical foundations of the practices of the IMF have, however questioned its commitment to help the poor countries.
Analysts argue that the strict conditions placed by the IMF reduce the chances that the countries will eliminate poverty and increase sustainability levels of the economy(Copelovitch, 2010). Although the policies are phrased in ways that seem good for the economy, their implementation in most countries has led to unstable economies. The conditions tied to the loans limit the extent of economic independence to determine the policies that should be enforced at a particular time and therefore undermine the effectiveness of the policies.
For example, recent IMF loans to Argentina have been tied to conditions that reduce the salaries of civil servants (Drabek, 2009). In this respect, it has made the poor countries subjects of the Western elites and reduced their independence of thought and determination in internal affairs. Conversely, it is unethical to include countries in the same organization, but give them different stakes or levels of control. In this respect, democracy dictates that in a free environment, each country should have one vote as a representative of its interests in a specific matter (Scien & Zhang, 1998).
However, the five largest economies in the world control more than 40% of the decision making power in the institution, and it is trivial how good decisions can be reached (Scien & Zhang, 1998). This aspect undermines the credibility of good policymaking processes and leads to subjectivity in the decisions. On the aspect of whether the policies of the IMF and the loan hurt the poor nations, it is plausible to note that the regulations hurt workers and the economies of most countries. .
However, analysis shows that such policies have led to widespread unemployment and the creation of new poor people. For example, the labour regulations given to Haiti in 1997 produced widespread unemployment where the employers preferred to lay down their workers(McQuillan & Montgomery, 1999). In this light, the focus on exports also reduces the women’s ability to look for food for their families and also the labour regulations affect the women’s ability to get jobs leading to their unemployment. The IMF policies may imply hidden agendas or undisclosed purposes within their decision-making processes.
Although it is funded by the taxpayer, the institutions’ operations are secretive and many countries that are affected by the policies are not involved in their formulation. The institution only liaises with selected bankers and financial institutions (Copelovitch, 2010). On this note therefore, it has no direct public scrutiny strategies, and this implies the existence of hidden agendas within its organization or objectives. On this note therefore, the IMF’s initial plans are commendable, but over time, the institution’s objectives have been questionable.
In advancing loans to reduce poverty and promote sustainability, some considerations must be given which are not present in the operations of the IMF. It is plausible to note that for the institution to remain beneficial to the poor countries, reforms should be made to make it more inclusive and in-touch with the needs of poor countries. References Bradford, C. I., & Lim, W. (2011). Global leadership in transition: Making the G20 more effective and responsive. Seoul: Korea Development Institute. Copelovitch, M. S. (2010). The International Monetary Fund in the global economy: Banks, bonds, and bailouts. Cambridge: Cambridge University Press.
Drabek, Z. (2009). Is the world trade organization, attractive enough for emerging economies? : Critical essays on the multilateral trading system. Basingstoke: Palgrave Macmillan. McQuillan, L. J., & Montgomery, P. C. (1999). The International Monetary Fund--financial medic to the world? : A primer on mission, operations, and public policy issues. Stanford, Calif: Hoover Institution Press. Scien, W., & Zhang, P. G. (1998). IMF and the Asian Financial Crisis. Singapore: World Scientific Publishing Company.