1.

INTRODUCTION International Monetary Fund:

The International Monetary Fund (IMF) is an international organization that provides financial assistance and advice to member countries. The International Monetary Fund (IMF) is the international organization that oversees the global financial system by following the macroeconomic policies of its member countries; in particular those with an impact on e change rate and the balance of payments. It is an organization formed with a stated ob!ective of stabilizing international e change rates and facilitating development through the enforcement of liberalizing economic policies on other countries as a condition for loans" restructuring or aid. It also offers loans with varying levels of conditionality" mainly to poorer countries. Its headquarters are in Washington, D.C., United tates . The IMF#s relatively high influence in world affairs and development has drawn heavy criticism from some sources. The IMF wor$s to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also wor$s with developing nations to help them achieve macroeconomic stability and reduce poverty. The International Monetary Fund was conceived in %uly &'(( originally with () members and came into e istence in *ecember &'() when +' countries signed the agreement" with a goal to stabilize e change rates and assist the reconstruction of the world#s international payment system. ,ountries 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 wor$s to improve the economies of its member countries. The IMF describes itself as -an organization of &./ countries" wor$ing to foster global monetary cooperation" secure financial stability" facilitate international trade" promote high employment and sustainable economic growth" and reduce poverty-.

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1.1 !istory:
The International Monetary Fund was conceived in %uly &'(( during the 0nited 1ations Monetary and Financial ,onference. The representatives of () governments met in the Mount 2ashington 3otel in the area of 4retton 2oods" 1ew 3ampshire" 0nited 5tates" with the delegates to the conference agreeing on a framewor$ for international economic cooperation. The IMF was formally organized on *ecember +/" &'()" when the first +' countries signed its 6rticles of 6greement. The statutory purposes of the IMF today are the same as when they were formulated in &'(7. The IMF#s influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than 8uadrupled from the (( states involved in its establishment" reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the 5oviet bloc. The e pansion of the IMF9s membership" together with the changes in the world economy" has re8uired the IMF to adapt in a variety of ways to continue serving its purposes effectively. 6t the +::' ;<+: =ondon summit" it was decided that the IMF would re8uire additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. 6s part of that decision" the ;<+: leaders pledged to increase the IMF#s supplemental cash tenfold to >):: billion" and to allocate to member countries another >+): billion via 5pecial *rawing ?ights. @n @ctober +7" +:&:" the Ministers of Finance of ;<+:" governing most of the IMF member 8uotas" agreed to reform IMF and shift about AB of the voting shares to ma!or developing nations and countries with emerging mar$ets. 6s of 6ugust +:&: ?omania (>&7.' billion)" 0$raine (>&+.AA billion)" 3ungary (>&&./ billion) and ;reece (>7: billion) are the largest borrowers of the fund.

Organi"ation # Finan$es
The IMF has a management team and &/ departments that carry out its country" policy" analytical" and technical wor$. @ne department is charged with managing the IMF#s resources. This section also e plains where the IMF gets its resources and how they are used. The IMF is led by a Managing *irector" who is head of the staff and ,hairman of the C ecutive 4oard. 3e is assisted by a First *eputy Managing *irector and two other *eputy Managing *irectors. The Management team oversees the wor$ of the staff" and maintains
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high<level contacts with member governments" the media" non<governmental organizations" thin$ tan$s" and other institutions. The IMF#s resources come mainly from the money that countries pay as their capital subscription when they become members. Duotas broadly reflect the size of each member#s economyE the larger a country#s economy in terms of output and the larger and more variable its trade" the larger its 8uota tends to be. For e ample" the world#s biggest economy" the 0nited 5tates" has the largest 8uota in the IMF. Duotas" together with the e8ual number of basic votes each member has" determine countries# voting power. They also help determine how much countries can borrow from the IMF and their share in allocations of special drawing rights or 5*?s (the reserve currency created by the IMF in &'A').,ountries pay +) percent of their 8uota subscriptions in 5*?s or ma!or currencies" such as 0.5. dollars" Curos" pounds sterling" or %apanese yen. They pay the remaining /) percent in their own currencies. Duotas are reviewed every five years and can be increased when deemed necessary by the 4oard of ;overnors. In +::'" the ;<+: agreed that the Fund should bring forward the timetable for the ne t general 8uota increase. The ne t general review was originally scheduled to be completed by +:&7. The agreement now is that it would be completed by %anuary +:&&" two years ahead of schedule. The general 8uota review provides an opportunity to increase the Fund9s general resources and would also provide scope for a further rebalancing of 8uota and voting shares toward dynamic emerging mar$ets and other economies.

Me%&ershi'
The IMF currently has a near<global membership of &./ countries. To become a member" a country must apply and then be accepted by a ma!ority of the e isting members. In %une +::'" the former Fugoslav republic of Gosovo !oined the IMF" becoming the institution#s &.Ath member. 0pon !oining" each member of the IMF is assigned a 8uota" based broadly on its relative size in the world economy. The IMF#s membership agreed in May +::. on a rebalancing of its 8uota system to reflect the changing global economic realities" especially the increased weight of ma!or emerging mar$ets in the global economy. Members of the IMF are &.A of the 01 members and Gosovo. Former members areE ,uba (left in &'A()" Taiwan (e pelled in &'.: due to political reasons). The other non<members areE 1orth Gorea" 6ndorra" Monaco" =iechtenstein" 1auru" ,oo$ Islands" 1iue" Hatican ,ity
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and the rest of the recognition. 6ll member states participate directly in the IMF. Member states are represented on a +(<member C ecutive 4oard (five C ecutive *irectors are appointed by the five members with the largest 8uotas" nineteen C ecutive *irectors are elected by the remaining members)" and all members appoint a ;overnor to the IMF#s 4oard of ;overnors. 6ll members of the IMF are also I4?* members" and vice versa.

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(. )O*+RN,NC+:
The IMF is accountable to the governments of its member countries.

(.1)o-ernan$e tru$ture
The IMF#s mandate and governance have evolved along with changes in the global economy" allowing the organization to retain a central role within the international financial architecture. The diagram below provides a stylized view of the IMF#s current governance structure.

(.( .oard o/ )o-ernors The 4oard of ;overnors is the highest decision<ma$ing body of the IMF. It consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the head of the central ban$. 2hile the 4oard of ;overnors has delegated most of its powers to the IMF#s C ecutive 4oard" it retains the right to approve 8uota increases" special drawing right (5*?) allocations" the admittance of new members" compulsory withdrawal of members" and amendments to the 6rticles of 6greement and 4y<=aws.

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The 4oard of ;overnors also elects or appoints e ecutive directors and is the ultimate arbiter on issues related to the interpretation of the IMF#s 6rticles of 6greement. Hoting by the 4oard of ;overnors usually ta$es place by mail<in ballot. The 4oards of ;overnors of the IMF and the 2orld 4an$ ;roup normally meet once a year" during the IMF<2orld 4an$ 5pring and 6nnual Meetings" to discuss the wor$ of their respective institutions. The Meetings" which ta$e place in 5eptember or @ctober" have customarily been held in 2ashington for two consecutive years and in another member country in the third year. (.0 )o-ernan$e Re/or% Important progress was made in the reform of the Fund#s governance in +::A<:." including the initiation of a process to realign members# voting power (see ,ountry ?epresentation). 3owever" enhancing the Fund#s legitimacy and effectiveness must also deal with the 8uestion of whether the significant changes since the establishment of the Fund re8uire reform of the institutional framewor$ through which members# voting power is actually e ercised. 6mong other things" this re8uires careful consideration of the respective roles and responsibilities of the 4oard of ;overnors" the IMF," the C ecutive 4oard" and IMF management. )o-ernan$e re/or% is $urrently &eing a$$elerated. In 6pril +::'" the International Monetary and Financial ,ommittee (IMF,)" which advises on IMF policies" called for a prompt start to a fresh review of 8uotas (the Fourteenth ;eneral ?eview)" and in 6pril +:&: the IMF, re8uested completion of the review before %anuary +:&&Isome two years ahead of the original schedule. The Fourteenth ;eneral ?eview is now underway and will address the realignment of 8uota shares and the size of the overall 8uota increase. In @ctober +::'" the IMF, endorsed a call by ;<+: leaders for a shift in 8uota share to dynamic emerging mar$et and developing countries of at least five percent from over<represented to under<represented countries using the current 8uota formula as the basis to wor$ from. In addition" there is a commitment to protecting the voting share of the poorest members.

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0. RO1+ OF IMF:

The International Monetary Fund is a global organisation founded in &'((. It aims was to help stabilise e change rates and provide loans to countries in need. 1early all members of the 0nited 1ations are members of the IMF with a few e ceptions such as ,uba" =ichtenstein and 6ndorra. The IMF is independent of the 2orld 4an$ although both are 0nited 1ations agencies and both are aiming to increase living standards. The 2orld 4an$ concentrates on long term loans to developing countries. are: o%e Main Fun$tions o/ IMF

0.1 Fun$tions o/ IMF

International Monetary ,ooperation Jromote e change ?ate stability To help deal with 4alance of Jayments ad!ustment 3elp *eal 2ith Cconomic ,risis by providing international coordination

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What the IMF does

2ith its near<global membership of &./ countries" the IMF is uni8uely placed to help member governments ta$e advantage of the opportunitiesIand manage the challengesI posed by globalization and economic development more generally. The IMF trac$s global economic trends and performance" alerts its member countries when it sees problems on the horizon" provides a forum for policy dialogue" and passes on $now<how to governments on how to tac$le economic difficulties. The IMF provides policy advice and financing to members in economic difficulties and also wor$s with developing nations to help them achieve macroeconomic stability and reduce poverty. Mar$ed by massive movements of capital and abrupt shifts in comparative advantage" globalization affects countries# policy choices in many areas" including labour" trade" and ta policies. 3elping a country benefit from globalization while avoiding potential downsides is an important tas$ for the IMF. The global economic crisis has highlighted !ust how interconnected countries have become in today9s world economy.

2ey IMF a$ti-itiesE The IMF supports its membership by providing

policy advice to governments and central ban$s based on analysis of economic trends and cross<country e periences;

research" statistics" forecasts" and analysis based on trac$ing of global" regional" and individual economies and mar$ets;

loans to help countries overcome economic difficulties; concessional loans to help fight poverty in developing countries; and Technical assistance and training to help countries improve the management of their economies.

Original ai%sE

The IMF was founded more than A: years ago toward the end of 2orld

2ar II. The founders aimed to build a framewor$ for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the ;reat *epression of the &'7:s and the global conflict that followed.

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5ince then the world has changed dramatically" bringing e tensive prosperity and lifting millions out of poverty" especially in 6sia. In many ways the IMF3s %ain 'ur'oseIto provide the global public good of financial stabilityIis the same today as it was when the organization was established. More specifically" the IMF continues to

provide a forum for cooperation on international monetary problems facilitate the growth of international trade" thus promoting !ob creation" economic growth" and poverty reduction;

promote e change rate stability and an open system of international payments; and =end countries foreign e change when needed" on a temporary basis and under ade8uate safeguards" to help them address balance of payments problems.

!o4 they do it
The IMF#s main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises" and wor$s with its member countries to promote growth and alleviate poverty. It has three main tools at its disposal to carry out its mandateE surveillance" technical assistance and training" and lending. These functions are underpinned by the IMF#s research and statistics. ur-eillan$e: The IMF promotes economic stability and global growth by encouraging countries to adopt sound economic and financial policies. To do this" it regularly monitors global" regional" and national economic developments. It also see$s to assess the impact of the policies of individual countries on other economies. This process of monitoring and discussing countries9 economic and financial policies is $nown as bilateral surveillance. @n a regular basisIusually once each yearIthe IMF conducts in depth appraisals of each member country#s economic situation. It discusses with the country#s authorities the policies that are most conducive to a stable and prosperous economy. ,onsistent with the decision on bilateral surveillance adopted in %une +::/" the

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main focus of the discussions is whether there are ris$s to the economy9s domestic and e ternal stability that would argue for ad!ustments in economic or financial policies. Te$hni$al assistan$e and training: IMF offers technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas" including fiscal policy" monetary and e change rate policies" ban$ing and financial system supervision and regulation" and statistics. The IMF provides technical assistance and training mainly in four areasE

Monetary and financial policies (monetary policy instruments" ban$ing system supervision and restructuring" foreign management and operations" clearing settlement systems for payments" and structural development of central ban$s)

Fiscal policy and management (ta and customs policies and administration" budget formulation" e penditure management" design of social safety nets" and management of domestic and foreign debt)

,ompilation" management" dissemination" and improvement of statistical data Cconomic and financial legislation.

1ending
In the event that member countries e perience difficulties financing their balance of payments" the IMF is also a fund that can be tapped to facilitate recovery. 6 policy program supported by financing is designed by the national authorities in close cooperation with the IMF. ,ontinued financial support is conditional on the effective implementation of this program. The IMF also provides low<income countries with loans at a concessional interest rate through the Joverty ?eduction and ;rowth Facility (J?;F) and the C ogenous 5hoc$s Facility (C5F). Resear$h and data

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5upporting all three of these activities is the IMF#s economic and financial research and statistics. In recent years" the IMF has applied both its surveillance and technical assistance wor$ to the development of standards and codes of good practice in its areas of responsibility" and to the strengthening of financial sectors. These are part of the IMF#s continuing efforts to strengthen the international financial system and improve its ability to prevent and resolve crises.

5. 6+CI,1 DR,WIN) RI)!T 7 DR8:

The 5*? was created by the IMF in &'A' to support the 4retton 2oods fi ed e change rate system. 6 country participating in this system needed official reservesIgovernment or central ban$ holdings of gold and widely accepted foreign currenciesIthat could be used to purchase the domestic currency in foreign e change mar$ets" as re8uired maintaining its e change rate. 4ut the international supply of two $ey reserve assetsIgold and the 0.5. dollarIproved inade8uate for supporting the e pansion of world trade and financial development that was ta$ing place. Therefore" the international community decided to create a new international reserve asset under the auspices of the IMF. 3owever" only a few years later" the 4retton 2oods system collapsed and the ma!or currencies shifted to a floating e change rate regime. In addition" the growth in international capital mar$ets facilitated borrowing by creditworthy governments. 4oth of these developments lessened the need for 5*?s. The 5*? is neither a currency" nor a claim on the IMF. ?ather" it is a potential claim on the freely usable currencies of IMF members. 3olders of 5*?s can obtain these currencies in e change for their 5*?s in two waysE /irst, through the arrangement of voluntary e changes between members; and se$ond" by the IMF designating members with strong e ternal positions to purchase 5*?s from members with wea$ e ternal positions. In addition to its role as a supplementary reserve asset" the 5*? serves as the unit of account of the IMF and some other international organizations.

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.as9et o/ $urren$ies deter%ines the -alue o/ the DR

The value of the 5*? was initially defined as e8uivalent to :....A/& grams of fine goldI which" at the time" was also e8uivalent to one 0.5. dollar. 6fter the collapse of the 4retton 2oods system in &'/7" however" the 5*? was redefined as a bas$et of currencies" today consisting of the euro" %apanese yen" pound sterling" and 0.5. dollar. The 0.5. dollar< e8uivalent of the 5*? is posted daily on the IMF9s website. It is calculated as the sum of specific amounts of the four bas$et currencies valued in 0.5. dollars" on the basis of e change rates 8uoted at noon each day in the =ondon mar$et. The bas$et composition is reviewed every five years by the C ecutive 4oard to ensure that it reflects the relative importance of currencies in the world#s trading and financial systems.

The DR interest rate

The 5*? interest rate provides the basis for calculating the interest charged to members on regular (non<concessional) IMF loans" the interest paid to members on their 5*? holdings and charged on their 5*? allocations" and the interest paid to members on a portion of their 8uota subscriptions. The 5*? interest rate is determined wee$ly and is based on a weighted average of representative interest rates on short<term debt in the money mar$ets.

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:. CURR+NT ,)+ND,; OF IMF:

Ta$9ling $urrent $hallenges
The IMF is helping many emerging mar$et countries tac$le the problems brought on by the devastating global economic crisis. Its lending to low<income countries has also been stepped up" as these countries start to feel the effects of the crisis. 6nd it is providing policy advice to advanced countries" for instance on how to address problems in their financing and ban$ing sectors" and how to design effective stimulus pac$ages. 6s part of its response" the IMF has already more than doubled its financial assistance to low<income countries" with

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new IMF concessional lending commitments to low<income countries through mid<%uly +::' reaching >+.' billion compared with >&.) billion for the whole of +::.. 6s the global economy continues to struggle in +::'" and with both trade and capital flows plummeting" the IMF is foreseeing mounting problems for many countries. The Fund is therefore see$ing to add to its resources" and has already negotiated borrowing agreements with a number of countries. The Fund has already made good progress toward its target of >+): billion in bilateral government loans as part of moves to triple the IMF9s lendable resources to >/): billion. 6greements are already in place with %apan (>&:: billion)" ,anada (>&: billion)" and 1orway (>(.) billion)" and a number of other countries have committed funds either through loans or the purchase of IMF notes. In addition" the Fund is closely trac$ing economic and financial developments worldwide so that it can provide policyma$ers with the latest forecasts and analysis of developments in financial mar$ets. 6nd it is engaging with the ;roup of +: (;<+:) leading economies and other sta$eholders on issues related to the evolution of the international financial system. Currently IMF %ain ,genda;s are:

+%ergen$y lending to e%erging %ar9ets

Cmerging mar$et countries are facing increasing difficulties around the world because of the spreading global economic crisis" with demand falling for their e ports" investment slumping" and cross<border lending drying up. 6 growing number of emerging economies have found room for policy manoeuvre becoming increasingly limited" and large<scale official support has been needed from bilateral and multilateral sources. 5ince +::." the IMF has committed more than >&A: billion in lending to a number of countries affected by the crisis" including 4elarus" 3ungary" Iceland" =atvia" Ja$istan" Joland" ?omania" 5erbia" 5ri =an$a" and 0$raine. It announced a precautionary loan for Cl 5alvador and an IMF team has also been in negotiations with Tur$ey.

!el'ing lo4<in$o%e $ountries /ight the $risis

The global economic crisis is threatening to undermine recent economic gains and to create a humanitarian crisis in the world9s poorest countries. In response" the IMF has stepped up lending to low<income countries to combat the impact of the global recession with a new framewor$ for loans to the world9s poorest nations" including increased resources" a
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doubling of borrowing limits" zero interest rates until the end of +:&&" and new lending instruments that offer more fle ible terms. Most low<income countries escaped the early phases of the global crisis" which began in the financial sectors of advanced economies. 4ut it is now hitting them hard" mainly through trade" as financial problems in advanced countries trigger recessions that dampen demand for imports from low<income countries. In addition" more than >&. billion of a planned >+): billion allocation of IMF 5pecial *rawing ?ights (5*?s) will go to low<income countries. These countries can benefit by either counting the 5*?s as e tra assets in their reserves" or selling their 5*?s for hard currency to meet balance of payments needs.

Re/or%ing the international /inan$ial syste%

The global economic crisis has spar$ed a rethin$ing of how the international financial system is structured. The IMF is assisting the ;<+: industrialized and emerging economies with recommendations to reshape the system of international regulation and governance. To a large e tent" global efforts thus far have been focused on the crisis at hand" but reforms are in progress with a view toward the post<crisis world. 6s input into the reform process" the IMF published a comprehensive study of the causes of the global financial crisis. The study ta$es stoc$ of the initial lessons learnt from the crisis and presses for a worldwide rethin$ of how to handle systemic ris$ management. 6lthough economic and financial sector policies will remain primarily the business of national governments" ongoing changes to the global financial architectureIincluding to the IMFIcan reduce the fre8uency and depth of future crises. 6dditional changes could also include addressing some of the shortcomings of the decision<ma$ing structure of the ;<+: by allowing greater scope for !oint decision ma$ing on a wider set of international economic and financial issues" with the IMF in its newly e panded role as a central player.

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=. T!+ IMF ,ND IT CRITIC :

@ver time" the IMF has been sub!ect to a range of criticisms" generally focused on the conditions of its loans. The IMF has also been criticised for its lac$ of accountability and willingness to lend to countries with bad human rights record. Two criticisms from economists have been that financial aid is always bound to so<called -,onditionalities-" including 5tructural 6d!ustment Jrograms (56J). It is claimed that ,onditionalities (economic performance targets established as a precondition for IMF loans) retard social stability and hence inhibit the stated goals of the IMF" while 5tructural 6d!ustment Jrograms lead to an increase in poverty in recipient countries. Many Criti$is%s o/ IMF in$ludeE
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1. Conditions o/ 1oansE
@n giving loans to countries" the IMF ma$es the loan conditional on the implementation of certain economic policies. These policies tend to involveE

?educing government borrowing < 3igher ta es and lower spending 3igher interest rates to stabilize the currency. 6llow failing firms to go ban$rupt. 5tructural ad!ustment. Jrivatization" deregulation" reducing corruption and

bureaucracy. The problem is that these policies of structural ad!ustment and macroeconomic intervention ma$e the situation worse.

For e ample" in the 6sian crisis of &''/" many countries such as Indonesia" Malaysia and Thailand were re8uired by IMF to pursue tight monetary policy (higher interest rates) and tight fiscal policy to reduce the budget deficit and strengthen e change rates. 3owever" these policies caused a minor slowdown to turn into a serious recession with mass unemployment.

In +::&" 6rgentina was forced into a similar policy of fiscal restraint. This led to a decline in investment in public services which arguably damaged the economy.

(. +>$hange Rate Re/or%sE

2hen the IMF intervened in Genya in the &'':s" they made the ,entral ban$ remove controls over flows of capital. The consensus was that this decision made it easier for corrupt politicians to transfer money out of the economy ($nown as the ;oldman scandal). ,ritics argue this is another e ample of how the IMF failed to understand the dynamics of the country that they were dealing with < insisting on blan$et reforms.

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The economist %oseph 5tieglitz has criticised the more monetarist approach of the IMF in recent years. 3e argues it is failing to ta$e the best policy to improve the welfare of developing countries saying the IMF -was not participating in a conspiracy" but it was reflecting the interests and ideology of the 2estern financial community.-

0. De-aluations
In earlier days" the IMF have been criticised for allowing inflationary devaluations.

5. Neo 1i&eral Criti$is%s

There is also criticism of neo liberal policies such as privatisation. 6rguably these free mar$et policies were not always suitable for the situation of the country. For e ample" privatisation can create lead to the creation of private monopolies who e ploit consumers.

:. Free Mar9et Criti$is%s o/ IMF

6s well as being criticised for implementing #free mar$et reforms# other cities the IMF for being too interventionist. 4elievers in free mar$ets argue that it is better to let capital mar$ets operate without attempts at intervention. They argue attempts to influence e change rates only ma$e things worse < it is better to allow currencies to reach their mar$et level.

There is also a criticism that bailout countries with large debt create moral hazard. 4ecause of the possibility of getting bailed out it encourages people to borrow more.

=. 1a$9 o/ Trans'aren$y and in-ol-e%ent:

The IMF have been criticised for imposing policy with little or no consultation with affected countries. %effrey 5achs" the head of the 3arvard Institute for International *evelopment saidE

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-In Gorea the IMF insisted that all presidential candidates immediately -endorse- an agreement which they had no part in drafting or negotiating" and no time to understand. The situation is out of hand...It defies logic to believe the small group of &"::: economists on &'th 5treet in 2ashington should dictate the economic conditions of life to /) developing countries with around &.( billion people.- K

?.

u''orting Military di$tatorshi's:

The IMF have been criticised for supporting military dictatorships in 4razil and 6rgentina" such as ,astillo 4ranco in &'A:s received IMF funds denied to other countries.

Res'onse to Criti$is% o/ IMF

Crisis ,l4ays lead to so%e Di//i$ulties: 4ecause the IMF deal with economic crisis" whatever policy they offer" there is li$ely to be difficulties. It is not possible to deal with a balance of payments without some painful read!ustment. IMF has had o%e u$$esses: The Failures of the IMF tend to be widely publicised. 4ut" its successes less so. 6lso criticism tends to focus on short term problems and ignores longer term view

Con/iden$eE The fact there is a lender of last resort provides an important confidence boost for investors. This is important during current financial turmoil.

Countries are not O&liged to ta9e an IMF loan: It is countries that approach the IMF for a loan. The fact so many ta$e loans suggests there must be at least some benefits of the IMF.

IMF +asy target:

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5ometimes countries may want to underta$e painful short term ad!ustment but there is a lac$ of political will. 6n IMF intervention enables the government to secure a loan and then pass the blame on to the IMF for the difficulties. @verall" the IMF success record is perceived as limited. 2hile it was created to help stabilize the global economy" since &'.: critics claim over &:: countries (or reputedly most of the Fund#s membership) have e perienced a ban$ing collapse that they claim have reduced ;*J by four percent or more" far more than at any time in Jost<*epression history. The considerable delay in the IMF#s response to any crisis" and the fact that it tends to only respond to them (or even create them) rather than prevent them" has led many economists to argue for reform. In +::A" an IMF reform agenda called the Medium Term 5trategy was widely endorsed by the institution#s member countries. The agenda includes changes in IMF governance to enhance the role of developing countries in the institution#s decision<ma$ing process and steps to deepen the effectiveness of its core mandate" which is $nown as economic surveillance or helping member countries adopt macroeconomic policies that will sustain global growth and reduce poverty. @n %une &)" +::/" the C ecutive 4oard of the IMF adopted the +::/ *ecision on 4ilateral 5urveillance" a landmar$ measure that replaced a 7:<year<old decision of the Fund#s member countries on how the IMF should analyze economic outcomes at the country level.

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?. IM6,CT OF IMF ON *,RIOU F,CTOR :

The IMF policies and rules have an impact on some factors li$e access to food" environment" public health etc.E I%'a$t on a$$ess to /ood 6 number of civil society organizations have criticized the IMF#s policies for their impact on people#s access to food" particularly in developing countries. In @ctober +::." former 05 Jresident 4ill ,linton !oined this chorus in a speech to the 0nited 1ations 2orld Food *ay" which criticized the 2orld 4an$ and IMF for their policies on food and agriculture. I%'a$t on 'u&li$ health In +::." a study by analysts from ,ambridge and Fale 0niversity9s published on the open< access Jublic =ibrary of 5cience concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Castern Curope by tuberculosis as public health care had to be wea$ened. In the +& countries to which the IMF had given loans" tuberculosis deaths rose by &A.AB. In +::'" a boo$ by ?ic$ ?owden titled" The *eadly Ideas of 1eoliberalismE 3ow the IMF has 0ndermined Jublic 3ealth and the Fight 6gainst 6ids" 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 ;*J in the underlying public health infrastructure. The boo$ claimed the conse8uences have been chronically underfunded public health systems" leading to dilapidated health infrastructure" inade8uate numbers of health personnel" and demoralizing wor$ing conditions that have fuelled the -push factorsdriving the brain drain of nurses migrating from poor countries to rich ones" all of which has undermined public health systems and the fight against 3IHL6I*5 in developing countries. I%'a$t on en-iron%ent

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IMF policies have been repeatedly criticized for ma$ing it difficult for indebted countries to avoid ecosystem<damaging pro!ects that generate cash flow" in particular oil" coal and forest< destroying lumber and agriculture pro!ects. Ccuador for e ample had to defy IMF advice repeatedly in order to pursue the protection of its rain forests" though parado ically this need was cited in IMF argument to support that country. The IMF ac$nowledged this parado in a March +:&: staff position report which proposed the IMF ;reen Fund" a mechanism to issue 5pecial *rawing ?ights directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other environmental finance. Criti$is% /ro% /ree<%ar9et ad-o$ates Typically the IMF and its supporters advocate a monetarist approach. 6s such" adherents of supply<side economics generally find themselves in open disagreement with the IMF. The IMF fre8uently advocates currency devaluation" criticized by proponents of supply<side economics as inflationary. 5econdly they lin$ higher ta es under -austerity programmeswith economic contraction. ,urrency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. 5ome economists claim these IMF policies are destructive to economic prosperity. ,omplaints have also been directed toward the International Monetary Fund gold reserve being undervalued. 6t its inception in &'()" the IMF pegged gold at 05>7) per Troy ounce of gold. In &'/7" the administration of 05 Jresident ?ichard 1i on lifted the fi ed asset value of gold in favour of a world mar$et price. This need to lift the fi ed asset value of gold had largely come about because Petrodollars outside the 0nited 5tates were worth more than could be bac$ed by the gold at Fort Gno under the fi ed e change rate system. Following this" the fi ed e change rates of currencies tied to gold were switched to a floating rate" also based on mar$et price and e change. The fi ed rate system had only served to limit the nominal amount of assistance the organization could provide to debt<ridden countries. In the %edia =ife and *ebt" a documentary film" deals with the IMF#s policies# influence on %amaica and its economy from a critical point of view. The *ebt of *ictators e plores the lending of billions of dollars by the IMF" 2orld 4an$ multinational ban$s and other international financial institutions to brutal dictators throughout the world.
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@. INDI, ,ND T!+ IMF:

IMF 5urveyE IndiaE ?apid ;rowth with Jromising Medium<term Jrospects 2ith robust growth spurring elevated levels of inflation" India should speed up its return to pre<crisis monetary and fiscal policies to $eep the economy in chec$" suggests the IMF in its annual assessment of one of the world9s fastest growing economies. In its report on the Indian economyI$nown as the 6rticle IH consultationIIMF economists said they e pect the 5outh 6sian country to grow above trend this year" with high levels of growth continuing over the medium term M2e e pect real ;*J to grow .N percent in +:&:L&&" with robust growth supported by high investment in infrastructure and productivity gains"O said the IMF9s mission chief for India" Masahi$o Ta$eda. India weathered the recent global financial crisis well" and since mid<+::' domestic demand has powered a vigorous recovery. The country9s growth rate remains among the strongest in the world. To4ard a %ore nor%al 'oli$y stan$e In its report" the IMF bac$ed the authorities9 policy of e iting from the stimulus implemented in the past two years. 4ut this e it strategy remains incomplete. ;iven the high level of government debt" e isting strong domestic demand" and large capital inflows" IMF economists said that fiscal policy is the preferred method for tightening. The IMF also supported the ob!ective to raise public investment" especially in infrastructure" and to improve social outcomes. The challenge will be to ma$e savings elsewhere to meet these ob!ectives while remaining on the consolidation path. Ta$9ling in/lation The IMF report also recommends further tightening monetary policy to meet the authorities9 inflation ob!ectives and anchor inflation e pectations.

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2ith little or no spare capacity in the economy" coupled with the threat of rising food prices" inflation is currently elevated in the range of .PI&:P percent. Inflation is e pected to come down slowly as last year9s high food prices caused by poor rainfall drop out of the inflation calculation" but underlying price pressures are still strong" say IMF economists. @ver the last year" the authorities have raised policy rates and the cash reserve re8uirement" but further increases in policy rates would help bring real short<term interest rates in line with historical norms" and help contain inflation" they add.

Ca'ital in/lo4s /und $urrent a$$ount de/i$it The current account deficit is pro!ected to reach 7.7 percent of ;*J in +:&:L&& and 7.) percent ne t year" say the economists in their report. The deficit has so far been financed mainly by foreign direct investment and e8uity inflows" but the authorities need to $eep an eye on the level of the current account deficit. 6s the deficit rises" so does the potential impact of a sudden stop or reversal of capital flows. 6nother ris$ is that the scale of the inflows could e ceed India9s capacity to absorb them. In this event" IMF economists suggest that e change rate appreciation should remain the first line of defence. If appreciation becomes too large" intervention in the foreign e change mar$et or macro prudential measures could also be ta$en. Meeting in/rastru$ture targets Infrastructure investment has grown rapidly in India over the past few years" and the authorities plan to double the money spent on this sector from >):: billion in the five years ending +:&&L&+ to >& trillion in the following half a decade. Jrivate participation is e pected to account for half of the total. Increased infrastructure spending should sustain higher growth" but there are several obstacles to achieving set targets. These include availability of financing" land ac8uisition" multiple clearances" capacity constraints" and governance issues along with various sector< specific concerns. The IMF believes structural reforms in these areas are needed to lower the cost of infrastructure" encourage private investment" and allow more efficient use of public resources.
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A. IMF # )1O.,1IB,TION:
;lobalization encompasses three institutionsE global financial mar$ets and transnational companies" national governments lin$ed to each other in economic and military alliances led by the 05" and rising Mglobal governmentsO such as 2orld Trade @rganization (2T@)" IMF" and 2orld 4an$. ,harles *erber argues in his boo$ Jeople before Jrofit" -These interacting institutions create a new global power system where sovereignty is globalized" ta$ing power and constitutional authority away from nations and giving it to global mar$ets and international bodies.- Titus 6le ander argues that this system institutionalises global ine8uality between western countries and the Ma!ority 2orld in a form of global apartheid" in which the IMF is a $ey pillar.QA:R The establishment of globalized economic institutions has been both a symptom of and a stimulus for globalization. The development of the 2orld 4an$" the IMF" ?egional development ban$s such as the Curopean 4an$ for ?econstruction and *evelopment (C4?*)" and more recently" multilateral trade institutions such as the 2T@ indicates the trend away from the dominance of the state as the e clusive unit of analysis in international affairs. ;lobalization has thus been transformative in terms of a reconceptualizing of state sovereignty. Following 0.5. Jresident 4ill ,linton#s administration9s aggressive

financial deregulation campaign in the &'':s" globalization leaders overturned long<standing restrictions by governments that limited foreign ownership of their ban$s" deregulated currency e change" and eliminated restrictions on how 8uic$ly money could be withdrawn by foreign investors.

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1C. CONC1U ION

The IMF collaborates with the 2orld 4an$" the regional development ban$s" the 2orld Trade @rganization (2T@)" 01 agencies" and other international bodies to wor$ globally.

IMF ma$es resources of the Fund available to members. Foster economic growth and high levels of employment.

IMF promotes international monetary cooperation" e pansion and balanced growth of international trade.

The IMF wor$s to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also wor$s with developing nations to help them achieve macroeconomic stability and reduce poverty.

The suggestion could be that IMF should deeply study the economic condition of the countries and should design and implement the best policy to handle the economic difficulties. IMF should not force the counties to adopt the policies offered by him. IMF must involve the affected country to while decision or policy ma$ing process.

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1C. .I.1IO)R,6!D:
.OO2 +CONOMIC OF )1O.,1 TR,D+ ,ND FIN,NC+ EO!N ON M, C,R+N!,

N+W 6,6+R Ti%es o/ India !industan Ti%es

We&liogra'hy
httpELLwww.imf.orgLe ternalL httpELLwww.google.com httpELLen.wi$ipedia.orgLwi$iLInternationalSMonetarySFund httpELLbusiness.mapsofindia.comLfinance<ministryLimf.html httpELLwww.britannica.comLC4chec$edLtopic

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