World Bank And Imf example essay topic

The mission statement is "To fight poverty with passion and professionalism for lasting results". Owned by a Washington-based Board of Directors, the World Bank's purposes haven't changed but its surveillance, financial and technical assistance operations, have developed to meet the changing requirements of its members in the wider spectrum of the global economy. A Board of Governors represent 184 member countries views and interests. The institutions that comprise the World Bank Group are: International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International finance corporation (IFC), Multilateral investment guarantee agency (MIGA) and International center for settlement of investment disputes (ICSID).

They are loosely affiliated and vary in numbers. IBRD has 184 members, IDA has 163, the IFC has 175, MIGA has 158 and ICSID has 134. Similar to the World Bank is the International Monetary Fund. There aim is solve economic quandaries whist promoting their own monetarist values. The bank provides the opportunity to correct inconsistencies or debts in a countries' balance of payments without hindering national or international prosperity. Other aims include the promotion and maintenance of high-level employment to facilitate the expansion growth of international trade and the elimination of foreign exchange restrictions which can arguably hamper the growth of world trade.

The IMF however hasn't been entirely successful or benevolent. George Shultz, a secretary of state under President Ronald Reagan said, "The IMF is ineffective, unnecessary, and obsolete". The World Bank and the IMF are the world's largest public lenders. Whilst the Bank manages a total of $200 billion, the Fund supplies member governments with money to overcome short-term credit difficulties. The Bank and the Fund are also openly and commonly referred to as the world's biggest 'loan sharks.

' When the Bank and the Fund lend money to debtor countries, the money comes with a flipside. These strings come in the form of policies called "structural adjustment policies". These policies require debtor governments to open their economies to penetration by foreign corporations, with direct effect to the country's workers and environment. When providing financial support to a member country, the IMF makes sure that the member is pursuing policies that will balance payment problems.

The commitment that members make to implement such economic restoration in return for the IMF's support is known as conditionality. This commitment ensures that members are able to repay the IMF in a timely manner allowing the IMF's limited funds to be available to other members as well. There are two levels of financial support or conditionality that the IMF gives. Low conditionality involves a country establishing that it has a need to balance payments and a declaration that it is taking measures to correct the problem. High conditionality involves designing a specific set of measures to restore a country's balance problem, a fund agreement that the program will be adequate for that purpose, and the country's commitment to implement the program.

A Heritage Foundation study looked at IMF loans between 1965 and 1995. It was found that 54% of the nations getting help were no better off than they were before the loan. Perhaps a reason for this is that like the World Bank, the IMF does not do enough to enforce its conditions. If a country violates its agreement with the IMF the fund may suspend the loan, only to later go back on its word and negotiate a new agreement. The loan will be re-negotiated, and the process will start again. The seventeen different arrangements the IMF had with Peru between 1971 and 1977, as well as eight separate standby programs for Brazil between 1965 best exemplify this.

As a condition for a loan the IMF will, for instance, demand that a nation reduces its current account deficit so the borrower restricts imports. Insistence that a country cut its budget deficit may cause the government to raise taxes, slowing growth. Even setting some useful conditions may have little impact if other internal and external policies still cause problems for the borrowing country. There are obviously cases in which the IMF has pushed for reform and been successful but this essay primarily concerned with weakness. As a synthesis to the IMF's conditioning for structural adjustment programs and Sap's in general is that they have been inconsistent. There is much secrecy surrounding the IMF making it extremely difficult to prepare quantitative analysis of IMF policies.

This is due to the fact that the organization refuses to release audits of its. What can be known is that the poorest countries of the world owe more money to these two institutions than they do any other private or government institutions because most of these loans were so poorly designed that the borrowing countries have not reaped enough income to pay them back. Today's emphasis on structural and institutional reforms has not always been part of IMF programs. In 1944, delegates from 44 nations set up an international monetary system to promote trade.

Each nation set a value for its currency relative to the dollar. The U.S., in turn, fixed the value of the dollar by agreeing to sell gold to other nations at $35 an ounce. The International Monetary Fund was set up to give temporary financing when countries had balance of payments problems as a result of their currencies breaking away from their fixed values. Although that system succeeded temporarily, differences in inflation between countries forced many to alter their currency values.

In 1971, President Nixon brought this system to an end by refusing to sell gold to other nations. The fixed-rate system collapsed completely. Instead of burning out, IMF simply switched its mission to acting as a medic to developing countries in crisis. It has been discussed how the World Bank and the IMF's methods have been open to scepticism. To further show the controversy surrounding the organizations, it is important to discuss how they also undermine human rights and domesticity. Economic policies such as Structural Adjustment Programs imposed by the World Bank and IMF have forced countries to cut education subsidies.

The World Bank is the single largest source of money for education programs for less economically developed countries. In the 1990's the Bank significantly boosted loans for education, spending an average of $1.9 billion for the period 1991-1999. It was found however that increased funding was not always matched by better results. In 1995 the World Bank discovered that the failure rate for its education loans was rising also, increasing from 11.8% of the portfolio in 1992 to 17.5% in 1994. In addition there was a 25 percent increase in the number of projects whose implementation progress has been rated as unsatisfactory from 12.4% in 1992 to 15.5%. The World Bank and the IMF have also forced countries to cut down on teachers.

In Kenya the IMF told the government that it would support a promised loan if the government gave into demands from striking teachers to raise salaries from the average basic salary of $150 per month despite the teacher strikes being supported by 70% of the population. In addition the World Bank and the International Monetary Fund, have played a major role in creating health problems in less economically developed countries through the economic policies that are implemented through Structural Adjustment Programs. For example in Zimbabwe since the structural Adjustment Programs were introduced, a person would get one third less spent on health care for them. In the Philippines, due to an IMF program, health care budgets for malaria and tuberculosis have fallen by 27% and 36% respectively while immunization programs have fallen by 26%. Altogether sub-Saharan Africa spends four times as much on debt repayment as she does on healthcare. These two institutions have forced cuts in health care, education and other social services.

Mexico is a great example. Mexico has followed most economic policies from the International Monetary Fund and the World Bank. However since Mexico first adopted the IMF prescriptions of trade, wages have fallen, poverty and inequality have increased, as has the country's debt. The results of becoming allies with the IMF has for less economically developed countries seen a rise in focus of resources on growing crops for export rather than raising farms and growing food for local communities. These impositions have particularly lead to deeper inequality in Latin America, Africa, and Asia. Following the revolution in Argentina on December 20 2001.

One of the first acts of interim president Adolfo Rodriguez Saa was to suspend payments on Argentina's $132 billion foreign debt. It was this debt and the decade-long austerity program imposed by the International Monetary Fund (IMF) that destroyed Argentina's economy. Since taking office, de la Rua's (the previous president) government had ruthlessly privatized essential services, slashed the salaries and pensions of government workers and raised taxes, finally driving fully 30% of the population below the poverty line. One thing is for certain. Wherever there is such unfair political or economic pragmatism, there will always be an opposition. There are currently anti debt groups such as Jubilee, 50 years is enough and the World Bank Bonds Boycott that are building moral, political, and financial pressure on the World Bank.

The intelligentsia of society have provided valuable critiques by publishing newspapers, magazines and academic journals. Anti-Debt groups have also been successful in organizing public demonstrations but they are not often reported on in the mainstream press for fear of higher awareness and an eventual backlash. There have been a number of proposals from a wide range of civil society groups, scholars and member countries themselves for reforming the World Bank. Let us reduction ally examine some ideals of a proposed system. At present the existing IMF is open to anyone who may qualify for bailouts and political aid to word it casually.

A proposed IMF may wish upon bona fide liquidity assistance. The structures of loans given are at present unclear and varied. One should consider making them collateralized and short term. At present conditionality is negotiated. In future it would be more productive to see none except a standard membership into the IMF.

Finally lets consider the IMF's intersection with the World Bank being joint effort being turned into a clear alliance to assist in liberalisation. Paul Krugman wrote in a Laboratory Columns Archive in May 1998 that in effect we have moved from national to global financial markets without creating a corresponding global version of national regulation. Ideally if there were no constraints one needs to recreate at a global level the safeguards that used to work at a national level. Lawerence J. Mc quillon recommended in his essay 'Reflections on the Monetary Fund" that it was time to look to market-based alternatives that could prevent future global financial disaster.

His principles include floating exchange rates to prevent a foreign-currency crisis. The introduction of Internationally accepted accounting practices and unfettered financial markets to coordinate global capital flows. Finally sound institutional reforms would promote investor confidence and self-sustaining economic growth. web web web web web Paul Krugman World Economy Laboratory Columns Archive, May 1998. = = imf. org imf site. org! web Lawerence J. McQuillan: Reflections on the International Monetary Fund.