International Monetary Fund

International Monetary Fund. (IMF). It is the most important international financial institution in charge of promoting foreign exchange policies at the international level as well as promoting trade. The IMF is part, together with the World Bank, of the specialized agencies in economic-financial issues of the United Nations , being integrated by 185 member countries. The institution is currently chaired by Kristalina Georgieva .

Summary

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  • 1 History
    • 1 Role of the IMF after 2009
  • 2 Objectives
  • 3 Loans
  • 4 Reviews
  • 5 References
  • 6 Sources

History

The creation of a body in charge of controlling and managing the development of the international economy was raised on July 22 , 1944 during the UN convention , held in Bretton Woods , New Hampshire , United States . Months later, in 1945 , with the North American support and co-sponsorship of several European nations, the IMF was born, which since then has been based in the North American capital, Washington DC

Its statutes declare as main objectives the promotion of sustainable exchange rate policies at the international level, facilitate international trade and reduce poverty.

Role of the IMF after 2009

At the summit of G20 in 2009 , held in Pittsburgh , United States , the IMF quadrupled its financial capacity to $ 1 trillion. He was also tasked with monitoring whether countries are sufficiently stimulating their economies and whether they are reforming their regulatory systems, as well as warning about financial problems, published by The Wall Street Journal.

During this meeting and under the co-sponsorship of US President Barack Obama and his German counterpart , Angela Merkel , the IMF took on the task of leading the process of rescuing the stability of the economies affected by the crisis. In this sense, nearly 500,000 million dollars were approved to rescue the economies by providing the agency with a line of credit that requires debtors to carry out unpopular economic reforms, such as reducing fiscal spending, such is the case of the applied in countries such as Greece , Portugal , Ireland , Italy and Spain [1] whose economic situations threaten the stability ofEurozone The economy is threatened .

objectives

Its stated purpose is to avoid crises in monetary systems, encouraging countries to adopt economic policy measures; As its name suggests, the institution is also a fund that member countries that need temporary financing can use to overcome balance of payments problems. Another objective is to promote international cooperation on international monetary issues and to facilitate the movement of trade through productive capacity.

Since its foundation, it has promoted exchange rate stability and ordered exchange regimes in order to avoid competitive exchange rate depreciations, it has facilitated a multilateral system of payments and transfers for transactions, trying to eliminate restrictions that hinder the expansion of world trade. It also advises governments and central banks in the development of public accounting systems. In summary:

  • Promote international monetary cooperation.
  • Facilitate the expansion and balanced growth of international trade.
  • Promote stability in currency exchanges.
  • Facilitate the establishment of a multilateral payment system.
  • Make occasional loans to members who have difficulties in their balance of payments.
  • Shorten the duration and decrease the degree of imbalance in the members’ balance of payments.

Loans

The IMF temporarily grants those financial resources to members who experience balance of payments problems. A member country has automatic access to 25% of its quota if it experiences balance of payments difficulties. If you need more funds (it almost always happens), you have to negotiate a stabilization plan. It is hoped that any member who receives a loan will repay it as soon as possible so as not to limit credit access to other countries. Before this happens, the country requesting the credit must indicate how it intends to solve its balance of payments problems so that it can repay the money in a repayment period of three to five years, although sometimes it reaches the 15 years.

critics

However, its policies (especially the conditions it imposes on developing countries for the payment of their debt or in granting new loans) have been severely questioned as causing regressions in the distribution of income and damages to social policies. Some of the most intense criticism has come from Joseph Stiglitz , former World Bank Chief Economist and 2001 Nobel Prize in Economics , who has pointed out that the IMF’s main problems lie in:

  • Sanitation of the public budget at the expense of social spending. The IMF points out that the State should not grant subsidies or assume the expenses of groups that can pay for their benefits, although in practice this has resulted in the reduction of social services to sectors that are not in a position to pay them.
  • Generation of primary fiscal surplus sufficient to cover external debt commitments.
  • Elimination of subsidies, both in productive activity and in social services, along with the reduction of tariffs.
  • Restructuring of the tax system. In order to increase tax collection, it has generally promoted the introduction of easily perceived regressive taxes (such as Value Added Tax)
  • Elimination of exchange barriers. The IMF at this point is in favor of the free floating of currencies and an open market.
  • Implementation of a free market structure in practically all sectors of goods and services, without State intervention, which should only assume a regulatory role when required.
  • The concept of services, in the interpretation of the IMF, extends to include areas that are traditionally interpreted as structures for the assurance of fundamental rights, such as education, health or social security.
  • Labor flexibility policies, understood as deregulation of the labor market.

These points were central to the IMF negotiations in Latin America as determinants of the access of the countries of the region to credit in the eighties. It is argued that they caused a slowdown in industrialization, or deindustrialization in most cases. The recessions in several Latin American countries at the end of the nineties and financial crises such as that of Argentina in late 2001, are presented as examples of the opinion of the failure of the “recipes” of the International Monetary Fund, since these countries determined their economic policy under the agency’s recommendations.

 

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