Shehroz Ahmed Adil – 10833Syed Hasan Mehdi - 13468

IMF Policies & Structure

Functions• The IMF works to foster global growth and

economic stability. • Manage their exchange rates• Such market imperfections, together with

balance of payments financing, provide the justification for official financing.

• The IMF can provide other sources of financing to countries in need that would not be available in the absence of an economic stabilization program supported by the Fund.

• To provide short-term capital to aid balance-of-payments.

STRUCTURE

• IMF negotiates conditions on lending and loans under their policy of conditionality.

• Low-income countries can borrow on concessional terms, which means there is a period of time with no interest rates, through the Extended Credit Facility (ECF).

• IMF conditions are often criticised for their bias against economic growth and reduce government services, thus increasing unemployment.

• A country may also be compelled to accept conditions it would not normally accept had they not been in a financial crisis in need of assistance.

• The IMF sometimes advocates “austerity Programs,” cutting public spending and increasing taxes even when the economy is weak, to bring budgets closer to a balance, thus reducing budget deficits.

Criticism on IMF

The IMF is only one of many international organizations and it is a generalist institution for macroeconomic issues only, it’s core areas of concern in developing countries are very narrow. One proposed reform is a movement towards close partnership with other specialist agencies to better productivity. The IMF has little to no communication with other international organizations such as UN specialist agencies like UNICEF, the Food and Agriculture Organization (FAO), and the United Nations Development Program (UNDP).

• Policies needed for national, global stability.

• Growing international experience provides valuable lessons.

• IMF will help countries devise effective crisis-prevention tools.

• Detect and contain risks before they turn into a crisis.

Policies To Tackle Financial Crises

IMF Quotas subscriptions generate most of the IMF’s financial resources. Each member country of the IMF is assigned a quota based on its relative size in the world economy. For each country, the quota determines:

•It’s financial contribution to the IMF.

•The amount of financing it can obtain from the IMF.

•It’s voting power.

POLICIES

IMF anti-inflation policies and the World Bank, which is bound by them, are making it impossible for Third World governments to make much progress either in achieving MDG ( Millennium Development Goals) targets or in promoting democratic institutions.

The MDGs include achieving universal primary education, cutting hunger and poverty in half, and sharply reducing maternal and infant mortality by 2015.

"Contradicting Commitments: How the Achievement of Education for All is Being Undermined by the International Monetary Fund", argues that the MDG target of providing universal primary education by the year 2015 is also threatened by the IMF's imposition of budget targets.

IMF Policies Poverty Goals

To meet the MDG target, according to the report, poor countries must sharply increase their investment in building schools, training and employing teachers, and in making education more accessible to poor and other disadvantaged children by, for example, eliminating school fees.

But in most cases, they cannot do so without exceeding spending limits imposed by the IMF, thus making it effectively impossible for them to meet their MDG commitments and the demands of their electorates.

The historical record indicates that Latin American in the 1950s and 1960s and East Asia in the 1960s and 1970s experienced very high economic growth rates despite inflation levels that averaged 20 percent per year, the report asserted.

Meanwhile, the fact that the elected governments were effectively boxed in by the IMF is doing nothing to promote confidence in democratic institutions throughout the developing world, according to the AAI.

"What this all comes down to is that the IMF acts like a school bully, taking power away from publicly elected officials, particularly in the poorest and weakest countries," said David Archer, the group's director for education. "This is not a recipe for working democracy; instead, it could spell democracy's death knell."

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