IMF

=INSTITUTIONS OF GLOBAL GOVERNANCE= =INTERNATIONAL MONETARY FUND= The IMF’s main mission is to ensure the stability of the economy in the international system. It does so in three ways: 1. Surveillance: - Oversees the international monetary system - Monitors financial and economic policies of its members. - Keeps track of economic developments on a national, regional and global basis. - Consulting regularly with its member countries Providing countries with macroeconomic and financial policy advice.(Macroeconomic: The field of economics that studies the behaviour of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels. The focus on movement and trends in the economy as a whole.

2. Technical Assistance: - Assist mainly in low-middle income countries in effectively managing their economy - Practical training and guidance on how to upgrade institutions - Design practical macroeconomic, financial and structural policies.

3. Lending: - Loans to countries that have trouble meeting international payments - Designed to help countries restore macroeconomic stability - Rebuilding countries international reserves, stabilizing their currencies and paying for all imports which are necessary for the countries growth - Concessional loans to low income countries to help develop their economies and reduce poverty.


 * Fast Facts on the IMF:**
 * **Membership:** 187 countries
 * **Headquarters:** Washington, D.C.
 * **Executive Board:** 24 Directors representing countries or groups of countries
 * **Staff:** Approximately 2,470 from 141 countries
 * **Additional pledged or committed resources:** US$600 billion
 * **Loans committed (as of 8/18/11):** US$282 billion, of which US$213 billion have not been drawn (see table)
 * **Biggest borrowers (amount agreed as of 8/18/11):** Greece, Portugal, Ireland
 * **Biggest precautionary loans (amount agreed as of 8/18/11):** Mexico, Poland, Colombia
 * **Original aims:**Article I of the Articles of Agreement sets out the IMF’s main goals:
 * promoting international monetary cooperation;
 * facilitating the expansion and balanced growth of international trade;
 * promoting exchange stability;
 * assisting in the establishment of a multilateral system of payments; and
 * making resources available (with adequate safeguards) to members experiencing balance of payments difficulties

=** The three chief mechanisms of the IMF are – **= Countries that have benefitted – all member states receive a report on their finances/advice. Reports comment on how debt is being handled, currency compared to world, advice to Fiji to improve agriculture and exporting of goods. The IMFs monitoring forecasts and policy advice informed by a global perspective and by experience from previous crises have been used by G20 and emerging market economies.
 * Surveillance**-

Provides technical assistance & training in a wide range of areas. About 80% of the IMFs finance goes to low & lower middle income countries in particular, sub Saharan Africa & Asia. Post- conflict countries are major beneficiaries. IMF regional centres (8) – located in continents – 3 in Africa, 2 in Caribbean, 1 for Middle East and 1 for Pacific Islands, 1 for Central America and plan to open 4 more. Provide training courses at the headquarters in Washington DC. Includes placements of experts in areas ranging from a few weeks to a few years. Assistance also provided in the form of technical studies, training courses, seminars & workshops. Also online advice.
 * Technical Assistance:**

Bangladesh – 1998 flood -138 million US dollars – aimed to assist with economic growth – the Bangladesh Gov’t was obliged to initiate reforms in revenue, banking & public enterprise. GFC- IMF approved a 3 yr. 30 billion euro loan to Greece in 2010. Iceland – 2010 - 22.5 million euro loan – joint package with EU. 3 major banks collapsed. Iceland have recovered – employment growing/tourism booming/ banking system has grown/. Met deadlines – program design, ownership & implementation worked in Iceland. IMF supported Iceland’s decision not to bail out the banks.
 * Lending**

Promotes international economic cooperation and provides member countries with short term loans so they can trade with other countries. Bails out countries during financial crises caused by GFC. Aims to avoid the mistakes that created the Great Depression Assists with poverty reduction Manages the global economic arena Provides advice to member states
 * What the IMF does –**

3 chief mechanisms of the organisation are surveillance, technical assistance & lending If IMF did not exist, larger crises could occur. Impose structural adjustment programs (SAPs) that undermine gov’t sovereignty Countries in poverty struggle to meet the SAPs Voting power – linked to economic power. You vote according to how much you lend. Eg US has 17.4% which provides it with a 15% veto over all key decisions. SAPS have a negative effect on the environment One size fits all approach – don’t take into account that problems might be quite different from country to country. IMF response to the GFC
 * Strengths**
 * Weaknesses**

IMF Founded at the end of World War II to promote global economic stability, the International Monetary Fund keeps a watch on the currency, trade and economic policies of its 184-member nations and makes nonbinding recommendations for improvement. The fund also provides low-cost loans to countries in financial need on the condition that borrowers undertake economic policy changes like adjusting their balance of payments or reducing inflation. In 2008 the I.M.F. was suddenly called back into action after years of declining relevance when financial crises began to swamp struggling countries. The fund brokered rescue packages for Pakistan, Iceland, Hungary and Ukraine -- moves that thrust it into the thick of a global crisis after a frustrating period in which it was a bystander. In late January 2009, the I.M.F. reduced its estimate for global growth for the year to just 0.5 per cent, the lowest level in more than 60 years. On March 1, the leaders of Germany, Britain, France and other European nations called for the resources of the I.M.F. to be doubled, to $500 billion, to help head off new problems in countries already hit hard by the global economic and financial crisis. U.S. Treasury Secretary Timothy F. Geithner, who once worked at the fund, has called for its financial resources to be expanded by $500 billion, effectively tripling its lending capacity to distressed countries and cementing its status as the lender of last resort for much of the world. The financial crisis has created an opportunity for the IMF to reinvigorate itself and possibly play a constructive role in resolving, or at the least mitigating, the effects of the global downturn. It has been operating on two fronts: (1) through immediate crisis management, primarily balance of payments support to emerging-market and less-developed countries, and (2) contributing to long-term systemic reform of the international financial system. 249 The IMF also has a wealth ofinformation and expertise available to help in resolving financial crises and has been providingpolicy advice to member countries around the world.

IMF rules stipulate that countries are allowed to borrow up to three times their quota 250 over a three-year period, although this requirement has been breached on several occasions in which the IMF has lent at much higher multiples of quota. In response to the current financial crisis, the IMF has activated its Emergency Financing Mechanism to speed the normal process for loans to crisis-afflicted countries. The emergency mechanism enables rapid approval (usually within 48- 72 hours) of IMF lending once an agreement has been reached between the IMF and the national government. At the 2009 February G-7 finance ministers summit, the government of Japan lent the IMF $100 billion dollars. 251 At the April 2009 London G-20 summit leaders of the world’s major economies agreed to increase resources of the IMF and international development banks by $1.1 trillion including $750 billion more for the International Monetary Fund, $250 billion to boost global trade, and $100 billion for multilateral development banks. For the additional IMF resources, $250 billion was to be made available immediately through bilateral arrangements between the IMF and individual countries, while an additional $250 billion would become available as additional countries pledged their participation. The increased resources include the $100 billion loan from Japan, and the members of the European Union had agreed to provide an additional $100 billion. Subsequently, Canada ($10 billion), South Korea ($10 billion), Norway ($4.5 billion), and Switzerland ($10 billion) agreed to subscribe additional funds. The Obama Administration has asked Congress to approve a U.S. subscription of $100 billion to the IMF’s New Arrangements to Borrow. China reportedly has said it

=Top Ten Reasons to Oppose the IMF=

What is the IMF?
The International Monetary Fund and the World Bank were created in 1944 at a conference in Bretton Woods, New Hampshire, and are now based in Washington, DC. The IMF was originally designed to promote international economic cooperation and provide its member countries with short term loans so they could trade with other countries (achieve balance of payments). Since the debt crisis of the 1980’s, the IMF has assumed the role of bailing out countries during financial crises (caused in large part by currency speculation in the global casino economy) with emergency loan packages tied to certain conditions, often referred to as structural adjustment policies (SAPs). The IMF now acts like a global loan shark, exerting enormous leverage over the economies of more than 60 countries. These countries have to follow the IMF’s policies to get loans, international assistance, and even debt relief. Thus, the IMF decides how much debtor countries can spend on education, health care, and environmental protection. The IMF is one of the most powerful institutions on Earth – yet few know how it works.

**modern day colonialism that SAPs the poor**
The IMF—along with the WTO and the World Bank— has put the global economy on a path of greater inequality and environmental destruction. The IMF’s and World Bank’s structural adjustment policies (SAPs) ensure debt repayment by requiring countries to cut spending on education and health; eliminate basic food and transportation subsidies; devalue national currencies to make exports cheaper; privatize national assets; and freeze wages. Such belt-tightening measures increase poverty, reduce countries’ ability to develop strong domestic economies and allow multinational corporations to exploit workers and the environment A recent IMF loan package for Argentina, for example, is tied to cuts in doctors’ and teachers’ salaries and decreases in social security payments.. The IMF has made elites from the Global South more accountable to First World elites than their own people, thus undermining the democratic process.

Street
Unlike a democratic system in which each member country would have an equal vote, rich countries dominate decision-making in the IMF because voting power is determined by the amount of money that each country pays into the IMF’s quota system. It’s a system of one dollar, one vote. The U.S. is the largest shareholder with a quota of 18 percent. Germany, Japan, France, Great Britain, and the US combined control about 38 percent. The disproportionate amount of power held by wealthy countries means that the interests of bankers, investors and corporations from industrialized countries are put above the needs of the world’s poor majority.

development model
Unlike the path historically followed by the industrialized countries, the IMF forces countries from the Global South to prioritize export production over the development of diversified domestic economies. Nearly 80 percent of all malnourished children in the developing world live in countries where farmers have been forced to shift from food production for local consumption to the production of export crops destined for wealthy countries. The IMF also requires countries to eliminate assistance to domestic industries while providing benefits for multinational corporations – such as forcibly lowering labor costs. Small businesses and farmers can’t compete. Sweatshop workers in free trade zones set up by the IMF and World Bank earn starvation wages, live in deplorable conditions, and are unable to provide for their families. The cycle of poverty is perpetuated, not eliminated, as governments’ debt to the IMF grows.

accountability
The IMF is funded with taxpayer money, yet it operates behind a veil of secrecy. Members of affected communities do not participate in designing loan packages. The IMF works with a select group of central bankers and finance ministers to make polices without input from other government agencies such as health, education and environment departments. The institution has resisted calls for public scrutiny and independent evaluation.

5) IMF policies promote corporate welfare
To increase exports, countries are encouraged to give tax breaks and subsidies to export industries. Public assets such as forestland and government utilities (phone, water and electricity companies) are sold off to foreign investors at  rock bottom prices. In Guyana, an Asian owned timber company called Barama received a logging concession that was 1.5 times the total amount of land all the indigenous communities were granted. Barama also received a fiveyear tax holiday. The IMF forced Haiti to open its market to imported, highly subsidized US rice at the same time it prohibited Haiti from subsidizing its own farmers. A US corporation called Early Rice now sells nearly 50 percent of the rice consumed in Haiti.

6) The IMF hurts workers
The IMF and World Bank frequently advise countries to attract foreign investors by weakening their labor laws— eliminating collective bargaining laws and suppressing wages, for example. The IMF’s mantra of “labor flexibility” permits corporations to fire at whim and move where wages are cheapest. According to the 1995 UN Trade and Development Report, employers are using this extra “flexibility” in labor laws to shed workers rather than create jobs. In Haiti, the government was told to eliminate a statute in their labor code that mandated increases in the minimum wage when inflation exceeded 10 percent. By the end of 1997, Haiti’s minimum wage was only $2.40 a  day. Workers in the U.S. are also hurt by IMF policies because they have to compete with cheap, exploited labor. The IMF’s mismanagement of the Asian financial crisis plunged South Korea, Indonesia, Thailand and other countries into deep depression that created 200 million “newly poor.” The IMF advised countries to “export their way out of the crisis.” Consequently, more than US 12,000 steelworkers were laid off when Asian steel was dumped in the US.

7) The IMF’s policies hurt women the most
SAPs make it much more difficult for women to meet their families’ basic needs. When education costs rise due to IMF-imposed fees for the use of public services (so-called  “user fees”) girls are the first to be withdrawn from schools. User fees at public clinics and hospitals make healthcare unaffordable to those who need it most. The shift to export agriculture also makes it harder for women to feed their families. Women have become more exploited as government workplace regulations are rolled back and sweatshops abuses increase.

8) IMF Policies hurt the environment
IMF loans and bailout packages are paving the way for natural resource exploitation on a staggering scale. The IMF does not consider the environmental impacts of lending policies, and environmental ministries and groups are not included in policy making. The focus on export growth to earn hard currency to pay back loans has led to an unsustainable liquidation of natural resources. For example, the Ivory Coast’s increased reliance on cocoa exports has led to a loss of two-thirds of the country’s forests.

global economy
The IMF routinely pushes countries to deregulate financial systems. The removal of regulations that might limit speculation has greatly increased capital investment in developing country financial markets. More than $1.5 trillion crosses borders every day. Most of this capital is invested short-term, putting countries at the whim of financial speculators. The Mexican 1995 peso crisis was partly a result of these IMF policies. When the bubble popped, the IMF and US government stepped in to prop up interest and exchange rates, using taxpayer money to bail out Wall Street bankers. Such bailouts encourage investors to continue making risky, speculative bets, thereby increasing the instability of national economies. During the bailout of Asian countries, the IMF required governments to assume the bad debts of private banks, thus making the public pay the costs and draining yet more resources away from social programs.

economic crisis.
During financial crises—such as with Mexico in 1995 and South Korea, Indonesia, Thailand, Brazil, and Russia in 1997—the IMF stepped in as the lender of last resort. Yet the IMF bailouts in the Asian financial crisis did not stop the financial panic—rather, the crisis deepened and spread to more countries. The policies imposed as conditions of these loans were bad medicine, causing layoffs in the short run and undermining development in the long run. In South Korea, the IMF sparked a recession by raising interest rates, which led to more bankruptcies and unemployment. Under the IMF imposed economic reforms after the peso bailout in 1995, the number of Mexicans living in extreme poverty increased more than 50 percent and the national average minimum wage fell 20 percent. For more information on the International Monetary Fund, visit // or or call 1-800-497-1994. //
 * www.globalexchange.org **