The IMF And World Bank
My research question is how does the International Monetary Fund work? What do they do for their members to support them to pay back the amount of money that they have been funded and likewise what do they do if a country doesn’t achieve its goal while it’s in the program? What types of risk will the country be facing during it time on the programs.
The international Monetary Fund (IMF) works to foster international monetary cooperation, secure financial stability, facilitate international trade promote higher employment rate and sustainable economic growth and reduce poverty around the world. The IMF is a part of the World Bank, and the World Bank get its money from developing country like the United States of America, and they give the money to the IMF programs so that they can use that money to fund poor countries in the world which have problems with their economic stability.
The IMF foundation was created in July of 1944 original with 45 members and came to existence in December of 1945 when 29 countries decided to signed up for the agreements. The IMF is a government by and accountable to the 187 countries that make up its global membership.
The IMF work with the World Bank to support countries with low income, they fund a certain amount of money after the government decides how much the country needs to have good economy, they provide technical support by training the people of the member of the country to do different thing which will increase their living standard. They provide money which will help the country to build school, hospital, and power plants for electricity so that people can have electric power in their homes. They also help their members to produce good quality product which will increase their income in the World Market.
The mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from its 187 countries. Member states with payment problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including covering the cost of importing and exporting basic goods and services
The IMF also supports militaries by funding the country security. The country securities receive the money from its government and pay all the people who are in the army.
The International Monetary Found support poor countries in Africa by providing programs which give money to the government to support poor businesses to get back to work. The IMF also helps the international trade of a country. They help the trade of a country on importing products to the world market and other countries so that they can get more profit.
In Tanzania the IMF and the World Bank help the government to provide more educations to its people because half of the population is illiterate. In area like this the SAP (structure adjustment programs) forced to introduce schools so that people can get education. In 2009 IMF agreed to lend Tanzania US $328 million to help the budget of the country.
The International Monetary Fund also helped Tanzania to support the government to fight AIDS and tuberculosis. They provide the government with money so that they can build clinics to help the victims of AIDS.
Funding countries doesn’t necessarily mean that the result always have good outcome in a country. Because of the new structure adjustment policies Tanzania was forced to introduce school fees under the SAP. This new policy immediately led to drop in primary and secondary school enrolment. Tanzania is not the only country in sub- Saharan Africa the percentage of 6-11 years old children to get enrolled in school fell from 60% in 1980 to less than 50% in 1990 however the IMF and the world bank policy makers say that “the reform often generate necessary short term pain but long term gain”. This means that for a country to have a good economy there some side effect.
Example when the IMF reduced the salary of government workers like teachers and government doctors, this reduce the number of teachers who were teaching primary and secondary school drop down because they didn’t like what they got from the government. After the IMF policy introduce school fees in African school a lot of parents couldn’t afford to pay the school fees and this led to children dropping out of school every day.
The IMF also can decide to sell state owned companies for example in Tanzania they sold the state –owned brewery company and a lot of works lost their jobs and citizens complained about but nothing was done.
This is what the international monetary system do they monitors all the financial and economic policies of its members in a country. They keep track of economic developments on a national, regional, and global basis, consulting regularly with member countries and providing them with macroeconomic and financial policy advice which will help them to develop their country. They also manage the trade of a country the control the country trade by deciding what is good for the country economy. (cite: International Monetary Fund). They decide what type of product goes out and what type comes in so that they won’t affect the country economy to come down.
The IMF provides loans to countries that have trouble meeting their international payments and cannot otherwise find sufficient financing on affordable terms. This financial assistance is designed to help countries restore macroeconomic stability by rebuilding their international reserves, stabilizing their currencies, and paying for imports—all necessary conditions, fighting diseases. The IMF also provides concessional loans to low-income countries to help them develop their economies and reduce poverty by increase work opportunities. Cite: International Monetary Fund)
What doesn’t work on? The problem is that the policy doesn’t work with some countries because the economy is too low to start with the normal program policies.
Governments enter into agreements with the IMF under the pressures of a foreign reserves crisis but they also bring in the Fund to shield themselves from the
Political costs of adjustment policies. Program participation lowers growth rates for as long as countries remain under a program. Once countries leave the program, they grow faster than if they had remained, but not faster than they would have without participation. The countries which receive loans can also be affected by its government people if the government is corrupt. The money will end up in government people who have excess to the money and when it comes to the time that they need to pay back the money the take it out from the country budget, by using the country budget money the country economy fall.
Many governments complain that they only go under the programs only because the conditions of the country a so serious and they join the IMF to hope for the best.
The benefit of IMF is that when they help a country from a bad economy and help it to have well economic to its people they reduce the dept. for 90 percent from what they help you with this is the big benefit which African countries which are supported by the IMF get.
Example Liberia was decided that they should have 90% of their debt was reduced at the end of 2008. In Niger 76% was reduced at the end of 2002 and other 14% at the end of 2006 by the equivalent of $ 1.3 billion By reducing these amount of debt to a country it help the country to have more credit on its economy from time to time, because if a country borrows $ 2.1 billion and get the debt relief of $ 1.3 billion this real helps a country on its structure adjustment.
What I think is that the IMF work in some ways to help all poor countries in the world but they also have small side effects for a country which may turn out to be helpful. Example the Tanzania brewer now produce export-quality beer and had shifted from drain on the state treasure to the national largest taxpayer, so it dose work and it’s a good program designed by developing country to help other countries with bad economy.
The big effect which I see about foreign in a country is that they take all businesses or jobs that should be given to the citizens, this lead to increase the number of unemployment.
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