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1. INTRODUCTION TO IMF

International Monetary Fund

The International Monetary Fund (IMF) is an international organization that provides financial

assistance and advice to member countries. The International Monetary Fund (IMF) is the

international organization that oversees the global financial system by following the

macroeconomic policies of its member countries; in particular those with an impact on

exchange rate and the balance of payments. It is an organization formed with a stated objective

of stabilizing international exchange rates and facilitating development through the

enforcement of liberalizing economic policies on other countries as a condition for loans,

restructuring or aid. It also offers loans with varying levels of conditionality, mainly to poorer

countries. Its headquarters are in Washington, D.C., United States. The IMF's relatively

high influence in world affairs and development has drawn heavy criticism from some sources.

The IMF works to foster global growth and economic stability. It provides policy advice and

financing to members in economic difficulties and also works with developing nations to help

them achieve macroeconomic stability and reduce poverty. The International Monetary Fund

was conceived in July 1944 originally with 45 members and came into existence in December

1945 when 29 countries signed the agreement,with a goal to stabilize exchange rates and assist

the reconstruction of the world's international payment system. Countries contributed to a pool

which could be borrowed from, on a temporary basis, by countries with payment imbalances.

The IMF was important when it was first created because it helped the world stabilize the

economic system. The IMF works to improve the economies of its member countries. The IMF

describes itself as "an organization of 187 countries, working to foster global monetary

cooperation, secure financial stability, facilitate international trade, promote high employment

and sustainable economic growth, and reduce poverty".

History

The International Monetary Fund was conceived in July 1944 during the United Nations

Monetary and Financial Conference. The representatives of 45 governments met in the Mount

Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with the

delegates to the conference agreeing on a framework for international economic cooperation.

The IMF was formally organized on December 27, 1945, when the first 29 countries signed its

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Articles of Agreement. The statutory purposes of the IMF today are the same as when they

were formulated in 1943.

The IMF's influence in the global economy steadily increased as it accumulated more

members. The number of IMF member countries has more than quadrupled from the 44 states

involved in its establishment, reflecting in particular the attainment of political independence

by many developing countries and more recently the collapse of the Soviet bloc. The expansion

of the IMFs membership, together with the changes in the world economy, has required the

IMF to adapt in a variety of ways to continue serving its purposes effectively.

At the 2009 G-20 London summit, it was decided that the IMF would require additional

financial resources to meet prospective needs of its member countries during the ongoing

global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMF's

supplemental cash tenfold to $500 billion, and to allocate to member countries another $250

billion via Special Drawing Rights. On October 23, 2010, the Ministers of Finance of G-20,

governing most of the IMF member quotas, agreed to reform IMF and shift about 6% of the

voting shares to major developing nations and countries with emerging markets. As of August

2010 Romania ($13.9 billion), Ukraine ($12.66 billion), Hungary ($11.7 billion) and Greece

($30 billion) are the largest borrowers of the fund.

Organization & Finances

The IMF has a management team and 17 departments that carry out its country, policy,

analytical, and technical work. One department is charged with managing the IMF's resources.

This section also explains where the IMF gets its resources and how they are used. The IMF is

led by a Managing Director, who is head of the staff and Chairman of the Executive Board. He

is assisted by a First Deputy Managing Director and two other Deputy Managing Directors.

The Management team oversees the work of the staff, and maintains high-level contacts with

member governments, the media, non-governmental organizations, think tanks, and other

institutions.

The IMF's resources come mainly from the money that countries pay as their capital

subscription when they become members. Quotas broadly reflect the size of each member's

economy: the larger a country's economy in terms of output and the larger and more variable its

trade, the larger its quota tends to be. For example, the world's biggest economy, the United

States, has the largest quota in the IMF. Quotas, together with the equal number of basic votes

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each member has, determine countries' voting power. They also help determine how much

countries can borrow from the IMF and their share in allocations of special drawing rights or

SDRs (the reserve currency created by the IMF in 1969).Countries pay 25 percent of their

quota subscriptions in SDRs or major currencies, such as U.S. dollars, Euros, pounds sterling,

or Japanese yen. They pay the remaining 75 percent in their own currencies. Quotas are

reviewed every five years and can be increased when deemed necessary by the Board of

Governors. In 2009, the G-20 agreed that the Fund should bring forward the timetable for the

next general quota increase. The next general review was originally scheduled to be completed

by 2013. The agreement now is that it would be completed by January 2011, two years ahead

of schedule. The general quota review provides an opportunity to increase the Funds general

resources and would also provide scope for a further rebalancing of quota and voting shares

toward dynamic emerging markets and other economies.

Membership

The IMF currently has a near-global membership of 187 countries. To become a member, a

country must apply and then be accepted by a majority of the existing members. In June 2009,

the former Yugoslav republic of Kosovo joined the IMF, becoming the institution's 186th

member. Upon joining, each member of the IMF is assigned a quota, based broadly on its

relative size in the world economy. The IMF's membership agreed in May 2008 on a

rebalancing of its quota system to reflect the changing global economic realities, especially the

increased weight of major emerging markets in the global economy.

Members of the IMF are 186 of the UN members and Kosovo. Former members are: Cuba (left

in 1964), Taiwan (expelled in 1980 due to political reasons). The other non-members are:

North Korea, Andorra, Monaco, Liechtenstein, Nauru, Cook Islands, Niue, Vatican City and

the rest of the recognition. All member states participate directly in the IMF. Member states arerepresented on a 24-member Executive Board (five Executive Directors are appointed by the

five members with the largest quotas, nineteen Executive Directors are elected by the

remaining members), and all members appoint a Governor to the IMF's Board of Governors.

All members of the IMF are also IBRD members, and vice versa.

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IMF member states

IMF member states not accepting the some obligations of IMF

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2. GOVERNANCE

The IMF is accountable to the governments of its member countries.

Governance Structure

The IMF's mandate and governance have evolved along with changes in the global economy,

allowing the organization to retain a central role within the international financial architecture.

The diagram below provides a stylized view of the IMF's current governance structure.

Board of Governors

The Board of Governors is the highest decision-making body of the IMF. It consists of one

governor and one alternate governor for each member country. The governor is appointed by

the member country and is usually the minister of finance or the head of the central bank.

While the Board of Governors has delegated most of its powers to the IMF's Executive Board,

it retains the right to approve quota increases, special drawing right (SDR) allocations, the

admittance of new members, compulsory withdrawal of members, and amendments to the

Articles of Agreement and By-Laws.

The Board of Governors also elects or appoints executive directors and is the ultimate arbiter

on issues related to the interpretation of the IMF's Articles of Agreement. Voting by the Board

of Governors usually takes place by mail-in ballot.

The Boards of Governors of the IMF and the World Bank Group normally meet once a year,

during the IMF-World Bank Spring and Annual Meetings, to discuss the work of their

respective institutions. The Meetings, which take place in September or October, have

customarily been held in Washington for two consecutive years and in another member country

in the third year.

Governance Reform

Important progress was made in the reform of the Fund's governance in 2006-08, including the

initiation of a process to realign members' voting power (see Country Representation).

However, enhancing the Fund's legitimacy and effectiveness must also deal with the question

of whether the significant changes since the establishment of the Fund require reform of the

institutional framework through which members' voting power is actually exercised. Among

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other things, this requires careful consideration of the respective roles and responsibilities of

the Board of Governors, the IMFC, the Executive Board, and IMF management. Governance

reform is currently being accelerated.

In April 2009, the International Monetary and Financial Committee (IMFC), which advises on

IMF policies, called for a prompt start to a fresh review of quotas (the Fourteenth General

Review), and in April 2010 the IMFC requested completion of the review before January 2011

some two years ahead of the original schedule. The Fourteenth General Review is now

underway and will address the realignment of quota shares and the size of the overall quota

increase. In October 2009, the IMFC endorsed a call by G-20 leaders for a shift in quota share

to dynamic emerging market and developing countries of at least five percent from over-

represented to under-represented countries using the current quota formula as the basis to work

from. In addition, there is a commitment to protecting the voting share of the poorest members.

3. ROLE OF IMF

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The International Monetary Fund is a global organisation founded in 1944. It aims was to help

stabilise exchange rates and provide loans to countries in need. Nearly all members of the

United Nations are members of the IMF with a few exceptions such as Cuba, Lichtenstein and

Andorra. The IMF is independent of the World Bank although both are United Nations

agencies and both are aiming to increase living standards. The World Bank concentrates on

long term loans to developing countries. Some Main Functions of IMF are:

Functions of IMF

International Monetary Cooperation

Promote exchange Rate stability

To help deal with Balance of Payments adjustment

Help Deal With Economic Crisis by providing international coordination

What the IMF does

With its near-global membership of 187 countries, the IMF is uniquely placed to help member

governments take advantage of the opportunitiesand manage the challengesposed by

globalization and economic development more generally. The IMF tracks global economic

trends and performance, alerts its member countries when it sees problems on the horizon,

provides a forum for policy dialogue, and passes on know-how to governments on how to

tackle economic difficulties. The IMF provides policy advice and financing to members in

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economic difficulties and also works with developing nations to help them achieve

macroeconomic stability and reduce poverty.

Marked by massive movements of capital and abrupt shifts in comparative advantage,

globalization affects countries' policy choices in many areas, including labour, trade, and tax

policies. Helping a country benefit from globalization while avoiding potential downsides is an

important task for the IMF. The global economic crisis has highlighted just how interconnected

countries have become in todays world economy.

Key IMF activities: The IMF supports its membership by providing

policy advice to governments and central banks based on analysis of economic trends

and cross-country experiences;

research, statistics, forecasts, and analysis based on tracking of global, regional, and

individual economies and markets;

loans to help countries overcome economic difficulties;

concessional loans to help fight poverty in developing countries; and

Technical assistance and training to help countries improve the management of theireconomies.

Original aims: The IMF was founded more than 60 years ago toward the end of World War

II. The founders aimed to build a framework for economic cooperation that would avoid a

repetition of the disastrous economic policies that had contributed to the Great Depression of

the 1930s and the global conflict that followed.

Since then the world has changed dramatically, bringing extensive prosperity and lifting

millions out of poverty, especially in Asia. In many ways the IMF's main purposeto

provide the global public good of financial stabilityis the same today as it was when the

organization was established. More specifically, the IMF continues to

provide a forum for cooperation on international monetary problems

facilitate the growth of international trade, thus promoting job creation, economic

growth, and poverty reduction;

promote exchange rate stability and an open system of international payments; and

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Lend countries foreign exchange when needed, on a temporary basis and under

adequate safeguards, to help them address balance of payments problems.

How they do it

The IMF's main goal is to ensure the stability of the international monetary and financial

system. It helps resolve crises, and works with its member countries to promote growth and

alleviate poverty. It has three main tools at its disposal to carry out its mandate: surveillance,

technical assistance and training, and lending. These functions are underpinned by the IMF's

research and statistics.

Surveillance:

The IMF promotes economic stability and global growth by encouraging countries to adopt

sound economic and financial policies. To do this, it regularly monitors global, regional, and

national economic developments. It also seeks to assess the impact of the policies of individual

countries on other economies.

This process of monitoring and discussing countries economic and financial policies is known

as bilateral surveillance. On a regular basisusually once each yearthe IMF conducts in

depth appraisals of each member country's economic situation. It discusses with the country's

authorities the policies that are most conducive to a stable and prosperous economy. Consistent

with the decision on bilateral surveillance adopted in June 2007, the main focus of the

discussions is whether there are risks to the economys domestic and external stability that

would argue for adjustments in economic or financial policies.

Technical assistance and training:

IMF offers technical assistance and training to help member countries strengthen their capacityto design and implement effective policies. Technical assistance is offered in several areas,

including fiscal policy, monetary and exchange rate policies, banking and financial system

supervision and regulation, and statistics.

The IMF provides technical assistance and training mainly in four areas:

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Monetary and financial policies (monetary policy instruments, banking system

supervision and restructuring, foreign management and operations, clearing settlement

systems for payments, and structural development of central banks)

Fiscal policy and management (tax and customs policies and administration, budget

formulation, expenditure management, design of social safety nets, and management of

domestic and foreign debt)

Compilation, management, dissemination, and improvement of statistical data

Economic and financial legislation.

Lending

In the event that member countries experience difficulties financing their balance of payments,

the IMF is also a fund that can be tapped to facilitate recovery. A policy program supported by

financing is designed by the national authorities in close cooperation with the IMF. Continued

financial support is conditional on the effective implementation of this program.

The IMF also provides low-income countries with loans at a concessional interest rate through

the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Facility (ESF).

Research and data

Supporting all three of these activities is the IMF's economic and financial research and

statistics. In recent years, the IMF has applied both its surveillance and technical assistance

work to the development of standards and codes of good practice in its areas of responsibility,

and to the strengthening of financial sectors. These are part of the IMF's continuing efforts to

strengthen the international financial system and improve its ability to prevent and resolve

crises.

4. SPECIAL DRAWING RIGHTS (SDR)

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The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate

system. A country participating in this system needed official reservesgovernment or central

bank holdings of gold and widely accepted foreign currenciesthat could be used to purchase

the domestic currency in foreign exchange markets, as required maintaining its exchange rate.

But the international supply of two key reserve assetsgold and the U.S. dollarproved

inadequate for supporting the expansion of world trade and financial development that was

taking place. Therefore, the international community decided to create a new international

reserve asset under the auspices of the IMF.

However, only a few years later, the Bretton Woods system collapsed and the major currencies

shifted to a floating exchange rate regime. In addition, the growth in international capital

markets facilitated borrowing by creditworthy governments. Both of these developments

lessened the need for SDRs.

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the

freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in

exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges

between members; and second, by the IMF designating members with strong external positions

to purchase SDRs from members with weak external positions. In addition to its role as a

supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other

international organizations.

Basket of currencies determines the value of the SDR

The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold

which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton

Woods system in 1973, however, the SDR was redefined as a basket of currencies, today

consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-

equivalent of the SDR is posted daily on the IMFs website. It is calculated as the sum of

specific amounts of the four basket currencies valued in U.S. dollars, on the basis of exchange

rates quoted at noon each day in the London market. The basket composition is reviewed every

five years by the Executive Board to ensure that it reflects the relative importance of currencies

in the world's trading and financial systems.

The SDR interest rate

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The SDR interest rate provides the basis for calculating the interest charged to members on

regular (non-concessional) IMF loans, the interest paid to members on their SDR holdings and

charged on their SDR allocations, and the interest paid to members on a portion of their quota

subscriptions. The SDR interest rate is determined weekly and is based on a weighted average

of representative interest rates on short-term debt in the money markets.

5. CURRENT AGENDAS OF IMF

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Tackling current challenges

The IMF is helping many emerging market countries tackle the problems brought on by the

devastating global economic crisis. Its lending to low-income countries has also been stepped

up, as these countries start to feel the effects of the crisis. And it is providing policy advice to

advanced countries, for instance on how to address problems in their financing and banking

sectors, and how to design effective stimulus packages. As part of its response, the IMF has

already more than doubled its financial assistance to low-income countries, with new IMF

concessional lending commitments to low-income countries through mid-July 2009 reaching

$2.9 billion compared with $1.5 billion for the whole of 2008.

As the global economy continues to struggle in 2009, and with both trade and capital flows

plummeting, the IMF is foreseeing mounting problems for many countries. The Fund is

therefore seeking to add to its resources, and has already negotiated borrowing agreements with

a number of countries. The Fund has already made good progress toward its target of $250

billion in bilateral government loans as part of moves to triple the IMFs lendable resources to

$750 billion. Agreements are already in place with Japan ($100 billion), Canada ($10 billion),

and Norway ($4.5 billion), and a number of other countries have committed funds either

through loans or the purchase of IMF notes.

In addition, the Fund is closely tracking economic and financial developments worldwide so

that it can provide policymakers with the latest forecasts and analysis of developments in

financial markets. And it is engaging with the Group of 20 (G-20) leading economies and other

stakeholders on issues related to the evolution of the international financial system. Currently

IMF main Agendas are:

Emergency lending to emerging markets

Emerging market countries are facing increasing difficulties around the world because of the

spreading global economic crisis, with demand falling for their exports, investment slumping,

and cross-border lending drying up. A growing number of emerging economies have found

room for policy manoeuvre becoming increasingly limited, and large-scale official support has

been needed from bilateral and multilateral sources.

Since 2008, the IMF has committed more than $160 billion in lending to a number of countries

affected by the crisis, including Belarus, Hungary, Iceland, Latvia, Pakistan, Poland, Romania,

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Serbia, Sri Lanka, and Ukraine. It announced a precautionary loan for El Salvador and an IMF

team has also been in negotiations with Turkey.

Helping low-income countries fight the crisis

The global economic crisis is threatening to undermine recent economic gains and to create a

humanitarian crisis in the worlds poorest countries. In response, the IMF has stepped up

lending to low-income countries to combat the impact of the global recession with a new

framework for loans to the worlds poorest nations, including increased resources, a doubling

of borrowing limits, zero interest rates until the end of 2011, and new lending instruments that

offer more flexible terms. Most low-income countries escaped the early phases of the global

crisis, which began in the financial sectors of advanced economies. But it is now hitting them

hard, mainly through trade, as financial problems in advanced countries trigger recessions that

dampen demand for imports from low-income countries.

In addition, more than $18 billion of a planned $250 billion allocation of IMF Special Drawing

Rights (SDRs) will go to low-income countries. These countries can benefit by either counting

the SDRs as extra assets in their reserves, or selling their SDRs for hard currency to meet

balance of payments needs.

Reforming the international financial system

The global economic crisis has sparked a rethinking of how the international financial system is

structured. The IMF is assisting the G-20 industrialized and emerging economies with

recommendations to reshape the system of international regulation and governance. To a large

extent, global efforts thus far have been focused on the crisis at hand, but reforms are in

progress with a view toward the post-crisis world.

As input into the reform process, the IMF published a comprehensive study of the causes of the

global financial crisis. The study takes stock of the initial lessons learnt from the crisis and

presses for a worldwide rethink of how to handle systemic risk management.

Although economic and financial sector policies will remain primarily the business of national

governments, ongoing changes to the global financial architectureincluding to the IMFcan

reduce the frequency and depth of future crises. Additional changes could also include

addressing some of the shortcomings of the decision-making structure of the G-20 by allowing

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greater scope for joint decision making on a wider set of international economic and financial

issues, with the IMF in its newly expanded role as a central player.

6. THE IMF AND ITS CRITICS

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Over time, the IMF has been subject to a range of criticisms, generally focused on the

conditions of its loans. The IMF has also been criticised for its lack of accountability and

willingness to lend to countries with bad human rights record. Two criticisms from economists

have been that financial aid is always bound to so-called "Conditionalities", including

Structural Adjustment Programs (SAP). It is claimed that conditionalities (economic

performance targets established as a precondition for IMF loans) retard social stability and

hence inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an

increase in poverty in recipient countries. Many Criticisms of IMF include:

1. Conditions of Loans:

On giving loans to countries, the IMF makes the loan conditional on the

implementation of certain economic policies. These policies tend to involve:

Reducing government borrowing - Higher taxes and lower spending

Higher interest rates to stabilize the currency.

Allow failing firms to go bankrupt.

Structural adjustment. Privatization, deregulation, reducing corruption and bureaucracy.

The problem is that these policies of structural adjustment and macroeconomic

intervention make the situation worse.

For example, in the Asian crisis of 1997, many countries such as Indonesia, Malaysia

and Thailand were required by IMF to pursue tight monetary policy (higher interest

rates) and tight fiscal policy to reduce the budget deficit and strengthen exchange rates.

However, these policies caused a minor slowdown to turn into a serious recession with

mass unemployment.

In 2001, Argentina was forced into a similar policy of fiscal restraint. This led to a

decline in investment in public services which arguably damaged the economy.

2. Exchange Rate Reforms:

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When the IMF intervened in Kenya in the 1990s, they made the Central bank remove

controls over flows of capital. The consensus was that this decision made it easier for

corrupt politicians to transfer money out of the economy (known as the Goldman

scandal). Critics argue this is another example of how the IMF failed to understand the

dynamics of the country that they were dealing with - insisting on blanket reforms.

The economist Joseph Stieglitz has criticised the more monetarist approach of the IMF

in recent years. He argues it is failing to take the best policy to improve the welfare of

developing countries saying the IMF "was not participating in a conspiracy, but it was

reflecting the interests and ideology of the Western financial community."

3. Devaluations

In earlier days, the IMF have been criticised for allowing inflationary devaluations.

4. Neo Liberal Criticisms

There is also criticism of neo liberal policies such as privatisation. Arguably these free

market policies were not always suitable for the situation of the country. For example,

privatisation can create lead to the creation of private monopolies who exploit

consumers.

5. Free Market Criticisms of IMF

As well as being criticised for implementing 'free market reforms' other cities the IMF

for being too interventionist. Believers in free markets argue that it is better to let

capital markets operate without attempts at intervention. They argue attempts to

influence exchange rates only make things worse - it is better to allow currencies to

reach their market level.

There is also a criticism that bailout countries with large debt create moral hazard.

Because of the possibility of getting bailed out it encourages people to borrow more.

6. Lack of Transparency and involvement:

The IMF have been criticised for imposing policy with little or no consultation with

affected countries.

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Jeffrey Sachs, the head of the Harvard Institute for International Development said:

"In Korea the IMF insisted that all presidential candidates immediately "endorse" an

agreement which they had no part in drafting or negotiating, and no time to understand.

The situation is out of hand...It defies logic to believe the small group of 1,000

economists on 19th Street in Washington should dictate the economic conditions of life

to 75 developing countries with around 1.4 billion people." \

7. Supporting Military dictatorships:

The IMF have been criticised for supporting military dictatorships in Brazil and

Argentina, such as Castillo Branco in 1960s received IMF funds denied to other

countries.

Response to Criticism of IMF

Crisis Always lead to some Difficulties:

Because the IMF deal with economic crisis, whatever policy they offer, there is likely

to be difficulties. It is not possible to deal with a balance of payments without some

painful readjustment.

IMF has had Some Successes:

The Failures of the IMF tend to be widely publicised. But, its successes less so. Also

criticism tends to focus on short term problems and ignores longer term view

Confidence:

The fact there is a lender of last resort provides an important confidence boost for

investors. This is important during current financial turmoil.

Countries are not Obliged to take an IMF loan:

It is countries that approach the IMF for a loan. The fact so many take loans suggests

there must be at least some benefits of the IMF.

IMF Easy target:

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Sometimes countries may want to undertake painful short term adjustment but there is

a lack of political will. An IMF intervention enables the government to secure a loan

and then pass the blame on to the IMF for the difficulties.

Overall, the IMF success record is perceived as limited. While it was created to help

stabilize the global economy, since 1980 critics claim over 100 countries (or reputedly

most of the Fund's membership) have experienced a banking collapse that they claim

have reduced GDP by four percent or more, far more than at any time in Post-

Depression history. The considerable delay in the IMF's response to any crisis, and the

fact that it tends to only respond to them (or even create them) rather than prevent

them, has led many economists to argue for reform. In 2006, an IMF reform agenda

called the Medium Term Strategy was widely endorsed by the institution's member

countries. The agenda includes changes in IMF governance to enhance the role of

developing countries in the institution's decision-making process and steps to deepen

the effectiveness of its core mandate, which is known as economic surveillance or

helping member countries adopt macroeconomic policies that will sustain global

growth and reduce poverty. On June 15, 2007, the Executive Board of the IMF adopted

the 2007 Decision on Bilateral Surveillance, a landmark measure that replaced a 30-

year-old decision of the Fund's member countries on how the IMF should analyze

economic outcomes at the country level.

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7. IMPACT OF IMF ON VARIOUS FACTORS

The IMF policies and rules have an impact on some factors like access to food, environment,

public health etc.:

Impact on access to food

A number of civil society organizations have criticized the IMF's policies for their impact on

people's access to food, particularly in developing countries. In October 2008, former US

President Bill Clinton joined this chorus in a speech to the United Nations World Food Day,

which criticized the World Bank and IMF for their policies on food and agriculture.

Impact on public health

In 2008, a study by analysts from Cambridge and Yale Universitys published on the open-

access Public Library of Science concluded that strict conditions on the international loans by

the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health carehad to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths

rose by 16.6%.

In 2009, a book by Rick Rowden titled, The Deadly Ideas of Neoliberalism: How the IMF has

Undermined Public Health and the Fight Against Aids, claimed that the IMF's monetarist

approach towards prioritizing price stability (low inflation) and fiscal restraint (low budget

deficits) was unnecessarily restrictive and has prevented developing countries from being able

to scale up long-term public investment as a percent of GDP in the underlying public health

infrastructure. The book claimed the consequences have been chronically underfunded public

health systems, leading to dilapidated health infrastructure, inadequate numbers of health

personnel, and demoralizing working conditions that have fuelled the "push factors" driving the

brain drain of nurses migrating from poor countries to rich ones, all of which has undermined

public health systems and the fight against HIV/AIDS in developing countries.

Impact on environment

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IMF policies have been repeatedly criticized for making it difficult for indebted countries to

avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal and forest-

destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice

repeatedly in order to pursue the protection of its rain forests, though paradoxically this need

was cited in IMF argument to support that country. The IMF acknowledged this paradox in a

March 2010 staff position report which proposed the IMF Green Fund, a mechanism to issue

Special Drawing Rights directly to pay for climate harm prevention and potentially other

ecological protection as pursued generally by other environmental finance.

Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of

supply-side economics generally find themselves in open disagreement with the IMF. The IMF

frequently advocates currency devaluation, criticized by proponents of supply-side economics

as inflationary. Secondly they link higher taxes under "austerity programmes" with economic

contraction.

Currency devaluation is recommended by the IMF to the governments of poor nations with

struggling economies. Some economists claim these IMF policies are destructive to economic

prosperity.

Complaints have also been directed toward the International Monetary Fund gold reserve being

undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy ounce of gold.

In 1973, the administration of US President Richard Nixon lifted the fixed asset value of gold

in favour of a world market price. This need to lift the fixed asset value of gold had largely

come about becausePetrodollars outside the United States were worth more than could be

backed by the gold at Fort Knox under the fixed exchange rate system.Following this, the fixed

exchange rates of currencies tied to gold were switched to a floating rate, also based on market

price and exchange. The fixed rate system had only served to limit the nominal amount of

assistance the organization could provide to debt-ridden countries.

In the media

Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica and its

economy from a critical point of view. The Debt of Dictators explores the lending of billions of

dollars by the IMF, World Bank multinational banks and other international financialinstitutions to brutal dictators throughout the world.

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8. INDIA AND THE IMF

IMF Survey: India: Rapid Growth with Promising Medium-term Prospects

With robust growth spurring elevated levels of inflation, India should speed up its return to pre-

crisis monetary and fiscal policies to keep the economy in check, suggests the IMF in its annual

assessment of one of the worlds fastest growing economies.

In its report on the Indian economyknown as the Article IV consultationIMF economists

said they expect the South Asian country to grow above trend this year, with high levels of

growth continuing over the medium term We expect real GDP to grow 8 percent in 2010/11,

with robust growth supported by high investment in infrastructure and productivity gains, said

the IMFs mission chief for India, Masahiko Takeda.

India weathered the recent global financial crisis well, and since mid-2009 domestic demand

has powered a vigorous recovery. The countrys growth rate remains among the strongest in

the world.

Toward a more normal policy stance

In its report, the IMF backed the authorities policy of exiting from the stimulus implemented

in the past two years. But this exit strategy remains incomplete. Given the high level of

government debt, existing strong domestic demand, and large capital inflows, IMF economists

said that fiscal policy is the preferred method for tightening. The IMF also supported the

objective to raise public investment, especially in infrastructure, and to improve social

outcomes. The challenge will be to make savings elsewhere to meet these objectives while

remaining on the consolidation path.

Tackling inflation

The IMF report also recommends further tightening monetary policy to meet the authorities

inflation objectives and anchor inflation expectations.

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With little or no spare capacity in the economy, coupled with the threat of rising food prices,

inflation is currently elevated in the range of 810 percent. Inflation is expected to come

down slowly as last years high food prices caused by poor rainfall drop out of the inflation

calculation, but underlying price pressures are still strong, say IMF economists. Over the last

year, the authorities have raised policy rates and the cash reserve requirement, but further

increases in policy rates would help bring real short-term interest rates in line with historical

norms, and help contain inflation, they add.

Capital inflows fund current account deficit

The current account deficit is projected to reach 3.3 percent of GDP in 2010/11 and 3.5 percent

next year, say the economists in their report. The deficit has so far been financed mainly by

foreign direct investment and equity inflows, but the authorities need to keep an eye on the

level of the current account deficit. As the deficit rises, so does the potential impact of a sudden

stop or reversal of capital flows. Another risk is that the scale of the inflows could exceed

Indias capacity to absorb them.

In this event, IMF economists suggest that exchange rate appreciation should remain the first

line of defence. If appreciation becomes too large, intervention in the foreign exchange market

or macro prudential measures could also be taken.

Meeting infrastructure targets

Infrastructure investment has grown rapidly in India over the past few years, and the authorities

plan to double the money spent on this sector from $500 billion in the five years ending

2011/12 to $1 trillion in the following half a decade. Private participation is expected to

account for half of the total.

Increased infrastructure spending should sustain higher growth, but there are several obstacles

to achieving set targets. These include availability of financing, land acquisition, multiple

clearances, capacity constraints, and governance issues along with various sector-specific

concerns.

The IMF believes structural reforms in these areas are needed to lower the cost of

infrastructure, encourage private investment, and allow more efficient use of public resources.

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9. CONCLUSION

The IMF collaborates with the World Bank, the regional development banks, the World TradeOrganization (WTO), UN agencies, and other international bodies to work globally.

IMF makes resources of the Fund available to members. Foster economic growth and

high levels of employment.

IMF promotes international monetary cooperation, expansion and balanced growth of

international trade.

The IMF works to foster global growth and economic stability. It provides policy

advice and financing to members in economic difficulties and also works with

developing nations to help them achieve macroeconomic stability and reduce poverty.

The suggestion could be that IMF should deeply study the economic condition of the

countries and should design and implement the best policy to handle the economic

difficulties. IMF should not force the counties to adopt the policies offered by him. IMF

must involve the affected country to while decision or policy making process.

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10. BIBLIOGRAPHY

http://www.imf.org/external/

http://en.wikipedia.org/wiki/International_Monetary_Fund

http://business.mapsofindia.com/finance-ministry/imf.html

http://www.britannica.com/EBchecked/topic

International Marketing By

>Sak Onkvisit>John J. Shaw

http://www.imf.org/external/http://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://business.mapsofindia.com/finance-ministry/imf.htmlhttp://www.britannica.com/EBchecked/topichttp://www.imf.org/external/http://en.wikipedia.org/wiki/International_Monetary_Fundhttp://business.mapsofindia.com/finance-ministry/imf.htmlhttp://www.britannica.com/EBchecked/topic