The International Monetary Fund's Advantages And Shortcomings

2226 words - 9 pages

The International Monetary Fund (IMF) is an organization of international that was started in 1944 at the Bretton Woods Conference and it officially was created by 29 members of countries on December 27, 1945. A fixed exchange rate system set up in Bretton Woods Agreement in which each country the IMF par value for the currency based on gold and the U.S. dollar. By reason of the dollar was fixed at $ 35 per ounce of gold, is also the same par value regardless of gold or dollars were used as basis. When the IMF moved to greater exchange-rate flexibility, the par values were also done away with it. The existence of economic stabilization program supported by the Fund, the IMF could provide a source other financing to countries that really need financial.
Funds raised from the IMF have two primary sources such as quotas and loans. Funds raised otherwise known as the countries have created most of the funds of the IMF. The size of the quota depends on the importance of the use of budgetary and fiscal policies in the world for example; the countries with the financial vitality of the greater also have a greater standard. An act to increase IMF resources is the development quota. The IMF has also raised funds for loans from countries other members. In fact, the IMF also have credit lines with other major industrial countries and Saudi Arabia.
IMF can work through three types. One of these is the surveillance which it involves monitoring the in terms of an economic and financial development, and was also monitoring in advising on policies aimed especially at crisis prevention. Since the dissolution of the Bretton Woods system of fixed exchange rates in the early 1970s, surveillance has expanded up largely through changes in procedure than by the adoption of new obligations. (Biagio Bossone, 2008). Furthermore, IMF also contributes money through a quota system to a pool from which countries that with payment imbalances, to provide temporary financing and to support policies that aimed at correcting the under laying problems. The basic problem that may be faced is loans to low-income countries that intended to reduce the poverty rate. The IMF had credit and loans outstanding to 92 countries for an amount of SDR 50.4 billion (about $66.5 billion): 6.6 billion went to Africa, 18.1 billion went to Asia, 16.1 billion went to Europe, 0.6 billion went to the Middle East, 9.0 billion went to western Hemisphere until April 30, 2000. Moreover, in the area of expertise of the IMF, it can also help countries through technical assistance and training. IMF also act as technical assistance, training and support to countries in several broad areas by enhancing their capacity to design and implement the fiscal and economic policies, in handling and improving public sector accountability, and in building the policymaking institutions effectively.
In the 1990s, the economy of Asian “Tigers” such as Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea,...

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