IMF History and Structure
TheIMF is a global organization whose primary purpose is to maintainfinancial stability, promote international trade, foster economicgrowth and elevate the living standards of developing nations. The20th century was a difficult period for all nations around the world.It was during this period that the world was experiencing an economiccrisis through what was termed as the Great Depression. Moreover,the two world wars were happening a situation that contributed to thecollapsing of the global economic system. In February 1944,delegates from 44 Allied nations met in Washington, DC to discussmeasures that would save the world from the crisis it was facing(Yago, Asai and Itoh 250). The main agenda of the meeting was tocreate policies that would restore the world’s financial andeconomic order. The primary debate was between the United States andthe United Kingdom. While the UK proposed a fund that could helpall states economically in times of crisis, the United States wantedan organization that would perform like a bank. It also wanted aninstitution that would allow nations to borrow money as a loan thatwould be repaid in agreed period.
TheUnite States won the motion and in December 1945 the IMF was founded. Later, Articles of Agreement were signed by twenty-nine membernations. In 1946, another meeting was convened to elect the executivedirectors, decide the permanent headquarters for the organization anddraft the bylaws (Yago, Asai and Itoh 256). The board of directorsappointed Washington DC as the headquarter for IMF and financialoperations of the organization began in March 1947.
Justlike any other organization, the IMF has an organizationalstructure that helps it to run smoothly. The board of directors isthe topmost authority in the IMF. It has one governor and alternategovernors from who are elected from countries that are members of theIMF.Moreover, the alternate governors are also the financeministers of the central banks in their respective countries. Fromthe board of governors, the second in command is the MinisterialCommittees.The major responsibility of the committees is toprovide legal advice to the board of directors on critical mattersthat need urgent attention. The committee is comprised of twenty-fourmembers who are selected from all states and members of the IMF. Last in the hierarchy of authority is the Executive Board, whichcomprise of twenty-four members are responsible for conducting dailybusiness at the International Monetary Fund (Yago, Asai and Itoh286). In most cases, they use the authority delegated to them by theboard of directors to make decisions at the IMF.
TheIMF has played an integral role in helping countries to build theirdomestic economies. For instance, it has helped many nations toclear their balance of payment deficit. It has also helped nations informulating new economic policies. Moreover, the institution has beena loan lender to nations experiencing a financial crisis. Additionally, the institution provides technical assistance tonations that need practical training in financial management. Thetechnical aid is very crucial for a country as it helps inredesigning of the financial, structural and economic policies. TheIMF provides approximately 80 percent of its technical assistance tostates that are indebted.
Furthermore,IMF supervises both the fiscal and economic policies of its memberstates. The institution oversees the national and internationaleconomic developments of its member nations. This process ofsupervising the economic performance of a country is referred to assurveillance. The IMF provides three forms of surveillance whichinclude global surveillance, regional surveillance, and nationalsurveillance (Yago, Asai and Itoh 280). In national surveillance, ateam from the IMF is sent country to country to investigate theeconomic and financial policies. Regional surveillance involves theregulation of different currencies such as the euro and dollars.Finally, global surveillance entails carrying out an investigation inregards to the internal economic trends.
CriticismsAgainst the IMF
Despitethe many advantages the IMF has brought to its member countries, ithas various reasons to be opposed. Critics argue that the IMF hascreated a modern day colonialism that continues to oppress the pooreven more. The IMF has established debt repayment policies thatrequire its members to reduce their spending. Therefore, thegovernments are forced to reduce their spending on healthcare,education and transportation subsidies. In some situations, thegovernment is required to freeze wages, privatize state assets anddevalue currency aiming at meeting the conditions placed by the IMFregarding the debt repayment. With such policies, poverty indeveloping countries continues to increase while countries’capacity to create strong domestic economies is reduced. Additionally, critics argue that the IMF only serves the wealthynations. The developed nations who are members of the institution aresaid to control the decision -making and policy making (Yago, Asaiand Itoh 300). The voting power is determined by the amount of moneydeposited in the quota system of IMF. Additionally, the IMF isconsidered as a secretive organization that has no accountability. When making policies the institution only works people from thefinance ministry and central bank, and it does not considercontributions from other government offices such as environment,health, education among others.
Yago,Kazuhiko, Yoshio Asai and Masanao Itoh. History of the IMF:Organization, policy, and market. New York: Springer, 2015.