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Is the IMF Superfluous and Unnecessary?

Similar to the recession faced in recent years by the United States as well as the rest of the world, people looking for and interested in receiving loans has been infinitesimal. After the U.S. crisis, despite low interest rates, matching lenders and buyers in a way where both can successfully lend and borrow was a arduous task. This was a hindrance the economy faced and attempted to address only to realize how complex this process truly is. Recently, due to many reports from the IMF, members arouse the idea of a “stigma” associated with borrowing funds to help prevent countries looming in financial and credit doom. New efforts by the IMF have attempted to reach out to countries in these categories but to their own surprise, lending requests has not been what they envisioned.

New lending programs have aimed toward countries with “good” economic policies but may need assistance to battle investor jitters and contagions. Country’s affected by new changes and expectations of emerging markets were the ideal image of who may need access to this extra funding but contrary to this, few countries have sought out the IMF. Countries such as Morocco, Poland, Mexico, and Poland were the only countries who signed up. This Flexible rollout Credit line was a potential backboard for emerging-market economies stressed by the global credit squeeze, and a Precautionary and Liquidity Line was another program aimed to help whoever might need it. Instead, countries have been stocking up on reserves and countries in the IMF region have amassed $6 trillion in foreign exchange reserves. Additionally, a new program called the Rapid Financing Instrument has yet to be tested and as situations worsen in Ukraine, this may be the first subscriber.

This so called “stigma” has been engendered by past IMF transactions including the IMF’s attempts to help China in the 1990’s. Still to this day, many Asians believe that the economic situations were only further hampered by the IMF’s notion of deep budget cuts and stringent monetary policy. Many countries now hope to never have to call upon the IMF for further help, but still the IMF does not seem to be truly impairing on a countries well being, albeit it is not a perfect system. In the future, the IMF plans to aim its progressive policies towards countries to keep them abreast of how they work and encourage more countries to sign up. How much will they be able to help countries needing assistance in the future? We will have to see how global conditions are maintained and the volatility of the market may help predict if they are truly and needed organization.

One Comment

  1. gjeong gjeong

    As a witness of the 1997 Asian financial crisis, I do not trust IMF (or I should say they are cruel…) It makes sense that if you borrow some money from somebody, then you should follow some of their rules. However, IMF’s rules were so cruel that not many people liked it (like what his post talks about). I doubt that IMF will change to truly help that countries that need help.

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