International Monetary Fund

Question

a) Has the IMF been successful in enforcing financially responsible behaviour among nations of the world? Is there a better alternative?

In my opinion, IMF has failed in enforcing financially responsible behaviour among nations of the world because of the changes that they had made in the IMF’s mission, bad economic policies, undertaking structural transformation lending , moral hazard and the ambiguous effects of IMF lending,

Before this, IMF’s original mandate was to promote exchange rate stability, to maintain orderly exchange rate arrangements among members, and to avoid competitive exchange rate depreciations. But now, IMF stated that they working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. At this point we would see IMF try to avoid the disorderly unwinding of global payment imbalances, the IMF chose to play the role of the world economy's cheerleader and to busy itself with IMF internal housekeeping matters. By so doing, the IMF not only risks further denting its already tarnished credibility, but it also risks raising anew fundamental questions about its continued relevance in today's global economy.

The IMF’s policies not only do not work, but often make matters worse for the countries in crisis. Several misdirected and bad economic policies that had been produce was:

• Capital market liberalization. The IMF pressures countries that petition for IMF loans to open their markets to outside investment capital. Rather than help matters, this approach often makes matters worse as it destabilizes the economy of the country as well as the global economy. Investors may invest huge sums in a country only to pull those investments at a moment’s notice, causing acute economic crises.

• Latin America as the template. Many of the ideas of the “Washington Consensus” were based on the experience...