The International Monetary Fund
According to the IMF website, The International Monetary Fund (IMF) carries out surveillance, lending, and technical assistance to developing countries and countries with balance of payment difficulties. Essentially the IMF is considered the “Global Fund of Last Resort.” Established in August of 1944 during the United Nations Monetary and Financial Conference, the IMF is funded by its current 185 member nations. Countries with payment imbalances borrow from the fund, temporarily, at an average rate of 3.49%. The “Conditionalities” of membership arguably produce worse outcomes for the troubled nations in need.
As an example, troubled nations must sell national assets, including natural resources, often to corporations, for pennies on the dollar, as a condition for aid. The IMF is headquartered in Washington D.C. and the U.S. has exclusive veto power within the IMF. In 2008, the IMF fell short of its budget by $400 million. During the 2009 G-20 summit, the IMF budget was tripled to $1 trillion. The IMF has gained criticism from economists and current member nations. Many argue that the IMF causes a certain degree of isolationism and a false sense of security within nations that would otherwise cleanse their economies by making genuine improvements, which hardly ever starts out for the best of every individual, but creates an opportunity to emerge stronger in areas such as innovation and financial management.
The situation is analogous to an individual person coming into hard times, but it just so happens they have a rich uncle that gives them however much many they feel they need to get back on their feet. Even if the rich uncle did not want interest paid or special favors, still, what did the person learn from the situation? But maybe that person, or country, just needed that one bailout. The implications are far greater than the simple example provided.
The conditionalities of borrowing money from the IMF may have a grave impact on the future development of a nation. Although conditions may seem to become better, obviously, from a sudden massive influx of capital, the conditions of repayment and distribution of resources may prove to be more in favor of those whom invested in the country, rather than the country needing help from the, seemingly, international community.
Click here to read more in depth information on the International Monetary Fund, such as its Articles of Agreement and arguments for and against the Fund.