The Role of IMF and Its Impact on Public Policy - PowerPoint Presentation Example

China and South Korea are emerging as superior world economies in the world today. This necessitates the need to establish the role played by the IMF in promoting these countries' development.

Basic information of IMF

IMF is an international organization that was established in the post world war II period. The aim of its establishment was to enhance the stability of foreign exchange. It was also meant to create a channel through which international payment systems would be reconstructed. This followed the disruption of the payment systems during World War II. Initially, it had a membership of 44 countries. However, its membership stands at 188 in the present day. The member countries contribute towards a common pool, from which countries with deficits can borrow. The roles of the IMF have also changed, including financial and technical assistance to affected member countries.

Role of IMF in East Asia

The effects of the IMF in East Asia are innumerable. However, the most significant is the assistance of these countries during the financial crisis of East Asia in 1997. Nevertheless, the critics of this role argue that the IMF did not save the situation. They argue that the higher interest rates charged, the tight monetary policies issued and the forced cut in the government budget worsened the situation. However, it is apparent that the financial bailouts given to these countries by the IMF helped them to recover from the crisis.

IMF’s effect on public policy in China

The IMF has influenced China’s public policy in various ways. It maintains and engages in policy dialogue with the Chinese authorities. It helps the Chinese government refine it's economic and structural refer issues. The IMF identifies and monitors economic development in China. It helps the Chinese government and authorities undertake developmental and policy implementations. It achieves this through exchanging views regarding these issues.

Economic growth/situation in China before and after it joined the IMF

The economic situation of China has changed since it joined IMF. China has grown immensely both economically and socially since joining the IMF. It has increased its ranking to become the 3rd powerful country in the IMF.  Its contribution towards supporting the IMF has grown significantly.

IMF’s effect on public policy in South Korea

The effects of the IMF on South Korea are a mixture of positive and negative impacts. It is argued that the bailout that the IMF granted South Korea during the East Asia financial crisis has helped them recover from the crisis. The negative impact is that it influenced Korean policies negatively. IMF forced South Korea to open up its financial markets. This brought up foreign banks that bought the local ones, hindering the domestic growth of the financial sector. IMF caused the increase in South Korea’s NHI deficit due to poor policy intervention from 1997 to 2002. The high-interest rate charged by the IMF on the funds lend to South Korea caused a further financial slump for South Korea.

Economic growth/situation in South Korea before and after it joined the IMF

The situation of South Korea is noted to have deteriorated from the time it joined the IMF. Although it benefited and experienced economic in the initial years of joining the IMF. However, in the periods after the East Asia financial crisis of 1997, the state of South Korea worsened, although it has now recovered. This deterioration of South Korea’s financial situation is attributed to poor policy intervention of the IMF after the crisis. The high interest charged by IMF also worsened the situation.

Similarities and differences between China's and Korea's economic transition

Similarities

Both countries have benefited from financial and technical assistance from the IMF. This has caused economic growth and development.

Differences

The policy interventions by IMF during the East Asia worsened the financial status of South Korea but did not alter that of China.

China has experienced higher economic growth than South Korea since joining the IMF.

Public policy interventions by IMF have affected China favorably but affected South Korea unfavorably.

Conclusion

IMF is an international organization offering both financial and technical assistance to countries in the world. Its influence, through financial interventions, has had both positive and negative impacts. Both China and South Korea are countries in the East Asia region. China has benefited more than South Korea from the IMF interventions.