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IMF Policy and Its Effects - Assignment Example

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IMF policy and its effects Instructor Name December 18, 2011 IMF policy and its effect Economic recession and depression are two words which most of the world is quite familiar with. These are used to denote a particular state of economy when downsizing of investments in a country has begun and end up with high inflation rates…
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IMF Policy and Its Effects
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IMF Policy and Its Effects

Download file to see previous pages... In his essay “What I Learned at the World Economic Crisis”, he described very thoroughly the problems of such countries and the role of international monetary fund IMF in creating and multiplying the downfall of a running economy. Stiglitz said that during his appointment as chief economist, he saw many economic crises in most parts of the world, which then took the form of a global crisis. He said that the IMF in not very serious on the issue of solving the problems of countries. Because it suggested wrong policies, many developing countries which were initially in a very good state, adapted those policies & in the end, declined off smoothly. Actually, IMF tries to implement the same tactics on each country without properly analyzing the background and ground facts. During the crises of Latin America in 1980s, IMF imposed controlled budget technique and tight policies if the countries agreed to provide them with an aid. This really proved to be good for them as they were not already involved with budget surpluses techniques so they survived from the crisis in a much better way. But the big issue is that IMF imposed all such techniques to those countries too like Thailand and Indonesia, who have a total different reality than US. This was a big mistake, not only from the IMF side but from the governments too, as they did not consider the fact that IMF was not fully aware of their economical status. They were already giving huge surpluses while avoiding the severe conditions of illiteracy and other factors that contributed a lot in economical development of a country. By implementing IMF policies, they nearly starved to death. The inflation rates and unemployment soared and people came upon the streets against their governments. Another major reason of this setback was that some Asian countries started liberalizing their capital markets, due to which they needed more revenue to compensate. So they implemented some short term financial programs which caused huge real estate disasters. In late 1990s, Thailand and Indonesia suffered major economic crises due to bad policies of IMF. Stiglitz suggested that the tight austerity measures, high interest rates and reductions in government’s expenditure cannot solve the problem of such countries; rather it would propel them more towards depression and result in more bankruptcies. If there would be internal policies of the country according to its own ground facts, then they would be more helpful. Privatization is not the solution; instead there must be market competition so that the best would tackle the system. There should be an institutional infrastructure from top to bottom, which would definitely be helpful in boosting the economy. If every country suffering from recession adapts these measures, it will definitely get out of it without much damage to the economy (Stiglitz. What I Learned at the World Economic Crisis. 2000). In the reply to all of above mentioned accusations made on IMF, Kenneth Rogoff, the Economic Counsellor and Director of the Research Department at IMF, came up with a comprehensive set of answers in his article “The IMF strikes back”. He said that there has been a debate on the competency of IMF staff that they are incapable and 3rd class students at their times, and also that IMF staff is careless and irresponsible that they don’ ...Download file to see next pagesRead More
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