Professional Documents
Culture Documents
Presented to: Prof. Naseem Bukhari Presented by: Nada Zain <36> Hina Qamar<26> Maria hsan<!"> Maryam #rshad<22> Zohra Nia$i<%&> BB# e'enin( 2!!)*++ ,%th semester.ate: 2)th of May/ 2!!0 1 .N 2.#3
ACKNOWLEDGEMENT _____________________________________________________________ I ABSTRACT ________________________________________________________________________II FINANCIAL SYSTEM..................................................................................................................................4 1! M"#$%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4 2! FI#&#'I&L I#()*UM$#)(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4 +! FI#&#'I&L M&*,$)(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4 4! FI#&#'I&L I#()I)U)I"#(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4 -! '$#)*&L B&#,(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4 FINANCIAL INSTITUTIONS......................................................................................................................4 INTERNATIONAL FINANCIAL INSTITUTIONS...................................................................................4 Definition................................................................................................................................................4 Explanation ............................................................................................................................................5 )%P$( "F I#)$*#&)I"#&L FI#&#'I&L I#()I)U)I"#(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Bretton Woods institutions......................................................................................................................5 Regional development banks..................................................................................................................5 Bilateral development banks...................................................................................................................5 Ot er regional finan!ial institutions.......................................................................................................5 .I()"*% !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!/ "eed for t e I#Is.....................................................................................................................................$ Bretton %oods !onferen!e.......................................................................................................................$ ."0 IFI( 0"*,1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2 THE IMF.........................................................................................................................................................7 PU*P"($(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3 ("U*'$ "F FU#4I#5!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3 &. ' e (uota s)stem................................................................................................................................* +. ,old oldings......................................................................................................................................* -. Borro%ing arrangements..................................................................................................................... 4. Interest ! arges and #ees ................................................................................................................&/ FU#')I"#(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!16 0urveillan!e .........................................................................................................................................&/ 'e! ni!al Assistan!e.............................................................................................................................&/ 1ending .................................................................................................................................................&& 7U")&(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!14 Definition..............................................................................................................................................&4 (uotas of some 2ember3 4'able5 .........................................................................................................&5 ' e 2ultifa!eted Role of (uotas..........................................................................................................&5 (P$'I&L 4*&0I#5 *I5.)( 8(4*(9!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1/ 0DR 6aluation.......................................................................................................................................&$ 7o% is 0DR !al!ulated8.......................................................................................................................&$ 0DR Interest Rate..................................................................................................................................&9 0DR Interest rate !al!ulation...............................................................................................................&9 PAKISTAN AND IMF..................................................................................................................................18 L$#4I#5 .I()"*%:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!13 IMF;( &))I)U4$ )"0&*4( U(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!26 THE WORLD BANK...................................................................................................................................21 .I()"*%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21
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"B<$')I=$!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21 0"*L4 B&#,: & B&#,1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21 PU*P"($(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21 4IFF$*$#'$ B$)0$$# 0"*L4 B&#,  ).$ IMF!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!22 MILL$##IUM 4$=$L"PM$#) 5"&L( 8M45(9!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2+ 0"*L4 B&#, 5*"UP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2International Bank for Re!osru!tion and Delopment. :IBRD;.............................................................+5 ' e International Development Asso!iation :IDA;..............................................................................+$ 0"*L4 B&#,;( &*$&( "F "P$*&)I"#!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!22 P*"<$')( "F 0"*L4 B&#, I# P&,I()&# !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!22 ASIAN DEVELOPMENT BANK...............................................................................................................3 "*5&#I>&)I"#!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+6 L$#4I#5!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+1 #")&BL$ P*"<$')(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+1 M$MB$*(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+1 ISLAMIC DEVELOPMENT BANK..........................................................................................................31 $()&BLI(.M$#)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+1 PU*P"($ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+2 FU#')I"#(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+2 M$MB$*(.IP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+2 .$&4 "FFI'$  *$5I"#&L "FFI'$( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+2 *$("U*'$ M"BILI>&)I"# !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!++ CRITICISM ON IMF AND THE WORLD BANK...................................................................................33 1! '"#4I)I"#&LI)I$(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!++ 2! IMP&') "# PUBLI' .$&L).!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+4 +! 4$=&LU&)I"#(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+4! '*I)I'I(M F*"M F*$$ M&*,$) &4="'&)$(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+-! IMF?0"*L4 B&#, (UPP"*) "F MILI)&*% 4I')&)"*(.IP( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+/! IMF & 0B : ($'*$)I=$ I#()I)U)I"#( 0I). #" &''"U#)&BILI)%!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+/ 2! 4$M"'*&'% I( B$I#5 )"*# &P&*) B% & FI#&#'I&L "LI5&*'.% 8MI5.) I( *I5.)9!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+/ 3! =I"L&)I"# "F I(L&MI' P*I#'IPL$(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+2 @! IMF P"LI'I$( .U*) ).$ $#=I*"#M$#)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+3 11! ").$* '"#)*"=$*(I$(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+3 ("M$ I*"#I' F&')( &B"U) ).$ IFI(:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+3 '*I)I'I(M B% ("M$ F&M"U( P$*("#&LI)I$(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+@ 0.% 4" '"U#)*I$( (I5# &5*$$M$#)( 0I). ).$ IFI;( IF ).$ '"#($7U$#'$( &*$ UL)IM&)$L% #$5&)I=$1 !!!!!!!!!!!!!!!+@ IMF & ).$ +*4 0"*L4!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!+@ RESPONSE TO CRITICISM .....................................................................................................................41 SUGGESTIONS............................................................................................................................................42 CONCLUSION.............................................................................................................................................42
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Financial System
) ese are t e five Aain Barts t at toget er Aake uB financial systeA:
1. Money
)o Bay for Burc ases anC store Dealt
2. Financial Instruments
)o transfer Dealt froA savers to investors anC to transfer risk to t ose best eEuiBBeC to bear it!
3. Financial Markets
Buy anC sell financial instruAents
4. Financial Institutions.
ProviCe access to financial Aarkets 8a finical interAeCiary9 F& financial institution is an institution t at BroviCes financial services for its clients or AeAbers!G Financial institutions are often regulateC be 5overnAent boCies
5. Central Banks
Monitor financial Institutions anC stabiliHe t e $conoAy
Financial Institutions
Financial Institutions are one iABortant Billar of t e financial systeA! ) eir Aain functions incluCe: *eCuce transactions cost by sBecialiHing in t e issuance of stanCarCiHeC securities *eCuce inforAation costs of screening anC Aonitoring borroDers! Issue s ort terA liabilities anC Burc ase longIterA loans!
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Explanation
) eir oDners or s are olCers are generally national governAents, alt oug ot er international institutions anC ot er organisations occasionally figure as s are olCers! ) e Aost BroAinent IFIs are creations of AultiBle nations, alt oug soAe bilateral financial institutions 8createC by tDo countries9 eJist anC are tec nically IFIs! Many of t ese are Aultilateral CeveloBAent banks! ) e bestIknoDn IFIs are t e 0orlC Bank, t e IMF, anC t e regional CeveloBAent banks! (oAe of t e IFIs are consiCereC U# agencies!
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History
"ur Aain focus of our Broject is on t e BrettonI0ooCs sister IFIs t e International Monetary FunC 8IMF9 anC t e 0orlC Bank so De aCCeC a brief istory of t ese institutions too!
Bretton
oods conference
Meeting at Bretton 0ooCs, #!.! 8<uly 1M22, 1@449, Curing 0orlC 0ar II to Aake financial arrangeAents for t e BostDar DorlC after t e eJBecteC Cefeat of 5erAany anC <aBan! In t e suAAer of 1@44, Celegates froA 44 countries Aet in t e AiCst of 0orlC 0ar II to res aBe t e DorlCKs international financial systeA! ) e location of t e Aeeting I in t e Blus Mount 0as ington .otel in rural Bretton 0ooCs, #eD .aABs ire I Das CesigneC to ensure t at t e Celegates DoulC ave no Cistractions, anC no Bressure froA lobbyists or 'ongressAen, as t ey DorkeC on t eir Blans for BostIDar reconstruction! ) e Aeeting Das born out of t e CeterAination by U( PresiCent Franklin 4 *oosevelt anC U, PriAe Minister 0inston ' urc ill to ensure BostIDar BrosBerity t roug econoAic coIoBeration, avoiCing t e econoAic conflicts betDeen countries in t e 1@+6s t at t ey believeC contributeC to t e Crift to Dar! ) e $*+,-+$"% ,&./0+"0/*' at t e Aeeting Dere t e U(, reBresenteC by t e U( )reasuryKs .arry 4eJter 0 ite, anC t e U,Ks <o n MaynarC ,eynes, D o Das serving as U, )reasury aCviser CesBite Ceclining ealt !
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&nC c airing t e BroceeCings Das .enry Morgent au, t e U( )reasury (ecretary, froA t e only country t at Das likely to eAerge froA t e Dar Dit a strengt eneC econoAy! PresiCent *oosevelt tolC t e conference: N) e econoAic ealt of every country is a BroBer Aatter of concern to all its neig bors, near anC Cistant!G
The IMF
' e International 2onetar) #und 8IMF9 is an international organiHation t at oversees t e global financial systeA by folloDing t e AacroeconoAic Bolicies of its AeAber countries, in Barticular t ose Dit an iABact on eJc ange rates anC t e balance of BayAents! It is an organiHation forAeC to stabiliHe international eJc ange! ) e IMF Das forAally organiHeC on 4eceAber 22, 1@4-, D en t e first 2@ countries signeC its &rticles of &greeAent! #oD, t e IMF as uge influence in t e DorlC econoAy! It is a sBecialiHeC agency of t e UniteC #ations but as its oDn c arter, governing structure, anC finances! Its AeAbers are reBresenteC t roug a Euota systeA broaCly baseC on t eir relative siHe in t e global econoAy! ) e IMF as 13- AeAber countries! ) e eaCEuarter of t e IMF is in 0as ington 4!'!
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IMF;s unit of account is (4* :=0DRs %ill furt er be elaborated later in t is report=;. ) e current Managing 4irector of IMF is a Frenc <eD naAeC 4oAiniEue (traussI,a n !
Balance of BayAents Cifficulties or to assist Dit Boverty reCuction! ) e IMF Dorks Dit ot er international organiHations to BroAote groDt anC Boverty reCuction! It also interacts Dit t ink tanks, civil society, anC t e AeCia on a Caily basis! 4or at least t at>s % at t e) sa)?= in t e later alf : t e !riti!al revie% part; of t is report )ou>ll see t e % at t e I2# is reall) doing=5
!urposes
FolloDing are t e Aain &rticles of &greeAent of t e IMF: i9 BroAote international Aonetary cooBeration ii9 eJBansion anC balanceC groDt of international traCe iii9 BroAote eJc ange rate stability iv9 elB establis Aultilateral systeA of BayAents anC eliAinate foreign eJc ange restrictions v9 Aake resources of t e FunC available to AeAbers vi9 ( orten t e Curation anC lessen t e Cegree of CiseEuilibriuA in international balances of BayAents .oDever, t e real unCiscloseC BurBoses t at t e critics argue uBon are ig ly controversial anC coABletely Cifferent froA t e above articles!
"ource of Fun#in$
0 ere Coes IMF get it;s Aoney1 ) e IMF gets t e funCing for t e loans froA t e folloDing sources:
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IMF is Bro ibiteC froA buying golC or engaging in ot er golC transactions!3-P Aajority 8of total voting BoDer9 neeCeC for sale anC Burc ase of golC! H/1 ",2 13&, 03& IMF 4'&2 ./%2 "utfloDs of golC froA t e IMFKs olCings occurreC unCer t e original &rticles of &greeAent t roug sales of golC for currency, anC via BayAents of reAuneration anC interest! &s noteC, since t e (econC &AenCAent of t e &rticles of &greeAent, outfloDs of golC can only occur t roug outrig t sales! ,ey golC transactions incluCeC: Q (ales for reBlenis Aent 81@-2I269! ) e IMF solC golC on several occasions to reBlenis its olCings of currencies! Q (out &frican golC 81@26I219! ) e IMF solC golC to AeAbers in aAounts roug ly corresBonCing to t ose Burc aseC froA (out &frica Curing t is BerioC! Q InvestAent in U!(! governAent securities 81@-/I229! In orCer to generate incoAe to offset oBerational Ceficits, soAe IMF golC Das solC to t e UniteC (tates anC t e BroceeCs investeC in U!(! governAent securities! (ubseEuently, a significant builCuB of IMF reserves BroABteC t e IMF to reacEuire t is golC froA t e U!(! governAent! Q &uctions anC NrestitutionN sales 81@2/I369! ) e IMF solC aBBroJiAately one t irC 8-6 Aillion ounces9 of its t enIeJisting golC olCings folloDing an agreeAent by its AeAbers to reCuce t e role of golC in t e international Aonetary systeA! .alf of t is aAount Das solC in restitution to AeAbers at t e t enIofficial Brice of (4* +- Ber ounceL t e ot er alf Das auctioneC to t e Aarket to finance t e )rust FunC, D ic suBBorteC concessional lenCing by t e IMF to loDIincoAe countries! 5 "ffIAarket transactions in golC 81@@@I26669! In 4eceAber 1@@@, t e $Jecutive BoarC aut oriHeC offIAarket transactions in golC of uB to 14 Aillion ounces to elB finance t e IMFKs BarticiBation in t e .eavily InCebteC Poor 'ountries 8.IP'9 Initiative! BetDeen 4eceAber 1@@@ anC &Bril 2666, seBarate but closely linkeC transactions involving a total of 12!@ Aillion ounces of golC Dere carrieC out betDeen t e IMF anC tDo AeAbers 8BraHil anC MeJico9 t at aC financial obligations falling Cue to t e IMF! In t e first steB, t e IMF solC golC to t e AeAber at t e Brevailing Aarket Brice anC t e Brofits Dere BlaceC in a sBecial account investeC for t e benefit of t e .IP' Initiative! In t e seconC steB, t e IMF iAAeCiately acceBteC back, at t e saAe Aarket Brice, t e saAe aAount of golC froA t e AeAber in settleAent of t at AeAberKs financial obligations! In t e enC, t ese transactions left balance of t e IMFKs olCings of B ysical golC unc angeC!
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GAB FLine of creCit set uB Dit several governAents anC banks t roug out t e DorlCG ) e 5eneral &rrangeAents to BorroD 85&B9 Das establis eC in 1@/2 as a borroDing facility betDeen t e IMF anC t e 516 8in 1@/2, t e 516 consisteC of eig t inCustrialiHeC nations M BelgiuA, 'anaCa, France, Italy, <aBan, t e #et erlanCs, t e U, anC t e U( M anC t e central banks of tDo ot ers M 5erAany anC (DeCenL t e coABosition of t e 516 as since c angeC9L t e 516 agreeC in aCvance to a AaJiAuA aAount it DoulC loan to t e FunC in t e event t e FunC neeCeC aCCitional resources to finance CraDings AaCe by AeAber nations! ) e IMF reBays t e 5&Bs less t an a year later, folloDing Euota increases! ) e 5&B as been utiliHeC several tiAes t roug out t e IMFKs istory, Aost recently In February 266@, t e IMF signeC a bilateral borroDing agreeAent Dit <aBan! For U(O166 billion 8about (4* /3 billion9
Functions
) e Dork of t e IMF is of t ree Aain tyBes: (urveillance )ec nical &ssistance LenCing in aCCition to t ese t ree IMF also Blays an iABortant role in t e fig t against AoneyI launCering anC terrorisA
*urveillance
IMF;s regular Aonitoring of econoAies anC associateC Brovision of Bolicy aCvice knoDn as surveillance! ) e IMF oversees t e international Aonetary systeA anC Aonitors t e financial anC econoAic Bolicies of its AeAbers! It keeBs track of econoAic CeveloBAents on a national, regional, anC global basis
#echnical +ssistance
)o assist Aainly loDI anC AiCCleIincoAe countries in effectively Aanaging t eir econoAies, t e IMF BroviCes Bractical guiCance anC training on oD to uBgraCe institutions, anC Cesign aBBroBriate AacroeconoAic, financial, anC structural Bolicies!
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,ending
) e IMF BroviCes loans to countries t at ave trouble Aeeting t eir international BayAents anC cannot ot erDise finC sufficient financing on afforCable terAs! ) is financial assistance is CesigneC to elB countries restore AacroeconoAic stability by rebuilCing t eir international reserves, stabiliHing t eir currencies, anC Baying for iABorts Rall necessary conCitions for relaunc ing groDt ! ) e IMF also BroviCes concessional loans to loDIincoAe countries to elB t eA CeveloB t eir econoAies anC reCuce Boverty & country in severe financial trouble, unable to Bay its international bills, Boses Botential BrobleAs for t e international financial systeA, D ic t e IMF Das createC to Brotect! &ny AeAber country, D et er ric , AiCCleIincoAe, or Boor, can turn to t e IMF for financing if it as a balance of BayAents neeCRt at is, if it cannot finC sufficient financing on afforCable terAs in t e caBital Aarkets to Aake its international BayAents anC Aaintain a safe level of reserves! T3& -3",.+,. ,"04*& /6 %&,2+,.( &bout four out of five AeAber countries ave useC IMF creCit at least once! But t e aAount of loans outstanCing anC t e nuAber of borroDers ave fluctuateC significantly over tiAe! In t e first tDo CecaCes of t e IMFKs eJistence, Aore t an alf of its lenCing Dent to inCustrial countries! But since t e late 1@26s, t ese countries ave been able to Aeet t eir financing neeCs in t e caBital Aarkets! ) e oil s ock of t e 1@26s anC t e Cebt crisis of t e 1@36s leC Aany loDerI anC loDerI AiCCleIincoAe countries to borroD froA t e IMF! In t e 1@@6s, t e transition Brocess in central anC $astern $uroBe anC t e crises in eAerging Aarket econoAies leC to a furt er increase in t e CeAanC for IMF resources! In 2664, benign econoAic conCitions DorlCDiCe Aeant t at Aany countries began to reBay t eir loans to t e IMF! &s a conseEuence, t e CeAanC for t e FunC;s resources CroBBeC off s arBly 8see graB 9! But in 2663, t e IMF began Aaking loans again
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to countries it by t e financial crisis anC ig fooC anC fuel Brices! In late 2663 anC early 266@ t e IMF lent O/6 billion to eAerging Aarkets affecteC by t e crisis! 0 ile t e financial crisis as sBarkeC reneDeC CeAanC for IMF financing, t e Cecline in lenCing t at BreceCeC t e financial crisis also reflecteC a neeC to aCaBt t e IMFKs lenCing instruAents to t e c anging neeCs of AeAber countries! In resBonse, t e IMF conCucteC a DiCeIranging revieD of its lenCing facilities anC terAs on D ic it BroviCes loans! In Marc 266@, t e FunC announceC a Aajor over aul of its lenCing fraAeDork, incluCing AoCerniHing conCitionality, introCucing a neD fleJible creCit line, en ancing t e fleJibility of t e FunC;s regular stanCIby lenCing arrangeAent, Coubling access liAits on loans, aCaBting its cost structures for ig Iaccess anC Brecautionary lenCing, anC streaAlining instruAents t at Dere selCoA useC! It as also sBeeCeC uB lenCing BroceCures anC reCesigneC its $Jogenous ( ocks Facility to Aake it easier to access for loDIincoAe countries! T3*&& #"+, $4*$/'&' /6 %&,2+,. &rticle I of t e IMFKs &rticles of &greeAent states t at t e BurBose of lenCing by t e IMF is N!!!to give confiCence to AeAbers by Aaking t e general resources of t e FunC teABorarily available to t eA unCer aCeEuate safeguarCs, t us BroviCing t eA Dit oBBortunity to correct AalaCjustAents in t eir balance of BayAents Dit out resorting to Aeasures Cestructive of national or international BrosBerity!N In Bractice, t e BurBose of t e IMFKs lenCing as c angeC CraAatically since t e organiHation Das createC! "ver tiAe, t e IMFKs financial assistance as evolveC froA elBing countries Ceal Dit s ortIterA traCe fluctuations to suBBorting aCjustAent anC aCCressing a DiCe range of balance of BayAents BrobleAs resulting froA terAs of traCe s ocks, natural Cisasters, BostIconflict situations, broaC econoAic transition, Boverty reCuction anC econoAic CeveloBAent, sovereign Cebt restructuring, anC confiCenceI Criven banking anC currency crises! )oCay, IMF lenCing serves t ree Aain BurBoses! 1! First, it can sAoot aCjustAent to various s ocks, elBing a AeAber country avoiC CisruBtive econoAic aCjustAent or sovereign Cefault, soAet ing t at DoulC be eJtreAely costly, bot for t e country itself anC Bossibly for ot er countries t roug econoAic anC financial riBBle effects 8knoDn as contagion9! 2! (econC, IMF BrograAs can elB unlock ot er financing, acting as a catalyst for ot er lenCers! ) is is because t e BrograA can serve as a signal t at t e country as aCoBteC sounC Bolicies, reinforcing Bolicy creCibility anC increasing investorsK confiCence! +! ) irC, IMF lenCing can elB Brevent crisis! ) e eJBerience is clear: caBital account crises tyBically inflict substantial costs on countries t eAselves anC on ot er countries t roug contagion! )oCay, IMF lenCing serves t ree Aain BurBoses!
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) e 0tand=B) Arrangement is a key lenCing facility establis eC in 1@-2! < oug its use as been Ceclining in recent years, it as reAaineC t e Aost BoBular facility for AiCCleI incoAe countries t at seek financial assistance! UnCer its structure, financing is BroviCeC in suBBort of aCjustAent to a balance of BayAents neeC anC CisburseC in tranc es baseC on conCitions sBelleC out in t e BrograA! ) e IMFKs largest loans ave traCitionally been BroviCeC unCer (B&s! LOAN INSTRUMENTS ( 7*+&6%8 1. S0",29B8 A**",.&#&,0' :SBA;( o 'ountries aCCress s ortIterA B"P BrobleAs o ProviCeC greatest aAount of IMF resources o ) e lengt is tyBically 12I24 Aont s o *eBayAent Dit in 2SI4 years o (urc arges aBBly to ig access levels
2. P/<&*08 R&24-0+/, ",2 G*/103 F"-+%+08 :PRGF; = E!/.&,/4' S3/->' F"-+%+08 :ESF;(
o LoDIincoAe countries o Largest nuAber of IMF loans in recent years! o Interest rate 6!- Bercent o *eBaiC over a BerioC of -TI16 years! 3. E!0&,2&2 F4,2 F"-+%+08 :EFF;( o 'ountries Dit longerIterA B"P BrobleAs o &rrangeAents unCer usually + years! o *eBayAent Dit in 4TI2 years o (urc arges aBBly to ig levels of access! 4. S4$$%&#&,0"% R&'&*<& F"-+%+08 :SRF;( o ( ortIterA financing on a large scale o *eBayAent Dit in 1I1T years! o (urc arge of +I- Bercent ?. S3/*09T&*# L+@4+2+08 F"-+%+08 :SLF;( o 'ountries Dit Bure liEuiCity s ocks o ( ort Curation o &ccess liAit of -66 P of Euota o Maturity of + Aont s o *eneDal uB to tDo tiAes Dit in a year A. C/#$&,'"0/*8 F+,",-+,. F"-+%+08 :CFF;( o 'ountries eJBeriencing a suCCen s ortfall in eJBort earnings o Increase in t e cost of cereal iABorts o 'arry no surc arge 7. E#&*.&,-8 "''+'0",-&( o 'ountries t at ave eJBerienceC a natural Cisaster o $Aerging froA conflict o (ubject to t e basic rate of c arge
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Money & Banking o Interest subsiCies are available o Must be reBaiC Dit in +SI- years!
8. ) e IMF as introCuceC a neD Flexible Credit Line :FCL; for countries Dit very strong funCaAentals, Bolicies, anC track recorC of Bolicy iABleAentation!
%uotas
Definition
) e IMF is Dorking on DiCeIranging reforAs to Aake sure it Aeets t e neeCs of its AeAber countries! "ne of t e Aost iABortant eleAents is governance reforA, D ic involves aCjusting Euota s ares to better reflect t e relative Deig t of AeAber countries in t e DorlC econoAy anC en ancing t e voice anC BarticiBation of loDIincoAe AeAbers Dit in t e institution! IMF CeciCes on t e Euota for eac AeAber, ric er countries ave larger Euota! $ac AeAber country of t e IMF is assigneC a Euota, baseC broaCly on its relative siHe in t e DorlC econoAy anC c aracteristics !7uotas are CenoAinateC in (Becial 4raDing *ig ts 8(4*s9, t e IMFKs unit of account! U(, aving largest econoAy, BroviCes 44P of t e total Euota U( as largest voting BoDer 12!6@P! 7uotas are revieDeC every - years by t e IMF! ) ey are calculateC by a forAula! 7uotas also CeterAine oD Auc eac AeAber can borroD froA t e IMF D en in neeC of aiC!
Page 14 of 42
Page 1- of 42
8in neeC9 Bresent Blans for reforA to $Jecutive 4irectors! If t ese Blans are sufficient for t e $Jecutive 4irectors, t e IMF grants t e AeAber a loan!
*DR 1aluation
) e value of t e (4* Das initially CefineC as eEuivalent to 6!333/21 graAs of fine golC RD ic , at t e tiAe, Das also eEuivalent to one U!(! Collar! &fter t e collaBse of t e Bretton 0ooCs systeA in 1@2+, oDever, t e (4* Das reCefineC as a basket of currencies, toCay consisting of t e euro, <aBanese yen, BounC sterling, anC U!(! Collar! in #oveAber 266-, t e Deig ts of t e currencies in t e (4* basket Dere reviseC baseC on t e value of t e eJBorts of gooCs anC services anC t e aAount of reserves CenoAinateC in t e resBective currencies D ic Dere elC by ot er AeAbers of t e IMF! ) ese c anges becaAe effective on <anuary 1, 266/!neJt revision Dill be in 2616! 0it effect froA <anuary 1, 266/, t e IMF as CeterAineC t at t e four currencies t at Aeet bot selection criteria for inclusion in t e (4* valuation basket Dill be assigneC t e folloDing Deig ts baseC on t eir roles in international traCe anC finance: U!(! Collar 844 Bercent9, euro 8+4 Bercent9, <aBanese yen 811 Bercent9, anC BounC sterling 811 Bercent9!
2o
is *DR calculated3
4urren5y Monday, May 11, 2009 1ei(hts 4urren5y amount under 95han(e rate + 6u7e 8*+ %%< !.%+!! +.3"0+! :.2. do77ar e;ui'a7ent !."")23+
uro
Page 1/ of 42
+otes,
(1)
The exchange rate for the Japanese yen is expressed in terms of currency units per U.S. dollar other rates are expressed as U.S. dollars per currency unit.
4urren5y
#ote: (4* Ber currency rates are baseC on t e reBresentative eJc ange rate for eac currency! P/0&,0+"% $+06"%%' "' " *&'&*<& -4**&,-8 ) ere are Botential Bitfalls of using t e (4* as a reserve currency!
Page 12 of 42
Q ) e current (4* is a relatively sAall basket of currenciesL t is is bot a strong Boint anC Deak Boint of t e (4*! Q ) e U( 4ollar, $uro anC U, PounC are containeC in t e (4* II t ese currencies ave been losing value against a larger basket of seconCary reserve currencies since t e late 2666s recession starteC in 2662! Q ) e (4* Coes not contain ' inese %uan, InCian *uBee, &ustralian 4ollar or 'anaCian 4ollar, D ic are iABortant benc Aark or seconCary global reserve currencies! Q ) e lack of global banking suBBort for consuAers 8t at is to say Brivate Bersons anC businesses9 for t e (4*!
Page 13 of 42
UV t is graB is taken froA IMF;s official siteWWW t e first coluAn s oDs t e lenCing instruAents 8eJBlaineC earlier9 useCX o (ince 1@33, 11 loan arrangeAents ave taken Blace! o (iJ loan arrangeAents Dere AaCe Curing t e regiAe of BenaHir B utto!
o )Do of t eA Dere AaCe Curing #aDaH ( arif regiAe! o )Do unCer Mus arraf regiAe 8to stabiliHe t e econoAy9! o "ne IMF loan is AaCe in current regiAe! 8It Das a arC steB for a neDly forAeC governAent to ask for IMF;s aiC, just s ortly after coAing to BoDer9 o 44P of t e total lenCing aAount as been CraDn froA t e original 166P agreeC uBon lenCing aAount!
Page 1@ of 42
Page 26 of 42
History
0orlC bank caAe lnto eJistance on 22t 4eceAber, 1@4-! it is t e Bart of t e UniteC #ations Dit Cifferent governance structure! ) e 0orlC Bank is one of tDo Aajor financial institutions createC as a result of t e Bretton 0ooCs 'onference in 1@44! ) e International Monetary FunC, a relateC but seBarate institution, is t e seconC! 4elegates froA a DiCe variety of countries attenCeC t e Bretton 0ooCs 'onference, but t e Aost BoDerful countries in attenCance, t e UniteC (tates anC Britain, Aainly s aBeC negotiations! 0orlC Bank conceiveC Curing 0orlC 0ar II at Bretton 0ooCs, #eD .aABs ire, t e 0orlC Bank initially elBeC rebuilC $uroBe after t e Dar! Its first loan of O2-6 Aillion Das to France in 1@42 for BostIDar reconstruction! *econstruction as reAaineC an iABortant focus of t e BankKs Dork, given t e natural Cisasters, uAanitarian eAergencies, anC Bost conflict re abilitation neeCs t at affect CeveloBing anC transition econoAies! ) e first BresiCent of 0orlC Bank Das E4.&,& M&8&* 8<une 1@4/M4eceAber 1@4/9 anC current BresiCent is R/7&*0 C/&%%+->.
/01ecti2e
) e 0orlC Bank BroviCes over O26 billion in assistance to CeveloBing anC transition countries every year! ) e BankKs Brojects anC Bolicies affect t e lives anC liveli ooCs of billions of BeoBle DorlCDiCe I soAetiAes for t e better, but very often in controversial anC BrobleAatic Days!
!urposes
0orlC Bank backgrounC anC objectives ave eJBanCeC anC evolveC over t e years! ) e original BurBose anC objectives as t e International Bank for *econstruction anC 4eveloBAent Das a facilitator role in BostIDar reconstruction! (ince 1@44, t is role as eJBanCeC anC 0orlC BankKs objectives ave groDn to CeveloB its current AanCate to Page 21 of 42
alleviate DorlCDiCe Boverty! ) ey Dork closely Dit t eir affiliate, t e International 4eveloBAent &ssociation! 0it all t is eJBansion anC groDt , 0orlC BankKs original focus as not c angeC! )oCay, reconstruction reAains a toB Briority in suc situations as: #atural Cisasters #eeCs affecting CeveloBing econoAies Post conflict re abilitation #eeCs affecting a transitioning econoAy
W/*%2 B",>
seeks to BroAote t e econoAic CeveloBAent of t e DorlCKs Boorer countries assists CeveloBing countries t roug longIterA financing of CeveloBAent Brojects anC BrograAs
Page 22 of 42
R&-+$+&,0' /6 F4,2+,. assists all AeAbersIIbot inCustrial anC CeveloBing countriesIIt at finC t eAselves in teABorary balance of BayAents Cifficulties by BroviCing s ortI to AeCiuAIterA creCits O$&*"0+/,' suBBleAents t e currency reserves of its AeAbers t roug t e allocation of (4*s 8sBecial CraDing rig ts9L to Cate (4* 21!4 billion as been issueC to AeAber countries in BroBortion to t eir Euotas S/4*-& /6 F4,2+,. CraDs its financial resources BrinciBally froA t e Euota subscriBtions of its AeAber countries C"$+0"% as at its CisBosal fully BaiCIin Euotas noD totaling (4* 14- billion 8about O21- billion9 S+D& ",2 S0*4-04*& as a staff of 2,+66 CraDn froA 132 AeAber countries as no affiliates or subsiCiaries
BroviCes to t e Boorest CeveloBing countries D ose Ber caBita 5#P is less t an O3/- a year sBecial financial assistance t roug t e International 4eveloBAent &ssociation 8I4&9 encourages Brivate enterBrises in CeveloBing countries t roug its affiliate, t e International Finance 'orBoration 8IF'9
acEuires Aost of its financial resources by borroDing on t e international bonC Aarket as an aut oriHeC caBital of O134 billion, of D ic AeAbers Bay in about 16 Bercent
In lig t of t e enorAous c allenge facing t e global coAAunity to eraCicate Boverty II D ic affects nearly alf of t e DorlC;s BoBulation living on less t an O2 Collars a Cay II t e international CeveloBAent coAAunity in 2666 aCoBteC sBecific targets for Boverty reCuction, noD knoDn as t e MillenniuA 4eveloBAent 5oals 8M45s9! ) e M45s constitute 3 basic Boverty reCuction goals ranging froA access to social services anC genCer eEuity to environAental sustainability! ) e overarc ing goal is to alve incoAe Boverty DorlCDiCe by 261-! 5oal 1: $raCicate eJtreAe Boverty anC unger 5oal 2: &c ieve universal BriAary eCucation 5oal +: ProAote genCer eEuality anC eABoDer DoAen 5oal 4: *eCuce c ilC Aortality 5oal -: IABrove Aaternal ealt 5oal /: 'oAbat .I=?&I4(, Aalaria, anC ot er Ciseases 5oal 2: $nsure environAental sustainability 5oal 3: 4eveloB a global Bartners iB for CeveloBAent
Page 24 of 42
aCjustAent BrograA 8Aore on structural aCjustAent BrograAs, beloD9! IB*4 loans can cover t e entire cost of a Broject, but Bank clout attracts Aany ot er sources of financing, esBecially froA t e Brivate sector! *ecently, t e Bank as also starteC offering suBBort for Brivate investors t eAselves, in an effort to attract CeveloBAent Aoney to (out ern countries! Finally, IB*4 also offers a ost of tec nical assistance BrograAs to its CeveloBing country AeAbers for NcaBacity builCingN anC Ntec nology transfer!N M&*'3+$ )o be eligible for IB*4 loans, governAents Aust be a AeAber t e 0orlC Bank, anC coABly Dit BankIiABoseC (tructural &CjustAent PrograAs 8(&Ps9, D ic ave been severely criticiHeC by #5"s DorlCDiCe as an unnecessarily ars set of AacroeconoAic Bolicies! (&Ps are aiAeC at reCucing governAent buCget Ceficits by Cecreasing governAent eJBenCiture 8Barticularly on social BrograAs9, increasing eJBort BroCuction, BrivatiHation, anC liberaliHing traCe anC investAent Bolicies! ) e BurBose of t ese reforAs is to elB countries becoAe Aore econoAically robust, creCitDort y anC able to Bay off its Cebts! ) ese Bolicies are BrereEuisites for loan eligibility anC often incluCe Brovisions for reCuceC governAent sBenCing on social services! ) e Bank offers aCvice anC loans to elB iABleAent (&Ps
Page 2/ of 42
borroDers! .oDever, I4& funCing is consiCerably loDer t an t at of t e 0orlC Bank, aAounting to O-!/ billion 8about +4P t at of IB*4Ks9 in F% 1@@4! I4& is consiCering t e establis Aent of tDo neD financing services to en ance t e Brivate sector! ) e rationale is t at t roug foreign investAent, I4& countries coulC gain Auc IneeCeC infrastructure! ) e first is a guarantee BrograA t at DoulC encourage t e Benetration of foreign caBital anC Aultinational corBorations! ) e seconC BrograA is t e I4& Private InvestAent FunC D ic DoulC be I4& Aoney AanageC by t e International Finance 'orBoration
Page 22 of 42
inCicators t roug iABroveAents in Bublic finance, governance anC financial regulatory fraAeDorks! ) ese interventions ave been successful in bringing about concrete c anges in Celivery of Brovincial services anC t us are social anC econoAic inCicators in t ese Brovinces! W/*>+,. 1+03 P">+'0", P/<&*08 A%%&<+"0+/, F4,2 0/ 7*+,. 2+66&*&,-& +, 03& %+<&' /6 $//*. ) e 0orlC Bank funCeC Pakistan Poverty &lleviation FunC Project 8PP&F9 is CesigneC to reCuce Boverty anC eABoDer t e rural anC urban Boor in Pakistan t roug t e Brovision of resources anC services to t e Boor, esBecially DoAen! ) is is being ac ieveC t roug an integrateC aBBroac t at incluCes builCing institutions of t e Boor anC t en BroviCing t eA Dit AicroIcreCit loansL grants for sAall scale infrastructure BrojectsL training anC skill CeveloBAent anC social sector interventions! ) e BrograA is iABacting over 16 Aillion BeoBle anC as AobiliHeC over //,666 coAAunity organiHations 8'"s9 in 22,666 localities across 111 Cistricts in t e country! More t an 1+,666 sAall scale villageIbaseC Brojects ave been iCentifieC, constructeC anC AaintaineC by coAAunities; rig t across t e country benefiting nearly / Aillion BeoBle! PP&F as issueC 1!- Aillion AicroIcreCit loans, 8average loanIsiHe U(O 1-69, benefiting nearly @ Aillion BeoBle! "ver t e last 2 years PP&F as Criven t e Aicrofinance sector groDt froA /6,666 borroDers to Aore t an 1!2- Aillion active borroDers in t e sector! H&%$+,. 03& <+-0+#' /6 03& E"*03@4">&. ) e "ctober 266- eart Euake in Pakistan CestroyeC or CaAageC arounC -2-,666 rural ouses, leaving Aore t an 2+,666 CeaC, anC renCering over + Aillion BeoBle Dit out s elter in #ort 0est Frontier Province 8#0FP9 anC &HaC <aAAu anC ,as Air 8&<&,9! In resBonse, t e governAent createC t e $art Euake *elief anC *econstruction &ut ority 8$**&9 anC launc eC an aAbitious U(O1!- billion oDnerICriven rebuilCing BrograA I largely suiteC to t e Aainly rural affecteC BoBulation! UnCer $**&;s *ural .ousing anC *econstruction PrograA 8*.*P9, Bartially funCeC by t e 0orlC Bank, oAeoDners are given arounC U(O+,666 in installAents to builC EuakeIresistant oAes I Dit routine visits by insBection teaAs to ensure coABliance to agreeC seisAicIresistant stanCarCs! "Dner Criven reconstruction anC re abilitation of an estiAateC 4/+,666 ouses ave begun anC is at various stages of coABletion! ) e *.*P as CisburseC over O1!1 billion to BrograA beneficiaries or 2- Bercent of t e overall O1!- billion estiAateC cost! W/*>+,. 1+03 03& ./<&*,#&,0 0/ +#$*/<& &24-"0+/, /40-/#&'. ) e 0orlC Bank is BroviCing assistance to t e 5overnAent of Pakistan in eCucation reforAs, at bot t e national anC t e Brovincial level! ) is suBBort is BroviCeC t roug CeveloBAent Bolicy oBerations Dit a strong focus on BriAary anC seconCary eCucation! ) ese BrograAs target increasing BarticiBation of girls anC c ilCren froA Boorer ouse olC t roug interventions suc as stuCent stiBenCs anC conCitional grant systeAs anC by Dorking in Bartners iB Dit t e Brivate sector to BroviCe access to loD cost Euality eCucation! "ur Dork as a strong focus on iABroving t e Euality of eCucation t roug initiatives suc as t e #ational $Cucation &ssessAent (ysteA 8#$&(9, D ic
Page 23 of 42
Aeasures stuCent ac ieveAent anC uses t e finCings to aCCress gaBs in stuCent learning! #$&( as establis eC, BiloteC anC iABroveC assessAent Aec anisAs anC instruAents, D ic are noD being regularly aCAinistereC! F/+,+,. 1+03 +,0&*,"0+/,"% $"*0,&*' 0/ 3&%$ P">+'0", 6+.30 $/%+/. &s Bart of our efforts to elB eraCicate Bolio globally, De aBBroveC tDo Brojects U(O42!21 Aillion in 266+ anC U( O 24!22 Aillion in 266/ for Pakistan to Burc ase t e oral Bolio vaccine! ) e Aoney is Bart of an innovative financing Bartners iB 8I4& BuyI CoDn9 betDeen t e 0orlC Bank, t e Bill & MelinCa 5ates FounCation, *otary International, anC t e UniteC #ations FounCation! ) ese organiHations ave forAeC t e InvestAent Partners iB for Polio, an initiative to elB eraCicate Bolio DorlCDiCe! ) e loan to Pakistan Dill elB t e country;s Polio $raCication Initiative D ic aiAs to Aake Pakistan a Polio free country! H&%$+,. P">+'0", $*&<&,0 03& '$*&"2 /6 HIVGAIDS. ) e .I=I&I4( situation is c anging raBiCly in PakistanL t e latest Cata inCicate a concentrateC eBiCeAic aAong injecting Crug users in several cities! ) e key c allenge facing t e country is to eJBanC anC iABrove Euality of .I= Breventive services to vulnerable grouBs t at are Aost at risk of contracting anC transAitting t e Cisease! ) ese incluCe seJ Dorkers anC injecting Crug users! ) e Bank is suBBorting t e 5overnAent efforts to control &I4( t roug t e .I=?&I4( Prevention Project CesigneC to Brevent t e Cisease froA becoAing establis eC in t ese BoBulations, D ile at t e saAe tiAe Dorking to Brotect t ese grouBs froA stigAatiHation! & key focus of t e Broject is Celivery of .I= Breventive services to ig risk BoBulations t roug BublicIBrivate Bartners iBs! & total of 12 service Celivery Backages for injecting Crug users 8I4Us9, seJ Dorkers, truckers anC jail inAates ave been contracteC out to #5"s by t e #ational anC Provincial &I4( 'ontrol PrograAs covering Aost Aajor cities across t e country! T3& W/*%2 B",>( *&%8+,. /, %/-"% &!$&*0+'& &rounC @6 Bercent of our staff in IslaAabaC office, Blus aCCitional staff in our 0as ington office are Pakistanis! 0 ile a large Bart of 0orlC Bank;s value is it;s global eJBerience anC eJBertise, local knoDleCge is inCisBensable to effective CeveloBAent! 0e also Dork closely Dit t e Pakistan governAent, civil society anC coAAunities in Cesigning our suBBort for t e country! Most iABortantly our overall assistance to t e country is sBecifically CesigneC to suBBort its oDn CeveloBAent goals! 0e ave BerioCic client satisfaction surveys t roug D ic De assess oD our services are BerceiveC by a cross section of society incluCing t e governAent, Brivate sector, civil society, acaCeAia, anC AeCia etc! ) ese Bolls are carrieC out globally by reButeC international firAs!
E<"%4"0+,. R&'4%0'
It;s one t ing to set goals anC objectives, but Dit out an effective Day to Aeasure t e results itKs Cifficult to knoD if t ey are effectively being Aet!
Page 2@ of 42
/r$ani6ation
) e ig est BolicyIAaking boCy of t e bank is t e BoarC of 5overnors coABoseC of one reBresentative froA eac AeAber state! ) e BoarC of 5overnors, in turn, elect aAong t eAselves t e 12 AeAbers of t e BoarC of 4irectors anC t eir CeButy! $ig t of t e 12 AeAbers coAe froA regional 8&siaIPacific9 AeAbers D ile t e ot ers coAe froA nonI regional AeAbers! ) e BoarC of 5overnors also elect t e bankKs PresiCent D o is t e c airBerson of t e BoarC of 4irectors anC Aanages &4B! ) e BresiCent as a terA of office lasting five years, anC Aay be reelecteC! )raCitionally, anC because <aBan is one of t e largest s are olCers of t e bank, t e PresiCent as alDays been <aBanese! ) e current PresiCent is .aru iko ,uroCa! ) e eaCEuarters of t e bank is at / &4B &venue, ManCaluyong 'ity, Metro Manila, P iliBBines, anC it as reBresentative offices arounC t e DorlC! ) e bank eABloys aBBroJiAately 2,466 BeoBle, coAing froA -- of its /2 AeAber countries, anC Dit Aore t an alf of t e staff being FiliBino!
Page +6 of 42
-en#in$
&4BKs annual Broject lenCing aAounts to about U(O2 billion Ber year Dit tyBical lenCing Ber Broject being in t e O166 Aillion range!
+ota0le !ro1ects
&fg an 4iasBora Project FunCing Uta (tate University leC Brojects to bring labor skills in ) ailanC $art Euake anC )sunaAi $Aergency (uBBort Project in InConesia 5reater Mekong (ubregional PrograA *"' Ping .u "ffs ore "il anC 5as 4eveloBAent (olar energy CeveloBAent funCs in InCia (trategic Private (ector Partners iBs for Urban Poverty *eCuction in t e P iliBBines )ransI&fg anistan 5as PiBeline Feasibility &ssessAent Loan of O1!2 billion to bail it out of an iABenCing econoAic crisis in Pakistan
Mem0ers
&4B as /2 AeAbers 85eorgia being t e /2t AeAber joineC in 26629
7sta0lis(ment
) e IslaAic by t e 'onference of Finance Ministers of MusliA 'ountries elC in <eCCa in 4 ul 7KaCa 1+@+., corresBonCing to 4eceAber 1@2+! ) e Inaugural Meeting of t e BoarC of 5overnors took Blace in *ajab 1+@-., corresBonCing to <uly 1@2-, anC t e Bank Das forAally oBeneC on 1- ( aDDal 1+@-. corresBonCing to 26 "ctober 1@2-! "n t e basis of BaiCIuB caBital, t e Aain s are olCers of t e Bank are froA t ese countries: (auCi &rabia U&$ (uCan Iran ,uDait $gyBt Libya InConesia )urkey Pakistan
Page +1 of 42
!urpose
) e BurBose of t e Bank is to foster t e econoAic CeveloBAent anC social Brogress of AeAber countries anC MusliA coAAunities inCiviCually as Dell as jointly in accorCance Dit t e BrinciBles of ( ariKa i!e!, IslaAic LaD!
Functions
) e functions of t e Bank are to BarticiBate in eEuity caBital anC grant loans for BroCuctive Brojects anC enterBrises besiCes BroviCing financial assistance to AeAber countries in ot er forAs for econoAic anC social CeveloBAent! ) e Bank is aut oriHeC to acceBt CeBosits anC to AobiliHe financial resources t roug ( ariKa coABatible AoCes! It is also c argeC Dit t e resBonsibility of assisting in t e BroAotion of foreign traCe esBecially in caBital gooCs, aAong AeAber countriesL BroviCing tec nical assistance to AeAber countriesL anC eJtenCing training facilities for Bersonnel engageC in CeveloBAent activities in MusliA countries to conforA to t e ( ariKa ! ( ariKa coABatible Bractices incluCe: Loan Leasing InstallAent (ale IstisnaKa $Euity ParticiBation Lines of Financing
) e unit of account of t e bank is t e IslaAic 4inar! ) e BankKs financial year is t e lunar .ijri year! ) e official language of t e Bank is &rabic, but $nglis anC Frenc are aCCitionally useC as Dorking languages!
Mem0ers(ip
) e Bresent AeAbers iB of t e Bank consists of -/ countries! ) e basic conCition for AeAbers iB is t at t e BrosBective AeAber country s oulC be a AeAber of t e "rganiHation of t e IslaAic 'onference, Bay its contribution to t e caBital of t e Bank anC be Dilling to acceBt suc terAs anC conCitions as Aay be CeciCeC uBon by t e Is4B BoarC of 5overnors!
'esource Mo0ili6ation
&s of +6?12?1423. 86@?61?26639, t e I4B;s total s are olCers; eEuity stooC at I4 -!4 billion 8U(O 3!- billion eEuivalent9 D ic is t e Aain source of funCing t e I4B;s oBerations! In aCCition to t is, I4B as AobiliHeC U(O @66 Aillion by Day of issuance of tDo (ukuks! ) e first (ukuk Das issueC in 266+ for U(O 466 Aillion D ic Dill Aature in &ugust, 2663 anC t e seconC one of U(O -66 Aillion Das issueC in 266- D ic Dill Aature in 2616! I4B also AobiliHes s ortIterA resources froA t e Aarket, as anC D en neeCeC, using t e *everse Muraba a! In orCer to Aeet t e future funCing reEuireAents of t e Bank, it is BlanneC t at I4B Dill taB t e international Aarket soAe tiAe Curing 2663 to raise aCCitional resources t roug issuance of (ukuk! ) e siHe anC t e currency of t e (ukuk issues Dill be CeciCeC close to t e tiAe of issuance!
1. Con#itionalities
"n giving loans to countries, t e IMF Aakes t e loan conCitional on t e iABleAentation of certain econoAic Bolicies! ) ese Bolicies tenC to involve: o *eCucing governAent borroDing I .ig er taJes anC loDer sBenCing o .ig er interest rates to stabiliHe t e currency! &lloD failing firAs to go bankruBt! o (tructural aCjustAent! PrivatiHation, Ceregulation, reCucing corruBtion anC bureaucracy! 'ritics of t e 0orlC Bank anC t e IMF are concerneC about t e conCitionalities iABoseC on borroDer countries! ) e 0orlC Bank anC t e IMF often attac loan conCitionalities baseC on D at is terAeC t e K0as ington 'onsensusK, focusing on liberalisationRof traCe, investAent anC t e financial sectorR, Ceregulation anC Brivatisation of nationaliseC inCustries! "ften t e conCitionalities are attac eC Dit out Cue regarC for t e borroDer countriesK inCiviCual circuAstances anC t e BrescriBtive recoAAenCations by t e 0orlC Bank anC IMF fail to resolve t e econoAic BrobleAs Dit in t e countries!
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It is claiAeC t at retarC social stability anC ence in ibit t e stateC goals of t e IMF, D ile (tructural &CjustAent PrograAs leaC to an increase in Boverty in reciBient countries! ) e Aain BrobleA is t at t ese Bolicies of structural aCjustAent anC Aacro econoAic intervention Aake t e situation DorseL De;ll take t ese tDo cases for an eJaABle to suBBort t is Boint: C"'& I( :A'+", C*+'+';, in t e &sian crisis of 1@@2, Aany countries suc as InConesia, Malaysia anC ) ailanC Dere reEuireC by IMF to Bursue tig t Aonetary Bolicy 8 ig er interest rates9 anC tig t fiscal Bolicy to reCuce t e buCget Ceficit anC strengt en eJc ange rates! .oDever, t ese Bolicies causeC a Ainor sloDCoDn to turn into a serious recession Dit Aass uneABloyAent! A C"'& II :A*.&,0+,";: In 2661, &rgentina Das forceC into a siAilar Bolicy of fiscal restraint! ) is leC to a Cecline in investAent in Bublic services D ic arguably CaAageC t e econoAy &rgentina, D ic aC been consiCereC by t e IMF to be a AoCel country in its coABliance to Bolicy BroBosals by t e Bretton 0ooCs institutions, eJBerienceC a catastroB ic econoAic crisis back in year 2661, D ic soAe believe to ave been causeC by IMFIinCuceC buCget restrictions R D ic unCercut t e governAentKs ability to sustain national infrastructure even in crucial areas suc as ealt , eCucation, anC security R anC BrivatiHation of strategically vital national resources! "t ers attribute t e crisis to &rgentinaKs AisICesigneC fiscal feCeralisA, D ic causeC subInational sBenCing to increase raBiCly! ) e crisis aCCeC to DiCesBreaC atreC of t is institution in &rgentina anC ot er (out &Aerican countries, Dit Aany blaAing t e IMF for t e regionKs econoAic BrobleAs! ) e current 8as of early 266/9trenC toDarCs AoCerate leftIDing governAents in t e region anC a groDing concern Dit t e CeveloBAent of a regional econoAic Bolicy largely inCeBenCent of big business Bressures as been ascribeC to t is crisis!
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be insufficient! In t e 266- Massey Lecture, entitleC N*ace &gainst )iAeN, (teB en LeDis argueC t at t e structural aCjustAent Bolicies of t e 0orlC Bank anC t e International Monetary FunC ave aggravateC anC aiCeC t e sBreaC of t e &I4( BanCeAic by liAiting t e funCing alloDeC to ealt anC eCucation sectors!
3. &e2aluations
) e IMF as also been criticiHeC for alloDing inflationary Cevaluations! 'urrency Cevaluation is recoAAenCeC by t e IMF to t e governAents of Boor nations! $!g &s a Bart of conCitions 8for t e last loan by IMF, #ov 26639 ) e Pakistani currency Das CevalueC after slig t c anges in t e Ciscount rate anC eJc ange rate CecreaseC officially by /I2P !
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C"'& I :B*"D+%; : In t e 1@/6s, t e IMF anC t e 0orlC Bank suBBorteC t e governAent of BraHil;s Ailitary Cictator <astello Bran!o Dit tens of Aillions of Collars of loans anC creCit t at Dere CenieC to Brevious CeAocraticallyIelecteC governAents! ) ey suBBort Ailitary Cictators just for t eir oDn interests anC to Aake t eir Bolicies iABoseC on suc countries! C"'& II :P">+'0",; :For instance, In Pakistan, t e IMF useC a Ailitary governAent to iABose t e 5eneral (ales )aJ 85()9, a national sales taJ on Aost consuAer iteAs! &t t e saAe tiAe, t ey BressureC t e governAent to eliAinate t e 0ealt )aJ! ) e Aost ironic tDist in IMF taJ Bolicy is t at t e IMF itself is eJeABt froA all taJes, along Dit its sister institutions, t e 0orlC Bank anC t e InterI&Aerican 4eveloBAent Bank, in sBite of t e fact t at t e trio of institutions oDn O1!4 billion Dort of BroBerty in 0as ington 4'! F$viCently, t e IMF eJeABts itself froA t e reEuireAent of Baying taJes to ensure aCeEuate governAental revenues,G Furt erAore, illegitiAate Cebts AaCe to Cictatorial governAents ave furt er DorseneC t e Cebt crisis! &s a resBonsible organiHation, IMF s oulC evaluate t e creCitDort iness anC legitiAacy of t e receivers before Aaking any loan arrangeAents! In t e case of illegitiAate Cebt, t e BrobleA is not necessarily Dit borroDers, but Dit lenCers!
P"'0 M",.+,. D+*&-0/*' .istorically t e IMFKs Aanaging Cirector as been $uroBean anC t e BresiCent of t e 0orlC Bank as been froA t e UniteC (tates! .oDever, t is stanCarC is increasingly being EuestioneC anC coABetition for t ese tDo Bosts Aay soon oBen uB to incluCe ot er EualifieC canCiCates froA any Bart of t e DorlC! U,2&#/-*"0+- S8'0&# Unlike a CeAocratic systeA in D ic eac AeAber country DoulC ave an eEual vote, ric countries CoAinate CecisionIAaking in t e IMF because voting BoDer is CeterAineC by t e aAount of Aoney t at eac country Bays into t e IMFKs Euota systeA! ItKs a systeA of one Collar, one vote! ) e U!(! is t e largest s are olCer Dit a Euota of 12 Bercent! 5erAany, <aBan, France, 5reat Britain, anC t e U( coAbineC control about +3 Bercent! ) e CisBroBortionate aAount of BoDer elC by Dealt y countries Aeans t at t e interests of bankers, investors anC corBorations froA inCustrialiHeC countries are But above t e neeCs of t e DorlCKs Boor Aajority! A#&*-",+D"0+/, Many critics anC econoAists consiCer IMF & 0orlC Bank: an instruAent for t e BroAotion of U( or 0estern interests in certain regions of t e DorlC U( as a veto on Aajor constitutional Cecisions Dit just over 1/P of t e s ares in t e bank! ) e U!(! is t e largest s are olCer Dit a Euota! ) e eaCEuarters of bot t ese IFIs is in 0as ington 4!'!, 8U( caBital9, too! Furt er Aore t e PresiCent of t e 0orlC Bank is as alDays been a U( national! In s ort, t e IMF Aainly serves Dealt y countries anC 0all (treet
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Moreover, reCuction in governAent social sBenCing in ealt anC eCucation Aeans Boor no longer can afforC t ese services! Liberalists backeC by IMF Aaintain t at Boverty as unfortunate or even unfair but not unjust, even if BeoBle Cie of unger!
1?.T(e IMF 0ails out ric( 0ankers@ creatin$ a moral (a6ar# an# $reater insta0ility in t e global econoAy
) e IMF routinely Bus es countries to Ceregulate financial systeAs! ) e reAoval of regulations t at Aig t liAit sBeculation as greatly increaseC caBital investAent in CeveloBing country financial Aarkets! More t an O1!- trillion crosses borCers every Cay! Most of t is caBital is investeC s ortIterA, Butting countries at t e D iA of financial sBeculators! ) e MeJican 1@@- Beso crisis Das Bartly a result of t ese IMF Bolicies! 0 en t e bubble BoBBeC, t e IMF anC U( governAent steBBeC in to BroB uB interest anC eJc ange rates, using taJBayer Aoney to bail out 0all (treet bankers! (uc bailouts encourage investors to continue Aaking risky, sBeculative bets, t ereby increasing t e instability
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3(y #o countries si$n a$reements wit( t(e IFI.s if t(e conseAuences are ultimately ne$ati2e
&fter so Aany critical oBinions anC controversies surrounCing t ese tDo sister, Bretton 0ooCs IFIs! & curious t oug t arises in Aost BeoBle;s AinCs: [0 y Co countries still turn to IMF for elB1; (o De trieC to finC out t e reason for t at anC ere;s D at De caAe across t ese tDo Aain Boints: L&,2&* /6 %"'0 *&'/*0 Most countries t at acceBt t e loans Co so because t ey ave no ot er Day of avoiCing total financial collaBse 8i!e! D en ot er frienCly countries aC refuseC t e elB too9 E!0&*,"% P*&''4*&' &nC t ere often are international Bressures on suc countries 8in neeC9 to get F&iCsG froA t e IMF anC 0orlC Bank
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.ere are soAe articles 8? selective eJtracts froA articles9 concerning t e cruel attituCe of IMF anC 0B concerning t e Boor countries!
IAagine aBBlying for a loan at a bank anC being tolC t at in orCer to receive t e Aoney you Aust agree to being it in t e face by Mike )yson, in t e stoAac Dit a bat sDung by <ose 'anseco anC kickeC in t e rear by a soccer Blayer every Aorning for t e rest of your life! Paying t e Aoney back is not as Cifficult as surviving t e uAiliating conCitions of t e loan!
) e IMFKs conCitions on financial aiC to Boor countries are unnecessary! It can afforC to be Aore generous
T3& IMF( R"$+,. 03& W/*%2) O,& P//* N"0+/, "0 " T+#&
Sat%rday )*ri+ 2,, 2009 #y Dana -a#rie+
) ere eJists a Couble stanCarC D ic alloDs ric er countries to use fiscal eJBansion in t e face of recession D ile Boorer nations are forceC into stricter econoAic restraints! UnCer t e guise of elBing econoAic Cistraug t countries, t e IMF is really bailing out foreign investors anC Aultinational corBorations! ) ey ave furt er fueleC c aos anC instability in soAe of t e Boorest regions in t e DorlC! ) e International Monetary FunC 8IMF9 as been CescribeC as one of t e enforcers of globaliHation! #ations D o receive IMF assistance are often forceC to surrenCer Aore sovereignty anC furt er oBen uB t eir borCers to international banks anC Aultinational corBorations! Muc of t eir Dealt is t en suckeC Cry by foreign BreCators Dit its resources anC BoBulation essentially becoAing t e collateral for suc financial aiC! &s a result of t e global econoAic crisis, Aany Aore nations are aving to turn to t e IMF for elB! &t t e recent 5I26 (uAAit in LonCon, t e IMF;s role Das eJBanCeC anC its BoDers en anceC! ) ere Das little Aention of its faileC Bolicies anC its less t en stellar recorC of effectively BroAoting CeveloBAent anC CeAocracy arounC t e DorlC! 0 ile soAe talk of reforA, t e IMF continues to raBe t e DorlC, one Boor nation at a tiAe! (oAe IMF conCitions t at countries ave been forceC to coABly Dit can only be CescribeC as ars anC unCeAocratic! "ften t e Cevaluation of a nation;s currency as been a BreconCition for IMF assistance! In orCer to Eualify for IMF loans, soAe nations ave also been forceC to loDer tariffs, restrict governAental subsiCies anC sBenCing, balance buCgets, as Dell as sellIoff state institutions to foreign interests! In soAe cases, t e IMF as even Bro ibiteC Dage increases as soAe countries ave trieC to Co so, in orCer to coABensate for a s arB rise in fooC Brices anC ot er coAAoCities! $nvironAental anC labor rig ts ave also taken a it as a result of IMF Bolicies! UnCer t e guise of elBing econoAic Cistraug t countries, t e IMF is really bailing out foreign investors anC Aultinational corBorations! ) ey ave furt er fueleC c aos anC instability in soAe of t e Boorest regions in t e DorlC!
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)esponse to (riticism
.ere is D at IMF anC it;s suBBorter say in resBonse to all t e critics: 1. C*+'+' "%1"8' %&"2' 0/ '/#& D+66+-4%0+&'. Because t e IMF Ceal Dit econoAic crisis, D atever Bolicy t ey offer, t ere is likely to be Cifficulties! It is not Bossible to Ceal Dit a balance of BayAents Dit out soAe Bainful reaCjustAent! 2. IMF 3"' 3"2 S/#& S4--&''&'. ) e Failures of t e IMF tenC to be DiCely BubliciHeC! But, its successes less so! &lso criticisA tenCs to focus on s ort terA BrobleAs anC ignores longer terA vieD 3. C/,6+2&,-& ) e fact t ere is a lenCer of last resort BroviCes an iABortant confiCence boost for investors! ) is is iABortant Curing current financial turAoil 4. C/4,0*+&' "*& ,/0 /7%+.&2 0/ 0">& ", IMF %/", It is countries D o aBBroac t e IMF for a loan! ) e fact so Aany take loans suggests t ere Aust be at least soAe benefits of t e IMF! ?. IMF E"'8 0"*.&0. (oAetiAes countries Aay Dant to unCertake Bainful s ort terA aCjustAent but t ere is a lack of Bolitical Dill! &n IMF intervention enables t e governAent to secure a loan anC t en Bass t e blaAe on to t e IMF for t e Cifficulties! W3"0 1& T3+,>( ) oug t ere Aig t be soAe 8neJt to negligible9 trut about t ese counter arguAents! But De can surely see t at t e stateC objectives are totally contraCicting D at t ese organiHations really Co!
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Suggestions
IMF anC 0orlC Bank s oulC use t eir BoDer in t e Bositive sense, to elB t e t irC DorlC not to create BrobleAs for t eA! ) e governAent of CeveloBing countries D o is successful in getting funCs froA t e IFIs, t ey Aust use it in efficiently anC sincerely! ) e IMF s oulC be accountable to all of its AeAbers 8even if t ey ave a 6!661P s are9 ) ere is so Auc criticisA about IFIs anC De t ink Aost of t e critics are true! ) e IMF reEuires CeeB, coABre ensive, structural reforAs! it s oulC start by CeciCing D et er it Dants to be a Aain Blayer in t e international financial arc itecture, or D et er it Dis es to reAain only a trusteC aCvisor! If it Dants to be a key Blayer, it Aust greatly increase its inCeBenCence, boost its financial caBacity anC aCoBt an autoAatic insurance facility! "t erDise its influence Dill be CeBenCent on t e Bolitical skills of its Aanaging Cirectors! &s regarCs its function as facilitator in t e Aultilateral surveillance Brocess, it Dill be critical to craft Bolitical agreeAent, D ic Dill solve t orny issues! Moreover unless eAerging Aarkets are BroviCeC Dit t e viable insurance facility, it Dill be very Cifficult to inCuce t e neeCeC c anges in t e incentive structure t at leaC t ese countries to accuAulate Aassive foreign reserves! 5lobal iAbalances anC national financial crises t at can sBill over into global Aarkets are best aCCresseC by a global institution like IFIs! ) e IMF can Dork to try to insure t at financial anC current account iAbalances are aCCresseC rat er t an ignoreC, anC t at t ey are aCCresseC by Bolicies t at are not Cestructive of global BrosBerity! ) e 0orlC Bank country offices s oulC be autonoAous in Cesigning Bolicies anC iABleAentation strategies on t e basis of a certain nation;s neeCs! 0e can;t aBBly t e saAe Bolicy in all countries! ) e country offices s oulC iCentify BrobleAs of a certain country anC t en forAulate Bolicies to solve t ose! InsteaC of focusing on groDt IbaseC CeveloBAent, it s oulC Bay attention on involveAent of t e Boor in t eir efforts for sustainable CeveloBAent! &s Prof! Mu aAAaC %unus founCer of 5raAeen bank saiC FI tolC t eA you ave forgot t e BeoBle, D o s oulC be t e centre of any CeveloBAent BrograA! %es, infrastructure can also elB in eraCicating Boverty! But it Dill be successful only D en t e Boor ave oDners iB in t at infrastructure, ) e 0orlC Bank s oulC lenC at least - Bercent of its total lenCing Aoney for Aicro creCit BrograAs!G
(onclusion
In s ort, t e DorlC can turn into a Auc better Blace to live in, for everyone! If only t e IMF anC 0orlC Bank use t eir enorAous aut ority anC t e iAAensely great econoAic BoDer in a ealt ier Day!
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