Achievement, success, failure, criticisms, of IMF

Achievements of IMF

• Establishment of a Monetary Reserve Fund: The Fund has played significant role to achieve the sizeable stock of the national currencies of different countries.
• Monetary Discipline and Cooperation: The IMF has shown the supremacy in maintaining monetary discipline and cooperation among the member countries. To achieve this objective, it has given assistance only to those countries which make stimulus efforts to solve their problems.
• Check on Competitive Currency Devaluation: There was a common tendency to make currency devaluation to boost up the exports. Thus, it creates disharmony in their economic and political relations. But with the coming up of IMF, the entire situation changed together. Now, no member country could devaluate its currency without the permission of the Fund. It is only permissible under certain circumstances.
• Technical Assistance to Members: such as training and technical facilities in specific areas of economic management such as export guidance
• No Interference in Domestic Affairs: Another notable contribution of the Fund is that it does not interfere in the internal economic policies of member countries directly or indirectly
• Special Interest in the Problems of Underdeveloped Countries: The Fund has continued to provide assistance in financial matters and to support the balance of payment to its member countries.
• Stability of Foreign Exchange Rate: The Fund has contributed an excellent role in attaining a stability in the foreign exchange rate.
• Standard by making gold as the measure for the par value of national currencies.
• Eliminate Disequilibrium in Balance of Payment: The Fund keeps a reserve of currencies of the different member countries to provide assistance in correcting disequilibrium in their balance of payment. It can declare the short supply of currency as ‘a scarce currency’ and asks the country to revalue her currency so that the exports may decline and imports from other countries may increase.
• Improvement of Multilateral Trade and Payments: The Funds has facilitated in the establishment of a multilateral trade and payments and also facilitated for the expansion of balanced growth of international trade.
• Expansion in World Market: The establishment of the fund has given stimulus to the expanding of world market.
• Special Drawing Right (SDR): The Fund had succeeded in establishing a scheme of SDR for international liquidity. Further, fund also took many steps to improve international liquidity.
• Helpful in Times of Difficulties: The Fund has been useful to all member countries faced with economic crisis at national level. On account of hike in petrol prices many countries of the world experienced acute shortage of foreign exchange. In order to ease this situation, it set up Petrol Facility Fund.
• The liberalization policies of IMF especially on trade have reduced problems of scarcity and structural inflation
• Policies such as privatization have helped to improve efficiency, accountability, management and reducing corruption.
• Inflation has been controlled through the need to reduce government expenditure as required by IMF

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Criticism/Failures of IMF

–         Limited Scope: International Monetary Fund has very limited scope as it strictly deals with the imbalances of payments arises out of current trade transactions but fails to make adjustments in repayments of war loans or of blocked starting or with exports and imports of capital.

–          Indifferent Treatment: Another shortcoming of the Fund is that the Fund adopts discriminate policy in favour of certain countries in its day-to-day functioning. It is said that IMF is only a “Rich countries Club.” It provides special treatment to western countries while ignores the interests of backward and underdeveloped countries.

–          Failure to Remove Exchange Controls: IMF has utterly failed to achieve the objective of eliminating exchange controls and trade restrictions.

–          Failure to Attain Exchange Stability: The fund has completely failed to maintain foreign exchange rate, exchange rates of different countries have been continuously changing despite the existence of the Fund.

–          No Solution of Liquidity Problem: Although the Fund had taken certain steps to improve the liquidity of financial resources but it could not find any solid solution to the problem.

–          Failure to Tackle the Problem of Dollar System: Another objection is raised that the IMF failed to tackle the problem of petro dollars. Despite great dollar shortage felt by the sterling countries, the Fund failed to declare the dollar a ‘scarce currency’ and to adopt the necessary measures to make the dollar freely available.

–          Defective membership of the Executive of the Fund: Another glaring shortcoming of fund is that the Executive of the Fund has been so organised under the safeguard of the interests of the rich countries like America and UK, Truly, these countries have dominance over the executive only due to defective procedure of selection of members to the executive of the Fund.

• It has tended to interfere with the internal economic affairs/conditions of the member states. This is because the member countries have to fulfil the IMF conditions to get financial assistance.
• The IMF policies have instead widened the gap between the poor and the rich. This is because its programs favour the rich.
• Foreign exchange wastage has become a common problem in LDCs due to IMF liberalization conditions that lead to importation of unnecessary goods.
• Increased debt burden has resulted in a bid to stabilize the BOP positions as required by IMF.
• Retrenchment has aggravated the problem of unemployment and reduction people’s welfare.
• IMF policies have failed to protect the peasant farmer in LDCs because of abolition of price control programs such as minimum price legislation.
• Divestiture conditions of IMF have greatly affected the locals. Since they do not have capital to purchase expensive state enterprises sold off

• The IMF lost its primary mission when the international financial system moved away from the gold standard to a floating exchange rate system.
• the loans enable member countries to pursue reckless domestic economic policies knowing that, if needed, the IMF will bail them out