Is the Lending the Funds from the IMF to Distressed Countries Hurting These Countries?

The IMF goal is to strengthen distressed countries. The IMF works in three main types. (IMF) Surveillance, lends and technical assistance. Supporting all three types is research and statistics. (IMF) Each main type of the IMF is important and plays an important role to ensure a globalized economy. Though surveillance, the IMF ensures that one countries financial and economic policy won't hurt another countries. The IMF lends money to those countries who can not find affordable financing "to meet its net international payments." (IMF) The IMF provides technical assistance in such areas as: "macroeconomic policy, tax policy and revenue administration, expenditure management, monetary policy, the exchange rate system, financial sector sustainability, and macroeconomic and financial statistics." (IMF)

In my opinion, the lending the funds to those countries that are hunting is only hurting the country more. Do you pay your mortgage on a home you know that is going to be reposed, or a car? Do you pay your credit card bills when you know you are going to file bankruptcy in a few months? The answer to that is no, it is a waste of money. The lending of funds to help these distressed country is not a long term solution to help these countries.

The main concern with the IMF austerity program is the method of implementation. Selowsky said it best during the IMF Forum, "do fiscal targets follow a one-size-fits-all approach" (Selowsky, Meltzer, Birsdall, 2004) By using this one-size-fits-all approach, the IMF is not addressing the needs of the individual countries in distress.

Examples of Successes:

1. The IMF stepped up to increase funding during the debt crisis of the 1980's. (IMF)

2. The IMF increased lending during the oil shock of the 1970's. (IMF)

3. "Mauritania is one of the IMF's principal success stories, where economic theories are turned into practice." (afrol News, 2005)

Examples of Failures:

1. "Russia's Meltdown: Anatomy of the IMF Failure. The IMF has overestimated the growth rate of Russia's GDP every year since 1994." (Cohen, 1998)

2. "Brazilian Crises: All the IMF injection has done is give more profit to speculators, rather than stabilize the Brazilian economy or help regular Brazilians, said Itamar Franco," (The Globe and Mail, 1999)

References:

IMF, Internal Monetary Fund, http://www.imf.org retrieved on October 28, 2005.

Selowsky, Meltzer, Birsdall, June 8^th, 2004, "Transcript of an IMF Book Forum
Does the IMF always prescribe fiscal austerity? Are targets too tight?" [Electronic Version] retrieved on October 28, 2005 from http://www.imf.org/external/np/tr/2004/tr040608.htm Participants: Marcelo Selowsky, Independent Evaluation Office, IMF Allan Meltzer, Carnegie-Mellon University and American Enterprise Institute Nancy Birsdall, Center for Global Development

Cohen, Dr. Ariel, October 23, 1998 "Russia's Meltdown: Anatomy of the IMF Failure", The Heritage Foundation, [Electronic Version] retrieved on October 28, 2005 from http://www.heritage.org/Research/RussiaandEurasia/BG1228.cfm

The Globe and Mail, February 1, 1999, "Brazil: A test of IMF's new tactics Another Failure?", [Electronic Version] retrieved on October 28, 2005 from http://www.geocities.com/Eureka/Concourse/8751/edisi03/brzl01.htm

Afrol News, October 17, 2005, "IMF praises Mauritanian President", [Electronic Version] Retrieved on October 28, 2005 from http://www.afrol.com/html/News2002/mau030_koehler_taya.htm