An evaluation of IMF and World Bank policies for economic growth

An evaluation of IMF- World Bank 1. Introduction Headquartered in Washington DC, the International Monetary Fund (IMF), is a global organization working towards the fostering of international monetary cooperation, facilitation of global trade, promotion of sustainable financial growth and high employment, and securing economic stability around the globe. What began in 1944 in what was known as the Bretton Woods Conference, reached formal existence thanks to the ideas of John Maynard Keynes and Harry Dexter White (Yago, Asai, & Itoh, 2015). In 1945 the aim of reconstruction of the global payment system and the inclusion of twenty-nine-member countries began what some would say is the big player in the current management of global economic crises and balance of payments problems. The IMF has ongoing objectives to promote and maintain conditions that sustain economic growth throughout the world. However, some may argue the IMF has not been able to give the world what it needs in terms of stability and commerce. Instead, some argue IMF and globalization has caused major problems, one of them being the disastrous Brexit. This essay aims to highlight the IMF, its problems, and policies it has aimed at poverty reduction and faster economic growth. 2. Body A. Background Established in Bretton Woods in July 1944, IMF was created alongside World Bank (Yago, Asai, & Itoh, 2015). They are known as the twin intergovernmental pillars or “Bretton Woods Institutions” that support the world’s financial and economic structure and order. Although both have roughly the same universal aims, there is one key distinction. The bank represents a development institution whereas IMF is primarily a cooperative institution seeking maintenance of an orderly system that includes receipts and payments among countries (Yago, Asai, & Itoh, 2015). Other differences are in their inherent structure. Meaning, IMF receives its funding from different sources and aids various categories of members, striving to accomplish specific objective via strategies peculiar to IMF. B. Policies for Faster Growth and Poverty Reduction One important aspect that could be a problem for IMF is the outdated policies for poverty reduction and economic growth. The website representing IMF has policies for the year 2001. Under a section titled: ‘Macroeconomic Policy and Poverty Reduction’, the policies aimed for stability citing it as a necessary aspect of growth and distribution and composition of growth. Part of the policies were to identify sources of instability and promote stabilization. IMF aimed to do this via the financing of poverty reduction methods, a strong fiscal policy, and policies to protect poor people from ‘shocks’. These shocks mean job loss, recessions, and so forth (IMF and World Bank, 2001). The IMF according to a recent book by Gaspar, Gupta & Mulas-Granados (2017), goes through various processes to analyze the current economic climate of any one country. This part of their assessment of what kinds of policy changes need to take place in order for countries to achieve economic stability sheds light on what the IMF does specifically to address concerns regarding organizational goals. A final robustness check consists in analyzing how the existence of independent fiscal institutions affects the impact of fragmentation on public debt dynamics. A small but growing literature has argued that independent fiscal institutions, such as fiscal councils, could improve policymakers’ incentives to opt for sound fiscal policies even in the presence of political fragmentation (Gaspar, Gupta, & Mulas-Granados, 2017, p. 228). However, as the authors reveal more of the processes, it appears these processes are not robust enough to create any significant change in countries that are in dire need of economic stability. From what has been shown in the past, most of the countries that IMF aimed to help like Nigeria for example, continue to experience financial instability and ongoing employment problems (Yago, Asai, & Itoh, 2015). It even appears the recent efforts to help the Republic of Mozambique have remained ineffective. C. Problems with IMF and the advent of Globalization In 2014, the IMF began their attempts to revitalize the Republic of Mozambique. Their aim was to encourage growth in the fishery and agriculture sectors. The information in the book states the IMF achieved 43.8 percent improvement towards the goal. “The global performance of this objective shows that of the 16 indicators monitored, 43.8 percent have attained the planned targets, whereas 50 percent have not attained the targets but have made progress, and 6.3 percent are well behind schedule” (International Monetary Fund. African Dept., 2014, p. 35). Although some progress was made in 2014, that did not signify overall progress was made. According to the African Development Bank Group, GDP growth declined. “Mozambique’s GDP growth declined in 2015 to 6.3% because of lower export earnings and public expenditure but is expected to expand 6.5% in 2016. Amid government-opposition political tensions, improved financial management and public expenditure are needed to counter growing inequalities” (AFDB, 2015). It seems like the policies sent in place and the objectives of the IMF are not conducive to economic growth in the country of the Republic of Mozambique. One problem could be globalization. If the aim is to improve fishery sectors, there is little done to keep other countries from fishing in the waters of Mozambique or providing the materials to create and maintain fisheries/nurseries for the cultivation and growth of fish and seafood (Serdy, 2016). D. IMF and Brexit Globalization has caused many problems for both developed and developing countries. One specific example is the Brexit event. Working class people in Britain felt they were losing their jobs to immigrants that came legally via the process of migration policies from the European Union (EU) (FOTOPOULOS, 2016). The EU provided people from Poland for example, access to British jobs and they worked for less, leading to economic pocket recessions in certain regions of England. Although the upper class fared well with the changes brought on by the EU, the lower class continued to lose work. The loss of income, loss of economic prosperity prompted many British people to vote ‘Leave’ from the EU in a 2016 referendum (FOTOPOULOS, 2016). This has caused some major changes to Great Britain from the lowering of value of the British pound, to foreign investors leaving the country. Whether this decision will work out for Britain, the world does not know. However, globalization may have been the main force behind the drastic action. 3. Conclusions In conclusion, the IMF has existed for more than seventy-two years and has provided guidance for countries to promote fair trading practices and policies that enable faster economic growth.