Short for International Monetary Fund according to abbreviationfinder, IMF is the most important international financial institution in charge of promoting foreign exchange policies at the international level as well as promoter of trade. The IMF forms part, together with the World Bank, of the specialized organisms in economic-financial matters of the United Nations, being integrated by 185 member countries. The institution is currently chaired by Kristalina Georgieva.
The creation of a body in charge of controlling and managing the development of the international economy was raised on July 22, 1944 during the UN convention, held in Bretton Woods, New Hampshire, United States. Months later, in 1945, with North American support and the co-sponsorship of several European nations, the IMF was born, which since then has been based in the North American capital, Washington DC.
Its statutes declare as main objectives the promotion of sustainable foreign exchange policies at the international level, facilitating international trade and reducing poverty.
Role of the IMF after 2009
At the 2009 G20 summit, held in Pittsburgh, United States, the IMF quadrupled its financial capacity to $1 trillion. It was also commissioned to monitor whether countries are sufficiently stimulating their economies and whether they are reforming their regulatory systems, as well as warning of financial problems, published by The Wall Street Journal.
During this meeting and under the co-sponsorship of US President Barack Obama and his German counterpart, Angela Merkel, the IMF assumed the task of leading the process of rescuing the stability of the economies affected by the crisis. In that sense, close to 500,000 million dollars were approved to rescue the economies by providing the agency with a line of credit that requires debtors to carry out unpopular economic reforms, such as the reduction of fiscal spending, such is the case of what applied in countries such as Greece, Portugal, Ireland, Italy and Spain  whose economic situations threaten the stability ofEurozone The economy is threatened.
Its stated purpose is to prevent crises in monetary systems by encouraging countries to adopt economic policy measures; As its name indicates, the institution is also a fund to which member countries that need temporary financing can resort to overcome balance of payments problems. Another objective is to promote international cooperation on international monetary issues and facilitate the movement of trade through productive capacity.
Since its foundation, it has promoted exchange stability and orderly exchange regimes in order to avoid competitive exchange depreciations, facilitates a multilateral system of payments and transfers for transactions, trying to eliminate the restrictions that hinder the expansion of world trade. It also advises governments and central banks on the development of public accounting systems. In summary:
- Promote international monetary cooperation.
- Facilitate the expansion and balanced growth of international trade.
- Promote stability in currency exchanges.
- Facilitate the establishment of a multilateral payment system.
- Make occasional loans to members who have difficulties in their balance of payments.
- Shorten the duration and reduce the degree of imbalance in the balance of payments of the members.
The IMF temporarily grants those financial resources to members that experience problems in their balance of payments. A member country has automatic access to 25% of its quota if it experiences balance of payments difficulties. If you need more funds (it almost always happens), you have to negotiate a stabilization plan. It is hoped that any member who receives a loan pays it back as soon as possible so as not to limit credit access to other countries. Before this happens, the borrowing country must indicate how it intends to solve its balance of payments problems so that it can repay the money over a repayment period of three to five years, although sometimes it is as long as the 15 years.
However, its policies (especially the conditions it imposes on developing countries to pay their debt or grant new loans) have been severely questioned as causing regressions in income distribution and damage to social policies. Some of the most intense criticism has come from Joseph Stiglitz, former World Bank Chief Economist and 2001 Nobel Laureate in Economics, who has pointed out that the IMF’s main problems lie in:
- Reorganization of the public budget at the expense of social spending. The IMF points out that the State should not grant subsidies or assume expenses of groups that can pay for their benefits, although in practice this has resulted in the reduction of social services to sectors that are not in a position to pay them.
- Generation of sufficient primary fiscal surplus to cover external debt commitments.
- Elimination of subsidies, both in productive activity and in social services, together with the reduction of tariffs.
- Restructuring of the tax system. In order to increase tax collection, it has generally promoted the implementation of regressive taxes that are easy to collect (such as the Value Added Tax).
- Elimination of exchange barriers. The IMF at this point is in favor of free floating currencies and an open market.
- Implementation of a free market structure in practically all sectors of goods and services, without State intervention, which should only assume a regulatory role when required.
- The concept of services, in the interpretation of the IMF, extends to include areas that are traditionally interpreted as structures for guaranteeing fundamental rights, such as education, health or social security.
- Labor flexibility policies, understood as the deregulation of the labor market.
These points were central in the IMF negotiations in Latin America as conditions for the access of the countries of the region to credit, in the 1980s. It is argued that they caused a slowdown in industrialization, or deindustrialization in most cases. The recessions in various Latin American countries at the end of the 1990s and financial crises such as the one in Argentina at the end of 2001 are presented as examples of the opinion of the failure of the “recipes” of the International Monetary Fund, since those countries determined their economic policy under the recommendations of the agency.