Most Powerful Groups in the World - International Monetary Fund Part 2

About the history of the organization known as the International Monetary Fund or IMF bank which helps oversee the global economy.



Exploits: As the IMF's power mounted, so did criticism. The Fund is seen as a repressive tool of the industrialized nations, which use it to manipulate poorer countries' economies. Although a Fund spokesman responds to such charges by saying, "The IMF is a private club and members must accept its rules," third-world members say they really have no choice but to join, since otherwise they face being cut off from World Bank aid as well as credit from banks that balk at giving loans to non-IMF nations. The Fund says it only sets broad economic targets for borrowing countries--such as cutting inflation by a certain amount. But the IMF attaches stringent conditions to its loans, such as devaluing the currency and reducing government spending. Fund-ordered cutbacks in social welfare programs are said to have provoked mass uprisings in cities such as Cairo, where riots occurred when the Egyptian government tried to comply with an IMF demand that it cut back on food subsidies. Many corrupt governments secretly approve of Fund policies, which they know will be unpopular among their poorer population, and are glad to let the IMF take the blame for their dirty work. The IMF also is accused of having double standards in its lending conditions. It tells developing countries to limit armament spending if they want to receive loans, while ignoring similar expenditures in more favored European nations. Human rights activists come down hard on the Fund's policy of making liberal loans to repressive countries such as Argentina and South Africa without even attempting to impose any conditions regarding individual liberties. The IMF is the only international agency in which the U.S. delegation is not bound by any human rights terms.

One of the IMF's most unique achievements was its creation of an international reserve asset in the late 1960s, in the form of "Special Drawing Rights." SDRs served to enlarge member countries' quotas without requiring them to contribute additional subscriptions in gold or currency, thus enabling them to borrow a greater amount. Unlike the World Bank, some of the Fund's major customers have been industrialized countries. The U.S. has been the second-largest user of the Fund's SDRs, and since 1963 has made withdrawals from the Fund 24 times for about $7.5 billion. The IMF came to the aid of economically troubled Great Britain in 1976 and of Italy in 1977. However, both countries paid a heavy price by agreeing to strict IMF terms to cut government spending and slow down inflation.

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