Strategic benefits of the international monetary fund
Disorders monetary and financial crises have played a role compounding in the outbreak of the second world war. In the aftermath of conflict, it seems necessary to empower a supranational organization to prevent and deal with fluctuations in the global monetary system. It is the international monetary fund which we wanted to make a "Constable prosperity." Indeed, this organization was born in December 1945 after the first 29 Member States conducted the ratification of the Statute developed monetary and financial conference of Bretton Woods (July 1944). It is an initiative designed to enable these States collectively manage disorders related to the imbalance of international payments.
Le F.M.I, advises countries on economic and fiscal policy which encourages coordination policies around the world also provides technical assistance to central banks accounting, tax and other financial matters. However, from 1980s, it is characterized by its interventions on productive structure of national economies through policies to reduce poverty at the global level structural adjustment. Can we consider these interventions and strategic advantages brought about by the F.M.I to developing countries?
The functioning of the F.M.I depends on its administration and its sources of funding that allowed him to allocate financial assistance immediately after the war and until the 1970s when monetary disorder have arisen for fieldwork in the implementation of a structural adjustment policy considered strategic by some advantages and challenged by others, through the management of debts of the 1980s and 1990s decades and strategy to fight against poverty to achieve concrete on political and social in developing countries consequences.
1. The F.M.I strategic operation
1.1. Mission and administration.
The international monetary fund is a financial institution, depending on the Organization of the United Nations (UN), which is designed to address international monetary disorder. The creation of the F.M.I in 1945 responds to the observation made by all Governments component that does not yet called the international community. Fund assigns its multiple objectives: to promote international monetary cooperation and work towards a balanced growth by implementing transnational trade multinational transactions payment plan common within a general framework of removing barriers to the development of international trade.
F.M.I, which the seat is located in Washington, D.c. DC in the United States of America, is accountable to its Member States 184 and managed by a Board of Governors which is the highest authority in which
Members are represented throughout the country. Each State shall appoint a Governor (often it is the Minister of finance or, Alternatively, the Governor of the Central Bank) as well as a substitute. The Board meets once per year to the General Assembly of the F.M.I. The Board members are also encouraged to sit in committees which treat questions specifically about the P.V.D. and they sit twice per year. There is also the 24 members of the Board of directors who meet three times a week under the chairmanship of the Director General. Five most important contributors to F.M.I (USA, Japan Germany, France, United Kingdom) have, right, an administrator; As well as China, the Russia and Saudi Arabia. Sixteen administrators remaining are appointed for a term of two years by a colleague country. Unlike other international agencies where each country has a voice, the F.M.I Board vote according to a system of weighting function of the share of the country in question. The members of the Board elect their President which carries the title of Director General, for a renewable term of five years. This position is occupied, since 1 May 2000 by HORST KOHLER former President of the European Bank for reconstruction and development (EBRD), eighth Director-General the F.M.I since its inception. To be able to function well and achieve its goals, F.. M.I is an international agency whose account and fueled by contributions from Member States.
1.2 Funding sources:
By becoming a member of the F.M.I, each State is requesting a subscription or share it pays at the time of its accession. The amount of this contribution varies based on the relative weight of the country in question, in the global economy. More than this (in terms of reproduction and its trade volume) is important, its share due to the F.M.I higher. The greatest contribution is the United States of America which is 17.6% to Japan and Germany with 6.5% and the France and the United Kingdom with 5.1%. The more modest contribution is the SEYCHELLES is the order of 0.0004%.
Amount of quota determines the time the subscription, the amount that each country can ask the F.M.I as well as its allocation in D.T.S (law of special prints) contests. Since 1969, the D.T.S are reserve and account currency unit in which are denominated funds allocated by the F.M.I. The D.T.S is not materialized currency and no room or no banknote is circulating D.T.S. This is a monetary unit which is identical to that filled the b.c carrry until the EU countries adopt the euro as the single currency. The value of the D.T.S is determined based on a weighted average four representative currencies most used currency in international transactions namely: the dollar, the euro, the yen and the pound sterling. This currency basket composition is reviewed periodically (every five years), but its value is determined on a daily basis. In 2002, average 01 D.T.S was worth $ 1.26 and total amount stood 290 billion.
To deal with transitory difficulties in their balance of payments financing, Member States may resort to the general resources account Fund, which can also borrow with other international institutions or informal organizations such as the club of Paris, which comprises 19 States with the highest claims on countries with whom negotiations OTC developing settled address over-indebtedness which characterizes the structure of their funds public weight.
Funding sources helps unlock credits and financial assistance to international monetary fund.
2 Competitions strategic financial of the F.M.I
2.1. Immediate post-war:
Since its inception, the F.M.I gives its very advantageous financial assistance to equilibrium in their balance of payments problems developing countries. Over the period 1947-2000, countries that have strongly requested the F.M.I are: the Mexico with 20 billion D.T.S, Korea 18 billion, Russia 16 billion, Brazil 13 billion and Argentina 11 billion.
Lending instruments are many: the so-called confirmation agreements established in 1951, which remains to this day senior loans support, plus five other existing appropriations grant terms today, and are all little or no similar characteristics. These credits are recognizance with conditions, they are temporary and disbursed according to the mechanism of funding sought by the applicant for a period of 6 months to 4 years State and they are refundable.
The creation of the F.M.I characterizes the institutional renewal marked post-war period. Fund ensures that monetary non-cooperative behaviour of between it two wars, which were originally crisis fuelled the warmongering spirit of many States happen again. It was then set up a new system international monetary (S.M.I) contributing to the stability of prices of currencies. This objective is concretized through the adoption of a system of fixed but adjustable exchange where prices are likely to vary from minima and maxima fluctuations margins defined in a concerted manner. Nevertheless, this regime more or less worked well for a quarter of a century to see arise monetary disorder at the beginning of the 1970s.
2.2. Monetary disorder 1970s:
Rules based monetary order introduced in 1944 are upset after American Government decision to remove the system of fixed exchange by refusing to provide free convertibility of the dollar into gold, in August 1971. This decision opens a period of generalized floating currencies. A system which will be formalized in 1976 with the signing of the agreements of Jamaica. Market logic overrides form of controlled global governance: capital and currency flow freely, pretext to large-scale speculative movements which reinforce the imbalances affecting balance of payments of many States. This situation in which the F.M.I. is found, has weakened as arbitration role has been reduced to the minimum portion.
The F.M.I. is an aid agency, nor a Bank development and, unlike loans allocated by the latter, its competition are not intended to finance projects or specific sectors of activity. they are under a deposit from the Central Bank of the recipient State only purpose to complement its foreign exchange reserves. Finally, the granting of the loan is subject to compliance with the effective implementation of an economic policy between the authorities of the beneficiary State and the authorities of the F.M.I.
This trend has significantly increased in the 1980s and mark a greater intervention of F.M.I. on productive structure of national economies through the so-called structural adjustment policies.
3 Strategic and structural adjustments (P.A.S.) in the P.V.D poverty reduction policy
3.1. Debt management during the decades 80 and 90.
After the monetary disorder of the 1970s, early 1980s Announces crucial for the F.M.I and in developing countries. During the 1980s, the F.M.I resources will serve primarily to overcoming the crisis world the debts, due to excessive loans to developing countries. In 1982, the Mexico suspends the service its debt, soon followed by others Latin American countries. Number of loans come to maturity in 1982 - 83 and this continent is under an obligation to transfer to more strategic F.M.I financial flows it can expect to receive. This spiral of debt opens a period characterized by marked by a succession of various rescheduling or debt restructuring plans savings structural adjustment policy. Such a policy, functional until our days, may be regarded as a strategic advantage provided by the F.M.I to developing countries provided that the Governments of these States have abilities and effective for the successful implementation of this famous policy including the misapplication methods can have harmful consequences which the example shown later in this topic. For the successful implementation of the P.A.S. I want as a model of the Morocco which, to begin its economic takeoff and deal with its problems, began during the 1980s and early 1990s and structural reforms, on advice of the F.M.I. and the World Bank.
The situation that prevailed at the beginning of the 1980s, characterized by severe imbalances, nearly put the Morocco Kingdom in a position of cessation of payments: A rate of inflation of 10.2% in 1982. Deficits in Treasury and the current account of balance of payments order respectively 12 and 12.2% of the GDP In 1982, a deficit of the regular budget of one billion 400 million dirhams. Debt amounting to 123% of the P.I.B in 1984 and a service external debt representing 57% of the farms of the goods and services. All accompanied by internal and external payments arrears as exorbitant and excessively high. Here the need to adopt measures, in fact, translated by the famous Morocco emergency and advantageous policy structural adjustment which focused on sanitation sector State-owned enterprises, modernization of the tax system, the liberalization of international trade and Exchange as well as the reform of the financial sector.
This courageous position taken had a real and positive impact. This is to ensure that what all these measures gave rise at the end of the year 1993: an inflation rate reduced to 5.2%. A deficit of 2.2% of P.I.B; Treasury The balance of payments deficit reduced to 2.1% of P.I.B; One incurs debt versus the P.I.B and debt service significantly less than what it was before the rescheduling; The strengthening of external assets reached 4 billion dollars. Another positive consequence of this policy, is the emergence of local communities as a factor of economic and social development. It was an example of developing countries which has been granted a beneficial Board of the F.M.I and the World Bank during the 1980s, and he was able to see the other end of the tunnel at the beginning of the 1990s
During this period, critics have increased against the international financial institutions. If the weight of debt continues to play the role of bottleneck, succeeding in this decade exchange crisis are somewhat different in nature. Some concerned industrialized countries (including the 92-93 with the crisis of the European monetary system Europe) but they are especially emerging countries such as the Mexico in 1994, several Asian countries in 1997, in 1998, Russia Brazil in 1999 and Argentina in 2001.
Each time a virtually identical scenario occurs: a speculative such currency movement leads to a strong depreciation of its value, which causes a leak of capital resulting in a deficit of the balance of payments. Is victim then seeks emergency F.M.I, however part of the appropriations that it allocates, requiring the State in question of the adjustments. In reality and in my opinion, are opportunities which can be very beneficial for the country in crisis more recovery the F.M.I has has in place a policy of poverty reduction facility and growth (F.R.P.C).
3.2. Strategy of the F.M.I. for overcoming the poverty.
The reduction facility poverty and growth (facility PRGF) is a initiative of the F.M.I implementation since September 1999. This policy reflects enlargement objectives loans granted the P.V.D focusing specifically on combating poverty in context strategy oriented growth. Can be the F.M.I grants loans combined with low interest with a view to further integrate strategic objectives fight against poverty and growth-promoting in its operations in the Member countries in General and of the poorest in particular. A recent review established in 2002, confirmed that this policy became very favourable to the P.V.D.
The F.R.P.C. programs rely on the basis of (D.S.R.P) poverty reduction strategy papers are prepared by national authorities of the beneficiary countries with active participation civil society, including the poor, and other partners development. Councils the F.M.I and bank world serve as reference for agreement concesional lending and relief debt of poor countries most indebted. Note therefore politics of the F.R.P.C focuses on the principle of the wide public participation and the greater supported the program through the country. Only help the recipient State in well target expenditures and its priorities in this regard, the programs supported by the F.R.P.C focus on managing public, in particular on strengthening measures aimed at improving public resource management, transparency and accountability. They put more attention also impact main measures macroeconomic policy to poverty and situation social. where appropriate, the F.M.I appealed for the design of programmes supported by the F.R.P.C B.M skills and services of the two institutions cooperate closely as regards cross-compliance. The B.M takes the initiative for the development of strategy reduction of poverty, including its assessment, monitoring, issues structural and sectoral, dimension social and determination priority spending to fight against the poverty.
Funds these programs are borrowed from the central banks of States or public body, usually in the market interest rates. Contributions bilateral donors resources of the F.M.I enable paid market interest rate gap lenders rate 0.5% paid annual by recipients. A reserve serves as a guarantee in case of late payment or default of payment or disparities temporary between payment and reimbursement. Such a policy is characterized by such loan such interest rate is - not a huge strategic advantage for developing countries which is probably good consequences on the economies of the P.V.D.
3.3 CONSEQUENCES of this policy.
In spite of significant financial assistance (17.8 billion in 1994 for the Mexico and 36 billion for Asia in the space of two years), the conditionality who presided over the allocation of the F.M.I support is now the subject of various challenges and lets say sometimes the F.M.I can bring benefits policy in developing countries because, according to the advocates of this thesis, structural adjustment policies and fight against poverty with the F.M.I characterised by strict orthodoxy of finances, which is expressed, first and foremost, by very strong fiscal policy requirements. It, more often, to increase revenues but above all to reduce living expenses (staff that can lower costs by reducing wages or by reducing the volume of employment) and select investment spending more severely moving toward areas of activities that generate income in currencies that would assure the debt service.
In this policy, which is considered as a strategic advantage to countries developing by some and challenged by others, any imbalance in the balance of payments analysis as the inevitability of an expensive management result an assumption now classic according to the "anti-politiques adjustments" and add that by placing monetary and fiscal policy adjustments Centre austerity, the action of the F.M.I could contribute to amplify the recessive effects generated by a fellow disorder which, initially, is attributable to the only private capital market failure. But ignoring this reality or at least understating the causal effect of this type of behavior and by imposing a strict macroeconomic conditionality, the action of the F.M.I leaves little place for reflections on the often extreme of proposed policies, social consequences. Made allusion to its harmful consequences, earlier in this topic, saying that their main causes are poor implementation of adjustment policies but the "Anti - P a. u.s." want to defend their position by offering such crisis years 2001-2002, according to them, is the perfect illustration of this paradox because it cost her position to a President of the Republic, Argentina plunged the country into a State of bankruptcy and thrown on the streets of thousands of needy even though Argentina, until here financially supported, appeared on the list of "good student" from F.M.I.
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