CSS & PMS Solved Essays | IMF in the 21st Century: Obligations and Limitations
Sara Khan, a Sir Syed Kazim Ali student, has attempted the CSS & PMS essay “IMF in the 21st Century | Obligations and Limitations” on the given pattern, which Sir Syed Kazim Ali teaches his students. Sir Syed Kazim Ali has been Pakistan’s top English writing and CSS, PMS essay and precis coach with the highest success rate of his students. The essay is uploaded to help other competitive aspirants learn and practice essay writing techniques and patterns to qualify for the essay paper.
Outline
1-Introduction
The IMF, as a global lender and the UN financial agency, plays a crucial role in ensuring economic stability worldwide by providing financial assistance, supporting capacity development, and publishing research papers, but its limitations, including unequal voting power and criticism for not respecting member countries’ autonomy, can undermine its credibility and hurt the sovereignty of member countries.
2- Understanding “IMF”
3- What does the IMF do in the 21st century?
4- What are the obligations associated with the IMF in the 21st century?
- ✓Promoting global economic stability
- Case in point: Sri Lanka defaulted on its debt after a severe economic crisis; the IMF approved a 3 billion US dollar loan to help survive the crisis.
- ✓Assisting in capacity development
- Case in point: The IMF’s capacity development efforts assist countries in tackling corruption, climate change, and income inequality.
- ✓Furnishing quality insights and analysis
- Case in point: The IMF offers authoritative and celebrated economics and finance publications through various channels like the World Economic Outlook (WEO), Global Financial Stability Report (GFSR), etc.
- ✓Offering policy advice to member countries
- Case in point: The IMF advises weak economies, such as Argentina, Greece, etc., aiming to revamp fiscal, monetary, and structural policies to boost economic growth.
- ✓Conducting regular assessments
- Case in point: The notable article, Article IV, of the IMF’s Articles of Agreement focuses on the surveillance responsibilities of the IMF and its members.
5-What are the limitations of the IMF in the 21st century?
- ✓Having unequal distribution of voting power in IMF
- Case in point: The IMF does not share equal voting powers with emerging markets and weak economies like Zimbabwe and Venezuela
- ✓Encountering difficulties in adapting to challenges
- Case in point: Such difficulties are spiraling global power entities like the BRICS block with robust economic growth, which have emerged as limitations to IMF’s efficient functioning.
- ✓Undermining the borrower country’s sovereignty
- Case in point: The conditions coming up with the concern of the loan eroding the borrower countries, like Ecuador’s sovereignty
- ✓Lacking concerns about social consequences
- Case in point: The social imbalance and brain drain in Pakistan due to the IMF’s limitations
- ✓Addressing unfolding economic challenges ineffectively
- Case in point: Slow response to the financial crisis that occurred in 2008, threatening IMF’s effectiveness
6-Critical Analysis
7-Conclusion
An international financial institution aiming to bring economic stability to the world’s economic landscape is a global lender, the IMF. The IMF operates as the United Nations (UN) financial agency, headquartered in Washington, D.C. The organization boasts 190 member countries and is tasked with far-reaching obligations and limitations in the contemporary era. One of the primary obligations of the IMF is to ensure economic stability worldwide. To achieve this, the IMF provides financial assistance to its member countries and supports capacity development through training programs. Additionally, the IMF furnishes valuable analysis by publishing research papers helpful in assessing the global economic landscape. However, the IMF is not without limitations. One limitation is the lack of equal voting power among member countries, which can undermine the organization’s credibility. Additionally, the IMF has been criticized for being slow to adapt to emerging economic challenges and not respecting the autonomy of its member countries. These limitations can hurt the sovereignty of member countries and have a far-reaching impact on the global economic landscape. In summary, the IMF is critical in promoting economic stability in the 21st century. The essay describes what the IMF is doing in the 21st century and its obligations and limitations.
Before jumping into the ocean of what the essay requires, it seems necessary to introduce the term IMF. The IMF stands for ‘International Monetary Fund’. The global organization of the United Nations that tends to help prosper economies, and IMF stands on the policy of funding, analyzing, and lending. It has 190 member countries providing funds for it. Further, it works to further trade and support economic policies and promote financial stability and sustainable economic growth. In addition, it works with governments and advises them to spend wisely. Thus, the IMF has headquarters in Washington, DC, and Kristalina Goergieva is its sitting managing director.
Moving ahead, the IMF is obligated to perform multiple functions. First, the IMF promotes economic stability, ensuring prosperity and sustainability worldwide. It does so by lending and giving loans and taking precautionary measures. It indeed provides precautionary lending and implements policies to help the crisis-stricken country. It is evident from the recent demonstration in Sri Lanka. The government defaulted on its debt has followed by a severe economic crisis, so the IMF approved a 3 billion US dollar loan to help survive the crisis. This is how the organization steps forward to maintain economic peace and stability. Thus, the IMF helps make financial stability a truth around the globe.
Second, the IMF provides assistance in capacity development to the member countries. It helps countries enhance institutional and human capacity to frame effective economic policies. It is essential as it is a fundamental mandate of the IMF and takes up to a third of its budget. Moreover, the global organization is obliged to assist capacity development by advising finance ministers on how to raise revenue, enabling governments to provide better public services, such as schools, roads, and hospitals, and training policymakers on how to formulate policies to reduce inequality. Also it aids in lowering various social evils; for instance, the IMF’s efforts help countries tackle corruption, climate change, income inequality, and gender disparity. Therefore,capacity development is the pivotal obligation of the IMF.
Third, the IMF imparts valuable insights and analysis to inspect global trends. The lending body provides views by publishing quality research papers and articles on copious fiscal and economic trends. To illustrate, the IMF offers authoritative and celebrated economics and finance publications through various channels like the World Economic Outlook (WEO), Global Financial Stability Report (GFSR), etc. These quality researches help foster economies by providing insights on issues and how to cope with them.Along with this, the official journal of the IMF publishes high-quality and peer-reviewed research, helping to provide authentic data or statistics to the readers. In this way, the IMF plays a role in bolstering economic growth and financial stability worldwide by providing economic insights to all developing and under-developed countries.
Fourth, one of the endeavours of the IMF is policy advice. The organization is responsible for advising countries in formulating economic policies and then analyzing whether these policies help in economic growth or not. For example, the IMF offers policy advice to weak economies, such as Argentina, Greece, etc., aiming to revamp fiscal, monetary, and structural policies that will boost economic growth and foster economic development – the purpose for which it was established. Additionally, the IMF staff arranges special comprehensive discussions to evaluate and inspect policies, and it examines the repercussions of these policies on the countries. In conclusion, policy advice is another obligation associated with the IMF.
Fifth, surveillance is also one of the core functions of the IMF. Using this obligation to its fullest, the IMF monitors its member countries’ overall economic workings and homework; it engages in surveilling the international monetary system. It also does regular health assessments of economic policies and financial systems. The notable article in this regard is Article IV of the IMF’s Articles of Agreement, focusing on the surveillance responsibilities of the IMF and its members. In addition, the IMF offers recommendations to member countries to address loopholes in policymaking. It ensures that countries’ economic policies promote economic growth and stability, providing a reasonable price balance. Briefly, the global lender’s fundamental obligation is surveillance or regular assessment.
Discussing the limitations of the IMF, some nations argue that there is an unequal distribution of voting power within the organization, which undoubtedly does not reflect the changing world order and emerging economic landscape, harming the IMF’s credibility and legitimacy. The problem is that it does not share equal voting rights with the developing economies and members with weak economies like Zimbabwe and Venezuela. It means the powerful economies with significant voting power dominate the decisions emerging from the issues, creating influence over the fragile economies. To conclude, unequal power distribution is the stone in the way of the IMF’s legitimacy and strength.
Next, the IMF encounters difficulties in adapting to contemporary rising challenges. The lending body seems facing constraints in moulding itself to emerging global economic dynamics. Such difficulties are spiraling global power entities like the BRICS block with robust economic growth, which have emerged as limitations to the IMF’s efficient functioning. Because of COVID-19 and changing dynamics, the IMF is also prone to more devastating challenges, and it is not as adaptive to them as it is non-adaptive to its objectives, priorities, and even policies. All these issues are slowing down its role in the global economic landscape. Long story short, the adaptability challenges of the IMF are slowing down its pace of integrity and credibility.
Furthermore, another limitation that puts a question mark on the IMF’s legitimacy is the condition that the body imposes on the borrower countries, like Ecuador, while giving loans to them, hurting their sovereignty. The countries already on the brink of default or inundated in the crisis expected nothing but this manipulation from it, as they are already going through many crises. And in such challenging circumstances, if someone puts a burden of conditions on their shoulders, too, they will definitely encounter issues in meeting these terms. Indeed, they may face difficulties implementing policy reforms that the IMF dictated, undermining their sovereignty and domestic policy autonomy. In short, the IMF loan’s conditionalities concern weakening the nation’s sovereignty.
Adding to it, the IMF’s focus shift is on economic stability, ignoring the social concerns most of the time. Undoubtedly, the institution’s objectives, policies, and the conditions they impose on the indigent nations all raise questions about the IMF’s consideration of social issues. Ostensibly, the policies the IMF orders to implement to stabilize the economies have imposed severe consequences for the people. For instance, talking about Pakistan, social imbalance and brain drain in the country are eminent examples of this. It is observed how the conditions dictated by the IMF affect the people’s peace and integrity. Each person is either depressed or sleep-deprived, owing to the adverse circumstances followed by skyrocketing inflation. To wrap up, the IMF’s policies have severe social impacts.
Lastly, the IMF is argued to have a slow response concerning the financial crisis. This poses dire consequences for the countries that are in the situation. The ineffectiveness of the global organization shows in its role in tackling the unfolding financial crisis that occurred in 2008. Supplementing to it, the institution’s slow response cast a shadow of economic downturns and social instability in countries with struggling economies. This limitation affects the IMF’s role in the global economic landscape, ruining its right to govern. To summarize, poor dealing with the unveiling challenges effectively has limited the IMF’s role in bringing economic stability worldwide.
Presenting the final analysis of the whole debate, the global lending organization is undoubtedly the last resort of many significantly weaker or defaulted economies. Many nations rely on or run towards it when facing economic and financial issues. Undoubtedly, the IMF provides them hope by giving loans, aid, and incentives to help revive their economies or even pull them out of the crisis. Nevertheless, among various other loopholes, the IMF’s limitations on the borrowers bring its integrity down and develop hatred among nations. However, this act hurts the borrower countries’ integrity, and obviously, it slows down their growth, too. The simple is that the IMF has thus obligations to strengthen economic growth but limitations to sabotaging economic sustainability.
To close the debate, the IMF, a powerful organization, is busy playing its role in its member countries’ economic prosperity and financial stability. Meanwhile, the members provide funding based on their global economic standing. As already discussed, so much is obligatory to the IMF as many things await its attention. It has to monitor, analyze, adapt, and implement actions fostering economic growth, stability, and sustainability around the globe. Apart from these, some limitations are significant barriers to becoming a successful organization, such as unequal voting power distribution, subverting the countries’ sovereignty, and adaptability issues, making it not a worthy institution.
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