Thursday, December 6, 2012

International Monetary Fund

The International Monetary Fund organization consists of 188 nation-state members and is aimed at international trade cooperation, the elimination of global trade barriers and enhancing international monetary cooperation. The IMF also claims to promote employment and the reduction of world poverty, but I believe these claims can be argued. The IMF is based on “fixed, but adaptable, exchange rates” for world currencies (Kruck, Rittberger & Zangl, 193). The developed gold/dollar standard is the basis for “supply and demand on international financial markets which determine the value of a currency” and has proven that “the free exchange of one currency for another” is required for “smooth payment transactions necessary for international trade” (Kruck, Rittberger & Zangl, 193).

In order to keep the healthy flow of world currencies and the profitable interest rates that go with exchanging them, moving across nation-state borders, the IMF offers loans to boost and reform nation-state banking systems and national economies. I will not claim to be an economist, but I feel that there are mass private profit incentives behind the main driving force of global currency promotion here.

The following excerpts from the textbook should be noted:

“After agreeing to such a loan the IMF disburses it itself by making available, to the state concerned, funds in widely accepted foreign currencies obtained from other states either as quotas or as a loan. The borrowing state ‘purchases’ these foreign currencies with its own currency.” (Kruck, Rittberger & Zangl, 198).

“When repaying, the state in question will repurchase its own currency with the foreign currency.” (Kruck, Rittberger & Zangl, 198).

“Loans are are provided under an arrangement which stipulates in advance the performance criteria for success or failure of the recipient’s agreed reform plan.” (Kruck, Rittberger & Zangl, 193).

The nation-state of Bangladesh, under an Extended Credit Facility arrangement with the IMF, received their first review in 2012. The IMF found that Bangladesh’s economy performed well and their Gross Domestic Product is predicted to grow by 6 percent in fiscal year 2013. The IMF also continued to maintain pressure on Bangladesh to control its budget deficit, by not exceeding 4.5% of the FY13 GDP, and kept a focus on regulated national banking under amendments to the 1991 Banking Companies Act.

Looking at the IMF loans to Bangladesh and the banking reform being conducted by the centralized bank there, it seems that these reforms are in accordance to IMF goals of stabilizing national currency values internationally to support the global economy. It would seem that the most industrialized nation-states hold the most valuable currencies, but still need to establish the currencies of technologically underdeveloped nation-states within the international market in order for obtaining the natural resources (of the underdeveloped nation-states) into ‘play’, incorporated into global trade, and therefore available for international corporate manufacturing and profit.

Byron, Rejaul. Reform Takes Hold in Banks. The Daily Star. January 4, 2010, (accessed on December 6, 2012 from http://www.thedailystar.net/newDesign/news-details.php?nid=120385)

International Monetary Fund webpage, Statement at the Conclusion of the IMF Mission on the First Review Under the Extended Credit Facility Arrangement with Bangladesh, December 6, 2012 (accessed on Dec 6, 2012 from http://www.imf.org/external/np/sec/pr/2012/pr12472.htm)

Kruck, Rittberger, & Zangl, International Organization, 2nd ed. (New York, NY: Palgrave Macmillan, 2012)

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