To what extent has the imf achieved its objectives?, Managerial Economics

To what extent has the IMF achieved its objectives?

The objective of achieving full convertibility of currencies has not been achieved.  In the first place countries impose restrictions in their trade with each other, and this has not helped the growth of world trade.  Secondly, the export capabilities of different countries are different and it is difficult for all currencies to be convertible in particular the range of exports for developing countries very limited and so is the demand for them.  This makes their currencies weak and unconvertible.

The objective of stabilizing exchange rates has not been achieved.  This is because outside the stated limits the adjustable peg system of exchange rates has the same limitations as the gold standard in that it is deflationary and can put strains on the country's foreign exchange reserves in times of a trade deficit and it is inflationary in times of a trade surplus.

While the IMF does give short-term assistance to member states in balance of payments problems, it is strictly on a short-term basis and it does not go to the root cause of the deficit.  A more useful form of assistance would be one that would go into projects that would increase the productive potential of the country, making it less dependent on imports and increasing its export potential.  Such assistance would have to be on long-term basis, but this is not within the objectives of the I.M.F., which gives assistance to finance a prevailing deficit.

Posted Date: 12/1/2012 4:50:41 AM | Location : United States







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