14 Jul 2022


Economic Development Institution: International Monetary Fund

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Economic development institutions (EDIs) are important factors towards continued economic growth in individual countries and in the stability in the world as a whole. These institutions look to create cooperation between member states as a means of improving global economy. Through a closer look at a single institution, it is evident that such EDIs are helpful in world politics and in embracing cohesion among the involved parties. The following paper looks into the various operations of the international Monetary Fund (IMF) in determining its importance to the politics of the world. The development and structure of the organization is distinct feature in providing the significant effect to the country of its location. This report will give an in-depth view of the importance of EDIs or if they are detrimental to the countries that interact with it. 

The IMF and World Politics 

The IMF is an international economic development institution that has its headquarters in Washington, D.C. It was formed in 1944 following the Bretton Woods Conference after which it was formalized in 1945 with 29 countries as the first members. It currently boasts 189 member countries all of whom participate in the mission and purpose of the organization. This commitment includes ensuring global monetary cooperation, providing resources during financial difficulty, securing stability of exchange-rate, smoothening international trade activities, and high employment and sustainable economic growth. The institution maintains an appropriate structure of leadership where all member countries appoint one governor and alternative governor to serve in the Board of Governors (Soleymani, 2010). There is an Executive Board that consists of 24 Executive Directors all of whom represent the member countries according to geography and size of the country’s economy with larger ones having their own. The Managing Director serves as the Chair of the Executive Board and heads the entire organization with assistance from a First Deputy managing director and three other Deputy Managing Directors (Soleymani, 2010). 

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Following the formation of IMF in the early years after the Second World War, the rules for membership into the international organization were left loose. Members are required to make significant payments towards their share, abide by the Code of Conduct stated in the Article of Agreement, provide information on national economy and should refrain from restricting other currency unless they receive permission from the IMF. Stricter rules are applied to member countries seeking loans and funding from the IMF. The organization is involved in numerous activities towards global economic development including working with developing countries as a strategy to reduce poverty, advising and providing funds to the members, and fostering global growth (Margalit, 2012). This function is achieved through surveillance, lending and capacity development. Since its formation, the IMF has been a key factor towards the global economy through cooperation and reconstruction after the World War II, change of policy following the collapse of the Bretton Woods System of a fixed exchange rate and helping countries of the former Soviet bloc as they transition into market-driven economies after the collapse of the Soviet Union (Soleymani, 2010). 

IMF Operations and Strategy behind Decisions 

As previously mentioned, the IMF is headquartered in Washington, D.C. which is in the US. However, there are multiple regional and representative offices across the world in various member countries. These offices are used particularly in the performance of the three major functions of the organization. The first is surveillance where it monitors the economic and financial policies of the members. The IMF highlights the possible risks that the government could encounter in future and uses this information on developing possible policy adjustments that the country can make. In the event that the member country has actual or potential threats to balance of payments, the IMF provides loans to help avert the risks (Soleymani, 2010). However, it is required that members adhere to certain conditions when seeking financial assistance usually by changing their economic policies to improve macroeconomic performance (International Monetary Fund). This strategic decision making is an attempt to ensure that the resources provided realize maximum benefit for the country and minimize waste. 

Impact and Effect of the IMF 

Social and Environmental Performance 

The lending practices of the IMF have had significant impact on the social and environmental performance of its member countries. Through the use of structural adjustment, borrowing countries have to readjust their economic policies in an attempt to steer growth. However, this strategy has worked contrary to the expectation. As presented by reports on developing countries, there was little improvement on the social and environmental aspects as the structural adjustment programs focused on economic policies. The human capital aspect was largely neglected resulting in little or no growth for the borrowing countries (Goodhope, 2012). The policies that are usually recommended usually relate to the agricultural sector with very few involving industrial development. In such cases, the environment is maintained as the manufacturing industries are usually designated for the richer countries that have enough wealth to develop further. The developing countries continue to maintain high poverty levels in the country (Weiss, 2013). 

Economic Performance 

In terms of economic performance, the IMF has done little to ensure global stability and economic growth. Following the collapse of the Bretton Woods system of a fixed exchange rate, the world experienced an oil shock which was closely followed by high debts for countries. This occurrence led to high levels of lending in an attempt to avert the debt crisis. Some of the countries were able to avert the problem, however, many continue to suffer from the same (International Monetary Fund). A lack of ineffective development plans have led to stagnating economies particularly for developing countries in Africa and some in Latin America. Poor management of the financial resources has been a major factor towards lack of economic growth in these areas. The 21 st Century has brought about new significant challenges for the organization. Food and oil prices have risen for quite some time leading to questions on how the international organization will help poorer countries achieve their respective goals for development (Weiss, 2013). 

Economic Cooperation and Competition 

One of the main goals of the economic development institution is ensuring cooperation among member countries. This purpose has increasingly become the most common practice in the organization as members interact through trade and foreign investments. Wealthier nations are seen to increasingly fund developing countries through development of various industries (Margalit, 2012). The US and European countries are observed to invest in the developing countries in an attempt to achieve the goals set by IMF (International Monetary Fund). Through the formation of IMF numerous countries have emerged as contenders for high economy. These nations include Brazil, China, Russia and India though there are cases where South Africa and Indonesia are at times included forming the acronym BRIICS. Such developments have increased competition among the first world countries in terms of trade and innovation. The countries also provide an appropriate solution to the poverty and inequality needs of other developing nations leading to cooperative operations. 

Social, Economic and Environmental Responsibilities and Influences of the IMF 

The IMF holds a social responsibility to all populations of the member countries. To begin with, the institution has the responsibility to help member governments averts crisis that may affect the rights of the populations. In this case, the organization helps governments increase employment opportunities to avoid a food crisis or an increase in crime. The organization has worked tirelessly to influence this change (Goodhope, 2012). Despite significant improvement the income inequality experienced is alarming and calls for further modifications of plans made by the economists in the organization. The policies demanded for borrowing countries should incorporate an in-depth knowledge of the social aspects of the same in an attempt to ensure social and economic development (Goodhope, 2012). 

The organization also has an economic responsibility of ensuring global financial stability. In 2008, the world experienced a financial crisis due to lack of effective planning to avoid the problem. As a result, many countries were affected leading a significant increase in demand for IMF resources. The international institution should set up an appropriate surveillance that can predict potential events like in 2008 and develop numerous strategies that will help avoid or reduce its impact (Weiss, 2013). Additionally, there multiple countries that continue to suffer in poverty with little signs for hope. The organization should focus on them primarily in eradicating factors that hinder economic growth like corruption and other social ills. 

Though the main goal of the IMF is to increase economy growth, this should not be achieved by neglecting the institution’s responsibility to conserve the environment. Hereby, member nations particularly the developed ones where manufacturing industries are in plenty should be warned on their pollution practices (Margalit, 2012). Significant measures should be taken to reduce negative impact on the environment. 


The economic development institution, IMF, is an international organization involved in ensuring global economic stability. From the above report it is evident that the institution has experienced numerous challenges and successes alike. Lack of income equality even in the developed countries is a major problem that is yet to be resolved. The conditionality approach in lending resources is also seen to hinder the economic development among poorer nations as the policies implemented do not relate to the condition of the country. However, the IMF has led to increased cooperation among the developed and developing countries resulting in significant relief from the IMF financial reserves. The potential of the organization is great whereby better surveillance and planning could result in economic growth and stability in the world. 


Goodhope, O. O. (2012). Globalization: The emerging new knowledge economy and consumer behavior dynamics. International Journal of Academic Research , 4(6), 197–20 

International Monetary Fund. (n.d.). Retrieved from http://www.imf.org/external/index.htm 

Margalit, Y. (2012). Lost in globalization: International economic integration and the sources of popular discontent. International Studies Quarterly , 56, 484–500. 

Soleymani, M. (2010). The heavy price of globalization: Globalization and sustainable development. Perspectives on Global Development & Technology , 9, 101–118. 

Weiss, M. A. (2013). International Monetary Fund: Background and issues for Congress. Congressional Research Service: Report , 1–25. 

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