International Monetary Fund is an international organization, joined by 185 countries, whose primary role is to monitor the stability of the global financial system by preserving the order in balance of payments and observing the exchange rates (What is IMF, 2006). IMF is also in charge of providing financial and technical assistance to its member countries and overseeing the progress that these countries have made.
IMF also sets out policy guidelines that are geared towards maintaining economic stability by reducing their member countries' vulnerability to economic fluctuations and financial crises and towards improving the living standards of the people residing in those countries. IMF was conceived at the Bretton Woods Conference in 1944 along with World Bank. However, it began its operations in May 1946. The Bretton Woods Conference was called in order to create a responsive action to the shared grievances and experiences that took place in the Great Depression.
In addition, the Conference was also an attempt towards eliminating the power concentration among few countries, and to task the responsibility on a powerful state that can oversee the balance and assume leadership in global affairs. Instantly following the Conference, United States of America has been established as the most dominant state because of its military, political and economic supremacy over other countries (Fry, et al. , 2002, 283). They mostly controlled how the institution provided the services that it was supposed to render its member countries.
Hence, IMF has become a political institution operating under certain circumstances wherein its proponents and leaders are bound to gain benefits from it. Structural Adjustment Policies Structural Adjustment Policies are the agreed conditionalities between the country availing for a loan and the IMF. Ideally, these policies are meant to keep the countries on track for the proper way of how the money lent should be spent. The rationale behind adjustments is to help the countries manage and reduce their debts and to strengthen their balance of payments while maintaining the growth and development within their countries (Easterly, 2002, 2).
However, these conditionalities keep the borrowers tied to the institution. SAPs are used to keep developing nations under huge amount of debts, so as to make sure that they are always held obliged to follow the dictates of the institution and the body governing it. These conditionalities are purposely fabricated to ensure debt repayment and restructure their economy in such a way that they fall rigidly under IMF's policies (Shah, 2007). These impositions by the IMF through the SAPs have kept poor countries from spending more for social services like education, health and development.
Rather, country spending became alloted to debt repayment and for the implementation of IMF sponsored economic policies. Hence, this kept countries stagnant in their economic standings, or worse, this has kept poor countries underdeveloped with greater chances of becoming poorer rather than uplifting their economic status (Shah, 2007). Economic Policies Applying a neoliberal framework of economic ideology, IMF operates under the tenets of liberalism and free trade.
IMF conditions are fabricated under the globalization ideals and principles. Under the conditions that they impose upon a country who wishes to borrow money from the institution, they require the borrowers to have their economy opened up to free trade. IMF encourages an export-oriented economy which keeps a poorer country highly dependent to a more developed country. This dependence hinders a country to achieve their full potentials in devising their probable ways of producing their own products and catering to their needs (Shah, 2007).
In addition, regardless of the hindrances that too much reliance on the export economy can cause, borrowing countries are expected to continue exporting to generate money for them to be able to cope to the debt repayment in a timely manner. Exporting is also highly encouraged to keep their local currencies abreast with foreign exchange rate – again, for borrowing countries to enable assurance of debt repayment. Another IMF sponsored policy is minimizing state intervention in the economic activities of the country.
This legalizes privatization of assets and other properties in order to generate more funds from taxes and other private entities. In this way, IMF gets a better look at opportunities on how to fully make use of the country's resources. Privatization makes it easier to eliminate, if not, limit the protection of domestic properties and industries that a state should impose upon its legal jurisdiction (Shah, 2007). Further, IMF encourages removing various foreign investor regulations to attract more investments in the country.
Also, IMF imposed policies are geared towards currency devaluation, increasing interest rates, removing restrictions in the labor market rendering it more flexible and eliminating government subsidies. Thus, governments are being asked to spend less for their people, limit consumption, and reduce if not eliminate financial regulations. Through the policies mentioned, labor value decreases which therefore suppresses the rights of labor workers and underestimates their skills and abilities.
Such policies which in a way have enabled the state to withdraw their support towards their citizens, have made their workers more susceptible to abuse and neglect. In addition, eliminating financial restrictions for foreign investors can cause capital inflows to be more volatile and stable. In line with this, such policy will render local business owners vulnerability in their own investments, wherein in cases of mere capital collapse foreign investors are free and legitimate to withdraw their investments.
In essence, this policy has stripped local industries of the protection that they need for local business survival. The negative effects of these policies can be seen over the long run. These policies slowly, but strongly stunt the growth and development of a certain country under IMF bidding. The effects are proven to be beneficial to IMF and its proponents, while it impeded the development of other countries. These policies are therefore used as tools in further depriving a country's right to development.a