Political instability may result from more leadership changes as political leaders are replaced in electoral responses. [19] IMF conditions are often criticized for cutting government services and thus increasing unemployment. [20] In addition to its commitments with respect to Special Drawing Rights under other Articles of this Agreement, each Participant undertakes to cooperate with the Fund and other participants in order to facilitate the effective functioning of the Drawing Rights Department and the correct use of Special Drawing Rights in accordance with this Agreement and with a view to establishing the Special Drawing Right on the Union`s main reserve assets. international. Monetary union. System. All the bretton Woods countries have agreed to a fixed peg to the US dollar with diversions of only 1%. Countries were required to monitor and maintain their currency anchors, which they achieved primarily by using their currency to buy or sell U.S. dollars as needed. The Bretton Woods system has thus minimized the volatility of international exchange rates, which has benefited international trade relations.
Greater stability in foreign exchange operations has also been a factor in the successful support of the World Bank`s international loans and grants. Because the IMF lends its money with “conditions” in the form of its SAPs, many people and organizations are fiercely opposed to its activities. Opposition groups argue that structural adjustment is an undemocratic and inhumane way to lend funds to countries facing economic failure. IMF debtor countries often face financial concerns that outweigh social concerns. 2. If the assets of the Fund in the currency of the outgoing Member are insufficient to pay the net amount due from the Fund, the balance shall be paid in a freely usable currency or by any other agreed means. If the Fund and the retiring member do not reach an agreement within six months of the date of withdrawal, the currency in question held by the Fund shall be paid without delay to the outgoing member. The outstanding amount must be paid in ten semi-annual instalments over the next five years. Each of these payments shall be paid, at the choice of the Fund, either in the currency of the departing Member acquired after its withdrawal or in a freely usable currency. At the end of March 2014, after the 2014 Ukrainian revolution, the IMF obtained an $18 billion rescue fund for the interim government of Ukraine. [56] [57] SDRs are not a currency; it is a unit of account through which Member States can exchange information with each other in order to settle international accounts.
SDRs can also be used in exchange for other currencies freely traded by IMF members. A country can do this if it has a deficit and needs more foreign exchange to meet its international obligations. “Following the needs of the governments of the richest companies, the IMF has allowed countries in crisis to borrow to avoid default. Trapped in the downward spiral of debt, developing countries soon had no choice but to take on new debt to repay the old debt. Before granting them new loans at higher interest rates, the future leaders asked the IMF to intervene with the guarantee of a backstop and to ask for the signing of an agreement with these countries. The IMF therefore agreed to resume the flow of the “financial pump” on condition that the affected countries first use this money to compensate banks and other private lenders while restructuring their economies at the discretion of the IMF: these were the famous conditionalities detailed in the structural adjustment programs. The IMF and its ultraliberal experts have taken control of the economic policies of borrowing countries. This introduced a new form of colonization. It was not even necessary to establish an administrative or military presence; debt alone supported this new form of submission. [144] Under the original Articles of Agreement, the IMF oversaw a modified gold standard system with fixed or stable exchange rates.
Each member declared a value for its currency against the U.S. dollar and, in return, the U.S. Treasury tied the dollar to gold by agreeing to buy gold at $35 an ounce and sell it to other governments. A country`s exchange rate can only vary by 1% above or below its declared value. To eliminate competitive devaluations, the IMF allowed exchange rate movements of more than 1 percent only for countries with a “fundamental balance of payments imbalance” and only after IMF consultation and approval. In August 1971, U.S. President Richard Nixon ended this system of fixed exchange rates by refusing to sell gold to other governments at a fixed price. .
