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DA2. IMF, World Bank, and MDGs

Statement

Answer the following questions:

  1. What are the key features of the IMF, and how do they align with the criticisms made toward this institution?
  2. What are the key features of the World Bank, and how do they align with the criticisms made toward this institution?
  3. What are the key features of the Millennium Development Goals (MDGs), and what possible improvements could be highlighted?

Answer

Introduction

In July 1994, 730 officials representing 44 countries met in Bretton Woods, New Hampshire, to create a new international monetary system and find a way to boost global economic growth. As a result of the negotiations, the Bretton Woods Agreement was signed, creating the International Monetary Fund (IMF) and the World Bank. Although the system has dissolved in the 1970s, both institutions are still alive (Chen, 2024).

International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an international organization that has 190 member countries and works towards furthering international monetary cooperation, encouraging the expansion of trade and economic growth, and discouraging policies that would harm prosperity (What is the IMF, 2024). The IMF’s key features include economic surveillance, lending, capacity development, and Special Drawing Rights (IMF Annual Report, 2021).

Economic surveillance is the IMF function that allows it to collect and analyze extensive data on each of its member countries and the global economy at large. This data is used for monitoring and giving policy advice to its members or warning them of potential economic problems (IMF Annual Report | Economic Surveillance, 2021). Critics argue that policy advice does not take the country’s circumstances into account and thus the advice is not effective or biased.

Lending lets the IMF provide financial assistance to countries in need including direct loans, emergency financing, and debt relief (IMF Annual Report | Lending, 2021). Critics argue that the IMF’s lending conditions are too strict and worsen the economic situation in the borrowing countries; and that IMF lends money to countries that do not need it such as China (Nordquist & Katz, 2024).

Capacity development allows the IMF to provide training and technical assistance to its member countries to help them build their capacity to design and implement effective economic policies (IMF Annual Report | Capacity Development, 2021). Critics argue that the IMF’s capacity development programs are not effective and do not take into account the cultural and social context of each country.

Special Drawing Rights (SDRs) are international reserve assets created by the IMF to supplement the official reserves of its member countries. SDRs are allocated to member countries in proportion to their IMF quotas, which are based on their relative economic size in the global economy (Kenton, 2022). Critics argue that the SDRs are not distributed fairly and that they benefit the rich countries more than the poor countries.

World Bank

The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Five institutions make up the World Bank Group: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID) (World Bank, 2016).

The key features of the World Bank involve collaboration between its five institutions and countries of the world to reduce poverty, increase shared prosperity, and promote sustainable development. The World Bank provides financing, advice, and other resources to developing countries in the areas of education, public safety, health, and other areas of need (What Is the World Bank, 2024).

Critics argue that the World Bank suffers from structural biases, where developing countries are underrepresented in the decision-making process while rich countries are over-represented. The World Bank is known for its inability to learn from its past mistakes, lack of accountability even when projects fail or cause harm, lack of transparency in its operations, and lack of positive impact (Alvarez, 2019).

Millennium Development Goals (MDGs)

The Millennium Development Goals (MDGs) are 8 goals established at the Millennium Summit of the United Nations in 2000. The goals aimed to promote human dignity and equality and achieve peace, democracy and environmental sustainability; and were set to be due by 2015 (Regan, 2011).

The 8 goals are: to eradicate extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality, improve maternal health, combat HIV/AIDS, malaria, and other diseases, ensure environmental sustainability, and develop a global partnership for development (Regan, 2011).

The Millennium Development Goals Report (2015) shows that there was significant progress in achieving the MDGs, but there were still many possible improvements. For example, goal 1 focuses on reducing poverty and the 2015 report shows that the number of people living in poverty decreased; however, that is not enough as such growth may be eradicated by a single economic crisis; thus, the focus should be shifted towards more sustainable growth that is resilient to economic crises.

The gap between rich and poor countries, as well as between urban and rural areas is still significant and needs to be addressed. Climate change’s threat is increasing and needs to be added as a separate goal and a global-wide response should be prepared. None of the goals targets the issue of conflict and violence despite it being the main reason for many other issues and human suffering.

Conclusion

Both the IMF and the World Bank played an important role in global economic growth. However, allegations of bias, ineffectiveness, corruption, lack of accountability, lack of transparency, and lack of impact have been circulating around these institutions. Simply terminating these institutions is not the solution, rather fixing them and making them more representative and accountable is the way forward.

The Millennium Development Goals made great progress between 2000 and 2015. The goals were ambitious and were not fully achieved, but the progress was good. However, while the world is evolving, so are its problems and challenges. There should be a review of the MDGs every 10 or 15 years to ensure that relevant challenges are addressed.

References