IMF and The Global Crisis
The International Monetary Fund was created in 1944, with a goal to stabilize exchange rates and supervise the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. It is an organization that oversees the global financial system by following the macroeconomics policies of its member countries. Its headquarters is located in capital city of USA, Washingtion D.C.
The IMF's influence in the global economy steadily increased as it accumulated more members. The number of its member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries and more recently the collapse of the Soviet bloc. The expansion of the it's membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively. Two Bretton Woods institutions, the International Monetary Fund and the World Bank, may no longer be relevant in today's economy.
The extent of the current global financial crisis, it appeared that the analytical tools for understanding and managing the current system were inadequate. National and global governance infrastructure for resolving or even preventing future crisis was at best obsolete, adding that the pace of financial and economic globalization "appear to have outstripped the pace of the theory and institutions that underlie it.
Global GDP growth to slow to 3.0% in 2009, down from 3.9% forecast in its July 2008 report. Moreover, economists note it is important to highlight the differences in what constitutes a recession in the developing and developed worlds. Because emerging markets / developing countries are capable of and require higher growth rates, a low GDP growth rate is roughly equivalent to a negative GDP growth rate in developed countries. The average of the two means the global economy can be considered to be in recession when global GDP falls below 3.0%, certainly if it falls below 2.5%. It is a somber report, no question. Many developed nations will now record close-to-negative or negative GDP growth for 2009. Add slowing emerging market growth and a credit market that will be in recovery mode for much of 2009 on to high commodity prices, and it is a formula for the worst global economic conditions since the 2001-2003 period.
Feroz Ahmed Bawany goal is to increase my knowledge and to understand the only civilized creations of Almighty Lord are HUMAN. He is a regular contributer to TRCB.com.
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