Critics question whether the IMF should continue to exist

IMF Confidence Crisis
Foreign Policy in Focus
Soren Ambrose
April 12, 2007

In the days leading up to its semi-annual meeting in Washington D.C., the IMF is facing a confidence crisis – many openly question whether it should continue to exist. The IMF has been long accused of imposing suffocating conditions with its loans, which prompted both Brazil and Argentina to pay off their loans early in 2005. In recent years, more countries such as Serbia, Indonesia and the Philippines have followed suit. Thus, many of the countries that used to be the IMF's largest borrowers no longer borrow from it. Not surprisingly, the Fund is expected to post its first loss in decades of approximately $100 million this year.

Recently, IMF’s Managing Director Rodrigo Rato announced a new goal of the bank – convening talks amongst the major economic powers with an aim to reduce imbalances that have adversely affect the global economy such as China’s alleged currency undervaluation. However, since his announcement, the IMF has been able to accomplish little in this regard. Meanwhile, a recent report authored by its internal watchdog raised questions about the IMF’s philosophy and practice over the last 30 years, while another report (authored by a former Brazilian Finance Minister) stated that the IMF should discontinue making loans to low-income countries because such a responsibility is more adeptly handled by the World Bank.

Questions
1. Does the IMF have a role to play as of the present time?
2. Is it advisable to ‘merge’ the IMF with the World Bank to create a more streamlined, efficient organization or are there any advantages to having 2 multilateral financial institutions?