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In: Economics

Write a 1-2 page essay wherein you consider the role of the IMF in alleviating and...

Write a 1-2 page essay wherein you consider the role of the IMF in alleviating and helping to resolve the global financial collapse of 2008. PLEASE TYPE

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Expert Solution

Increasing the financial resources available for IMF support to member countries was a key part of the efforts to overcome the global financial crisis. In 2009 and 2010, members provided additional financial resources to the Fund through bilateral borrowing agreements for about SDR 170 billion (about US$250 billion at current exchange rates). These resources were subsequently incorporated into expanded New Arrangements to Borrow (NAB), increasing their size from SDR 34 billion to SDR 370 billion (about $510 billion).

To solve 2008 financial collapse IMF undertook following steps:

1. Created a crisis firewall:- To meet ever increasing financing needs of countries hit by the global financial crisis and to help strengthen global economic and financial stability, the Fund greatly bolstered its lending capacity after the onset of the global crisis in 2008. This was done by increasing quota subscriptions of member countries—the IMF's main source of financing—and securing large borrowing agreements.

2. Reforming the IMF’s governance: - To strengthen its legitimacy, in April 2008 and November 2010, the IMF agreed on wide-ranging governance reforms to reflect the increasing importance of emerging market countries. The reforms also ensured that smaller developing countries would retain their influence in the IMF.

3. Helping the world’s poorest :- The IMF undertook an unprecedented reform of its policies toward low-income countries and quadrupled resources devoted to concessional lending.

4. Stepping up crisis lending :- The IMF overhauled its lending framework to make it better suited to country needs, giving greater emphasis to crisis prevention, and streamlined program conditionality. Since the start of the crisis, the IMF committed well over $700 billion in financing to its member countries.

5. Sharpening IMF analysis and policy advice:-The IMF provided risk analysis and policy advice to help member countries overcome the challenges and spillovers from the global economic crisis. It also implemented several major initiatives to strengthen and adapt surveillance to a more globalized and interconnected world, taking into account lessons learned from the crisis.


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