Question

What opportunities might current IMF lending policies to developing nations create for international businesses? What threats might they create? How would you assess the lending policy and practices of the on developing nations? What might need to change and why? Reflecting back on the global financial crisis of 2008-09, did the globalization of capital markets contribute to the crisis? If so, what can be done to stop such global financial contagion in the future?

Answer 1

IMF lending policies are meant to help the countries to tackle with the financial problem and the flow of trade becomes easy. It stabilize the economy and help in the growth of an economy of the country. The key objective of recent lending reforms has been to complement the traditional crisis with the role of International Monetary Fund with the use of effective crisis tools. IMF has three main purpose:-

1 . It can help to deal with the financial crisis. It acts a catalyst for other lenders. It can help in increasing investor's confidence.

2. It helps in dealing with the capital account problems to control it within the time until it develop into a huge crisis.

3.It helps the country to deal in the best way possible and to avoid any kind of distruptive economic adjustment.

The opportunities that might be developed by IMF lending policies are as follows:-

1.It helps in stabilizing the economy. The question that arises now is how?

Now, The International Monetary system of economy works towards it. It makes such rules which helps the country to deal with imbalance of an economy. It helps to deal with incorrect balance between the payments and receipts of the nation. They set a proper value and exchange the currencies at stable rate so that the economy may also be in the situation of stability and trade flow may be easy. They may stabilize the growing rate of inflation, tachnical assistance and guidance may be provided and deal with tge other economic consequences like unemployment, open opportunities for youngsters, trade etc. They lend so that the flow of trade between countries become an easy affair to deal with.

Threat created by IMF are:-

1 . It can disrupt the global economy recovery.

2.Although it has good reports but still it is at risk from a global downfall.

3.It may hurt the financial environment.

4.It mask longer-term risks of debt.

Now, the present lending policies still lacks certain phases.

The loan conditions are based on following economic policies:-

1. Higher interest rate to stabilize the currency.

2.Reducing the Government from borrowing which leads to increase taxation and reduce investment. .

Instead of pressuring the countries to open market for the outside investment capital they should help to look into the matter. But they worsen the situation. IMF never lend for individual projects. IMF need to increase the resources to deal with the growing financial crisis globally. The lending policies need to be structural adjusted before its implementation.

Global financial crisis was one of the worst situations of an economy. It has affected millions of Americans.

Investors lost their confidence, exports of the country decreased leading a great loss to the economy, consumer spending decrease due to lack of money and unwillingness, economy turned into recession.

Suggestions to stop global financial contagion in future:-

1.Proper structural management of flow of capital.

2. Macro economic and prudent policies are important defense to an economy.

3. Capital account liberalization should be proceeded carefully.

4.Same as ablve, Financial account liberalization can boost the risk of crisis should too be proceeded carefully.

5.More help and scope for such high crisis must be open and executed in the international market.