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Impact of policies by International Financial Institutions on Developing Nations

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Impact of policies by International Financial Institutions on Developing Nations

Whereas the developing counties and their governments should define their economic policies in tandem with their development strategy,  international financial institutions influence these policies by lending loans that are accompanied with conditions. These conditions may be prior actions, benchmarks, or triggers which the developing nations need to meet before they can receive the loans.  In most times the recipient nation have little or no option but to implement the policy prescriptions before they can get the loans (Bal-Gunduz et al., 54)

These conditions often touch on sensitive economic policies of the recipient countries. Some of the areas likely to be affected include economic deregulation, privatization, and tax reforms.  The number of such conditions keeps on increasing. Additionally, international financial institutions have been accused of giving priority to countries that have a positive assessment in terms of economic policies.

International financial institutions are mandated to conduct research in development economics. This research has, however, been criticized because, most of the time, it has been shown to be biased and to contain technical flaws. Their researchers have also been known to influence the policy-makers in these institutions.

Another challenge sited is that although nations have different needs and that different analyses are conducted for different nations, these institutions tend to advocate for a one-size-fits-all solution.

The FSAP (Financial Sector Assessment Program) joint program between World bank and IMF analyses the financial sector in nations with the view to identify vulnerabilities that could trigger a crisis and make recommendations to mitigate these vulnerabilities (Javed, 96). Governments of countries tend to implement these recommendations with little debate. These nations hardly get any room to negotiate the directives given by the financial institutions. These assessments eventually have impacts on the financial markets of the affected countries.

The surveillance activities meant to monitor how Fund- member countries are implementing and adopting specific economic policies tend to attract a lot of media coverage almost to the point of coercing the said counties into implementation without deviations.

It has also been observed that bilateral and multilateral donors tend to favor countries with IMF programs. Furthermore, more donors are now using IMF assessment to appropriate aid, especially to developing countries since they may not be having information regarding such a country. This forces low-income countries to be in good books with the IMF for them to attract funding from other donors (Bal-Gunduz et al., 97).

In the New Rulers of the World, John Pilger draws a picture of what it is like for an Indonesian to work for Western corporations like Nike and Gap. Through secret filming, he interacts with the oppressed workers in Gap who say that it does not matter what it time it was; they had to finish the

 

 

 

 

 

number of Gap trousers, were not even free to attend a call of nature, and would sometimes pee on themselves while working. At the work station, it was punishable if a worker was found talking to a fellow worker. To add salt into the injury the workers were so poorly paid, taking home a meager 72p per day, while the products they made would be sold about 250 times of their daily wage (Pilger, 72). At Nike, a worker’s daily wage was not enough to buy the retail price of shoelaces they made. Their paychecks were also subjected to disciplinary fines.  There was also physical abuse and beating of workers by the security guards.

Additionally, workers had to make some payment before they are recruited into the workforce.  Morning exercises were mandatory despite one’s health status. Women workers were summarily dismissed upon the realization that they were pregnant. The factory conditions were not fit for work because the noise, fumes, dust, and heat pollutions were beyond the accepted levels. Child labor of children below 16 years was also taking place. These and many more are the working conditions the Indonesian workers experience while working for Western Corporations.

 

Works Cited

Bal-Gunduz, Yasemin, et al. The Economic Impact of IMF-Supported Programs in Low-Income Countries. International Monetary Fund, 2013.

Javed, Omer. The Economic Impact of International Monetary Fund Programmes: Institutional Quality, Macroeconomic Stabilization, and Economic Growth. Springer, 2016.

Pilger, John. The New Rulers of the World. Verso, 2003.

 

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