An Agreement To Stimulate International Trade

The IMF`s mandate is to monitor the international monetary and financial system and monitor the economic and financial policies of its 188 member countries. This activity is called “surveillance” and facilitates international cooperation. Since the decline of the Bretton Woods fixed exchange rate system in the early 1970s, surveillance has grown significantly through procedural changes, not new commitments. The Responsibilities of the Fund have changed from those of the guardian to those of the members` policy. The Fund generally analyses the adequacy of each member country`s economic and financial policies for orderly economic growth and assesses the consequences of this policy for other countries and for the global economy. IMF conditionality is a series of strategies or “conditions” that the IMF needs in exchange for financial resources. The IMF does not require country guarantees for loans, but asks the government for help to correct its macroeconomic imbalances in the form of political reforms. If the conditions are not met, the funds are withheld. Conditionality is the most controversial aspect of IMF policy. These credit conditions ensure that the credit country will be able to repay the fund and that the country will not seek to resolve its balance-of-payments problems in a way that would have a negative impact on the international economy. The incentive problem of moral hazard, namely the actions of economic operators who maximize their own benefits at the expense of others if they do not bear the full consequences of their actions, is mitigated by conditions rather than providing guarantees; In any case, countries that need IMF loans do not have guarantees of international value. Conditionality also assures the IMF that the funds allocated to them will be used for the purposes defined in the articles relating to the agreement and provides guarantees as to the country`s ability to correct its macroeconomic and structural imbalances. The Fund believes that the member`s adoption of certain corrective measures or policies will allow the member to repay the Fund, which will ensure that the same resources are available to assist other members.

Critics of bilateral and regional approaches to trade liberalization have many additional arguments. They propose that these approaches undermine and supplant the MULTILATERAL approach of the WTO, which must be favoured for global use on a non-discriminatory basis, rather than supporting and complementing it. Therefore, the long-term outcome of bilateralism could be a deterioration of the global trading system into competing and discriminatory regional trading blocs, which could lead to additional complexity that complicates the flow of goods between countries.