International Financial Management: Challenges Faced by IMF

This article discusses the challenges faced by the International Monetary Fund (IMF) in terms of surveillance, governance, role in crisis management, and conditionality. The legitimacy of the institution is questioned due to its failure to overcome these challenges. The article also presents some of the shielding points concerning the importance of IMF.

Running head: INTERNATIONAL FINANCIAL MANAGEMENT
International financial management
Name of the Student
Name of the University
Author Note

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Part a)
In this particular section, summary of article that is extracted from journal of
economic perspective titled “The IMF Unmet Challenges” by Barry Eichengreen and Ngaire
Woods” have been presented. The article is about the international monetary institutions
(IMF) where several critics of the funds are demonstrated in terms of different aspects. Main
contexts of article are discussion of several controversies surrounding the funds and their
interventions results in passionate actions on regular basis (Relooney.com, 2018). Analysis if
the purpose of funds has been targeted in the article concerning the problems articulations
those are to be solved by IMF or which it has been designed. Effectiveness of IMF is viewed
by players of whether it is impartial or competent enough and its existence is viable for its
member countries. Some authors and economists considered IMF as obligatory institutions
and some regard it as an ineffective due to its failure on part of overcoming some challenges.
Furthermore, critics is also surrounding around execution of its core operations for its
member countries.
In some part of article, some of the shielding points concerning the importance of
IMF has also been presented in the article by discussing their role in coordinating problems
across member counties for financial and monetary system and operation of national
economies as a whole. The challenges faced by the funds discussed in the article are
conceptual and some other challenges are practical pertaining to question the impartiality of
IMF (Axelrod et al. 2017). The legitimacy of institution is threatened by the challenges faced
and thereby the capacity of organization to execute its core operations is questionable.
The four challenges depicted in the article leading to threatening the authenticity of
intuition and their capacities for effective execution of its function are related to surveillance,
disagreement about role of IMF, conditionality and problems of governance. Critics of IMF

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question its capability for solving the challenges faced. Article gives an in depth explanation
of all the four challenges faced by institutions and hence questioning its legitimacy.
The first challenge discussed in the article pertains to monitoring of financial and
economic policies of 188 member countries of IMF and how the surveillance is organized by
the institution regarding the same. Some of the possible risks to stability and a need of advice
in relation to adjustment of policies have been depicted concerning this particular challenge.
Several explanations of failures of IMF regarding surveillance are presented in the article
with some of the issues stemming from practical implications of economic analysis.
Challenge is faced in terms of integration of financial and micro economic analysis. Risks
and spillovers are the central focus of surveillance that has been demonstrated in the article.
Surveillance of IMF is considered as corrective due to its significant role in assembling and
conveying information. However, fund has failed to sound louder warnings.
Another challenge that is presented in the article concerns with the governance
problems of funds. The problem of governance of funds is related to impartiality of
institution funds to its member countries. Due to existence of disproportionate voice of some
member countries of the institution, decision making of institution is persuaded in the
direction consistent with national interest even though such directions are not aligned with
the interest of membership and international financial and monetary system stability.
Members of institution are not represented adequately that results in neglecting of interest by
the institution funding decisions (Deresky, 2017).
The disagreement of role of IMF in crisis management of sovereign debt is one of the
challenges that are discussed in the article. Coordination problems associated with the
institutions is depicted in terms of the measures taken by funding system for resolving debt
crisis issues such as transaction costs and legal framework that are agreed at international

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level. Institution should be capable of providing emergency liquidity assistance to its member
countries while some of the efforts taken to solve such issue are perplexing (Kentikelenis et
al., 2016). Given the uncertainties faced in terms of restructuring of funding system, IMF has
continued the lending procedure for quite long time.
Furthermore, critics have also presented views regarding the conditionality of IMF
that is marked as last fourth challenge faced by the IMF. The confusion surrounds around
attachment of conditionality towards the loan. Conditionality is the commitments of
government towards the policy for receiving assistance. Disagreement exists in terms of
number of commitment and requirement (Gallagher, 2015). The compliance associated with
the funding institution becomes painful when the costs are front loaded and loans benefits are
deterred. In relation to this particular challenge faced by IMF, it can be inferred that the
achievements of policy conditions should be specified by IMF. In addition to this, institution
should also take into account how such policies are designed. Discipline concerning
designing of conditions should be encouraged by focusing on conditionality such that the
issue of political system overloading can be avoided (El Aynaoui et al., 2016). Governance
reforms of institution would help in enhancing the perceived intervention of funds
intervention with the help of which associated complaints can be addressed.
Therefore, from the analysis of the challenges demonstrated in the article, it can be
inferred that the failure of IMF to overcome the challenges are the main concerns of critics.
The political theory language raises the institution legitimacy for its failure to meet such
challenge. The future of IMF depends upon shaping of governance reforms in the interest of
its member countries impartially. There is a need to address the effectiveness of funds by
strengthening its structure and legitimacy. Capital control of IMF was also criticized as it
created conflict between the shareholders and institution. Output of legitimacy of institution

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was questionable due to creation of doubts in terms of surveillance quality, relevance of
conditions and solving problems of debt by utilizing funding approach.

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References list:
Axelrod, V. G., Harmon, J., Russell, W. G., & Wirtenberg, J. (2017). The challenge and the
opportunity. The Sustainable Enterprise Fieldbook: When It All Comes Together, 204.
Deresky, H., 2017. International management: Managing across borders and cultures.
Pearson Education India.
Eichengreen, B., & Woods, N. (2016). The IMF's Unmet Challenges. Journal of Economic
Perspectives, 30(1), 29-52.
El Aynaoui, K., El Mokri, K., Dadush, U., & Berahab, R. (2016). The Unmet Challenge of
Interdependence in the EU-MENA Space: A View from the South. Seven Years after
the Crisis: Intersecting Perspectives, 35.
Gallagher, K. P. (2015). Contesting the Governance of Capital Flows at the
IMF. Governance, 28(2), 185-198.
Kentikelenis, A. E., Stubbs, T. H., & King, L. P. (2016). IMF conditionality and development
policy space, 1985–2014. Review of International Political Economy, 23(4), 543-582.
Relooney.com. (2018). Retrieved 9 April 2018, from
http://www.relooney.com/NS3040/Barry-Eichengreen-IMF-Unmet-Challenges.pdf
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson.

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