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Roles of International Financial Institutions Essay


Global financing is a system that involves financial institutions that work internationally or around the world. Such institutions include the International Monetary Fund (IMF) and World Bank. These institutions are global banks that give funds to countries with financial constraints as well as giving economic advice. This paper focuses on the roles of international financial Institutions.

According to Chossudoysky (2003), some of the financial institutions like the World Bank and IMF were formed in the last periods of World War II. Woods Bretton initiated both financial institutions, and their roles keep changing because of technology and political progress.

Their traditional role was to standardize currency exchange rates and monitor international trade in its members and lend money to countries which experienced financial crises. World Bank greatly assisted European countries, especially after the World War II to rebuild their countries.

The World Bank later made plans to support third world countries, particularly those that are in Africa. This has made global economy undergo a change in International Financial Institutions (IFIs) because foreign trade and capital are the cause of the economic development.

Today, global financial institutions are guided by international laws since they control many countries. These international laws were put in place due to many conflicts such as political crisis, which hinder the financial institutions from being operational in some countries.

The law ensures that the member countries are able to pay their contribution without any crisis. The IMF and the World Bank are regulated by the United Nations because they are its agencies. The United Security Council controls the two financial institutions and makes sure that it supports its member countries (Hill, 2009).

The global financial institutions such as the World Bank have long-term goals like development. It also upholds international financial cooperation while promoting global trade and making sure that the exchange rate in all the involved countries are stable. These financial institutions like the IMF get their resources from the quota system where the member countries give contributions, especially when there are new members subscribing.

The IMF also gets its funding from the gold holdings. It is the third largest institutions that have many tons of gold. Goldman (2005) asserts that borrowing is also another way that the global institutions use to get funds; they borrow from their members whose economic status is high. An interest charge from the countries which borrows loans is also of great help to the global financial institutions.

Hill (2009) argues that the main roles of these financial institutions is surveillance, where they monitor the financial status of the member countries and how its fairing globally. It also advices and gives loans to those countries whose economic status are deteriorating and also monitor the economic status while designing economic policies.

When the member countries are under financial trouble, they are protected by these institutions without considering whether the country is rich, poor, or in middle level status. They give technical assistance to low level countries and train them on how to advance or improve their profit institutions while also helping them to plan on both financial and macroeconomic strategies.

Additionally, the global financial institutions lends loans to countries that are unable to pay international debts by helping them to restore their economic status while ensuring that their currencies are stable and also pays for their imports so that they can continue trading with other countries and alleviate poverty.

Apart from giving finances to member countries, World Bank has financed projects, which includes irrigation such as North Africa and klalis project in Iraq. It has been viewed as a bank that transfers money from well able countries to the poor ones. It is also seen as advancement for many countries because it influences their decisions.

The World Bank together with International Finance Corporation prevents fraud, especially in private projects. The IFC fights corruption so that the projects and investments are successful. It also seeks to alleviate poverty by giving resources to the projects that directly benefits the poor while creating employment opportunities to the unemployed (Goldman, 2005).

World Bank has helped countries like Malawi who were protesting against their presidents’ dictatorship in 1994. The security forces of Malawi had also against the rules of World Bank because they went to its offices and scrutinized the banks documents without its approval. The World Bank did not suspend giving Malawi loans, but it was able to convince the government of Malawi to look into the future of its people and avoid financial disasters (Chossudoysky, 2003).

It has also responded to natural disasters; for example, in Pakistan where floods caused major destruction. The bank aided the country by giving finances especially to the families that were affected as well as reconstruction of highways, houses, and improvement of road networks.

In conclusion, the international financial institutions have helped their member countries by stabilizing worldwide exchange rates, which has led to growth of international trade. They have also removed the trading barriers between their member countries and have improved on global development.

Financial institutions have improved economic status and the living standards of the less fortunate in the underdeveloped countries. These institutions focus on broadening and strengthening the financial concerns of their member countries as well as assisting with funds when economic difficulty arises.

References

Chossudoysky, M. (2003) The Globalization of Poverty. Impacts of IMF and World Bank. Penange: Third World Network.

Goldman, M. (2005). Imperial Nature and Struggles for Social justice in the Age of Globalization. New York. Yale University Press.

Hill, C. W. (2009). International Business. Competing in Global Market Place (7th ed.). Boston: Massachusetts.

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IvyPanda. (2018, October 10). Roles of International Financial Institutions. Retrieved from https://ivypanda.com/essays/roles-of-international-financial-institutions-2/

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IvyPanda. "Roles of International Financial Institutions." October 10, 2018. https://ivypanda.com/essays/roles-of-international-financial-institutions-2/.

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IvyPanda. 2018. "Roles of International Financial Institutions." October 10, 2018. https://ivypanda.com/essays/roles-of-international-financial-institutions-2/.

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IvyPanda. (2018) 'Roles of International Financial Institutions'. 10 October.

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