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Established following World War II to help with post-war recovery, the International Monetary Fund (IMF) serves as a lender to modern governments and an overseer of international financial markets. IMF supporters claim that it is a necessary lender of last resort for areas in crisis and that it can impose necessary or difficult reforms on backward economies. Critics counter that the IMF supersedes national autonomy, exacerbates economic problems more often than not, and serves as a tool of the wealthiest nations only. Economists frequently criticize the IMF for creating moral hazard on national scales.

IMF Advantages

The IMF assists member nations in several different capacities. If a country has a balance of payments deficit, the IMF can step in to fill the gap. It serves as a council and adviser to countries attempting a new economic policy. It also publishes papers on new economic topics.

Its most important function is its ability to provide loans to member nations in need of a bailout. The IMF can attach conditions to these loans, including prescribed economic policies with which borrowing governments must comply.

IMF Disadvantages

Despite its lofty status and commendable objectives, the IMF is attempting to pull off a nearly impossible economic feat: perfectly timing and sizing economic intervention on an international scale.

The IMF has been criticized for not doing much and for overreaching. It has been criticized for being too slow or too eager to assist failing national policies. Since the United States, Japan and Great Britain feature prominently in IMF policies, it has been accused of being a tool for free-market countries only. Simultaneously, free-market supporters roundly criticize the IMF for being too interventionist.

Some member nations, such as Italy and Greece, have been accused of pursuing unsustainable budgets because they believed the world community, led by the IMF, would come to their rescue. This is no different than the moral hazard created by government bailouts of major banks.

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