Monetary Fund. The IMF provided 32 Billion Euros in emergency loans to keep the Greek

economy from collapsing. So why did the IMF take a risk on such an unstable economy? What

exactly is the IMF?

The IMF was created alongside the World Bank in 1945, as overlapping finance arms of the

United Nations. The World Bank focuses on financing and investing in developing countries,

as well as eliminating poverty. The IMF primarily monitors exchange rates, stabilizes international

monetary systems and fosters global financial cooperation.

Well since World War 2, the world’s economies have become interdependent on each other through

trade and investment. While this helps strengthen the global financial system, it also creates

weaknesses in the economic chain. When an unforeseeable crisis, like a recession or

a natural disaster, destabilizes one nation’s economy, it can severely affect dependent

countries. The balancing force of the IMF prevents any potential “domino effect”

in collapsing economies.

The IMF is one of several global banks that provides loans to troubled economies to promote

a stable WORLD economy. The IMF, and its sister organisation, the World Bank, tend to serve

more Western interests, like the US and the EU. While other global banks, like the New

Development Bank and the Asian Infrastructure Investment Bank serve Chinese and Russian

interests more. In total, the IMF has 188 member states.

After the global financial crisis of 2008, African countries were hit hard. The demand

for imported goods from Africa declined, and international growth rates slowed. In response,

the IMF proactively made billions of dollars available to places like Ghana, at extremely

low interest rates. With this support, Ghana’s growth rate increased to over 9% in 2011,

and remains one of Africa’s frontier emerging markets.

Currently, the IMF’s biggest borrowers are Portugal, Greece, Ireland and Ukraine. The

IMF also gives “precautionary” loans as a sort of preventative measure before things

get too bad. Receivers of precautionary loans include: Mexico, Poland, Colombia and Morocco.

Despite their support, the IMF has been widely criticized for allowing disparate levels of

influence. This is because member nations which invest more money in the IMF get more

voting rights. The US comprises nearly a fifth of all available votes because they are the

largest contributor. Additionally, since the IMF is somewhat of a last resort, countries

in trouble have no choice but to agree to significant austerity measures that may not

necessarily be in their best interests, or agree with their ideologies.

While the IMF is a powerful force within the world economic balance, it also openly serves

the interests of its member countries. With so much influence in the political policies

of struggling countries, it is dangerous to try and treat domestic problems with simple

cash infusions and austerity measures. However, without it, countries like Greece may face

worse alternatives. If Greece leaves the eurozone over money woes, it would be devastating to

all of Europe.

The European Union is also at risk after Greece’s refusal to accept a bailout. To learn more

about the future of the EU, check out our video now. And subscribe for new videos every

day. Thanks for watching.