The IMF has been severely criticised by academics, politicians, and public-interest groups. Much of the criticism is serious and well intentioned.
First, the IMF today is not as strong as it was a few years ago. “The US’ abandonment, in 1971, of the fixed exchange rate system managed by the IMF heralded an abrupt erosion of its authority.”
Second, it has failed to strongly warn emerging market countries of the dangers of liberalizing their restrictions on domestic financial activities and international capital flows without prior actions to strengthen their financial institutions and establish appropriate frameworks.
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Third, the IMF attached austere conditions to its loans and did not pay more attention to growth and income distribution, i.e., poverty reduction.
Fourth, the IMF is also criticised for relying on a highly simplified framework and strong assumptions when it calculates the quantitative performance criteria that countries must meet to remain automatically eligible for successive loan disbursements under a programme with the Fund.
Fifth, “over time the Fund began to look increasingly like a multilateral surveillance forum where developments in the international monetary system were discussed, while its power to influence economic policies was gradually restricted only to those countries that appealed to it for financial aid.”
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Sixth, IMF has been accused of making errors of judgment both in the prevention and in the management of financial crises.
Seventh, the IMF has become a forum for political debates like that of United Security Council, instead of a technical body for the deliberations of specific monetary issues. It is evident from numerous forums of informal discussions.
Eighth, in the words of Noble laureate Joseph Stieglitz, “IMF is a political institution. The 1998 bailout was dictated by a concern to maintain Boris Yeltsin in power.”
Ninth, Stieglitz further opines that IMF is dominated by market fundamentalists, who think that markets by and large work well and that governments by and large work badly.