{"id":118379,"date":"2021-09-20T17:03:53","date_gmt":"2021-09-21T00:03:53","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=118379"},"modified":"2021-09-20T17:03:53","modified_gmt":"2021-09-21T00:03:53","slug":"changing-the-operation-policy-of-the-imf-may-need-to-consider","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/09\/20\/changing-the-operation-policy-of-the-imf-may-need-to-consider\/","title":{"rendered":"CHANGING THE OPERATION POLICY OF THE IMF MAY NEED TO CONSIDER"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

The\npurpose of establishing the International Monetary Fund was a good policy design\nbecause there had been conflicts in the international financial management\nrelating to exchange rate determination and gaining trade advantages.  Economically, powerful countries attempted to\ntake power by determining the exchange rate for their currency units. This\nsituation was encountered during the 1930s. Currently, the IMF operating system\nmakes disadvantages. Many developing countries haven\u2019t had trading power in the\ninternational trading system and the IMF’s focus is on patching foreign\nexchange reserves and foreign value of currency units. The best policy action\nof the IMF is supporting financing activities for the balance of payment adjustment.\nIt is a structural problem without a proper solution. The IMF operations during\nthe several decades did not specifically aim how to make justice for developing\ncountries and the priority of issues of the international financial system was\nto negotiate specific problems for the developed world. <\/p>\n\n\n\n

Many\ncountries have predicaments to settle the overall balance of the payment\nresulting from massive payments for imports of goods and services. The\ndepreciation of currency values of developing countries is because of the\nmassive outgoing of foreign exchange reserves and many other reasons that\ndirect the IMF\u2019s attention to problems. The COVID-19 crisis has also brought\ninto press the same issues to developing countries because a considerable\nvolume of foreign reserves of these countries used to import jabs and other\ngoods and services while the lockdown of economies restricted the earning of\nforeign exchange. The exchange rate determination and the securing of foreign\nreserves have become vicious economic issues in developing countries. I saw a\nsuggestion of Dr. Samarasiri, the management of macroeconomic variables\nprovincial level. Would it be helpful to exchange rate-related and international\ntrade matters that cannot be assumed because the idea is more complicated?  <\/p>\n\n\n\n

The\nexchange rate of a domestic currency unit is a macroeconomic factor that has\nmany links to a variety of considerations in an economy. The main reason to\nestablish the International Monetary Fund was the operational instability of\nthe international financial system, especially the competition between major\ncountries in Europe and America that led to creating the over-emphasised\ncompetitive situation that was pushing for revaluing and devaluing the foreign\nvalue of currency units. The operational structure of the IMF has addressed\nthis issue. Accordingly, no member countries could revalue or devalue more than\n10%  of the existing value of the\ncurrency unit without the permission of the IMF. It was a very good policy decision\nof the IMF, this situation has been negatively affected on many developing\ncountries since the mid-1950s, and the policymakers of the IMF have not been\nattempted to broaden a successful and acceptable policy process to answer for\nthe problem.   <\/p>\n\n\n\n

The\ncrisis had in the international finance system was not only a foreign exchange\nreserves-related issue like present Sri Lanka facing, and the countries had\nconflicts in Europe and America to get trade advantages. For foreign exchange\nreserve building purposes, the competition was influenced by the reciprocal of\npolicy actions, combined with the shortage of reserves. The value determination\nof reserves negatively affected the rate of exchange. <\/p>\n\n\n\n

Under\nthe operation regulation of the IMF, it has a plan to provide financing\nfacilities to improve individual reserves of countries with conditions that are\nsupportive of developed countries. However, the problem is the IMF policy\nintermingled with the reactions of other major countries such as India, China,\nRussia. This is a complex matter that developing countries approach without the\nsupport of an international authority. <\/p>\n\n\n\n

Since\nthe late eighteenth century, many countries had been acted in destabilizing the\ninternational financial system. Major countries, especially France and European\ncountries, used the techniques of devaluation and revaluation without\ninternational controls.      <\/p>\n\n\n\n

Sri\nLanka had a Currency Board System during the 1930s when the international\nfinancial system was in a crisis and the monetary unit of Sri Lanka was linked\nto the British Sterling pound and the exchange rate of the currency unit was\ndetermined by the British Pound. The economic policymakers of the country were\nthe British authority, and the policymakers were not concerned about the matter,\nas they were in a dependent finance system. Sri Lanka\u2019s economy was like a canola\nseed near the universe. China entered the IMF in the 1970s and the operations\nof China and India made a considerable impact on the IMF operations, but major\nissue of developing countries has not been considered and China also attempted\nto disturb the smooth operation of the International Financial System. When\ndeeply considering the issues, the developing countries are being disadvantaged\nand the issue should be negotiated by the IMF with the developing countries.  <\/p>\n\n\n\n

The\nInternational Monetary Fund was established after considering two proposals\nfrom the UK and the USA. (Proposals were published as White\u2019s plan and Keynesian\nPlan). If it is considered the original proposal, such as creating a common\ncurrency unit (BANCOR) for all countries in the world, it would have\nappropriated all countries in the world a common currency unit, and all\ncountries would have gained justice to maintain the exchange rate. Like Euro\nwas created for European countries in the year 2000, if BANCOR operated in the\nworld it would have benefited all poor countries and the international trade\ncreates justice for all countries.<\/p>\n\n\n\n

The\npolicy action to improve the exchange rate in developing countries is earning\nmore foreign exchange from international trade. However, many developing\ncountries have no plans to market products and services at the international\nlevel, the major reason associated with the quality of products and services of\ndeveloping countries. The policy requirement for building foreign exchange\nreserves has been ignored by the countries by mixing economic policies with\npolitics. Developing countries need to implement economic policies without\npolitical influences, and they should submit proposals to the IMF to reform its\noperational policies to get out of current problems. <\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS The purpose of establishing the International Monetary Fund was a good policy design because there had been conflicts in the international financial management relating to exchange rate determination and gaining trade advantages.  Economically, powerful countries attempted to take power by determining the exchange rate for their currency units. This situation was encountered […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-118379","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/118379","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=118379"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/118379\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=118379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=118379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=118379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}