On June 30th 2015, Greece missed a major loan repayment deadline to the International Monetary Fund. The IMF provided 32 billion euros in repayment 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 on 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. Since World War 2, the world’s economies have become independent 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 recession destabilizes the nations’ economy, it can severely affect dependent countries.
The balance 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 organization, 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 IMF made billions of dollars available to places like Ghana, at extremely low interest rates.
Currently, the IMF’s biggest borrowers are Portugal, Greece, Ireland and Ukraine. Receivers of precautionary loans from IMF include Mexico, Poland, Colombia and Morocco. 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 austerity measures. However, countries like Greece without it, may face worse alternatives. If Greece leaves the Eurozone, it would be devastating to all of Europe. The EU is also at risk after Greece’s refusal to accept a bailout.
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