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Effects of International Monetary Fund on the Developing Countries

Problems of Conditionalities

Operation of the IMF is bound to have adverse effects on the developing countries from the way its operation are carried out. This is because developing countries have not been able to fulfill the IMF’s requirements such as devaluation of currency, adjustment of producer prices, retrenchment of workers in the civil and public service. As a result, West African Countries cannot get loans from the funds.

Effect of Quotas on African Countries

It is obvious that developing countries’ voting right depends on their contribution quota which placed them at a great disadvantage in getting required assistance as and when due. The IMF decisions have favoured only industrialised nations at the expense of the poor nations whose quotas are very little to the fund.

Non Availability of Foreign Exchange

The problems facing under-developed countries are non-availability of foreign exchange which is a major constraint on the countries’ growth. This is because their import requirements far outstrip their export earnings.

Insufficiency of International Reserve Funds

This is due to the fact that the proportion of the quota of developing countries is so small that it has not been possible to meet the demand of all the countries that have balance of payments deficits requiring loans.

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