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The IMF, its First Female Chief Economist and Covid-19

Written by Shreya Panda, a grade 11 student.

The decisions made by the International Monetary Fund (IMF) affect people around the globe. So what is the IMF and why is it so important?

By I Kid You Not , in Ages 12 - 18 News People , at June 28, 2020 Tags: , , , , , , ,

Written by Shreya Panda, a grade 11 student.

The decisions made by the International Monetary Fund (IMF) affect people around the globe. So what is the IMF and why is it so important?

What is the IMF?

The IMF, a UN specialized branch, is an international organization that includes 189 countries that work together to try and stabilize the global economy.

Why was it created?

The organization was formed at the Bretton Woods Conference in 1944 in the United States. The conference was attended by delegates from 44 countries during  World War II, including the Soviet Union, the United Kingdom,and the United States.

The objective of the meeting was to discuss financial arrangements for the end of the war ( including the setting up of a stable system of exchange rates and how to pay for rebuilding the damaged economies of Europe).

The World Bank and the IMF were later set up to fulfill these aims.

Aims and Objectives

Like all prestigious organizations, the IMF too has a few key objectives:

  • It monitors global conditions while identifying risks among its member countries.
  • It advises its member nations on how to improve their economies and helps them out in case of financial crises.
  • It provides short-term loans and other technical assistance in case of such financial crises. IMF’s main goal is to prevent such mishaps from occurring by guiding its members in the right direction.  

Each member contributes a sum of money called a quota subscription– the richer the country, the higher its quota. These quota subscriptions help in funding loans. The largest loan received yet in IMF’s history was by Argentina in 2018- a sum of fifty-seven billion dollars.

Any country can apply to join, as long as it meets the few basic requirements. These include disclosing information about the country’s economy and paying the quota subscription.

Who is Gita Gopinath?

The journey of Gita Gopinath from a middle-class Mysuru girl to a world-class economist is a saga of hard work, grit, and focus.

Indian-born Gita Gopinath is currently the Economic Counselor and Director of the Research Department at the International Monetary Fund.

She received her Ph.D. in economics from Princeton University in 2001 after her B.A. from Lady Shri Ram College and M.A. from Delhi School of Economics.

Her appointment as the first female Chief Economist at the IMF, since 2019, has made us Indians proud.

IMF’s Stance on the Global Economy

According to Gita Gopinath, the economic crisis triggered by the coronavirus pandemic is global and plays out differently than past crises. The services sector has been hit harder than manufacturing in, both, advanced and emerging market economies.

She also mentioned a striking divergence of financial markets from the real economy, which could herald greater volatility in financial markets and potentially sharp corrections.

The IMF also says that it sees a “profound uncertainty” about the path of recovery in light of the situation of the global pandemic.

Gopinath also says that even though there are signs of early recoveries in several countries and, hence, hopes of reopening their economies, new waves of infections and re-imposed lockdown measures still pose risks.

The IMF and the Indian Economy

In the ‘June 2020 World Economic Report’, the IMF has predicted that the Indian economy would contract by 4.5 percent in 2020.

In a recent interview with NDTV, Gita Gopinath mentioned that India will grow at slightly over 1% in the two years to 2021. Even as the government tries to lift the social and economic conditions of the country amid the pandemic, India may receive a very slow economic growth.

However, Gopinath also claims that the expected pessimistic growth of the nation isn’t unique just to India. Rather, this projection is similar to many other countries too but as the country reopens, the health crisis abates, and the global economy recovers, India will also recover.

Written by Shreya Panda, a grade 11 student.

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