GLOBAL CLASSROOMS · GLOBAL CLASSROOMS IMF AND ECONOMY IN: ARGENTINA DENMARK SOMALIA ISRAEL...

GLOBAL CLASSROOMS

IMF AND ECONOMY IN: ARGENTINA DENMARK SOMALIA

ISRAEL DOMINICAN REPUBLIC

Let’s Review!

•  The International Monetary Fund •  What is it?

•  What does it do?

•  Created after WWII

•  188 member states

•  Money, money, money

Subtopics

•  Debt Forgiveness and Loan Reform •  When developing countries have trouble paying back their

loans, what do we do then?

•  Conditionality •  Developed Countries tell Developing Countries what to do

with the money they lend them •  Should we keep it or get rid of it?

•  IMF Voting Reform •  Donor countries have all the voting power •  Do we make the system more fair/equal?

ARGENTINA

Current Status:

•  Founding member of UN

•  Classified as “high-income economy” by WorldBank •  Developed country

•  Very high rating in Human Development Index

•  Joined IMF in 1956

•  Quota: 2117 million SDR

•  Currency: peso

Economy

•  Current status in IMF: no outstanding debts!

•  Strengths: lots of natural resources, developing industry

•  In 2001 Argentina had its worse economic collapse in history and the president declared a default on all foreign debt

•  How have they recovered: •  Increased state intervention in economy •  Nationalization of Spain’s Repsol (oil) •  Reducing imports (registration and approval process) •  Agreement with China on currency exchange •  Agreement with IMF on how to repay debt to US •  Still ongoing, has caused continued high inflation

Debate

•  What can Argentina contribute to the debate?

! Argentina has gone into severe debt in the past, but they have successfully recovered and paid back their loans by working with the IMF and their donor countries.

! They may have a lot to gain by avoiding reform with the hopes of growing into a more influential country with more power now that they are recovering.

DENMARK

Current Status:

•  Classified as “high-income economy” by WorldBank •  Developed country


•  One of the highest GDP in the world



•  Currency: Danish krone

Economy


•  Strengths: great income equality, effective taxation system, successfully transitioned from agriculture to industry

•  Balance of payments surplus

•  Depends on imports of raw materials

•  Long term problem might be increased ratio of retirees to workers

Debate

•  Does Denmark stand anything to gain from reform?

!  It is true that Denmark is currently a very powerful country in the IMF with little economic distress

! But, their economy has grown a lot in recent years which means they are due for recession

! They also are not on the euro…potential problems?

SOMALIA

Current Status:

•  Due to civil unrest, it has been difficult to measure the status of the economy

•  Low rating in Human Development Index



•  Currency: Somali shilling

Economy

•  Current status in IMF: outstanding debts!

•  Strengths: agriculture based economy (and livestock) which is exported and a large portion of their economy

•  Has had a hard time gaining domestic revenue

•  Inability to pay back loans to the IMF is an increasing problem because Somalia’s banking sector is really underdeveloped

•  They are currently ineligible for assistance from the IMF because their debt is too large

Debate

•  Why does Somalia need reforms in the IMF to pass?

! They need debt forgiveness!!!!

! But they also have options for repayment because they have a well developed telecommunications sector and strong agricultural exports

! Keep in mind, if Somalia could arrange for another loan to develop their banking sector, this could help them recover from debt on a long term scale

Some Help?

•  Given how complex Somalia’s current situation is, take a look at this article that breaks down reasons for economic difficulty:

http://mgafrica.com/article/2015-08-01-15-things-you-didnt-know-about-somalias-cash-situation-1

ISRAEL

Current Status:

•  Considered the most advanced country in the Middle East



•  Quote: 1061 million SDR

•  Currency: new shekel

Economy


•  Strengths: strong education system system has lead to a well developed technology sector and a strong central bank system

•  Though Israel has a strong economy, they have very high levels of poverty and income inequality

•  Internal unrest is a constant problem and threatens tourism rates which bring in a lot of revenue

Debate

•  Where does Israel stand in comparison to other countries?

! Be careful! Israel may seem like a strong contender, but they still have several potentially damaging issues to consider, meaning in the long run, we don’t really know how stable the country is

! Being on board with some reform now might help them later on just in case

DOMINICAN REPUBLIC

Current Status:

•  Classified as “middle-income economy” by WorldBank •  Developing country

•  High rating in Human Development Index


•  Quote: 218 million SDR

•  Currency: peso

Economy

•  Current status in IMF: outstanding debts!

•  Strengths: strong exports in sugar, coffee, tobacco

•  Demand is highly dependent on the US

•  Has struggled with debt because internal turmoil and economic collapse (banks failing) •  The IMF has had to visit because of growing debt •  Tax reforms •  Reduced government spending •  Selling government bonds •  Economy is growing which is helping them pay off their debt

Debate

•  How can DR fight for reform on behalf of developing countries?

! DR is in somewhat of a curious place: ! While they struggle with paying loans, they are still

managing to do so while improving their economy

!  For this reason, DR is in a good position to defend reform on behalf of developing countries because they still hold relatively stable economic standing

! They have a lot to gain and not a lot to lose!

At the end of the day…

•  What kind of voting power do these countries have? •  Argentina = .87% (22nd most powerful country) •  Denmark = .78% (25th most powerful country) •  Somalia = .05% •  Israel = .45% •  Dominican Republic = .12%

***Percentages show the amount of voting power that country has out of the entire IMF committee

•  For Comparison •  USA = 16.74% •  Equal voting rights = .53%

GLOBAL CLASSROOMS · GLOBAL CLASSROOMS IMF AND ECONOMY IN: ARGENTINA DENMARK SOMALIA ISRAEL...

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