Discuss The Arguments for and Against Requiring Accounting and Economic Reform as a Condition for IMF / World Bank Support by Way of Loans/aid

 Requiring accounting and economic reforms as a condition for the IMF / World Bank to provide support has been a long-term strategy by these organisations, a strategy which has caused much debate. The arguments for and against requiring accounting and economic reforms as a condition for IMF / World Bank support point to the strengths and the weaknesses of this strategy respectively. The failures and the inconsistent success levels of the IMF / World Bank assistance by way of loans /aid being conditional upon the requiring of accounting and economic reform contributed to the development of alternative strategies to achieve development.

Although the IMF / World Bank are affiliated to the UN they are institutions which have been strongly influenced by the United States since their establishment in the immediate post-war period. The IMF / World Bank are based in Washington D C, and were established to fund economic development as well as reconstruction in the regions adversely affected by the Second World War. The World Bank or more specifically the International Bank for Reconstruction and Development (IBRD) arguably played a prominent role in the economic revitalisation of Western Europe after 1945 (Baylis & Smith, 2006 p. 327). With the emergence of the Cold War, received even further help through the American Marshall Plan (Woodruff, 2005 p. 258). The Soviet Union and the communist states of Central and Eastern Europe could have benefited from the assistance of the IMF / World Bank yet were opposed to such help as it would have undermined the political and social foundations of their regimes. In the early years of the IMF / World Bank, the United States used these institutions to assist the economic growth and development in Japan and South Korea as well as Western Europe (Evans & Newnham, 1998 p. 574). The countries of Western Europe, Japan, and South Korea were more likely to successfully reconstruct their economies with the help of the IMF / World Bank due to pre-existing infrastructures, skilled labour, and resources (Burnell, 1997 p. 117). The IMF / World Bank could reasonably argue that it contributed to successful economic development in several countries such as Malaysia and Taiwan (Brown with Ainley, 2005 p. 117).

The strategy of the IMF / World Bank of requiring accounting and economic reforms as a condition of giving loans / aid has worked best in the countries that were relatively well governed in the first place (Welch & Oringer, 1998 p.1). The objective of the IMF / World Bank has been to provide any government of member states with loans / aid to promote economic development as well as international trade. The IMF / World Bank is funded by all member states on a pro-rata basis, with the United States being the largest contributor, and therefore wanting a greater influence over the strategy pursued by these institutions (Baylis & Smith, 2006 p. 660). The rest of the money for the IMF / World Bank to use on loans / aid comes from bonds they sell on the international financial meaning that as organisations it is in their best interests to promote capitalism (Evans & Newnham, 1998 p. 574). The fact that the IMF / World Bank has to raise capital in the international markets means that it needs loans to be paid back (Brown with Ainley, 2005 p. 127). The IMF / World Bank will consider granting loans / aid to any countries that request help. Assistance given with the proviso that money goes to the government, and is spent to solve the problems that need to be tackled such as poor balance of payments and low levels of trade (Welch & Oringer, 1998 p. 2). Requiring accounting and economic reforms are set as conditions for loans / aid as the IMF / World Bank regard such changes as the best means of maximising the success rates of their interventions. Accounting reforms were, and remain required to ensure that the full amounts of all loans / aid were spent on economic development or recovery instead of enriching corrupt government officials or ruling elites (Brown with Ainley, 2005 p. 117).