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International Financial Institutions and the United States

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Major decisions will be made on the financing and governance of IFIs. This includes the role of the United States in these institutions. The World Bank has proposed a general capital increase while the IMF has proposed a new leadership succession process. These will likely be closely scrutinized by Congress. In addition to the policy issues that should be discussed, policymakers will also consider whether legislation is needed to allow the U.S. to participate in IFI activities.

International financial institutions play a critical role in the social development of nations with developing economies. They help fund development projects and provide technical assistance to borrowers. They also conduct extensive research on development issues. Increasingly, they are lending to non-sovereign-guaranteed actors, including subnational governments and the private sector.

After the global financial crisis of 2007, several European countries began to have public debts and a reduced economy. Greece was one of the countries to seek help from international financial institutions. In 2010, Greece asked for EUR110 billion in loans from the IMF and its Eurozone partners in order to pay off its debts. However, this assistance came with a condition: a severe reduction of government spending. Such a policy would have a deleterious impact on the countries’ economies.

The IMF and World Bank have increasingly become influential in international development. The IMF and World Bank both require that countries implement policy reforms to receive resources from them. Failure to implement these reforms can lead to delays in loan disbursements and even suspension of lending.

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