International monetary fund (IMF)
They are backward because they have no petrol and other mineral sources. They have to depend on the countries of the First World for their development for this purpose. They want a good deal of monetary help or loan.
The International Monetary Fund was established to offer monetary aid to the poor and underdeveloped countries of the U.N.O. It works in close collaboration with the World Bank. It uses a fund subscribed by the member countries of U.N.O.
Functions of the I.M.F:
It purchases foreign currencies from its member countries and offers loans to the needy countries. It adjusts the exchange rates. It also provides technical assistance and advice in monetary dealings between the member countries. The interest rates charged by the I.M.F. are higher. These rates and other conditions for having loans are not favourable to the under-developed countries but they are compelled to take loans for their economic development on the conditions laid down by the I.M.F.
There are short-term and long-term loans. The short term is for five years and the long term is up to ten years. The member country is required to return it to the I.M.F. along with interest. If a country finds it unable to return the loan within the fixed time, it may request for rescheduling of the loan. The loan will be rescheduled but its rate of interest will go on increasing. The I.M.F. may write off the loan if there are adequate reasons for doing so.
The I.M.F. often dictates its policies to the backward loan taking countries for the return of the loan. In other words, it is an economic slavery. Such countries free policy of their own. To raise income, they have to buy new taxes on their public each year while making a budget. As a result, the people are hard hit. Rates of every thing begin to rise and the people turn against their government. This is the dark side of taking loans from I.M.F.
Among other proposals, I.M.F. sometime recommends even taxation of agricultural products and cut in defence expenditure. This is not desirable and is against the freedom of a country.