GS Paper: GS2-20.Important International institutions, agencies and fora- their structure, mandate.

Central idea: The International Monetary Fund (IMF) last week confirmed a $3 billion bailout plan for Sri Lanka’s struggling economy. However, Pakistan failed to get a penny. Countries seek help from the IMF usually when their economies face a major macroeconomic risk, mostly in the form of a currency crisis.

International Monetary Fund (IMF) IMF is an international organization that provides loans, technical assistance, and policy advice to its member countries. It was established in 1944 with the goal of promoting international monetary cooperation and exchange rate stability, facilitating balanced economic growth, and reducing poverty around the world. It has 190 member countries, and its headquarters is located in Washington, D.C. Its main function is to provide financial assistance to countries facing economic difficulties, such as the balance of payments problems, currency crises, and high levels of debt. It also provides technical assistance and policy advice to help countries improve their economic policies and institutions, and to promote economic stability and growth. Governing of IMF The IMF is governed by its Board of Governors, which consists of one governor and one alternate governor from each member country. The day-to-day operations of the IMF are managed by its Executive Board, which is responsible for making decisions on financial assistance and policy advice.

 

What is an IMF Bailout?

• An IMF bailout, also known as an IMF program, is a loan package provided by the International Monetary Fund (IMF) to financially troubled countries.
• These loan packages come with specific terms and conditions that the borrowing country must meet to access the funds.
• They typically have a set of conditions that a country must meet to qualify for the loan package.
• These conditions, also known as “conditionalities,” typically include measures that promote fiscal discipline, monetary stability, and structural reforms to improve the country’s economic competitiveness.

IMF programs are often seen as a last resort for countries facing financial crises, and they are only granted if a country cannot access capital markets on its own. IMF programs can be classified into three main types:

1. Stand-by Arrangements: They are short-term lending programs designed to provide financial assistance to countries experiencing short-term balance of payments problems. These programs typically last for one to two years and require countries to implement specific macroeconomic policies to stabilize their economies.
2. Extended Fund Facility: Such programs are medium-term lending programs designed to help countries with balance of payments difficulties resulting from structural weaknesses. These programs are typically longer-term and come with more extensive policy conditionality, which requires more significant structural reforms to the country’s economy.
3. Rapid Financing Instrument: It is a loan program designed to provide quick financing to countries facing an urgent balance of payments need. The program is designed to be more flexible than other IMF programs, with fewer conditions and a shorter application process.

Why do countries seek IMF bailouts?

• Countries need IMF bailout when their economies face major macroeconomic risks, such as a currency crisis, due to gross mismanagement of the nation’s currency by the central bank under the covert influence of the ruling government.
• Such currency crises cause a rapid rise in the overall money supply, which causes prices to rise across the economy and the exchange value of the currency to drop.
• Bad luck such as a decrease in foreign tourists can also contribute to a crisis in a country like Sri Lanka.

Benefits provided by IMF bailout:

IMF programs provide several benefits to countries in financial distress. For instance:

• Access to funding: An IMF bailout provides immediate funding to a country experiencing a financial crisis, allowing it to meet its immediate financial obligations.
• Credibility push: A bailout can provide credibility to a country’s economic policies, signalling to international investors that the country is taking the necessary steps to restore its economy.
• Assistance with structural reforms: IMF programs require countries to implement structural reforms that can help address the underlying problems that led to the financial crisis, improving the country’s long-term economic prospects.

Limitations of an IMF bailout

• Harsh austerity measures: IMF programs often require countries to implement strict economic policies, which can be unpopular and difficult to implement.
• Limited resources: The IMF has limited resources, which can limit the amount of assistance it can provide to countries in need.
• Stigmatization: Bailout can stigmatize a country in the eyes of international investors, signaling that the country is unable to manage its own economy without outside assistance.

---

Try this PYQ from CSP 2022

“Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following?

(a) Asian Development Bank

(b) International Monetary Fund

(c) United National Environment Programme Finance Initiative

(d) Word Bank

 

[wpdiscuz-feedback id=”0bg8oemwws” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

 

---

Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

The International Criminal Court (ICC) has issued an arrest warrant for war crimes for Russian President Vladimir Putin and Maria Lvova-Belova, Russia’s commissioner for children’s rights.

Charges against Putin

• The ICC issued the warrants because it believes that Putin bear individual criminal responsibility for the war crime of –

1. Unlawful deportation of population and
2. Unlawful transfer of population from occupied areas of Ukraine to the Russian Federation

The ICC and its Background

• The ICC is a standing body created two decades ago to investigate war crimes, genocide and crimes against humanity under a 1998 treaty known as the Rome Statute.
• The court is based in The Hague, a Dutch city that has long been a center for international law and justice.
• Many democracies joined the ICC, including close American allies such as Britain.
• However, the United States has kept its distance due to fears that the court may one day seek to prosecute American officials.
• Russia is also not a member.

Implications of the Warrants   

• Human rights groups hailed the warrant as an important step toward ending impunity for Russian war crimes in Ukraine.
• The likelihood of a trial while Putin remains in power appears slim since the court cannot try defendants in absentia, and Russia has said it will not surrender its own officials.
• Putin’s isolation in the West deepens, and his movements overseas could be limited.
• If he travels to a state that is a party to the ICC, that country must arrest him according to its obligations under international law.

Possibility of Putin Facing Trial

• The ICC has no power to arrest sitting heads of state or bring them to trial, and instead must rely on other leaders and governments to act as its sheriffs around the world.
• A suspect who manages to evade capture may never have a hearing to confirm the charges.

---

Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

US has urged Israel and the Palestinians to ease tensions amid a spike in violence that has put the West Bank region on edge.

Where is West Bank?

• The West Bank is a landlocked territory near the coast of the Mediterranean in Western Asia that forms the main bulk of the Palestinian territories.
• It is bordered by Jordan and the Dead Sea to the east and by Israel to the south, west, and north.

Point of discussion: Anti-Semitism

• Anti-Semitism (hatred against Jews) is an officially stated policy of many theocratic countries (created by divine orders of religion).
• This includes entire Arab world, the self-proclaimed caliphate ‘Turkiye’ and even Pakistan.
• Jews, the micro-minority religion of the world were denied access to their homeland.

What is the Israel-Palestine Conflict?

• The land to which Jews and Palestinians lay claim to was under the Ottoman Empire and then the British Empire in early 20th century.
• Palestinian people —the Arab people from the same area— want to have a state by the name of Palestine in that area.
• The conflict between Israelis and Palestinians is over who gets what land and how it’s controlled.
• Jews fleeing the persecution in Europe at the time wanted to establish a Jewish state on the land which they believe to be their ancient homeland.
• The Arab at the time resisted, saying the land was theirs. The land at the time was called Palestine.
• In 1917’s Balfour Declaration, the United Kingdom declared its support for the establishment of a “national home for the Jewish people” in Palestine.
• Arabs resisted it which led to violence.

Jews into West Bank: Arab hinterland in Israel

• Some 75,000 Jews migrated to Palestine from 1922-26 and some 60,000 Jews emigrated in 1935, according to a history published by the University of Central Arkansas.
• It adds that Palestinian Arabs demanded the UK to halt Jewish emigration, but the UK ignored such calls. There were violent incidents, leading to deaths of some 500 people.
• In 1923, the British Mandate for Palestine came into effect.
• The document was issued by the League of Nations, the failed predecessor of the United Nations (UN).
• The mandate gave the UK the responsibility for creating a Jewish national homeland in the region.
• In 1936, the UK government recommended the partition of Palestine into Jewish and Arab states.

How did the issue escalate?

• In 1947, Britain referred the issue of Palestine to the UN, which came up with a partition plan.
• It put up two proposals. One, two separate states joined economically —the majority proposal— and, two, a single bi-national state made up of autonomous Jewish and Palestinian areas, the minority proposal.
• The Jewish community approved of the first of these proposals, while the Arabs opposed them both.

Israel’s independence

• In May 1948, Israel declared its independence. This was eye-pricking development for Arabs.
• The Arab countries of Lebanon, Syria, Iraq, and Egypt invaded the newly-declared country immediately.
• When the war ended, Israel gained some territory formerly granted to Palestinian Arabs under the UN resolution in 1947.
• It also retained control over the Gaza Strip and the West Bank respectively.

Resolving the conflict

Ans. Two-state solution

• The two-state solution refers to an arrangement where Israeli and Palestinian states co-exist in the region.
• However, such a solution has not materialised over the decades.
• As outlined in the beginning and in the briefly explained roots of the conflict, the two-state solution means two separate states for Israelis and Palestinians.

Why it hasn’t worked out?

There are four main reasons why the two-state solution has not materialized by now:

[1] Borders

• There is no consensus as to how to draw the lines dividing the two proposed states.
• Many people say borders should have pre-1967 lines.
• In 1967 Israeli-Arab war, Israel captured Sinai Peninsula, Gaza Strip, West Bank, Old City of Jerusalem, and Golan Heights.
• Israel is not willing to give up these gains. It returned Sinai to Egypt in 1982.
• Moreover, there is the question of Israeli settlements in West Bank.

[2] Question of Jerusalem

• Both Israel and Palestinians claim Jerusalem as their capital and call it central to their religion and culture.
• The two-state solution typically calls for dividing it into an Israeli West and a Palestinian East, but it is not easy to draw the line — Jewish, Muslim and Christian holy sites are on top of one another.
• Israel has declared Jerusalem its ‘undivided capital’, effectively annexing its eastern half, and has built up construction that entrenches Israeli control of the city.

[3] Refugees

• A large number of Palestinians had to flee in the 1948 War.
• They and their descendants —numbering at 5 million— demand a right to return. Israel rejects this.
• The return of these people would end the demographic majority of Jews, ending the idea of Israel that’s both democratic and Jewish.

[4] Security

• Security concerns are also central to Israel as it’s constantly harassed by terrorist group Hamas that controls Gaza Strip.
• Hamas and other Islamist group in Gaza launch rockets into Israel time-to-time.
• Moreover, there are also concerns of Palestinians’ attack inside Israel.
• This year in March-April, at least 18 Israelis were killed in Palestinian attacks inside Israel.
• A total of 27 Palestinians were also killed in the period, including those who carried out attacks inside Israel. Palestinians too have their concerns.
• For Palestinians, security means an end to foreign military occupation.

Why the two-state solution is needed?

• Besides fulfilling the basic desire of both Jews and Arabs of their own states, supporters of two-state solutions say it must be backed because its alternatives are simply not workable.
• A single state merging Israel, West Bank, and Gaza would reduce Jews to a minority.
• At the same time, in such a state, Jews would be a significant minority which would mean that the Arab majority would be miffed.

Moral reasoning for a two-state solution

• It says that the aspirations of one person should not be overridden for others’ aspirations.
• It’s a struggle for collective rights between two distinct groups of people.
• Jews are the global micro-minority with a very small piece of land to exist.
• Depriving Israeli Jews of a Jewish state or Palestinians of a Palestinian state would represent a subordination of one group’s aspirations to someone else’s vision.

Way forward

• India opines that long-term peace in Israel and Palestine can be achieved only through a negotiated two-State solution leading.
• This can be done with the establishment of a sovereign, independent and viable State of Palestine living within secure and recognized borders.

 

Crack Prelims 2023! Talk to our Rankers

(Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more