World Bank and IMF in Vietnam Essay

Introduction

The International Monetary Fund (IMF) and World Bank group have been the organizations that try to save the failing economies in the world and have always tried to leverage the economic constraints in most developing nations. However, most countries that have predominantly been depending on World Bank and IMF have engaged in malpractices with the funds given as loans thus ending up suffering bad debts. Just like other nations like India, Malaysia, and Canada, Vietnam has benefited from IMF and World Bank, but it is undergoing a dangerous position in the world's ranking countries external debt position due to the domestic macroeconomic instability and global crisis since 2008. This paper seeks to analyze an in-depth effect of World Bank and IMF loans, the struggles that Vietnam is passing through to settle their vast debts and possible impacts of defaulters of IMF and World Bank loans to the monetary support organizations.

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Positive Effects

Economic Growth

There has been a robust enduring partnership between Vietnam and World bank since 1976. (Kaja & Werker 2010, 171). Vietnam started a collaboration with World bank early in 1976 leading to the first credit approval in 1978. The adoption of credit provided grounds for the renovation of Vietnam since 1986 after the Sixth Congress of the Communist Party their full drive termed as DOI Moi" as a mandate to reform the nation's socioeconomic life. Since the initiation of the plan and start of the partnership with World bank, Vietnam has been holding consultative group meetings with World bank group to discuss the efficacy of the developments that the nation is capable of starting using the foreign aid and support from World bank loan.

Improvement of Education

IMF (2017, 15) mentioned that Vietnam enjoyed the loans from IMF in the direction that the credits were used to start vocational training institutions that projected to an educational expansion. On the other hand, the loan from World bank enabled Vietnam to start a policy termed as 'Education for All' in 1993 whereby the primary education sector provided better books, made classes and improved school infrastructure to support learning.Enrollment rate in schools was improved from 86% in 1993 to 95% in 2002. Regarding economy growth, Vietnam enhanced its economic dynamics since 1994 by utilizing the $150 million for structuring market economy to the current most dynamic markets. Besides empowering economic growth, the World Bank and IMF support helped in saving people from the overwhelming poverty by assisting them to adopt the best practices towards poverty reduction through giving out credit facilities.

Dramatic Reduction of Poverty

The social outcomes in Vietnam have improved significantly since 1993 as the number of poor people is continuously diminishing. Poor people in the marginalized areas gained access to electricity by 2005 while many others were getting a breakthrough from the impending dangers of poor health. The people are living below the poverty line reduced to about 13.5% percent by 2014.

Negative Effects

International Development Association and IMF (2010, 2) mentioned that Vietnam's external debt position had been historically growing since its first attempt to borrow from IMF. The country has been reported to be negatively affected by domestic macroeconomic instability in conjunction with global crisis since 2008. The nation is at good stake for handling its debt crisis since it has the concessional long maturity and some sorts of reasonably diversified currency composition. It also has some significant foreign direct investments inflows which result in non-debt creating financing. However, most of the business operators have ever been switching their foreign denominated currency into assets and gold thus leading to a loss of international reserves leading to the depreciation of the nation's exchange rate . Similarly, the increased macroeconomic instability has brought about domestic public debt like the debt of the general government to World Bank and IMF. The nation has switched to predominantly depending on World Bank and IMF for support due to the weak channeling of money into ornaments and non-capital assets.

On the other hand, the Vietnam debt assessment from the support of IMF and World Bank has not shown any significant changes since the last DSA. The nations are at a higher debt holding with the World Bank since it depicts a 7.0 as compared to the IMF debt that is 0.1. There is a high projection of deficit since 2008 thus guaranteeing that the percentage debt that Vietnam is operating in is growing day by day. The nation is trying to settle its economic problems by drawing down government deposits thus showing that its dependency on World Bank group made the country misuse the funds thus facing a massive debt crisis. Therefore, from such analysis, it is clear that IMF and World Bank finances affect nations negatively as the money borrowed from World bank group was not utilized well.

Bibliography

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