SC - possessive pronoun - help needed

[Guest]

Although the coordination of monetary policy can help facilitate the orderly financing of existing imbalances, it is unlikely that its effect on their size is significant in the absence of an appropriate fiscal adjustment.

(A) it is unlikely that its effect on their size is significant
(B) it is unlikely that the size of their effect would be significant
(C) affecting their sizes are not likely to be significant
(D) the significance of their effect on its size is unlikely
(E) its effect on their size is not likely to be significant

answer is E here .

Can someone help me understad the usage of "its" and "their" in this sentence and how they refers back to "cordination of monetary policy" and "existing imbalances" respectively. Also why option A is wrong?

Thanks! a lot

[jwinawer]

What is the source of the question? Thanks!