What is IMF & Main Functions of IMF and how it work in the world PDF

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it will give you the idea how IMF established and what are the functions of IMF and how its working in the world....

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Name: Mussab Ali Shah Roll No: 1030-BH-ECON-18 Semester: VI Course: Money Banking And Monetary Course Code: ECON 3205 Instructor: Ms. Saira Majeed Date: 15-02-2021 ___________________________ What is IMF (International Monetary Fund)? It is an international organization, which was established in December 27, 1945 in Bretton woods, New Hampshire United state. Now the headquarter of IMF is in Washington D.C, and its consist of 190 countries. Actually after the Great Depression (1929) and II world war world (1939-1945) suffered from severe economic crises, that times major powers set together and decided to make an organization which would help the members countries during the economic crises. The basic purpose of IMF is the stability of monetary system, secure financial stability, promote high employment, International trade, Sustainable economic growth and eradicate poverty. Main Functions of IMF (International Monetary Fund) 1: Lending the meeting temporary unfavorable balance of payments positions The IMF does not lend for developmental project. The financial assistance provided by IMF enables the members to reduce its deficit of balance of payments and other short term external liabilities. These lending are to be paid back in three to five years. 2: Purchase and Sale of Foreign Currency The fund buys and sells the currencies of the member countries. Whenever a country buys the currency of another country from the fund, the latter makes its available by purchasing the same from the country concerned, of which is constitutes the national currency. In any one year a member country can purchase from the fund foreign currency up to the maximum of 25% of its quota. But in some cases IMF can raise this limit to even 100 per cent of quota. 3: Bank of Central Banks

The fund is called the bank of the central banks of different member countries of the world. Just as central bank holds the cash of the commercial banks of the country, likewise IMF also holds reserves of the central banks of the member countries. 4: Technical Assistance The fund also provides technical assistance to its member countries. The fund sends its experts on deputation to member countries to advise them o matters like exchange control, foreign payments, credit control, central banking and economic policy etc. The fund also publishes many technical journals and magazines. 5: Imparts training It also imparts training to the representative of member countries. The training is imparted to the senior officers of the central banks and the finance departments. In 1975, a training centre was set up to impart training to policy makers of different nations. 6: Facilities during Emergency Although IMF is opposed to any sort of controls either on foreign exchange or on foreign trade, yet member countries have been given the right to resort to these controls during emergency in the hope that they will lift it as the situation warrants. 7: Increases International Liquidity IMF has increased international liquidity by creating a new currency in the form SDR. IMF also lends foreign currency to member countries. All this increases international liquidity. 8: Determining exchange rate for every member country When a country becomes members of the fund, it has to declare par value of its currency in terms of dollar or gold .This facilities multilateral convertibility of that currency. But now exchange rate is determined by market forces of demand and supply, so this function has been dropped. 9: Poverty Reduction For helping low income countries having extreme poverty, IMF has set up a special fund. In this fund, contribution is received from developed nations and from emerging developing nations. 10: Change in Exchange rate i : If any country want to change its exchange rate from 11 to 20 percent, no prior permission is needed from IMF. Simply intimation to IMF will be sufficient. ii: If any country want to change its exchange rate from 11 to 20 percent, prior permission of IMF is required for such change.

iii: If the country wants to change its exchange rate by more than 20 percent, then such decision is taken with the consent 2/3 of its members. At present determination of exchange rate and change in exchange rate are decided by the market forces, i.e now a country cannot decide the par value of its currency, the exchange rate is decided by the demand and supply of that currency in foreign exchange market. 11: Research Function IMF is set up a separate statistical bureau for conducting research regarding balance of payments, money and banking, finance and fiscal policy etc. IMF publishes report of such research work. Its main publications are- Finance and Development, IMF Survey, Balance of Payments Year Book, Direction of Trade, International Financial statistics, etc. Theses Publications are useful for member nations for framing economic policies. 12: Special lending facilities of IMF Following are the main lending facilities provided by IMF to member nation. i: Compensatory and Contingency Financing Facility (C.C.F.F) Under this scheme, special financial assistance is provided to the member nations for compensating them for shortfall in exports, because of some contingencies like earthquakes, flood, drought etc. ii: Buffer stock Financing Facility (B.S.F.F) Under this scheme, special financial assistance is provided to member nations for maintain buffer stocks (Reserve Stocks) of primary products like food grains. iii: Structural Adjustment Facility (S.A.F) Under this scheme concessional loans are provided by IMF to least developed member nations for meeting deficit in balance of payments. Under this scheme, the rate of interest is between 0.5% to 1% P.a. iv: Enhanced Adjustment Facility (E.A.F) It is known as Enlarge Access policy. Under This Scheme, enhanced loan are provided to least developed member nations with heavy debt burden for making economic reforms. Under this scheme, a member country can take loans up to 425% of its quota....