INTERNATIONAL MONETARY FUND (IMF)- STRUCTURE, FUNCTIONS, OBJECTIVES, AND RESOURCES

IMF came into being on December 27, 1945 when 29 countries of the world signed on ‘’Aricles of Agreement’’. It started functioning in march 1947.

Structure:

the board of governors is the supreme body of IMF, which is headed by governorand an alternate governor who are appointed by the members of the fund. The of governors deals with the entry of new members, determination of quotas and distribution of SDRs. Board of governor consists of one governor from each of its 188 members. There is an annual meeting of the fund which is held once in a year all members participate in it.

The other big authority in the IMF is ‘Executive Board’. It has a Managing director who is the chairman of the executive board and controls day-to-day matters of the fund.

Objectives:

1. To increase international cooperation by providing consultancy services regarding international monetary issues.
2. To assist in the balanced growth of world trade, which will be helpful in raising the efficiency, employment and income of the world.
3. To stabilize the exchange rate and discourage the tendency of competitive devaluation.
4. To abolish those restrictions which are obstacles in the way of world trade and create a multilateral system of payments.
5. The countries facing deficit in their balance of payment can borrow from IMF to finance temporarily.
6. To reduce the volume and time period of disequilibrium in balance of payment.

Functions:

1. To maintain stable exchange rate policies.
2. Surveillance: it is responsibility of the fund to see whether members are serious regarding their functions and responsibilities thus under this function there is regular dialogue and policy advice which IMF offers to each member. Hence IMF makes an appraisal of each member’s economy
3. Exchange restrictions: no country can put any type of restrictions on the payment regarding current account. However a country can impose rstrictions on the movement regarding capital amount. Again no country can impose restrictions that the transactions will be made in certain currencies.
4. Consultation and Technical Assistance: fund provides technical assistance to its members regarding strengthening their capacity to design and implement effective policies. Fund assists in the area of fiscal policy, monetary policyexchange rate, banking and financial system etc.
5. Lending for BOP difficulties: basically fund is aimed to provide assistance to those member countries which suffer from BOP difficulties. But to the poor countries it also assists in the attainment of growth and alleviation of poverty.

Resources:

The main source of the fund is those subscriptions which are paid by the members in the form of quotas and SDRs. In order to enhance its resources, the fund can borrow from the official as well as non-official sources.

Special Drawing Rights and IMF quota:- the big question at the Bretton Woods conference with respect to the institution that how member country would access international liquidity. After consultation quota was assigned to member countries in accordance to their relative economic power and their credit to IMF. Further members were provided voting rights in proportion to their quotas. Hence there is conflict between developed and developing countries regarding their voting rights as developing nations have lesser say in major decisions of IMF.

SDRs: SDRs are supplementary foreign exchange reserve assests defined and maintained by the IMF. it is not a currency instead represent a claim to currency held by IMF member countries for which they may be exchanged. The value of SDR is defined by a weighted currency basket of four major currencies: the US dollar, the Japanese yen, the Euro and British pound. The central bank of member countries held SDR with IMF and it can be use by them to access fund from IMF in case of financial crisis in their domestic market.