What Is the International Monetary Fund and What Does It Do

Helps different countries of the world to improve their economic situation. After the Second World War, the need for such an international organization was felt for international monetary cooperation, expansion of foreign trade, and proper flow of international capital, which would support various national monetary, freedoms. Keeping it safe and giving birth to a stable international economy. In this regard, the 'Keynes Plan' was presented by Britain, and the 'White Plan' by the United States. To know the opinion of different nations on these plans, a monetary conference was called in 1944 in the United States of America at a place called Britain Woods in which representatives of 44 countries participated and after much deliberation, two monetary institutions were established. One of these was the International Monetary Fund, which was established on December 27, 1945. It started its business on 1st March 1947. The number of member countries of the International Monetary Fund as of the end of September 2016 is 189. The current Managing Director of the International Monetary Fund is Christine Lagarde.

International Monetary Fund

Objectives of the International Monetary Fund

The main objectives of the establishment of the International Monetary Fund

(1) Establishment of International Monetary Cooperation

The main objective of the establishment of the International Monetary Fund is to establish monetary cooperation between different countries of the world and to solve international economic problems through cooperation and consultation.

(2) To bring stability to foreign exchange rates

The second main purpose of its establishment is to promote exchange stability, establish orderly exchange arrangements among the member countries, and eliminate the situation of competitiveness.

(3) To remove and reduce the exchange control

The third main objective of the establishment of the International Monetary Fund is to loosen or remove the exchange control imposed by the countries before the Second World War so that the adverse effect on foreign trade is eliminated. To be.

(4) Interpretation of multilateral payments

The International Monetary Fund will assist in the establishment of a multilateral payment and trading system in place of bilateral agreements.

(5) Promotion of international trade

The fifth objective of the fund is to encourage them by removing all kinds of obstacles related to foreign trade.

(6) Helping in the balanced development of the country

, the International Monetary Fund gives financing and other useful suggestions for the balanced economic development of the nations.

7 Removal of imbalance for international payments

The fund also tries to remove and reduce the imbalance in the balances of payment of the member states. For this purpose, the Monetary Fund sells and lends foreign currencies to the member countries.

(8) Giving financial assistance to the member countries in crisis

The fund also provides financial assistance to the member countries in times of crisis and also helps in the export of capital from the rich to the poor.

Functions of the International Monetary Fund

To fulfill its objectives, the International Monetary Fund does the following:

(1) To determine the parity rates or exchange rates of the currency

The main purpose of establishing the Monetary Fund is to determine the exchange rates among the member countries and to maintain stability in it. To fulfill this effect, each country has to fix the exchange rate of its currency in gold and this rate can be changed up to 10% without the permission of the Fund. Since December 1971, central rates of exchange have been fixed by the member countries, subject to a change of 2.25% at any time. From January 1976, the Fund would accept free exchange rates only, that is, the recognition of the monetary values of gold was abolished.

(2) Providing short-term international credit

The fund sells foreign currency i.e. gives loans to eliminate or reduce the short-term imbalance arising in the balance of payments of the member countries. Generally, the fund does not provide foreign exchange to any country in a category exceeding 25% of its contribution, but in special circumstances, this share can be 50% or more.

(3) Arranging for scarce currency

When the currency of a country is scarce, the fund can meet the demand for that currency by borrowing from that country or can buy that currency by giving gold. But still, if the currency remains scarce, then the fund can ration that currency by giving information and the member countries can also be allowed to impose exchange control on such currency.

(5) Providing technical assistance

The International Monetary Fund provides the services of its experts from time to time to provide technical assistance to its member countries, which helps those countries to solve complex problems. Two departments Central Banking Service Department and the Affairs Department were established to provide technical assistance through the fund.

6) Provision has been made for the representatives of the member countries

by the Program Fund and for this purpose, a training center has been established in 1964. This observation is related to economic development, number-collection, international payments, financial system and analysis related things.

(7) Publishing statistics

Many data related to banking, international trade, fiscal policy, etc. are published by the International Monetary Fund.

India benefits from International Monetary Fund

(1) Independence of ₹

- After the establishment of the International Monetary Fund, the relationship of India's currency with the stalling ended and now India's rupee became an independent currency, and its value is now fixed in gold.

(2) Membership of the World Bank

- Being a member of the International Monetary Fund, India could become a member of the World Bank. India gets financial assistance from time to time for its economic development from the bank.

(3) Importance of India in the international

l arena India has an important place in the International Monetary Fund. Until recently, India was one of the five countries that had a place on the board of directors of the fund, due to which India used to participate in the policy-making of the fund. Due to all these reasons, the importance of India in the international economic field has increased.

(4) Technical advice and monitoring -

India has been getting necessary advice from time to time regarding monetary and financial policies from the International Monetary Fund of India.

5) Help in times of crisis

International Monetary Fund has given as much help as possible in reducing the distant adversity in India's balance of payments. For example, at the time of the Pakistani invasion in 1965, he accepted a loan of 200 million dollars, in 1974-75, India got foreign exchange from the Monetary Fund to meet the economic crisis and similarly, the fund gave India three installments in 1981-82. accepted a loan of $400 million.

Successes of the International Monetary Fund.

• Although the purchase of currencies from the Monetary Fund has mostly been assisted by the fund to developed countries like Britain, the United States, and later France. Despite many problems, the International Monetary Fund has been successful to a considerable extent in establishing the world monetary balance during the 70 years of its tenure, as is evident from the following description.

(1) International Monetary Fund

has been successful in establishing international monetary cooperation based on its internal organization and external influence.

(2) based on their influence by the international currency,

resourceful nations like America have been inspired to solve the reconstruction problems of European countries.

(3) The Fund has substantially helped

in rectifying the temporary imbalances in the balance of payments of the member states and has made a significant contribution to the solution of the problem of international liquidity.

(4) The Monetary Fund

has always contributed significantly in making maximum adjustments in the credit policies of the member nations.

(5) The Monetary Fund has succeeded

in reducing the restrictions imposed on foreign trade, exchange controls and establishing a multifaceted system of foreign payments.

(6) Monetary funds have eliminated

harmful systems like the plurality system practiced by the nations.

7 Developing countries are assisted by the Monetary

Fund. This fund has been providing assistance to these countries to maintain balance of payments and to maintain monetary stability.

(8) International trade has also increased due to the easy

system of payments by the International Monetary Fund and the world trade has increased 20 times from the previous years.

Criticisms of the work of the International Monetary Fund

1. Limitation – It provides foreign exchange only for current payments.

2. Lack of long term

loans It gives priority to only short term loans and not to long term loan arrangement.

3. Lack of liquidity-

Lack of liquidity is found in the monetary fund, work is being done to improve it.

4. No basis for determining the limit.

The extent of credit facilities provided to the member countries has not been determined. Hence, this makes the credit policy unscientific.

5. Assistance to under-developed countries

Semi-developed countries require a large amount of capital for their development work, but the International Monetary Fund does not provide them sufficient credit facilities.