Role of IMF

The International Monetary Fund is a global organisation founded in 1944. It aims was to help stabilise exchange rates and provide loans to countries in need. Nearly all members of the United Nations are members of the IMF with a few exceptions such as Cuba, Lichtenstein and Andorra.

  • The IMF is independent of the World Bank although both are United Nations agencies and both are aiming to increase living standards. The World Bank concentrates on long term loans to developing countries.

Functions of IMF

  1. International Monetary Cooperation
  2. Promote exchange Rate stability
  3. To help deal with Balance of Payments adjustment
  4. Help Deal With Economic Crisis by providing international coordination

What The IMF does

1. Economic Surveillance. IMF produces reports on member countries economies and suggest areas of weakness / possible danger. The idea is to work on crisis prevention by highlighting areas of economic imbalance. A list of IMF reports on member countries are available at: IMF Countries

2. Loans to Country’s with financial crisis. The IMF has $300 billion of loanable funds. This comes from member countries who deposit a certain amount on joining. In times of financial / economic crisis, the IMF may be willing to make available loans as part of a financial readjustment.

  • the IMF has arranged more than $180 billion in bailout packages since 1997.

3. Technical assistance and economic training. The IMF produce many reports and publications. They can also offer support for local economies. More on technical assistance

How is the IMF Financed?

The IMF is financed by member countries who contribute funds on joining. They can also increase this throughout their membership. The IMF can also ask its member countries for more money. IMF financial resources have risen from about $50 billion in 1950 to nearly $300 billion last year, sourced from contributions from its 183 members.This initial amount depends on the size of the countries economy. E.g. the US deposited the largest amount with the IMF. The US currently has 16% of voting rights at the IMF, a reflection of its quotas deposited with IMF. The UK has 4% of IMF Voting rights. Loans are also available to developing countries to ‘deal with poverty reduction.’

Special Drawing Rights SDR

The IMF use Special drawing rights to provide a unit for the amount of foreign currency member states can draw on. SDRs are defined in terms of a basket of major currencies including: Euro, Pound Sterling, Japanese yen and US Dollar.

Examples of IMF Intervention

IMF Reports

Criticisms of IMF

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