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Origin: After the Second World War the remaking and restoration issues of the world economy
got intense. Protectionism, restrictive foreign exchange policy, dumping, bilateral trade regime
and other conservative trade policy led to a grave decline in world trade. In 1944, delegates of 44
countries met in Bretton Woods, New Hampshire, to draw up an arrangement for the post-World
War II monetary request. Their objective was to keep away from a reiteration of the ruinous
strategies that could start another contention. Consequence of this gathering was formation of
World Bank, International Monetary Fund and the World Trade Organization (that become
operational as of late). $9 billion is the paid-up capital of IMF whereas $1.7 million is gold
which is paid by the other member countries. Till today the total members of IMF is 190
countries and in IMF Bangladesh joined in August 17, 1972. The total staff of IMF is 2800
which includes 24 Executive Board members.
Functions:
SURVEILLANCE
FINANCIAL ASSISTANCE
TECHNICAL ASSISTANCE
Surveillance: The IMF closely monitors the economic and financial developments of
each member country and regularly conducts policy dialog with a member country (also
known as the Article IV Consultation), usually once a year, in order to assess its
economic conditions in order to provide policy recommendations. The IMF also analyzes
global and regional trends and viewpoints based on data from individuals.
Financial Assistance: In order to facilitate the adjustment process and restore the
economic growth and stability of the member countries through various loan instruments
or 'facilities,' the IMF lends to its member countries facing balance of payments
problems. In general, an IMF loan is issued under an "arrangement," enabling a
borrowing country to follow particular policies and steps to address its balance of
payments.
Technical Assistance: The IMF provides technical assistance to support member
countries in strengthening their capacity to design and implement effective policies in
four areas, namely (1) monetary and financial policies, (2) fiscal and management
policies, (3) statistics and (4) economic and financial legislation. In addition to technical
assistance, the IMF also provides IMF member countries with training courses and
seminars.
IMF also helps to reduce poverty as well. Reducing world poverty is another key function of
the IMF. With the collaboration of WORLD BANK and other organizations, the IMF is
working on reducing poverty around the world.
There are several facilities of IMF. Below described the facilities relevant to developing
countries.
Supplemental Reserve Facility (SRF): The SRF was launched in 1997 to provide
large-scale, short-term financing. During the 1990s, the lack of market certainty faced
by emerging economies in the business sector triggered major capital outflows,
requiring development on a larger scale.
A.2. A quota is allocated to each IMF member, which defines its financial and organizational ties
with the institution. Quotas specify the subscriptions of the members to the IMF, their
proportional voting rights, their full access to IMF funding and their shares in the SDR
allocations. The cumulative quotas amounted to SDR 213 billion in 2003 ($ 296 billion). In
Special Drawing Rights, quotas are denominated. The United States, with a quota of SDR 37.1
billion ($ 51.2 billion) and a voting power of 17% of the total, is the largest member of the IMF.
(Jap 6, Ger 5.9, Fran 4.9, Ital 3.2 = 41.7) (USA 16.8, UK 4.9). With a quota of SDR 3.1 million
($ 4.3 million) (share 0.001) and voting power of 0.01 percent, the smallest member is Palau.
The quota for Bangladesh is equivalent to SDR 533.3 million. The new quota share is 0.25
percent, and 0.25 percent of the total is voting strength. (Power of Voting Afghanistan (0.08),
Bangladesh (0.25), India (1.89), Bhutan (0.01), Nepal (0.07), Pakistan (0.48), Maldives (0.01)
taken together is 2.76). The Board of Governors shall perform a general review at intervals of
approximately five years and, where it considers it necessary, shall recommend an alteration of
the quotas. Approval needs an 85% majority. Two key issues are discussed in the review: the
scale of the total increase and the distribution of the increase between the members. 12 general
reviews have been completed so far by the fund. The 11th review (1998) increased the quota by
45 percent, and no increase was recommended by the 12th review. Primarily, the more voting
power a country can have, they can take that much money from IMF. Hence, this mainly
encourages some of the member countries to create New Development Bank.
4-Jan-21 1.35977
3-Jan-21 1.35977/1+0.01201
Hence, SDR for 3/1/2021 = 1.3436
A.4. a) While doing export, payments have to be made. There are several export payment terms.
Which are described below:
i. Cash in Advance: When the credit standing of the buyer is not known or is
uncertain, this type of payment terms is used.
ii. Open Account: When a sale is made on open account. The seller assumes all of
the risk. In such cases, this type of terms should be offered only to reliable
customers in economically stable countries.
iii. Consignment: Goods are shipped to the buyer and payment is not made until
they have been sold. Here, all the risk is assumed by the seller.
iv. Letters of Credit: This document is issued by the buyer’s bank which promises
to pay the seller a specified amount when the bank has received certain
documents stipulated in the letter of credit. There are two criterions of LCs
- Confirmed: Act of a correspondent bank in the seller’s country by which it agrees to
honor the issuing bank’s letter of credit
- Irrevocable: Once the seller has accepted the credit, the customer cannot alter or cancel
it without the seller’s consent
v. Air Waybill: This type of payments is issued by carrier to be presented as proof
that the shipment has been made.
vi. Pro Forma Invoice: In such cases, exporter’s formal quotation containing a
description of the merchandise, price, delivery time, proposed method of
shipment, ports of exit and entry, and terms of sale are provided.
vii. Documentary Drafts: This is an export draft. It is an unconditional order drawn
by the seller on the buyer instructing the buyer to pay the amount of the order on
presentation (sight draft) or at an agreed future date (time draft).
b)
c) Topographical: The topography mainly means the surface features of a region. Differences
in topography may require products to be altered: Cake mixes, internal combustion engines etc.
This includes: Mountains and Plains, Deserts and Tropical Forests, Bodies of Water and so on.
This has an impact on international business. Basically, topography is how land heaves and dips
in hills and valleys and how it slopes to allow the flow of streams and rivers. By researching the
topography of the route and plotting the best way around geographical barriers, farmers who
used the railroads to bring their goods to customers in various parts of the country quickly and
efficiently made more money. Because of mountains there is a scope of hampering the trade
between countries as they block access of one area from another. On the other hand, as desserts
are difficult to cross and are sparsely populated it has impact on international business.
Moreover, depends on the body of water and whether the trader has access to craft that can
navigate the body of water international business takes place. To overcome these issues: in
Northern Africa, the first migration began. The area was becoming overcrowded, and to support
themselves, hunter/gatherer communities required vast areas of land. Thus, in the process, they
traveled north to present-day Europe, and east to Asia, forming trade routes that were long paths
from one position to another where goods and services were traded. People also crossed the land
bridge that once made the Bering Strait passable on foot. Also, water was used to promote trade.
Some of these bodies of water became popular because they were able to provide a fast means of
transport for merchants so that they could sell their goods to a large customer population.