IMF INTRO, FACTS & HISTORY

To promote global economic growth and financial stability, the International Monetary Fund
is based in Washington, D.C. The IMF was established in the year 1945 and is an
organization of 189 countries. It is governed and accountable to the member countries that
contribute to its near-global membership. It is an autonomous organization affiliated to
U.N.O. The IMF has a fundamental mission to ensure the stability of the International
Monetary System.

The IMF was originally established with 30 member countries which later grew to 190 in
1987.

The headquarters of the IMF is located in the country having the highest capital quota of the
Fund.

In the year 1944, the representatives of 44 nations met to figure out a plan for the economic
order after World War II.
The aim was to prevent the repetition of destructive policies that could lead to other conflicts
or issues.

Therefore, the International Monetary Fund was created. It has played a crucial role in
maintaining economic and financial stability globally.

OBJECTIVES
The main objectives of IMF, as noted in the Articles of Agreement, are as follows:
(i)International Monetary Co-Operation:
The most important objective of the Fund is to establish international monetary co-operation
amongst the various member countries through a permanent institution that provides the
machinery for consultation and collaborations in various international monetary problems and
issues.

(ii) Ensure Exchange Stability:

Another important objective of the Fund is to ensure stability in the foreign exchange rates by
maintaining orderly exchange arrangement among members and also to rule out unnecessary
competitive exchange depreciations.
(iii) Balanced Growth of Trade:
IMF has also another important objective to promote international trade so as to achieve its
required expansion and balanced growth. This would ensure development of production
resources and thereby promote and maintain high levels of income and employment among
all its member countries.
(iv) Eliminate Exchange Control:
Another important objective of the Fund is to eliminate or relax exchange controls imposed
by almost each and every country before Second World War as a device to deliberately fix
the exchange rate at a particular level. Such elimination of exchange controls was made so as
to give encouragement to the flow of international trade.

(v) Multilateral Trade and Payments:

To establish a multilateral trade and payment system in respect to current transactions
between members in place of the old system of bilateral trade agreements was another
important objective of IMF.

(vi) Balanced Growth:

Another objective of IMF is to help the member countries, especially the backward countries,
to attain balanced economic growth by exchange the level of employment.

(vii) Correction of BOP Maladjustments:

IMF also helps the member countries in eliminating or reducing the disequilibrium or
maladjustments in balance of payments. Accordingly, it gives confidence to members by
selling or lending Fund’s foreign currency resources to the member nations.

(viii) Promote Investment of Capital:

Finally, the IMF also promotes the flow of capital from richer to poorer or backward
countries so as to help the backward countries to develop their own economic resources for
attaining higher standard of living for its people, in general.

FUNCTIONS
The IMF performs a wide array of functions. The major functions of IMF which are as
follows:-

Attain stability in exchange rates

The IMF functions to maintain stability in exchange rates and discouraging fluctuations in the
rates of exchange.

It is one of the primary functions of the IMF. It makes several arrangements to enforce and
maintain the same.

Eradicate the disequilibrium in Balance of Payment

The fund works to help the member countries in eradicating or minimizing the balance of
payment disequilibrium over a short period or long period by selling or lending foreign
currencies to its members.

Maintain the credit facilities

The IMF maintains various borrowing and credit facilities to help the member countries in
correcting disequilibrium in the balance of payments.

There are several credit facilities such as basic credit facility, compensatory financing
facility, extended fund facility, and more. The fund can charge interest on the credits as well.

Maintain currency demand and supply

One important function of the IMF is to maintain the balance between demand and supply of
currencies.

The fund, as required, can declare a currency as a scare one in case of high demand and can
increase its supply by borrowing from the concerned country or purchasing the currency in
exchange for gold.

Maintaining liquidity of resources

The next important function of the IMF is to maintain the liquidity of its resources. The
member countries can borrow from the IMF by surrendering their currencies in exchange.

Monitoring the monetary and fiscal policies

The IMF has a function of monitoring the fiscal and monetary policies of its member nations.

This is done to determine the impact of the policies on the economy and other nations as well.
Also, it is used for various other analysis purposes as well.

Serve as the bank of Central Banks

The IMF is known as the bank of the Central banks of the member countries. It collects the
resources of the Central banks similar to the country’s central bank.

Impart training
The IMF provides training to the representatives of the member nations and staff. The
training which the IMF provides is to the senior officers of the finance departments and
central banks of the countries.

DIFFERENCE BETWEEN WORLD BANK AND IMF

Basis of
The International Monetary Fund The World Bank
Comparison

It is an international organization It is a global organization

Meaning that maintains the global monetary established to advise and finance
system. the emerging and developing
 nations to make them
economically developed.

The World bank consists of five

The IMF is a single organization
organisations. The two major
having four credit lines as follows:
institutions are as follows: The
Organizational Board of DirectorsInternational
International Bank for
Structure Monetary and Financial
Reconstruction and Development
CommitteeExecutive
(IBRD)The International
BoardManaging Director
Development Association (IDA)

The IMF offers technical and The World Bank operates to

Operations advisory assistance to its members facilitate lending to its member
for developing the nations. nations.

To deal with matters that relate to To decrease or eradicate poverty

Objectives macroeconomics and financial levels and to promote economic
sector development