Question

Discuss the role of the International Monetary Fund (IMF) in the international trading system.

(7 marks. Word limit Maximum 450 words)

Answer 1

The Role of the International Monetary Fund (IMF) in the International Trading System:

1. The International Monetary Fund plays an indirect role in trade.The IMF's mandate includes facilitating the expansion and balanced growth of international trade, promoting exchange stability, and providing the opportunity for the orderly correction of countries' balance-of-payment problems.

2. The IMF's fundamental mission is to help ensure stability in the international system. It does so in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members.

3. Surveillance: The IMF oversees the international monetary system and monitors the financial and economic policies of its members. It keeps track of economic developments on a national, regional, and global basis, consulting regularly with member countries and providing them with macroeconomic and financial policy advice.

4. Technical Assistance: To assist mainly low- and middle-income countries in effectively managing their economies, the IMF provides practical guidance and training on how to upgrade institutions, and design appropriate macroeconomic, financial, and structural policies.

5. Lending: The IMF provides loans to countries that have trouble meeting their international payments and cannot otherwise find sufficient financing on affordable terms. This financial assistance is designed to help countries restore macroeconomic stability by rebuilding their international reserves, stabilizing their currencies, and paying for imports—all necessary conditions for relaunching growth. The IMF also provides concessional loans to low-income countries to help them develop their economies and reduce poverty.