Question

WHAT ARE THE MAJOR OBJECTIVES OF THE INTERNATIONAL MONETARY FUND

Answer 1

The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership.

The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.

The IMF’s fundamental mission is to ensure the stability of the international monetary 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.

IMF Resources

Most resources for IMF loans are provided by member countries, primarily through their payment of quotas.

Quotas

Quota subscriptions are a central component of the IMF’s financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy.

Special Drawing Rights (SDR)

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.

Gold

Gold remains an important asset in the reserve holdings of several countries, and the IMF is still one of the world’s largest official holders of gold.

Borrowing Arrangements

While quota subscriptions of member countries are the IMF's main source of financing, the Fund can supplement its quota resources through borrowing if it believes that they might fall short of members' needs.

Economic Surveillance

The IMF oversees the international monetary system and monitors the economic and financial policies of its 189 member countries. As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments.

Lending

The IMF provides loans to member countries experiencing actual or potential balance of payments problems to help them rebuild their international reserves, stabilize their currencies, continue paying for imports, and restore conditions for strong economic growth, while correcting underlying problems.

Capacity Development

The IMF works with governments around the world to modernize their economic policies and institutions, and train their people. This helps countries strengthen their economy, improve growth and create jobs.

DETAILED OBJECTIVES

1. International Monetary Co-operation:

The foremost objective of the Fund was to establish monetary co-operation amongst the various member countries. IMF provides the machinery for consultation and collaboration on international monetary problems. During the Second World War, IMF had played a vital role to promote monetary co-operation amongst the different countries of the World.

2. To Promote Exchange Stability:

Before the Second World War, great instability was prevailing in the foreign exchange rates of different countries which had adversely affected the international trade. Thus, IMF has the objective to promote exchange stability and to avoid the bad effects of depreciation on exchange rates.

3. To Eliminate Exchange Control:

Another significant objective of IMF is to eliminate the control over foreign exchange. During war period, almost every country has fixed the exchange rate at a particular level. This has adversely affected the international trade. Hence, it becomes inevitable to remove the control over exchange rate by boosting international trade.

4. Establishment of Multilateral Trade and Payment:

IMF aimed at establishing and multilateral trade and payment system in place of old bilateral trade by the elimination of exchange restrictions which hampers the growth of smooth trade relations in the world trade.

5. Growth of International Trade

IMF is useful to promote international trade by removing all obstacles and bottlenecks which had created unnecessarily restrictions. In this way, a significant role has been assigned to it so as to accelerate the growth of international trade by maintaining equilibrium in the balance of payment.

6. Balanced Economic Growth:

IMF helps the member countries to achieve the balanced economic growth. It facilitates the expansion of balanced growth by the promotion and maintenance of high level of employment as the primary objective of economic policy. For this purpose, IMF helps to exploit natural resources and to put into productive channel.

7. To remove the Disequilibrium in the Balance of Payment:

IMF helps the member nations to eliminate the disequilibrium in the balance of payment by selling or lending foreign currencies to the member countries. With its financial assistance and guidance, International Monetary Fund helps to lessen the degree of disequilibrium in the balance of payment of its member nations.

8. Expansion of Capital Investment in Under-develop Countries:

IMF provides assistance to import capital from the rich countries to the poor countries so that the poor or underdeveloped country get a chance to expand their capital investment on productive activities or social overheads which in turn helps to raise standard of living and to achieve prosperity among member countries.

9. Generating of Higher Employment and Income:

IMF helps to expand the trade with the significant measures of multilateral trade and balanced economic growth. This in turn generate employment and income.

10. To Develop Confidence:

Another objective was assigned to the IMF to create confidence among member countries by coming up to their rescue at the time of any crisis by providing temporary monetary help. This will provide them an opportunity to correct disequilibrium in the balance of payments.

11. Help during Emergency:

The fund will provide short-term monetary help to its member countries during any type of emergency.

12. Shorten the Duration and Lessen the Degree:

In accordance with the above, it shortens the duration and lessen the degree of disequilibrium in the international balance of payment of member countries.