The full form of IMF is the International Monetary Fund. It is an international organization established in 1945 to promote global economic growth, monetary cooperation, financial stability, international trade, and reduce poverty worldwide.
More than eighty countries are members of the IMF. The members include all the BRICS countries and other nations from Asia, the Americas, and Europe. Lithuania declared its independence in 1918. After nearly three decades of communism, it became a member of the European Union in 2004. The Baltic country was the first to join the eurozone when the common currency was introduced in January 2008.
How Does the IMF Help Countries?
The IMF has a role in the global economy, as it helps nations decide which economic policies to follow. The IMF helps certain countries get loans so they can finance their financial projects. Some of the IMF funds projects include increasing manufacturing in a nation’s economy or increasing exports. Other projects help governments in danger of a currency crisis or the current economy of a nation. These projects include providing countries with loans to help them deal with economic issues. In cases where the government has huge debt, the IMF will either help nations negotiate payment or set up a bailout package for the debt. How Does the IMF Run Its Monetary System? The IMF has created its currency called the Dollar.
The History of the IMF
Following the Second World War, nations such as UK, France, Japan, and the US sought a haven from the war. They pooled their collective military strength to form a global organization and created the International Monetary Fund in 1945. The first Board of Governors of the IMF had 15 members, and each of the nations’ delegates appointed them. At that time, there were eight members. It was the beginning of an ever-growing international institution, which provided the essential needed security during World War II. In 1951, as the IMF grew, the United States withdrew from the board because it sought a greater role in setting the direction and priorities of the international monetary system. Until 1965, the IMF was governed by the member nations.
Primary Objectives of the IMF
The primary objectives of the IMF are to Increase the wealth of the member countries. Improve the standard of living of member countries. Improve financial stability in member countries. Improve the competitiveness of the member countries. Improve governance in member countries. Improve international monetary cooperation. Development of countries. The Fund’s role in developing and maintaining macroeconomic stability “The IMF takes macroeconomic policy advice from member countries through a system of national consultations. It also ensures that governments act in a fashion consistent with economic principles and monitor and, if necessary, correct member countries’ policies, including those considered growths- and employment-inhibiting.
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Functions of IMF
Some of the major functions of IMF are as follows:
- Exchange Stability: It may discourage fluctuations in the rate of exchange to maintain exchange stability.
- BOP Disequilibrium: It helps member countries minimize the disequilibrium of the balance of payments by selling or lending foreign currencies to the members. It may advise its members to change the par value of its coins if there are fundamental changes in its members’ economies.
- Determination of Par Value: It enforces the system of determination of par value of the currencies of the member countries. As per the guidelines of the IMF, the member countries must declare the par value of their currencies in terms of gold and US dollars.
- Stabilize Economies: It gives suggestions to member countries related to economic and monetary matters to help them stabilize their economies.
- Balance the Demand and Supply of Currencies: It may declare a currency as scarce currency in great demand and can increase its supply by borrowing it from the country concerned or by purchasing it in exchange for gold.
- Maintain Liquidity: It allows members to borrow from the IMF in exchange for their currencies. The borrowing countries are required to repurchase their currencies by repaying loans in convertible currencies.
- Technical Assistance: It provides technical assistance to the member countries. It provides the services of its specialists and experts or can send outside experts to provide technical support to member countries.
IMF and Development
The IMF’s primary goal is to design a stable international financial system, a stable system of currency exchange rates, and international payments so that countries can make transactions with one another. In three different ways, it does this:
- Keeps a record of the global markets and member countries’ economies
- Lending to countries facing problems with the balance of payments
- Providing representatives with practical support
- Lending to countries that face issues with the balance of trade
- Providing members with practical support
- The mandate was revised in 2012 to cover all macroeconomic & financial sector issues with global sustainability.
Internationally the finance ministry is not leading in economic development. The government must promote exports by giving exporters a subsidy. Our national exports are suffering due to the huge amount of taxes.
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A Quick FAQ to IMF
What is the full form of IMF?
IMF full form stands for International Monetary Fund.
Who runs IMF?
The Executive Board of the International Monetary Fund (IMF) today selected Kristalina Georgieva to serve as IMF Managing Director and Chair of the Executive Board for a five-year term starting on October 1, 2019.
Who is IMF chairman now?
The current Managing Director (MD) and Chairwoman of the IMF is Bulgarian economist Kristalina Georgieva, who has held the post since October 1, 2019. Gita Gopinath was appointed as Chief Economist of IMF from 1 October 2018.
What is the function of IMF?
The International Monetary Fund aims to reducing global poverty, encouraging international trade, and promoting financial stability and economic growth. The IMF has three main functions: overseeing economic development, lending, and capacity development.
Is India a member of the IMF?
India is a founder member of the IMF. India has not taken any financial assistance from the IMF since 1993.
Who are the members of the IMF?
The International Monetary Fund (IMF) is an organization of 190 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.
Where is the headquarters of IMF?
IMF headquarters has two buildings: HQ1 visitors’ entrance is at 720 19th Street, NW and HQ2 visitors’ entrance is at the corner of 19th St and Pennsylvania Avenue. For more information about the Washington, DC metro, see Washington Metropolitan Area Transit Authority.
What is the difference between World Bank and IMF?
The World Bank Group works with developing countries to reduce poverty and increase shared prosperity, while the International Monetary Fund serves to stabilize the international monetary system and acts as a monitor of the world’s currencies.