International Monetary Fund (IMF) : Functions and Facilities

 International Monetary Fund (IMF)

What is IMF (International Monetary Fund)?

Answer- 

The IMF is an international organization. The IMF was established to promote the international monetary co-operation, exchange stability, an orderly exchange arrangements to foster economic growth and high level of employment and to provide temporary financial assistance to countries to help ease balance of payment adjustments.

International Monetary Fund (IMF) : Functions and Facilities

Since IMF was established its purposes have remained unchanged but its operations which involve surveillance, financial assistance and technical assistance have developed to meet the changing needs of its member countries in an evolving world economy.

IMF was established on December 27, 1945 in Washington DC on the recommendations of Bretton Wood Conference, but it started its operation on March 1, in 1947.

What are the Functions of IMF?

Answer –   1) It provides short term credit to its member countries to meet international payments.

                   2) It arranges for conservation of currencies subject to certain limits, the currency of any member country can be converted into the currency of any other member country, thus can be multilateral payments.

                  3) It attempts to secure co-operative stabilization of exchange rates, that is, secure stability of rates of exchange through the co-operation of the members.

IMF Facilities:-

There are some other important facilities under which IMF gives loans to its member countries. These facilities are as follows –

    a)      Poverty reduction and growth facility.

b)      Stand-by arrangements.

c)       Extended Fund facility.

d)      Supplemental reserve facility.

e)      Contingent Credit lines.

f)       Compensatory financing facility.

g)      Emergency assistance.

The main source of IMF resources is the quotas, that is, allotted to its member countries. Till 1971, all the amounts of quotas and assistance provided were denominated in US dollar, but since December 1971, all the quotas and transactions of IMF are expressed in SDR (Special Drawing Rights), which is also known as Paper Gold. 

In 1971, 1 SDR was assumed equivalent to subsequent decline in dollar value. 1 SDR become equivalent to 1.585 US dollar by the end of April,1995.