Important Roles of International Monetary Fund

International Monetary Fund (IMF) played a significant role in stabilizing the exchange rates thereby facilitating international payment adjustments. Economists across the world have commended its role in enforcing monetary discipline among its members.

role of imfIMF brings Stability in Exchange rate:

The IMF has laid down a clear guidance of exchange rate policies. Its policies prevent the member countries from making competitive devaluation to boost up exports. As a result of all these, the system of exchange under the IMF is stable.

IMF role in development of international trade:

The IMF has been instrumental to the growth of international trade. It acts as the reservoir of the currencies of all the member countries. A borrowing country can borrow the currency of another country out of this reservoir. It extends loans in foreign exchange to the member countries for financing the current transactions. It also provides technical advice on monetary and fiscal matters. It conducts research studies and publishes them. This multilateral assistance helps members in solving their problems in trade, thereby promoting international trade.

IMF is strict on multiple exchange rates:

The IMF does not permit the member countries to adopt multiple exchange rates leading to restrictive practices. The system of exchange rate combines the element of stability with flexibility. It maintains stability in exchange rates.

IMF’s Elaborate lending operations:

The main operation of the fund is lending to member countries. It has introduced a variety of loan facilities to its members. Initially, the lending operations were confined only for solving the problems of . But now they have been remarkably extended. Member countries can have regular facilities, concessional facilities and special facilities. Credit Tranches and extended fund facility are some of the regular facilities. Structural adjustment facility and enhanced structural adjustment facility are some concessional schemes offered to the member countries. The special facilities offered by the IMF fund include compensatory and contingency financing facility, systematic transformation facility and contingency credit line.

IMF role in Currency convertibility:

With the charges introduced after 1973 in the international monetary system, a member can peg its currency to

  • either a single major currency or
  • a basket of currencies or
  • allow it to float independently.

A currency is said to be floating when its is left free to find its own parity in the international market. The IMF is the catalyst in the convertibility of currencies. It endeavors to achieve full global convertibility of currencies in the next decade. All developing countries will achieve full convertibility.

IMF role in Consultation and guidance:

The IMF provides the necessary machinery for consultation and collaboration on international monetary problems. Monetary, fiscal and financial problems and also matters relating to exchange and trade affecting international payments are clearly studied. It deputes experts to member countries to deal with the balance of payments problems. It also conducts short term training courses on fiscal, monetary and balance of payments for personnel from member nations.

IMF is a Boon to developing countries:

The IMF is a boon to developing countries. Less developed countries get enormous assistance from IMF like

  • Financial assistance to get rid of balance of payment deficits
  • concessional financial assistance for promotion of exports
  • suggestions for overcoming constraints in the development process
  • Assistance in the formulation of development oriented monetary, fiscal, exchange and trade policies
  • extension of central banking advisory services to less developed countries towards the improvement of functioning of their central banks
  • institutional training for the personnel in member countries; and
  • Special Drawing Rights (SDRs) to resolve the problem of international liquidity.
Tags:

Leave a Reply




Recent Posts


Related pages


what are the types of businesseffects of labour turnovermachine hour rate method of depreciationwhat is the meaning of performaexamples of capital expensesdefine capitalism in economicsdefinition of autocracysubscribers to the memorandum of associationliquidity current ratio formulawhat was the purpose of gattadvantage of fdiidbi establishmentformula of quick ratiopluralistic nature of indian societyrelationship between a banker and customersebi history pdfwhat is dishonour of billhow to calculate nominal wagedisadvantages of being listed on the stock exchangelong term debt to capital ratioadvantages and disadvantages of stratified samplinginductive method vs deductive methodaccounting tickmarksstock jobbersdefine depositoryfactors influencing ethical behaviorultra vireprivate distributor brand definitiondefine piercing the corporate veiladvantages and disadvantages of skimming pricinginvestment fluctuation reservetqm benefitsgeneralized system of preferenceswhat is payback methodraw material inventory turnsarguments for and against nationalisationreturn on capital employed ratio interpretationpayback period formulapromotor definitionwhat is formal organization and informal organization1 rupee is equal to how many dollarsunfavorable balance of paymentsultra vires definitiondefine commercial billsadvantages of payback periodadvantages of agglomerationadvantages for a franchisorpayback period methodeoq in cost accountinghorizontal filing cabinetswhat is jettison in marine insurancecapital employed turnover ratio formulaconvenience sampling definition statisticsmarketing skimmingselling shares advantages and disadvantagesadvantages and disadvantages of trade unions to employersedp auditingkeynes investment theoryprecis writtingsole trading concern definitionwhy tqm is importantinformal report definitionsidbiwho is merchant bankersebi stock exchangedeductive inductive approachwhat is minimum reserve system of rbiimportance of corrective maintenanceduties of promoters of a companycapital market reforms in indiaadvantages and disadvantages of office automation systemnbfc bankreceivables turnover ratio example