International Monetary Fund (IMF)

                                         International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an organization of 187 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. The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty

Background of IMF:

The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression. The IMF came into formal existence in December 1945, when its first 29 member countries signed its Articles of Agreement. It began operations on March 1, 1947. Later that year, France became the first country to borrow from the IMF. The IMF’s membership began to expand in the late 1950s and during the 1960s as many African countries became independent and applied for membership. But the Cold War limited the Fund’s membership, with most countries in the Soviet sphere of influence not joining.

Governance structure of (IMF)

The governing body or the managing body of the IMF consists of 3 vital parts, they are , Board of Governor ,Ministerial committees & Executive board.

Board of Governors

The Board of Governors is the highest decision-making body of the IMF. It consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the head of the central bank. The Board of Governors also elects or appoints executive directors and is the ultimate arbiter on issues related to the interpretation of the IMF’s Articles of Agreement.

Ministerial Committees

The IMF Board of Governors is advised by two ministerial committees, the* International Monetary and Financial Committee (IMFC) and the *Development Committee. The IMFC has 24 members, drawn from the pool of 187 governors. The IMFC meets twice a year, during the Spring and Annual Meetings. The Committee discusses matters of common concern affecting the global economy and also advises the IMF on the direction its work.
The Development Committee is a joint committee, tasked with advising the Boards of Governors of the IMF and the World Bank on issues related to economic development in emerging and developing countries. The committee has 24 members (usually ministers of finance or development).
The Executive Board
The IMF’s 24-member Executive Board takes care of the daily business of the IMF. Together, these 24 board members represent all 187 countries. Large economies, such as the United States and China, have their own seat at the table but most countries are grouped in constituencies representing 4 or more countries. The largest constituency includes 24 countries. The board normally makes decisions based on consensus but sometimes formal votes are taken.

Goals and Objectives of (IMF):

• provide a forum for cooperation on international monetary problems
• facilitate the growth of international trade, thus promoting job creation, economic growth, and poverty reduction;
• promote exchange rate stability and an open system of international payments; and
• Lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.
• Stabilizing the foreign exchange rate.
• Maintain the equilibrium of income and expenditure among the member countries.

Functions of (IMF):

Some vital functions of the IMF are mentioned here,

1. Stepping up crisis lending: The IMF responded quickly to the global economic crisis , with lending commitments reaching a record level of more than US$250 billion in 2010. This figure includes a sharp increase in concessional lending (that’s to say, subsidized lending at rates below those being charged by the market) to the world’s poorest nations.
2. Greater lending flexibility: The IMF has overhauled its lending framework to make it better suited to countries’ individual needs. It is also working with other regional institutions to create a broader financial safety net, which could help prevent new crises.
3. Providing analysis and advice: The IMF’s monitoring, forecasts, and policy advice, informed by a global perspective and by experience from previous crises, have been in high demand and have been used by the G-20, as noted in Section 4.
4. Drawing lessons from the crisis: The IMF is contributing to the ongoing effort to draw lessons from the crisis for policy, regulation, and reform of the global financial architecture.
5. Historic reform of governance: The IMF’s member countries also agreed to a significant increase in the voice of dynamic emerging and developing economies in the decision making of the institution, while preserving the voice of the low-income members.
6. Lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.
7. Also try to increase per capita income and employment opportunity of the member countries.
*policy advice to governments and central banks based on analysis of economic trends and cross-country experiences;
*Research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets;
*Loans to help countries overcome economic difficulties;
*Concessional loans to help fight poverty in developing countries; and
*Technical assistance and training to help countries improve the management of their economies.

Income source of (IMF):

IMF procures its financial support from several sources:
1. Quota: The IMF’s resources come mainly from the money that countries pay as their capital subscription when they become members.
2. SDR: The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.
3. Gold: The IMF holds a relatively large amount of gold among its assets, not only for reasons of financial soundness, but also to meet unforeseen contingencies. The IMF holds 103.4 million ounces (3,217 metric tons) of gold.
4. Borrowing arrangement: If the IMF believes that its resources might fall short of members’ needs .For example, in the event of a major financial crisis, it can supplement its own resources by borrowing.
5. By Income model reform:

Role of IMF in world economy:

As the world economy became engulfed in the worst crisis since the Great Depression of the 1930s, the IMF mobilized on many fronts to support its member countries, increasing its lending, using its cross-country experience to advise on policy solutions, and introducing reforms to modernize its operations and become more responsive to member countries’ needs.
1. Stepping up crisis lending. The IMF responded quickly to the global economic crisis, with lending commitments reaching a record level of more than US$250 billion in 2010. This figure includes a sharp increase in concessional lending (that’s to say, subsidized lending at rates below those being charged by the market) to the world’s poorest nations.
2. Greater lending flexibility. The IMF has overhauled its lending framework to make it better suited to countries’ individual needs. It is also working with other regional institutions to create a broader financial safety net, which could help prevent new crises.
3. Providing analysis and advice. The IMF’s monitoring, forecasts, and policy advice, informed by a global perspective and by experience from previous crises, have been in high demand and have been used by the G-20, as noted in Section 4.
4. Drawing lessons from the crisis: The IMF is contributing to the ongoing effort to draw lessons from the crisis for policy, regulation, and reform of the global financial architecture.

5. Historic reform of governance: The IMF’s member countries also agreed to a significant increase in the voice of dynamic emerging and developing economies in the decision making of the institution, while preserving the voice of the low-income members.

6. Reinforcing multilateralism: The crisis highlighted the tremendous benefits from international cooperation. Without the cooperation spearheaded by the Group of Twenty industrialized and emerging market economies (G-20) the crisis could have been much worse. At their 2009 Pittsburgh Summit G-20 countries pledged to adopt policies that would ensure a lasting recovery and a brighter economic future, launching the “Framework for Strong, Sustainable, and Balanced Growth.”The backbone of this framework is a multilateral process.

7. Stepping up crisis lending: As part of its efforts to support countries during the global economic crisis, the IMF is beefing up its lending capacity. It has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries’ varying strengths and circumstances. More recently, further reforms have been approved that strengthen the IMF’s capacity to prevent crises. In particular:

• Doubling of lending access limits for member countries and streamlining procedures to reduce perceived stigma attached to borrowing from the Fund
• Introducing and refining a Flexible Credit Line (FCL) .

8.Strengthening the international monetary system :The current International Monetary System—the set of internationally agreed rules, conventions, and supporting institutions that facilitate international trade and cross-border investment, and the flow of capital among countries—has certainly delivered a lot. But it has a number of well-known weaknesses. IMF work for strengthening the in monetary system.

9. Supporting low-income countries: The IMF has upgraded its support for low-income countries, reflecting the changing nature of economic conditions in these countries and their increased vulnerabilities due to the effects of the global economic crisis. It has overhauled its lending instruments, especially to address more directly countries’ needs for short-term and emergency support.

10. Economic policy: IMF also has the role of monitoring and finalizing the economic policy of its member countries.

Role of IMF in the economy of Bangladesh

Bangladesh got the membership of IMF in 17august 1972.Although IMF don’t procure direct economic benefits to any country, it has an important role in our economic growth.
N.B😦 Mention above all +, considering marks)

1. IMF provide different training program for developing the human resource & economic growth. IMF institute was established in 1954.

2. Monitoring different economic policy: monitoring, evaluating & overhauling / scrutinizing the economic policy taken by the govt.

3. Providing technological assistance:

4. Role as a medium of business: Play a vital role in operating business with foreign countries.

5. Providing economical assistance:

6. Establishing the rule of Law: IMF ensures the rule of law by different institutional development in our country.

7. Reserving the value of currency:

8. Work as a auditor::

9. Infrastructural collaboration: By Policy Support Instrument (PSI) , IMF accomplish several functions:

*Reduce the influence of government on the market.
*Plays a vital role in public and social services. Such as , education ,water, health, power .
*Attributing VAT on every consumer.
*Creates opportunity for direct foreign business.

10. Lending Money: IMF provides financial support to Bangladesh.

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