IMF (objectives and policies)

Topics: International Monetary Fund, World Bank, Economics Pages: 8 (2641 words) Published: September 19, 2014
IMF –OBJECTIVES AND POLICIES

Introduction

The International Monetary Fund—also known as the “IMF” or the “Fund”—was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, U.S. in July 1944. The 45 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s.

Some Facts on IMF

Current membership: 185 countries

Staff: approximately 2,716 from 165 countries

Total Quotas: Total quotas at end-July 2009 were SDR 217.4 billion (about US$ 341 billion)

Technical Assistance provided: 90% to middle and low income countries

IMF Objectives

To promote international monetary co-operation through a permanent institution which provide the machinery for consultation and collaboration on international monetary problems. To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy. To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation To assist in the establishment of a multilateral system of payments in respect of current transactions which hamper the growth of world trade. To give confidence to members by making the general resources of the fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustment in their balances of payments without resorting to measures destructive of national or international prosperity. In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

IMF Policies

The IMF focuses mainly on a country’s macroeconomic policies, i.e: Policies relating to government budget
Policies related to the management of money and credit, and
The exchange rate and financial sector policies, including the regulation and supervision of banks and other financial institutions

IMF Activities

The IMF performs three main activities:
monitoring national, global, and regional economic and financial developments and advising member countries on their economic policies ("surveillance"); lending members hard currencies to support policy programs designed to correct balance of payments problems; and offering technical assistance in its areas of expertise, as well as training for government and central bank officials.

IMF Responsibilities

IMF Surveillance:
A core responsibility of the IMF is to encourage a dialogue among its member countries on the national and international consequences of their economic and financial policies, to promote external stability. This process of monitoring and consultation, normally referred to as "surveillance", has evolved rapidly as the world economy has changed. IMF surveillance has also become increasingly open and transparent in recent years Exchange rate,monetary,and fiscal policies.

Financial sector issues.
Assessment of risks and vulnerabilities.
Institutinal and structural issues

IMF Lending

A core responsibility of the IMF is to provide loans to countries experiencing balance of payments problems. This financial assistance enables countries to rebuild their international reserves; stabilize their currencies; continue paying for imports; and restore conditions for strong economic growth. Unlike development banks, the IMF does not lend for specific projects.

The Process of IMF lending

An IMF loan is usually provided under an"arrangement," which stipulates the specific policies and measures a country has agreed to implement to resolve its balance of payments problem. The economic program underlying an...
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