File Name: imf functions and objectives .zip
Alongside, know the structure, members, and achievements of IMF. This write-up aims to provide you with detailed information on the International Monetary Fund and the World Bank. We have put together the difference between the International Monetary Fund and the World Bank to develop a better understanding of the topic.
The IMF is an independent international organization. It is a cooperative of member countries, whose objective is to promote world economic stability and growth. In return, the IMF provides its members with macroeconomic policy advice, financing in times of balance of payments need, and technical assistance and training to improve national economic management.
Members pay up to 25 percent of their quota in the form of reserve assets and the remainder in their own currency. A member borrows from the IMF by purchasing reserve assets using its own currency, and repays the IMF by repurchasing its own currency using reserve assets. The total quota or capital subscription of all members is currently SDR Other Functions of Quotas. How Quotas Are Determined.
The Board of Governors determines the aggregate quota and the distribution of this aggregate among the individual member countries. Quota reviews have focused on the role and size of the IMF; the adequacy of IMF resources and the need for a possible quota increase; the distribution of quotas, including possible changes to quota formulas; and governance and representation.
The IMF may also undertake ad hoc quota adjustments at the request of individual members, both within and outside the context of a general review, although significant adjustments in quota shares have tended to take place in the context of general quota increases. The twelfth general review of quotas was concluded in January with no change in quotas.
An 85 percent majority of the total voting power of the Board of Governors is required for any change of quotas. Quota Formulas. Quota formulas exist to calculate the quotas of member countries. Five quota formulas are currently used for this purpose, incorporating variables that measure the economic size, external position, openness to trade, and variability of export earnings of member countries.
In practice, the IMF has tended to distribute the bulk of quota increases as a uniform percentage of existing quotas, with the result that actual quotas of individual members differ significantly from the calculated quotas.
The formulas are currently being reviewed with a view to simplifying and updating them. This mandate gives the IMF its unique character as an international monetary institution, with broad oversight responsibilities for the orderly functioning and development of the international monetary and financial system. The IMF pursues the various facets of its mandate in a number of ways.
These are summarized below, and described more detail in later chapters. In becoming members of the IMF, countries agree to pursue economic policies that are consistent with the objectives of the IMF. The Articles of Agreement enable the IMF to lend to member countries that have a balance of payments need to provide temporary respite and enable countries to put in place orderly corrective measures and avoid a disorderly adjustment of the external imbalance.
Such lending is usually undertaken in the context of an economic adjustment program implemented by the borrowing country to correct the balance of payments difficulties, which also safeguards IMF resources.
In addition to providing direct financing to its member countries, the IMF plays an important catalytic role in helping member countries to mobilize external financing for their balance of payments needs.
The IMF is the central institution in the international monetary system. It serves as a forum for consultation and collaboration by members on international monetary and financial matters, and works with other multilateral institutions to devise international rules that would facilitate the prevention and orderly resolution of international economic problems.
These allocated SDRs are part of the net international reserves of members and can be exchanged for convertible currencies. They are not a claim on the IMF.
These activities are particularly important in developing countries, where resources are scarce and institutions often weak. Information is disseminated through its numerous economic reports and research studies on member countries, as well as specialized statistical publications. The IMF also conducts research in areas relevant to its mandate and operations, mainly to improve its economic analysis and its advice to member countries.
The results of this research are disseminated through books, IMF and academic journals and working papers, occasional papers, and the internet. Without new focus and carefully chosen priorities, the institution risked being pulled in too many directions and losing its relevance to large parts of the membership.
A number of initiatives derived from the MTS have already been put in place or are near-completion. These include the ad-hoc changes in the quotas of four member countries or initiatives such as the streamlining of consultations.
The origin of the IMF lies in the experience of countries during the inter-war period, including the Great Depression. In the s and s, many countries attempted to maintain domestic income in the face of shrinking markets through competitive devaluation of their currencies and resort to exchange and trade restrictions.
Such measures could achieve their objectives only by aggravating the difficulties of trading partners who, in self-defense, were led to adopt similar policies, leading to a destructive vicious cycle.
There was growing recognition of the largely self-defeating nature of these policies at the country level and the increasing global welfare losses, resulting in a widening acceptance of the need for a globally agreed code of conduct in international trade and financial matters. It was in this context that representatives of 45 countries reached an agreement in Bretton Woods, New Hampshire during July , , on the constitution and functions of an international institution to supervise and promote an open and stable international monetary system.
To continue to fulfill its core mandate as set out in the Articles of Agreement, the IMF has continuously adapted to meet new challenges in the evolving world economy. Its present governance and organizational structures are described in more detail in Chapter Since , membership has expanded steadily to include nearly all countries in the world today.
Eligibility for membership is based on three basic requirements: the applicant must be a country; it must be in control of its foreign affairs; and it must be willing and able to fulfill the obligations of membership. Article XXVI also makes provision for the compulsory withdrawal of a member that fails to fulfill its obligations under the Articles of Agreement, and sets out a procedure for compulsory withdrawal.
However, compulsory withdrawal is a last resort and the member is given ample opportunities to correct its policies and fulfill its obligations to the IMF. The size of the IMF is often also viewed in terms of the total quota of all its members. In nominal SDR terms, the total quota has expanded significantly over time, reflecting the growth in membership, in the size of the world economy, and in the financing needs of the membership Box 1 and Appendix. However, the total quota has been declining relative to world GDP.
As the membership has expanded, so has the size and diversity of the staff of the IMF. At end there were about 2, staff members, from more than two-thirds of the member countries, and a much more elaborate organizational structure, as described in Chapter The IMF staff comprises mainly economists, but also includes financial specialists, accountants, statisticians, lawyers, linguists, writers, editors, and support personnel. In addition, the IMF has resident representative offices in many member countries and a number of regional technical assistance and training centers.
The Articles of Agreement state that the IMF staff should be of the highest caliber in terms of standards of efficiency and technical competence, while the appointments should also pay due regard to the importance of recruiting personnel on as wide a geographical basis as possible. Staff are immune from legal process with respect to acts performed by them in their official capacity, except when the IMF waives this immunity. A substantive account of the historical evolution of the IMF in response to the changing global economic needs can be found in some of the sources cited in endnote 1.
User Account. IMF eLibrary. Advanced search Help. Kitts and Nevis St. Lucia St. Public Health Health Policy. Print Citation Alert off. Get Code Buy. The IMF is an independent international organization, and is a cooperative of member countries, whose objective is to promote world economic stability and growth.
The member countries are the shareholders of the cooperative, providing the capital of the IMF through quota subscriptions. In return, the IMF provides its members with macroeconomic policy advice, financing in times of balance-of-payments need, and technical assistance and training to improve national economic management. Overview of the IMF Chapter 2. Special Drawing Rights Chapter 5. Strengthening the International Financial System Chapter 8. Governance and Decision-Making Chapter Show Summary Details.
Mandate The IMF is an independent international organization. Lending Capacity. Quota subscriptions by members provide by far the bulk of the resources reserve assets available to the IMF to finance its lending operations. Therefore, quotas to a large extent determine the lending capacity of the IMF. Voting Power. Quotas largely determine the distribution of the voting power of the IMF and, therefore, the relative influence of individual members in decision-making at the IMF.
Access Limits. These access limits vary according to the type of borrowing arrangement between the member and the IMF. For example, under the credit tranches and the Extended Fund Facility, borrowing is subject to an annual limit of percent of quota and a cumulative limit of percent of quota. SDR Allocations. Functions The IMF pursues the various facets of its mandate in a number of ways. Financing Temporary Balance of Payments Needs The Articles of Agreement enable the IMF to lend to member countries that have a balance of payments need to provide temporary respite and enable countries to put in place orderly corrective measures and avoid a disorderly adjustment of the external imbalance.
The proposals put forward in the MTS cover the following issues: New directions in surveillance. The difficulties in tackling unprecedented global imbalances, and the challenges facing individual countries, underscore the need for stronger exercise of surveillance by the IMF.
At the global level, the MTS calls for efforts to identify—and promote effective responses to—risks to economic stability, including from payments imbalances, currency misalignments, and financial market disturbances. At the country level, the MTS calls for efforts to choosing focus and effectiveness over comprehensiveness, with deeper analysis of financial systems, a greater multilateral perspective to surveillance, and more regional context and outreach.
In the many countries that have already emerged to become major global players, the MTS calls for efforts to augment candid and focused macroeconomic analysis with enhanced surveillance over financial and capital markets.
At the same time, the MTS calls for efforts to improve crisis prevention and response. More effective engagement in low-income countries. The MTS calls for efforts to marshal the expected rise in aid flows, including from debt relief, to achieve higher growth and the Millennium Development Goals. Helping countries do so requires a deeper but more focused engagement by the IMF, including new understandings with the World Bank and other agencies on the division of labor.
Quota and voice reform is central to the legitimacy and effectiveness of the IMF. During the Singapore Annual Meetings, a two-year package was initiated with, as a first step, an ad-hoc increase in quotas for four countries. The MTS calls for efforts to address other aspects of governance, including transparent selection of management and better definition of the role of the Board.
Capacity building. The MTS calls for targeted efforts in this area to help members implement reforms.
The International Monetary Fund IMF as one of the leading global financial organisations that deals with the issues of securing financial stability, facilitation of international trade, promoting economic growth in a sustainable manner, and poverty reduction in a global scale. There are mixed opinions about the role and performance of organisation in dealing with these issues. Some people perceive IMF to be an important organisation making valuable contribution to macroeconomic stability, whereas others blame the organisation for financial problems within specific countries and areas. Nevertheless, nowadays IMF has to deal with a set of complex challenges in local and global scales. This paper attempts to critically evaluate a set of issues directly related to IMF performance. The paper has identified major challenges faced by IMF to include its governance structure, increasing level of politicisation, leadership challenges, performance evaluation difficulties, and dealing with social instability. Moreover, necessary changes have been proposed for IMF that should assist in dealing with the challenges the organisation is facing.
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