International Monetary Fund (IMF)- Role & Functions
The IMF is a global organization that works to achieve sustainable growth and prosperity for all of its 191 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being.
India became member of IMF on December 27, 1945. India is the 6th largest quota holding member of IMF and currently holds 2.76% SDR, also holds 2.63% voting share. According to IMF, India is the world’s fastest growing major economy in 2022.
- The IMF was established in 1944 in the aftermath of the Great Depression of the 1930s. It was founded by 44 member countries that sought to build a framework for economic cooperation.
- The IMF is governed by and accountable to 191 countries that make up its near-global membership.
- The IMF is able to lend about $1 trillion to its member countries.
- Its Headquarter is in Washington DC.
Core Function of IMF
- Policy Advice: Monitors the economic and financial policies of member countries and provides policy advice, an activity known as surveillance. As part of this process, which also takes place at the global and regional levels, the IMF identifies potential risks and recommends appropriate policy adjustments to sustain economic growth and promote financial stability.
- Financial Assistance: Providing loans and concessional financial assistance to member countries experiencing actual or potential balance-of-payments problems is a core responsibility of the IMF. Unlike development banks, the IMF does not lend for specific projects. Instead, the IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth. It also provides precautionary financing to help prevent crises.
- Capacity Development: The IMF provides technical assistance and training known as capacity development. Capacity development accounts for around a third of the IMF’s annual spending. It is available to all members upon their request and is tailored to a country’s specific needs. It can help countries to improve tax collection and bolster public finances, to modernize their monetary and exchange rate policies, develop legal systems, or strengthen governance. The IMF provides technical assistance and training to help member countries to build effective economic institutions, increase economic stability and growth and meet their Sustainable Development Goals (SDGs).
IMF focuses on Major issues
- Trade: Open, stable, and transparent trade policies are key for economic growth and resilience and for addressing key global challenges, including climate change, food security, and underdevelopment.
- Fiscal Policy: Fiscal policy is the use of government spending and taxation to influence the economy. The IMF monitors and analyzes global fiscal trends and advises IMF member countries on fiscal issues directly.
- Sovereign Debt: The ability to carry debt varies widely among countries. Debt vulnerabilities have increased especially in low-income countries and some emerging market economies. The IMF’s analytical work helps identify sovereign debt risks and provides policy advice on how to address these risks at an early stage. Jointly with the World Bank, the IMF fosters debt transparency and supports countries in strengthening their capacity to report and manage their public debt.
What is FSAP?
The Financial Sector Assessment Program (FSAP), established in 1999, is a comprehensive and in-depth assessment of a country’s financial sector. FSAPs in advanced economies are conducted by the IMF with a focus on assessing the resilience of the financial sector, the quality of the regulatory and supervisory framework, and the capacity to manage and resolve financial crises.
In developing and emerging market economies, FSAPs are conducted jointly with the World Bank. These FSAPs also include a financial development assessment, which is the responsibility of the World Bank. Based on their findings, FSAPs produce recommendations of a micro- and macro-prudential nature and on developmental needs in developing and emerging market economies, tailored to country-specific circumstances.
The FSAP is a key instrument of the Fund’s surveillance and provides important inputs to bilateral surveillance in the context of Article IV consultation.
(Source: IMF)
Frequently Asked Question (FAQ)
How many member countries are there of IMF?
191.
IMF was established in year…….?
1944.
Where is H.Q of IMF?
Washington, DC.
What functions MIF perform?
It focuses on fostering global monetary cooperation, securing financial stability, facilitating and promoting international trade, employment and economic growth around the world.
What are SDRs?
The IMF issues an international reserve asset known as Special Drawing Rights, or SDRs, that can supplement the official reserves of member countries. Total global allocations are currently about SDR 204.2 billion, about $293 billion. IMF members can voluntarily exchange SDRs for currencies among themselves.