What is the International Monetary Fund | अंतर्राष्ट्रीय मुद्रा कोष क्या हैं

Objectives of the IMF 

Its objectives are the following:

(a) Increase in monetary cooperation

It is to establish a multi-purpose payment system by encouraging international monetary cooperation among the countries of the world.

(b) Increase in trade and employment

Encourage international trade at a firm-level so that the trade of all member countries is improved, their incomes are increased and a high level of employment can be established in them.

(c) Promoting exchange stability

The third objective of the Fund is to encourage exchange stability in the world. Since exchange rate fluctuations are a hindrance to the way of world trade, the fund aims to establish exchange stability with a view to the strong growth of international trade. It does not follow complete rigidity with regard to any exchange stability policy and member states are permitted by the Fund to change the parity values of their currencies by following the policy to a certain extent.

Thus, from the point of view of exchange stability, the Fund has linked some elements from the gold standard and some elements from the variable exchange rate system to them to the state of the agreement, that is, the flexible stability of the exchange rates.

(d) Assistance in payment balance

To provide a favorable amount of short-term funds with security, if required, in member states so that member states can overcome the opposition of their payment funds without hindering national and international progress.

(e) Removing payment disparity

To provide funds to member countries to reduce the duration and quantum of permanent balances of the international payment balances of the member countries. It should be noted here that the Fund does not help to remove the long-time disequilibrium of the member countries' payment balances.

(f) discouraging foreign exchange barriers and total currency depreciation

The ultimate objective of the Monetary Fund is that discourages the tendency of the Member States to have all kinds of Foreign Exchange Restrictions and Complete Depreciation of Currency. In this regard, it is clearly stated in Section 8 of the Fund Charter that no member country shall attach any restriction between the transfer and payment of ongoing international transactions without obtaining prior approval of the Fund. With this, the Fund has allowed member states to ban the flight of capital from their territory. But, in this regard also, there is a condition that due to such restriction, the conductivity of capital arising out of the ongoing transaction and the active trade is not hampered in any way.

Functions of the International Monetary Fund (IMF)

The following functions are carried out by the International Monetary Fund:

(1) Exchange Rates: On the establishment of a monetary fund, member countries were asked to declare the value of their currencies in gold and US dollars. Gold was accepted as a common ground and parity rates were fixed by the Fund with various countries. Until 1971, after exchange rates were fixed, no country allowed its parity rate to decrease or increase beyond the limit of one per cent of the prescribed rate.

A policy of managed flexibility was adopted with respect to currency exchange rates. Any Member State was allowed to change its par value to the extent of 10 per cent, informing it (the Fund) only without anyone's approval. Further, a provision was made for prior approval from the Monetary Fund for conversion from 10 per cent to 30 per cent and it was provided that there should be the consent of 2/3rd of the members of the IMF to get the approval of the change beyond 20 per cent.

According to the Smith Sonian Agreement of December 19, 1971, the upper term limit of the exchange rate was increased to 22 percent. The main aspects of the Smith Sonian Agreement, which was made with regard to the prevention of the dollar crisis, were as follows:

(i) Dollar Depreciation: The gold price was raised to $38 per ounce instead of $35 per ounce. In other words, the dollar depreciated 7.9 percent. (ii) Exchange Rate Fluctuation Limit: The upper-term limit of 1 per cent in the value of foreign currencies was raised to 2.65 per cent.

(iii) Changes in exchange rates: Member states were allowed to reschedule the exchange rate of their currency from gold and the dollar at will, as a result, some currencies devalued, and some were overvalued.

(iv) End of surcharge on U.S. imports: The 10 percent surcharge imposed by the U.S. government on its imports has been lifted.

Despite the Smith Sonian Agreement, exchange rates could not be stabilized. In these cases, the policy of floating rates was adopted. Developing countries related their currencies to dollars, pounds, etc. The International Monetary Fund decided to approve only the free exchange rates in January 1976. As per the decision of the Interim Committee of the International Monetary Fund, an independent policy on exchange rates can be adopted by the Member States.

But they have to accept indigenous and foreign economic policies of common nature. Member States should maintain a proper exchange arrangement with the International Monetary Fund and the other Member States and encourage stability in the exchange rate.

(2) Technical Support: The Mudra Fund provides for technical assistance to member countries. This help can be done in two ways-

(a) The international monetary fund officials advise the member countries on their specific problems. This helps in the creation of appropriate monetary, exchange, revenue, and balance of payments policies for the members.

(b) The services of scholars having specific knowledge who are outside the fund are obtained. These scholars go to the Member States. In 1975-76, 134 such experts were sent to 45 member countries by the Fund. The International Monetary Fund has set up two departments with regard to technical assistance:

(i) Central Banking Service Department and

(ii) Department of Tax-Related Affairs.

The Central Service Department was established in 1962 and its organization was strengthened in 1964-65. The Tax Department was established in 1954.

(3) Removing the imbalance of short-term balance of payments: The Monetary Fund undertakes to remove the mismatch in the short-term balance of payments of the member countries and reduce its duration. In this regard, foreign exchange is sold by the Fund to the Member States. In addition, a stand-by agreement is also given if needed. The time of the wording of foreign exchange is usually one year. which can be extended on the basis of mutual agreement.

A Member State cannot receive more than 25 per cent of its intractable currency in exchange for its currency from the International Monetary Fund in a year. The loan is given by the Monetary Fund to remove the temporary inequality. These loans are for a period of 3 years to 5 years. In the words of the former Managing Director of the Fund, the International Monetary Fund is like a fire brigade that should be used only in case of a crisis.

The International Monetary Fund recently launched two schemes for member countries:

(i) Compensatory Financing Facility: Accordingly, financial assistance is provided in excess of the normal for countries that mainly produce and export primary commodities.

(ii) Oil Facility Scheme: Oil payments under this scheme were given to the importing countries in 1974. This was done to remove the adverse impact on the balance of oil prices due to the rise in oil prices. Funds for the scheme are arranged by oil exporters and industrialized nations.

(4) Scarce Currency: The demand for the currency of a country increases when the balance of payments of a country continues to be favorable to that country. When the amount of such currency with the fund is reduced, it can borrow that currency from the country concerned. If the country concerned does not lend its currency, the money can be purchased from that country by giving gold (currently SDR) by the fund. Even if the demand for that currency is not met, then such money is declared a rare currency by the Monetary Fund and that currency is rationed.

(5) Advice on Exchange Control: The Monetary Fund advises developing countries on exchange control. However, the Monetary Fund is opposed to restrictions on exchange and foreign trade. But he gives member states the right to impose such restrictions in the transitional period.

(6) Contacts with International Organizations: The International Monetary Fund maintains contact with all international organizations in the world. Its representatives attend the annual meetings of these organizations. As a result, the International Monetary Fund is aware of the economic changes in the world.

(7) Training Related Programmes: The Money Fund has been providing training for the representatives of the member countries since 1951. The training programmes include training on international payments, economic development, financial arrangements, collection of marks, and analysis. This training is for the higher officials of central banks and the finance department of the government.

(8) Publication of the Monetary Fund: Knowledge is disseminated by the Monetary Fund through its publications in the Member States. It has many publications such as International Survey (fortnightly), International Development Data (Monthly), Annual Payment Balance, Annual Report on Exchange Controls, Direction of Business (Monthly, Finance and Development Quarterly), etc.

These publications provide important information to teachers, students, researchers, and government departments.

(9) Service on Statistical Improvement: The Money Fund provides services relating to the collection, analysis, and publication of general and financial summaries. There is a Bureau of Statistics in this regard. It helps member countries to improve and publish data related to central bank improvement in bulletins data, currency, and banking, interest rate, price, foreign trade, the balance of payments, national income, production, etc. These groups help in the economic comparison of member countries and the analysis of monetary and payment-related problems.

Trust Fund: It has been decided to create a Trust Fund in January 1976 by the Monetary Fund. The Mudra Fund will sell 25 million ounces of gold over a period of four years. The profit from the sale of gold will create a trust fund. Out of this, the developing countries will be given assistance at the rate of 1/2 per cent interest. A list of 60 countries, including India, has been prepared to provide this assistance. The loan given out of this fund has to be repaid in ten half-yearly installments

Part of the International Monetary Fund

The International Monetary Fund (IMF) organ is as follows:

(1) Board of Governors: 

The entire powers of the International Monetary Fund are in the Board of Administrators. The Board of Administrators is a general body of the Monetary Fund. It carries out the work of determining policies, changes in the abattoirs, entry of new members, the election of directors, etc. The Board of Administrators consists of an Administrator (Governor) appointed by each member country. Its tenure is 5 years. The Member State also appoints an alternative administrator. The annual session of the Board of Administrators takes place in the month of September or October.

(2) Board of Executive Directors:

There is an Executive Board of Managing Directors for the day-to-day functioning of the International Monetary Fund. It has 24 members. It consists of 5 members from the countries which have the most reserves in the monetary fund. The rest of the members are elected according to a regional basis.

(3) Managing Director:

There is a managing director of a money fund. It is appointed by the Executive Board of Management. It is worth noting here that the appointment of the Managing Director is not from the Board of Management. He is a fair person.

(4) Other employees: 

There are other officials of the Monetary Fund. They are appointed by the Managing Director or other officers. In April 1976, there were 1363 employees.

Head Office: As per the legislation of the International Monetary Fund, the head office of the Fund should be in the country which has the highest concentration of residents. The Head Office of the Fund is located in Washington (US) due to the largest number of U.S. penetrations. In 1996, the number of members of the International Monetary Fund is 181. The number is currently 189.

Money Fund Instruments: When a country accepts membership of the Monetary Fund, the reserve is fixed for it. The financial instruments of the Monetary Fund are created from the quotas of all the member countries. Initially, in order to become a member of the Fund, a country had to deposit one part of its reserve in the form of gold and the other part in its own currency. Now the gold standard can be deposited as special drawing rights (SDR).

The instruments of the Monetary Fund have been enhanced as per the international monetary requirements. In 1959, the candidates of the member countries increased by 50 percent, in 1965, the candidates increased by 25 percent. Then in 1970, there was a 25 percent increase in the number of candidates. In 1976, the capital of the International Monetary Fund increased by 33.6 percent. The account of the Fund is expressed in the SDR with effect from March 20, 1972. One unit of the first SDR was equivalent to 0888371 grams of gold. Since July 1974, the value of the SDR is determined based on the average value of the currencies of 16 countries. The value of the currencies of the member countries appears in the SDR. In 1983, the quota of funds increased to 98 thousand crores.

Successes of the International Monetary Fund

After studying the money fund, it is concluded that the monetary fund has been successful to a substantial extent in establishing the world monetary balance in the 30 years of its office as is evident from the following description:

(1) The International Monetary Fund has been able to establish international monetary cooperation on the basis of its internal organization and external influence.

(2) On the basis of its influence, a rich nation like the United States has been motivated by the Monetary Fund to address the problems of reconstruction of European countries.

(3) The Monetary Fund has reduced the restrictions imposed on foreign trade, foreign exchange control. Has succeeded in establishing the multifaceted form of making and foreign payments. Now the currencies of 35 countries are freely convertible into other currencies.

(4) The Monetary Fund has been successful in increasing international liquidity. It has substantially increased its permanent toilets and provided for special drawing rights.

(5) In times of monetary crisis, technical advice and financial assistance is provided by the Monetary Fund. Between 1949 and 1958, 30 countries devalued their currencies. The Monetary Fund has succeeded in organizing the devaluations of these currencies.

(6) Developing countries have been assisted by the Monetary Fund. The Fund has been providing assistance to these countries on its balance of payments and monetary stability. Training arrangements have been made for the officers of these countries. A trust fund has also been created to help developing countries.

(vii) The Monetary Fund has increased international trade by making arrangements for payments. Those countries whose trade is in the event of deficit are supported by the Monetary Fund. This has led to an increase of about 16 times in world trade over the years.

(viii) India has benefited from technical consultations from time to time from the Monetary Fund. The Fund has assisted in the formulation of India's economic policy. The experts of the Monetary Fund have been visiting India from time to time.

(9) Loans of 642 million SDR were sanctioned in 1974 from the Fund for India.

(10) Assistance of 203 million SDR was received by India in respect of the "oil facility" in 1975.

(11) As per the decision to increase the capital of the Monetary Fund, which was taken in January 1976, India's reserve would be 11.45 million SDR instead of 9.40 million SDR. This is 2.93 per cent of the total capital of the International Monetary Fund.

(12) Being a member of the Monetary Fund, India has got the opportunity to be a member of the World Bank. India has been benefiting from the World Bank. It has been improving its economy by getting the assistance of the World Bank and is now moving towards self-reliance.

India has been receiving a substantial amount of assistance from the Monetary Fund. The Monetary Fund and the World Bank have played an important role in its current economic progress.