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INTERNATIONAL MONETARY FUND

This article is written by ADARSH SHARMA , Siddhartha law college Dehradun , BA LLB during his internship at LeDroit India

CONTENTS

  • INTRODUCTUION
  • It has three critical missions-
  • Objectives of IMF
  • Background of IMF
  • India and IMF

INTRODUCTUION

Each of the 190 nations that make up the IMF is represented on the organization’s executive board. according to its monetary significance, Supporting economic policies that promote monetary cooperation and financial stability helps to increase productivity, job creation, and economic well-being. The IMF is run by and accountable to its member countries. The three primary objectives of the IMF are to advance trade and economic growth, encourage international monetary cooperation, and oppose policies that might jeopardize prosperity. Member countries of the IMF work together with other international organizations and with each other to carry out these missions so that the most potent nations in the world economy. own the most ability to vote.

Objectives of IMF

To promote international monetary cooperation
Dependable financial standing,
Encourage high employment and sustained economic growth by facilitating international commerce.
Diminish global poverty
Macroeconomic expansion
Guidance on policy and funding for emerging nations
Support for a global payment system and stable currency rates

It has three critical missions-

Trade growth is encouraged by international monetary cooperation and trade expansion.
Stifling measures that might undermine growth
Member nations of the IMF cooperate with one another and with other IO to carry out these missions.

Background of IMF

  • It was thought of during a July 1944 United Nations meeting at Bretton Woods, New York. 
  • The 44 participating countries sought to establish a framework for economic cooperation to avoid the competitive devaluations that had made the 1930s Great Depression worse. Unless a country is an IMF member, it will not be able to join the International Bank for Reconstruction and Development (IBRA). 
  • The US dollar took the role of gold as the official reserve and the IMF established a convertible currency system with fixed exchange rates that adheres to the terms of the Bretton Woods conference, which was held with the intention of fostering global financial cooperation.
  • Since the IMF established the floating exchange rate system in 1971, nations have been allowed to select their own exchange rate regime, meaning that the value of one currency relative to another is determined by market forces. Today, this system has to be changed in _countries.

    The IMF is one of the most significant organizations in the world economy. Because of its architecture, the system—also known as liberalism—was able to strike a balance between the expansion of global capitalism and the preservation of national economic sovereignty and human wellbeing. 
  • In 1997, there was a financial crisis that swept over East Asia, extending from Korea to Thailand and Indonesia. In order to help the majority of the afflicted economies avoid default, the IMF produced bailouts, or rescue packages, and tied the packages to changes in the banking, financial, and currency systems.

    The former USSR’s nations were greatly assisted by the IMF in making the transition from centrally planned to market-driven economy.

Governance set up of IMF

Board of Governors: Each virtually nation beach country designates one alternate governor, who in turn selects the second governor.It is in charge of choosing or designating governors. the executive board’s executive directors. One of the main functions of agreement legislation is also their amendment. The two menstruation committees advise the board of governance. The development committee and the International Monetary and Financial Committee (IMFC). Normally, the World Bank, IMF, and board of governors convene once a year to deliberate on the activities of their corresponding establishments.

India and IMF

  1. India was one of the IMF’s original eleven members and has benefited from the organization’s growth and development of global money exchange. 
  2.  India has significant balance of payments imbalances, especially with the dollar and other hard currency nations, dating back to the partition era. 
  3. The IMF was the one that saved India’s financial challenges stemming from the Indo-Pak war between 1965 and 1971, the IMF provided loans to the country. 
  4. Up to March 31, 1971, India bought foreign currency worth Rs. ( 817.5 crores) from the IMF, and it has fully reimbursed the amount. 
  5.  Since 1970, the establishment of (SDR) has allowed India to provide more aid to other IMF members.
  6. Following a sharp increase in the cost of its imports, gasoline, food, and fertilizers, India was forced to borrow money from the fund.
  7. An enormous loan of Rs. 5000 crores was granted to India in 1981 to help it overcome the foreign exchange crisis brought on by a balance of payments deficit.
  8.  India requested significant foreign funding for the expansion of communications and for the different river projects. The only realistic way to get the cash was to borrow it from the World Bank and IMF because private foreign capital was not available. 
  9. In the early 1990s, a three-month foreign exchange reserve was often considered a safe minimum reserve, with two weeks’ imports being the standard. This part was dreadfully inadequate. 
  10. In response, the Indian government immediately pledged 67 tons of its gold holdings as collateral to the International Monetary Fund (IMF) in order to get a 2.2 billion dollar emergency loan.
  11. A commitment was made to the IMF by India to implement a number of structural reforms, including devaluation, reduction of the budget deficit, reduction of government spending, reforms to industrial policy, reforms to banking, and privatization of the public sector entrance press 
  12. The foreign police began implementing the LPG set of policies. 
  13. India holds a unique position on the IMF’s board of directors. India plays a significant influence in setting the fund’s policy. As a result, India now enjoys more recognition in global circles.
  14. Since 1993, India has not received any financial support from the IMF. On May 31, 2000, all of the loans obtained from the IMF were repaid. 
  15. The RBI governor serves as the alternative governor at the IMF, while the Indian finance minister is ex officio member of the governors’ board..

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