Function of the IMF Function of the IMF The principal function of the IMF is to super vise the international monetary system. Several functions are derived from this. These are: granting of credit to member countries in the midst of
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Presentation Transcript
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Function of the IMF<br>
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Function of the IMF The principal function of the IMF is to super vise the international monetary system.
Several functions are derived from this. These are: granting of credit to member countries in the midst of temporary balance of payments deficits, surveillance over the monetary and exchange rate policy of member countries, issuing policy recommendations. It is to be noted that all these functions of the IMF may be combined into three.
These are: regulatory, financial, and consultative functions:<br>
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Regulatory Function: The Fund functions as the guardian of a code of rules set by its (AOA— Articles of Agreement).<br>
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Financial Function: It functions as an agency of providing resources to meet short term and medium term BOP disequilibrium faced by the member countries.<br>
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Consultative Function: It functions as a center for international cooperation and a source of counsel and technical assistance to its members.<br>
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Function of the IMF The main function of the IMF is to provide temporary financial support to its members so that ‘fundamental’ BOP disequilibrium can be corrected. However, such granting of credit is subject to strict conditionality. The conditionality is a direct consequence of the IMF’s surveillance function over the exchange rate policies or adjustment process of members.
The main conditionality clause is the intro duction of structural reforms. Low income countries drew attraction of the IMF in the early years of 1980s when many of them faced terrible BOP difficulties and severe debt repayment prob lems. Against this backdrop, the Fund took up ‘stabilisation programme’ as well as ‘structural adjustment programme’. Stabilisation programme is a demand management issue, while structural programme concentrates on supply management. The IMF insists member countries to implement these programmes to tackle macroeconomic instability.<br>
