An Introduction to IMF on Global Economic Issues
A widening range of global economic issues confronting today's economies offers both opportunities and risks to the success of their societies. Many industries have encountered problems and are still having trouble, and the nations that depend on those industries are now subtly attempting to recover.
While some difficulties are particular to a given area or nation, as economies become more interconnected, the health of one has more and more bearings on the health of others. At times like this, the IMF comes forward to give a helping hand in dealing with major global economic issues.
What is the IMF?
What is the IMF?
The International Monetary Fund (IMF) is an international organisation of 190 member countries to promote high employment and sustainable economic growth, secure financial stability, ease international trade, and lower poverty worldwide. It came into existence in 1945, and its headquarters are in Washington, DC.
The International Monetary Fund (IMF) has assisted nations in overcoming many global economic issues over the years. Additionally, the organisation is still developing and adapting to the dynamic global market.
Objectives of IMF
Objectives of IMF
The major objectives of IMF include:
To encourage international monetary cooperation between the participating nations.
Promotion of exchange stability to maintain orderly exchange agreements between member nations.
Facilitating balanced expansion in the global economy to increase income and employment.
To develop a multilateral system of payments to facilitate international transactions among the member countries.
Functions of IMF
Functions of IMF
The major functions of IMF include:
Assisting member countries in getting short-term credits
Facilitating orderly currency exchange rate adjustments
To establish itself as a major foreign currency lending institution
Determining a country's currency value and making necessary changes to make an orderly adjustment of member countries' exchange rates
Ensuring stability in currency exchange rate mechanism to prevent competitive exchange depreciation
Role of IMF on Global Economic Issues
The IMF staff typically releases an IMF report twice a year. It presents the analyses of IMF staff economists on the short-term and long-term trajectories of global economic issues. Other ways in which IMF has played a major role in countering global economic issues are:
The IMF has historically been the body many nations have turned to during several global economic issues. Throughout the years, this organisation has played an essential role in giving economic aid to failing nations.
The IMF offers financial assistance to crisis-affected nations to have breathing room as they adopt adjustment measures to reestablish economic stability and prosperity.
Additionally, it offers preemptive funding to aid with crisis prevention and insurance. The IMF regularly improves its lending toolkit to accommodate nations' shifting needs.
The IMF maintains a continuous policy discussion with the governments of its member nations to maintain stability and prevent crises in the international monetary system.
It evaluates the state of the economy and makes policy suggestions that promote sustainable growth.
The IMF also keeps track of regional and international financial and economic developments.
However, these are just some of the IMF's many roles in global economic issues.
Case Study
Andorra joined the International Monetary Fund (IMF) in October 2020. A little nation called Andorra is situated between France and Spain. It is, nevertheless, Europe's biggest microstate. As the latest country to join the IMF, Andorra can now get annual reviews of its economy from the IMF, sometimes known as health checks, technical aid and, if necessary, IMF lending. This is especially helpful while the country deals with the COVID-19-related crisis.
1. Who is the latest member of the IMF?
Ans. Andorra, a little country between France and Spain, is the latest member to join the IMF.
2. IMF has how many members, including Andorra?
Ans. IMF has 190 members, including Andorra, who joined as the 190th member of the IMF.
Summary
The International Monetary Fund (IMF) is an organisation that supports world commerce, economic expansion, and financial stability. The IMF plays a huge role in dealing with global economic issues by providing loans, technical support, and oversight of economic policy. The IMF's major objectives are facilitating balanced expansion in the global economy and promoting international monetary cooperation.
Some major functions of the IMF include assisting and facilitating short-term credits and exchange rate mechanisms. The IMF's role in global economic issues includes providing financial and technical assistance to struggling nations.
FAQs on IMF on Global Economic Issues
1. Who provides funding to the IMF?
The three sources of IMF funding are member quotas, multilateral borrowing agreements, and bilateral borrowing agreements.
Member Quotas: The IMF's main financing source is member quotas. According to a quota system, each nation contributes to the IMF according to the size of its economy and its political weight in international commerce and finance. These quotas are typically reviewed every five years.
Multilateral Borrowing Agreements: Another source of finance to support IMF resources to prevent or deal with the damage to the international monetary system is the New Arrangements to Borrow (NAB). Several member nations and organisations are prepared to lend the IMF more money through the NAB.
Bilateral Borrowing Agreements: To ensure that it can meet the financial demands of its members, the IMF has engaged in many rounds of bilateral borrowing agreements (BBAs) since the start of the world financial crisis. After quotas and the NAB, BBAs function as the third line of defence.
2. Who is responsible for deciding how IMF funds are utilised?
The IMF executive board, composed of representatives from the Fund's member nations, consists of 24 members and approves loans. A group of nations is often represented by an executive director. For instance, India is represented at the IMF by an Executive Director who also represents three other countries: Bangladesh, Sri Lanka, and Bhutan. Eight board seats are occupied by Europeans.
Before a loan request is submitted to the board, specifics are first negotiated between IMF personnel, management, and the applicant nation. Before the board meeting to approve the loan, documents explaining the arrangement are distributed to board members.
3. Mention a brief history of the IMF.
The Great Depression's breakdown of international monetary cooperation prompted the creation of the IMF, an organisation dedicated to boosting global economic growth and alleviating poverty. The Bretton Woods Conference in 1944 was the catalyst for the creation of the International Monetary Fund (IMF). The Conference to create a framework for postwar international economic cooperation had 45 government representatives in attendance.
On December 27, 1945, the IMF went into operation with 29 members committed to abiding by this agreement. It started running its finances on March 1st, 1947. At the moment, 189 nations are IMF members.
