Structure And Function Of The International Monetary Fund


During the great depression times of 1930s the states put a arrest on the foreign trading. This act of seting barriers devalued the currency of the states, and citizens were non allowed to maintain foreign currency. This led the universe to a crisp diminution in the trade chart and lowered populating criterion of people. The constitution of International Monetary Fund was the consequence of economic dislocation. International Monetary Fund was officially established in December 1945 but representatives of 45 states agreed for the model of International Monetary Fund. Till 1975 the establishment had a system called par value system, harmonizing to which the currencies of state was valuated against US dollar and US dollar was valuated against gold. This transition of dollar into gold was stopped in 1975. From so International Monetary Fund solved the job of balance of payments in many hapless states of the universe. A loan installation plan named as Structural Adjustment Facility was started in March 1986. The International Monetary Fund helped the oil exporting states in paying their debts. These were some of the historical fiscal activities where the International Monetary Fund played a important function.


The chief map of International Monetary Fund is to force the cooperation in international pecuniary and stableness of exchange rates assists the international trade to turn and supply resources for the member states to assist them in state of affairs of hard balance of payments and poverty conditions. Presently there are 187 states which hold the rank of International Monetary Fund. The establishment has its ain organisational construction, administration, fiscal assets but is a specialised constituent of United Nations. The members of the International Monetary Fund have their ain recognization in the planetary economic system. The International Monetary Fund keeps record of its member states and their economic status, alerts them about the hazards involved in any peculiar fiscal activity and gives advice on making economic policies. International Monetary Fund aid states which are in trouble by imparting them, it besides provide proficient aid and preparation to better the economic status of the state. All these plants of International Monetary Fund are monitored and supported by the surveillance and research and development squad of the International Monetary Fund. The International Monetary Fund besides has coaction and partnership with many international organisations which work for the growing and to cut down poorness. Institution besides keeps active communicating with civil societies, research workers and the media individuals. ( Eichengreen. , 2002 )

Operationss of International Monetary Fund


The International Monetary Fund supervises the international pecuniary system and supervises the economic and financial policies of its member states. National regional and planetary economic developments the member states are tracked by the International Monetary Fund and macroeconomic and fiscal advice are besides provided. International Monetary Fund ‘s act of monitoring of economic stableness in the member states is known as Surveillance. Surveillance is of three types: State Surveillance, Regional Surveillance, and Global Surveillance. Country surveillance is the comprehensive audience provided to the member states of International Monetary Fund. An International Monetary Fund squad is formed for the procedure which is used to see the state and surveies the fiscal and economical policies of the state. The study of the state is presented to the board of members of the International Monetary Fund to acquire the planetary positions on the financial and economical policies. Regional surveillance is the monitoring of assorted currency brotherhoods like euro country, and Eastern Caribbean Currency Union. Global surveillance includes the procedure of reexamining planetary economic tendencies and covers the countries of economic developments, policies, and chances of the planetary fiscal market.

Technical Aid

The International Monetary Fund provides its aid in practical preparation of the states which enables them to pull off their fiscal policies more efficaciously. This preparation is good for a state to upgrade the system and redesign the economic, fiscal and structural policies of the state. Supplying proficient aid to its member states is one of the nucleus maps of the International Monetary Fund. International Monetary Fund supplies about 80 % of the aid to the states which are extremely indebted. The International Monetary Fund provides proficient aid in many different signifiers harmonizing to the demand of the state. Partnership with many givers is highly of import for the operation of International Monetary Fund as they used to finance around two tierce of the International Monetary Fund operations of proficient aid.

Lending Fundss

A state can confront many terrible fiscal crises like inability to pay foreign measures, negative balance of payments, and job with the stableness of international fiscal system. International Monetary Fund was established for the support of these states in these fiscal crises. International Monetary Fund helps every member state in financing to pay off the balance of payments and international payments.

Organizational Structure of International Monetary Fund

The board of governors is the top authorization of the International Monetary fund. It has one governor and one surrogate governor for each state which is member of the International Monetary Fund. The appointive governor of each state is either the finance curate or the governor of the cardinal bank of the state. The power of authorization in International Monetary Fund is concentrated to the board of governors. Certain powers of the Board of governors can be given to the board of executive. The meeting of board of governors of the International Monetary Fund happen merely one time in a twelvemonth in normal fortunes. The executive board of IMF has 24 managers which are elected by the member states of IMF and the pull offing manager who is besides the president of the board. Voting power of different member states of IMF varies harmonizing to the affair related Departments. The pull offing manager I selected by voting procedure and the member who gets the highest figure of ballots is appointed as the MD of the IMF. ( International Monetary Fund Organization Chart )

International Monetary Fund Funds & A ; Lending

Nature of Lending

In the initial decennaries of the constitution of International Monetary Fund it used to impart half of its financess to the states which required industrial growing. But by 1970s the states make themselves capable of run intoing their fiscal demands of the capital market. In late seventies and 80s because of the fluctuating oil monetary values and fiscal crisis many states with lower and lower in-between income borrowed from International Monetary Fund. The demands of International Monetary Fund resources increased in 1990s due the passage of cardinal and Eastern Europe and the economic crisis in the emerging markets. By the twelvemonth 2004 the planetary economic conditions began to stabilise so the borrowers of International Monetary Fund financess start paying their loans to International Monetary Fund hence the demand of loans from International Monetary Fund declined aggressively.

Lend for Financial Stability

The intent of International Monetary Fund ‘s support has been altering repeatedly since the organisation was established. Initially International Monetary Fund used to fund the states for their fiscal AIDSs in covering with the fluctuations in the short term trading. Now the intent of financess has been changed to help the jobs in balance of payments which arises due to merchandising fluctuations, natural calamities, economic passages, economic development and currency crisis.

Conditionss of Support

The support conditions of International Monetary Fund loans depend on the economic wellness and fiscal policies of the member states. The economic policies of the states are discussed with International Monetary Fund in order to guarantee that the current issues should be addressed most efficaciously. The loans from International Monetary Fund are distributed in many installments and each installment has to run into the conditions are marks defined to acquire the following installment from International Monetary Fund. The inside informations of the economic plan of the authorities demand to be submitted to the MD of International Monetary Fund. International Monetary Fund resources are used to finance merely a little fraction of the balance of payments. The typically needed conditions for IMF support are the macroeconomic and structural policies.

Difference in Roles of International Monetary Fund and World Bank

International Monetary Fund and World Bank both are wholly different in many facets like their construction, different resources of support, different members and different ends. The major difference in the functions of International Monetary Fund and World Bank is that the bank is a development establishment whereas the International Monetary Fund is an establishment which maintains the system of payments between states. Unlike the World Bank International Monetary Fund is a little establishment with around 2300 people working for it. IT has no subordinates or subdivisions. International Monetary Fund assists the members of the organisation in their jobs of balance of payments whereas the World Bank financially assists the poorer states whose GNP is less than 865 dollars per twelvemonth.

Three chief worldviews about IMF


Using the liberalism universe position on operations of IMF it can be seen that the liberalism position is applicable on the policies of IMF of reding states in economic crisis. IMF regulates the trade policies of the states ; it encourages foreign trade between states so that the companies can reciprocally acquire benefits of the trade by globalising the production of goods. The policies of IMF do non alter with the altering state of affairss and states as the liberalism position besides considers all provinces equal. Like happened with Thailand in 1997, IMF applied the same policies in this state of affairs which were earlier used in Latin American crisis and decline the state of affairs of Thailand.

Economic Patriotism

This position best fits the operations and construction of IMF. The major histrions in this position are the provinces and the members of IMF are states. The motivation of policies and schemes of IMF is to convey stableness in the economic system of the member states merely. The dealingss of IMF with the states are dominated by IMF. The patriotism position is based on the Hegemonic stableness theory which supports the stableness in economic system of provinces. Objective of IMF is the same, to convey stableness in the economic conditions of a state.


This position considers the major histrion in policies is category i.e. the rich and developed counties are the states which are benefitted by IMF operations. Policies of IMF are designed such that while assisting a hapless state in crisis it is really making net income for the controlling states. The executive commission of IMF has members merely from these developed and rich states as discussed in this position. The trade relation ever benefits the states like USA.

South Korea Economic Crisis & A ; IMF

The Asiatic economic crisis of 1997 occurred due to the worsening value of Nipponese Yen, difficult competition with China, surfeit in electronics market, and heavy adoption by Korean Bankss. So the crisis was non merely the consequence of external economic alterations but besides Korea was responsible for it. IMF issued a 57 billion USD loan to the state with certain footings and conditions. Harmonizing to utmost broad position IMF ‘s actions created moral jeopardy and embedded broad position provinces that the IMF ‘s intervention was required to command the state of affairs. Harmonizing to the nationalist position IMF helped the US economic system non the Korea. Structural position says that the economic IMF conditions were made to profit the G5 states. Harmonizing to Feldstein structural reform of Korean policies was unneeded. Sachs criticized that the Bankss would work out the intent in a better manner than the IMF. The concluding results were the booming Korea, enlargement of Korean companies like LG.

Overview of International Monetary Fund based on Stiglitz ‘s Article

Joseph Stiglitz had written several articles on the universe economic system and the function of fiscal establishment in it. In his article “ What I learned at the World Economic Crisis – The Insider ” he considers that the International Monetary Fund has helped many states in the fiscal crisis and in times when the states were confronting the job of balance of payments. The policies and funding construction of the International Monetary Fund is really inexorable and do non alter based on the altering jobs in the universe economic system. International Monetary Fund implied some policies to assist Latin America I the fiscal crisis of 1980s and was successful in the intent. But it applied the same constabularies and construction on the economic crisis of Thailand in 1997. These deductions of policies really worsen the state of affairs. There is no flexibleness in the footings and conditions of the International Monetary Fund support. So the article proposes that the financial policies of International Monetary Fund should be manipulable in order to work out a wider scope of jobs. ( Stiglitz. , 2000 )