International monetary fund
auto International Monetary Fund also called, as IMF in short, is an international financial organization that was established in order to promote orderly exchange arrangements, international monetary cooperation and exchange stability among various member countries. This organization also aims to provide fast economic growth to its member countries besides providing highest employment levels.
Temporary financial assistance is also provided by this organization to its member countries for easing off the balance of payments adjustments. Since its inception, the objectives of IMF have remained the same but for meeting the ever changing need it has evolved some operations like technical assistance, financial assistance and surveillance. The headquarters of this international organization lies at Washington D.C in United States and at present, there are 185 member countries of this organization. In the past some years, this organization has helped member countries in great way by observing the exchange rates to ensure stable global financial systems. The last country to join this prestigious organization is Montenegro, which joined on 18th January, 2007. It is very important to note here that all the United Nation member countries participate directly in International Monetary Fund with exception of North Korea, Andorra, Cuba, Monaco, Tuvalu, Liechtenstein, and Nauru.
The mission:
The main objective of International Monetary Fund it to provide financial assistance to all the member countries that are facing financial problems. All the member states that are facing problems regarding balance of payments can easily request for loans etc for improving the situation. This can also be done by making request for the organizational management of economies at IMF. But in return of getting assistance, the member countries of International Monetary Fund are also required to launch certain types of reforms that aim at improving the financial strength of member country. The reader should note here that many times, these reforms become quite essential as the member countries, that have fixed exchange rate policies, often engage in various types of monetary, fiscal and political practices that are harmful for them. All those countries that have budget deficits or are suffering from high inflation levels or have strict prices controls, are also suffering from balance of payment problem. These reforms are carried out by means of structural adjustment programs and basic motive of these reforms is to help the member countries to come out of crisis permanently, rather than helping them temporarily with financial assistance. These reforms, however, have been criticized for their non-transparent behavior.
How to become member:
If any country wishes to become member of International Monetary Fund, it has to apply to IMF for the same. The application is first reviewed by the executive board of International Monetary Fund and after it is considered fit by the above board; report is submitted regarding the same to the Board of Governors of IMF. All the recommendations made by the executive board are also attached with it in the form of Membership resolution. These recommendations made by the executive board also cover the quota amount in the form of payment of the subscription. Apart from this, there are also many other terms and conditions that are applicable to all the countries that wish to become member of IMF.
Once the membership resolution is adopted by the Board of Governors, the applicant country is required to make all the necessary amendments in its law so that it can easily sing the Articles of Agreement of International Monetary Fund and fulfill all other required obligations. The quote of member country in the International Monetary Fund determines the required amount of subscription, the voting weight it can be granted, the access of the member country to the financing made by IMF and the allocation of renowned SDR or the Special Drawing Rights . It is very important to understand here that the member country cannot increase its given quote unilaterally and if it wishes to do so, the same has to be approved by the Executive Board of IMF. However, the increase in quota is restricted by number of formulae like the contribution of country in the economy at world level etc.
Criticism:
International monetary fund has also been criticized for some aspects. One of biggest criticism of IMF is that the growth and development of a country halts when conditions are applied by this international body for providing funds. Though IMF takes such step to ensure the proper utilization of money, it may provide obstacles in the path of growth and development of some countries. These are commonly called as Conditionality. The second criticism with which International Monetary Fund is suffering from is the Structural Adjustment Programs. It is criticized that the structural adjustment programs initiated by the International Monetary Fund have resulted in increase of poverty in many countries that have adopted these programs. There are also some people, especially those ones that support the Supply-Side economics, that disagree with the programs conducted by IMF.
These people say that because International Monetary Fund uses the process of currency devaluation many times, it has resulted in increase in the levels of inflation in the recipient countries and thus, rather than proving useful, IMF ways have prove detrimental to the growth of member countries. The reader may like to note here that the International Monetary Fund advocates the Keynesian approach towards the development of member countries, which has been disagreed by many economists. The other reason why the efforts made by the International Monetary Fund have been criticized is because of the fact that higher taxes are applied by the member countries for different types of Austerity Programs and this has resulted in Economic Contraction of the member country. There are also many economists that think that IMF should not recommend currency devaluation to poor countries, as doing this is quite harmful for the economy and its growth.
Whether the steps taken by the International Monetary Fund are detrimental or useful for any economy, it can certainly be said that this international organization has really helped a lot in maintaining the global financial stability.
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