The International Monetary Fund (IMF), conceived in July 1944 at a UN’s conference held in Bretton, New Hampshire, U.S.A is a leading global financial organization made up of 188 countries. Its main goals concentrate on securing financial stability, facilitating international trade, alleviating high rates of unemployment and reducing poverty around the world. During its establishment, the 44 governments, which were represented in the conference, created a credible framework that would eradicate competitive devaluations that were witnessed after the First World War that caused 1930s Great Depression. This is an international organization whose functions keeps on expanding year by year owing to various economic, social and political factors. But still its core functions will always stand out and they include the following.
Providing Financial Assistance
The primary objective of IMF is to provide financial assistance to poor countries that are experiencing difficult economic times due to civil wars, natural disasters etc. Member countries who would want to boost their economies through infrastructural development and other things that help to create a good investing environment may also solicit funds from IMF. This organization lends out money through loans that are given under certain conditions.
Preventing Possible Financial Crisis
Countries are required to launch certain reforms that will regulate how the borrowed funds will be utilized to prevent fraudulent individuals from embezzling the funds. Also, these reforms are meant to cushion those countries which have fixed exchange rates policies from a crisis resulting from monetary, fiscal and various political practices. The risk of a possible staggering balance of payments in future may arise due to under/over-valued currencies, inflation and budget deficits if these reforms aren’t put in place. Therefore, IMF not only assists member states to develop economically by lending them loans but they also provide measures that cushion them from experiencing a possible financial crisis.
Carrying Out National, Regional & Global Surveillance
Through a formal system known as surveillance, IMF tries to review a country’s policies, regional and global financial and economic developments to ensure its own stability and prevent a financial crisis from happening in their system. By so doing, this organization encourages all member countries to establish policies that stirs up economic growth as well as polices which fosters living standards of the locals in a particular state. It also gives countries various advices that guide them in reducing financial instabilities and vulnerability to economic recessions.
Using its World Economic Outlook, this organization provides a reliable and regular assessment of all global prospects found in the world’s financial markets. It also assesses public financial developments in its Fiscal Monitor and Global Financial Stability Report. After thorough assessment it publishes a series of region-based economic outlooks which countries can take advantage of them to assess their own economic system.
Providing Various Types of Financial & Economic Training to Member Countries
Apart from lending loans to the member countries, IMF trains individual countries on various monetary habits to avoid rampant inflation, disequilibrium in the balance of payments and other financial crises, which affect most countries having ‘struggling’ economies. Since, 1950s, IMF has been offering various training courses on international economics and on balance of payments statistics. In fact, in 1964, the IMF Institute was founded to foster these training activities allowing various countries to take advantage of good money management habits. The IMF Institute is composed of professional monetary and management officers that equip officials from member countries with lots of financial knowledge. These officials benefit from various subjects including methodologies used in balance of payments, managing public finance, analyzing government finance statistics and subjects that deal with financial policies.
Providing Technical Assistance
This is another important and core function of IMF that aims at providing technical assistance in various sectors to individual countries. It is a program, which is regulated by the Fiscal Affairs Department, the Bureau of Statistics and Monetary and Exchange Affairs Department. Other departments, which may chip in, include the Bureau of Computing Services, the Legal Department and country-based departments may participate.
How Technical Assistance is Offered
Technical assistance is delivered through field assignments, staff missions and studies as well as workshops meant to update state officials with trending developments in the global financial industry. In this particular training, IMF focuses on ensuring that each and every official of its member countries are well conversant with tax systems, analysis of huge financial statistical data, macroeconomic management, developing a central banking system and regional and global fiscal policies.
Member countries also benefit from advices on central and general banking legislation, money and capital markets, as well as structure of interest rates at different times of the year. IMF’s objective is to ensure that, through regional and global cooperation, every country gets to take advantage of the various financial and economic instruments it provides. This is evident in Eastern Europe and Soviet Union where IMF has transformed the centrally planned economies through their technical assistance services to holistic market oriented economies.
Partnering With Donors
IMF collaborates with various donors on behalf of each member country that requires assistance at any time. These donors may be either bilateral or multilateral donors. They both help IMF in meeting the requirements of all member countries. Robust and well-bonded partnerships with other institutions such as UN ensure that countries receive every kind of assistance whether political, social, or economic.
What About New Members?
This international monetary organization assist new member states in developing export and import sectors, choosing the right currency, setting up interest rates and credit regulations, making structural reforms and reserving certain financial requirements. This enables the new members to acquaint themselves with IMF’s rules, terms, & conditions before starting a long-term economic relationship.
Generally, the functions of IMF not only involve financial assistance but also incorporates various things that are meant to improve economic status of each member country. Since the Asian crisis (1997-1998) and Mexican peso crisis (1994 – 1995), IMF has been very vibrant in providing technical, financial and economic assistance to all member countries to prevent such crises from happening in the future. It develops universal standards that help in creating an equal platform where all countries can access help. It offers useful advices to member countries regarding financial markets and how to create a good business environment where investors can find it favorable. This allows countries to develop economically without straining their resources.