International Monetary Fund (IMF) is an international financial institution established in 1944 with the primary goal of promoting global monetary cooperation, ensuring exchange rate stability, facilitating the balanced growth of international trade, and providing resources to help member countries facing balance of payments problems.
In this article, we will discuss the International Monetary Fund (IMF), the origin of the IMF, its controlling bodies, its objective, and its functions along with India’s relations with the IMF.
Also Read: International Monetary Fund (IMF): Objectives and Functions
Table of Content
- What is the International Monetary Fund (IMF)?
- Formation of the International Monetary Fund (IMF)
- Organizational Structure of the International Monetary Fund (IMF)
- Objectives of the International Monetary Fund (IMF)
- Functions of the International Monetary Fund (IMF)
- India’s Relations with the International Monetary Fund (IMF)
- Global Inflation due to changes in Monetary Policy
- International Monetary Fund (IMF) UPSC
What is the International Monetary Fund (IMF)?
The International Monetary Fund (IMF) is an international organization comprising 190 countries that work together to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty worldwide. Established in 1944, the IMF provides financial assistance to member countries facing balance of payments problems, offers policy advice and technical assistance, conducts research on global economic issues, and monitors economic developments globally to promote stability in the international monetary system.
Formation of the International Monetary Fund (IMF)
The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. IMF came into operation later on 27th December 1945. Today, the IMF is an international organization that consists of 189 member nations. IMF is a specialised agency of the United Nations, the headquarters of IMF is situated in Washington D.C.
- IMF aims to encourage global monetary cooperation for attaining financial stability and facilitating and promoting international trade, employment, and economic growth among nations around the world.
- The breakdown of international monetary cooperation during the Great Depression led to the development of the IMF, which aimed at improving economic growth and reducing poverty worldwide. IMF was initiated at the Bretton Woods Conference in 1944 in which 45 government representatives were present to discuss a framework for postwar international economic cooperation.
- Later, IMF came into operation in 1945 with 29 member nations, these nations agreed to found to its treaty. It began its financial operations on March 1st, 1947. Currently, the IMF has 189 member nations.
- IMF is considered a key organization in the international economic system that aims to rebuild international capital along with maximizing national economic sovereignty and human welfare.
Organizational Structure of the International Monetary Fund (IMF)
The United Nations is the parent organization that handles the proper functioning and administration of the IMF. The head of the IMF is a Managing Director who is elected by the Executive Board for a tenure duration of 5 years in-office. IMF consists of the Board of Governors, Ministerial Committees, and the Executive board.
The detailed organisational structure of IMF is shown below in the table:
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Organizational Structure of International Monetary Fund (IMF) |
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Governing Bodies |
Roles and Responsibilities |
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Board of Governors |
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Ministerial Committees 1. International Monetary and Financial Committee (IMFC) 2. Development Committee |
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Executive Board |
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Objectives of the International Monetary Fund (IMF)
IMF was developed as an initiative to encourage international monetary cooperation, enable international trade, attain financial stability, provide high employment, reduce poverty among the nations around the world and sustain economic growth.
The main objectives of International Monetary Fund are mentioned below:
- To reduce poverty around the world.
- To attain financial stability by eliminating the exchange rate stability.
- To facilitate a balanced international trade.
- To encourage global monetary cooperation among the nations.
- To provide high employment through economic assistance and sustainable economic growth.
Functions of the International Monetary Fund (IMF)
IMF mainly aims on supervising the international monetary system along with providing credits to the member nations. The functions of International monetary Fund can be categorised into three types:
- Regulatory Functions: IMF functions as a regulatory body and focuses on administrating a code of conduct for exchange rate policies and restrictions on payments for current account transactions as per the rules of the Articles of Agreeent.
- Financial Functions: IMF provides financial support and resources to the member nations to meet short term and medium term Balance of Payments (BOP) disequilibrium.
- Consultative Functions: IMF is a centre for international cooperation for the member nations. It also acts as a source of technical assistance.
India’s Relations with the International Monetary Fund (IMF)
- India is among founders member of the International Monetary Fund. Each member nation of IMF has an alternate governor, the alternate governor for India is the Governor of Reserve Bank of India (RBI). There is also an Executive Director representative for India.
- India has 2.76% shareholding in IMF which is equivalent to a quota of Special Drawing Rights 13,114 Million. India is eighth largest quota holding nation in International Monetary Fund.
- India has completely repaid all the loans taken form the IMF in 2000, now India is a contributor to the IMF.
- India’s voting rights increased to 2.63 percent from the current 2.3 percent from the reforms.
Global Inflation due to changes in Monetary Policy
The prediction is that the world’s growth will slow down over the next few years. It’s expected to go from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024. This is lower than the average growth we’ve seen between 2000 and 2019, which was 3.8 percent. Advanced countries like the US and Europe will see slower growth, while developing countries will also experience a slight dip. Inflation worldwide is also expected to decrease gradually due to changes in monetary policy and lower prices of goods. However, it might take until 2025 for inflation to reach the desired target in most places.
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International Monetary Fund (IMF) UPSC
International Monetary Fund (IMF) is an important topic for the UPSC Exam perspective which is included in the International Relations and Economy sections. International organizations such as the International Monetary Fund (IMF) often appear in current affairs. The syllabus for the UPSC Mains includes the topic “International Organisations” which makes it important to know about such International Organisations for the preparation.
Summary – International Monetary Fund (IMF)
The International Monetary Fund (IMF) is a global organization formed in 1944 to help countries work together on monetary matters. It has 190 member countries that collaborate to promote stability in the world’s money systems, support global trade, encourage economic growth, and reduce poverty. The IMF provides financial help to countries facing payment issues, gives advice on economic policies, and conducts research to understand and address global economic challenges. It was created after a meeting in 1944, and since then, it has been helping countries facing economic difficulties. India, as one of its founding members, has actively participated, repaid loans, and increased its role in decision-making. The IMF plays a crucial role in maintaining a stable and cooperative international financial environment.
FAQs on International Monetary Fund (IMF)
When was the formation of International Monetary Fund initiated and came into operation?
The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. IMF came into operation later on 27th December 1945. IMF began its financial operations on March 1st 1947.
How many member nations were there in IMF initially and now?
IMF came into operation in 1945 with 29 member nations, these nations agreed to found to its treaty. Currently, the IMF has 190 member nations.
What is the aim of International Monetary Fund (IMF) ?
The International Monetary Fund aims to reducing global poverty, encouraging international trade, and promoting financial stability and economic growth. IMF has mainly three functions: Regulatory Functions, Financial Functions and Consultive Functions.
What does International Monetary Fund IMF do?
The International Monetary Fund (IMF) performs several functions to promote international monetary cooperation, financial stability, and economic growth
Who gives IMF money?
The International Monetary Fund (IMF) receives its funding primarily from its member countries. Each member’s financial contribution is known as a “quota,” which is determined based on its economic size and other factors. The quota represents a financial commitment from the member country to the IMF, and it determines both the member’s financial commitment and its voting power within the organization.
Is India an IMF country?
India is indeed a member of the International Monetary Fund (IMF). As a member, India has a quota, contributes financial resources, and has a role in the decision-making processes of the organization. India has actively participated in IMF programs, received financial assistance when needed, and has also contributed to the IMF’s resources.