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Before people from different countries can buy or sell anything to each other, they have to solve a basic problem. Buyers have to be able to change their money from their country's currency to the seller's national currency. This is called "foreign exchange." Each currency, whether it's the US dollar or the indian rupees, has a value in terms of other currencies.

This is the "exchange rate." Without a reliable supply of foreign exchange in each country, and without relatively stable exchange rates, world trade would drop drastically. You wouldn't be wearing tennis shoes made in Asia, or eating an apple grown in New Zealand. The International Monetary Fund was founded over 50 years ago to allow currency to be exchanged freely and easily between member countries. Today, the IMF works to help member countries ensure that they always have enough foreign exchange to continue to do business with the rest of the world.

Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's industrial states. independent nation-states. Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. This created the unique situation whereby the United States dollar became the "reserve currency" for the nation-states which had signed the agreement.

WHAT IS IMF : 

WHAT IS IMF “It is an organization of 186 countries ,working to foster global monetary cooperation , secure financial stability ,facilitate international trade ,promote high employment and sustainable economic growth and reduce poverty” . The IMF is the most detailed attempt to organize the conduct of international monetary affairs.

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The International Monetary Fund was created in July 1944, originally with 45 members, with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. (Condon, 2007) Headquarters in Washington D.C. International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn (R) briefs journalists on the outcomes of the International Financial Monetary and Financial Committee meeting with Egyptian Finance Minister and International Monetary and Financial Committee (IMFC) Chairman Youssef Boutros-Ghali (M), and IMF First Deputy Managing Director John Lipsky (L); April 25, 2009 at IMF Headquarters in Washington, DC.

Who runs the IMF? : 

Who runs the IMF? Member Countries IMF Managing Directors Executive Board Board of Governors First Deputy Managing Dir Deputy Managing Dir Deputy Managing Dir

MEMBERSHIP : 

MEMBERSHIP There are two types of members: ORIGINAL MEMBERS: All those countries whose representatives took part in BRETTONWOODS CONFERENCE and who agreed to be the members of the fund prior to 31st December,1945. ORDINARY MEMBERS: All those who became its members subsequently. *BANK has the authority to suspend any member and similarly every member is free to resign.

Membership qualifications Any country may apply for membership to the IMF. The application will be considered first by the IMF's Executive Board. After its consideration, the Executive Board will submit a report to the Board of Governors of the IMF with recommendations in the form of a "Membership Resolution." These recommendations cover the amount of quota in the IMF, the form of payment of the subscription, and other customary terms and conditions of membership. After the Board of Governors has adopted the "Membership Resolution," the applicant state needs to take the legal steps required under its own law to enable it to sign the IMF's Articles of Agreement and to fulfil the obligations of IMF membership.

Membership in the World Bank requires membership in the IMF, and they are both specialized agencies of the United Nations. The World Bank was given domain over long-term financing for nations in need, while the IMF's mission was to monitor exchange rates, provide short-term financing for balance of payments adjustments, provide a forum for discussion about international monetary concerns, and give technical assistance to member countries.

RESOURCES OF THE FUND : 

RESOURCES OF THE FUND QUOTAS AND THEIR FIXATION: The fund has general account based on quotas allocated to its members .when a country joins the fund, it is assigned a quota that governs the size of its subscription, its voting power and its drawing rights . FUND BORROWING: It was in force from October 1962 to December 1998 .At that time its total borrowing was SDR 17 billion .

SHARE OF IMF QUOTA

OBJECTIVES OF THE IMF : 

OBJECTIVES OF THE IMF INTERNATIONAL MONETARY CO OPERATION TO FACILITATE EXPANSION AND BALANCED GROWTH OF INTERNATIONAL TRADE TO PROMOTE EXCHANGE STABILITY GENERATING HIGHER EMPLOYMENT AND INCOME ABOLITION OF EXCHANGE RESTRICTION AID TO MEMBERS DURING EMERGENCY TO SHORTEN THE DURATION AND LESSEN THE DEGREE OF DISEQUILIBRIUM IN THE INTERNATIONAL BALANCE OF PAYMENTS OF MEMBERS.


ACHIEVEMENTS OF THE IMF : 

ACHIEVEMENTS OF THE IMF INTERNATIONAL MONETARY CO-OPERATION EXCHANGE STABILITY CHECKING COMPETITIVE DEPRECIATION INCREASED ASSISTANCE INCREASE IN CAPITAL RESOURCES EXPANSION OF TRADE GURANTEE AGAINST COMPETITIVE DEVALUATION

CRITICISM REGARDING IMF : 

CRITICISM REGARDING IMF The united states is the biggest shareholders in the IMF,holding nearly 18% in shares,and the IMF is generally considered a tool of the U.S.treasury. IMF steps in and provide money,reform are not forthcoming.forexample-despite a post-crisis recovery in some asian countries,fundamental strutural reform has not taken place in any of of the asians countries.

IMF says, it makes loans in exachange for policy reform,it has not been successful in turning countries to the free market.Instead,the fund has created loan addicts, “more than 70 nations have depended on imf aid for 20 or more years,24 countries have received IMF creidts for 30 or more years.

One of the biggest critiques of the IMF and world bank is that they hardly ever co-ordinate their activities

IMF AND INDIA : 

IMF AND INDIA Joint india-imf training program (ITP) is established in pune. The ITP provides policy-oriented training in economics and related operational fields to officials in india. Courses covers macroeconomics management and policies,financial programming,monetory policy,exchange rate policy and foreign exchange operations. The cost of running the ITP program is shared by the IMF,reserve bank of india,government of australia.

From,1970,India no longer appointed its own executive director, as it lost its place among the five countries with the largest quota.It was replased by japan. IMF gives a lost of recommentations ,when they visit India,and the Indian government flush them down the toilet.

ADVANTAGES TO INDIA OF THE MEMBERSHIP OF IMF : 

ADVANTAGES TO INDIA OF THE MEMBERSHIP OF IMF FINANCIAL ASSISTANCE FROM THE FUND loan given by IMF to INDIA HELPS IN FOREIGN EXCHANGE CRISIS FREEDOM FROM STERLING MEMBERSHIP OF THE WORLD BANK ECONOMIC CONSULTATION

Cont.. : 

Cont.. An economist said India could grow faster than IMF’s estimate. “Growth next year will definitely be slower than this year, but it may still touch 7%. New oil refineries coming up next year will also boost GDP (gross domestic product). I agree with IMF that growth momentum will slow further, but it may pick up towards the end of next year,” said Dharmakirti Joshi, principal economist with credit rating agency Crisil Ltd.

CONCLUSION : 

CONCLUSION The IMF’s primary purpose is to safeguard the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to buy goods and services from each other. This is essential for achieving sustainable economic growth and raising living standards. providing advice to members on adopting policies that can help them prevent or resolve a financial crisis, achieve macroeconomic stability, accelerate economic growth, and alleviate poverty; making financing temporarily available to member countries to help them address balance of payments problems—that is, when they find themselves short of foreign exchange because their payments to other countries exceed their foreign exchange earnings; and offering technical assistance and training to countries at their request, to help them build the expertise and institutions they need to implement sound economic policies.

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