IMF is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments.
It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies on other countries as a condition for loans, restructuring or aid.
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 SDR, or Special Drawing Right s , is an international reserve asset that member countries can add to their foreign currency and gold reserves and use for payments requiring foreign exchange.
Its value is set daily using a basket of four major currencies: the euro, Japanese yen, pound sterling, and U.S. dollar.
The IMF introduced the SDR in 1969 because of concern that the stock and prospective growth of international reserves might not be sufficient to support the expansion of world trade. (The main reserve assets at the time were gold and U.S. dollars.)
Most of the IMF's loans to low-income countries are made on concessional terms, under the Poverty Reduction and Growth Facility .
2. Under a mechanism introduced by the IMF in 2005—the Policy Support Instrument —countries can request that the IMF regularly and frequently review their economic programs to ensure that they are on track.
The success of a country's program is assessed against the goals set forth in the country's poverty reduction strategy , and the IMF's assessment can be made public if the country wishes.
The IMF also participates in debt relief efforts for poor countries that are unable to reduce their debt to a sustainable level even after benefiting from aid, concessional loans, and the pursuit of sound policies.
To ensure that developing countries reap full benefit from the loans and debt relief they receive, in 1999 the IMF and the World Bank introduced a process known as the Poverty Reduction Strategy Paper (PRSP) process.
How much money a member can borrow from the IMF
25% of the country’s quota may be used
If this is not sufficient, then members can borrow up to 3 times the amount of its quota
present plans for reform to Executive Directors
If these plans are sufficient for the Executive Directors, the IMF grants the member a loan
The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.