IMF

1. The IMF servesasa global hubfor knowledgeoneconomicandfinancial issues.Itsharesthisknowledge
withgovernmentinstitutionssuchasfinance ministriesandcentral banksindifferentforms.
The large financial packageswhichthe IMFhasarranged for countriesaffectedbythe Asiancrisisandits
aftermathhave stimulatedadebate bothamongpolicy-makersandacademicsasto theircostsand
benefits.
The international monetaryfund(IMF) andthe WorldBank knowsasthe BrettonWoodsinstitution
were establishedin1944. The purpose of the IMF wasto promote internationalmonetarycooperation,
exchange rate stability,andthe expansionof international trade byactingaslenderof lastresortwhena
membercountryfacedan economiccrisis.
By approachingthe IMF, a membercountryfacinga financial crisishasaccessto the fund’sresources
and advice.
Its holdingsof foreignexchange;total valuesof exportsandimportsof merchandise;international
balance of payments;international investmentposition;national income;price indicesandthus
measuresof itsinflationrates;andwhat,if any,exchange controlsacountryhas ineffect.
Benefitsof IMF:
The IMF providesloanstocountriesin financialdistressata relativelylow interestrate.
The benefitsof belongingtothe IMFare obviouslyconvincingtothe 184 countriesthathave voluntarily
joinedthe organization.These countriesanticipate thatmembershipwillhelpthemruntheirown
economiesbetter.Because membercountriesare knowntobe followingthe IMFcode of conduct,
membershipencouragesinvestmentandtrade,leadingtofulleremployment.The IMFalsoprovides
technical assistance andfinancial supportwhenthe membercountryneedsit.
 Accessto informationoneconomicpoliciesof all membercountries
 Opportunitytoinfluence members’economicpolicies
 Accessto technical assistance inbanking,fiscal affairs,andexchange matters
 Financial supportintimesof paymentdifficulties
 Increasedopportunityfortrade andinvestment
Some benefitsare givenbelow:
Creditorsacceptthe relativelylowinterestrate paidbythe IMF for twomainreasons.
The firstreasonis basedona publicgoodargument.The role of the IMF in the international monetary
systemisof strategicimportance toboth debtorsandcreditors,asexplainedearlierinthissection.
Therefore,ingeneral,countrieshave beenpreparedtoacceptrelativelylow compensationasa kindof a
membershipfee tothe IMF.Nevertheless,because of domesticpoliticalpressuresindustrial countries,
especiallythe UnitedStates,have questionedthe tariff structure of the IMF.At the same time,some
countrieshave become more interestedinmaximisingthe revenuesontheirofficialreserveholdings.

2. Second,lowinterestratesare acceptedbecause the claimsonthe IMFare highlyliquid:the reserve
positioninthe IMF can be drawn onimmediatelyincase of balance-of-paymentsproblems.Thismakes
it possible forthe claimsonthe IMF to be countedas part of a member
The financial structureofthe IMF : The IMF’s involvementincrisismanagementconsistsingeneralof
twoelements:policyadvice andthe provisionof loans.Onthese loansarelativelylow interestrate is
charged.Thisis possible because the IMFacquiresresourcesatrelativelylow costsasa resultof its
special,fairlycomplex financialstructure.Mostmembercountriespoolpartof theircentral bankofficial
reservesandputthemat the disposal of the IMF. Thispool of quotasisusedby the IMF to finance the
creditsitextendstoothermembercountries.Creditorcountriesare compensatedforthisuse of
reservesbya remunerationwhichislargelybasedonthe SDRinterestrate,composedof the weighted
three-monthinterestrate ongovernmentpaperof the UnitedStates, Japan,the UnitedKingdomand
France and the three-monthinterbankdepositrate inGermany>Thus,the remunerationonthe use of
resourcesbythe IMF closelymirrorsmoneymarketinterestratesinmajorindustrial countries.
Kapur,D. (1998). How the IMF works. Foreign Policy,(111), 116.
Harper,R. (2009). Insidethe IMF.Routledge.
Bakker,A.F., & Schrijvers,M.A. (2000). The financial benefitsof the IMF. PSL Quarterly Review,53(214).