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Questions and Answers
What is the main purpose of the IMF in relation to the establishment of a multilateral system of payments?
What is the main purpose of the IMF in relation to the establishment of a multilateral system of payments?
In what year did the IMF start functioning?
In what year did the IMF start functioning?
What is the role of the Board of Governors in the IMF?
What is the role of the Board of Governors in the IMF?
How are the resources of the IMF subscribed by members?
How are the resources of the IMF subscribed by members?
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What is one of the main objectives of the IMF as summarized in the Articles of Agreement?
What is one of the main objectives of the IMF as summarized in the Articles of Agreement?
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What is the significance of a member nation's quota in the IMF?
What is the significance of a member nation's quota in the IMF?
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Who appoints six out of the 22 directors on the Board of Executive Directors of the IMF?
Who appoints six out of the 22 directors on the Board of Executive Directors of the IMF?
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Which advantage is the IMF seeking to achieve by avoiding the international disadvantages of the gold standard?
Which advantage is the IMF seeking to achieve by avoiding the international disadvantages of the gold standard?
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What is NOT a primary objective of economic policy according to the IMF's main objectives?
What is NOT a primary objective of economic policy according to the IMF's main objectives?
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Why does the IMF aim to avoid the internal disadvantages of the gold standard?
Why does the IMF aim to avoid the internal disadvantages of the gold standard?
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What does the IMF seek to promote through its objective of facilitating exchange stability?
What does the IMF seek to promote through its objective of facilitating exchange stability?
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Study Notes
Objectives of IMF
- To assist in the establishment of a multilateral system of payments for current transactions between members and eliminate foreign exchange restrictions that hamper world trade.
- To give confidence to members by providing them with opportunities to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
- To shorten the duration and lessen the degree of disequilibrium in the international balance of payments of members.
Organisation of IMF
- The IMF came into existence in December 1945 and started functioning in March 1947.
- It is an autonomous organisation affiliated to the UN, with its main office in Washington.
- Initially, the IMF had 30 countries as its members, which increased to 149 by April 30, 1986, covering nearly all non-communist nations of the world.
Management of IMF
- The management of the Fund is under the control of two bodies: the Board of Governors and the Board of Executive Directors.
- The Board of Governors is the general body of management, consisting of one Governor and an Alternate Governor for each member country, responsible for formulating the general policies of the Fund.
- The Board of Executive Directors controls the day-to-day activities of the Fund, comprising 22 directors, with 6 appointed by the members having the largest quotas and 16 elected by other nations.
Resources of IMF
- The resources of the IMF are subscribed by the members, based on their national income and position in international trade.
- Every member nation must contribute 25% of its quota in international reserve assets and the remaining 75% in its own currency.
- The payment of 25% part of the quota is in Special Drawing Rights (SDRs), an international reserve asset created by the IMF in 1969.
- The Fund may also enlarge its resources by borrowing, selling gold to the public, and receiving fees from borrowing members.
Importance of Quota
- A member nation's quota determines its subscription to the IMF, which in turn determines the magnitude of the IMF resources and their composition.
- Quota determines a country's access to IMF resources through drawings or borrowing from the Fund.
- Quota determines a country's voting power in the IMF management.
- Quota determines the share of a member country in the allocation of SDRs.
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Description
Test your knowledge on the objectives of IMF outlined in Unit 3 (sections 3 to 5). Understand the aims of the Fund in promoting international monetary cooperation and addressing the advantages and disadvantages of different standards.
