ACKNOWLEDGEMENT

I would sincerely like to put forward my heartfelt appreciation to our respected Political
Science Professor, Mrs. T.Nirmala Devi for giving me a golden opportunity to take up this
project regarding- International Monetary Fund. I have tried my best to collect information
about the project in various possible ways to depict clear picture about the given project
topic.
TABLE OF CONTENTS
 INTRODUCTION

The International Monetary Fund (IMF) is an international organisation

that provides financial assistance and advice to member countries. IMF was born at the
World War II, out of the Bretton Woods Conference in 1945. It was created out of a need to
prevent economic crises like the Great Depression. With its sister organization, the World
Bank, the IMF is the largest public lender of funds in the world. It is a specialized agency of
the United Nations and is run by its 186 countries. Membership is open to any country that
conducts foreign policy and accepts the organization’s statues.
The IMF is responsible for the creation and maintenance of the international
monetary system, the system by which international payments among countries take place. It
thus strives to provide a systematic mechanism for foreign exchange transactions in order to
foster investment and promote balanced global economic trade. To achieve these goals, the
IMF focuses and advises on the macroeconomic policies of a country, which affect its
exchange rate and its government’s budget, money and credit management. The IMF will
also appraise a country’s financial sector and its regulatory policies, as well as structural
policies within the macroeconomy that relate to the labour market and employment. In
addition, as a fund, it may offer financial assistance to nations in need of correcting balance
of payments discrepancies. The IMF is thus entrusted with nurturing economic growth and
maintaining high levels of employment within countries.
The role of law in international momentary relations has been misunderstood,
maligned and malnourished. However, not only is there an essential function for the
institution of law in international monetary relations, but an understanding of it is
fundamental to an insight into international relations.
The IMF is a special financial forum, the main purpose of which is to openly discuss the
fiscal policies of its members ad to avoid server exchange restrictions on international
currencies. Article 1 of the articles of agreement sets out International Monetary Fund’s main
responsibilities:
 Promoting international monetary co-operation;
 Facilitating the expansion and balanced growth of global trade;
 Promoting currency exchange stability;
 Assisting in the establishment of a multilateral system of payments; and
 Making its resources available (Under adequate safeguards) to members experiency
difficulties in repayments.
 INDIA’S BENEFITS OF BECOMING THE IMF MEMBERS

India likewise got the accompanying advantages of turning into the IMF individuals, for
example:
1. Autonomy of the Indian Rupee
2. Enrolment of the World Bank
3. Accessibility of Foreign Currencies
4. Notoriety in International Circle
5. Direction and Advice
6. Auspicious Help
7. Opportunity from Sterling
8. Deal and Purchase of Foreign Exchange
9. Monetary Consultation
10. Help amid Emergency.

IMF has assumed a significance job in Indian economy. IMF had given financial help now
and again to India and has additionally given proper consultancy in assurance of different
strategies in the nation. India is the organizer individual from IMF. It assumed a huge job in
the definition of Fund Policies. The Finance Minister is ex-officio Governor in IMF Board of
Governors. Till 1970, India was among the initial five countries having the most elevated
standard with IMF and because of this status India was apportioned a lasting spot in
Executive Board of Directors. India has taken advances in remote monetary standards from
IMF or improving its equalization of instalments awkward nature. India has additionally
taken specialized consultancy for taking care of its inner monetary issues. The master
gatherings of the IMF have visited India on different events.
INDIA ADDITIONALLY GOT THE ADVANTAGES OF TURING INTO THE IMF
INDIVIDUALS:

1. Autonomy of the Indian Rupee:

Prior to the foundation of the IMF, the Indian rupee was connected with the British Pound
Sterling. Indian rupee has turned out to be free after the foundation of IMF. It’s esteem is
communicated as far as gold. It isn't dictated by the Pound Sterling. It implies that Indian
rupee is effectively convertible into the cash of some other nation.

2. Acceptances of the World Bank:

India has turned into an individual from the World Bank likewise by ideals of its enrollment
of the Fund. Therefore, India even got a few advance offices from the World Bank for its
improvement purposes.

3. Accessibility of Foreign Currencies:

The Government of India has been buying remote monetary forms from the Fund every once
in a while to meet the basics of advancement exercises. The expansive measure of
accessibility of remote monetary forms has enormously advanced the financial improvement
of the nation.

4. Disrepute in International Circle:

India is one of those six nations which have involved an extraordinary spot in the Board of
Directors of the Fund. Hence, India had assumed a respectable job in deciding the strategies
of the Fund. This has expanded India's distinction in the worldwide circles. India checks out
the plan of Fund's strategies.
5. Direction and Advice:

Being individual from the Fund, India got the master sentiment from the Fund for taking care
of its monetary issues. The frame of mind of the Fund towards India has dependably stayed
thoughtful. The Fund has given significant guidance to the Government of India as to the
financing of the Five-Year Plans.

6. Convenient Help:

India has gotten convenient assistance from the Fund to dispose of the shortage on its
equalization of instalments. The Fund allowed advances to meet the monetary troublesome is
emerging out of the Indo-Pak struggle of 1965 and 1971. Thus, the fund has given timely
help to solve economic crisis.

7. Opportunity from Sterling:

Before turning into the individual from the store, Indian rupee was convertible into different
monetary forms through the vehicle of sterling with the obsession of paper estimation of the
rupee in gold, Indian money is presently unreservedly convertible into some other cash.

8. Deal and Purchase of Foreign Exchange:

Store has depended the deal and buy of remote trade worth more than Rs. 2 lakh to Reserve
Bank of India. The last can't go into any exchange of outside trade that is of the estimation of
not as much as Rs. 2 lakh.

9. Financial Consultation:

In the monetary administration of Five-Year Plans, IMF has given significant appeal to
Government of India and to propose measures for its financial advancement.

10. Help amid Emergency:

India got a lot of money related help from the Fund to comprehend its financial emergency
emerging because of regular calamities like flood, seismic tremors, starvations and so forth.
 OBJECTIVES

Article 1 of the Articles of Agreement (AGA) curse out six purposes for which the IMF was
set up:

These are:
1. To promote international monetary cooperation through a permanent institution which
provides the machinery for relief and partnership on international monetary problems.

2. To facilitate the expansion and balanced growth of international trade, and to contribute to
the promotion and maintenance of high levels of employment and real income and to the
development of the productive resources of all members as primary objective of economic
policy.

3. To promote exchange stability, to maintain orderly exchange arrangements among

members, and to avoid competitive exchange reduction.

4. To assist in the establishment of a multilateral system of payments in respect of current

transactions between members and in the elimination of foreign exchange restrictions which
hamper the growth of world trade.

5. To give confidence to members by making the general resources of the Fund temporarily
available to them under adequate safeguards, thus providing them with the opportunity to
correct maladjustments in their balance of payments, without resorting to measures
destructive of national or international prosperity.

6. In accordance with the above, to shorten the duration and lessen the degree of dis-
equilibrium in the international balance of payments of members.
Unfair of IMF representing the interest between rich and poor countries

Likewise, Stigliz, a Nobel Prize winner and former chief economist for the World Bank,
claimed that institution like IMF driven by an ideology and special interests in rich countries
(Milner, 2005). Moreover, IMF officials have imposed the wrong policies on the poor
countries
and worsened their economic and political situations. Furthermore, we see that the poor or
developing countries have been increasingly capacity to engage in world economy because of
technological advancement, reduced barrier of trade, reduced communication and
transportation
cost and policy change. But the capacity of the IMF and World Bank has not grown
proportionately, thus they are less able to help those countries, especially at the times of crisis
(Milner, 2005).

The Members and the Administration:

By joining the IMF, each member country pays the amount of money called the 'Quota
Subscription' as a loan union deposit. Also the quotas are different purposes. The IMF would
create a pool of money that they would give to members during financial difficulties. They
decide on separate drawing rights (SDRs). They determine the voting power of the member.

Statutory Benefits
Benefits of International Monetary Fund are one through international monetary cooperation,
Permanent company that provides machines. Consultation and cooperation on the
International Monetary Fund, Issues, Expansion and balanced growth, International trade and
thereby, to contribute, Promotion and management of high level jobs. Realistic income and
product development, The primary goal is all the members' resources, even economic policy,
To promote conversion stability, maintain regularly Conversion arrangements between
members and avoid Competitive exchange depreciation, Helping the establishment of a
multilateral system. Payments between current transactions, Members and foreign exchange
elimination Limitations of global trade growth. Trusting the members by creating the general
public. They are temporarily available sources of funds Provide adequate security and thus
provide them. The possibility of fixing bad in their balance Payments without taking action
National or international wellbeing. .Reduce the time duration and, as outlined above, Reduce
the level of illness in the international community payment of members payments.
Is there a need for Reforms in IMF:
It was expected to provide new public benefit in the form of financial market stability. The
IMF has undertaken a two-segment of the IMF monetary crisis and the liquidity crisis, in
view of the recurring banking crisis. This problem has returned to the 2008 global financial
crisis. Since the early 1980s, term loans have been spent on decentralized projects for decades
prior to long-term lending to countries. Loans further helped to develop. IMF loans are also
linked to structural reforms, based on Washington consensus following World Bank
leadership. Loans are laid on the structural adjustment policies and implementation of
successful reforms in the economy. Monitoring, continuous monitoring and policy
recommendations are part of the new policy. Since 1990, IMF loans have been linked to
economic reform measures and capital accounting liberalization. An important lesson learned
from the 1990s financial crises in Mexico and Southeast Asian countries, Russia, and Turkey
can lead to weakness in the banking sector without liberalization of the economy, and without
strong banking supervision.
The Review of IMF policies
The original plan of the Bretton Woods system concerns international development and meets
for consultations with developing countries. The Bretton Woods debate developed a number
of new-enthusiastic proposals for developing the development-friendly international financial
order, some of which found their way to the deal. Many architects of this system have lost the
privilege and have dreamed of the powers of the system and are concerned about free trade
and foreign investment in the region. The countries of Latin America and India have
expressed strong frustration in the absence of existing international extremity-content content
and have sought "New International Economic Order" (NIEO) to support their development
goals with Africa and other developing countries. Demanding greater access to financial
resources in the North in line with developmental needs, the fund has increased overall
participation in the decisive process.

Evidence on association between IMF loan and economic growth

The evidence on the effect of IMF loans on economic growth of the emerging economies is
mixed. IMF reviews generally report a positive relationship between IMF loans and
economic growth. For example, after IMF loans received IMF loans, the structured
adjustment facility (SAF) and improved structural adjustment facilities (ESAF), and the IMF
study (IMF) 1997). The living standards of people in these countries improved and there was
considerable progress towards external viability. IMF study progress is uneven, thereby
repealing the policy weaknesses and many ESAF countries are still weak. There is no
systematic impact of adjustable loans on Easter (2003) growth. It has had fewer banking
crises in countries participating in 113 low and middle income countries from 1970 to 2010
and IMF-supported programs. Countries with strong fundamentals that have taken IMF loans
may have financial crises. DeHar and Walter (2010), studying IMF programs found that in
developing countries, IMF helped reduce the likelihood of currency crisis in 68 developing
countries. They also refer to the terms of the loan agreement that they vary. Since 1990, IMF
loans have been linked to economic reform measures and capital accounting liberalization.
One important lesson learned in those days is the financial sector which leads to vulnerability
in the liberal banking sector without the simplified banking supervision. Prevverski and
Verlane (2000) and Barro and Lee (2003) have found that IMF loans share a negative impact
on economic growth.
Financial assistance
The IMF gives the money to member states only with balance payments problems A member
of the payment can pay a member country and can immediately withdraw 25 percent quota
from the IMF. And if in case of more trouble, the Member may ask for more money from the
IMP and takes up its quota member three times to launch and use reforms in the country
Borrow money efficiently. Through frequently used mechanisms are:
The IMF has to give money
1. Standby arrangements
2. Extended arrangements
3. Structural Adjustment Mechanism (with low interest rates).

Regular IMF facilities

Designed to provide standby arrangements (SBA)Short-term payments for a temporary or
cyclical nature, such arrangements are usually between 12 and 18 months. Drawings on a
quarterly basis, they made a clause in their release. Meeting performance standards and
completion Periodic Program Reviews. Repurchases are made of 31/45 years after each
purchase. Extended Fund Facility (EFF) is designed for support. Medium-term programs
usually go for three Years. EFF aims to exceed the balance of payments and the Problems
derived from macroeconomic and construction issues. Performance criteria apply and standby
arrangements and make purchases 41/2 to 10 years.
Concessional IMF facility
Improved Construction Adjustment Facility (ESAF) was stablished in 1987 and expanded in
1994.it was created with low-income member countries for balance of payments issues,
ESAF drawings, no loans and other members' purchases Currencies. They are made with
three years of support Programs and 0.5 percent annual interest rate Percent, a 51h year grace
period and a 10year maturity. Quarterly Benchmarks and Semi Annual Performance
Standards are applicable; There are currently 80 low-income countries ESAF is eligible to
use.