Q.What is IMF? Discuss its various objectives and functions.

The International Monetary Fund (IMF) is the world's central institution for international monetary cooperation. Its main objectives and functions are to promote international monetary cooperation and exchange-rate stability, facilitate the balanced growth of world trade, help correct members' balance-of-payments problems, and provide short- and medium-term financial assistance (loans) to member countries facing payment difficulties — usually subject to structural/economic reforms. …

Note: The rationalised chapter does not detail the IMF's internal structure; the following is the standard Business-Studies treatment. The one place the IMF appears in this chapter's context is India's own reform story: in 1991, caught in a severe debt trap and a balance-of-payments crisis, India approached the IMF for funds. The IMF agreed to lend on the condition that India carry out structural changes to be able to repay — and those conditions effectively pushed India to liberalise its economy and move onto the path of globalisation. That episode captures exactly what the IMF does and how.

What the IMF is

• The International Monetary Fund is an international financial institution that works for international monetary cooperation among nations.
• It acts as a source of financial assistance to member countries, especially those facing balance-of-payments difficulties.

Objectives of the IMF

• To promote international monetary cooperation among member countries.
• To promote exchange-rate stability and orderly exchange arrangements, and to discourage competitive currency devaluations.
• To facilitate the balanced growth of international trade, and through it high levels of employment and income.
• To help eliminate or reduce balance-of-payments disequilibrium of member nations.
• To promote a multilateral system of payments for current transactions and remove foreign-exchange restrictions that hamper trade.

Functions of the IMF

• Financial assistance — Provides short- and medium-term loans to member countries to help them overcome temporary balance-of-payments problems (as India did in 1991).
• Conditional lending — Such assistance is generally granted subject to the borrowing country undertaking structural/economic reforms so that it can repay. …