I.M.F stands for International Monetary Fund is an international organization. The headquarter of I.M.F is situated at Washington, D.C., U.S.A. It was established on December 27, 1945. At present, there are 189 member countries. India is founding member. It was established to
- Facilitate growth of international trade.
- Promote exchange stability and prevent unnecessary exchange depreciation.
- Assist in establishment of multilateral system of payments.
- Eliminate foreign exchange restrictions
In order to fulfill the above mentioned objectives, IMF requires every member to fix the par value of its currency which the country cannot change (except to correct a fundamental disequilibrium). The member countries can further purchase or draw from the fund foreign currencies in exchange for their own currencies to correct an adverse balance of payments situation. India is regularly turning to the I.M.F whenever in need of foreign exchange to cover balance of payments deficits.
The function of I.M.F is to promote global growth and economic stability by providing policy, advice and financing the members to achieve stability and decrease poverty as per I.M.F
The member countries of I.M.F give money to a pool via quota system from which the countries experiencing balance of payment problems can borrow money. As of 2016, the fund had SDR 477 billion at about $666 billion. SDR means Special Drawing Rights and is a new international monetary unit equal to fixed proportions of five major currencies from October 1, 2016. SDR basket consists of five major currencies, U.S. dollar 41.73 percent, Euro 30.93 percent, Renmirbi (Chinese Yuan) 10.92 percent, Japanese Yen 8.33 percent, and British pound 8.09 percent. SDRs are allocated to member of countries to borrow a limited amount from the I.M.F.