Functions of IMF

  1. Granting of Loans of its Financial Resources: The fund can use its resources for granting loans to member contrives. A member country facing a temporary deficit in its balance of payments (i.e., shortage of foreign exchange) can purchase from the fund the required foreign currency to meet the deficit by offering its own currency in exchange.

The amount of loans that a country can borrow from fund in any one year should not exceeds ¼ of its quota, and the total amount of its loans outstanding at any time should not exceed 1¼ of its quota.

  1. Promotion of Exchange Stability: The fund is convinced that stable exchange rates are essential for the balanced growth of multilateral trade with this and in view, it has takes upon itself the responsibility of maintaining stable exchange rates among the currencies of member countries.
  2. Management of Scare Currencies: Some times, it may so happen that many member countries may demand from the fund the currency of one particular country. If such a situation arises, the fund will try to increase the supply of that currency either by borrowing from the country concerned.

If the supply of that currency still proves to be insufficient to satisfy the needs of all the needy members, the fund declares the currency scare.

  1. Elimination of Exchange Control and other Exchange Restrictions: The funds feels that, if there are restrictions on purchase and sale of foreign exchange, the rates of exchange agreed upon case to be effective. So, if wants to ensure that there are no exchange control and other exchange restrictions on ordinary trade and current transactions.


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