International monetary fund, Microeconomics


The important objectives before the Fund presently are as follows:

• To promote international cooperation;
• To facilitate the expansion and balanced growth of international trade;
• To addict in establishing a multilateral systems of payments for current transactions between member countries as well as in eliminating foreign exchange restrictions that hamper the growth of world;

• To make available to the member countries the IMFs general resources on a temporary basis to enable them to correct BOP difficulties without resorting to measures that would harm national or international prosperity;

• To shorten the duration and lessen the degree of disequilibrium in the BOP of member countries.

The basic functions of the IMF are as follows:

i) To lay down ground rules for conduct of international finance;

ii) To provide short and medium-term assistance for overcoming short-term BOP deficits; and

iii) Creation and distribution of reserved in the form of special Drawing Rights (SDRs).

The Fund has 184 member-countries accounting for more than 80 per cent of the total world population and 90 per cent o the world trade. Each member-country contributes a certain sum of money called a quota subscription as a cost of membership fee.

Quota represents the subscription by a member-country to the capital fund of the IMF. Quotas are fixed for each country taking into account such factors as (i) GNP of the country, (ii) current account transactions, (iii) variability of current receipts,
and (iv) official reserves.

Each member country contributes 25 % of its quota in the form of SDR or foreign exchange and 75% in the country's own currency. Quoted serve various purposes:

• They determine the member's contribution to the Fund's resources which form a pool of money that the IMF can draw to lend to members in financial difficulty.

• The determine the voting powers of the members (each country has 250 basic votes plus one additional vote for each SDR 1,00,000 of quota).

• They are the basis for determining how much the contributing member can borrow from the IMF.

• They are the basis for determining how much each member receives form the IMF in periodic allocation of SDRs.

Overall, each member's quota is the most fundamental element in its financial relationship with the IMF.

Posted Date: 11/9/2012 6:21:20 AM | Location : United States

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