What Is The Full Form Of IMF?
The full form of the IMF is an International Monetary Fund. It is an organization of international recognition based in Washington DC comprising 189 countries working towards international monetary cooperation, establishing financial stability, promoting international tradeInternational TradeInternational Trade refers to the trading or exchange of goods and or services across international borders. , promoting employment and economic growth, and poverty eradication around the globe.
The World Bank finances it. It was formed in 1944 at the Bretton woods conference by the vision of Harry Dexter White and John Maynard Keynes and formally came into existence in 1945 with 29 member countries with the aim of reformation of the international payment system. It has a vital role in the management of the balance of payment and the global financial crisisFinancial CrisisThe term "financial crisis" refers to a situation in which the market's key financial assets experience a sharp decline in market value over a relatively short period of time, or when leading businesses are unable to pay their enormous debt, or when financing institutions face a liquidity crunch and are unable to return money to depositors, all of which cause panic in the capital markets and among investors..
Table of contents
- The IMF stands for the International Monetary Fund. It is a widely recognized organization based in Washington, DC, in 189 countries. The organization aims to promote monetary cooperation, ensure stability, support trade, foster growth, and combat poverty globally.
- Established in 1945, this organization manages the balance of payments and addresses global financial crises. The organization aimed to revamp international payment and was funded by the World Bank after the Bretton Woods conference. Harry Dexter White and John Maynard Keynes created it.
- The IMF promotes monetary cooperation and global stability, offers financial aid to debt-ridden countries, and encourages economic growth.
Full Form Of IMF Explained
The full form of IMF in economics is International Monetary Fund, that was established in 1944, with the aim of promoting monetary co-operation through the world and fostering international trade along with economic stability, which will ultimately help in reducing poverty.
The international monetary fund has as its mission to bring down global poverty, promote international tradeInternational TradeInternational Trade refers to the trading or exchange of goods and or services across international borders. , financial stability, and economic growth. The three main functions of the international monetary fund are economic development, lending, and capacity development. Through economic surveillance, the IMF observes developments that have a bearing on member economies and the world economy. This lends to member countries with balance of payment issues so that they can re-establish their economies. The body also provides policy advice and training through its technical assistance programs. Through these steps, the organization aims to support all the member countries so that they can co-operate and achieve macroeconomic stability, backed by strong economic policies and maximum growth.
Let us study the history of the organization right from its beginning.
- The full form of IMF in economics is in 1944. The economic depression brought about countries raising restrictions on trade in a bid to revive their struggling economies, which led to a devaluation of currenciesDevaluation Of CurrenciesCurrency devaluation is deliberately done in order to adjust the established exchange rates by the government and it is mostly done in the cases of fixed currencies. This mechanism is used by economies with a semi-fixed or fixed exchange rate, and it should not be confused with depreciation. and depression in global trade.
- The crises in international monetary cooperation caused a requirement for oversight. This led to a conclave of 45 countries named as the Bretton Woods conference to propose a framework for international economic cooperation and how to reinstate Europe.
- It was decided to form the IMF as a global economic body. Harry Dexter White, an American, envisioned the IMF function as a bank, ensuring borrowing countries could repay their debts in a timely manner.
- It was formally formed on 27 December 1945 when the 29 member countries agreed to its agreement articles.
- The end of 1946 saw the IMF grow to 39 members.1 March 1947 saw the IMF begin its financial operation, and 8 May saw France becoming the first country to borrow from the international monetary fund.
- It was one of the prime bodies of the international economic system. Its nature and form allowed it to reform international capitalismCapitalismCapitalism is an economic system consisting of businesses, resources, capital goods, and labour. Private entities own it, and the income is derived by the level of production of these factors. Because of the private hands, these entities can be operated efficiently and maximize their production activity also. with a boost to national economic cooperation and human welfare.
- The influence of the IMF increased as it added more members to its fold.
The international monetary fund functions in three main spheres:
- Observing the economies of member countries
- Lending to nations struggling with the balance of payment issues
- Helping member countries reform their economies
#1 – Overseeing Member Country Economies
- The international monetary fund’s major concern is to promote stability in the world economic system. It monitors the economies of its 189 member countries. The activity is known as economic surveillance conducted at the national and international levels.
- Through economic surveillance, the IMF oversees activities that have a bearing on member economies as well as the world economy. Member nations are asked to have economic policies that are in sync with the IMF policies. Overseeing the member countries’ macroeconomicMacroeconomicMacroeconomics aims at studying aspects and phenomena important to the national economy and world economy at large like GDP, inflation, fiscal policies, monetary policies, unemployment rates. and financial plans, the international monetary fund sees stability risks and recommends possible amendments.
#2 – Lending
- This offers its funds to strengthen member countries’ economies with issues in their This offers its funds to strengthen member countries’ economies with issues in their balance of paymentsBalance Of PaymentsThe formula for Balance of Payment is a summation of the current account, the capital account, and the financial account balances. The term balance of payments refers to the recording of all payments and obligations pertaining to imports from foreign countries vis-à-vis all payments and obligations pertaining to exports to foreign countries. It is the accounting of all the financial inflows and outflows of a nation. instead of lending to fund projects. The economic aid can refurbish international reserves, stabilize the currency, and boost economic growth. instead of lending to fund projects. The economic aid can refurbish international reserves, stabilize the currency, and boost economic growth.
- This wants the member countries to pay back the loans, and the nations must go for structural reformation policies monitored by the international monetary fund. Lending from the IMF has a twofold form. The first at market interest rate while the other is at concessional rates. The concessional rate of interest lending is done to countries with lower income and low or no interest rates.
#3 – Economic Advisory
The international monetary fund’s last function is through capacity development by providing policy advice and training through its various programs. The body provides member nations with an economic adviser in the following areas:
- Financial policy
- Exchange rate policy
- Financial system regulation
Why does this Matter?
The financial aid and financial restructuring policies not only help the countries in need that are provided with financial assistance, but it also helps the entire global economy. The prime reason such a loan is given is to maintain the balance of the global economy.
Given below are some of the primary activities of the organization. Let us try to understand them in detail.
- Policy advisory to governments and central financial bodies based on economic trends and cross-country trade analyses.
- Research, statistical forecasting, and analyses on the tracking of global and regional economies and markets.
- Loans and financial assistance to member countries to overcome the economic crisis.
- Loans at reduced rates of interest to help developing countries fight economic crises.
- Technical advice and assistance to help countries improve their economic situation.
The international monetary fund is seen as a fund of funds providing economic stability to countries with the debt burden. Let us look at its functions.
#1 – Fix the Par Value of Currencies in Gold or Dollar Terms
Every member country has to declare the par value of its currency in Dollar or gold terms. The purpose of the international monetary fund is to maintain stability in the exchange rates of member nations.
#2 – Foreign Currency Loans
They realize the importance of a stable exchange for the growth and progress of free world trade. A member country can buy foreign currency from the fund to overcome its temporary balance of payment deficit.
#3 – Short Supply of Currency
It is possible that a country’s currency is in short supply. A short supply of a currency in the forex market shows a favorable balance of payment. If the fund observes that a particular member country has a surplus balance of payment and the supply of its currency is insufficient relative to demand, the fund may ask the country to revalue its currency.
On a global level, the IMF has many benefits as follows.
- The advantage of the IMF is that it promotes international monetary cooperation and global financial stability. It provides financial aid to countries in debt, especially those with problems in the balance of payments. It promotes overall economic growth.
- It helps in identifying the potential risk and any kind of vulnerabilities through proper and detailed analysis of exchange rates, economic policies and positions.
- The advice and the technical assistance that the organization gives to the member nations guide them towards designing and implementing strong economic policies that lead to national development and poverty eradication.
- Its research and knowledge-sharing practices disseminate crucial economic analysis to the member nations, thus, contributing to global stability.
Thus, all functions and roles of the economic organization contribute to the global financial development in a sustainable manner.
Frequently Asked Questions (FAQs)
The IMF does not provide funding for specific projects. Instead, it offers financial support to countries in crisis to allow them to implement policies that restore economic stability and growth.
As a general rule, both U.S. citizens and green card holders are obligated to pay U.S. federal income tax regardless of where they reside, according to the United Nations. However, the Internal Revenue Service (IRS) website specifies that only two global organizations, the IMF and the World Bank, are exempt from this requirement.
The IMF primarily provides loans to member countries, which must be repaid. However, in certain circumstances, the IMF can give concessional loans or grants to countries facing exceptional challenges, such as natural disasters or conflicts.
This has been a guide to what is the Full Form of IMF. We explain its role, functions, along with history, why it matters, activities, and benefits. You may refer to the following articles to learn more about finance –