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262 International Marketing BRILLIANT'S

INTERNATIONAL MONETARY FUND (IMF)

Q.41. Write a short note on: IMF. [MBA (FT) 2006, 05]
OR
Discuss the objectives and functions of International Monetary
Fund.
Origin of IMF
The IMF is also called the fund in an international monetary institu-
tion established by 44 nations under Bretton Woods agreement of July
1944. The Principal aim was to avoid the economic mistakes of the 1920’s
and 1930’s The attempts of many countries to return to the old gold sys-
tem after the first world was failed miserably. The world depression of the
30’s forced every country imposed trade restrictions, exchange controls
and restored to exchange depreciation in order to encourage its exports.
This further brought a marked decline in world trade and extension of
depression. It was against this background that 44 Nations assembled at
the United Nations Monetary and Financial Conference at Bretton Woods,
New Hampshire (USA) from July 1 to July 22, 1944. Thus the IMF was
established to promote economic and financial cooperation among its
members in order to facilitate the expansion and balance growth of world
trade. It started functioning from March 1, 1947. In June 1996, the fund
had 181 members.
Objectives of the Fund
Following are the main objectives of IMF:
1. To avoid the competitive devaluation and exchange control.
2. To establish and maintain currency convertibility with stable ex-
change rates.
3. To develop multilateral trade and payment.
4. To promote international monetary cooperation through a perma-
nent institution which provides the machinery for consumption
and collaboration in international monetary problems.
5. To facilitate the expansion and balanced growth of international
trade and to contribute thereby to the promotion and mainte-
nance of high levels of employment and real income and to the
development of the productive resources of all members as pri-
mary objectives of economic policy.
6. To promote exchange stability to maintain orderly exchange ar-
rangement among members and to avoid competitive exchange
depreciation.