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Name MUHAMMED DAUD Roll No:21011624-093



Assignment 2
Assignment Due Date: 31/05/2022


Semester:2
nd
Assignment Submitted Date: 31/05/2022


Batch: LLB (Hons) 2021-2026
Course Code: ECO-101



Course: Introduction to Economics




S ubmitted To:
Mr. Altamash Irshad













UNIVERSITY OF GUJRAT

International Monetary Fund (IMF):
The International Monetary Fund (IMF ) is an international financial institution headquartered in Washington
DC, consisting of 190 countries. Its stated mission is "working to foster global monetary cooperation, secure
financial stability, facilitate international trade, promote high employment and sustainable economic growth,
and reduce poverty around the world." Formed in 1944, started on 27 December 1945, at Bretton wood
confrence primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal
existence in 1945 with 29 member countries and the goal of reconstructing the international monetary system. It
now plays a central role in the managementof balance of peyment difficulties and international financial
crises. Countries contribute funds to a pool through a quota system from which countries experiencing balance
of payments problems can borrow money. As of 2016, the fund had XDR 477 billion (about US$667 billion).
Through the fund and other activities such as the gathering of statistics and analysis, surveillance of its
members' economies, and the demand for particular policies, the IMF works to improve the economies of its
member countries. The organization's objectives stated in the Articles of Agreement are: to promote
international monetary co-operation, international trade high employment, exchange-rate stability, sustainable
economic growth, and making resources available to member countries in financial difficulty

What does IMD do?
The IMF has three critical missions: furthering international monetary cooperation, encouraging the expansion
of trade and economic growth, and discouraging policies that would harm prosperity. To fulfill these missions,
IMF member countries work collaboratively with each other and with other international bodies

IMF AND ITS WORKING:
According to the IMF itself, it works to foster global growth and economics stability by providing policy advice
and financing the members by working with developing countries to help them achieve macroeconomic stability
and reduce poverty. The rationale for this is that private international capital markets function imperfectly and
many countries have limited access to financial markets. Such market imperfections, together with balance-of-
payments financing, provide the justification for official financing, without which many countries could only
correct large external payment imbalances through measures with adverse economic consequences. The IMF
provides alternate sources of financing such as the poverty Reduction and Growth Facility
Upon the founding of the IMF, its three primary functions were: to oversee the fixed exchange
rate arrangements between countries, thus helping national governments manage their exchange rates and
allowing these governments to prioritize economic growth, and to provide short-term capital to aid the balance
of payments. This assistance was meant to prevent the spread of international economic crises. The IMF was
also intended to help mend the pieces of the international economy after the Great Depression and World War
II failed verification ] as well as to provide capital investments for economic growth and projects such
as infrastructure. [citation needed ]
Conditionality of loans:
IMF conditionality is a set of policies or conditions that the IMF requires in exchange for financial
resources. The IMF does require collateral from countries for loans but also requires the government seeking
assistance to correct its macroeconomic imbalances in the form of policy reform. [ If the conditions are not met,
the funds are with held. The concept of conditionality was introduced in a 1952 executive board decision and
later incorporated into the Articles of Agreement.
Conditionality is associated with economic theory as well as an enforcement mechanism for repayment.
Stemming primarily from the work of Jacques Polak, the theoretical underpinning of conditionality was the
"monetary approach to the balance of payments".

Structural adjustment:
Further information: Structural adjustment
Some of the conditions for structural adjustment can include:
 Cutting expenditures or raising revenues, also known as austerity.
 Focusing economic output on direct export and resource extraction,
 Devaluation of currencies,
 Trade liberalisation, or lifting import and export restrictions,
 Increasing the stability of investment (by supplementing foreign direct investment with the opening of
facilities for the domestic market,
 Balancing budgets and not overspending,
 Removing price controls and state subsidies,
 Privatization, or divestiture of all or part of state-owned enterprises,
 Enhancing the rights of foreign investors vis-a-vis national laws,
 Improving governance and fighting corruption,
 Banning the use of cryptocurrencies.
These conditions are known as the Washington Consensus.
IMF AND ITS IMPACT:
According to a 2002 study by Randall W. Stone, the academic literature on the IMF shows "no consensus on the
long-term effects of IMF programs on growth".
Some research has found that IMF loans can reduce the chance of a future banking crisis, while other st
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