Reflective Journal: The International Monetary Fund and its functions
The International Monetary Fund (IMF) works to foster economic growth and economic stability, which is an association that mainly creates the stability in exchange rates and offers temporary loans for the state members in order to tackle their balance of payment problems. Beside, the members contribute their national currencies to the IMF pool for providing loans to deficit countries. In addition, the IMF article of agreement has emphasized that the members had to peg their currencies to gold or US dollars. The IMF utilizes its gold holdings to acquire dollars and other currencies for its operations. The capital of the IMF consists of the aggregate of the quotas allotted to the member countries member can pay its quota in its national currency. Therefore, the developed countries (DC) hold the significant powers in IMF.
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Moreover, the IMF has the obligations to lend money for the members to stop the deficit in balance of payment. The IMF will examine the states’ debt is sustainable or not before it lends money for them. Also, Ukraine is having the political crisis, the tensions between Russia let her suffer in external debt. "Debt in Ukraine is sustainable," Reza Moghadam said in a news conference during the IMF and World Bank spring 2014 meetings. (Strupczewski, 2014) This year, the IMF offers $7 billion to Ukraine to finance support the state budget and central bank reserves, Finance Minister Oleksandr Shlapak said. On the other hand, the IMF has pledged to cover Ukraine's financing needs of $27 billion over the next two years while Ukraine needs about $30 billion through 2015 to balance the situation. Lending money is one of the IMF functions. As a result, the currency in Ukraine will rebound soon after financing the money.
Beside, reconciling conflicting claims of member countries and helping them to get rid of the financial crisis are also the IMF functions. The U.S. Assistant Secretary of State urged Ukraine to sign a new deal with the IMF, which would “send a positive signal to private markets and would increase foreign direct investment that is so urgently needed in Ukraine.” In this news, it can illustrate that after signing the agreement with IMF may boost Ukraine foreign investments and strengthen the sort of stable and predictable business environment that investors require.
Also, the function of advising member countries on economic, monetary and technical matters can be demonstrated in the news of “Boosting forex reserves: Pakistan refuses to sell $2.7b worth of gold says IMF”. According to the report, the State Bank of Pakistan (SBP) holds over 2 million troy ounces of monetary gold, having $2.7 billion value at market rate. Therefore, the IMF is advising Pakistan to sell gold holdings at a time when other countries are buying the commodity as a strategic reserve. The IMF had even sold its surplus gold to India a couple of years ago in order to maintain the market’s stability.