International Monetary Fund (IMF) is a global organization formed in July 1944 during the great depression. It came into operation in December 1945 to stabilize the global economy. It was formed when the global economy collapsed to accelerate the slowdown in the world economy. Headquartered in Washington D.C., USA, IMF emerged as a part of the Bretton wood conference. Initially, the IMF constituted 29 member countries and now expanded to include 189 countries as its members. Out of 196 countries, only Cuba, North Korea, Monaco, Taiwan, Vatican City, East Timor, and Liechtenstein are excluded from being IMF members.
The IMF aims to foster economic growth, poverty reduction, and trade around the world by providing economic aid, assistance, fund lending, and financial advice to its member countries.
India: A Leading Member
India serves as a founding member of the IMF. It has been granted a notable place in the formulation of IMF policies. India secured the highest quota of voting rights with the IMF and thus assigned a position in the Executive board of directors. The Finance minister of India is appointed as ex-officio governor in IMF. Until 1970, India sustained the power to appoint a permanent member on the Board of directors. But due to a reduction in its quota, India slipped from its special power.
India has reaped assistance and has taken loans from the IMF to improve its economy and fund its deficits in the balance of payment (BOP). Marking its place in IMF helped India in several ways including
• Recognition of Indian Rupee: IMF alleviated the dependency of the Indian rupee (INR) on pound sterling (GBP). Earlier, the rupee was measured in terms of the pound. But now it is being exhibited in terms of gold, making it exchangeable with a global currency.
• Leading Position: India became a leading member in formulating IMF policies. India is among the top six countries to be assigned a position on the board of directors of IMF which adds to building its global reputation.
• Seeking Expert Assistance: On multiple instances, India sought the assistance of IMF experts in solving its macroeconomic issues and BOP deficits. India frequently borrowed large sums of money to meet its finances and to cope up with the economic crisis. In April 2020, IMF offered a loan of billions of dollars to India to cope with the covid crisis.
• Member of World Bank: India’s membership with the IMF helped it gain loans from the World Bank to revive the economy and accelerate economic development.
India received financial aid during the economic crisis that helped it to counter the huge crisis which otherwise would have lead to a collapse of the Indian economy.
At a Glance
The International Monetary Fund caters to primarily three crucial needs of its member countries. It monitors the financial and economic issues and policies, providing financial aid, and lastly assisting in decision making and implementing policy to strengthen the economy. The countries Portugal, Pakistan, Greece, and Ukraine have taken a sizable amount of loans from the IMF.