What is INTERNATIONAL MONETARY FUND AND HOW IT WORKS?

by marana

What is INTERNATIONAL MONETARY FUND AND HOW IT WORKS?

The IMF stopped Pakistan's loan repayments and imposed strict tax collection demands on the government, which are now under negotiation. Talks between Pakistan and the International Monetary Fund (IMF) on reviving the seven-billion loan program have begun in Islamabad and will continue until February 9, 2023.

What is the international monetary fund IMF?

The IMF was established in 1944, while Pakistan became a member of the IMF on 11 July 1950.

The IMF is an international organization consisting of 190 member countries. All of these work together to stabilize the global economy. Any country can apply for membership by fulfilling the conditions. These requirements include information about the economy and the amount owed, called subscription quotas. The richer the country, the more money they have to pay for subscriptions. The IMF does three things to monitor and support the economy. : Monitoring economic and financial matters. It focuses on how the country is doing and what risks it faces, such as trade disputes following Brexit uncertainty in the UK and the economic impact of militant violence in Pakistan. Recommendations are given to member countries. How they can improve their economy. Short-term loans and financial aid to countries in need. These loans are made possible by the quota subscription of member countries.

The IMF has loans to member countries totaling $1 trillion for grant of Loans for to member’s countries for

What are the objectives of the IMF?

The IMF is often considered the "last resort" for securing loans. The IMF is the last hope of any country affected by an economic crisis. Harvard University economist Benjamin Friedman says it is difficult to determine the IMF's impact because it is impossible to know "whether its interventions will affect a country." Let things get better or worse and what could be the alternative.” “In 2002 Brazil received a loan from the IMF before defaulting on its debts. His government soon succeeded in reviving the economy and he paid off all his debts two years ago.

What is the criticism on the IMF?

The IMF sometimes imposes tighter loans on member countries that have been criticized as too harsh. These include reducing the national debt, reducing corporate taxes and strengthening the economy through foreign investment. When the European economic crisis hit in 2009, Greece was hit the hardest. In order to receive aid from the IMF, Greece had to make significant changes to its economy. Critics say the IMF's insistence on Greece's austerity policies has harmed both the country's economy and society.

Who is the head of the IMF?

Krista Lina Georgieva has been the Executive Director of the IMF since 2019. She was previously the Executive Director of the World Bank, replacing Christine Lagarde at the IMF, who is now the President of the European Central Bank. Krista Lina Georgieva is the poorest country in the European Union. The first head of the IMF from Bulgaria Since its inception, the IMF is usually headed by a European, while the World Bank is headed by an American. Krista Lina Georgieva warned before the annual conference that Brexit would be painful for both Europe and Britain.

Why was the IMF created?

The IMF was created as a result of the Bretton Wood Conference held in the United States in 1944. During World War II, 44 countries from around the world participated in this conference, including Great Britain, the United States, and the Soviet Union. At this conference, the world economy Along with the topics, the creation of a stable system of exchange rates and the recovery of the economy of war-affected European countries were also discussed. The World Bank and the IMF were created to fulfill these goals. IMF members agreed on a fixed exchange rate system to be maintained until 1970. The Executive Board approved a six billion dollar loan for Pakistan in July 2019. According to the history of the IMF program, Pakistan under military president Ayub Khan. had three programs from the IMF. Pakistan received four programs from the IMF during the first government formed under Prime Minister Zulfiqar Ali Bhutto.

When did Pakistan go to IMF under military president General Ziaul Haq?

According to the details available on the world organization's website regarding Pakistan's participation in IMF programs, Pakistan has had 23 programs with the IMF so far and the first program was decided in December 1958 under which Pakistan received two and a half million dollars. were given. . The deal was done. After that, the series of IMF programs continued to grow. The IMF Board last lent $1.1 billion to Pakistan under the Seventh and Eighth Expanded Fund Reviews in August 2022. It participated in both programs. During this period, Pakistan joined two IMF programs.

Pakistan joined the IMF program in the first government of former Prime Minister Nawaz Sharif.

During Benazir Bhutto's second term as Prime Minister, Pakistan joined three IMF programs, while during Nawaz Sharif's second term as Prime Minister, Pakistan joined two IMF programs. During the tenure of former military President Pervez Musharraf, there were two IMF programs, one program was under the People's Party government from 2008 to 2013, one program was from 2013 to 2018 under the Pakistan Muslim League and Nawaz government, and one program was under the Government of Pakistan. Tehreek-e-Insaaf Govt. . Pakistan joined the IMF program, which was continued by the Nawaz League coalition government after the fall of the Tehreek-e-Insaf government.

How does the IMF lend to a country?

First, a member country asks the IMF for financial assistance. The country's government and IMF staff discuss the economic and financial situation and the amount of the loan. Policies are agreed and then the IMF agrees to lend to the country. IMF conditionality refers to the policy measures a country must take in order to receive a loan. Presented to the board, but the system can be accelerated under emergency funding. The Executive Board approves the loan, and then the IMF monitors policy actions. When a country's economic and financial situation improves, the loan amount is returned to the IMF to be made available to other member countries.

Unlike development banks, the IMF does not lend for a specific project. Its purpose is to provide financial assistance to countries suffering from an economic crisis. Thus, economic stability and the implementation of production policies are ensured. An economic crisis in a country can be caused by a balance of payments crisis, where the country does not have enough money to repay its foreign debt. Can pay or buy imports. Otherwise, a financial crisis may occur due to a large deficit in its income and expenditure. According to the IMF, these crises can reduce productivity, increase unemployment, reduce incomes and create an atmosphere of insecurity. In the event of a serious crisis, the risk of default (bankruptcy) increases and debt restructuring becomes inevitable.