IMF (INTERNATIONAL MONETARY FUND)

IMF:

• The IMF was established in 1944 in the aftermath of the Great Depression of 1930s.
• 44 founding member countries sought to build a framework for international economic cooperation.
• It has 190 member countries with staff drawn from 150 countries.

Mandate of IMF :

• To improve and Enhance global trade.
• To address balance of payment deficit(financing).
• Addressing international monetary problems by collaborating with other financial institutions.

Function of IMF:

1. Technical Assistance and training.
2. Surveillance of Member economic policies.

Technical Assistance and Training:

The IMF provides technical assistance and training to governments including central banks, Finance ministries, revenue administrations, and finance sector. These capacity development efforts are centered on the IMF's core areas of expertise ranging from taxation through central bank operations to the reporting of macro-economic date. Such training helps countries tackle cross-cutting issues, such as income inequality, gender equality, corruption and climate change.

Surveillance of Member Economic Policies:

The IMF monitors the International monetary system and global economic developments to identify risks and recommend policies for growth and financial stability. The funds also undertakes a regular health check of the economic and financial policies of it's 190 members. In addition, the IMF identifies possible risks to the economic stability of it's member countries and advises their governments on possible policies adjustments. IMF monitors it's members by current account deficit, fiscal deficit, circular deficit, circular debt, debt servicing , money laundering and terror financing depleting foreign reserves and declining exchange rate stability.

Cooperation:

All the concern departments should be involve in making their related policies.

Financing Balance of Payment Deficits:

At any given time the sum of money entering into the country with respect to the sum of money exiting from the country. This phenomenon is known as financing balance of payments deficit.

IMF Lending:

IMF gives loan to countries to stabilize their economy and this loan is given on the Quota basis. 145% of loan is given to the countries according to their currency value, on Quota.

IMF Letter of Intent:

IMF gives loan to economic disturb countries on some conditions which includes SAPs. Structural Adjustment Programs (SAPs) are economic policies for developing countries that have been promoted by world bank and IMF since the early 1980s, by the provision of loans conditional on the adoption of such policies. These policies are centered around increased privatization, liberalizing trade and foreign investment and balance government expanding revenues. 

IMF and Pakistan:

• Pakistan join IMF in 1950 and 22 loans have been granted to Pakistan till now of 2022 last loan in 2019.
• Extended credit facility.
• On July 3,2019 IMF approved a 39-months extended arrangement under the extended fund facility (EFF) for Pakistan 6B$ i.e 210 percent of Quota Special drawing rights (SDR) (4268m).
• 1B$ trench is haulted  due to PTI governement subsidies.
• PTI government gives subsidies to public on petrol and electricity.
• Increase of POL (petroleum , oil, lubricant) at 5% per month to reach 50rs per litre.
• Increase the poverty tax from 2% to 4%.
• To impose petroleum development levy and 17 % sales tax.
• To do away with pensions and salaries for which rupees 200 billion were allocated.
• Government reduce subsidies from 536B to 570B.
• The target of FBR to collect tax increased from 6.1 trillion to rupees 7.35 trillion.

Criticism on IMF :

a) Favouring the capitalistic segments of the world :

• Neo-liberalism.
• Increased privatization.
• De-regularization (State-intervention).
• Liberalization (trade).

b) Structural Adjustment Programs (SAPs):

• Rigid (not flexible).
• Taxes, Tariffs, Subsidies, Privatization.
• Social impact.
• Lower and lower middle class.
• Inflation + purchasing power decrease.

c)Unbalanced voting power:

 Voting power of any country depends upon the quota (SDR) of the country. A country with high quota will have a high voting power.