Most Important Function Of The International Monetary Fund Finance Essay

Most Important Function Of The International Monetary Fund Finance EssayAs Mussa says In official discussions of the role of the International Monetary Fund (IMF), especially at meetings of the IMF Executive Board and of the ministerial-level International Monetary and finance Committee, it is often spy that charge is the IMFs most important function.1Evidence on the importance of this function is what I ingeminate from the literature of Murilo Portugal who points out that One of the main purposes of the IMF is to promote planetary cooperation on monetary and financial affairs, being the machinery for consultation and collaboration on these issues. However, of all IMF functions this is the one that is least developed. This function is currently practiseed by means of exercises of three-sided surveillance of world(a) stinting and financial conditions. Two major reports are prepared twice a year for that purpose, the foundation Economic Outlook and the worldwide Financial Stab ility Report. These reports are discussed by the Executive Board and later taken up by the IMFC, both of which make generic exhortations to certain countries or group of countries to pursue policies that are considered appropriate from their own perspective, but that are also required from a world(prenominal) point of view. There is, however, a bear need to enhance the effectiveness of multilateral surveillance.2Mr Lars Heikensten said the following on surveillance The IMFs key instrument for reaching its overall objective should be its noise activities, which are primarily carried out within the scope of its surveillance function. The IMFs primarily role is not to treat illnesses but to prevent them from breaking out. Much abide be done to bolster the IMFs surveillance function, both as regards individual countries but also, to an increasing extent, by way of a stronger regional and global focus. This lurch in emphasis can, among other things, be motivated by the fact that glo balisation and increased integration has resulted in a situation where more and more countries national policies give rise to externalities. A strong multilateral surveillance function could contribute, more clearly than to daytime, to creating a broad multinational discussion of global imbalances, incorrectly valued exchange rates, etc., which generate risks to stability both in individual countries and in the international financial system as a whole.In this context, it is crucial that the process countries accept and support the role that has been given to the IMF, including taking seriously its advice and recommendations. We are often more keen to underline the importance of the IMFs surveillance function for other countries than we are to be guided by the IMFs analyses of our own countries. This is not beneficial for the IMFs credibility.3For more several basiss, one of them is that we are now lifespan the globalization era and as I cite from the IMF official website that In todays globalized economy, where the economic and financial policies of one country may spill over to take up many other countries, international cooperation on a global scale to monitor and influence economic developments is essential. With its nearly universal membership of 185countries, IMF surveillance provides the instrument for this cooperation. Effective surveillance contributes to a stable international monetary system that sustains sound economic growth through the following mutually-reinforcing processes multilateral surveillance, or heedlessness of the world economy and bilateral surveillance which comprises appraisal of and advice on the policies of each individual member country to promote external and domestic stability (including growth) psychoanalysis of cross country spillovers and sharing of the aggregate experience of 185 members.4Another reason is that the supervision of fiscal hydrofoil or supervision of monetary and financial transparency goes under, ac ts and interacts with the function of surveillance which monitors the policies chosen by the governments and the interchange banks of the member families and the.The Fiscal transparency entails being open to the public about the structure and functions of government that position fiscal policies and outcomes, and the past, present, and future fiscal activities of government. Such transparency fosters better-informed public debate, as well as greater government accountability and credibility.5And the transparency of the Monetary and financial policies can be more effective if their objectives, rationale, and methods of implementation are communicated to the public in a clear and timely manner. Such transparency by central banks and financial agencies responsible for supervision and regulation of financial institutions and markets can also foster more informed market expectations, and greater public accountability.6Another reason is that the IMF will not start the process of lending unless it has the information about the member country that has the need, so the lending process comes after the process of surveillance.When its member countries experience balance of payments (BOP) difficulties, either through capital account or current account crises, the IMF can make loans designed to help them stabilize their international payments situation and adopt policy changes sufficient to reverse their situation and overcome their problems. In some cases, the IMF makes short-term loans to help prevent countries economies from spiraling into financial crisis and to comfort renewed inflows of private sector capital.7And even there are a lot of critics on the IMF that it is giving a lot of long term loans which should be the role of the World Bank or other big market lenders as the World Bank has the better experience, competence, the ability and the support from the member countries to perform long term loans.As Dr Rosa emphasised It also argues that the main role of the IMF should increasingly delegate the role of long-term lending for structural purposes to the World Bank.8And she continues It is the World Bank, however, that has the staff and the technical expertise to develop and cost sectoral strategies together with invitee countries. The IMF, therefore, should work closely with the World Bank to ensure that the macroeconomic frameworks of client countries reflect the financing needs of their poverty-reduction strategies. Achieving this result will entail much-improved coordination in-country between statistical agencies, line ministries, finance ministries, and central banks and, in Washington, between the IMF and the World Bank.9 and so to add that how important the function of surveillance the IMF Executive board decided to update and enhance this function by approving its new frame work.On a Statement by IMF Managing Director Rodrigo de Rato on IMF Executive Board Decision to Approve New Framework for Surveillance I get this quoteThe cha nge we are making is the first major revision in the surveillance framework in some 30 years, and it is the first ever panoptic policy statement on surveillance. The new decision reflects current best practice in our work of monitoring members exchange rate policies and domestic economic policies. It reaffirms that surveillance should be focused on our core mandate, namely promoting countries external stability. And it gives clear guidance to our members on how they should run their exchange rate policies, on what is satisfactory to the international community, and what is not.10The IMF should use the tools it has of bilateral and multilateral surveillance all the way through to encourage financial stability by making analysis for the day to day work with the members and by making these info available for all financial actors in addition to policy makers and market participants.11For all of that I conceptualize that the most important function of the IMF is surveillance and what i t needs is more support from the member countries and from the IMF in implanting its policies for the better function of the economical structures of the countries in the open global economic world of today.