Page 261 - DMGT401Business Environment

Business Environment

Notes Role of IMF in Serving its Members

The IMF helps its member countries by:
1. reviewing and monitoring national and global economic and financial developments and
advising members on their economic policies;

2. lending them hard currencies to support adjustment and reform policies designed to
correct balance of payments problems and promote sustainable growth; and

3. offering a wide range of technical assistance, as well as training for government and
central bank officials, in its areas of expertise.

1. Advice on Policies and Global Oversight: The IMF's Articles of Agreement calls for it to
oversee the international monetary system, including by exercising firm "surveillance" –
that is, overlooking – over its member countries' exchange rate policies. The IMF conducts
its oversight in three ways:

(a) Country surveillance, it takes the form of regular (usually yearly) comprehensive
consultations with individual member countries about their economic policies, with
interim discussions as needed. The consultations are referred to as "Article IV
consultations" as they are mandated by Article IV of the IMF's charter. (They are also
referred to as "bilateral" consultations, but this is strictly speaking a misnomer:
when the IMF consults with a member country, it represents the entire membership,
so that the consultations are really always multilateral.)
(b) Global surveillance, it entails reviews by the IMF's Executive Board of global
economic trends and developments. The main reviews of this kind are based on
World Economic Outlook and Global Financial Stability reports prepared by IMF
staff, normally twice a year, before the semiannual meetings of the International
Monetary and Financial Committee (IMFC).
(c) Regional surveillance, under this the IMF examines policies pursued under regional
arrangements.

Example: This includes Board discussions of developments in the European Union, the
euro area, the West African Economic and Monetary Union, the Central African Economic and
Monetary Community, and the Eastern Caribbean Currency Union.
IMF management and staff also participate in surveillance discussions of such groups of
countries as the G-7 (the Group of Seven major industrial countries) and APEC (the Asia-
Pacific Economic Cooperation forum).
2. Lending to Help Countries in Difficulty: The IMF lends foreign exchange to countries with
balance of payments problems. An IMF loan eases the adjustment that a country has to
make to bring its spending in line with its income so as to correct its balance of payments
problem. But IMF lending is also intended to support policies, including structural reforms,
that will improve a country's balance of payments position and growth prospects in a
lasting way.

3. Technical Assistance and Training: The IMF shares its expertise with member countries on
a regular basis by providing technical assistance and training in a wide range of areas,
such as central banking, monetary and exchange rate policy, tax policy and administration,

254 LOVELY PROFESSIONAL UNIVERSITY