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International Business

notes larger change than 20 per cent, the Fund requires more time to take its decision. Such a decision
is taken by 2/3rd of the members. The Fund can also change, by a majority decision, par values of
all countries by a given proportion. If a member-country does not like this change, it must notify
the Fund within 72 hours. A country can change its par value only if it is faced with the problem
of correcting “Fundamental disequilibrium” in its balance of payments position.

9.3.5 other facilities

The balance of payments, exchange rate problems and monetary and fiscal issues are the other
issues on which the IMF advises its member countries. The Fund has set up three departments to
solve banking and fiscal problems of member countries. These departments are:
1. Central Banking Service Department: This department helps member countries with the
services of its experts to manage and run their central banks. These services are especially
provided to developing countries for making reforms in their banking system.
2. Fiscal Affairs Department: This department is established to provide advice on fiscal
matters of the member countries.
3. IMF Institute: It conducts short-term training courses on the fiscal, monetary, banking and
BOP policies for the officers of the member countries.

In addition to these, the Fund’s research department publishes many reports in a year containing
material relating to different policy measures. The major publications are IMF Annual Report
and IMF staff papers, Finance and Development Journal, etc.

Notes Although IMF is opposed to any sort of controls either on foreign exchange or
foreign trade, yet member-countries have been given the right to resort to these controls
during emergency in the hope that they will lift it as early as the situation warranted.

9.3.6 main functions of the fund

From the brief account of the Fund given above, it can be seen that the Fund performs several
major functions. Fund deals only with the central bank or the government of a country. It has no
right to interfere with the economies of the member-countries. Main functions of the Fund are
enumerated below. However, some of these functions are being modified:
1. Determination of the rate of exchange by every country: When a country becomes member
of the Fund, it has to declare par value of its currency in terms of dollar or gold. This
facilitates multilateral convertibility of that currency.
2. Loan of foreign currency: If a country has an adverse balance of payments, the Fund gives
foreign currency, required by the said country, on loan at a fixed rate of exchange. It enables
the country to discharge its foreign liability. Such loans are of short duration.
3. Restriction on foreign currency: The Fund buys and sells the currencies of the member-
countries. Whenever a country buys the currency of another country from the Fund, the
latter makes it available by purchasing the same from the country concerned, of which
it constitutes the national currency. However, in any one year, a member-country can
purchase from the Fund foreign currency up to the maximum of 15% of its quota.
4. Bank of central banks: The Fund is called the Bank of the central banks of different countries
of the world. Just as a central bank holds the cash reserves of the commercial banks of
the country, likewise IMF also mobilizes resources of the central banks of the member-
countries.

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