Success/achievements of International Monetary Fund
According to Halm,”funds is like an international reserve Bank”.The fund has performed the significant functions to attain its objectives.Following are the main achievements of IMF:
1) International Monetary Cooperation
One of the main objectives of the Fund is to present a forum where most of the countries of the world ay b able to solve their monetary problems by mutual cooperation,The fund has created feeling among the member countries that their economic problems are not only their exclusive problems,but of the whole international society.IMF has succeeded in achieving this objective.
2) Reconstruction Of European Countries
Because of the efforts of the Fund,rich countries like America gave liberal economic assistance under Marshal Plan for the reconstruction of European countries without this Plan war-devastated European countries could not have been rehabilitated.
3) Multilateral System of foreign Payments
At the time of the establishment of the Fund,almost all countries were exercising exchange control in one way or the other.There were many restrictions on foreign trade.IMF has succeeded in reducing the same and in establishing multilateral systems of foreign payments,and thus promoted world trade.
4) Increase in international Liquidity
Corresponding to increase in international trade,the Fund has succeeded in increasing international liquidity.It has created a new liquid asset in the form of SDRs.As a result,international liquidity has increased manifold.It provides credit facilities to member countries in foreign currency.
5) Increase in International Trade
The Fund has succeeded in expanding the international trade and making it free from restrictions to a large extent.It has rendered payments relating to international trade easy.By helping the countries suffering from trade disequilibrium,it has promoted their trade.
6) Special Aid to Developing Countries
The fund has done a special service to developing countries in finding a solution to their problems.It has been actively helping them in correcting their unfavourable balance of payments and achieving monetary stability.These countries have been receiving adequate guidance from the fund in framing their monetary,export-import and exchange policies.
7) Providing Statistical data and information
IMF has set up a separate statistical bureau for conducting research regarding balance of payments,money and banking,finance and fiscal policyetc.It also publishes report of such research work.These publications are useful for member nations for framing economic policies.
8) Helpful in Times of difficulties
The fund has come to the rescue of all member countries faced with economic crisis.On account of hike in petrol prices many countries of the world experienced acute shortage of foreign exchange.In order to ease this situation,it set up Petrol Facility Fund.
9) Easiness and flexibility in Making International Payments
Because of use of SDRs the dependence on gold for making international payments has reduced.Through the facility of SDRs international payments have become easier and flexible.
10) Special Lending to Crisis hit Nations
In year 208-2009,the growth momentum in world economy is adversely affected by the global financial crisis.In April 2009,the growth momentum in world economy is adversely affected by the global financial crisis. IMF made a special fund for lending to crisis hit countries. IMF seeks to inject cash into the world economy and help the crisis hit nations to overcome global financial crisis.
Failures of International Monetary Fund
The IMF has failed to achieve some of its objectives.Its main failures are as under:-
1) Lack of stability in Exchange rate
The fund has failed to achieve its main objective of exchange rate stability.It succeeded till 1972 in maintaining fixed rat of exchange.Thereafter,it became variable once again.Lack of stability in exchange rate is the major failure of the Fund. At present,rate of exchange is determined by market forces of demand and supply.
2) Lack of stability in the Price of Gold
Many efforts were made by the fund to bring stability in the price of gold but it failed miserably. Upto 1971 the price of gold was kept stable at $35 per ounce(oz.),but thereafter it has increased manifold.
3) Inability to Remove Restrictions on foreign Trade
The fund has failedto remove restrictions on foreign trade and control on foreign exchange. Many countries of the world have resorted to policy of protection with greater vigour.
4)Rich Nations Club
Critics say that IMF is a club of rich countries like America,Britain etc. and helps their supporters.It pursues a policy of description.
5)No help for Developmental Projects
IMF has been giving loans only for meeting temporary balance of payments deficit.It provides no loans for development projects to promote development.
6)No Solution of Problem of international Liquidity
Fund is not a proper solution of problem of international liquidity.Although Fund has considerably increased its permanent resources and helped in problem of the creation of new currency in form of Special Drawing Rights(SDRs),yet the problem of liquidity persists.Consequently it will be difficult for the Fund to lend resources to developing countries and help them overcome their balance of payments deficit.
7)Interference in Domestic Economies
While providing loans,IMF imposes many conditions on member nations, e.g. reduction in growth rate of money supply,measures to control wages/salaries and prices,devaluation,reduction in fiscal deficit etc.It results in excessive interference of IMF in the working of domestic economies of member nations.