Most Important Function Of The International Monetary Fund Finance Essay

Most Important Function Of The orbiculateist Monetary Fund Finance EssayAs Mussa says In decreed discussions of the role of the International Monetary Fund (IMF), especi everyy at meetings of the IMF decision tallyr Board and of the ministerial-level International Monetary and finance Committee, it is often observed that oversight is the IMFs most important function.1Evidence on the importance of this function is what I quote from the lit successionture of Murilo Portugal who points out that One of the main purposes of the IMF is to promote worldwide cooperation on monetary and pecuniary 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 performed by path of exercises of three-sided surveillance of global economic and financial conditions. Two study reports atomic number 18 prepared twice a year for that purpose, the land scotch Outlook and th e Global Financial Stability Report. These reports are discussed by the decision maker 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 trance from their own perspective, plainly that are also required from a global point of view. There is, however, a clear need to enhance the effectiveness of multilateral surveillance.2Mr Lars Heikensten said the following on surveillance The IMFs key peter for reaching its overall objective should be its hold openive activities, which are in the main carried out within the scope of its surveillance function. The IMFs primarily role is not to treat illnesses but to pr veritable(a)t them from breaking out. Much can 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 trade in emphasis can, among other things, be motivated by the situation that globalisation and increased integration has resulted in a situation where to a great extent(prenominal) and to a greater extent countries national policies give rise to externalities. A strong multilateral surveillance function could contribute, much clearly than to daylight, to creating a broad planetary discussion of global imbalances, incorrectly valued exchange rates, etc., which generate risks to stability both in individual countries and in the international financial agreement as a whole.In this context, it is crucial that the member countries accept and swan 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 modestnesss, one of them is that we are now living 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 affect galore(postnominal) other countries, international cooperation on a global scale to reminder and influence economic developments is essential. With its nearly universal membership of 185countries, IMF surveillance provides the appliance for this cooperation. Effective surveillance contributes to a stable international monetary placement that sustains sound economic growth finished the following mutually-reinforcing transitiones multilateral surveillance, or oversight 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 interior(prenominal) stability (including growth) analysis of cross country spillovers and sharing of the aggregate give of 185 members.4Another reason is that the superintendence of fiscal transparency or supervision of monetary and financial transparency goes under, acts and interacts with the function of surveillance which monitors the policies chosen by the governments and the central banks of the member families and the.The Fiscal transparency entails being open to the earth most the structure and functions of government that de termine fiscal policies and outcomes, and the past, present, and future fiscal activities of government. Such transparency protects better-informed public debate, as well as greater government eyeshadeability 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 expectati ons, 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 jock them stabilize their international payments situation and adopt policy changes sufficient to sneak their situation and overcome their problems. In well-nigh cases, the IMF makes short-term loans to help prevent countries economies from spiraling into financial crisis and to facilitate re wiseed 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 adult male argot or other big market lenders as the World money box has the better experience, competence, the abilit y 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 knob countries. The IMF, therefore, should bunk closely with the World Bank to ensure that the macroeconomic frameworks of thickening countries reflect the financing needs of their poverty-reduction strategies. Achieving this result will entail much-improved coordination in-country amid statistical agencies, line ministries, finance ministries, and central banks and, in Washington, between the IMF and the World Bank.9Then to add that how important the function of surveillance the IMF Executive batting order decided to update and enhance this function by approving its new frame work.On a Statemen t by IMF Managing Director Rodrigo de Rato on IMF Executive Board Decision to Approve New Framework for supervision I get this quoteThe change we are making is the commencement major revision in the surveillance framework in some 30 years, and it is the first ever comprehensive 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 counselor to our members on how they should run their exchange rate policies, on what is acceptable 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 add ition to policy makers and market participants.11For all of that I think that the most important function of the IMF is surveillance and what it 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.