Functions of IMF:
(I) Bringing stability in exchange rate: The IMF is maintaining exchange rate stability and emphasising devaluation criteria, restricting members to go in for multiple exchange rates and also to buy or sell gold at prices other than declared par value.
(II) Correcting BOP Disequilibrium: The IMF is helping the member countries in eliminating or minimizing the short-period disequilibrium in their balance of payments either by selling or lending foreign currencies to the member nation.
(III) Determining par values:
1. IMF enforces the system of determination of par values of the currencies of the member countries.
2. According to the Articles of Agreement of the IMF, every member nation should declare the par value of its currency in terms of gold or US dollars.
3. Under this article, IMF ensures smooth working of the international monetary system, in favour of some developed countries.
(IV) Balancing demand and supply of currencies:
1. IMF is entrusted with the important function of maintaining balance between demand and supply of various currencies.
2. The Fund (IMF) can declare a currency as scarce currency which is in great demand and can increase its supply by borrowing it from the country concerned or by purchasing the same currency in exchange of gold.
(V) Reducing trade restrictions: The Fund also aims at reducing tariffs and other trade barriers imposed by the member countries with the purpose of removing restrictions on remittance of funds or to avoid discriminating practices.
(VI) Providing credit facilities:
1. IMF is providing different borrowing and credit facilities with the objective of helping the member countries.
2. These credit facilities offered by it include basic credit facility, extended fund facility for a period of three years, compensatory financing facility and structural adjustment facility.
