The main functions of the International Monetary Fund are:
1. Promotion of Exchange Stability: The fund is convinced that stable exchange rates are essential for the balanced growth the multilateral trade. With this end in view, it has taken upon itself the responsibility of maintaining stable exchange rates among the currencies of member counties.
2. Elimination of Exchange Control and Other Exchange Restrictions: The Fund feels that, if there are restrictions on purchase and sale of foreign exchange, the rates of exchange a greed’ upon cease to be effective. So, it wants to ensure that there are no exchange control and other exchange restrictions on ordinary trade and current transactions.
3. Granting of Loans out of its Financial Resources: The Fund can use its resource for granting loans to member countries. A member country facing a temporary deficit in its balance of payments can purchase from the Fund the required foreign currency to meet the deficit by offering its own currency in exchange. The purchase of the required foreign currency from the Fund by Member Country by giving its own currency in return is call a load from the fund.
4. Management of Scarce Currencies: Sometimes, it may so happen that many member countries may demand from the Fund the currency of the particular country, because all of them are indebted to that country on account of the chronic favorable balance of trade enjoyed by that country. If such a situation arises, the Fund will try to increase the supply of that currency either by borrowing from the country concerned or by purchasing that currency with gold. If the supply of that currency, still, proves to be insufficient to satisfy the needs of all the needy members, the fund declares the currency scarce, and rations that currency among the countries needing them.
