How IMF Provide Loan ? | Burning Issue - Editorial Analysis

CONTENT :
WHAT IS IMF AND HOW DOES IT PROVIDE LOANS?
DIFFERENCE BETWEEN IMF AND WORLD BANK LOANS?
WHAT HAPPENS IF A COUNTRY FAILS TO PAY BACK A LOAN (DEFAULTS) FROM THE IMF?

IMF HAS BEEN IN THE NEWS A LOT RECENTLY

1. Gita Gopinath has been appointed as Chief Economist at the International Monetary Fund, to take over from Maurice Obstfeld at the end of the year.

She was the Economic Advisor to the Chief Minister of Kerela.

2. Pakistan will take the loan of 6-7 billion from IMF.

IMF gave warning to Pakistan saying that the amount of involvement Chinese market is doing in your country is not good for you ( Pakistan ) the long run.

WHAT EXACTLY IS THE IMF (INTERNATIONAL MONETARY FUND)

The International Monetary Fund is an organization of 189 member countries. It stabilizes the global economy in three ways.
First, it monitors global conditions and identifies risks.
Second, it advises its members on how to improve their economies.
Third, it provides technical assistance and short-term loans to prevent financial crises.
The IMF has the rare ability to look into and review the economies of all its member countries.

As a result, it has its finger on the pulse of the global economy better than any other organization.

Lending to countries with balance of payments issues.

DIFFERENCE BETWEEN IMF AND WORLD BANK LOANS?

The bank is established as a development organization whereas the fund is founded as a cooperative organization.

World Bank provides financial and technical aid to the developing nations of the world.

On the other hand, IMF is formed to promote financial stability, international trade, high employment, reduce poverty and so on.

World Bank Gives loan for growth.
IMF gives loans when a country desperately needs money.
IMF loans mean the growth of the country is not doing well.
India And World Bank Sign 300 Million Dollar Loan Agreements

The Central government and the World Bank have signed 300 million dollar loan agreements for India Energy Efficiency Scale up Programme.

They signed 220 million dollar Loan Agreement and an 80 million Guarantee Agreement for the Efficiency Scale-Up Program.

The Program, to be implemented by the Energy Efficiency Services Limited (EESL), will help scale-up the deployment of energy saving measures in residential and public sectors, strengthen ESL’s institutional capacity, and enhance its access to commercial financing.

NOTE :
Sameer Kumar Khare is the Joint Secretary in the Ministry of Finance.
President of the World Bank– Jim Yong Kim.
Headquarters of World Bank– Washington, DC.

WHAT IMF SAID ABOUT INDIA’S LOANS
India’s dept lower than best-emerging market economies.

India takes the loan from world bank, not from IMF.

IMF HAS DIFFERENT TYPE OF LOANS
Stand-By Arrangements (SBA) – The majority of Fund assistance to middle-income countries is provided through SBAs.

Extended Fund Facility (EFF) – Arrangements under the EFF are longer than SBAs usually 3 years. Countries that are in a lot of trouble and will need help for a long time.

Flexible Credit Line (FCL) – The FCL is for crisis prevention or response purposes. The length of the FCL is one or two years.

Precautionary Line (PLL) – This is for countries that are beginning to get weak.
Pakistan is under this economic crisis :
Extended Fund Facility (EFF) – Arrangements under the EFF are longer than SBAs usually 3 years. Countries that are in a lot of trouble and will need help for a long time.

WHAT HAPPENS IF A COUNTRY FAILS TO PAY BACK A LOAN (DEFAULTS) FROM THE IMF?

IMF will not provide any further loan.