Disadvantages of IMF- The international Monetary Fund (Part 2)

Disadvantages of The international Monetary Fund (IMF)- (Part 2) 11). Passive approach by IMF The IMF has been passive in its approach and not been effective in promoting exchange stability and maintaining orderly exchange arrangements. This is considered as one of the major disadvantages of IMF. The original fund agreement permits fluctuations of exchange rate within limits. It can fluctuate within a range of one per cent above or one per cent below the official price. This is called adjustable peg system. The exchange rate of currency was fixed in terms of golden dollar. Over years, U.S gold stock declined and U.S balance of payments suffered. It led to the collapse of Bretton Wood System in August 1971 when U.S refused convertibility of dollars into currency. Member countries were also following diverse exchange policies. These events simply prove that IMF was not able to maintain a uniform international exchange system which is a big disadvantage. 12). Unsound policy