INTERNATIONAL MONETARY FUND

(IFM)

 

The International Monetary Fund (IMF) is an international organization that oversees the global financial system by observing exchange rates and balance of payments, as well as offering financial and technical assistance when requested. Its headquarters are located in Washington, D.C.

The primary mission of the IMF is to provide financial assistance to countries that experience serious financial difficulties. Member states with balance of payments problems may request loans and/or organizational management of their national economies. In return, the countries are usually required to launch certain reforms.

The International Monetary Fund (IMF) concentrates on providing advice and temporary funds for countries with economic difficulties.

The economic medicine prescribed by the IMF is painful. For example, it often insists on strict anti-inflationary measures, such as increasing the prices on basic goods and services. Besides supervising the international monetary system and providing financial support to member countries, since the early 1990s the IMF has been concentrating its efforts in two areas. First, it has mounted a massive campaign to assist the countries of Eastern Europe in difficult transition from centrally planned to market economies. It is providing not only money but, what is more important, expertise in establishing those financial and economic structures (central banks, tax systems, currency convertibility, tariff regimes, etc.) indispensable for functioning of a free-enterprise system. Second, it is continuing to assist its poorer members in creating environment for economic growth.

Each member has a quota which is based on a complex formula that takes account of the country’s size and its importance in world trade and finance. The quota determines the amount of financial resources the member has to make available to the IMF (subscription) and its access to the Fund’s facilities as well as its voting power. Part of each member’s subscription is paid in reserve assets, and the remainder in the member’s own currency.

An unwritten rule establishes that the IMF's managing director must be European and that the president of the World Bank must be from the United States. Executive Directors, who confirm the managing director are voted in by Finance Ministers from countries they represent.

The IMF is for the most part controlled by the major Western Powers, with voting rights on the Executive board based on a quota derived from a monetary stake in the institution. Rarely does the board vote and pass issues contradicting the will of the US or Europeans.

 

 

COMPREHENSION CHECK

I. Give English equivalents to the following:

Резервные кредиты, страны-должники, благоприятный курс, в свою очередь, уменьшать субсидии, кредиты развития, одолеваемая долгами, текущая (краткосрочная) задолженность, слаборазвитые страны, в крайнем случае.

 

II. Read the words and guess their meanings:

global financial system, exchange rates, balance of payments, offering financial and technical assistance, to experience serious financial difficulties, increasing the prices, transition from centrally planned to market economies, currency convertibility, economic growth, the Executive board, monetary stake in, floating debt, debt-ridden, development loans, underdeveloped countries, in turn, favourable rate, debtor countries, to reduce subsidies, standby loans, in the last resort.

 

III.Which of the following is true?

1. The IMF came into existence in December 1945, when the first 29 countries signed its Articles of Agreement.

2. IMF is composed of 22 Governors.

3. The quota determines the amount of financial resources the member has to make available to the IMF.

4. IMF member countries may utilize the Fund’s resources.

5. Borrowing countries have to pay the loans back within 3-5 years.

6. Much of the IMF’s work is centered on annual consultations with each member country to ensure that its national policies take into account their consequences for the world economy and avoid unfair exchange policies.

7. The IMF's influence in the global economy steadily increased as it accumulated more members.

8. The IMF is for the most part controlled by the major Western Powers, with voting rights on the Executive board based on a quota derived from a monetary stake in the institution.

 

 

IV. Translate into English:

1. МВФ был создан 27 декабря 1945 года.

2. МВФ предоставляет кратко- и среднесрочные кредиты при дефиците платёжного баланса государства.

3. Предоставление кредитов обычно сопровождается набором условий и рекомендаций, направленных на улучшение ситуации.

4. Основные функции МВФ:

· содействие международному сотрудничеству в денежной политике

· расширение мировой торговли

· кредитование

· стабилизация денежных обменных курсов

5. Высший руководящий орган МВФ — Совет управляющих (Board of Governors), в котором каждая страна-член представлена управляющим и его заместителем. Обычно это министры финансов или руководители центральных банков.

 

 

V. Answer some questions on the Text:

1. What is the IMF?

2. For what purpose was it established?

3. What are the functions of IMF in countries with economic difficulties?

4. What new activities has the IMF been engaged with since the early 1990s?

5. Is the IMF funded by wealthy member countries?

6. Is the “structural adjustment” process of ailing economies painful for nations?

 

 

Литература

Основная: 1, 3, 5, 6.

Дополнительная: 1, 2, 4, 6, 7, 11.

 

 

TOPIC 12.

MONETARY POLICY

Monetary policy is one of the tools that a national Government uses to influence its economy. Using its monetary authority to control the supply and availability of money, a government attempts to influence the overall level of economic activity in line with its political objectives. Monetary policy is one of the main instruments of macroeconomics. It is based on the ability of the Central bank to control the money supply, which leads to changes in interest rates and the exchange rate, and therefore in the amount of investment, which influences directly the national output.

This method of controlling the economy centers on adjusting the amount of money in circulation in the economy and so the level of spending and economic activity.

The Central Bank attempts to achieve economic stability by varying the quantity of money in circulation, the cost and availability of credit, and the composition of a country's national debt. The Central Bank has three instruments available to it in order to implement monetary policy:

· Controlling the money supply

· Controlling interest rates

· Managing the exchange rate

The aim of the authorities when controlling the money supply is to limit the amount borrowed, and hence spent, by businesses and individuals during a inflationary period. It is hoped in this way to limit the level of overall demand in the economy and thus to remove or reduce inflationary pressure. During a recession monetary policy is aimed at increasing the money supply to encourage spendings.

The three most important instruments available to affect the money supply are:

· open market operations,

· reserve requirements

· the discount rate.

Open Market Operations. Open market operations are the most important way of controlling the money supply. It refers to the Bank trading government bonds in the open market - that is when they are bought from and sold to commercial banks and individuals.

When the Bank sells government bonds in the open market, the Bank withdraws the money from population and reduces the money supply. When the Bank buys government bonds in the open market, it increases the amount of money in circulation and hence the money supply.

Reserve requirements are a percentage of commercial banks', and other depository institutions', demand deposit liabilities (i.e. chequing accounts) that must be kept on deposit at the Central Bank as a requirement of Banking Regulations. Though seldom used, this percentage may be changed by the Central Bank at any time, thereby affecting the money supply and credit conditions. If the reserve requirement percentage is increased, this would reduce the money supply by requiring a larger percentage of the banks, and depository institutions, demand deposits to be held by the Central Bank, thus taking them out of supply. As a result, an increase in reserve requirements would increase interest rates, as less currency is available to borrowers. This type of action is only performed occasionally as it affects money supply in a major way. Altering reserve requirements is not merely a short-term corrective measure, but a long-term shift in the money supply.

The Discount Rate.

The second instrument of monetary control available to the central bank is the discount rate.

The discount rate is the interest rate that the Bank charges when the commercial banks want to borrow money. Thus, by setting the discount rate at a penalty level in excess of the general level of interest rates, the Bank can induce commercial banks voluntarily to hold additional cash reserves. Since banks have to hold more cash as reserves, the money multiplier is reduced, less money can be created and the money supply is lower.

VOCABULARY

instruments of macroeconomics - макроэкономические инструменты

to control the money supply - контролировать предложение денег

the exchange rate - обменный ( валютный ) курс

the amount of investment - размер капиталовложений

to adjust the amount of money in circulation - корректировать количество денег в обращении

implementation of a nation ' s monetary policy - осуществление, проведе­ние в жизнь национальной денежно-кредитной политики

to implement - выполнять, осуществлять, обеспечивать выполнение

on behalf of - от имени

reserve requirements - резервные требования

a discount rate - учетная ставка

the money multiplier - денежный мультипликатор

required reserves - требуемые резервные фонды

easily convertible into cash - легко обратимый в наличные ( напр ., депо ­ зиты , ценные бумаги )

a required reserve ratio - требуемая резервная норма

cash reserves - кассовые резервы

excess reserves - избыточные резервы

to draw (syn. to write out, to make out, to issue) a cheque - выписать чек

created money - созданные деньги

inversely proportional (ant. directly proportional) - обратно пропорцио ­ нальный

to maintain - поддерживать

to impose a reserve requirement - налагать ( вводить ) резервное требование

fraction - часть , доля

in excess of smth - сверх чего - либо

prudent - расчетливый, предусмотрительный

in force - в силе

to charge - назначать , начислять

up to the hilt - полностью , целиком

if the worst comes to the worst - если случится самое худшее

they are short of cash - у них не хватит наличных денег

the penalty rate - повышенная (штрафная) ставка

it is not worth making the extra loans - не стоит предоставлять дополни­тельных займов

to induce smb to do smth ( syn . to cause smb to do smth ) - заставить кого-то сделать что-то

voluntarily - сознательно , осознанно

COMPREHENSION CHECK

 

I.Suggest the Russian equivalents:

To restore their required reserve ratio; maintain cash reserves equal to 5% of sight deposits; create $20 million of sight deposits; a higher fraction of their total assets; a lower fraction as loans; the interest rate that the Bank charges; extra lending; impose a reserve requirement; the dangers and costs involved; prudent banks; lend up to the hilt; the minimum safe ratio of cash to deposits; flood of withdrawals; the Bank can induce banks voluntarily to hold additional cash reserves; the required reserve ratio given

 

II. Find in the text English equivalents for the following:

     Источник денег, добавлять или изымать деньги, давать взаймы деньги банкам, денежный запас, ставка процента, регулирование ставок процента, брать деньги взаймы, сокращать производство, снижать инфляцию, кредитные ставки, способствовать росту деловой активности, ограничивать денежный запас, от имени правительства; кредитно-денежная политика; для поощрения расходов; операции на открытом рынке; резервные требования; кассовый резерв; избыточные резервы; требуемая резервная норма (уровень резервных требований); создавать деньги; денежный мультипликатор; обратно пропорциональный; сверх резервной нормы; дисконтная (учет­ная) ставка; повышенная ставка.

 

 

III .Fill in the gaps with the words and expressions from the text:

1. Monetary policy is a method of controlling the economy that centres on          the amount of money _____ in the economy and so ______ and _____     .

2. In some ____ countries the Central Bank operates monetary policy            government policy.

3. Monetary policy has three main aspects: controlling ____ , controlling ____ , managing ____.

4. The aim of the authorities when controlling the money supply is ____ , and hence ____ , by businesses and individuals during ____ .

5. It is hoped to limit the level of ____ in the economy and thus to remove or reduce ____ .

6. During a recession monetary policy is aimed at ____ to ____ spendings.

7. The three most important instruments ____ the money supply are ____ , ____ and ____ .

8. When the Bank sells ____ in the open market, the Bank ____ the money from population and ____ the money supply.

9. When the Bank buys government bonds in the open market, it ____ the amount of money____ and hence ___.

10. Banks have to hold a proportion of their assets ____ in case customers demand.

11. The required reserve has to be ____ , that is easily____ into cash.

12. ____ is a minimum ratio of____ to ____ hat the central bank requires commercial banks to hold.

13. Commercial banks can make loans, i.e. they can ____ and increase ____   .

14. The discount rate is ____  that the Bank ____ when the commercial banks want ____ .

IV. Are the following statements true or false? If they are false correct them.

1. The Central Bank borrows money from other banks.

2. The responsibility of the Central Bank is managing the money supply and interest rates.

3. The Central Bank tries to lower inflation restricting the supply of money and increasing credit costs.

4. Small businesses and consumers pay the prime rate when they borrow money from banks.

5. A required reserve ratio is a minimum ratio of cash reserves to deposits that the central bank requires commercial banks to hold.

6. Commercial banks can make loans, i.e. they can create money and increase their excess reserves.

7. According to recent studies the money supply and interest rates can be effectively changed by the traditional central bank tools.

8. Monetary policy is an instrument for moving the economy from a recession.

9. During inflation velocity may fall when the money supply is restrained.

10. Expenditures on capital goods and interest rates are mutually dependent.

 

V. Translate into English using all the active possible

1. Основополагающей целью кредитно-денежной политики является помощь экономике в достижении общего уровня производства, характе­ризующегося полной занятостью и отсутствием инфляции.

2. Кредитно-денежная политика состоит в изменении денежного предложения с це­лью стабилизации совокупного объема производства, занятости и уровня цен.

3. Kредитно-денежная политика вызывает увеличе­ние денежного предложения во время спада для поощрения расходов, а во время инфляции, наоборот, ограничивает предложение денег для ог­раничения расходов.

4. Существуют три основных средства кредитно-денежного контроля: операции на открытом рынке, изменение резервной нормы и изменение учетной ставки.  

5. Операции на открытом рынке - наиболее важное средство контроля денежного предложения. Этот термин относится к покупке и продаже госу­дарственных облигаций Центральным банком на открытом рынке, то есть к покупке и продаже облигаций коммерческим банкам и населению в целом.

6. При изменении резервной нормы меняется величина денежного мультипликатора и, следовательно, денежное предложение.

7. В основе де­нежного мультипликатора лежит тот факт, что резервы, потерянные од­ним банком, получает другой.

8. Подобно тому, как коммерческие банки взыскивают процентные платежи по своим ссудам, центральный банк взыскивает процентные платежи по ссудам, предоставленным коммерческим банкам. Такая став­ка процента называется учетной ставкой.

9. Снижение учетной ставки поощряет коммерческие банки к приоб­ретению дополнительных резервов путем заимствования у центрального банка.

10. Готовность банков давать ссуды на основе избыточных резервов периодически меняется, и в этом кроется причина государственного кон­троля за денежным предложением с целью обеспечить экономическую стабильность.

 

VI. Answer the questions:

1. What is the aim of monetary policy?

2. Why is it important to control the money supply?

3. What is the role and responsibility of the Central Bank?

4. How does the Central Bank manage money supply?

5. Dwell on open market operations.

6. What consequences does monetary policy have for businesses?

7. Explain the creation of money by commercial banks. What does a money multiplier show?

8. Why does the Bank impose a reserve requirement? What's the effect of the Bank imposing a reserve requirement?

9. Why does a reserve requirement act like a tax on banks?

10. What is a discount rate? How does it work?

 

Литература

Основная: 1, 3, 5.

Дополнительная: 2, 4, 6, 7.

 

TOPIC 13.

IMPORT AND EXPORT

International trade is the exchange of goods and services between different countries. Depending on what a country produces and needs, it can export (sell goods to another country) and import (buy goods from another country).

Whenever a country imports or exports goods and services, there is a resulting flow of funds: money returns to the exporting nation, and money flows out of the importing nation. Trade and investment is a two-way street, and with a minimum of trade barriers, international trade and investment usually makes everyone better off.

In an interlinked global economy, consumers are given the opportunity to buy the best products at the best prices. By opening up markets, a government allows its citizens to produce and export those things they are best at and to import the rest, choosing from whatever the world has to offer.

Some trade barriers will always exist as long as any two countries have different sets of laws. However, when a country decides to protect its economy by erecting artificial trade barriers, the result is often damaging to everyone, including those people the barriers were meant to protect.

Governments can control international trade. The most common measures are tariffs (or duties) and quotas. A tariff is a tax on imported goods, and a quota is the maximum quantity of a product allowed into a country during a certain period of time. These measures are protectionist as they raise the price of imported goods to «protect» domestically produced goods.

International organizations such as the WTO (World Trade Organization) and EFTA (European Free Trade Association) regulate tariffs and reduce trade restrictions between member countries.

Companies can choose from various methods to establish their products in a foreign market. One option is to start by working with local experts such as sole agents or multi-distributors, who have specialist knowledge of the market and sell on behalf of the company. This often leads to the company opening a local branch or sales office. Another option is to sell, or give permission to use, patents and licenses for their products. Companies may wish to start by manufacturing in the export market, in which case they can either set up a local subsidiary or a joint venture with a local partner.

Many of these documents can be replaced with computerized procedures. Standard 'aligned' export documentation is also used: the required information is entered on a single master document and then photocopied to produce all the required documents.

Many import or export deals are arranged through an exporter's agent or distributor abroad – in this case the importer buys from a company in his own country and this company imports the goods. Alternatively, the deal may be arranged through an importer's buying agent in a buying house acting for the importer, or through an export house based in the exporter's country. In this situation, the exporter sells directly to a company in his own country, who will then export the goods.

Prices for exports may be quoted in the buyer's currency, the seller's currency or in a third 'hard' currency (e.g. US dollars, EURO or Swiss Francs). The price quoted always indicates the terms of delivery, which conform to the international standard Incoterms. The terms of delivery that are most common depend on the kinds of goods being traded and the countries between which the trade is taking place.

 

Vocabulary

tariffs тарифы

sole agents отдельные агенты
duties пошлины

quotas квоты

multi-distributors дистрибуторы
protectionist протекционистские    

joint venture совместное предприятие, СП
local subsidiary филиал   

COMPREHENSION CHECK

I. Give English equivalents to the following:

в конечном результате; вызвать; ввести квоту; плохо сделанные; торговые  ограничения; товары и услуги; принести в жертву; быть ответственным за; иметь сомнительную экономическую ценность.

II. Read the words and guess their meanings:

Customs, Duty free, Export declaration, Export license, Export trading company, Force majeure, Free port, Import restrictions, Quota, Trade sanctions, Subsidies, WTO.

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