Arab Monetary Fund (AMF)

What Is the Arab Monetary Fund (AMF)?

The term Arab Monetary Fund (AMF) alludes to an organization sent off in 1976 by the Arab League. The fund was laid out to balance payments and advance beneficial trade between participating member nations to help the development of their economies. The fund has 22 member nations spread across the Middle East and North Africa.

Grasping the Arab Monetary Fund (AMF)

The Arab Monetary Fund was laid out as a sub-organization of the Arab League in 1976 and became active the next year. The fund's central offices are in Abu Dhabi in the U.A.E. It frequently works in close joint effort with the International Monetary Fund (IMF). Initial funding of the AMF was potential on account of the acceleration of oil prices during the 1970s. The fund's assets added up to $1.18 billion as of February 2021.

The fund's mission is to "establish the monetary starting points for Arab economic integration and advance economic development in Arab countries." The AMF previously approached chasing after its order by giving low-interest loans to creating Arab states. From that starting point, the AMF started to participate in projects that target, among others, the accompanying objectives:

• Limiting trade limitations and payments
• Creating capital markets inside and among Arab nations
• Aligning monetary policies among member nations
• Slackening flows of capital across the Arab world

The fund's organizational structure is going up by its board of governors, trailed by the board of executive directors, and the chief general. Each state is addressed in the board of governors by a lead representative and an alternate or delegate lead representative. This board names eight individuals from the member states to the board of executive directors for a three-year period, alongside the chief general for a very long time — a term that is renewable.

The board of governors likewise assign a portfolio of obligations to the individual directors, for example, the inclusion of new members and suspension of different members, the distribution of funds to member nations, the management of audits, and financial reporting.

Comparative regional funds have been examined in Asia and Africa, however still can't seem to be laid out.

As indicated over, 22 Middle Eastern and African member states make up the AMF. They incorporate the United Arab Emirates, Jordan, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritiana, Yemen, and Comoros.

Special Considerations

As noted before, the fund likewise loans money to participating member states to assist with handling their balance of payment (BOP) deficits. Among them are the accompanying three types of loans:

• Automatic loans: Loans extended in this program don't go more than 75% of a participating country's portion of the fund's capital. Automatic loans mature in somewhere around three years and consider a 18-month grace period.
• Ordinary loans: Member countries that need a loan to cover over 75% of their portion of the fund's capital meet all requirements for ordinary loans and can go as high as 100% of their contribution in convertible currencies.
• Compensatory loans: When a country encounters a surprising BOP shortfall — regularly due to a drop in trades — the fund might advance a compensatory loan valued at 100% of its contributions in convertible currencies. Like the automatic loan, it matures in three years with 18 extra month grace period.

Illustration of an AMF Project

How about we take one of the ventures the AMF chipped away at to show how it seeks after the objectives listed previously. The AMF and the World Bank Group (WBG) announced a partnership in 2015. The agreement pointed toward fortifying the retail financial sector in the Arab world. In doing as such, the two organizations felt that they could improve financial markets and trade across the Arab community.

Both the AMF and the WBG teamed up on-the-ground drives in three areas. To start with, they directed financing toward the improvement of electronic payment infrastructure and credit reporting systems. Next, they developed the beginning up sector by giving banks the skill to guarantee bond issues and begin up financing and send off small and medium enterprise (SME) stock markets. At last, the AMF and World Bank gave financing to the expansion of mobile and microfinancing networks in member nations.

Highlights

• The fund is comprised of 22 member states.
• The fund was laid out in 1976 by the Arab League.
• The fund's management comprises of a board of governors, and a board of executive directors, alongside different units and subcommittee's that form the structural system of the fund.
• The Arab Monetary Fund is an organization that expects to balance payments and elevate trade to help economic development between member nations.