The International Monetary Fund (IMF) was set up mainly to

Step 1: Analyze the question The question asks about the main purpose for which the IMF was established.

Step 2: Explain the concept The IMF was created in 1944 at the Bretton Woods Conference and began operations in 1945. Its main objectives are:

• Promoting international monetary cooperation
• Ensuring exchange rate stability
• Facilitating the expansion and balanced growth of international trade
• Providing short-term financial help to member countries with balance of payments difficulties
• Eliminating restrictions on currency exchange

Step 3: Evaluate each option

• A. Cater for financial needs of developed countries: Wrong. The IMF serves all member countries, developed and developing.
• B. Create conditions favourable for the growth of world trade: Correct. This reflects the IMF's founding aim of stable exchange rates, a smooth international payments system, and expanded world trade.
• C. Create favourable balance of payment: Wrong. The IMF helps countries correct temporary balance of payments problems. It does not guarantee a favourable balance for them.
• D. Develop domestic trade: Wrong. The IMF is concerned with international, not domestic, trade.
• E. Offset foreign debts only: Wrong. Its role is not limited to debts, and the word "only" makes the option too narrow.

Step 4: Answer

Tip: For IMF questions, remember "M for Monetary stability": exchange rates, payments, and trade. For the World Bank, remember "B for Building": long-term development loans and projects. Watch for extreme words like "only" in options, which often signal a wrong answer.