imf

Introduction
 The IMF works to foster global growth and
economic stability. It provides policy advice
and financing to members in economic
difficulties and also works with developing
nations to help them achieve macroeconomic
stability and reduce poverty.
Thursday, June 06, 2013
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BACKGROUND
 After the Great Depression in the 1930s there was a
need for an organization to create a system for
exchange rate stability.
 Countries’ economies affected by WWII.
 need for reconstruction in well-developed nations
 need for development in the lesser developed nations
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Bretton Woods Conference
 1940s proposals for monetary system by Harry Dexter
White (U.S.) and John Keynes (UK).
 establish the value of each currency.
 eliminate restrictions and certain practices on trade.
 Bretton Woods Conference, New Hampshire, July 1944
with delegates of 44 nations.
 final negotiations of the IMF and the World Bank took place.
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Establishment
 The international monetary fund(IMF) was
established on 27th dec 1945.
 IMF started functioning with effect from 1st
march, 1947.
 Organization Headquarters Washington, D.C.
 Official languages English, French, and Spanish
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Membership
 IMF started with the initial membership
of 44 countries.
 The IMF currently has a near-global
membership of 188 countries.
 To become a member, a country must apply and then be
accepted by a majority of the existing members.
 In April 2012, Republic of South Sudan joined the
IMF, becoming the institution's 188th member.
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Quota
 A member country's quota defines its financial and
organizational relationship with the IMF, including:
 Subscriptions
 A member country's quota subscription determines
the maximum amount of financial resources the
country is obliged to provide to the IMF.
 A member’s IMF quota is equivalent to its
subscription in the organisation.
 A member must pay upto 25% of its quota in the
form of international reserve assets(SDRs or widely
accepted foreign currencies) and rest in its own
currency.
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Voting power
 The quota largely determines a member's voting
power in IMF decisions.
 Each member has 250 basic votes plus one
additional votes for each SRD 100,000 of quota.
 Accordingly, the United States has 421,965
votes (16.76 percent of the total).
 India has 58,952 votes(2.34% of total).
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IMF Member
country
Quota: millions
of SDRs
Quota:
percentage of
the total
Governor Alternate Number of
votes
Percentage out
of total votes
USA 42,122.4 17.69 Timothy Geithner Ben Bernanke 421,961 16.75
Japan 15,628.5 6.56 Koriki Jojima Masaaki
Shirakawa 157,022 6.23
Germany 14,565.5 6.12 Jens Weidmann Wolfgang
Schäuble 146,392 5.81
France 10,738.5 4.51 Pierre Moscovici Christian Noyer 108,122 4.29
UK 10,738.5 4.51 George Osborne Sir Mervyn King 108,122 4.29
Italy 7,055.5 3.24 Vittorio Grilli Ignazio Visco 95,996 3.81
China 9,525.9 4.00 Zhou Xiaochuan Yi Gang 81 151 3.65
Saudi Arabia 6,985.5 2.93 Ibrahim A. Al-
Assaf Fahad Almubarak 70,592 2.80
Canada 6,369.2 2.67 Jim Flaherty Mark Carney 64,429 2.56
Russia 5,945.4 2.50 Anton Siluanov Sergey Ignatyev 60,191 2.39
India 5,821.5 2.44 P. Chidambaram Duvvuri Subbarao 58,952 2.34
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Recent reforms
 In 2011, the number of basic votes was nearly
tripled, which helped to ensure poorer countries
maintained a say in running the institution.
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Access to financing
 A member country can borrow up to 200
percent of its quota annually and 600 percent
cumulatively.
 SDR allocations
 SDRs are used as an international reserve
asset.
 A member's share of general SDR
allocations is established in proportion to its
quota.
 The most recent general allocation of SDRs
took place in 2009. Thursday, June 06, 2013
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IMF Lending's
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 IMF provides financial assistance to members
with balance of payment problems, in support
of policies aimed at correcting them.
IMF provides two kinds of financial assistance.
1.Non-concessional.
2.Concessional assistance(low interest).

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IMF Organization Chart
International Monetary
and Financial Committee
Board of Governors Joint IMF-World Bank
Development Committee
Executive Board
Independent
Evaluation Office
Managing Director
Deputy Managing Directors

Board of Governors
 The Board of Governors consists of one
governor and one alternate governor for each
member country.
 The Board of Governors is advised by
the International Monetary and Financial
Committee and the Development Committee.
 International Monetary and Financial Committee
has 24 members .
 The Development Committee has 25 members.
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Executive Board
 24 Executive Directors make up Executive
Board.
 The Executive Directors represent all 188
member-countries.
 Eight countries each appoint an Executive
Director: the United
States, Japan, Germany, France, the United
Kingdom, China, the Russian Federation, and
Saudi Arabia
 The remaining 16 Directors represent
constituencies consisting of 4 to 22 countries.Thursday, June 06, 2013
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Management
 The IMF is led by a Managing Director, who is
head of the staff and Chairman of the Executive
Board.
 The Managing Director is assisted by a First
Deputy Managing Director and three other
Deputy Managing Directors.
 The IMF's Executive Board is responsible for
selecting the Managing Director.
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The current management team
 Managing Director of
IMF.
 July 5, 2011 Christine
Lagarde (France).
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Deputy Managing Directors
David Lipton, of the United
States
Naoyuki
Shinohara, a
Nemat Shafik, from
Egypt
Min Zhu, from ChinaThursday, June 06, 2013
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Special Drawing Rights
 Once SDRs have been added to a member
country’s official reserves, the country can
voluntarily exchange its SDRs for usable
currencies.
 The SDR is neither a currency, nor a claim on the
IMF.
 Holders of SDRs can obtain these currencies in
exchange for their SDRs in two ways:
first, through the arrangement of voluntary
exchanges between members.
second, by the IMF designating members with
strong external positions to purchase SDRs from
members with weak external positions.
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 SDR’s value
 The value of the SDR is based on a basket of
key international currencies—the euro,
Japanese yen, pound sterling, and U.S. dollar.
 The SDR interest rate provides the basis for
calculating the interest charged to members on
regular (non-concessional) IMF loans.
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SDR allocations to IMF members
 The IMF may allocate SDRs to members in
proportion to their IMF quotas, providing each
member with a costless asset.
 There are two kinds of allocations:
 General allocations of SDRs(1970-72, for
SDR 9.3 billion; in 1979–81, for SDR 12.1
billion; and in August 2009, for an amount of
SDR 161.2 billion.)
 Special allocations of SDRs(SDRs increased
from SDR 21.4 billion to SDR 204.1 billion ).
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OBJECTIVES.
1.International monetary cooperation.
2.To ensure stability in foreign exchange rates.
3.To eliminate exchange control.
4.To promote international trade.
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5.To help member nations to achieve balanced
economic growth of international trade.
6.To eliminate or to reduce the disequilibrium in
balance of payments.
7.To promote investment of capital in backward
and underdeveloped countries.
8.To develop confidence among members.
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How Does the IMF Achieve Its Goals?
 The IMF has three main activities:
surveillance, financial assistance, and
technical assistance.
Surveillance
Each year, the IMF sends economists to each of
its member countries to analyze the country's
economic situation.
 The team examines fiscal and monetary
policy, exchange rate, general macroeconomic
stability, and any related policies, such as labour
policy, trade policy, and social policy (such as the
pension system). Thursday, June 06, 2013
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 After the team finishes its analysis, the IMF
executive board discusses the report and
gives it to the leaders of the country in
question as the official opinion of the IMF.
Financial Assistance
 Member countries with balance of payments
problems can receive credits and loans to pay
off their obligations and readjust their
economic policies so that they will not face
another crisis or near-crisis.
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 The loans are disbursed in phases to ensure
that the receiving country moves forward with
the reforms required of it.
 Loans are generally granted for relatively short
periods of time, for just a few months, or for as
long as ten years, depending on the type of
loan.
 The receiving country must pay back loans on
time, on a rigorous schedule, because the
loans are intended to be temporary assistance.
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Technical Assistance
 The IMF provides technical assistance on
fiscal and monetary policy, regulatory
procedures, tax policy, and collection of
statistics, among other issues.
 These programs are aimed at strengthening
developing countries' abilities to reform and
properly manage their macroeconomic
policies.
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The IMF provides technical assistance
and training mainly in four areas:
 Monetary and financial policies (monetary policy
instruments, banking system supervision and
restructuring, foreign management and
operations, clearing settlement systems for
payments, and structure development of central
banks);
 Fiscal policy and management (tax and customs
policies and administration, budget
formulation, expenditure management, design of
social safety nets, and management of domestic
and foreign debt);
 Compilation, management, dissemination, and
improvement of statistical data;
 And advising on economic and financialThursday, June 06, 2013
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Criticism
 Limited scope: Deals with only imbalances in
payments but not with the repayments of war loans
or of blocked reserves or with the exports and
imports of capital.
 Fixation of unscientific quotas: Quotas were fixed
keeping in mind the economic and political interests
of the U.S.A. and the U.K. But not on any scientific
basis.
 Discriminatory treatment : It gives special
concession to western countries while neglecting
backward or underdeveloped countries.
 Inability to remove exchange controls.Thursday, June 06, 2013
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 No success in securing exchange stability: It has
failed to bring complete stability in foreign exchange
rates.
 No solution of the liquidity problems.
 No elimination of multiple exchange rates.
 Free convertibility of currencies not attained:
Except the US dollars, no other currency is freely
convertible into any other currency.
 Inadequate representation to developing
countries: 90% member countries are developing
countries but only 38% of voting power is given.Thursday, June 06, 2013
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References:-
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 www.imf.org
 Monetary economics by M.L.Seth.
 http://www.globalization101.org

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