International Monetary Fund

INTERNATIONAL
MONETARY FUND

Presented by:
Jatin Vaid

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International
Monetary Fund

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Overview

 The International Monetary Fund (IMF) is an organization of
186 countries, working to foster global monetary cooperation,
secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce
poverty around the world.

 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.

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Overview
 With its global membership of 186 countries, the IMF is
uniquely placed to help member governments take
advantage of the opportunities—and manage the
challenges—posed by globalization

 The IMF tracks global economic trends and performance,
alerts its member countries when it sees problems on the
horizon, provides a forum for policy dialogue, and passes
on know-how to governments on how to tackle economic
difficulties

 The IMF 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
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Key IMF Activities
The IMF supports its membership by providing:

III. policy advice to governments and central banks based on
analysis of economic trends and cross-country experiences;
IV. research, statistics, forecasts, and analysis based on
tracking of global, regional, and individual economies and
markets;
V. loans to help countries overcome economic difficulties;
VI. concessional loans to help fight poverty in developing
countries; and
VII. technical assistance and training to help countries improve
the management of their economies.

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IMF Functions
The IMF's main goal is to ensure the stability of the international
monetary and financial system. It helps resolve crises, and works with
its member countries to promote growth and alleviate poverty.

III. Economic and Financial Surveillance : The IMF
promotes economic stability and global growth by encouraging countries
to adopt sound economic and financial policies. To do this, it regularly
monitors global, regional, and national economic developments.

V. Technical Assistance and Training: IMF offers technical assistance and
training to help member countries strengthen their capacity to design
and implement effective policies. Technical assistance is offered in
several areas, including fiscal policy, monetary and exchange rate
policies, banking and financial system supervision and regulation, and
statistics.

VII. IMF Lending: In the event that member countries experience difficulties
financing their balance of payments, the IMF is also a fund that can be
tapped to facilitate recovery.

IX. Research and Data : Supporting all three of these activities is the IMF's
economic and financial research and statistics.
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Objectives of IMF
I. To promote international monetary
cooperation
II. To facilitate the expansion and
balanced growth of International Trade
III. To promote exchange rate stability
IV. To make its resources available to its
members who are experiencing BOP
problems
V. To establish a multilateral system of
payments
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Conditionality
• IMF lends to its member countries,
ensuring that, members are pursuing
policies that will improve external
payment problems.
• Commitment to implement corrective
measures.
• To repay in a timely manner.

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Membership
I. The IMF currently has a near-global membership of 186
countries. To become a member, a country must apply and
then be accepted by a majority of the existing members.

III. Upon joining, each member of the IMF is assigned a quota,
based broadly on its relative size in the world economy.

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Special Drawing Rights (SDR)
• SDR is an international reserve asset
• Supplements members’ existing reserve assets –
gold, forex.
• Unit of account for IMF operations and
transactions
• Value of SDR is based on basket of major
currencies used in IB.
• Weights assigned show relative importance.
• France, Ger, Jp, UK, US – Largest exports
• US – 0.557; EURO-0.426; YEN – 21.0; POUND-
0.0984
• More stable.

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Subscriptions
 A member's quota subscription determines the maximum amount
of financial resources the member is obliged to provide to the IMF.

 A member must pay its subscription in full upon joining the IMF:
up to 25 percent must be paid in the IMF's own currency, called
Special Drawing Rights (SDRs) or widely accepted currencies
(such as the dollar, the euro, the yen, or pound sterling), while the
rest is paid in the member's own currency.

 Voting power. The quota largely determines a member's voting
power in IMF decisions. Each IMF member has 250 basic votes
plus one additional vote for each SDR 100,000 of quota.

 Access to financing. The amount of financing a member can
obtain from the IMF (its access limit) is based on its quota. Under
Stand-By and Extended Arrangements, which are types of loans,
a member can borrow up to 200 percent of its quota annually and
600 percent cumulatively.

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Organization &
Management
 The IMF has a management team and 17 departments that carry
out its country, policy, analytical, and technical work.

The current management team:

 Dominique Strauss-Kahn, a French national, became the
IMF's tenth Managing Director in November 2007.
Previously, he was the Finance Minister of France during
1997-99.
 John Lipsky, an American, has been First Deputy Managing
Director since September 2006. Before coming to the IMF,
he worked for JPMorgan Investment Bank.
 Takatoshi Kato, a Japanese national, became Deputy
Managing Director of the IMF in February 2004. Previously,
he advised the president of Tokyo-Mitsubishi Bank.

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Governance Structure
 The Board of Governors is the highest decision-making
body of the IMF. It consists of one governor and one
alternate governor for each member country. The governor
is appointed by the member country and is usually the
minister of finance or the head of the central bank.
 While the Board of Governors has delegated most of its
powers to the IMF's Executive Board, it retains the right to
approve quota increases,
special drawing right (SDR) allocations, the admittance of
new members, compulsory withdrawal of members, and
amendments to the Articles of Agreement and By-Laws. It
also elects or appoints executive directors
 The Boards of Governors of the IMF and the World Bank
Group normally meet once a year
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Governance Structure
 Ministerial Committees: The IMF Board of Governors is
advised by two ministerial committees, the
International Monetary and Financial Committee (IMFC) and
the Development Committee.
The IMFC has 24 members, drawn from the pool of 186
governors

 The Executive Board: The IMF's 24-member Executive Board
takes care of the daily business of the IMF. Together, these
24 board members represent all 186 countries.

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Finances
 Quotas:
The IMF's resources come mainly from the money that countries
pay as their capital subscription when they become members.
Quotas broadly reflect the size of each member's economy: the
larger a country's economy in terms of output and the larger and
more variable its trade, the larger its quota tends to be. They also
help determine how much countries can borrow from the IMF and
their share in allocations of special drawing rights or SDRs (the
reserve currency created by the IMF in 1969).

 Gold:
The IMF holds a relatively large amount of gold among its assets,
for reasons of financial soundness, also to meet unforeseen
contingencies.
The IMF holds 103.4 million ounces (3,217 metric tons) of gold,
worth about $83 billion as of end-August 2009, making it the
third-largest official holder of gold in the world.

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History of IMF
The IMF has played a part in shaping the global economy since
the end of World War II.
1. Cooperation and reconstruction (1944–71)
During the Great Depression of the 1930s, countries attempted to
shore up their failing economies by sharply raising barriers to
foreign trade, devaluing their currencies to compete against each
other for export markets, and curtailing their citizens' freedom to
hold foreign exchange. These attempts proved to be self-
defeating. World trade declined sharply, and employment and
living standards plummeted in many countries.

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History of IMF
2. The Bretton Woods agreement
 The IMF was conceived in July 1944, when representatives of 45
countries meeting in the town of Bretton Woods, New Hampshire,
U.S, agreed on a framework for international economic
cooperation, to be established after the Second World War. They
believed that such a framework was necessary to avoid a
repetition of the disastrous economic policies that had contributed
to the Great Depression.
 The IMF came into formal existence in December 1945, when its
first 29 member countries signed its Articles of Agreement. It
began operations on March 1, 1947. Later that year, France
became the first country to borrow from the IMF.
 Par value system - The countries that joined the IMF between
1945 and 1971 agreed to keep their exchange rates (the value of
their currencies in terms of the U.S. dollar). This prevailed until
1971.
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History of IMF
3. The end of the Bretton Woods System (1972–81)
 By the early 1960s, the U.S. dollar's fixed value against gold, under
the Bretton Woods system of fixed exchange rates, was seen as
overvalued.
 In August 1971, U.S. President Richard Nixon announced the
"temporary" suspension of the dollar's convertibility into gold.
 Since the collapse of the Bretton Woods system, IMF members
have been free to choose any form of exchange arrangement they
wish : allowing the currency to float freely, pegging it to another
currency or a basket of currencies, adopting the currency of
another country, participating in a currency bloc, or forming part of
a monetary union.

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International Monetary Fund

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International Monetary Fund