International monetary fund

• Madhuri Gupta

• Sahiba Bhumra

• Prakriti Patle

• Shvani Naidu

• Angad Singh Chada

• Apoorv Pandey

• Yogesh Wadhwani

• Piyush Chantola

• Pankaj Rao

Group Members -

What is IMF

Fast facts about IMF

History

Member countries

Organization structure

Functional department of IMF

Functions of IMF

How IMF help member countries

Financing facilitiesProcess of IMF lending

Special drawing rightsImf and Indian economyBenefits toI ndia

Content

What Is IMF?

International Monetary Fund (IMF) is an organization working to foster global monetary cooperation, of 188 countries to :

Secure financial stability,

Facilitate international

trade,

Promote high employment

and

Sustainable economic growth,

And Reduce poverty around

the world.

Organization formed with a stated objective of stabilizing international exchange rates and

facilitating development.

Monitoring economic and financial developmentsand policies, in member countries and at the globallevel, giving policy advance to its members basedon its more than fifty years of experience.

Lending to member countries with balance ofpayments problems, supporting adjustment andreform policies aimed at correcting the underlyingproblems.

Providing the governments and central banks of itsmember countries with technical assistance andtraining in its areas of expertise.

IMF looks at the performance of the economy as awhole (macroeconomic performance)

Focuses also on the financial sector policies Ex:regulation and supervision of banks and otherfinancial institutions.

Pays attention to structural policies that affectmacroeconomic performance.

Ex: labor market policies (affect employment andwage behavior)

• Membership: 187 countries

• Headquarters: Washington, D.C.

• Executive Board: 24 Directors representing countries or groups of countries

• Staff: Approximately 2,470 from 141 countries

• Total Quotas : US$ 383 billion

• Biggest Borrowers : Greece , Portugal ,Ireland (as of 18/08/2011)

• The members of the IMF are 186 members of the UN (all UN member states but 7) and Republic of Kosovo.

• Apart from Cuba, the other six member states of the UN not belonging to the IMF are: North Korea, Andorra, Monaco, Liechtenstein, Nauru and South Sudan.

Fast facts

• All member states participate directly in the IMF.

• 24-member executive board-

Five executive directors are appointed by the five members with the largest quotas,

Nineteen executive directors are elected by the remaining members.

all members appoint a Governor to the IMF's board of governors.

• The powers of the other countries are represented on a proportional scale to their population and economic rank in the world.

• The Executive board are the general owners of the IMF and can control major decisions.

• All members of the IMF are also International Bank for Reconstruction and Development (IBRD) members and vice versa

Fast facts

Post 1930 Era was impacted by The Great Depression & World War II.

• During the Great Depression the countries were trying to shore up their falling economies by –1. sharply raising barriers to foreign trade2. devaluing their currencies to compete against each other for

export markets3. curtailing their citizens' freedom to hold foreign exchange

• Countries affected by World War II desperately required• Economic Reconstruction (for well developed nations)• Economic Development (for less developed nations)

• World trade declined sharply (see chart below), and employment and living standards plummeted in many countries. • This breakdown in international monetary cooperation led the

IMF's founders to plan an institution charged with overseeing the international monetary system—the system of exchange rates and international payments that enables countries and their citizens to buy goods and services from each other.

The Bretton Woods agreement

• The IMF was conceived in July 1944,

• Representatives of 45 countries met in the town of Bretton Woods, New Hampshire, in the Northeastern United States, agreed on a framework for international economic cooperation.

• 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 firstcountry to borrow from the IMF.

• Par value system (Bretton Woods system)

• Initially, member countries agreed to peg their currencies in US Dollar terms and for US, the value of Dollar in terms of Gold-to correct Fundamental Disequilibrium.

How IMF Help Member Countries

• When a country joins the IMF, it agrees to subject its economic and financial policies to the FUND.

SURVEILLANCE

• Lending to countries with balance of payments difficulties

• Financial assistance to countries to meet International Payments

LENDING

• To assist mainly low-and middle-income countries in effectively managing their economies

TECHNICAL ASSISTANCE

Surveillance over Members’ Economic Policies

countries agree to pursue economic policies that are consistent

with the objectives of the IMF.

The Articles of Agreement confer on the IMF the legal authority

to oversee compliance by members with this obligation

IMF is “the only organization that has a mandate to examine on

a regular basis the economic

circumstances of virtually every country in the world.”

Surveillance ( Like A Doctor )

Strengthening human skills and institutional capacity ofcountries

Helps members in strengthening their policy formulation andimplementation, and the legal,

institutional, and market frameworks within which they operate.

It also constitutes an important complement to IMF surveillanceand lending operations in member countries.

Technical Assistance (like a teacher)

Lending to countries to support reforms

Improving financial sector surveillance.

Development of standards and codes of

good practice.

Enhancement of transparency in the IMF

and its member countries.

Involvement of the private sector in crisis resolution

Financial Assistance (like a banker)

Organization structure

Board of Governors

The Board of Governors is the highest decision-making body of the IMF.

The governor is appointed by the member country and is usually the minister of finance or the head of the central bank.

Ministerial Committees

The IMF Board of Governors is advised by two ministerial committees,the International Monetary and Financial Committee (IMFC) andthe Development Committee.

The IMFC has 24 members, drawn from the pool of 186 governors.

The Board of Governors, the highest decision-making body of the IMF, 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 governor of the central bank.

Board of Governors decide on major policy issues

All powers of the IMF are vested in the Board of Governors.

Day-to-day decision making – Executive Governors

24 in number.

The Managing Director is Chair person of the EB

Meets thrice a week, more if required

Five largest shareholders of IMF – US, japan, Germany, UK & France along with China, Russia and Saudi Arabia have their own seats on EB

Other members are selected for 2 year terms by groups of countries known as constituencies

The Board of council may delegate to the Executive Board all except certain reserved powers.

The Board of Governors normally meets once a year.

Key policy issues relating to international monetary

system are considered twice a year by IMFC

Development committee reports to the Governors on

development policy and other related matters

IMF has a weighted voting system – the larger the

country’s quota (dependent on its economic size)

more votes for the country

The Executive Board meets three times a week, maybe more.

The Board has a voting system:- The larger the economy, the more voting power it has

- But, most decisions are based on consensus

How the polices are determined ?

Most loans are provided by member countries, determined by their quota, which is calculated based upon a country’s relative size in the world economy.

For a closer look at the Member Quotas we can reference the IMF website.

Upon joining, the 25% of the quota is paid in some major currency US Dollar, British Pound, Yen while the remaining 75% is paid in their own currency.

Where does the IMF get it’s Money from ?

The Bretton Woods system of monetary management established the rules forcommercial and financial relations among the world's industrial states.independent nation-states.

Preparing to rebuild the international economic system as World War II was stillraging, 730 delegates from all 44 Allied nations gathered at the MountWashington Hotel in Bretton Woods, New Hampshire, United States, for theUnited Nations Monetary and Financial Conference. The delegates deliberatedupon and signed the Bretton Woods Agreements during the first three weeks ofJuly 1944.

Bretton Woods system

The SDR, or Special Drawing Rights, is an international reserve asset that member countries can add to their foreign currency and gold reserves and use for payments requiring foreign exchange.

Its value is set daily using a basket of four major currencies: the euro, Japanese yen, pound sterling, and U.S. dollar.

The IMF introduced the SDR in 1969 because of concern that the stock and prospective growth of international reserves might not be sufficient to support the expansion of world trade. (The main reserve assets at the time were gold and U.S. dollars.)

What is the SDR?

The SDR was introduced as a supplementary reserve asset, which the IMF could "allocate" periodically to members when the need arose, and cancel, as necessary.

IMF member countries may use SDRs in transactions among themselves, with 16 "institutional" holders of SDRs, and with the IMF.

The SDR is also the IMF's unit of account. A number of other international and regional organizations and international conventions use it as a unit of account, or as the basis for a unit of account.

What is the SDR?

1. Most of the IMF's loans to low-income countries are made on concessional terms, under the Poverty Reduction and Growth Facility.

2. Under a mechanism introduced by the IMF in 2005—the Policy Support Instrument—countries can request that the IMF regularly and frequently review their economic programs to ensure that they are on track.

3. The success of a country's program is assessed againstthe goals set forth in the country's poverty reductionstrategy, and the IMF's assessment can be made publicif the country wishes.

4. The IMF also participates in debt relief efforts for poorcountries that are unable to reduce their debt to asustainable level even after benefiting from aid,concessional loans, and the pursuit of sound policies.

5. To ensure that developing countries reap full benefitfrom the loans and debt relief they receive, in 1999 theIMF and the World Bank introduced a process known asthe Poverty Reduction Strategy Paper (PRSP)process.

India and the imf

• India and the IMF has a positive relationship. The IMF has

provided financial assistance to India, which has helped in

boosting the country's economy.

• The IMF praised the country for it was able to avoid the Asian

Financial Crisis in 1999 and was also able to maintain the

average rate of growth of its economy.

• In 2005, the IMF said that the budget of India is very positive

for it points that the economy of the country will grow at the

rate of 6.7%.

India and the IMF• The Managing Director of International Monetary Fund

Rodrigo De Rato visited India in May 2005.

• International Monetary Fund said that the reasons behind

the economy growth of India are that the RBI has been

able to control inflation and has also handled its monetary

policies very skillfully.

• The IMF has suggested that India can become a financial

super power by bringing in more reforms in its economic

policies that will increase its growth rate to 8%.