Name: Apoorva Bhardwaj

Roll No.: 30
Subject: International Business

INTERNATIONAL MONETARY
FUND (IMF)

 What Is the International Monetary Fund?

The International Monetary Fund (IMF) is an international organization that promotes global
economic growth and financial stability, encourages international trade, and reduces poverty.
Quotas of member countries are a key determinant of the voting power in IMF decisions.
Votes comprise one vote per 100,000 special drawing right (SDR) of quota plus basic votes.
SDRS are an international type of monetary reserve currency created by the IMF as a
supplement to the existing money reserves of member countries.

 History:

The IMF was founded in 1945 as part of the Bretton Woods Agreement, which aimed to
promote international financial cooperation by adopting a system of fixed-rate convertible
currencies. At the time, the dollar was worth $35 per ounce of gold. 2 The IMF oversaw the
system; for example, a country could vary its exchange rate by up to 10% in any direction, but
bigger adjustments required authorization from the IMF.

The IMF also served as a gatekeeper: countries could not join the International Bank for
Reconstruction and Development (IBRD), a World Bank precursor established by the Bretton
 Name: Apoorva Bhardwaj
Roll No.: 30
Subject: International Business
Woods agreement to support Europe's reconstruction after WWII, unless they were IMF
members. 45

Since the Bretton Woods system failed in the 1970s, the IMF has advocated for a system of
floating exchange rates, in which market forces decide the relative value of currencies. This
system is still in effect today.

 Functions of IMF:

i. Founding and mission: The IMF was conceived in July 1944 at the United Nations Bretton
Woods Conference in New Hampshire, United States. The 44 countries in attendance sought
to build a framework for international economic cooperation and avoid repeating the
competitive currency devaluations that contributed to the Great Depression of the 1930s. The
IMF's primary mission is to ensure the stability of the international monetary system—the
system of exchange rates and international payments that enables countries and their citizens
to transact with each other.

ii. Surveillance: The IMF uses a formal system known as surveillance to monitor member
country policies as well as national, regional, and global economic and financial events in
order to maintain stability and prevent crises in the international monetary system. The IMF
offers member countries advice and promotes policies that enhance economic stability,
minimise vulnerability to economic and financial crises, and improve living standards. It also
publishes periodic assessments of global prospects in the World Economic Outlook, financial
markets in the Global Financial Stability Report, public finance developments in the Fiscal
Monitor, and the external positions of the world's largest economies in the External Positions
of the World's Largest Economies.

iii. Financial Assistance: The IMF's primary responsibility is to provide loans to member
nations that are experiencing or may be facing balance-of-payments concerns. Individual
country adjustment programmes are developed in close collaboration with the IMF and
financed by the IMF, with continued financial support contingent on successful
implementation of these changes. In April 2009, the IMF strengthened its lending capacity
and approved a comprehensive revision of its financial support mechanisms in response to the
global economic crisis, with more modifications implemented in later years. These reforms
improved the IMF's crisis-prevention toolset, enhancing its ability to prevent systemic
contagion.

iv. SDRs: Special Drawing Rights, or SDRs, are an international reserve asset issued by the IMF
to complement the official reserves of member countries participating in the SDR Department
(currently all members of the IMF). A general allocation of SDRs must be consistent with the
goal of addressing the long-term global requirement for reserve assets, and it must be
approved by an 85 percent majority of the total voting power of the Board of Governors. The
allocation is allocated to member nations in proportion to their quota shares at the Fund once
it has been agreed upon. Now, total global allocations are around SDR 204.2 billion (around
$293 billion). SDRs can be exchanged for currencies among IMF members on a voluntary
basis.
 Name: Apoorva Bhardwaj
Roll No.: 30
Subject: International Business

v. Capacity Development: The IMF provides technical support and training to member nations
to help them improve their economic institutions and human capacities. Designing and
implementing more effective taxes and administration policies, spending management,
monetary and exchange rate policies, banking and financial system supervision and
regulation, legislative frameworks, and economic data are just a few examples.

vi. Resources: IMF financial resources are mostly derived from member quotas. The quota of a
member reflects its size and role in the global economy. The IMF performs quota reviews on
a regular basis.

 Primary Aims of the IMF:

i. Promote international monetary cooperation.

ii. Facilitate the expansion and balanced growth of international trade.
iii. Promote exchange stability.
iv. Assist in the establishment of a multilateral system of payments.
v. Make resources available (with adequate safeguards) to members experiencing balance-of-
payments difficulties.

 The main objectives of IMF, as noted in the Articles of Agreement, are as follows:

i. International Monetary Co-Operation:

ii. Ensure Exchange Stability:
iii. Balanced Growth of Trade:
iv. Eliminate Exchange Control:
v. Multilateral Trade and Payments:
vi. Balanced Growth:
vii. Correction of BOP Maladjustments