The International Monetary Fund (IMF) works to achieve
sustainable growth and prosperity for all of its 190
The IMF or International Monetary Fund is an
organization with 190 member countries that aims to
attain sustainable growth and profitability for the
members. It supports economic policies that are focused
on promoting economic balance and pecuniary
cooperation. The IMF is governed by and accountable to
the member countries. The IMF is a specialized agency
of the UN, with headquarters in Washington D.C.
Due to the Great Depression of the 1930s, international
monetary cooperation collapsed and the global economy
was shaken due to economic setbacks. The Bretton
Woods Conference of 1944 brought 45 government
representatives together to have a discussion on postwar
international economic cooperation. This conference
gave rise to the origin of the International Monetary
Fund. The IMF is an important topic for the UPSC Exam.
It is frequently in the news and hence IAS aspirants must
be aware of the structure, significance, members, and
other details of the organization.
International Monetary Fund (IMF)
The IMF or International Monetary Fund is an
organization with 190 member countries that aims to
attain sustainable growth and profitability for the
members. It supports economic policies that are focused
on promoting economic balance and pecuniary
cooperation. The IMF is governed by and accountable to
the member countries. The IMF is a specialized agency
of the UN, with headquarters in Washington D.C.
Due to the Great Depression of the 1930s, international
monetary cooperation collapsed and the global economy
was shaken due to economic setbacks. The Bretton
Woods Conference of 1944 brought 45 government
representatives together to have a discussion on postwar
international economic cooperation. This conference
gave rise to the origin of the International Monetary
Fund.
The formation of the IMF was initiated in 1944 at the
Bretton Woods Conference. IMF came into operation on
27th December 1945 and is today an international
organization that consists of 189 member countries.
Headquartered in Washington, D.C., IMF focuses on
fostering global monetary cooperation, securing financial
stability, facilitating and promoting international trade,
employment, and economic growth around the world.
The IMF is a specialized agency of the United Nations.
member countries. It does so by supporting economic
policies that promote financial stability and monetary
cooperation, which are essential to increase productivity,
job creation, and economic well-being. The IMF is
governed by and accountable to its member countries.
The IMF has three critical missions: furthering
international monetary cooperation, encouraging the
expansion of trade and economic growth, and
discouraging policies that would harm prosperity. To
fulfill these missions, IMF member countries work
collaboratively with each other and with other
international bodies.
Formation of IMF
The breakdown of international monetary cooperation
during the Great Depression led to the development of
the IMF, which aimed at improving economic growth
and reducing poverty around the world. The International
Monetary Fund (IMF) was initially formed at the Bretton
Woods Conference in 1944. 45 government
representatives were present at the Conference to discuss
a framework for postwar international economic
cooperation.
The IMF became operational on 27th December 1945
with 29 member countries that agreed to bound to this
treaty. It began its financial operations on 1st March
1947. Currently, the IMF consists of 189 member
countries.
The IMF is regarded as a key organisation in the
international economic system which focuses on
rebuilding the international capital along with
maximizing the national economic sovereignty and
human welfare.
Detailed information on the IMF can be checked in the
video below –
Organizational Structure of International Monetary
Fund (IMF)
The United Nations is the parent organization that
handles the proper functioning and administration of the
IMF. The IMF is headed by a Managing Director who is
elected by the Executive Board for a 5-year term of
office. The International Monetary Fund (IMF) consists
of the Board of Governors, Ministerial Committees, and
the Executive Board.
To know more about the organizational structure of IMF,
refer to the table below:
Objectives of the IMF
IMF was developed as an initiative to promote
international monetary cooperation, enable international
trade, achieve financial stability, stimulate high
employment, diminish poverty in the world, and sustain
economic growth. Initially, there were 29 countries with
a goal of redoing the global payment system. Today, the
organization has 189 members. The main objectives of
the International Monetary Fund (IMF) are mentioned
below:
1. To improve and promote global monetary
cooperation of the world.
 2. To secure financial stability by eliminating or
minimizing the exchange rate stability.
3. To facilitate a balanced international trade.
4. To promote high employment through economic
assistance and sustainable economic growth.
5. To reduce poverty around the world.
What are the functions of the IMF?
IMF mainly focuses on supervising the international
monetary system along with providing credits to the
member countries. The functions of the International
Monetary Fund can be categorized into three types:
Surveillance Function
 The primary function of the IMF is to monitor
the international monetary system along with the
economic and financial policies of the 190
member countries. This surveillance process
happens at regional, global, and country levels.
 The International Monetary Fund (IMF) analyzes
stability and growth risks and suggests and
assists countries in essential policy adjustments
for sustainable economic growth and financial
and economic stability.
Financial Function
 Economic crises can arise at anytime in any
form. It can be a balance of payment crisis,
high fiscal deficits or debts, etc.
 The International monetary fund provides
financial assistance to countries that are hit by
the crisis and help them to restore economic
stability in the country.
 It also provides precautionary financial advice to
the members to prevent and get prepared for the
crisis.
Technical or Capacity Development Function
The International Monetary Fund also provides
training and capacity development assistance to the
central banks, tax authorities, finance ministers, and
economic institutions of the member countries. These
efforts help the countries to achieve the objectives of
sustainable growth and development. The capacity
development efforts of the IMF focus mainly on the
following parameters:
Public Finance
 IMF guides the countries on the better
mobilization of revenues and effective
management of expenditure by using fiscal
instruments such as tax & custom duties, budget
management, public finance, debt management,
etc.
 The training helps the countries to improve the
infrastructure of the country such as better
schools, hospitals, roads, etc, attract foreign
direct investments, ensure fiscal health, foster
transparency, mitigate the risk of climate change,
and reduce the risks of exchange rate
fluctuations, etc.
Monetary and Financial Policies
 The IMF works with the central banks of the
countries on modernizing the monetary and
financial policies so that they can cope with the
crisis.
 Recently, the IMF has also started providing
capacity development on cyber-risk and fintech.
Legal Framework
The IMF also guides the countries to align their legal and
governance framework with international standards to
support financial reforms, address the issues of money
laundering and black money, etc.
Statistics
 It also helps the countries in the compilation,
management, and analysis of financial and
macroeconomic data.
 This helps the countries to better understand the
economy and formulate more effective economic
policies that can cater to the needs of the
economy.
What are the IMF Quotas?
When the country joins the International Monetary Fund
(IMF), it is assigned a quota based on the economic size
of the country in relation to the global economy and the
existing member countries. Quotes are provided in the
denominations of the Special Drawing Rights (SDRs).
 The review of these quotes is conducted usually
after every five years through which the IMF
looks at the adequacy of quotes according to the
needs of the member countries for liquidity and
financial stability. The quota of the member
countries determines the voting power of each
member and its access to IMF financing.
 250 basic votes are provided to each member
plus one additional vote for each SDR 100,000
quota. India holds the position of eighth-highest
quota-holding member of the IMF.
Structure of the International Monetary Fund
The highest decision-making authority is possessed by
the Board of Governors of the International Monetary
Fund [IMF]. Each citizen of the country comprises one
governor and one alternate governor. The member of the
countries leads to the appointment of the Minister of
Finance or the head of the central bank. Two ministerial
committees, the International Monetary and Financial
Committee and the Development Committee have the
responsibility of advising the Board of Governors.
 The Board of Governors have consigned most of
their authorities to the Executive Board of the
International Monetary Firm and keeps back the
authority to approve the quotas, and allocations
of the SDR [special drawing right], admit new
members, and mandatorily withdraw the
members and alterations or amendments of the
Articles of Bylaws and Agreements.
 The International Monetary Fund’s executive
board comprises 24 members. The Board of
Governors plays an instrumental role in electing
the Executive Board. It directs the daily affairs of
the IMF and exerts the powers consigned to it by
the Board of Governors and the authorities
provided to it by the Articles of Agreements. The
 Board puts forth on the basis of consensus,
sometimes the votes are taken.
Special Drawing Rights (SDR) of IMF
The Special Drawing Right [SDR] has been established
by the International Monetary Fund. It is an international
reserve asset that is interest-bearing. The SDR
corresponds to the plethora of international currencies
consisting of the dollars of the United States, Japanese
yen, Euro, Chinese Renminbi, and pound sterling. The
SDR value of a currency is determined by the value of
dollars in the United States.
 It is also elicited by the market exchange rates, of
an SDR basket of currencies. The Special
Drawing Rights are also evaluated over the span
of five years. The SDR possesses the claim of
freely usable currencies of the members of the
International Monetary Funds, this is not just a
currency.
 The Special Drawing Rights are only allocated to
the members of the International Monetary
Funds who make active participation in the SDR
department.
 As of now, all the members of the Special
Drawing Rights are a part of the SDR
Department. India possesses the current quota of
SDR to be 5,821.5 million, leading it to be called
the 13th largest quota-handling country at
International Monetary Funds and providing its
shareholdings at 2.44%.
Criticism of IMF
The criticism of the IMF is widely publicized as they are
more, outnumbered the success of the organization in
recent years. The main areas of criticism are:
 Conditions associated with the loans are
obtrusive and compromise the economic and
political sovereignty of the receiving countries.
 The policies of the International Monetary Fund
are imposed without comprehending the definite
features of the respective countries.
 The organization allows for inflationary
devaluations
 The IMF policies are implemented all at go. It
does not follow an adequate sequence.
IMF and India
India is one of the founding members of the
International Monetary Fund. On May 31, 2000, India
paid off all loans to the International Monetary Fund. The
Finance Minister of India serves as the ex-officio
Governor on the Board of Governors. Also, the Governor
of the Reserve Bank of India acts as the Alternate
Governor. Dr. Rakesh Mohan, Executive Director of
India at the IMF, also represents Bangladesh, Sri Lanka,
and Bhutan.
 Following the footsteps of the Bretton Woods
System, the IMF now assists countries
experiencing a balance-of-payments problem.
Moreover, it also supports governments in
dealing with multiple economic issues.
 The IMF also offers technical support and
capacity building to developing and
impoverished countries.
 IMF laid assistance to India during a post-
partition crisis.
 The International Monetary Fund allocated funds
to India when it was facing an economic crisis
during the Indo-Pak conflict of 1965 and 1971.
The aid that India can attain through IMF has
surged due to the SDR. India has also attained a
position on the Board of Directors.
 The country plays an instrumental role in
specifying the policies of the IMF. India has also
taken assistance to track the status of the Indian
economy. Since 1933 India has not taken any
economic aid from the IMF and the repayment of
loans finished on 31 May 2000.
 The Finance Minister of India is part of the ex-
officio Governor on the Board of Governors of
the International Monetary Fund. The Governor
of the Reserve Bank of India is the alternate
governor at the International Monetary Fund.
 Each member country also has an alternate
governor. The alternate governor for India is the
Governor of the RBI. There is also an Executive
Director for India who represents the country at
the IMF.
 India’s quota in the IMF is SDR 13,114.4 million
that gives India a shareholding of 2.76%. Read
about the Special Drawing Rights – Created in
1969 by International Monetary Fund (IMF) at
the linked article.
 This makes India the eight largest quota holding
country at the organization.
 In 2000, India completed the repayment of all the
loans it had taken from the IMF.
 Now, India is a contributor to the IMF.
Who runs the IMF?
 The IMF is accountable to its member country
governments. At the top of the organizational
structure is the Board of Governors, consisting of
one governor and one alternate governor from
each member country, usually the top officials
from the central bank or finance ministry. The
Board of Governors meets once a year at
the IMF–World Bank Annual Meetings. Twenty-
four of the governors serve on the International
Monetary and Financial Committee, or IMFC,
which advises the IMF's Executive Board.
 The day-to-day work of the IMF is overseen by
its 24-member Executive Board, which
represents the entire membership and is
supported by IMF staff. The Managing Director
is the head of the IMF staff and Chair of the
Executive Board and is assisted by four Deputy
Managing Directors.
How is the IMF funded?
IMF funds come from three sources: member quotas,
credit arrangements, and bilateral borrowing agreements.
MEMBER QUOTAS
Member quotas are the primary source of IMF funding. A
member country’s quota reflects its size and position in
the world economy. Read more on the IMF regularly
reviews quotas.
NEW ARRANGEMENTS TO BORROW
New Arrangements to Borrow (NAB) between the IMF
and a group of members and institutions are the main
backstop for quotas. In January 2020, the IMF Executive
Board agreed to double the size of the NAB to SDR 365
billion, or $504 billion.
BILATERAL BORROWING AGREEMENTS
Member countries also have committed resources
through bilateral borrowing agreements (BBAs). In
2020, the IMF Executive Board approved a new round of
BBAs, totaling SDR 138 billion, or $190 billion.
Frequently Asked Questions
VISIT - https://www.imf.org/en/About/Factsheets/IMF-
at-a-Glance
Do Study SDR – special drawing rights
IMF TIMELINE - helps prevent and manage financial crises by
https://www.imf.org/en/About/Timeline
The International Monetary Fund (IMF) plays a crucial
role in the global financial system. It is an international
organization that aims to promote global monetary
cooperation, secure financial stability, facilitate
international trade, foster economic growth, and reduce
poverty. In this blog, we will delve into the functions,
structure, and significance of the IMF in the international
financial landscape.
The Functions of the IMF
1. Surveillance and Economic Analysis: The IMF
monitors the economic and financial
developments of its member countries, providing
policy advice and conducting assessments to
ensure stability and sustainable growth.
2. Financial Assistance: The IMF provides
financial support to member countries facing
balance of payments difficulties. These financial
programs come with policy conditions aimed at
addressing underlying economic issues.
3. Technical Assistance and Capacity
Development: The IMF offers technical
expertise, training, and advice to member
countries to strengthen their economic
institutions and policies.
4. Promoting International Monetary
Cooperation: The IMF fosters collaboration
among countries, promotes exchange rate
stability, and facilitates the smooth functioning
of the international monetary system.
Structure of the IMF
The IMF has a hierarchical structure that includes the
following components:
1. Board of Governors: Consisting of
representatives from each member country, the
Board of Governors is the highest decision-
making body in the IMF. It meets once a year to
discuss key policy issues.
2. Executive Board: Comprising 24 Executive
Directors, the Executive Board is responsible for
day-to-day operations. It discusses policy
matters, approves financial assistance, and
conducts evaluations.
3. Managing Director: The Managing Director
heads the IMF and is elected by the Executive
Board. They oversee the organization’s activities,
represent the IMF in international forums, and
coordinate policy implementation.
4. IMF Staff: A team of economists, researchers,
and experts supports the IMF’s operations,
including conducting economic analyses,
providing technical assistance, and managing
financial programs.
Significance of the IMF
The IMF plays a vital role in the global economy, and its
significance can be understood through the following
points:
1. Crisis Prevention and Resolution: The IMF
providing financial assistance and policy advice,
ensuring stability in member countries and the
global financial system.
2. Promoting Economic Growth: Through its
surveillance and policy advice, the IMF supports
member countries in implementing sound
economic policies, fostering sustainable
economic growth, and reducing poverty.
3. Global Financial Stability: The IMF promotes
financial stability by monitoring global economic
and financial developments, identifying risks,
and recommending policies to mitigate them.
4. Facilitating International Trade: The IMF’s
work on exchange rates and international
monetary cooperation helps facilitate trade by
promoting stable exchange rate regimes and
reducing trade barriers.
5. Addressing Global Challenges: The IMF
addresses various global challenges, including
income inequality, climate change, and the
impact of technological advancements, to
promote inclusive and sustainable growth.
Conclusion
The International Monetary Fund (IMF) is a key global
institution that plays a pivotal role in ensuring financial
stability, fostering economic growth, and facilitating
international cooperation. Through its surveillance,
financial assistance, and technical expertise, the IMF
contributes to the stability and prosperity of its member
countries. Understanding the functions and significance
of the IMF is essential for comprehending the dynamics
of the international financial system.
https://mbahub.in/business-environment/international-
monetary-fund-imf/