FOREX MANAGEMENT

INTERNATIONAL MONETARY FUND

 GROUP MEMBERS
KRISHNAMOHAN MAURYA 13

KUSHANKI THAKKAR 14

LALIT JAIN 15

LAV KABRA 16

MAYANK JAIN 17

NIKHIL PALOD 18
 CONTENTS
INTRODUCTION
 
ROLE OF I.M.F
 
SPECIAL DRAWININGS RIGHTS(S.D.R)
 
CALCULATION OF S.D.R
 
SIGNATORY OF IMF
 
CASE STUDY
 
CONCLUSION
 
BIBLIOGRAPHY
 INTRODUCTION
Conceived in July 1944 during the United Nations
Monetary and Financial Conference

The representatives of 45 governments met in the Mount

Washington Hotel in the area of Bretton Woods, New
Hampshire, United States.

IMF was formally organized on December 27, 1945, when

the first 29 countries signed its Articles of Agreement.
 OBJECTIVES
To avoid the competitive devaluation and exchange control.

To establish and maintain currency convertibility

 
To develop multilateral trade and payments.
 
To promote international monetary co-operation through a
permanent institute.
 
To facilitate the expansion of balanced growth of international trade.
 
 OBJECTIVES
To lend confidence to members by making the funds
resources available to them under adequate
safeguards.
 
To shorten the duration and lessen the degree of
disequilibrium in the international balance of
payments of members.
 FUNCTIONS
Guardian of good conduct’ in the area of Balance of payments.
 
Reducing tariffs and other trade restrictions.
 
Provides technical advice.
 
Provides short term financial assistance to its member countries.
 
Provides machinery for orderly adjustment of exchange rates.
 
 FUNCTIONS
Reservoir of currencies

Lending institution of foreign currencies.

Machinery for altering the par values of the currency of a

member country.
 
International consultancy.
 
Conducts research studies and publishes report.
 ROLE OF I.M.F
IMF SURVEILLANCE

Oversee the international monetary system and monitor the

economic and financial policies

IMF highlights possible risks to domestic and external

stability and advises on needed policy adjustments

Facilitates the exchange of goods, services, and capital

among countries, thereby sustaining sound economic growth
 ROLE OF I.M.F
IMF LENDING

Core responsibility : To provide loans to member

countries experiencing balance of payments problems

Financial assistance enables countries:

• To rebuild their international reserves
• To Stabilize their currencies;
• To Continue paying for imports
 ROLE OF I.M.F
IMF LENDING

Restore conditions for strong economic growth while

undertaking policies to correct the underlying
problems

The IMF does not lend for specific projects

 ROLE OF I.M.F
TECHNICAL ASSISTANCE
Helps the members countries to effectively manage
their economic policy and financial affairs

Helps the countries to strengthen their capacity in

both human and institutional resources

To design appropriate macroeconomic,financial, and

structural policies.
Special Drawing Rights
(SDRs)
 WHAT IS SDR ?
An international reserve asset

Created by the IMF in 1969 to supplement its member

countries’ official reserves

Its value is based on a basket of four key international

currencies i.e. Dollar, Euro, Yen, Pounds
 WHAT IS SDR ?
SDRs can be exchanged for freely usable currencies

September 9, 2009, the amount of SDRs increased from SDR

21.4 billion to SDR 204.1 billion

Every five years the basket of currencies changes

The SDR is neither a currency, nor a claim on the IMF.

Rather, it is a potential claim on the freely usable currencies
of IMF members
 NEED OF SDRs
To support BRETTON WOODS fixed exchange rates
system

The international supply of two key reserve assets—

gold and the U.S. dollar—proved inadequate for
supporting the expansion of world trade and financial
development : The international community decided to
create a new international reserve asset i.e. SDRs
 Calculation of SDR
Tuesday, June 08, 2010
Percent change in
exchange rate
Currency amount U.S. dollar against U.S.
Currency Exchange rate 1
under Rule O-1 equivalent dollar from
previous
calculation
Euro 0.4100 1.19220 0.488802 -0.426
Japanese yen 18.4000 91.44000 0.201225 0.437
Pound sterling 0.0903 1.44230 0.130240 -0.552
U.S. dollar 0.6320 1.00000 0.632000

1.452267
U.S.$1.00 = SDR 0.688579 2 0.133 3
SDR1 = US$ 1.45227 4
 Calculation of SDR Interest Rate
For the week of June 07, 2010 to June 13, 2010
(Data as of Friday, June 04, 2010)

Currency amount Exchange rate

Currency under Rule O-1 against the SDR 1 Interest rate 2 Product
(A) (B) (C)   (A) x (B) x (C)

0.4100 0.824976 0.3579 0.1211

Euro

18.4000 0.00737531 0.1150 0.0156

Japanese Yen
U.K. Pound
0.0903 1.00263 0.4900 0.0444
Sterling
U.S. Dollar 0.6320 0.68406 0.1400 0.0605

Total 0.2416

SDR Interest Rate 3 0.24

SIGNATORY OF IMF
 TOP TWELVE COUNTRIES
1) AMERICA 7) ITALY

2) JAPAN 8)BRAZIL

3) PEOPLE’S REPUBLICS OF 9) SPAIN

CHINA
10)CANADA
4) GERMANY
11)RUSSIA
5) FRANCE
12)INDIA
6) UNITED KINGDOM
CASE STUDIES
 IMF HELPED : Hungary
Banks were having difficulty gaining access to much-
needed liquidity

A number of countries were struggling under a

shortage of hard currency i.e. foreign currency had
evaporated and the value of local currencies had
plunged
 IMF HELPED: Hungary
Value of the Hungarian currency, the forint, had dropped
by 20 percent against the euro as a result of restricted
access to hard currency

The forint's fall has made it difficult for Hungarians to pay

back housing and other loans taken out in foreign
currencies

Hungary was the country to secure an international helping

hand in the form of a €20 billion ($25 billion) loan package
 IMF HELPED: Ukraine
Steel industry which accounts for 6 percent of
Ukraine's gross domestic product and 40 percent of its
exports

A sharp reduction in global demand for steel

 IMF HELPED: Ukraine
Resulted into collapse of the Ukrainian currency, the
hryvna, as foreign currency inflows had dried up

The IMF agreed to a $16.5 billion loan for Ukraine in

an attempt to forestall a financial meltdown
 IMF WRECKED : Jamaica
In January of 1974 the US and the IMF moved to
destabilize Jamaica’s radical government with
disastrous consequences

Manley’s government announced a plan to alter the

system of tax breaks offered to US and Canadian
bauxite (aluminium ore) companies based in Jamaica

Government voided previous agreements and imposed

a production levy on all bauxite mined or processed
 IMF WRECKED : Jamaica
CONSEQUENCES

The companies shifted their locations and filed the actions

with the world bank’s international centre for the settlements
of the investments disputes

Jamaica was put to various IMF “tests”, repeated failures led to

more and more regulation of the island’s domestic economic
programmes

Political violence and the fortunes of the black market soared.

 IMF WRECKED : Jamaica
CONSEQUENCES

Jamaica had paid out a total of £443 million to its

foreign creditors, including £176 million to the IMF

Due to all these the average income in Jamaica was 25

percent lower and the cost of living 320 percent higher

Jamaica’s foreign debt had grown to over £2.2 billion,

among the highest per capita in the world
 INDIA & IMF
Helps in foreign exchange crisis

Membership of the world bank

Economic consultation

India has become a creditor and stopped taking loans

from it
The loans provided by IMF to India
SDR 3,260,405,000 in 1992

SDR 3,584,905,000 in 1993

SDR 2,763,180,833 in 1994

SDR 1,966,633,125 in 1995

SDR 1,085,250,003 in 1996

SDR 589,791,667 in 1997

SDR 284,916,664 in 1998

SDR 38,500 in 1999

 CONCLUSION
The IMF is the world’s central organization for
international monetary cooperation .The IMF’s
primary purpose is to safeguard the stability of 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. This is essential for achieving
sustainable economic growth and raising living
standards.
 BIBLIOGRAPHY
http://en.wikipedia.org/wiki/InternationalMonetaryFund

www.imf.org
 
www.wikipedia.org
 
www.socialistworker.co.uk
 
http://www.spiegel.de
 
GOOGLE SEARCH ENGINE