Headquarters : Members


Washington D C , USA 185 countries

Managing Director : Dominique Strauss-Kahn

History of IMF
• IMF was introduced as there arouse a need for International cooperation in economics, trade and balance of payment affairs. • United States made a proposal for establishment of International Stabilization Fund. It was known as White plan • UK proposed establishment of International Clearing Union. It was known as Keynes plan. • IMF came in to existence by the joint plan prepared in 1944. • Thus IMF came in to existence to promote economic and financial co-operation among the member countries.

• The International Monetary Fund was formally created in July 1944. during the United nations Monetary and Financial Conference • The IMF was formally organized on December 27 1945, when the first 29 countries signed its Articles of Agreement. The statutory purposes of the IMF today are the same as when they were formulated in 1944 . Headquarters • IMF is a post-war international monetary institution.

• Growth in IMF Membership, 1945 - 2005 (number of countries)

Organizational structure
BOARD OF GOVERNORS •Interim Committee •Development committee



Key Members
Quota: Millions of SDRs IMF Member Country Quota: Percentage

Australia Belgium USA United Kingdom India Brazil













Objectives of IMF
• 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. • To provide exchange stability.

Objectives Conti.
• To maintain orderly exchange arrangements among members and to avoid competitive exchange depreciation. • To assist in the establishment of a multilateral system of payments in respect of current transactions. • 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 of IMF
• ‘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

• • •

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

How Does IMF Get Its Money
• Mainly from the Quotas that countries deposit when they join. • The Quotas reflects the size of each members economy. • Under some Circumstances it gets money from Trusts.

Role of IMF
 Lending:- Providing financial assistance to low-income countries experiencing protracted BOP through:• Poverty Reduction And Growth Facility(PRGF) • Heavily Indebted Poor Countries Initiative(HIPC) • Multilateral Debt Relief Initiative (MDRI)

 Technical Assistance:- For development of productive resources of member countries through help in Policy Making and Training.
• Regional Technical Assistance Center at Pacific, Caribbean and Africa. • It accounts for about one-fifth of IMF’s operating budget. • Bilateral donors of technical assistance program:Australia, China, Canada, France, Germany, India, Japan, Russia, Luxembourg, Portugal, US, UK etc.

• Multilateral Donors:- African Development Bank, Arab
Monetary Fund, Asian Development Bank etc.

Ghana : discovery of oil field Nigeria : natural gas Developing countries : combat poverty and growth.

 Surveillance:- Help in providing policy advise to low income countries by:i. Establishing Economic Frameworks that support sustained growth and poverty reduction. ii. Identify and manage sources of macroeconomic risk and vulnerabilities. iii. Strengthen institutions and policies that underline sound macroeconomic management. Progress report is annually published in Global Monitoring Report by IMF and World Bank.

Balance of Payment Difficulties
• It occurs due to:• Fiscal Deficit • High Level of external and/or public debt • Exchange rate fixed at inappropriate levels • Natural Disasters or Armed conflicts

• It causes:• Country’s Currency Depreciate rapidly • International goods expensive

Balance of Payment Status

• And also in here

• World's payment balances in 2005 (States in surplus in blue (dark blue = Euroland) / States in deficit in red)

How IMF helps

• Through IMF Lending • Through IMF Loan

IMF Helps Ghana Learn From Others on Inflation Targets
• February 14, 2008 • The IMF is sharing its cross-country experience in inflation targeting with Ghana as the country adapts its monetary policy and aims to reach middle-income status by 2015.

IMF to Back Liberia With Debt Relief, New Finance
• March 20, 2008 • In a major move to back Liberia's economic recovery after a ruinous 14-year period of civil war, the IMF has announced a series of measures to support it with debt relief and new financing.

Exchange rate
• The exchange rates between two countries specifies how much one currency is worth in terms of other. Ex:- JPY 102 = USD 1 & USD 1= 41.35 INR

Spot exchange rate refers to the current exchange rate

• Free or Pegged If a currency is free floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. • Nominal & real exchange rates The nominal exchange rate is the price in domestic currency of one unit of foreign currency.

• is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. • SDRs are allocated to member countries in proportion to their IMF quotas • Its value is based on a basket of key international currencies. • SDRs are popularly known as “papergold”

• SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. • 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 • A few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. • Today, the SDR has only limited use as a reserve asset.

SDR valuation
• The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar • After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies,today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar • The basket composition is reviewed every five years to ensure that it reflects the relative importance of currencies in the world's trading and financial systems.

The SDR Interest Rate
• The SDR interest rate provides the basis for calculating the interest charged to members on regular (nonconcessional) IMF loans. • The SDR interest rate is determined weekly

• Under its Articles of Agreement, the IMF may allocate SDRs to members in proportion to their IMF quotas Each member country of the IMF is assigned a quota, based broadly on its relative size in the world economy India’s quota – 4158.2 millions US$ of SDRs, 1.91% of total. If a member's SDR holdings rise above its allocation, it earns interest on the excess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall. 2 types of allocations – 1) general allocations of SDRs 2) special one time allocation of SDRs

• • •

• The IMF provides emergency assistance to help members countries during natural disasters and conflicts. • Since 1962, 38 countries have received aid upto US $2.9 billion from IMF.

• Emergency assistance loans are subject to the basic rate of charge and should be repaid within 3.5 to 5 yrs.

Countries that received emergency assistance since 1995

1998 1998 1999 2003 2005 2005 2008



138.2 55.9 501.0

4.0 6.3
158.4 3.3

Role of IMF in INDIA
Joined IMF on 27 DEC, 1945 Subscribes to the IMF’s special data dissemination standard India borrowed SDR 3.9 billion (1981-82) SDR 2.2 billion (1991-93)

Technical assistance
• In recent years, the fund has provided India in government securities, foreign exchange market, public expenditure management & tax & custom administrations • Current scenario SDR (Net cumulative allocation)- 681.17 m Holdings - 6.78 m Outstanding purchases & loans - None

Where do our interest lie?
• Our monetary policy framework is not consistent , we need to build a consistent framework of monetary policy

Our strength
• By James Gordon (Washington based multilateral institution's representative) “India does not need any financing from IMF considering that the country had crossed $103 billion of FOREX reserves” Emerging market economy Feb 13, 2004 Acc to indiatimes - India borrowed from IMF in crisis of 1990’s & fully repaid its loan.

• Acc to finance ministry source FOREX crossed $ 100 billion and now providing money to “nation building” countries like • $ 43 m to Indonesia $ 350 m to Brazil $ 05 m to Burundi So now India has that potential to be include into IMF financial transactions plan (40 countries) By P Uaidynathan Iyer in New Delhi Jan 19, 2004

IMF and the World Bank
• IMF and World bank both were created at an International Conference convened in Bretton Woods. • IMF promotes international monetary cooperation and provides policy advice and technical assistance to maintain strong economies. • The World bank promotes long-term economic development and poverty reduction to help countries reform particular sectors or implement specific projects • IMF and World bank collaborate regularly and at many levels on assistance to member countries and are involved in several joint initiatives.

Criticisms of IMF

• Iraqi Oil Crisis

• Common Criticisms of the IMF
• The IMF has created an immoral system of modern day colonialism that drains the poor • The IMF serves wealthy countries and Wall Street • The IMF is a secretive institution with no accountability • • IMF policies promote corporate welfare IMF Policies hurt the environment

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