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- 2. The International MonetaryFund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. 1. WHAT THEY DO ? 2. HOW THEY DO ? 3. MEMBERSHIP 4. COLLABORATION WITH OTHER COUNTRIES
- 3. Organization & Finances 1.MANAGEMENT 2. STAFF OF INTERNATIONAL CIVIL SERVANTS 3. QUOTAS 4. SPECIAL DRAWING RIGHTS 5. GOLD 6. BORROWING ARRANGEMENTS
- 4. The IMF hasplayed a part in shaping the global economy since the end of World War II. 1. Cooperation and reconstruction (1944–71) 2. The end of the Bretton Woods System (1972–81) 3. Debt and painful reforms (1982–89) 4. Societal Change for Eastern Europe and Asian Upheaval (1990– 2004) 5. Globalization and the Crisis (2005 - present)
- 5. 1. Governance structure 2.Country representation 3. Accountability
- 7. 1. Board ofdirectors 2. Ministerial committees 3. The executive board 4. Governance reforms
- 8. 1. Giving moresay to emerging markets 2. Protecting the voice of low-income countries 3. Timeline for implementing the reform
- 9. 1. Engagement withintergovernmental groups 2. Civil society, think tanks, and the media 3. Internal watchdog 4. Ethics office and code of conduct 5. Transparency
- 10. 1. Stepping upcrisis lending 2. A partner in Europe 3. Supporting low-income countries 4. Reinforcing multilateralism 5. Strengthening the international monetary system 6. Implementing organizational changes
- 11. When can acountry borrow from IMF ? Process of Borrowing
- 12. Types of Loans Concessional Loans Extended Credit Facility Standby Credit facility Rapid Credit Facility Non– Concessional Loans Standby Arrangements Flexible Credit Line Precautionary & Liquidity Line Emergency Assistance Rapid Financing Instrument
- 13. • Quota • GoldHoldings • Borrowing Arrangements (NAB & GAB)
- 15. The SDRis 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, and SDRs can be exchanged for freely usable currencies. SDRs are denoted with the currency code XDR.
- 16. Special drawing rights:purpose for creating it & its uses Traditional purpose of SDR SDR’s were created to be an asset held in foreign exchange reserves under the Bretton Woods system of fixed exchange rates. After the collapse of that system in the early 1970s the SDR has taken on a far less important role • Volatility in gold and USD • SDR as deposit & SDR as loan: the IMF allows member countries to hold SDR deposits. This protects the countries from volatility in its foreign exchanges rates. If counties want to give loan to developing countries they can use SDR as an alternative to their local currency
- 17. Special drawing rights:its uses Conventional uses of SDR Peg for international currency valuation: in 1983 14 countries had pegged the values of their currency to SDR, today only Syria peg its pound to SDR. International balance of trade settlement: if many countries have to settle their trade balances across multiple currency they could use the SDR as a convenient alternative Aids to developing countries: IMF advices developing countries to purchase SDR from developing countries to encourage investment into the country Unit of account Use in international law: some international treaties allow SDR as useful settlement of dispute and penalty.
- 18. The SDRis based on basket of international currencies comprising the US dollar , Japanese yen , euro and pound sterling. Initially value of SDR was defined as equivalent to o.888671 grams of fine gold SDR is defined as basket consisting of : US dollars : 41.9% Euro : 37.4% Yen : 11.3% Pound Sterling : 9.4% Recalculated after every 5 years.
- 19. Currently, thevalue of 1 SDR is equal to sum of 0.423 euros, 12.1 yen, 0.111 pounds and 0.66 us dollars. IMF fixes the value of 1 SDR in terms of US dollars daily. As on January 3,2014 1 SDR = $1.535590
- 20. Is determinedweekly. Based on weighted average of representative interest rates on 3 month debt in the money market of the 4 SDR basket currencies.
- 21. For the weekof December 30, 2013 to January 05, 2014 Currency Currency amount under Rule O-1 (A) Exchange rate against the SDR 1 (B) Interest rate 2 (C) Product (A) x (B) x (C) Euro 0.4230 0.89399 0.1632 0.0617 Japanese Yen 12.1000 0.00616932 0.0600 0.0045 U.K. Pound Sterling 0.1110 1.07034 0.2700 0.0321 U.S. Dollar 0.6600 0.647162 0.0700 0.0299 Total 0.1282 SDR Interest Rate 3 0.13
- 22. The IMFallocates SDRs to member countries in proportion to their IMF quotas. Such an allocation provides a costless, unconditional international reserve asset on which interest is neither earned nor paid. General allocations of SDRs are based on a long-term global need to supplement existing reserve assets. A Special allocation of SDRs became effective August 10, 2009 and was issued on September 9, 2009, to countries that joined the IMF after 1981 and so had never been allocated any. Date Amount 1970–1972 XDR 9.3 billion 1979–1981 XDR 12.1 billion August 28, 2009 XDR 161.2 billion September 9, 2009 XDR 21.4 billion Sometime after March 3, 2011 XDR 20.8 billion
- 23. Since the SDRis an average of four currencies it is less valuable than the strongest and is among the first to go when reserves are sold off. Developing countries argue that it would help their liquidity if they had more SDRs, but the quota system ensures that the rich industrial countries have most of them.
- 24. G20, LONDON SUMMIT. 2009 G20,KOREA SUMMIT. 2010 World over finance ministers agreed at the G20’s Korea meeting in 2010 to increase the “quotas” (contributions) of each member to the IMF, effectively doubling the IMF’s SDR assets to about $US 750 billion.
Editor's Notes
- #16 Not a currency, SDRs instead represent a claim to currency (nongold foreign exchange reserve assets) held by IMF member countries for which they may be exchanged. Created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the US dollar, the value of a SDR is defined by a weighted currency basket of four major currencies: the US dollar, the euro, the British pound, and the Japanese yen.
- #24 The IMF itself calls the current role of the SDR "insignificant".[imf 2] Developed countries, who hold the greatest number of SDRs, are unlikely to use them for any purpose. The only actual users of SDRs may be those developing countries that see them as "a rather cheap line of credit".[6] One reason SDRs may not see much use as foreign exchange reserve assets is that they must be exchanged into a currency before use.[Williamson 2] This is due in part to the fact private parties do not hold SDRs: they are only used and held by IMF member countries, the IMF itself, and a select few organizations licensed to do so by the IMF.[7] Basic functions of foreign exchange reserves, such as market intervention and liquidity provision, as well as some less prosaic ones, such as maintaining export competitiveness via favorable exchange rates, cannot be accomplished directly using SDRs. This fact has led the IMF to label the SDR as an "imperfect reserve asset"