International Monetory Fund (IMF)
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The International Monetary Fund (IMF) is a global organization that aims to stabilize international exchange rates and facilitate development by providing financial and technical assistance to its 185 member countries. Established in 1944 during the Bretton Woods conference, its main objectives include promoting international monetary cooperation, facilitating balanced growth of international trade, and providing loans to address balance of payments issues. The IMF is governed by a board of governors from member countries and offers various credit facilities to assist member nations in need.
International Monetory Fund (IMF)
- 1. INTERNATIONAL MONETARY FUNDSINTERNATIONAL MONETARY FUNDS
- 2. Introduction The International Monetary Fund (IMF) is an international organization global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It is an organization formed to stabilize international exchange rates and facilitate development. It also offers financial and technical assistance to its members, making it an international lender of last resort.
- 3. Contd.. Headquarters Washington D. C., USA The IMF describes itself as “an organization of 185 countries”.
- 4. The Bretton Woods Agreement United Nations conference convened in Bretton Woods, U.S.A in July 1944. Result of discussion was – IMF (International Monetary Fund) – IBRD (International Bank for Reconstruction and Development) – ITO (International trade organization) The IMF and IBRD are called as the “Bretton Woods Twins”. However, the proposal for the ITO did not materialize: instead the General Agreement on Tariff and trade (GATT) was formed.
- 5. Main Objectives of IMF To promote International monetary cooperation that provides machinery for consultation and collaboration on international monetary problems. To facilitate the expansion of balanced growth of international trade, and therefore employment and income To stabilize exchange rates and to avoid competitive devaluations. Elimination of foreign exchange restrictions, which hamper the economic growth. To provide loans to help cover shortfalls in Balance of Payments (BOP) to help correct BOP problems without hurting national or international interests. To reduce restrictions on payments for trade.
- 6. Functions of IMF Regulatory Functions: Initsregulatoryaspect, the IMFadministersacode ofgoodbehaviorininternational payments.Itregulatesexchange rate practicesand internationalpayments. FinancialFunctions:Asafinancialinstitution, IMFoffersmedium-termloanstothe national monetaryauthoritiestoenablethemtomake uptheirbalanceof paymentdeficits.TheIMFresourcescomefromthemembercountries. Consultative Functions: Asaconsultant,theIMFprovidesa forum forinternational cooperationandisasourceofcounselingandtechnicalassistancetoits members.
- 7. TYPES OF MEMEBERS ORIGINAL MEMBERS: All those countries whose representative took part in Bretton Woods Conference and who agreed to be member of the funds prior to 31st December, 1945 are called original member. These are 29 in number out of 45 government participation in conference. ORDINARY MEMBER: All those who become its member subsequently are called ordinary member. These are 156 in number (total number of member of IMF 185 subtracted from original member 29).
- 8. IMF governance and organization IMF is controlled and managed by a Board of Governors. Each member country nominates Governors. All the nominated governors make the board of Governors. Each country also nominates an alternate Governor who casts the vote in the absence of Governor. Each Governor is allotted a number of votes, which is determined by the quota allotted to the respected country in the capital of the IMF.
- 9. Organisation structure Board of governors Executive director 24 in number. President Finance Dept. Economic Dept. Law Dept. Foreign affair Research Dept. Managing director
- 10. Resources of funds Quotas – It relative voting power – Allocation Of SDR – Access to IMF resources Fund Borrowing – General Agreement to Borrow (1962) – G10 » BELGIUM,CANADA,FRANCE,WEST GERMANY,ITALY,JAPAN,NETHERLANDS,SWEDEN, U.K., USA » Switzerland joined later and making it a group of 11
- 11. Main function of funds Fund lending • Credit facilities – Poverty reduction and growth facility (PRGF) Concession lending arrangements to low income countries in recent year are the largest amount of the loan have been made through the PRGF. The interest rate revived on PRGF loans is only 0.5% and loans are to be repaid over a period of 5.5-10 years – Stand-By Arrangements (SBA) It is designed to help countries addressing short term balance of payments problem and repayment is normally expected within 2.5-4 years. – Extended fund facility (EFF) It was established in 1974 to help member countries to address more protracted balance of payments problems requiring fundamental reforms to the structure of the economy. Repayment is expected within 4.5-7 years – Emergency Assistance
- 12. Criticism Fund conditionality Limited activities The quota has not been scientifically evolved U. S. Dominance – Rule are loaded against the under developed countries
- 13. Advantages to India being a member of IMF Financial assistance Help in foreign exchange crisis Membership of the World Bank Economic consultation Trading relationship SDRs allotment and holding by India