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International Monetary Fund

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Published in: Banking & Finance
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History, role, function & operation of IMF

Rohit G / Indore

5 years of teaching experience

Qualification: MBA/PGDM (WBUT - 2015)

Teaches: Accountancy, Commerce Subjects, Economics, Mathematics, Bank Clerical, IBPS, SBI Exam, SSC Exams, BBA Entrance, BBA Subjects, Management Subjects

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  1. International Monetary Fund
  2. International Monetary Fund —IMF is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balanc of payments.
  3. Cont, o It is an organization formed with a stated objective of stabilizin g international exchange rates and facilitating development thro ugh the enforcement of liberalizing economic-policies on other countries as a condition for-loans, restructuring or aid. o IMF is a forum of national economic policies, international mo netary and financial systems, which involves active dialogue wi th each member country.
  4. Cont, , , o Total quotas of $312 billion; outstanding loans of $71 billion to 82 countries (According to the report of August 31, 2005). o Five largest shareholders—United States, Japan, Germany, Franc e, United Kingdom. o The IMF was created to support-orderly international currency e xchanges and to help nations having balance of payment proble ms through short term loans of cash.
  5. 'UOÉUILISEA\ …
  6. History IMF was created in 1946. IMF started to make service with I BRD (International Bank of Rec onstruction and Develo ment in 1947. The IMF was created to support or derly international currency ex hanges and to help nations having balance of payment problems thro ugh short term loans of cash.
  7. Cont, , , The International Monetary*und Was created in 1944, at the Bretton Woods conference to prevent the kindyof chain reacti on in the economic system that caused world currencies to coll apse like in the Great Depression o the-1930s. Bretton wood agreement was contracted in 1944.
  8. Who runs the IMF Member Countries Board of Governors Executive Board IMF Managing Directors First Deputy Managing Dir Deputy Managing Dir Deputy Managing Dir
  9. Membership There are two types of members: ORIGINAL MEMBERS: Alfthose countries whose representativ es took part in BRETTONWOODS CONFERENCE and who agre ed to be the members of thefund prior to 31st December, 1945 ORDINARY MEMBERS: All those-whebecame its members sub sequently. BANK has the authority to suspend any ember and similarly m ember is free to resign.
  10. Growth in IMF Membership In the beginning 29 member countries Today, 187 member Countriesa::: Staff of about 2680 Persons
  11. Purposes of the IMF o Promote international monetary cooperation. o Expansion and balanced growth-ofinternational trade. o Promote exchange rate stability. o The elimination of restrictions on the international flow of capita 1. o Help establish multilateral system of payments and eliminate fo reign exchange restrictions.
  12. Cont, , , o Make resources of the Fund available to members. o Shorten the duration and lessen the degree=of disequilibrium in international balances-of payments. o Promote international monetary cooperation, exchange stability, and orderly exchange arrangements,
  13. Cont, , , o Foster economic growth and high levels of employment. o Temporary financial assistance to countries to help the balan ce of payments adjustments
  14. ROLE OF IMF ' Focusing on its core macroeconomic and financial areas of responsibility. Working in a complementary fashion with other institutions established. ' Collection and allocation o reserves. Rendering advice to member countries on their international monetary affairs.
  15. Cont, , , Promoting research in various areas of international economics and monetary economics. Providing a forum for discussion and consultation among member countries. Being in the centerof competence.
  16. Functions of IMF ' Surveillance (like a doctor) Gathering data and assessing economic police of countries. Technical Assistance (like a teacher) Strengthening human skills and institutional capacity of countries.
  17. Cont, , , Financial Assistance (like a banker) Lending to countries t o support reforms. •ott 15 LtCAL Ttsorq F 822351408 U Wæslil.NGTON.D.C.
  18. Operations Monitoring economic and financial developments and policies, in member countries and at the global level, giving policy advance to its members based-on-its-more than fifty years of experience. ' Lending to member countries with balan æof payments problems, supporting adjustment and reform policies aimed at correcting the underlying problems.
  19. Cont, , , Providing the governments and central banks of its member countries with technical assistance and training in its areas of expertise. IMF looks at the performance off the conomy as a whole (macroeconomic performance) ' Focuses also on the financial sector po icies. ex: regulation and supervision of banks and other financial institutions.
  20. How the polices are determined: in their headquarters in Washington: The Executive Board meets three times a weekÄmaybe more. The Board has a voting system:- Thelargerthe economy, the more voting power it has But, most decisions are based on consensus
  21. here does the IMF get it' s Money from? Most loans are provided by member countries, determined by t heir quota, which is calculated country' s relativ e size in the world economy. ' For a closer look at the Member Quotas we can reference the I MF website. Upon joining, the 25% of the quota is paid in some major curr ency US Dollar, British Pound, Yen while the remaining 75% i s paid in their own currency.
  22. Role of IMF in INDIA Joined IMF on 27 DEC, 1945 India borrowed SDR 3.9 billion (1981-82) & SDR 2.2 bilhon (199— 1-93). ' In recent years, the fund provided to India was in government sec urities, foreign exchange market, publl expenditure management & tax & custom administrations.
  23. Cont, , , Current scenario ' SDR (Net cumulative allocation - 681.17 m ' Holdings - 6.78 m Outstanding purchasesr& loans - None By James Gordon (Washington based mu tllateral institution's r epresentative) "India does not need any financingTrom IMF considering that th e country had crossed $103 billion of FOREX reserves'
  24. Cont, , , Emerging market economy Feb 13, 2004 Acc to India times - India borrowed from IMF in crisis of 1 990' s & fully repaid its loan. So now India has that potential to be Inc ude into IMF fina ncial transactions plan 40 countries) By P Uaidynathan lyer in NewDelhi Jan 19, 2004
  25. India and the IMF ' India and the IMF has a positive relationship. The IMF has provided financial assistancetolndia,-which has helped in boosting the country's economy. The IMF praised the country for it le to avoid the Asian Financial Crisis in 1999 and was also able to maintain the average rate of growth of its economy.
  26. Cont, , , ' In 2005, the IMF said that the budget of India is very positive for it points that the economy of-the country will grow at the rate of 6.7%. The Managing Director of International Monetary Fund Rodrigo De Rato visitedfr)diajn May 2005.
  27. Cont, , , ' International Monetary Fund said that the reasons behind the economy growth of India are that the RBI has been able to co ntrol inflation and has also handled its-monetar policies very skillfully. The IMF has suggested that India can become a inancial supe r power by bringing in more reforms in its economic policies t hat will increase its growth rate to 8% .
  28. Collaborating with Other Institutions The IMF collaborates with — the World Bank, — the regional development banks, — the World Trade Orgaxnization, — United Nations agencies, and — other international bodies. Each of these institutions has its wn area of responsibility and specialization and its particular ontribution to make to the world economy.
  29. How does the IMF serve its member countries? Monitoring national, globaloand regional economic and finan cial developments and advising member countries:on their ec onomic policies ("surveillance"). Lending members hard currencies to support policy program s designed to correct balanc or payments problems. Offering technical assistance in its areas of expertise, as well as training for government and central bank officials.
  30. Where the IMF gets its money Most comes from the quota subscriptions — The money each member contributes-when joining the I General Arrangements to Borrow (19 ) — Line of credit set up withseveral governments and bank s throughout the world
  31. When is a country in need ? A country that had not taken in enough foreign currency to pay t he other countries for what they have boug -t — spends more money than it takes in. IMF will lend foreign exchange to that member — hoping to stabilize its currency-which will strengthen its trade
  32. How Does the IMF help Poor co o o untries? Most of the IMF's loans to low-income countries are made on concessional terms, under the overt Reduction and Grow th Facility. Under a mechanism introduced by the IMF ln2005—the Poli cy Support Instrument—countries can request that the IMF regularly and frequently review heir economic programs to e nsure that they are on track.
  33. o o Cont, , , The success of a country's program is assessed against the g oals set forth in the country's poverty reduction strategy, a nd the IMF's assessment can be made public if the country w ishes. The IMF also participates in debt relief efforts for poor cou ntries that are unable to reduce their debt to a sustainable lev el even after benefiting from aid, concessional loans;and the pursuit of sound policies.
  34. Cont, , , o To ensure that developing countries reap full benefit from t he loans and debt relief theyreceive„in 1999 the IMF and t he World Bank introduced a process known as-the Poverty Reduction Strategy Paper (PRSP) process.
  35. How much money a member can borrow from-the4MÄ 25% of the country' s quota may be used. If this is not sufficient, hen members can borrow up to 3 times the amount of its quota — present plans for reform to Executive Directors If these plans are sufficient for the Executive Directors, the 1M F grants the member a loan.
  36. Conclusion The IMF's primary purpose is to safeguard the stabilityof the intern ational monetary system—the system of exchange rates and interna tional payments that enables countries (and their citizens) to buy go ods and services from each other. Th1S is-essential for achieving sus tainable economic growth and raising living standards. Providing advice to members on adopting policlWthat can hel p them prevent or resolve a financial crisis, achieve macroeconomi c stability, accelerate economic growth, and alleviate poverty.
  37. Cont, , , Making financing temporarily available to member countries t o help them address balance f:pa ments problems—that is, w hen they find themselves short of foreign exchangebecause th eir payments to other countries exceed their foreign exchange earnings. Offering technical assistance and training to countries at their r equest, to help them build the expertise and institutions they ne ed to implement sound economic policies.
  38. THAN YOU

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