International Monetary Fund:

International Monetary Fund (IMF) is an organization working to foster

global monetary cooperation, of 188 countries to:

Secure Financial Stability

Facilitate International Trade
Promote High Employment
Sustainable Economic Growth

Reduce Poverty around the Globe

Creation of IMF:
The IMF was conceived in July 1944, when representatives of 45 governments agreed on a
framework for international economic cooperation.
The IMF came into formal existence in December 1945, when its first 29 member countries
signed its Articles of Agreement
It began operations on March 1, 1947. Later that year, France became the first country to borrow
from the IMF.

Par value system (Bretton Woods system):

Member countries agreed to peg their currencies in US Dollar terms and for US, the value
of Dollar in terms of Gold-to correct Fundamental Disequilibrium.

The Pakistan became a member of IMF in 1956

Historical Overview:

The International Monetary Fund (IMF) is an organization of 186 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.
The IMF works to foster global growth and economic stability. It provides policy advice
and financing to members in economic difficulties and also works with developing
nations to help them achieve macroeconomic stability and reduce poverty.
With its global membership of 186 countries, the IMF is uniquely placed to help member
governments take advantage of the opportunitiesand manage the challengesposed by
globalization
The IMF tracks global economic trends and performance, alerts its member countries
when it sees problems on the horizon, provides a forum for policy dialogue, and passes
on know-how to governments on how to tackle economic difficulties

 The IMF provides policy advice and financing to members in economic difficulties and
also works with developing nations to help them achieve macroeconomic stability and
reduce poverty

Objectives of IMF:

To promote international monetary cooperation

To facilitate the expansion and balanced growth of International Trade
To promote exchange rate stability
To make its resources available to its members who are experiencing BOP problems
To establish a multilateral system of payments

Functions of IMF:
The IMF's main goal is to ensure the stability of the international monetary and financial system.
It helps resolve crises, and works with its member countries to promote growth and alleviate
poverty.

1. Economic & Financial Surveillance:

The IMF promotes economic stability and global growth by encouraging countries to
adopt sound economic and financial policies. To do this, it regularly monitors global,
regional, and national economic developments.
2. Technical Assistance and Training:
IMF offers technical assistance and training to help member countries strengthen their
capacity to design and implement effective policies. Technical assistance is offered in several
areas, including fiscal policy, monetary and exchange rate policies, banking and financial
system supervision and regulation, and statistics.
3. IMF Lending:
In the event that member countries experience difficulties financing their balance of
payments, the IMF is also a fund that can be tapped to facilitate recovery.
4. Research and Data:
Supporting all three of these activities is the IMF's economic and financial research
and statistics

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Statement of Conditionality:

IMF lends to its member countries, ensuring that, members are pursuing policies that will
improve external payment problems.
Commitment to implement corrective measures
To repay in a timely manner.

Membership:

The IMF currently has a near-global membership of 186 countries. To become a member,
a country must apply and then be accepted by a majority of the existing members.
Upon joining, each member of the IMF is assigned a quota, based broadly on its relative
size in the world economy.

Process of IMF Lending:

IMF Loans are usually granted under an ARRANGEMENT.

The Executive Board of the Fund has to approve all arrangements.
These arrangements are based on the economic program formulated by the concerned
country in consultation with the Fund.
Then they are presented to the Executive Board of the Fund in a Letter of Intent.
Loans are released in phased installments as the program is carried out.

Where the IMF Gets Its Money:

Multilateral borrowing:
While quotas are the IMFs main source of financing, the IMF can supplement these resources
through multilateral borrowing if it believes that its capacity to lend might fall short of member
countries requirements. The New Arrangements to Borrow (NAB) are the IMFs main backstop
for quota resources. Through the NAB, a number of member countries and institutions stand
ready to lend additional resources to the IMF. The General Agreements to Borrow (GAB) allows
further IMF borrowing from a more limited number of countries. The NAB and the GAB
constitute a SECOND LINE OF DEFENSE , ensuring the IMF has sufficient capacity to lend,
for example in the event of a major financial crisis.

Bilateral borrowing
Bilateral Borrowing is the temporarily supplemented IMF resources to ensure that the IMF could
meet the borrowing needs of its member countries during the global financial crisis. The IMF
first entered into bilateral borrowing agreements in 2009-2010. These agreements were
subsequently incorporated into the NAB. In 2012, with the deepening of euro area crisis, the IMF
and several members agreed on another round of bilateral borrowing for four years, as a THIRD
LINE OF DEFENSE after the quota and NAB resources. In 2016, in view of continued
uncertainty in global economy, the membership committed to maintain bilateral borrowing,
under a new improved framework, through at least the end of 2019.

Lending capacity:
The IMF can use its quota-funded holdings of currencies of financially strong economies to
finance lending. The member countries that participate in the financing of IMF transactions are
selected by the Executive Board on a periodic basis and include both advanced and emerging
market economies. The IMFs holdings of these currencies, together with its own SDR holdings,
make up its usable resources. As explained above, the IMF can temporarily supplement these
resources by borrowing.
The amount the IMF has readily available for new (non-concessional) lending is indicated by
its Forward Commitment Capacity (FCC). This is determined by its usable resourcesincluding
amounts committed under the IMFs standing multilateral borrowing arrangementsplus
projected loan repayments over the subsequent twelve months, less the Funds repayment
obligations on its borrowing in the subsequent twelve months, less the resources that have
already been committed under existing lending arrangements, less a prudential balance.

Gold holdings
The IMF also has gold holdings, accumulated from payments by member countries. The gold
holdings amount to about 90.5 million troy ounces (2,814.1 metric tons), making the IMF one of
the largest official holders of gold. The IMFs Articles of Agreement strictly limit the use of this
gold. If approved by an 85 percent majority of the total voting power of member countries, the

IMF may sell or accept gold as payment by member countries. It is prohibited from buying gold
or engaging in other gold transactions.
In December 2010, the IMF concluded the sale of 403.3 metric tons of gold (about one-eighth of
its holdings) following authorization by its Executive Board. The limited gold sale was
conducted with strong safeguards in place to avoid market disruption. All gold sales were at
market prices, including direct sales to official holders.
Profits amounting to SDR 4.4 billion from the sale of gold were used to establish an endowment
as part of a new income model, designed to put the IMFs finances on a sustainable footing. A
proportion of the gold sales is used to subsidize concessional financing for low-income countries.

Concessional lending and debt relief

Lending to low-income countries is resourced through contributions from member countries and
the IMF itself, rather than through quota subscriptions. The IMF currently provides low-interest
loans under the Poverty Reduction and Growth Trust (PRGT). Debt relief is provided under
the Heavily Indebted Poor Countries (HIPC) Initiative and the Catastrophe Containment and
Relief (CCR) Trust.

Benefits of IMF Membership to Pakistan:

Pakistan has been provided relief by IMF in the financing facility by lending a huge amount as a
loan to meet its monetary policy. The breakup of the sum provided are as follows:

1988-91 $ 900 million

1994-97 $850 million

1997-2000 $ 500 million

2008-09 $ 7.6 billion

2009-10 $3.2 billion

2012-13 $3.4 billion

2013-14 $3.43 billion

Special Drawing Rights (SDR):

SDR is an international reserve asset

Supplements members existing reserve assets gold, forex.
Unit of account for IMF operations and transactions
Value of SDR is based on basket of major currencies used in IB.
Weights assigned show relative importance.
France, Ger, Jp, UK, US Largest exports

US 0.557; EURO-0.426; YEN 21.0; POUND- 0.0984

More stable.

Subscriptions:

A member's quota subscription determines the maximum amount of financial resources

the member is obliged to provide to the IMF.
A member must pay its subscription in full upon joining the IMF: up to 25 percent must
be paid in the IMF's own currency, called Special Drawing Rights (SDRs) or widely
accepted currencies (such as the dollar, the euro, the yen, or pound sterling), while the
rest is paid in the member's own currency.

Voting power:
The quota largely determines a member's voting power in IMF decisions. Each IMF
member has 250 basic votes plus one additional vote for each SDR 100,000 of quota.

Access to financing:
The amount of financing a member can obtain from the IMF (its access limit) is based on
its quota. Under Stand-by and Extended Arrangements, which are types of loans, a member
can borrow up to 200 percent of its quota annually and 600 percent cumulatively.

Organization and Management:

Managing Director:

Christine Lagarde

First Deputy Managing Director:

David Lipton

Deputy Managing Director :

Mitsuhiro Furusawa

Deputy Managing Director:

Tao Zhang

Governance Structure:

The Board of Governors is the highest decision-making body of the IMF. It consists of
one governor and one alternate governor for each member country. The governor is
appointed by the member country and is usually the minister of finance or the head of the
central bank.
While the Board of Governors has delegated most of its powers to the IMF's Executive
Board, it retains the right to approve quota increases, Special Drawing Rights (SDR)
Allocations , the admittance of new members, compulsory withdrawal of members, and
amendments to the Articles of Agreements and By-Laws . It also elects or appoints
executive directors
The Boards of Governors of the IMF and the World Bank Group normally meet once a
year

Ministerial Committees:
The IMF Board of Governors is advised by two ministerial committees, the International
Monetary and Financial Committee (IMFC) and the Development Committee.
The IMFC has 24 members, drawn from the pool of 186 governors
The Executive Board:
The IMF's 24-member Executive Board takes care of the daily business of the IMF.
Together, these 24 board members represent all 186 countries.

Finances:

Quotas:

The IMF's resources come mainly from the money that countries pay as their capital
subscription when they become members.
Quotas broadly reflect the size of each member's economy: the larger a country's economy in
terms of output and the larger and more variable its trade, the larger its quota tends to be.
They also help determine how much countries can borrow from the IMF and their share in
allocations of special drawing rights or SDR(the reserve currency created by the IMF in
1969).

Gold:

The IMF holds a relatively large amount of gold among its assets, for reasons of financial
soundness, also to meet unforeseen contingencies.
The IMF holds 103.4 million ounces (3,217 metric tons) of Gold, worth about $83 billion as
of end-August 2009, making it the third-largest official holder of gold in the world.