IMF

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MISSION STATEMENT
We strive to be a distinctive specialist
banking group driven by commitment
to our core philosophies and values


Managing Director Christina Legarde

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IMF -
The International Monetary Fund (IMF)
is an organization of 187 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.

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Strategic focus
Deliver sustainable growth by:
Remaining focused
Delivering a distinctive offering to clients
Delivering on financial targets

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IMF FUNCTIONS
The work of the IMF is of three main
types. Surveillance involves the
monitoring of economic and financial
developments, and the provision of
policy advice, aimed especially at
crisis-prevention.
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The IMF also lends to countries with
balance of payments difficulties, to
provide temporary financing and to
support policies aimed at correcting
the underlying problems; loans to low-
income countries are also aimed
especially at poverty reduction.
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Third, the IMF provides countries with
technical assistance and training in its
areas of expertise. Supporting all three
of these activities is IMF work in
economic research and statistics.
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In recent years, as part of its efforts to
strengthen the international financial
system, and to enhance its
effectiveness at preventing and
resolving crises, the IMF has applied
both its surveillance and technical
assistance work to the development of
standards and codes of good practice
in its areas of responsibility, and to the
strengthening of financial sectors.

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THE OPERATION OF THE IMF
IMF is an international financial organization
comprised of 187 member countries
Purposes, as stipulated in its Articles of
Agreement, are to
Promote international monetary cooperation
Facilitate the expansion of international trade
Promote exchange stability and a multilateral system
of payments
Make temporary financial resources available to
members under adequate safeguards
Reduce the duration and degree of international
payments imbalances
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THE OPERATION OF THE IMF
Most important feature of IMF is its quota system
Determine both the amount members can borrow from the
IMF and their relative voting power
Higher a members quota, the more it can borrow and the greater
its voting power
Members quotas are their subscriptions to the IMF
Based on their relative sizes in the world economy
Pays one fourth of its quota in widely-accepted reserve
currencies (US dollar, British pound, euro, or yen) or in
Special Drawing Rights
Pays remaining three-quarters of quota in its own national
currency
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THE OPERATION OF THE IMF
The IMF engages in four areas of activity
Economic surveillance or monitoring
Dispensing of policy advice
Lending
Perhaps most important
Technical assistance
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TRANCHE
If an IMF member faces balance of payments
difficulties
Can automatically borrow one fourth of its quota in the
form of a reserve tranche
When the IMF lends to a member country, what actually
happens is domestic country purchases international
reserves from the IMF using its own domestic currency
reserves
Member country is then obliged to repay IMF by repurchasing its
own domestic currency reserves with international reserve assets
IMF lending is known as a purchase-repurchase arrangement
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TRANCHE
Credit tranches
Originally, each were equal to of the members quotas
In the late 1970s, credit tranches were increased to 37.5% of
quota
First credit tranche is more or less automatic
Second through fourth credit tranches require that the member
adopt policies (conditionality) that will solve balance of
payments problem at hand
Effectively limits a member countrys credit to 150 percent
of its quota
As IMF evolved, it created a number of special credit
facilities that extend potential credit beyond 150% level
Drawings on IMF by its members have to be repaid
Five-year limit was established
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IMF LENDING
AN ASSESSMENT

Reform of existing IMF framework could involve
Reconstituting it more along the lines of a world
central bank
Reaffirming role of the SDR as a reserve asset
Giving IMF independent responsibility for
regulating world liquidity through expanded
quotas and SDR management
Redesigning adjustment mechanisms to spread
responsibility over deficit and surplus countries
Changes are radical and would require a complete
redrafting of the IMFs Articles of Agreement
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