Headquarters : Washington D C ,

USA

Members : 185 countries

Managing Director : Dominique Strauss-Kahn

 History of IMF

IMF was introduced as there arouse a need for

International cooperation in economics, trade
and balance of payment affairs.
United States made a proposal for
establishment of International Stabilization
Fund. It was known as White plan
UK proposed establishment of International
Clearing Union. It was known as Keynes plan.
IMF came in to existence by the joint plan
prepared in 1944.
Thus IMF came in to existence to promote
economic and financial co-operation among
the member countries.
 EMERGENCE OF IMF
The International Monetary Fund was formally
created in July 1944. during the United nations
Monetary and Financial Conference
The IMF was formally organized on
December 27 1945, when the first 29
countries signed its Articles of
Agreement. The statutory purposes of
the IMF today are the same as when
they were formulated in 1944 .
Headquarters
IMF is a post-war international monetary
institution.
 Growth in IMF Membership, 1945 - 2005
(number of countries)
Organizational structure

BOARD OF
Interim
GOVERNORS
Committee
Development
committee

EXECUTIVE BOARD OF
DIRECTORS

MANAGING
DIRECTOR

IMF SECRETARIAT
 Key Members

Quota: Millions of SDRs

IMF Member Country Quota: Percentage

3236.4 1.49
Australia

4605.2 2.12
Belgium

37149.5 17.09
USA

10738.5 4.94
United Kingdom

4158.3 1.91
India

3036.1 1.4
Brazil
 Objectives of IMF
To avoid the competitive devaluation and exchange
control.

To establish and maintain currency convertibility.

To develop multilateral trade and payments.

To promote international monetary co-operation through

a permanent institute.
To facilitate the expansion of balanced growth of
international trade.
To provide exchange stability.
 Objectives Conti.
To maintain orderly exchange arrangements among
members and to avoid competitive exchange
depreciation.
To assist in the establishment of a multilateral system of
payments in respect of current transactions.
To lend confidence to members by making the funds
resources available to them under adequate safeguards.

To shorten the duration and lessen the degree of

disequilibrium in the international balance of payments of
members.
Functions of IMF
Guardian of good conduct in the area of Balance of
payments
Reducing tariffs and other trade restrictions
Provides technical advice
Provides short term financial assistance to its member
countries
Provides machinery for orderly adjustment of
exchange rates
Reservoir of currencies
Lending institution of foreign currencies

 Machinery for altering the par values of the

currency of a member country

International consultancy

Conducts research studies and publishes report

 How Does IMF Get Its Money

Mainly from the Quotas that countries deposit when

they join.

The Quotas reflects the size of each members

economy.

Under some Circumstances it gets money from

Trusts.
Role of IMF

Lending:- Providing financial assistance to low-income

countries experiencing protracted BOP through:-
Poverty Reduction And Growth Facility(PRGF)

Heavily Indebted Poor Countries

Initiative(HIPC)
Multilateral Debt Relief Initiative (MDRI)
 Technical Assistance:- For development of productive
resources of member countries through help in Policy
Making and Training.
Regional Technical Assistance Center at

Pacific, Caribbean and Africa.

It accounts for about one-fifth of IMFs operating budget.

Bilateral donors of technical assistance program:-

Australia, China, Canada, France, Germany, India, Japan,
Russia, Luxembourg, Portugal, US, UK etc.

Multilateral Donors:- African Development Bank, Arab

Monetary Fund, Asian Development Bank etc.
Ghana : discovery of oil field
Nigeria : natural gas
Developing countries : combat poverty and
growth.
 Surveillance:- Help in providing policy advise to low
income countries by:-
i. Establishing Economic Frameworks that support
sustained growth and poverty reduction.

ii. Identify and manage sources of macroeconomic risk and

vulnerabilities.

iii. Strengthen institutions and policies that underline sound

macroeconomic management.

Progress report is annually published in Global Monitoring

Report by IMF and World Bank.
Balance of Payment Difficulties
It occurs due to:-
Fiscal Deficit

High Level of external and/or public debt

Exchange rate fixed at inappropriate levels

Natural Disasters or Armed conflicts

It causes:-
Countrys Currency Depreciate rapidly

International goods expensive

 Balance of Payment Status

And also in here

World's payment balances in 2005 (States in surplus in

blue (dark blue = Euroland) / States in deficit in red)
 How IMF helps

Through IMF Lending

Through IMF Loan

IMF Helps Ghana Learn From
Others on Inflation Targets

February 14, 2008

The IMF is sharing its cross-country experience in

inflation targeting with Ghana as the country adapts its
monetary policy and aims to reach middle-income status
by 2015.
IMF to Back Liberia With Debt
Relief, New Finance
March 20, 2008

In a major move to back Liberia's economic recovery after a

ruinous 14-year period of civil war, the IMF has announced a
series of measures to support it with debt relief and new
financing.
Exchange rate

The exchange rates between two countries

specifies how much one currency is worth in
terms of other.
Ex:- JPY 102 = USD 1
& USD 1= 41.35 INR

Spot exchange rate refers to the current

exchange rate
 Free or Pegged
If a currency is free floating, its exchange rate is
allowed to vary against that of other currencies and is
determined by the market forces of supply and
demand.

Nominal & real exchange rates

The nominal exchange rate is the price in domestic
currency of one unit of foreign currency.
SPECIAL DRAWING RIGHTS(SDR)
is an international reserve asset, created by the IMF in
1969 to supplement the existing official reserves of
member countries.

SDRs are allocated to member countries in proportion to

their IMF quotas

Its value is based on a basket of key international

currencies.
SDRs are popularly known as papergold
WHY SDR WAS CREATED?
SDR was created by the IMF in 1969 to support the
Bretton Woods fixed exchange rate system.
International supply of two key reserve assets gold
and the U.S. dollarproved inadequate for supporting
the expansion of world trade and financial development
A few years later, the Bretton Woods system collapsed
and the major currencies shifted to a floating exchange
rate regime.
Today, the SDR has only limited use as a reserve asset.
SDR valuation
The value of the SDR was initially defined as equivalent to
0.888671 grams of fine goldwhich, at the time, was also
equivalent to one U.S. dollar

After the collapse of the Bretton Woods system in 1973,

however, the SDR was redefined as a basket of
currencies,today consisting of the euro, Japanese yen,
pound sterling, and U.S. dollar

The basket composition is reviewed every five years to

ensure that it reflects the relative importance of currencies
in the world's trading and financial systems.
The SDR Interest Rate
The SDR interest rate provides the basis for calculating
the interest charged to members on regular (non-
concessional) IMF loans.

The SDR interest rate is determined weekly

SDR ALLOCATION
Under its Articles of Agreement, the IMF may allocate SDRs to
members in proportion to their IMF quotas

Each member country of the IMF is assigned a quota, based

broadly on its relative size in the world economy

Indias quota 4158.2 millions US$ of SDRs, 1.91% of total.

If a member's SDR holdings rise above its allocation, it earns

interest on the excess; conversely, if it holds fewer SDRs than
allocated, it pays interest on the shortfall.

2 types of allocations
1) general allocations of SDRs
2) special one time allocation of SDRs
EMERGENCY ASSISTANCE
The IMF provides emergency assistance to help
members countries during natural disasters and
conflicts.

Since 1962, 38 countries have received aid upto US $2.9

billion from IMF.

Emergency assistance loans are subject to the basic

rate of charge and should be repaid within 3.5 to 5 yrs.
Countries that received emergency
assistance since 1995
Country Year Event Amount
(U.S
$MILLION)
BANGLADESH 1998 FLOODS 138.2
DOMINICAN 1998 HURRICANE 55.9
TURKEY 1999 EARTHQUAKE 501.0
GRENADA 2003 HURRICANE 4.0
MALDIVES 2005 TSUNAMI 6.3
SRILANKA 2005 TSUNAMI 158.4
DOMINICAN 2008 HURRICANE 3.3
 Role of IMF in INDIA

Joined IMF on 27 DEC, 1945

Subscribes to the IMFs special data dissemination

standard

India borrowed SDR 3.9 billion (1981-82)

SDR 2.2 billion (1991-93)
Technical assistance

In recent years, the fund has provided India in

government securities, foreign exchange market,
public expenditure management & tax & custom
administrations
Current scenario
SDR (Net cumulative allocation)- 681.17 m
Holdings - 6.78 m
Outstanding purchases & loans - None
Where do our interest lie?

Our monetary policy framework is not consistent ,

we need to build a consistent
framework of monetary policy
Our strength

By James Gordon (Washington based multilateral

institution's representative)
India does not need any financing from IMF
considering that the country had crossed $103
billion of FOREX reserves
Emerging market economy Feb 13, 2004
Acc to indiatimes - India borrowed from IMF in crisis
of 1990s & fully repaid its loan.
Cont..

Acc to finance ministry source FOREX crossed $

100 billion and now providing money to nation
building countries like
$ 43 m to Indonesia
$ 350 m to Brazil
$ 05 m to Burundi
So now India has that potential to be include into
IMF financial transactions plan (40 countries)
By P Uaidynathan Iyer in New Delhi Jan 19, 2004
IMF and the World Bank
IMF and World bank both were created at an
International Conference convened in Bretton Woods.

IMF promotes international monetary cooperation and

provides policy advice and technical assistance to
maintain strong economies.

The World bank promotes long-term economic

development and poverty reduction to help countries
reform particular sectors or implement specific projects

IMF and World bank collaborate regularly and at many

levels on assistance to member countries and are
involved in several joint initiatives.
Criticisms of IMF
Case

Iraqi Oil Crisis

 Common Criticisms of the IMF
The IMF has created an immoral system of
modern day

colonialism that drains the poor

The IMF serves wealthy countries and Wall

Street

The IMF is a secretive institution with no

accountability
IMF policies promote corporate welfare

IMF Policies hurt the environment

Thank You