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Detail information about IMF.

Detail information about IMF.

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  • Thursday, June 06, 20131
  • Introduction The IMF works to foster global growth andeconomic stability. It provides policy adviceand financing to members in economicdifficulties and also works with developingnations to help them achieve macroeconomicstability and reduce poverty.Thursday, June 06, 20132
  • BACKGROUND After the Great Depression in the 1930s there was aneed for an organization to create a system forexchange rate stability. Countries’ economies affected by WWII. need for reconstruction in well-developed nations need for development in the lesser developed nationsThursday, June 06, 20133 View slide
  • Bretton Woods Conference 1940s proposals for monetary system by Harry DexterWhite (U.S.) and John Keynes (UK). establish the value of each currency. eliminate restrictions and certain practices on trade. Bretton Woods Conference, New Hampshire, July 1944with delegates of 44 nations. final negotiations of the IMF and the World Bank took place.Thursday, June 06, 20134 View slide
  • Establishment The international monetary fund(IMF) wasestablished on 27th dec 1945. IMF started functioning with effect from 1stmarch, 1947. Organization Headquarters Washington, D.C. Official languages English, French, and SpanishThursday, June 06, 20135
  • Membership IMF started with the initial membershipof 44 countries. The IMF currently has a near-globalmembership of 188 countries. To become a member, a country must apply and then beaccepted by a majority of the existing members. In April 2012, Republic of South Sudan joined theIMF, becoming the institutions 188th member.Thursday, June 06, 20136
  • Quota A member countrys quota defines its financial andorganizational relationship with the IMF, including: Subscriptions A member countrys quota subscription determinesthe maximum amount of financial resources thecountry is obliged to provide to the IMF. A member’s IMF quota is equivalent to itssubscription in the organisation. A member must pay upto 25% of its quota in theform of international reserve assets(SDRs or widelyaccepted foreign currencies) and rest in its owncurrency.Thursday, June 06, 20137
  • Voting power The quota largely determines a members votingpower in IMF decisions. Each member has 250 basic votes plus oneadditional votes for each SRD 100,000 of quota. Accordingly, the United States has 421,965votes (16.76 percent of the total). India has 58,952 votes(2.34% of total).Thursday, June 06, 20138
  • IMF MembercountryQuota: millionsof SDRsQuota:percentage ofthe totalGovernor Alternate Number ofvotesPercentage outof total votesUSA 42,122.4 17.69 Timothy Geithner Ben Bernanke 421,961 16.75Japan 15,628.5 6.56 Koriki Jojima MasaakiShirakawa 157,022 6.23Germany 14,565.5 6.12 Jens Weidmann WolfgangSchäuble 146,392 5.81France 10,738.5 4.51 Pierre Moscovici Christian Noyer 108,122 4.29UK 10,738.5 4.51 George Osborne Sir Mervyn King 108,122 4.29Italy 7,055.5 3.24 Vittorio Grilli Ignazio Visco 95,996 3.81China 9,525.9 4.00 Zhou Xiaochuan Yi Gang 81 151 3.65Saudi Arabia 6,985.5 2.93 Ibrahim A. Al-Assaf Fahad Almubarak 70,592 2.80Canada 6,369.2 2.67 Jim Flaherty Mark Carney 64,429 2.56Russia 5,945.4 2.50 Anton Siluanov Sergey Ignatyev 60,191 2.39India 5,821.5 2.44 P. Chidambaram Duvvuri Subbarao 58,952 2.34Thursday, June 06, 20139
  • Recent reforms In 2011, the number of basic votes was nearlytripled, which helped to ensure poorer countriesmaintained a say in running the institution.Thursday, June 06, 201310
  • Access to financing A member country can borrow up to 200percent of its quota annually and 600 percentcumulatively. SDR allocations SDRs are used as an international reserveasset. A members share of general SDRallocations is established in proportion to itsquota. The most recent general allocation of SDRstook place in 2009. Thursday, June 06, 201311
  • IMF LendingsThursday, June 06, 201312 IMF provides financial assistance to memberswith balance of payment problems, in supportof policies aimed at correcting them.IMF provides two kinds of financial assistance.1.Non-concessional.2.Concessional assistance(low interest).
  • 13IMF Organization ChartInternational Monetaryand Financial CommitteeBoard of Governors Joint IMF-World BankDevelopment CommitteeExecutive BoardIndependentEvaluation OfficeManaging DirectorDeputy Managing DirectorsThursday, June 06, 2013
  • Board of Governors The Board of Governors consists of onegovernor and one alternate governor for eachmember country. The Board of Governors is advised bythe International Monetary and FinancialCommittee and the Development Committee. International Monetary and Financial Committeehas 24 members . The Development Committee has 25 members.Thursday, June 06, 201314
  • Executive Board 24 Executive Directors make up ExecutiveBoard. The Executive Directors represent all 188member-countries. Eight countries each appoint an ExecutiveDirector: the UnitedStates, Japan, Germany, France, the UnitedKingdom, China, the Russian Federation, andSaudi Arabia The remaining 16 Directors representconstituencies consisting of 4 to 22 countries.Thursday, June 06, 201315
  • Management The IMF is led by a Managing Director, who ishead of the staff and Chairman of the ExecutiveBoard. The Managing Director is assisted by a FirstDeputy Managing Director and three otherDeputy Managing Directors. The IMFs Executive Board is responsible forselecting the Managing Director.Thursday, June 06, 201316
  • The current management team Managing Director ofIMF. July 5, 2011 ChristineLagarde (France).Thursday, June 06, 201317
  • Deputy Managing DirectorsDavid Lipton, of the UnitedStatesNaoyukiShinohara, aNemat Shafik, fromEgyptMin Zhu, from ChinaThursday, June 06, 201318
  • Special Drawing Rights Once SDRs have been added to a membercountry’s official reserves, the country canvoluntarily exchange its SDRs for usablecurrencies. The SDR is neither a currency, nor a claim on theIMF. Holders of SDRs can obtain these currencies inexchange for their SDRs in two ways:first, through the arrangement of voluntaryexchanges between members.second, by the IMF designating members withstrong external positions to purchase SDRs frommembers with weak external positions.Thursday, June 06, 201319
  •  SDR’s value The value of the SDR is based on a basket ofkey international currencies—the euro,Japanese yen, pound sterling, and U.S. dollar. The SDR interest rate provides the basis forcalculating the interest charged to members onregular (non-concessional) IMF loans.Thursday, June 06, 201320
  • SDR allocations to IMF members The IMF may allocate SDRs to members inproportion to their IMF quotas, providing eachmember with a costless asset. There are two kinds of allocations: General allocations of SDRs(1970-72, forSDR 9.3 billion; in 1979–81, for SDR 12.1billion; and in August 2009, for an amount ofSDR 161.2 billion.) Special allocations of SDRs(SDRs increasedfrom SDR 21.4 billion to SDR 204.1 billion ).Thursday, June 06, 201321
  • OBJECTIVES.1.International monetary cooperation.2.To ensure stability in foreign exchange rates.3.To eliminate exchange control.4.To promote international trade.Thursday, June 06, 201322
  • 5.To help member nations to achieve balancedeconomic growth of international trade.6.To eliminate or to reduce the disequilibrium inbalance of payments.7.To promote investment of capital in backwardand underdeveloped countries.8.To develop confidence among members.Thursday, June 06, 201323
  • How Does the IMF Achieve Its Goals? The IMF has three main activities:surveillance, financial assistance, andtechnical assistance.SurveillanceEach year, the IMF sends economists to each ofits member countries to analyze the countryseconomic situation. The team examines fiscal and monetarypolicy, exchange rate, general macroeconomicstability, and any related policies, such as labourpolicy, trade policy, and social policy (such as thepension system). Thursday, June 06, 201324
  •  After the team finishes its analysis, the IMFexecutive board discusses the report andgives it to the leaders of the country inquestion as the official opinion of the IMF.Financial Assistance Member countries with balance of paymentsproblems can receive credits and loans to payoff their obligations and readjust theireconomic policies so that they will not faceanother crisis or near-crisis.Thursday, June 06, 201325
  •  The loans are disbursed in phases to ensurethat the receiving country moves forward withthe reforms required of it. Loans are generally granted for relatively shortperiods of time, for just a few months, or for aslong as ten years, depending on the type ofloan. The receiving country must pay back loans ontime, on a rigorous schedule, because theloans are intended to be temporary assistance.Thursday, June 06, 201326
  • Technical Assistance The IMF provides technical assistance onfiscal and monetary policy, regulatoryprocedures, tax policy, and collection ofstatistics, among other issues. These programs are aimed at strengtheningdeveloping countries abilities to reform andproperly manage their macroeconomicpolicies.Thursday, June 06, 201327
  • The IMF provides technical assistanceand training mainly in four areas: Monetary and financial policies (monetary policyinstruments, banking system supervision andrestructuring, foreign management andoperations, clearing settlement systems forpayments, and structure development of centralbanks); Fiscal policy and management (tax and customspolicies and administration, budgetformulation, expenditure management, design ofsocial safety nets, and management of domesticand foreign debt); Compilation, management, dissemination, andimprovement of statistical data; And advising on economic and financialThursday, June 06, 201328
  • Criticism Limited scope: Deals with only imbalances inpayments but not with the repayments of war loansor of blocked reserves or with the exports andimports of capital. Fixation of unscientific quotas: Quotas were fixedkeeping in mind the economic and political interestsof the U.S.A. and the U.K. But not on any scientificbasis. Discriminatory treatment : It gives specialconcession to western countries while neglectingbackward or underdeveloped countries. Inability to remove exchange controls.Thursday, June 06, 201329
  •  No success in securing exchange stability: It hasfailed to bring complete stability in foreign exchangerates. No solution of the liquidity problems. No elimination of multiple exchange rates. Free convertibility of currencies not attained:Except the US dollars, no other currency is freelyconvertible into any other currency. Inadequate representation to developingcountries: 90% member countries are developingcountries but only 38% of voting power is given.Thursday, June 06, 201330
  • Thursday, June 06, 201331
  • References:-Thursday, June 06, 201332 www.imf.org Monetary economics by M.L.Seth. http://www.globalization101.org