International Monetary Fund

1. INTERNATIONAL MONEATARY
FUND
Presented By:- Mohd Ali
Presented To:- Prof. Mohit Maurya
SRMS IBS

2. HISTORY
 The International Monetary Fund was conceived in July
1944 originally with 45 members and came into existence
in December 1945 when 29 countries signed the
agreement.
 The IMF was originally laid out as a part of the Bretton
Woods system exchange agreement in 1944. During
the Great Depression, countries sharply raised barriers to
trade in an attempt to improve their failing economies. This
led to the devaluation of national currencies and a decline
in world trade
 Their objective is to promote world economic stability and
growth.

3. INTERNATIONAL MONETARY FUND
 The International Monetary Fund (IMF) is an
international organization headquartered in Washington,
of "189 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
 It is an organization formed with a stated objective of
stabilizing international exchange rates and facilitating
development through the enforcement of liberalizing
economic policies on other countries as a condition for
loans, restructuring or aid.

4. QUICK FACTS
 Membership: 189 countries
 Headquarters: Washington, D.C.
 Staff: Approximately 2,600 from 147 countries
 Total quotas: US$327 billion (as of 3/13/15)
 Executive Board: 24 Directors each representing a
single country or a group of countries
 Additional pledged or committed resources: US$
885 billion
 Committed amounts under current lending
arrangements (as of 3/13/15): US$163 billion, of which
US$137 billion have not been drawn
 Biggest borrowers (amounts outstanding as of
3/13/15): Portugal, Greece, Ireland, Ukraine
 Biggest precautionary loans (amount agreed as of
3/13/15): Mexico, Poland, Colombia, Morocco

5. MANAGING DIRECTOR

6. HEADQUARTERS IN WASHINGTON DC

7. WHO RUNS THE IMF?
MEMBER
COUNTRIES
BOARD OF
GOVERNORS
DEPUTY
MANAGING
DIRECTOR
DEPUTY
MANAGING
DIRECTOR
EXECUTIVE
BOARD
FIRST DPTY
MANAGING
DIRECTOR

8. OBJECTIVES
I. To promote international monetary
cooperation
II. To facilitate the expansion and balanced
growth of International Trade
III. To promote exchange rate stability
IV. To make its resources available to its
members who are experiencing BOP
problems
V. To establish a multilateral system of
payments

9. FUNCTIONS OF IMF
 Surveillance Gathering data and assessing
economic policies of countries
 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.

10.  Technical Assistance Strengthening
human skills and institutional capacity of
countries.
 Providing the governments and central
banks of its member countries with technical
assistance and training in its areas of
expertise.

11.  Financial Assistance Lending to countries
to support reforms .
 Lending to member countries with balance
of payments problems, supporting
adjustment and reform policies aimed at
correcting the underlying problems.

12. SPECIAL DRAWING RIGHTS (SDR)
 The SDR is an international reserve asset, created
by the IMF in 1969 to supplement its member
countries' official reserves.
 Its value is based on a basket of four key
international currencies, and SDRs can be
exchanged for freely usable currencies.
 With a general SDR allocation that took effect on
August 28 and a special allocation on September 9,
2009, the amount of SDRs increased from SDR
21.4 billion to SDR 204.1 billion (currently
equivalent to about $324 billion).

13.  The value of the SDR was initially defined as
equivalent to 0.888671 grams of fine gold.
 the SDR was redefined as a basket of currencies,
today consisting of the euro, Japanese yen, pound
sterling, and U.S. dollar.
 The U.S. dollar-value of the SDR is posted daily on the
IMF's website.
 It is calculated as the sum of specific amounts of the
four currencies valued in U.S. dollars, on the basis of
exchange rates quoted at noon each day in the London
market.

14. INDIA AND THE IMF
 India joined the IMF on December 27, 1945, as
one of the IMF's original members.
 India’s current quota in the IMF is SDR (Special
Drawing Rights) 5,821.5 million, making it the
13th largest quota holding country at IMF and
giving it shareholdings of 2.44%.
 India (together with its constituency countries
Viz. Bangladesh, Bhutan and Sri Lanka) is
ranked 17th in the list of 24 constituencies at
the Executive Board.

15.  India subscribes to the IMF's Special Data
Dissemination Standard. Countries
belonging to this group make a commitment
to observe the standard and to provide
information about their data and data
dissemination practices.

16. WHERE THE IMF GETS ITS MONEY
 Most comes from the quota subscriptions
 the money each member contributes when joining the
IMF
 General Arrangements to Borrow (1962)
 line of credit set up with several governments and banks
throughout the world

17. QUOTAS & SUBSCRIPTIONS
 Quota subscriptions generate most of the
IMF's financial resources.
 Each member country of the IMF is
assigned a quota, based broadly on its
relative size in the world economy.
 A member's quota determines its maximum
financial commitment to the IMF and its
voting power, and has a bearing on its
access to IMF financing.

18.  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

19.  A new country is assigned an initial quota in the same
range as the quotas of existing members
 The quota formula is a weighted average of GDP (weight
of 50 percent), openness (30 percent), economic
variability (15 percent), and international reserves (5
percent )
 GDP is measured as a blend of GDP based on a market
exchange rates (weight of 60 percent) and on PPP
exchange rates (40 percent).
 Quotas are denominated in Special Drawing Rights
(SDRs)

20. BENEFITS TO INDIA FROM INTERNATIONAL
MONETARY FUND’S MEMBERSHIP:
 Financial Assistance
 While India has not been a frequent user of IMF
resources, IMF credit has been instrumental in
helping India respond to emerging balance of
payments problems on two occasions.
 In 1981-82, India borrowed SDR 3.9 billion under
an Extended Fund Facility, the largest arrangement
in IMF history at the time.
 In 1991-93, India borrowed a total of SDR 2.2
billion under two stand by arrangements, and in
1991 it borrowed SDR 1.4 billion under the
Compensatory Financing Facility.

21.  Technical Assistance
In recent years, the Fund has provided India with
technical assistance in a number of areas, including the
development of the government securities market, foreign
exchange market reform, public expenditure
management, tax and customs administration
Since 1981 the IMF Institute has provided training to
Indian officials in national accounts, tax administration,
balance of payments compilation, monetary policy, and
other areas.

22. CASE-1991 INDIAN ECONOMIC CRISIS
 By 1985, India had started having balance of
payments problems. By the end of 1990, it was in a serious
economic crisis. The government was close to default,
its central bank had refused new credit and foreign exchange
reserves had been reduced to such a point that India could
barely finance three weeks’ worth of imports which led the
Indian government to airlift national gold reserves as a pledge
to the International Monetary Fund (IMF) in exchange for a
loan to cover balance of payment debts.
 The economic crisis was primarily due to the large and
growing fiscal imbalances over the 1980s. During the mid-
eighties, India started having balance of payments problems.
Precipitated by the Gulf War, India’s oil import bill swelled,
exports slumped, credit dried up, and investors took their
money out.

23.  Government of India's immediate response was to
secure an emergency loan of $2.2 billion from
the International Monetary Fund by pledging 67 tons
of India's gold reserves as collateral. The Reserve
Bank of India had to airlift 47 tons of gold to the Bank
of England and 20 tons of gold to the Union Bank of
Switzerland to raise $600 million
 Result
 A program of economic policy reform 1991 has since
been put in place which has yielded very satisfactory
results so far.

25. SRI LANKA TO USE IMF LOAN TO REFORM ECONOMY
AFTER CONFLICT $2.6 BILLION LOAN GRANTED.
 Sri Lanka had been running high budget deficits for several
years and had borrowed to finance these deficits
internationally on short terms which left the country
exposed to a sudden reversal of this borrowing.
 When the global financial crisis hit, there was a sudden
stop in financing from international markets and the central
bank intervened to prevent the exchange rate from
depreciating. This, in turn, put pressure on Sri Lanka’s
international currency reserves, which still remain at very
low levels.
 Protection for poor, assisting the most vulnerable are key
goals

26. Thank you