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INTERNATIONAL
MONETARY FUND


  Presented by:
  Jatin Vaid



                  1
International
Monetary Fund


                 2
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.




Ch 1                                                                    3
Overview
  With its global membership of 186 countries, the IMF is
   uniquely placed to help member governments take
   advantage of the opportunities—and manage the
   challenges—posed 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
Ch 1                                                           4
Key IMF Activities
 The IMF supports its membership by providing:

 III.   policy advice to governments and central banks based on
        analysis of economic trends and cross-country experiences;
 IV.    research, statistics, forecasts, and analysis based on
        tracking of global, regional, and individual economies and
        markets;
 V.     loans to help countries overcome economic difficulties;
 VI.    concessional loans to help fight poverty in developing
        countries; and
 VII.   technical assistance and training to help countries improve
        the management of their economies.




Ch 1                                                                  5
IMF Functions
       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.

 III. Economic and 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.

 V.     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.

 VII. 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.

 IX. Research and Data : Supporting all three of these activities is the IMF's
     economic and financial research and statistics.
Ch 1                                                                             6
Objectives of IMF
 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
Ch 1                                           7
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.


Ch 1                                     8
Membership
 I.     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.

 III.   Upon joining, each member of the IMF is assigned a quota,
        based broadly on its relative size in the world economy.




Ch 1                                                                9
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.

Ch 1                                            10
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.

Ch 1                                                                   11
Organization &
                           Management
      The IMF has a management team and 17 departments that carry
       out its country, policy, analytical, and technical work.

 The current management team:

      Dominique Strauss-Kahn, a French national, became the
       IMF's tenth Managing Director in November 2007.
       Previously, he was the Finance Minister of France during
       1997-99.
      John Lipsky, an American, has been First Deputy Managing
       Director since September 2006. Before coming to the IMF,
       he worked for JPMorgan Investment Bank.
      Takatoshi Kato, a Japanese national, became Deputy
       Managing Director of the IMF in February 2004. Previously,
       he advised the president of Tokyo-Mitsubishi Bank.


Ch 1                                                            12
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 right (SDR) allocations, the admittance of
   new members, compulsory withdrawal of members, and
   amendments to the Articles of Agreement 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
Ch 1                                                          13
Governance Structure
  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.




Ch 1                                                              14
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 SDRs (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.


Ch 1                                                                  15
History of IMF
     The IMF has played a part in shaping the global economy since
     the end of World War II.
 1. Cooperation and reconstruction (1944–71)
     During the Great Depression of the 1930s, countries attempted to
     shore up their failing economies by sharply raising barriers to
     foreign trade, devaluing their currencies to compete against each
     other for export markets, and curtailing their citizens' freedom to
     hold foreign exchange. These attempts proved to be self-
     defeating. World trade declined sharply, and employment and
     living standards plummeted in many countries.




Ch 1                                                                   16
History of IMF
 2. The Bretton Woods agreement
  The IMF was conceived in July 1944, when representatives of 45
    countries meeting in the town of Bretton Woods, New Hampshire,
    U.S, agreed on a framework for international economic
    cooperation, to be established after the Second World War. They
    believed that such a framework was necessary to avoid a
    repetition of the disastrous economic policies that had contributed
    to the Great Depression.
  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 - The countries that joined the IMF between
    1945 and 1971 agreed to keep their exchange rates (the value of
    their currencies in terms of the U.S. dollar). This prevailed until
    1971.
Ch 1                                                                  17
History of IMF
 3. The end of the Bretton Woods System (1972–81)
  By the early 1960s, the U.S. dollar's fixed value against gold, under
    the Bretton Woods system of fixed exchange rates, was seen as
    overvalued.
  In August 1971, U.S. President Richard Nixon announced the
    "temporary" suspension of the dollar's convertibility into gold.
  Since the collapse of the Bretton Woods system, IMF members
    have been free to choose any form of exchange arrangement they
    wish : allowing the currency to float freely, pegging it to another
    currency or a basket of currencies, adopting the currency of
    another country, participating in a currency bloc, or forming part of
    a monetary union.




Ch 1                                                                   18
Thank You!




Ch 1                19

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International Monetary Fund

  • 1. INTERNATIONAL MONETARY FUND Presented by: Jatin Vaid 1
  • 3. 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. Ch 1 3
  • 4. Overview  With its global membership of 186 countries, the IMF is uniquely placed to help member governments take advantage of the opportunities—and manage the challenges—posed 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 Ch 1 4
  • 5. Key IMF Activities The IMF supports its membership by providing: III. policy advice to governments and central banks based on analysis of economic trends and cross-country experiences; IV. research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets; V. loans to help countries overcome economic difficulties; VI. concessional loans to help fight poverty in developing countries; and VII. technical assistance and training to help countries improve the management of their economies. Ch 1 5
  • 6. IMF Functions 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. III. Economic and 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. V. 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. VII. 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. IX. Research and Data : Supporting all three of these activities is the IMF's economic and financial research and statistics. Ch 1 6
  • 7. Objectives of IMF 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 Ch 1 7
  • 8. 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. Ch 1 8
  • 9. Membership I. 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. III. Upon joining, each member of the IMF is assigned a quota, based broadly on its relative size in the world economy. Ch 1 9
  • 10. 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. Ch 1 10
  • 11. 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. Ch 1 11
  • 12. Organization & Management  The IMF has a management team and 17 departments that carry out its country, policy, analytical, and technical work. The current management team:  Dominique Strauss-Kahn, a French national, became the IMF's tenth Managing Director in November 2007. Previously, he was the Finance Minister of France during 1997-99.  John Lipsky, an American, has been First Deputy Managing Director since September 2006. Before coming to the IMF, he worked for JPMorgan Investment Bank.  Takatoshi Kato, a Japanese national, became Deputy Managing Director of the IMF in February 2004. Previously, he advised the president of Tokyo-Mitsubishi Bank. Ch 1 12
  • 13. 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 right (SDR) allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the Articles of Agreement 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 Ch 1 13
  • 14. Governance Structure  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. Ch 1 14
  • 15. 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 SDRs (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. Ch 1 15
  • 16. History of IMF The IMF has played a part in shaping the global economy since the end of World War II. 1. Cooperation and reconstruction (1944–71) During the Great Depression of the 1930s, countries attempted to shore up their failing economies by sharply raising barriers to foreign trade, devaluing their currencies to compete against each other for export markets, and curtailing their citizens' freedom to hold foreign exchange. These attempts proved to be self- defeating. World trade declined sharply, and employment and living standards plummeted in many countries. Ch 1 16
  • 17. History of IMF 2. The Bretton Woods agreement  The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, U.S, agreed on a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression.  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 - The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar). This prevailed until 1971. Ch 1 17
  • 18. History of IMF 3. The end of the Bretton Woods System (1972–81)  By the early 1960s, the U.S. dollar's fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued.  In August 1971, U.S. President Richard Nixon announced the "temporary" suspension of the dollar's convertibility into gold.  Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish : allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. Ch 1 18