Introduction to IMF, The Bretton Woods Agreement, Objectives of IMF, Functions of IMF, Members of IMF, Governance and Organizational Structure of IMF, Resources of Funds, Application of Funds by IMF, Advantages to India from IMF.

1. INTERNATIONAL MONETARY FUNDSINTERNATIONAL MONETARY FUNDS

2. Introduction
The International Monetary Fund (IMF) is an
international organization
global financial system by following the macroeconomic
policies of its member countries,
in particular those with an impact on exchange rates and the
balance of payments. It is an organization formed to
stabilize international exchange rates and facilitate
development.
It also offers financial and technical assistance to its
members, making it an international lender of last resort.

3. Contd..
 Headquarters Washington D. C., USA
 The IMF describes itself as “an organization of 185
countries”.

4. The Bretton Woods Agreement
 United Nations conference convened in Bretton Woods, U.S.A
in July 1944.
Result of discussion was
– IMF (International Monetary Fund)
– IBRD (International Bank for Reconstruction and
Development)
– ITO (International trade organization)
The IMF and IBRD are called as the “Bretton Woods Twins”.
However, the proposal for the ITO did not materialize: instead the
General Agreement on Tariff and trade (GATT) was formed.

5. Main Objectives of IMF
 To promote International monetary cooperation that provides
machinery for consultation and collaboration on international
monetary problems.
 To facilitate the expansion of balanced growth of international
trade, and therefore employment and income
 To stabilize exchange rates and to avoid competitive
devaluations.
 Elimination of foreign exchange restrictions, which hamper
the economic growth.
 To provide loans to help cover shortfalls in Balance of
Payments (BOP) to help correct BOP problems without
hurting national or international interests.
 To reduce restrictions on payments for trade.

6. Functions of IMF
 Regulatory Functions: Initsregulatoryaspect, the IMFadministersacode ofgoodbehaviorininternational payments.Itregulatesexchange rate practicesand
internationalpayments.
 FinancialFunctions:Asafinancialinstitution, IMFoffersmedium-termloanstothe national monetaryauthoritiestoenablethemtomake uptheirbalanceof
paymentdeficits.TheIMFresourcescomefromthemembercountries.
 Consultative Functions: Asaconsultant,theIMFprovidesa forum forinternational cooperationandisasourceofcounselingandtechnicalassistancetoits
members.

7. TYPES OF MEMEBERS
 ORIGINAL MEMBERS:
All those countries whose representative took part in Bretton Woods
Conference and who agreed to be member of the funds prior to 31st
December, 1945 are called original member. These are 29 in number out of
45 government participation in conference.
 ORDINARY MEMBER:
All those who become its member subsequently are called ordinary member.
These are 156 in number (total number of member of IMF 185 subtracted
from original member 29).

8. IMF governance and organization
 IMF is controlled and managed by a Board of
Governors. Each member country nominates
Governors. All the nominated governors make the
board of Governors.
 Each country also nominates an alternate Governor
who casts the vote in the absence of Governor.
 Each Governor is allotted a number of votes, which
is determined by the quota allotted to the respected
country in the capital of the IMF.

9. Organisation structure
Board of governors
Executive director
24 in number.
President
Finance
Dept.
Economic
Dept.
Law
Dept.
Foreign
affair
Research
Dept.
Managing director

10. Resources of funds
 Quotas
– It relative voting power
– Allocation Of SDR
– Access to IMF resources
 Fund Borrowing
– General Agreement to Borrow (1962)
– G10
» BELGIUM,CANADA,FRANCE,WEST
GERMANY,ITALY,JAPAN,NETHERLANDS,SWEDEN,
U.K., USA
» Switzerland joined later and making it a group of 11

11. Main function of funds
 Fund lending
• Credit facilities
– Poverty reduction and growth facility (PRGF)
Concession lending arrangements to low income countries in recent year are the
largest amount of the loan have been made through the PRGF. The interest
rate revived on PRGF loans is only 0.5% and loans are to be repaid over a
period of 5.5-10 years
– Stand-By Arrangements (SBA)
It is designed to help countries addressing short term balance of payments
problem and repayment is normally expected within 2.5-4 years.
– Extended fund facility (EFF)
It was established in 1974 to help member countries to address more protracted
balance of payments problems requiring fundamental reforms to the structure
of the economy. Repayment is expected within 4.5-7 years
– Emergency Assistance

12. Criticism
 Fund conditionality
 Limited activities
 The quota has not been scientifically evolved
 U. S. Dominance
– Rule are loaded against the under developed countries

13. Advantages to India being a member of
IMF
 Financial assistance
 Help in foreign exchange crisis
 Membership of the World Bank
 Economic consultation
 Trading relationship
 SDRs allotment and holding by India