This document provides an overview of international finance topics including international monetary systems, exchange rates, the balance of payments, and the role of the International Monetary Fund (IMF). It discusses the gold standard, Bretton Woods system, and fixed and flexible exchange rate systems. It also describes the functions of the IMF in stabilizing currency exchange rates, financing balance of payments deficits, and advising borrowing countries. Additionally, it summarizes the IMF's response to the COVID-19 pandemic by providing emergency financing, debt relief, calls for bilateral debt suspension, and efforts to enhance liquidity and adjust existing lending arrangements.

1. Contents:
1. Introduction to International Finance.
2. Will this pandemic or otherwise stop International
Finance?
3. Introduction to International Monetary System- Gold
Standard, Bretton Woods system.
4. Fixed -Flexible Exchange Rate Systems, Euro Market.
5. Role of IMF.
1

2. INTERNATIONAL FINANCE
International
Financial
Systems
Foreign
Direct
Investment
Trade
Operation
International
Monetary
Systems
Exchange
Rates
Balance of
Payments
2

3. Will this pandemic or other can stop
International Finance?
Technical Advancement Profitability Cost control
Resource Availability
3

4. International Monetary Fund (IMF)
• Managing Director: Kristalina Georgieva
• Chief Economist: Gita Gopinath
• Headquarters location: Washington, D.C., United States
• Membership: 189 countries
• Main organ: Board of Governors
• Parent organization: United Nations
www.imf.org
4

5. Bretton Woods Conference
• Also known as United Nation’s Monetary & Financial Conference
• 44 countries’ representatives attended
• Article of Agreement
• Founded:
1. World Bank
2. IMF
3. GATT
5

6. Structure
Head – Board of Governance
Executive Board (24 members, out of
which 8 seats are reserved under Quota
Subscription)
Managing Director (5 years appointment)
Staff Members
6

7. https://www.imf.org/en/About/Factsheets/A-
Guide-to-Committees-Groups-and-Clubs#G7
7

8. Functions of IMF
• Stabilizing currency exchange rates
• Financing Balance of Payments deficits
• Advising borrowing governments
8

9. GOLD CURRENCY EXCHANGE SYSTEM
9

10. GOLD CURRENCY EXCHANGE SYSTEM
10

11. GOLD CURRENCY EXCHANGE SYSTEM
IMF Decided:
1. To stop Gold Currency Exchange System.
2. No onus of keeping x gm gold to print xx
amount.
3. No Money ≠ Gold exchange.
America entered Floating exchange rate in 1973
(Market decides the exchange rate)
1992- India also adopted Floating rate exchange
11

12. GOLD CURRENCY EXCHANGE SYSTEM
SDR / Paper Gold meaning:
Upto 1970- 1SDR= $1 & $1=0.88grams gold
Present System- 1SDR = basket of 5 currency (Yuan,
Euro, Yen, UK Pound USD)
https://www.imf.org/external/np/fin/data/rms_sdrv.a
spx
https://www.imf.org/en/News/Articles/2016/09/30/
AM16-PR16440-IMF-Launches-New-SDR-Basket-
Including-Chinese-Renminbi
1SDR = US $1.44 (approx.) (As on December 04, 2020)
12

13. How much to deposit in International
Monetary Fund?
• Size of economy = Quota
• Quota = SDR Contribution
• SDR Contribution directly proportionate to Voting Rights
• SDR deposit: 0.05% interest rate paid by IMF
• SDR loan (BoP Crisis): 1.050% interest rate
• SDR can be converted into member currency
13

14. How much to deposit in International
Monetary Fund?
• Size of Economy , GDP, Openness to
Global Market in respect of FDI, FII,
Trade Barriers, Convertibility of
Capital Account
• Amazing Fact:
BRICS = 1/5th or 20% of World GDP
2/5th Population
14

15. How much to deposit in International
Monetary Fund?
15

16. Why Reforms Required in IMF?
• Higher IMF quota simply means more voting rights and borrowing permissions under IMF. But it is
unfortunate that formula is designed in such a way that USA itself has 17.7% quota which is higher than
cumulative of several countries. The G7 (https://www.imf.org/en/About/Factsheets/A-Guide-to-
Committees-Groups-and-Clubs) group contains more than 40% quota where countries like India & Russia
have only 2.5% quota in IMF. Some countries are over represented in the IMF and that’s why emerging
countries are against this quota scheme of IMF.
• Further it is almost impossible to make any reform in the current quota system as more than 85% of total
votes are required to make it happen. The 85% votes does not 85% countries but countries which have 85%
of voting power and only USA has voting share of around 17% which makes it impossible to reform quota
without consent of developed countries.
• IMF Board of Governors conducts quota reviews meetings at regular interval say in every 5 years. Any
revision in IMF quota system shall be approved by at least 85% majority of total voting power ad a member
consent is necessary to change its quota in IMF.
16

17. Why Reforms Required in IMF?
• Balance of economic and geopolitical power
has shifted, becoming more dispersed across
the world, particularly with the emergence of
China and India – among the world’s largest
and fastest growing economies
• India’s quota is 2.76% and China’s is 6.41%,
while the U.S.’s quota is 17.46 % (translates to a
vote share of 16.52%) giving it a unique veto
power over crucial decisions at the IMF, many
of which require a supermajority of 85%
• The U.S. has resisted diluting its share, wary
that it will benefit countries such as China
17

18. IMF Reform (2010)
Quota Reform
• Quota for Emerging Economies
India 2.4% (11th) = 2.7% (8th)
China 4.0% = 6.4%
• Quota for Poor Nations
• Proposed needs 85% votes
Governance Reform
• No reservations for Director. All
should be elected
• No Permanent Chair
• Review of ED composition in
every 8 years
• Proposed needs 85% votes
18

19. Few more Criticism of IMF
• Fail in economic surveillance of countries around the world
1. Mexico (1995)
2. East Asian Crisis (1997)
3. Subprime Crisis (2008)
4. European Sovereign Debt Crisis (2010)
5. PIGS Crisis (2011)
• SDR High Interest Rate
• Reforms are pending
19

20. Few more Criticism of IMF
20

21. Few more Criticism of IMF
https://www.thehindubusinessline.com/news/world/I
MF-chief-promises-%E2%80%98belly-
dance%E2%80%99-if-US-endorses-
reforms/article20883618.ece
21

22. What IMF did in Covid-19?
In addition to providing policy advice and technical assistance, the Fund’s actions are focused on five tracks:
• Emergency financing (Approved $100 billion to 70 countries)
• Grants for debt relief (approved immediate debt service relief to 29 countries under the IMF’s
revamped Catastrophe Containment and Relief Trust)
• Calls for bilateral debt relief ( bilateral creditors to suspend debt service payments from the poorest
countries)
• Enhancing liquidity (need of short-term moderate balance of payments support)
• Adjusting existing lending arrangements (accommodate urgent new needs arising from the coronavirus)
• Capacity Development (supporting over 160 countries to address urgent issues such as cash management,
financial supervision, cyber security and economic governance
22

23. International Monetary Fund (IMF)
&
World Bank
IMF
• Foster global monetary cooperation
• Secure financial stability
• Facilitate international trade
• Promote high employment
• Sustainable economic growth
• Reduce poverty around the world
World Bank
• Vital source of financial and
technical assistance to developing
countries around the world
• Reduce poverty and support
development
• Provides low interest loans
23

24. Extra Readings..
• https://www.insightsonindia.com/wp-content/uploads/2018/08/IMFs-
Annual-Assessment-of-Indias-Economy.pdf
• https://www.imf.org/en/About
• https://www.elibrary.imf.org/
24

25. Apply at IMF
• https://www.imf.org/en/About/Recruitment/apply-now
25

26. Fixed and Flexible Exchange Rate Systems
26

27. Exchange Rate????
27

28. Fixed Exchange Rate System
• Also known as “Currency Par Value” and “Pegged Exchange Rate System
28

29. Fixed Exchange Rate System
Methods to determine:
Gold Standard System Exchange
Rate
• Gold is common unit of parity
between currencies of two different
countries in circulation
• It is relative fixed exchange rate and
not a rigid exchange rate
Bretton Wood System of
Exchange Rate
• National currencies were
convertible
• Countries were required to fix their
currencies against USD
29

30. Flexible Exchange Rate System
• Also known as “Floating Exchange Rate”
30

31. Euro Market
31

32. Euro Market
• Also known as “Euro Currency Market” and “Euro Money Market”
• Euro ≠ Europe or European Currency
32

33. Lets understand some terminologies
• Euro Market
• Euro Bonds
• Foreign Bonds
• LIBOR (London Inter-Bank Offer Rate)
33

34. What is Euro Market?
• Market where foreign currencies are deposited
• Owned by non-residents of the country
The market has 2 sides:
• The receipts of deposits
• The lending of deposits
34

35. Sources of Euro Deposits?
35
Individual Agencies MNCs SMEs Banks Govt.

36. Users of Euro Currency?
36
Individuals Government
Agencies Banks

37. Features of Euro Market
37
International
Independent
Wholesale
Competitive
Short Term
Inter Bank

38. Significance of Euro Market
38
Floating
Funds
Corporate
Investment
Fund’s
Source
Investment
Option

39. Interesting Fact
39

40. Effects of Euro Market
40
Adverse Positive

41. https://www.elibrary.imf.org/view/IMF022/12
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9781616353223/12455-
9781616353223_A005.xml?language=en&redir
ect=true
41

42. Thank you for Listening or Pretending to
Listening..
42