Lena project finished

PROJECT REPORT
ON
“INTERNATIONAL MONETARY FUND’’
Submitted in partial fulfillment of the
requirements
For the award of the degree of
Bachelor of business administration (BBA)
SUBMITTED BY:
Fueko Kadiayi L’hena
UNDER THE GUIDENCE OF:
Mr. Sachin Kumar
MGU/132/SN1105003/018
SESSION: 2013-2016
MAHATMA GANDHI UNIVERSITY
MEGHALAYA

Certificate:
This is to certify that FUEKO KADIAYI L’HENA
Has planned and conducted the project entitled
“INTERNATIONAL MONETARY FUND” under my
guidance and supervision and the report submitted
therewith was the result of bonafide work done by
her.
Place:
Date:

ACKNOWLEDGEMENT
This research provides a welcomedopportunity and
chance to acknowledgethe help and assistance of the
people who with their intellectual insights or
constructive criticism, other times in the form of
friendship have helped me to develop this research.
Completing a task successfully is never a one-man
effort. Similarly completionof this report is a result of
invaluable support and contribution of number of
people in direct and indirect manner.
I owe to all those people who have sincerely helped
me in making this report informative and worthy.
Last but not the least I would liketo express my
gratitude to all my friends and teacher who
helped me in this work, else without their insights
and opinions, this project would not have been
possible.
Fueko Kadiayi L’hena
MGU/132/SN1105003/018

TABLE OF CONTENT
1. INTRODUCTION.
2. FUNCTIONS
3. IMFSURVEILLANCE
4. HOW THE IMF MAKESDECISIONS
5. IMFLENDING
6. WHERE THE IMFGETS ITS MONEY
7. QUESTIONS AND ANSWERSON IMF GOLD SALES
8. THE IMFAND THE WORLD BANK
9. SOME COUNTRY MEMBER ANDTHEIR RELATIONSWITH IMF

1. INTRODUCTION
The International Monetary Fund (IMF) is an
international organization headquartered
in Washington, D.C., of "189 countries working to
foster global monetary cooperation, secure financial
stability, facilitateinternational trade, promote high
employment and sustainable economic growth, and
reduce poverty around the world." Formed in 1944 at
the Bretton Woods Conference, it came into formal
existence in 1945 with 29 member countries and the
goal of reconstructing the international payment
system. It now plays a central role in the management
of balance of payments difficulties and international
financial crises. Countries contribute funds to a pool
through a quota system from which countries
experiencing balance of payments problems can
borrow money. As of 2010, the fund had SDR476.8
billion, about US$755.7 billionat then exchange rates.
Through the fund, and other activities such as
statistics-keeping and analysis, surveillance of its
members' economies and the demand for particular
policies, the IMF works to improve the economies of
its member countries. The organization's objectives
stated in the Articles of Agreement are: to promote
international monetary cooperation, international
trade, high employment, exchange-rate stability,
sustainable economic growth, and making resources
availableto member countries in financial difficulty.

History
IMF "Headquarters 1" in Washington, D.C.
The IMF was originallylaid 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.
The Gold Room within the Mount Washington Hotel
where the Bretton Woods Conference attendees
signed the agreements creating the IMF and World
Bank
This breakdownin international monetary co-
operation created a need for oversight. The

representatives of 45 governments met at the Bretton
Woods Conference in the Mount Washington Hotel
in Bretton Woods, New Hampshire, in the United
States, to discuss a framework for postwar
international economic cooperationand how to
rebuild Europe.
There were two views on the role the IMF should
assume as a global economicinstitution. British
economist John Maynard Keynes imagined that the
IMF would be a cooperative fund upon which
member states could draw to maintain economic
activity and employment through periodic crises. This
view suggested an IMF that helped governments and
to act as the U.S. government had during the New
Deal in response to World War II. Americandelegate
Harry Dexter White foresaw an IMF that functioned
more likea bank, making sure that borrowing states
could repay their debts on time. Most of White's plan
was incorporated into the final acts adopted at
Bretton Woods.
Member countries
IMF member states
IMF member states not accepting the obligations of
Article VIII, Sections 2, 3, and 4

Not all member countries of the IMF are sovereign
states, and therefore not all "member countries" of
the IMF are members of the United Nations. Amidst
"member countries" of the IMF that are not member
states of the UN are non-sovereign areas with special
jurisdictions that are officiallyunder the sovereignty
of full UN member states, such as Aruba, Curaçao,
Hong Kong, and Macau, as well as Kosovo. The
corporate members appoint ex-officio voting
members, who are listed below. All members of the
IMF are also International Bank for Reconstruction
and Development (IBRD) members and vice versa.
Former members are Cuba (which left in
1964),Venezuela (which left in 2007),
Colombia(which left in 2011) and the Republic of
China (Taiwan), which was ejected from the UN in
1980 after losing the support of then U.S. President
Jimmy Carter and was replaced by the People's
Republic of China.[51] However, "Taiwan Province of
China" is still listed in the officialIMF indices.[52]
Apart from Cuba, Venezuela and Colombia,the other
UN states that do not belong to the IMF
are Andorra, Liechtenstein Monaco, Nauru and North
Korea.
The former Czechoslovakia was expelledin 1954 for
"failing to provide required data" and was readmitted
in 1990, after the Velvet Revolution. Poland withdrew
in 1950—allegedly pressured by the Soviet Union—
but returned in 1986.

Qualifications
Any country may apply to be a part of the IMF. Post-
IMF formation, in the early postwar period, rules for
IMF membership were left relativelyloose. Members
needed to make periodic membership payments
towards their quota, to refrain from currency
restrictions unless granted IMF permission, to abide
by the Code of Conduct in the IMF Articles of
Agreement, and to provide national economic
information. However, stricter rules were imposed on
governments that applied to the IMF for funding.
The countries that joined the IMF between 1945 and
1971 agreed to keep their exchange rates secured at
rates that could be adjusted only to correct a
"fundamental disequilibrium" in the balance of
payments, and only with the IMF's agreement.
Some members have a very difficult relationship with
the IMF and even when they are still members they
do not allowthemselves to be monitored. Argentina,
for example, refuses to participate in an Article IV
Consultation with the IMF.
Benefits
Member countries of the IMF have access to
information on the economicpolicies of all member
countries, the opportunity to influence other
members’ economic policies, technical assistance in

banking, fiscal affairs, and exchange matters, financial
support in times of payment difficulties, and
increased opportunities for trade and investment.
Leadership
Board of Governors
The Board of Governors consists of one governor and
one alternate governor for each member country.
Each member country appoints its two governors.
The Board normally meets once a year and is
responsible for electing or appointing executive
directors to the Executive Board. While the Board of
Governors is officiallyresponsible for approving
quota increases, Special Drawing Right allocations,
the admittance of new members, compulsory
withdrawal of members, and amendments to the
Articles of Agreement and By-Laws, in practice it has
delegated most of its powers to the IMF's Executive
Board.
The Board of Governors is advised by the
International Monetary and Financial Committee and
the Development Committee. The International
Monetary and Financial Committee has 24 members
and monitors developments in globalliquidity and
the transfer of resources to developing countries.
The Development Committee has 25 members and
advises on criticaldevelopment issues and on
financial resources required to promote economic
development in developing countries. They also
advise on trade and environmental issues.

Executive Board
24 Executive Directors make up Executive Board. The
Executive Directors represent all 188 members
countries in a geographicallybased roster. Countries
with large economies have their own Executive
Director, but most countries are grouped in
constituencies representing four or more countries.
Followingthe 2008 Amendment on Voice and
Participation which came into effect in March 2011,
eight countries each appoint an ExecutiveDirector:
the United States, Japan, Germany, France, the UK,
China, the Russian Federation, and Saudi Arabia.
The remaining 16 Directors represent constituencies
consisting of 4 to 22 countries. The Executive Director
representing the largest constituency of 22 countries
accounts for 1.55% of the vote. This Board usually
meets several times each week. The Board
membership and constituency is scheduled for
periodic review every eight years.
List of Executive Directors of the IMF
Managing Director
The IMF is led by a managing director, who is head of
the staff and serves as Chairmanof the Executive
Board. The managing director is assisted by a First
Deputy managing director and three other Deputy
Managing Directors.Historicallythe IMF's managing

director has been European and the president of the
World Bank has been from the United States.
However, this standard is increasingly being
questioned and competition for these two posts may
soon open up to include other qualified candidates
from any part of the world.
In 2011 the world's largest developing countries,
the BRIC nations, issued a statement declaring that
the tradition of appointing a European as managing
director undermined the legitimacyof the IMF and
called for the appointment to be merit-based.
On 28 June 2011, Christine Lagarde was named
managing director of the IMF, replacing Dominique
Strauss-Kahn.
Previous managing director Dominique Strauss-
Kahn was arrested in connection with charges of
sexually assaulting a New York hotel room attendant
and resigned on 18 May.On 28 June 2011 Christine
Lagarde was confirmed as managing director of the
IMF for a five-year term starting on 5 July 2011.

In 2012, Lagarde was paid a tax-exempt salary of
US$467,940, and this is automaticallyincreased every
year according to inflation. In addition, the director
receives an allowanceof US$83,760 and additional
expenses for entertainment
2. Functions
Upon the founding of the IMF, its three primary
functions were: to oversee the fixed exchange
rate arrangements between countries, thus helping
national governments manage their exchange
rates and allowingthese governments to prioritise
economic growth,and to provide short-term capital
to aid balance of payments. This assistance was meant
to prevent the spread of international economic
crises. The IMF was also intended to help mend the
pieces of the international economy after the Great
Depression and World War II.As well, to provide
capital investments for economic growth and projects
such as infrastructure.
The IMF's role was fundamentally altered by the
floating exchange rates post-1971. It shifted to
examining the economicpolicies of countries with
IMF loanagreements to determine if a shortage of
capital was due to economicfluctuations or economic
policy. The IMF also researched what types of
government policy would ensure economic recovery.
The new challenge is to promote and implement
policy that reduces the frequency of crises among the
emerging market countries, especiallythe middle-

income countries that are vulnerable to massive
capital outflows.Rather than maintaining a position
of oversight of only exchange rates, their function
became one of surveillanceof the overall
macroeconomicperformance of member countries.
Their role became a lot more active because the IMF
now manages economic policy rather than just
exchange rates.
In addition, the IMF negotiates conditions on lending
and loans under their policy of conditionality,which
was established in the 1950s. Low-income
countries can borrow on concessional terms, which
means there is a period of time with no interest rates,
through the Extended Credit Facility (ECF), the
Standby Credit Facility(SCF) and the Rapid Credit
Facility (RCF). Non concessional loans, which include
interest rates, are provided mainly through Stand-By
Arrangements (SBA), the FlexibleCredit Line (FCL),
the Precautionary and Liquidity Line (PLL), and the
Extended Fund Facility. The IMF provides emergency
assistance via the Rapid Financing Instrument (RFI)
to members facing urgent balance-of-payments needs
2.1. How the IMF Promotes Global Economic
Stability
The IMF advises member countries on economic and
financialpolicies that promote stability, reduce
vulnerability to crises, and encourage sustained growth
and high living standards. It also monitors global
economic trends and developments that affect the

health of the internationalmonetary and financial
system and promotes dialogue among member
countries on the regionaland global consequences of
their policies. In addition to these surveillance
activities, the IMF provides technical assistance to help
strengthen members’ institutional capacity and makes
resources available to them to facilitate adjustment in
the event of a balance of payments crisis.
Why is global economic stability important?
Promoting economic stability is partly a matter of
avoiding economicand financial crises, large swings
in economic activity, high inflation, and excessive
volatility in foreign exchange and financial markets.
Instability can increase uncertainty, discourage
investment, impede economic growth, and hurt living
standards. A dynamic market economy necessarily
involves some degree of volatility,as wellas gradual
structural change. The challenge for policymakers is
to minimize instability in their own country and
abroad without reducing the economy’s ability to
improve living standards through rising productivity,
employment, and sustainable growth.
Economic and financial stability is both a national and
a multilateralconcern. As recent financial crises have
shown, economies have become more interconnected.
Vulnerabilities can spread more easily across sectors
and national borders.
How does the IMF help?

The IMF helps countries implement sound and
appropriate policies through its key functions of
surveillance, technical assistance, and lending.
A. Consulting with member states
The IMF monitors members’ economies through
regular—usually annual—consultations with each
member country. During these consultations, IMF
staff discusses economic and financial developments
and policies with national policymakers, and often
with representatives of the private sector, labor and
trade unions, academia, and civil society. Staff
assesses risks and vulnerabilities, and considers the
impact of fiscal, monetary, financial, and exchange
rate policies on the member’s domestic and balance
of payments stability and assesses implications for
global stability. The IMF offers advice on policies to
promote each country’s macroeconomic,financial,
and balance of payments stability, drawing on
experience from across its membership.
The framework for these consultations is set forth in
the IMF Articles of Agreement and, more recently, in
the Integrated Surveillance Decision. The
consultations are also informed by membership-wide
initiatives, including
 work to systematically assess countries'
vulnerabilities to crises;
 the Financial Sector Assessment Program,
which assesses countries’ financial sectors and

helps formulate policy responses to risks and
vulnerabilities; and
 The Standards and Codes Initiative in which
the IMF, along with the World Bank and other
bodies, assesses countries’ observance of
internationally recognized standards and codes
of good practice in a dozen policy areas.
B. Overseeing the bigger picture
The IMF also closelymonitors globaland regional
trends.
The IMF’s periodic reports, the World Economic
Outlook, its regional overviews, the Fiscal Monitor,
and the Global Financial Stability Report, analyze
global and regionalmacroeconomicand financial
developments. The IMF’s broad membership makes it
uniquely well suited to facilitatemultilateral
discussions on issues of common concern to groups of
member countries, and to advance a shared
understanding of policies needed to promote
stability. In this context, the Fund has been working
with the Group of 20 advanced and emerging
economies to assess the consistency of those
countries’ policy frameworks with balanced and
sustained growth for the globaleconomy.
The Fund has reviewed its surveillancemandate in
light of the global crisis. It has introduced a number of
reforms to improve financial sector surveillance
within member countries and across borders, to
enhance understanding of interlinkages between
macroeconomicand financial developments (e.g.

through a Spillover Report), and promote debate on
these matters.
Data: In response to the financial crisis, the IMF is
working with members, the Financial Stability Board,
and other organizations to fill data gaps important for
global stability.
Technical assistance: The IMF helps countries
strengthen their capacity to design and implement
sound economic policies. It provides advice and
training in areas of core expertise—including fiscal,
monetary, and exchange rate policies; the regulation
and supervision of financial systems; statistics; and
legal frameworks.
Lending: Even the best economic policies cannot
completely eradicateinstability or avert crises. If a
member country faces a balance of payment crisis,
the IMF can provide financial assistance to support
policy programs that willcorrect underlying
macroeconomicproblems, limit disruption to both
the domestic and the global economy, and help
restore confidence, stability, and growth. The IMF
also offers precautionary credit lines for countries
with sound economic fundamentals for crisis
prevention.
3. IMF Surveillance
The IMF oversees the internationalmonetary system
and monitors the economic and financialpolicies of its
189 member countries. This activity is known as

surveillance. As part of this process, which takes place
both at the global level and in individualcountries, the
IMF highlightspossible risks to stability and advises on
needed policy adjustments. In this way, it helps the
internationalmonetary system serve its essential
purpose of sustaining economic growth by facilitating
the exchange of goods, services, and capital among
countries, and ensuring the conditions necessary for
financialand economic stability.
Why is IMF surveillance important?
Surveillanceis essential to identify risks that policies
may need to address to sustain growth. Moreover,in
today's globalized economy, where the policies of one
country typically affect many other countries,
international cooperationis essential. The IMF, with
its near-universal membership of 189 countries,
facilitates this cooperation. There are two main
aspects to the IMF’s surveillance work: bilateral
surveillance, or the appraisal of and advice on the
policies of each member country; and multilateral
surveillance, or oversight of the world economy.
Consulting with member states
IMF economists continually monitor members’
economies. They visit member countries—usually
annually—to exchange views with the government
and the central bank and consider whether there are
risks to domestic and global stability that argue for
adjustments in economic or financial policies.

Discussions mainly focus on exchange rate, monetary,
fiscal, and financial policies, as well as macro-critical
structural reforms. During their missions, IMF staff
also typically meets with other stakeholders, such as
parliamentarians and representatives of business,
labor unions, and civil society, to help evaluate the
country’s economic policies and outlook.
Upon return to headquarters, the staff presents a
report to the IMF’s Executive Board for discussion.
The Board’s views are subsequently transmitted to
the country’s authorities, concluding a process known
as an Article IV consultation. In recent years,
surveillance has become more transparent. Almost all
member countries now agree to publish a Press
Release summarizing the views of the Board, as well
as the Staff Report and accompanying analysis. Many
countries also publish a statement by staff at the end
of an IMF mission.
Overseeing the bigger world picture
The IMF also monitors global and regional economic
trends, and analyzes spillovers from members’
policies onto the globaleconomy. The key
instruments of multilateralsurveillance are the
regular publications World Economic Outlook
(WEO), Global FinancialStability Report (GFSR),
and Fiscal Monitor . The WEO provides detailed
analysis of the world economy and its growth
prospects, addressing issues such as the
macroeconomiceffects of global financial turmoil. It
also assesses key potential global spillovers with a

particular focus on the cross-border impact of
economic and financial policies in systemic
economies. The GFSR assesses global capital market
developments and financial imbalances and
vulnerabilities that pose risks to financial stability.
The Fiscal Monitor updates medium-term fiscal
projections and assesses developments in public
finances.
The IMF also publishes Regional Economic
Outlook reports, providing more detailed analysis for
major regions of the world. It cooperates closely with
other groups such as the Group of Twenty (G20)
industrialized and emerging market economies, since
2009 supporting the G20’s efforts to sustain
international economic cooperationthrough
its mutual assessment process. The IMF provides
analysis of whether policies pursued by member
countries are consistent with sustained and balanced
global growth. Since 2012, it has prepared Pilot
External Sector Reports, which analyze the external
positions of systemically large economies in a globally
consistent manner. Twice a year, the IMF also
prepares a Global PolicyAgenda that pulls together
the key findings and policy advice from multilateral
reports and defines a future agenda for the Fund and
its members.
Keeping surveillance relevant
Surveillancein its present form was established by
Article IV of the IMF’s Articles of Agreement, as
revised in the late 1970s following the collapse of the

Bretton Woods system of fixed exchange rates. Under
Article IV, member countries undertake to collaborate
with the IMF and with one another to promote
stability. For its part, the IMF is charged with
(i) overseeing the international monetary system to
ensure its effective operation, and (ii) monitoring
each member's compliance with its policy obligations.
The IMF regularly reviews its surveillanceactivities.
The 2011 Triennial SurveillanceReview (TSR)
highlighted progress in addressing weaknesses
in pre-crisis surveillance but also found significant
gaps. In particular, IMF surveillancewas seen as too
fragmented, with risk assessments lackingdepth and
insufficient focus on interconnections and
transmission of shocks. The 2011 TSR recommended
improvements in six key areas: interconnectedness,
risk assessments, external stability, financial stability,
traction, and the legalframework.
As part of broader efforts to continue improving
surveillance, the Executive Board adopted in July
2012 a new Decision on Bilateraland Multilateral
Surveillance(the Integrated SurveillanceDecision) to
strengthen the underlying legal frameworkfor
surveillance, and discussed the first Pilot External
Sector Report. In September 2012, the Executive
Board endorsed a new Financial Surveillance
Strategy that proposes concrete and prioritized steps
to further strengthen financial surveillance. These
actions help ensure that the IMF is in a better position
to address spillovers from members’ policies on
global stability; monitor members’ external sectors in
a more comprehensive manner; more effectively
engage members in a constructive dialogue; better

safeguard the effective operation of the international
monetary system; and support global economic and
financial stability.
The 2014 TSR, completed in September 2014, builds
on these reforms by identifying five operational
priorities for strengthening surveillance: integrate
and deepen risk and spillover analysis; mainstream
macro-financialsurveillance; pay more attention to
structural policies, including labor market issues;
deliver more cohesive and expert policy advice; and a
client-focused approach to surveillance,supported by
clear and candid communication. The Managing
Director’s ActionPlan for Strengthening
Surveillance outlines concrete measures to take
forward work in these priority areas, including an
updated Guidance Note for Surveillance under Article
IV Consultations. A review of the FinancialSector
Assessment Program was also completed in
September 2014. Steps are being taken to strengthen
surveillance in each of these priority areas in
consultation with the IMF Executive Board. The
regular surveillance review has been moved to a five-
year cycle with progress assessed in a mid-point
review in 2017.
Since the demise of the Bretton Woods system of
fixed exchange rates in the early 1970s, surveillance
has evolved largely by way of changes in procedures
rather than through the adoption of new obligations.
The responsibilities changed from those of guardian
to those of overseer of members’ policies.
The Fund typically analyzes the appropriateness of
each member country’s economic and financial

policies for achieving orderly economic growth, and
assesses the consequences of these policies for other
countries and for the global economy.
IMF Data Dissemination Systems participants:
IMF member using SDDS
IMF member using GDDS
IMF member, not using any of the DDSystems
Non-IMF entity using SDDS
Non-IMF entity using GDDS
No interactionwith the IMF
In 1995 the International Monetary Fund began work
on data dissemination standards with the view of
guiding IMF member countries to disseminate their
economic and financial data to the public. The
International Monetary and Financial Committee
(IMFC) endorsed the guidelines for the dissemination
standards and they were split into two tiers: The
General Data Dissemination System (GDDS) and
the Special Data Dissemination Standard (SDDS).
The executive board approved the SDDS and GDDS in
1996 and 1997 respectively, and subsequent
amendments were published in a revised Guide to the

General Data Dissemination System. The system is
aimed primarily at statisticians and aims to improve
many aspects of statistical systems in a country. It is
also part of the World Bank Millennium Development
Goals and Poverty Reduction Strategic Papers.
The primary objective of the GDDS is to encourage
member countries to build a framework to improve
data quality and statistical capacity building in order
to evaluate statistical needs, set priorities in
improving the timeliness, transparency, reliability
and accessibilityof financial and economic data. Some
countries initially used the GDDS, but later upgraded
to SDDS.
Some entities that are not themselves IMF members
also contribute statistical data to the systems:
 PalestinianAuthority – GDDS
 Hong Kong – SDDS
 Macau – GDDS
 EU institutions:
 the European Central Bank for
the Eurozone – SDDS
 Eurostat for the whole EU – SDDS, thus
providing data from Cyprus (not using any
DDSystem on its own) and Malta (using only
GDDS on its own)

4. How the IMF Makes Decisions
The IMF has evolved along with the global economy
throughout its 70-year history, allowing the
organizationto retain a central role within the
internationalfinancialarchitecture. Unlike the General
Assembly of the United Nations, where each country
has one vote, decision-makingat the IMF was designed
to reflect the relative positions of its member countries
in the global economy. The IMF continues to undertake
reforms to ensure that its governance structure
adequately reflects fundamental changes taking place
in the world economy. Current reforms are intended to
reflect the larger role that emergingmarket and
developing economies now play in the global economy.
The diagram below provides a stylized view of the
IMF's current governance structure.

Board of Governors
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, among other things, 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.
The Board of Governors also elects Executive
Directors and is the ultimate arbiter on issues related
to the interpretationof the IMF’s Articles of
Agreement. Voting by the Board of Governors may
take place either by holding a meeting or remotely
(through the use of courier services, electronicmail,
facsimile, or the IMF’s secure online voting system).
Decisions are made by a majority of votes cast, unless
otherwise specified in the Articles of Agreement.
The Boards of Governors of the IMF and the World
Bank Group normally meet once a year, during
the IMF–World Bank Annual Meetings, to discuss the
work of their respective institutions. The Annual
Meetings, which take place in September or October,
have customarily been held in Washington for two
consecutive years and in an alternate member
country in the third year.
Ministerial Committees
The 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
189 governors, and represents all member countries.
Its structure mirrors that of the Executive Board and
its 24 constituencies. The IMFC meets twice a year,
during the IMF–World Bank Spring and Annual
Meetings, to discuss the management of the

international monetary and financial system,
proposals by the Executive Board to amend the
Articles of Agreement, or any other matters of
common concern affecting the globaleconomy. The
Committee issues a communiqué summarizing its
views followingeach meeting, providing guidance for
the IMF’s work program. The IMFC operates by
consensus and does not conduct formal votes.
The Development Committee is a joint committee,
tasked with advising the Boards of Governors of the
IMF and the World Bank on issues related to
economic development in emerging market and
developing countries. The committee has
25 members (usually ministers of finance or
development). It represents the full membership of
the IMF and the World Bank and mainly serves as a
forum for building intergovernmental consensus on
criticaldevelopment issues.
The Executive Board
The IMF’s 24-member Executive Board conducts the
daily business of the IMF and exercises the powers
delegated to it by the Board of Governors, as wellas
those powers conferred on it by the Articles of
Agreement. Followingthe entry into force of the
Board Reform Amendment on January 26, 2016, and
starting with the next regular electionto be
concluded by October 2016, all 24 Executive
Directors will be elected. Previously, the member
countries holding the five largest quotas were each

entitled to appoint an Executive Director, while 19
were elected by the remaining member countries.
The Board discusses all aspects of the Fund’s work,
from the IMF staff's annual health checks of member
countries' economies to policy issues relevant to the
global economy. The Board normally makes decisions
based on consensus, but sometimes formal votes are
taken. The votes of each member equal the sum of its
basic votes (equally distributed among all members)
and quota-based votes. Therefore, a
member’s quota determines its voting power.
Followingmost formal meetings, the Board
summarizes its views in a document known as a
Summing Up. Informal meetings may also be held to
discuss complex policy issues at a preliminary stage.
IMF Management
The IMF’s Managing Director is both chairmanof the
IMF’s Executive Board and head of IMF staff. The
Managing Directoris appointed by the Executive
Board for a renewable term of five years and is
assisted by a First Deputy Managing Director and
three Deputy Managing Directors. The IMF’s
Governors and ExecutiveDirectors
may nominate nationals of any of the Fund’s member
countries for the position of Managing Director.
Although the Executive Board may select a Managing
Director by a majority of votes cast, the Board has in
the past made such appointments by consensus. For
the 2011 selection, the Executive Board adopted a
procedure that allowed the selectionof the next

Managing Directorto take place in an open, merit-
based, and transparent manner. The Executive Board
adopted the same procedure to govern the 2016
selection.
Governance reform
The Fund’s governance structure must keep pace
with the rapidly evolving world economy to ensure it
remains an effective and representative institution of
all of its 189 member countries. To secure this
objective, in December 2010 the Board of Governors
of the IMF approved a package of far-reaching
reforms of the Fund's quotas and governance. These
reforms, which become effective on January 26, 2016
represent a major realignment in the ranking of quota
shares that better reflects globaleconomic realities,
and a strengthening in the Fund’s legitimacy and
effectiveness. The elements of the reform include
 A quota increase and shift in shares.
 The 14th General Review of Quotas will result in
an unprecedented doubling of quotas and a
major realignment of quota and voting shares to
emerging and developing countries (with a more
than 6 percent quota shift to dynamic emerging
market and developing countries and under-
represented countries).

 Protecting the voting power of the poorest.
 The quota shares and voting power of the
poorest members will be preserved.

 Quota formula and next review.
 A comprehensive review of the current quota
formula and bringing forward the completionof
the 15th General Review of Quotas to January
2014.

 A new compositionand more representative
Board.
 The 2010 reforms also include an amendment to
the Articles of Agreement that would facilitatea
move to a more representative, all-elected
Executive Board. Following the next regular
electionof Executive Directors, as of November
1, 2016, there will be two fewer Board members
from advanced European countries, and all
Executive Directors will be elected rather
The implementation of the governance reforms
makes the Fund an even more effective and
representative institution.
Good governance
The Fund activelypromotes good governance within
its own organization. It has adopted a number of
integrity institutions, including a Code of Conduct for
Staff—bolstered by financial certificationand
disclosure requirements, and sanctions—a
similar Code of Conduct for Members of the Executive

Board, and an Integrity Hotline offering protection to
“whistleblowers.”The IMF Ethics Office advises the
institution and its staff on ethics issues, inquiries into
alleged violations of rules and regulations, and
oversees the ethics and integrity training program for
all staff members. Accountability arrangements have
also been put in place to ensure effective
implementationof the strategic priorities of the
institution.
Work on the 15th General Review had been delayed
because of the delay in the effectiveness of the 14th
General Review.
5. IMF Lending
A core responsibility of the IMF is to provide loans to
member countries experiencingactual or potential
balance of payments problems. This financial
assistance helps countries in their efforts to rebuild
their internationalreserves, stabilize their currencies,
continue paying for imports, and restore conditions for
strong economic growth, while undertaking policies to
correct underlying problems. Unlike development
banks, the IMF does not lend for specific projects.
When can a country borrow from the IMF?
A member country may request IMF financial
assistance if it has an actual or potential balance of
payments need—that is, if it lacks or potentially lacks
sufficient financing on affordable terms to meet its

net international payments (e.g., imports, external
debt redemptions) while maintaining adequate
reserve buffers going forward. IMF resources provide
a cushion that eases the adjustment policies and
reforms that a country must make to correctits
balance of payments problem and help restore
conditions for strong economic growth.
The changing nature of IMF lending
The volume of loans provided by the IMF has
fluctuated significantly over time. The oil shock of the
1970s and the debt crisis of the 1980s were both
followed by sharp increases in IMF lending. In the
1990s, the transition process in Central and Eastern
Europe and the crises in emerging market economies
led to further surges of demand for IMF resources.
Deep crises in Latin America and Turkey kept
demand for IMF resources high in the early 2000s.
IMF lending rose againsince late 2008 in the wake of
the global financial crisis.
The process of IMF lending
Upon request by a member country, IMF resources
are usually made availableunder a lending
“arrangement,” which may, depending on the lending
instrument used, specify the economicpolicies and
measures a country has agreed to implement to
resolve its balance of payments problem. The
economic policy program underlying an arrangement
is formulated by the country in consultation with the

IMF and is in most cases presented to the
Fund’s Executive Board in a “Letter of Intent” and is
further detailed in the annexed “Memorandum of
Understanding”. Once an arrangement is approved by
the Board, IMF resources are usually released in
phased installments as the program is implemented.
Some arrangements provide very strongly
performing countries with one-time up-front access
to IMF resources and thus are not subject to explicit
policy understandings.
IMF lending instruments
The IMF’s various loaninstruments are tailored to
different types of balance of payments need (actual,
prospective, or potential; short-term or medium-
term) as wellas the specific circumstances of its
diverse membership. Low-income countries may
borrow on concessional terms through facilities
availableunder the Poverty Reduction and Growth
Trust (PRGT; see IMF Support for Low-Income
Countries). Concessional loans carry zero interest
rates until the end of 2016.
Non-concessional lending
The IMF’s instruments for non-concessional loans are
Stand-By Arrangements (SBA); the Flexible Credit
Line (FCL); the Precautionaryand Liquidity Line
(PLL); for medium-term needs, the Extended Fund
Facility (EFF); and for emergency assistance to
members facing urgent balance of payments needs,
the Rapid Financing Instrument (RFI). All non-

concessional facilities are subject to the IMF’s market-
related interest rate, known as the “rate of charge,”
and large loans (above certainlimits) carry a
surcharge.
The rate of charge is based on the SDR interest rate,
which is revised weeklyto take account of changes in
short-term interest rates in major international
money markets. The maximum amount that a country
can borrow from the IMF, known as its access limit,
varies depending on the type of loan, but is typically a
multiple of the country’s IMF quota. This limit may be
exceeded in exceptional circumstances. The Stand-By
Arrangement, the FlexibleCredit Line and the
Extended Fund Facility have no pre-set cap on access.
Stand-By Arrangements (SBA). Historically, the bulk
of non-concessional IMF assistance has been provided
through SBAs. The SBA is designed to help countries
address short-term balance of payments problems.
Program targets are designed to address these
problems and disbursements are made conditional on
achieving these targets (‘conditionality’). The length
of a SBA is typically 12–24 months, and repayment is
due within 3¼-5 years of disbursement. SBAs may be
provided on a precautionary basis—where countries
choose not to draw upon approved amounts but
retain the option to do so if conditions deteriorate.
The SBA provides for flexibilitywith respect to
phasing, with front-loaded access where appropriate.
FlexibleCredit Line (FCL). The FCL is for countries
with very strong fundamentals, policies,and track
records of policy implementation. FCL arrangements

are approved, at the member country’s request, for
countries meeting pre-set qualificationcriteria. The
length of the FCL is either one year or two years with
an interim review of continued qualificationafter one
year. Access is determined on a case-by-case basis, is
not subject to access limits, and is availablein a single
up-front disbursement rather than phased.
Disbursements under the FCL are not conditional on
implementationof specific policy understandings as
is the case under the SBA because FCL-qualifying
countries have a demonstrated track record of
implementing appropriate macroeconomicpolicies.
There is flexibility to either draw on the credit line at
the time it is approved or treat it as precautionary.
The repayment term of the FCL is the same as that
under the SBA.
Precautionary and Liquidity Line (PLL). The PLL is for
countries with sound fundamentals and policies, and
a track record of implementing such policies. PLL-
qualifying countries may face moderate
vulnerabilities and may not meet the FCL
qualificationstandards, but they do not require the
substantial policy adjustments normally associated
with SBAs. The PLL combines qualification(similar to
the FCL but with a lowerbar) with focused conditions
that aim at addressing the identified remaining
vulnerabilities. Duration of PLL arrangements range
from either six months or one- to two years. One-to-
two year PLL arrangements are subject to semi-
annual reviews. Access under six-month PLL
arrangements is limited to [125] percent of quota in
normal times, but this limit can be raised to [250]

percent of quota in exceptionalcircumstances where
the balance of payments need is due to exogenous
shocks, including heightened regional or global stress.
One- to two-year PLL arrangements are subject to an
annual access limit of [250] percent of quota, and all
PLL arrangements are subject to a cumulative cap of
[500] percent of quota. There is flexibilityto either
draw on the credit line or treat it as precautionary.
The repayment term of the PLL is the same as for the
SBA.
Extended Fund Facility (EFF).
This facility helps countries address medium- and
longer-term balance of payments problems reflecting
extensive distortions that require fundamental
economic reforms. Its use has increased substantially
in the recent crisis period, reflecting the structural
nature of some members’ balance of payments
problems. Arrangements under the EFF are typically
longer than SBAs—normally not exceeding three
years at approval. However, a maximum duration of
up to four years is also allowed, predicated on the
existence of a balance of payments need beyond the
three-year period, the prolonged nature of the
adjustment required to restore macroeconomic
stability, and the presence of adequate assurances
about the member’s ability and willingness to
implement deep and sustained structural reforms.
Repayment is due within 4½–10 years from the date
of disbursement.

Rapid Financing Instrument (RFI).
The RFI was introduced to replace and broaden the
scope of the earlieremergency assistance policies.
The RFI provides rapid financial assistance with
limited conditionality to all members facing an urgent
balance of payments need. Access under the RFI is
subject to an annual limit of 37.5 percent of quota and
a cumulative limit of 75 percent of quota.
Concessional lending
The Fund’s concessional facilities for Low Income
Countries (LICs) under the PRGT were reformed in
2010 with refinements in 2013 as part of broader
efforts to make the Fund’s financial support more
flexibleand better tailored to the diverse needs of
LICs. The norms and limits for concessional facilities
were expanded in 2015 to maintain their levels
relative to increasing production, trade, and capital
flows. Financing terms have been made more
concessional, and the interest rate is reviewed every
two years (currently zero percent until end-2016). All
facilities support country-owned programs aimed at
achieving a sustainable macroeconomicposition
consistent with strong and durable poverty reduction
and growth. Better-positioned PRGT-eligible
countries may receive “blended” Fund financial
support that mixes nonconcessional and concessional
resources.
The Extended Credit Facility (ECF) is the Fund’s main
tool for medium-term support to LICs facing

protracted balance of payments problems. Financing
under the ECF currently carries a zero interest rate, a
grace period of 5½ years, and a final maturity of 10
years.
The Standby Credit Facility (SCF) provides financial
assistance to LICs with short-term or potential
balance of payments needs. The SCF can be used in a
wide range of circumstances, including on a
precautionary basis. Financing under the SCF
currently carries a zero interest rate, with a grace
period of 4 years, and a final maturity of 8 years.
The Rapid Credit Facility (RCF)
Provides rapid financial assistance with limited
conditionality to LICs facing an urgent balance of
payments need. The RCF streamlines the Fund’s
emergency assistance for LICs, and can be used
flexibly in a wide range of circumstances. Financing
under the RCF currently carries a zero interest rate,
has a grace period of 5½ years, and a final maturity of
10 years.
5.1. Conditionality of loans
IMF conditionality is a set of policies or conditions
that the IMF requires in exchange for financial
resources.The IMF does require collateral from
countries for loans but also requires the government
seeking assistance to correct its macroeconomic

imbalances in the form of policy reform. If the
conditions are not met, the funds are withheld.
Conditionality is perhaps the most controversial
aspect of IMF policies.The concept of conditionality
was introduced in a 1952 Executive Board decision
and later incorporated into the Articles of Agreement.
Conditionality is associated with economictheory as
well as an enforcement mechanism for repayment.
Stemming primarily from the work of Jacques Polak,
the theoretical underpinning of conditionality was the
"monetary approach to the balance of payments".
5.2. Structural adjustment
Further information: Structural adjustment
Some of the conditions for structural adjustment can
include:
 Cutting expenditures, also known as austerity.
 Focusing economic output on direct export
and resource extraction,
 Devaluation of currencies,
 Trade liberalization,or lifting import and export
restrictions,
 Increasing the stability of investment (by
supplementing foreign direct investment with
the opening of domestic stock markets),
 Balancing budgets and not overspending,
 Removing price controls and state subsidies,
 Privatization, or divestiture of all or part of state-
owned enterprises,

 Enhancing the rights of foreigninvestors vis-a-
vis national laws,
 Improving governance and fighting corruption.
These conditions are known as the Washington
Consensus.
5.3. Benefits
These loanconditions ensure that the borrowing
country will be able to repay the IMF and that the
country will not attempt to solve their balance-of-
payment problems in a way that would negatively
impact the international economy.[21][22] The incentive
problem of moral hazard—when economic
agents maximize their own utility to the detriment of
others because they do not bear the full consequences
of their actions—is mitigated through conditions
rather than providing collateral;countries in need of
IMF loans do not generally possess internationally
valuable collateralanyway.
Conditionality also reassures the IMF that the funds
lent to them willbe used for the purposes defined by
the Articles of Agreement and provides safeguards
that country will be able to rectify its macroeconomic
and structural imbalances.In the judgment of the IMF,
the adoption by the member of certaincorrective
measures or policies will allowit to repay the IMF,
thereby ensuring that the resources willbe available
to support other members
As of 2004, borrowing countries have had a very good
track record for repaying credit extended under the
IMF's regular lending facilities with full interest over

the duration of the loan. This indicates that IMF
lending does not impose a burden on creditor
countries, as lending countries receivemarket-rate
interest on most of their quota subscription, plus any
of their own-currency subscriptions that are loaned
out by the IMF, plus all of the reserve assets that they
provide the IMF.
6. Where the IMF Gets Its Money
Most resources for IMF loans are providedby member
countries, primarily through their payment of quotas.
Borrowing provides a temporary supplement to quota
resources and has played a critical role in enablingthe
Fund to meet members’ needs for financialsupport
duringthe global economic crisis. Concessional lending
and debt relief for low-income countries are financed
through separate contribution-basedtrust funds.
6.1. The quota system
Each member of the IMF is assigned a quota, based
broadly on its relativesize in the world economy,
which determines its maximum contribution to the
IMF’s financial resources. Upon joining the IMF, a
country normally pays up to one-quarter of its quota
in the form of widely accepted foreign currencies
(such as the U.S. dollar, euro, yen, or pound sterling)
or Special Drawing Rights (SDRs). The remaining

three-quarters are paid in the country’s own
currency.
Quotas are reviewed at least every five years. In 2010,
the 14th General Review of Quotas was completed,
and the IMF’s members agreed that the Fund’s quota
resources should be doubled to SDR 477 billion. The
quota increases under the 14th Review came into
effect in January 2016.
The Fourteenth General Review of Quotas was
completed two years ahead of the original schedule in
December 2010, with a decision to double the IMF’s
quota resources to SDR 477 billion.
6.1.1. IMF Quotas
Quota subscriptions are a central component of the
IMF’s financialresources. Each member country of the
IMF is assigneda quota, based broadly on its relative
position in the world economy. A member country’s
quota determines its maximum financialcommitment
to the IMF, its voting power, and has a bearingon its
access to IMF financing.
When a country joins the IMF, it is assigned an initial
quota in the same range as the quotas of existing
members of broadly comparable economic size and
characteristics.The IMF uses a quota formula to help
assess a member’s relative position.
The current quota formula is a weighted average of
GDP (weight of 50 percent), openness (30 percent),
economic variability(15 percent), and international
reserves (5 percent). For this purpose, GDP is

measured through a blend of GDP—based on market
exchange rates (weight of 60 percent)—and on PPP
exchange rates (40 percent). The formula also
includes a “compression factor” that reduces the
dispersion in calculatedquota shares across
members.
Quotas are denominated in SpecialDrawing Rights
(SDRs), SpecialDrawing Rights (SDRs), the IMF’s unit
of account. The largest member of the IMF is the
United States, with a current quota (as of January 25,
2016) of SDR 42.1 billion(about $58 billion), and the
smallest member is Tuvalu, with a current quota of
SDR 1.8 million(about $2.5 million).
The conditions for implementing the quota increases
agreed under the 14th General Quota Review were
met on January 26, 2016. As a result, the quotas of
each of the IMF’s 189 members willincrease to a
combined SDR 477 billion(about US$659 billion)
from about SDR 238.5 billion(about US$329 billion).
Quotas play several key roles in the IMF
A member's quota determines that country’s financial
and organizationalrelationship with the IMF,
including.
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 Fund: up to
25 percent must be paid in SDRs or widely accepted
currencies (such as the U.S. dollar, the euro, the yen,
or the pound sterling), while the rest is paid in the

member's own currency.
Voting power.
The quota largelydetermines a member's voting
power in IMF decisions. Each IMF member’s votes are
comprised of basic votes plus one additional vote for
each SDR 100,000 of quota. The 2008 reform fixed
the number of basic votes at 5.502 percent of total
votes. The current number of basic votes represents
close to a tripling of the number prior to the
implementationof the 2008 reforms.
Access to financing.
The amount of financing a member can obtain from
the IMF (its access limit) is based on its quota. For
example, under Stand-By and Extended
Arrangements, a member can borrow up to 200
percent of its quota annually and 600 percent
cumulatively. However, access may be higher in
exceptionalcircumstances.
How quota reviews work
The IMF's Board of Governors conducts general quota
reviews at regular intervals (usually every five years).
Any changes in quotas must be approved by an
85 percent majority of the total voting power, and a
member’s quota cannot be changed without its
consent. There are two main issues addressed in a
general quota review: the size of an overallincrease
and the distribution of the increase among the
members.

First, a general quota review allowsthe IMF to assess
the adequacy of quotas both in terms of members’
balance of payments financing needs and in terms of
its own ability to help meet those needs. Second, a
general review allows for increases in members’
quotas to reflect changes in their relative positions in
the world economy. Ad hoc increases outside general
reviews do not occur often, but the increases in
quotas for 54 member countries approved under the
2008 Reform are a recent example.
6.2. Special Drawing Right (SDR)
The SDR is an internationalreserve asset, created by
the IMF in 1969 to supplement its member countries’
official reserves. As of March 2016, 204.1billion SDRs
(equivalent to about $285 billion) had been created
and allocated to members. SDRs can be exchanged for
freely usable currencies. The value of the SDR is
currently based on a basket of four major currencies:
the U.S. dollar, euro, the Japanese yen, and pound
sterling. The basket will be expandedto include the
Chinese renminbi (RMB) as the fifth currency, effective
October 1, 2016.
The role of the SDR
The SDR was created by the IMF in 1969 as a
supplementary international reserve asset, in the
context of the Bretton Woods fixed exchange rate
system. A country participating in this system needed

official reserves—government or central bank
holdings of gold and widely accepted foreign
currencies—that could be used to purchase its
domestic currency in foreign exchange markets, as
required to maintain its exchange rate. But the
international supply of two key reserve assets—
gold and the U.S. dollar—proved inadequate for
supporting the expansion of world trade and financial
flows that was taking place. Therefore, the
international community decided to create a new
international reserve asset under the auspices of the
IMF.
Only a few years after the creation of the SDR, the
Bretton Woods system collapsed and the major
currencies shifted to floating exchange rate regimes.
Subsequently, the growth in international capital
markets facilitatedborrowing by creditworthy
governments and many countries accumulated
significant amounts of international reserves. These
developments lessened the reliance on the SDR as a
global reserve asset. However, more recently, the
2009 SDR allocations totaling SDR 182.6 billion
played a criticalrole in providing liquidity to the
global economic system and supplementing member
countries’ official reserves amid the global financial
crisis.
The SDR is neither a currency, nor a claim on the IMF.
Rather, it is a potential claim on the freely usable
currencies of IMF members. Holders of SDRs can
obtain these currencies in exchange for their SDRs in
two ways: first, through the arrangement of voluntary
exchanges between members; and second, by the IMF
designating members with strong external positions

to purchase SDRs from members with weak external
positions. In addition to its role as a supplementary
reserve asset, the SDR serves as the unit of account of
the IMF and some other international organizations.
Basket of currencies determines the value of
the SDR
The value of the SDR was initiallydefined as
equivalent to 0.888671 grams of fine gold—which, at
the time, was also equivalent to one U.S. dollar. After
the collapse of the Bretton Woods system in 1973, the
SDR was redefined as a basket of currencies.
Currently, the SDR basket consists of the U.S. dollar,
euro, Japanese yen, and pound sterling. Effective
October 1, 2016, the basket will be expanded to
include the Chinese renminbi.
The value of the SDR in terms of the U.S. dollar is
determined daily and posted on the IMF’s website. It
is calculated as the sum of specific amounts of each
basket currency valued in U.S. dollars, on the basis of
exchange rates quoted at noon each day in the
London market.
The basket composition is reviewed every five years
by the Executive Board, or earlier if the IMF finds
changed circumstances warrant an earlierreview, to
ensure that it reflects the relative importance of
currencies in the world’s trading and financial
systems. In the most recent review (concluded in
November 2015), the Executive Board decided that,
effective October 1, 2016, the Chinese renminbi is
determined to be freely usable and willbe included as

a fifth currency, along with the U.S. dollar, euro,
Japanese yen, and pound sterling, in the SDR basket.
A new weighting formula was also adopted in the
2015 review. It assigns equal shares to the currency
issuer’s exports and a composite financial indicator.
The financial indicator comprises, in equal shares,
official reserves denominated in the member’s (or
monetary union’s) currency that are held by other
monetary authorities that are not issuers of the
relevant currency, foreign exchange turnover in the
currency, and the sum of outstanding international
bank liabilitiesand international debt securities
denominated in the currency.
The respective weights of the U.S. dollar, euro,
Chinese renminbi, Japanese yen, and pound sterling
are 41.73 percent, 30.93 percent, 10.92 percent, 8.33
percent, and 8.09 percent. These weights will be used
to determine the amounts of each of the five
currencies to be included in the new SDR valuation
basket that will take effect on October 1, 2016.
The next review is currently scheduled to take place
by September 30, 2021.
The SDR interest rate
The SDR interest rate provides the basis for
calculatingthe interest charged to borrowing
members, and the interest paid to members for the
use of their resources for regular (non-
concessional) IMF loans. It is also the interest paid to
members on their SDR holdings and charged on their
SDR allocation.The SDR interest rate is determined

weekly and is based on a weighted average of
representative interest rates on short-term debt
instruments in the money markets of the SDR basket
currencies.
SDR allocations to IMF members
Under its Articles of Agreement (Article XV, Section 1,
and Article XVIII), the IMF may allocateSDRs to
member countries in proportion to their IMF quotas.
Such an allocationprovides each member with a
costless, unconditional international reserve asset.
The SDR mechanism is self-financing and levies
charges on allocations, which are then used to pay
interest on SDR holdings. If a member does not use
any of its allocatedSDR holdings, the charges are
equal to the interest received. However, if a member's
SDR holdings rise above its allocation,it effectively
earns interest on the excess. Conversely, if it holds
fewer SDRs than allocated,it pays interest on the
shortfall. The Articles of Agreement also allowfor
cancellationsof SDRs, but this provision has never
been used.
The IMF’s Articles of Agreement provide for the
possibility to prescribe as other holders of SDRs—
that is, other than IMF members—certaintypes of
official organizations, such as the BIS, ECB, and
regional development banks. A prescribed holder
may acquire and use SDRs in transactions and
operations with other prescribed holders and the
IMF’s members. The IMF cannot allocateSDRs to itself
or to prescribed holders.

General allocations of SDRs
Have to be based on a long-term global need to
supplement existing reserve assets. Decisions on
general allocations are made for successive basic
periods of up to five years, although general SDR
allocationshave been made only three times. The first
allocationwas for a total amount of SDR 9.3 billion,
distributed in 1970-72, the second—for SDR 12.1
billion—distributed in 1979-81, and the third—for
SDR 161.2 billion—was made on August 28, 2009.
Separately, the Fourth Amendment to the Articles of
Agreement became effective August 10, 2009 and
provided for a special one-time allocationof SDR 21.5
billion. The purpose of the Fourth Amendment was to
enable all members of the IMF to participate in the
SDR system on an equitable basis and rectify the fact
that countries that joined the IMF after 1981—more
than one fifth of the current IMF membership—never
received an SDR allocationuntil 2009.
The 2009 general and special SDR allocations
together raised total cumulative SDR allocations to
SDR 204.1 billion.
Buying and selling SDRs
IMF members often need to buy SDRs to discharge
obligations to the IMF, or they may wish to sell SDRs
in order to adjust the composition of their reserves.
The IMF may act as an intermediary between
members and prescribed holders to ensure that SDRs

can be exchanged for freely usable currencies. For
more than two decades, the SDR market has
functioned through voluntary trading arrangements.
Under these arrangements a number of members and
one prescribed holder have volunteered to buy or sell
SDRs within limits defined by their respective
arrangements. Followingthe 2009 SDR allocations,
the number and size of the voluntary arrangements
has been expanded to ensure continued liquidity of
the voluntary SDR market. The number of voluntary
SDR trading arrangements now stands at 32,
including 19 new arrangements since the 2009 SDR
allocations.
Since September 1987, voluntary transactions have
ensured the liquidity of the SDRs. However, in the
event that there is insufficient capacity under the
voluntary trading arrangements, the IMF can activate
the designation mechanism. Under this mechanism,
members with sufficiently strong external positions
are designated by the IMF to buy SDRs with freely
usable currencies up to certain amounts from
members with weak external positions. This
arrangement serves as a backstop to guarantee the
liquidity and the reserve asset character of the SDR.

6.3. Gold holdings
The IMF’s gold holdings amount to about 90.5 million
troy ounces (2,814.1 metric tons), making the IMF
one of the largest official holders of gold in the world.
However, the IMF’s Articles of Agreement strictly
limit the use of this gold. If approved by an 85 percent
majority of total voting power of member countries,
the IMF may sell or accept gold as payment by
member countries but it is prohibited from buying
gold or engaging in other gold transactions.
In December 2010, the IMF concluded the sale of
403.3 metric tons of gold (about one-eighth of its
holdings) as authorized by the Executive Board in
September 2009. The limited gold sale was conducted
under strong safeguards to avoid market disruption
and all gold sales were at market prices, including
direct sales to officialholders.
SDR 4.4 billionof profits from the sale of its gold were
used to establish an endowment as part of the IMF’s
new income model, designed to put the institution’s
finances on a sustainable footing. A proportion of the
gold sales are used to subsidize concessional
financing for low-incomecountries.
The IMF’s lending capacity
The IMF can use its quota-funded holdings
of currencies of financially strong economies to
finance lending. The Executive Board selects these
currencies every three months. Most are issued by
industrial countries, but the list has also included

currencies of emerging market economies. The IMF’s
holdings of these currencies, together with its own
SDR holdings, make up its own usable resources. If
needed, the IMF can temporarily supplement these
resources by borrowing (see below).
The amount the IMF has readily availablefor new
(non-concessional) lending is indicated by its forward
commitment capacity (FCC). This is determined by its
usable resources—including amounts availableunder
the IMF’s standing multilateralborrowing
arrangement (see below)—plus projected loan
repayments over the subsequent twelve months, less
the resources that have already been committed
under existing lending arrangements, less a
prudential balance.
Borrowing arrangements
The IMF maintains two standing
multilateral borrowing arrangements—the New
Arrangements to Borrow(NAB) and the General
Arrangements to Borrow(GAB). If the IMF believes
that its quota resources might fall short of the needs
of its member countries—for example, in the event of
a major financial crisis—it can activate these
arrangements.
In 2011, the NAB was expanded from SDR 38 billion
to SDR 370 billion, with the addition of 14 new
participants, including those from a number of
emerging market countries. The expanded NAB was
activated ten times for the maximum period of six

months and for the full amount, with the last
activationstarting on October 1, 2016.
In the context of the agreement in December 2010 to
double the Fund’s quota resources under the 14th
General Review of Quotas, it was agreed that there
should be a corresponding rollbackof the NAB,
resulting in a shift in the composition of the Fund’s
lending resources from NAB to quotas. Following
payments of quota increases under the 14th Review
in February 2016, the NAB has been rolled back from
SDR 370 billionto SDR 182 billion, and the last
activationwas terminated on February 25, 2016.
Since the onset of the global crisis, the IMF has signed
a number of bilateralloan and note purchase
agreements to supplement its quota resources. The
first round of bilateralborrowing took place in 2009–
10. The use of 2009–10 bilateral borrowing has been
discontinued since April 1, 2013.
In 2012, as economic and financial conditions
worsened in the euro area, a number of countries
committed to increase IMF resources further through
bilateralborrowing agreements. As of March 10,
2016, 34 agreements are now effective for an amount
equivalent to SDR 279 billion. The 2012 bilateral
borrowing agreements had initial two-year terms,
with the possibility of being extended by two
additional one-year terms. The agreements were
extended by one year in 2014 and by additional one
year in 2015 in light of continued vulnerabilities in
the global economy. These resources serve as a
second line of defense to the Fund’s quota and NAB
resources.

IMF concessional lending and debt relief
The IMF currently provides two primary types of
financial assistance to low-incomecountries: low-
interest loans under the Poverty Reduction and
Growth Trust (PRGT), and debt relief under the
Heavily Indebted Poor Countries (HIPC) Initiative,
and the Catastrophe Containment and Relief (CCR)
Trust. These resources come from member
contributions and the IMF itself, rather than from the
quota subscriptions.
In July 2009, the Executive Board approved far-
reaching reforms of the concessional facilities,
including temporarily providing zero interest
payments on concessional loans to all low-income
countries (subsequently extended through end-
2016), to help them cope with the crisis. Along with
these reforms, the Fund also sought to boost its
concessional lending capacity over 2009–14 by
mobilizing an additional SDR 10.8 billion(about $14.8
billion) in new financing commitments and SDR 1.5
billion(about $2.3 billion, in end-2008 present value
terms) in new subsidy resources.
In September 2012, the Fund adopted a strategy to
make the PRGT self-sustaining and to support
concessional lending of about SDR 1¼ billion(about
$2.0 billion) a year, on average, over the longer term.
To provide the PRGT with the financial resources
needed to sustain this strategy, the Executive Board
also approved a second partial distribution of the
Fund’s general reserve of SDR 1.75 billion(about $2.4
billion) attributed to windfall profits from gold sales.

The proviso for this distribution was that it would
become effective only once satisfactory assurances
were received that members would contribute at
least SDR 1.575 billion(equivalent to at least 90
percent of the distribution) in subsidy resources to
the PRGT, either from their share in the distribution
of reserves or from other, new contributions. Such
assurances were achieved on October 10, 2013. To
date, a total of 156 countries have pledged 95 percent
of the distribution and 136 members had paid their
shares (86½ percent of the total distribution).
The PRGT-HIPC Trust was established to provide debt
relief under the HIPC Initiative and to subsidize PRGT
lending. The resources available to the Trust consist
of grants and deposits pledged from 93 member
countries and contributions from the IMF itself. The
bulk of the IMF’s contribution comes from off-market
gold transactions made during 1999–2000.
The MultilateralDebt Relief Initiative (MDRI) was
launched in 2006, financed from two trusts (MDRI-I
and MDRI-II) using the IMF’s own resources of SDR
1.5 billionin the Special Disbursement Account (SDA)
and SDR 1.12 billionin bilateral resources transferred
from the PRGT, respectively. The MDRI-I Trust
provided debt relief to countries (both HIPCs and
non-HIPCs) with per capita incomes at, or below $380
a year (on the basis of 2004 gross national income).
The MDRI-II Trust provided debt relief to HIPCs with
per capita incomes above $380 a year. Since no debt
remained that was eligiblefor MDRI relief, the two
MDRI trusts were liquidated in 2015 and the bulk of
the resources remaining in those trusts were
transferred to the CCRT (see below).

The Post-Catastrophe Debt Relief (PCDR) Trust was
established in June 2010 to provide post-catastrophe
debt relief. The Trust was initially financed by SDR
280 million(equivalent to around $384 million) of
the IMF’s own resources. In 2015, the IMF expanded
the PCDR Trust, transforming it into the Catastrophe
Containment and Relief (CCR) Trust, to enable it to
provide exceptional debt relief to countries that are
confronting a major international public health
disaster that constitutes a threat to lives, economic
activity, and international commerce across several
countries. The reformed Trust has, to date, financed
debt relief amounting to about $100 millionto
countries hard-hit by the Ebola epidemic. In addition
to using resources remaining in the PCDR Trust (SDR
102 million), and from the liquidation of the MDRI-I
Trust (SDR 13 million), the Fund is seeking bilateral
contributions to support adequate financing for the
CCR Trust. In this context, the bulk of the remaining
balance (SDR 39 million) in the MDRI-II Trust (which
represents bilateralresources) has been transferred
to the CCRT. The Fund has also been seeking
additional bilateralcontributions of $150 million, of
which nearly $89 millionhave been pledged so far
and $53 million received.
Gold in the IMF
Gold played a central role in the international
monetary system until the collapse of the Bretton
Woods system of fixed exchange rates in 1973.Since

then, its role has diminished.But it remains an
important asset in the reserve holdings of several
countries, and the IMF is still one of the world’s largest
official holders of gold. In line with the new income
model for the Fund agreed in April 2008,profits from
limited gold sales were used to establish an
endowment, and used to boost the IMF’s concessional
lending capacity to eligible low-income countries
(LICs).
How the IMF acquired its gold holdings?
The IMF holds around 90.5 millionounces (2,814.1
metric tons) of gold at designated depositories. On
the basis of historical cost, the IMF’s total gold
holdings are valued at SDR 3.2 billion(about $4.5
billion), but at current market prices, their value is
about SDR 80.1 billion(about $112.7 billion).
The IMF acquired its gold holdings through four main
channels:
 When the IMF was founded in 1944 it was
decided that 25 percent of initial quota
subscriptions and subsequent quota increases
were to be paid in gold. This represents the
largest source of the IMF's gold.
 All payments of charges (interest on member
countries' use of IMF credit) were normally
made in gold.
 A member wishing to acquire the currency of
another member could do so by selling gold to
the IMF. The major use of this provision was

sales of gold to the IMF by South Africa in 1970–
71.
 Member countries could use gold to repay the
IMF for credit previously extended.
The IMF’s legal framework for gold
Role of gold.
The Second Amendment to the Articles of Agreement
in April 1978 fundamentally changed the role of gold
in the international monetary system by eliminating
its use as the commondenominator of the post-World
War II exchange rate system and as the basis of the
value of the Special Drawing Right (SDR). It also
abolished the official price of gold and ended its
obligatory use in transactions between the IMF and
its member countries. It furthermore required the
IMF, when dealing in gold, to avoid managing the
price of gold, or establishing a fixed price.
Transactions.
The Second Amendment to the Articles of Agreement
limits the use of gold in the IMF’s operations and
transactions. The IMF may sell gold outright
according to prevailing market prices. It may accept
gold in the discharge of a member country's
obligations (loan repayment) at an agreed price,
based on market prices at the time of acceptance.
Such transactions require Executive Board approval

by an 85 percent majority of the total voting power.
The IMF does not have the authority to engage in any
other gold transactions—such as loans, leases, swaps,
or use of gold as collateral—nordoes it have the
authority to buy gold.
Over the last six decades of the IMF’s existence, there
have been several instances when the IMF has
decided to return gold to member countries, or to sell
some of its holdings. The reasons for this are varied:
between 1957-70, the IMF sold gold on several
occasions to replenish its holdings of currencies.
During roughly the same period, some IMF gold was
sold to the United States and invested in U.S.
Government securities to offset operationaldeficits.
In December 1999, the Executive Board authorized
off-market transactions in gold of up to 14 million
ounces to help finance the IMF’s participation in the
Heavily Indebted Poor Countries (HIPC) Initiative.
Most of the gold was sold in transactions between the
IMF and two members (Brazil and Mexico)that had
financial obligations falling due to the IMF.
The IMF’s strictly limited gold sales (2009-
10)
On September 18, 2009, the Executive
Board approved the sale of 403.3 metric tons of gold
(12.97 millionounces)—one-eighth of the Fund’s
total holdings of gold at that time. This move was part
of a new income model agreed in April 2008 to help
put the IMF’s finances on a sound, long-term footing.
Key to this new income model was the creationof an

endowment funded by the profits from the sale of this
gold.
The first phase in the Fund’s gold sales was
exclusivelyoff-market transactions to interested
central banks and other officialholders, at market
prices. In October and November 2009, the Fund sold
212 metric tons of gold in separate off-market
transactions to three central banks: 200 metric tons
were sold to the Reserve Bank of India; 2 metric tons
to the Bank of Mauritius, and 10 metric tons to
the Central Bank of Sri Lanka.
In February 2010, the IMF announced the beginning
of sales of gold on the market. At that time, a total of
191.3 tons of gold remained to be sold. In order to
avoid disrupting the gold market, sales were phased
over several months.
In December 2010 the IMF concluded the gold sales
program with total sales of 403.3 metric tons of gold
(12.97 millionounces). Total proceeds amounted to
SDR 9.5 billion(about $14.4 billion), of which SDR
6.85 billionconstituted profits over the book value of
the gold and SDR 4.4 billionof this was used to
establish an endowment as envisaged under the new
income model.
In February 2012, the Executive Board approved a
first distribution of SDR 700 million of reserves from
windfall gold sales profits (realized because of a
higher gold price than the assumed price when the
new income model was endorsed by the Executive
Board), subject to assurances that at least 90 percent
of the amount would be made availablefor
the Poverty Reduction and Growth Trust (PRGT). This
distribution, which became effective in October 2012,

was part of a financing package endorsed by the
Executive Board to boost the IMF’s lending capacity.
To date, members whose shares represent 95 percent
of the amount distributed have pledged to transfer
these shares to the PRGT (or make an equivalent
budgetary contribution) and 87 percent of the
amounts distributed have been transferred.
In September 2012, the Executive Board approved a
second distribution of SDR 1,750 millionof
reserves from windfall gold sales profits, subject to
the same assurances as the first one. This distribution
became effective in October 2013. To date, members
whose shares represent 95 percent of the amount
distributed have pledged to transfer these shares to
the PRGT (or make an equivalent budgetary
contribution) and 86½ percent of the amounts
distributed have been transferred. The successful
distributions of gold windfall profits were a key step
toward making the PRGT sustainable over the
medium and longer term, and assuring an annual
lending capacity of about SDR 1¼ billionon average
on an ongoing basis.
7. QUESTIONS AND ANSWERS ON IMF GOLD
SALES
IMF Gold Sales
On September 18, 2009, the IMF's Executive Board
approved gold sales strictly limited to 403.3 metric

tons, representing one eighth of the Fund's total
holdings at that time. The gold sales program was
completed in late December 2010.
Frequently Asked Questions
 How much gold was sold?
 How was the gold sold?
 Why has the IMF decided to sell gold?
 How will the resources from gold sales help with
lending to low-income countries?
 Why can't the IMF use the gold sales profits
directly for low-income country lending?
 What were the proceeds from the sales?
 How was disruptionof the gold market avoided?
 How did the on-market sales occur?
Q. How much gold was sold?
• The Executive Board approved sales strictly limited
to the gold the IMF had acquired after the Second
Amendment of the Articles of Agreement in April
1978. This amounted to 12,965,649 fine troy ounces
or 403.3 metric tons, which represented one-eighth of
the Fund's total holdings at the time of approval.
• The volume of gold sales approved by the Executive
Board was unchanged from the proposed sales in the
new income model endorsed by the ExecutiveBoard
in April 2008, which was also the same volume as
recommended by the CrockettCommittee in its

January 2007 report on the sustainable long-term
financing of the IMF.
• The IMF announced in February 2010 that phased
sales of gold on the market would be initiated shortly.
At that time, a total of 191.3 tons of gold remained to
be sold, following the sale of a total of 212 tons to
three central banks during October and November
2009.
Q. How was the gold sold?
• According to the modalities for the gold sales
adopted by the Executive Board, the Fund initially
stood ready to sell gold off-market directly to central
banks and other official sector holders at market
prices. During October and November 2009, the Fund
sold a total of 212 tons in this manner to the Reserve
Bank of India, the Bank of Mauritius, and the Central
Bank of Sri Lanka. On September 7, 2010, the Fund
sold 10 metric tons to the Bangladesh Bank.
• Second, the gold sales were conducted on-market in
a phased manner over time, following the approach
adopted successfully by the central banks
participating in the Central Bank Gold
Agreement (CBGA).
• Participants in the CBGA renewed in 2009
announced ceilings on sales of 400 tons annually, and
2,000 tons in total during the five years starting on
September 27, 2009, and noted that the Fund's sales
could be accommodated under these ceilings.
• As one of the elements of transparency in the sales,
the Fund informed markets that on market gold sales
were about to commence on February 17, 2010.

The IMF provided regular updates on progress with
the gold sales through its normal reporting channels.
Q. Why has the IMF decided to sell gold?
• The strictly limited sales of Fund gold approved by
the Executive Board will help put the financing of the
IMF on a sound long-term footing, and also help to
boost the Fund's capacity to provide concessional
loans to low income countries.
• New income model: an endowment funded with the
profits from gold sales is a central component of
the new income model that the Board endorsed in
April 2008. The new income model would provide
more diverse income sources that are better aligned
with the variety of functions performed by the Fund.
• Concessional lending: Resources linked to the gold
sales willalso be used indirectly to increase the
Fund's capacity to provide concessional loans to low
income countries.
Q. How will the resources from gold sales help
with lending to low-income countries?
• Back in 2009, the IMF agreed on a financing package
aimed at raising its concessional lending capacity to
SDR 11.3 billion(US$17 billion) over 2009–2014
through the Poverty Reduction and Growth
Trust (PRGT) (See Press Release No. 09/268).
Contributions linked to the windfall gold profits will
count towards that package's target of raising an
additional SDR 1.5 billion(US$2.3 billion) to subsidize
the PRGT's low-interest concessional lending, which

currently carries a zero interest rate, with the balance
coming from other sources, including additional
bilateralcontributions from member countries.
• In February 2012, the Executive Board approved the
distribution to all IMF members of SDR 700 million
(about US$1.1 billion) from the general reserve
attributed to a portion of the windfall profits from
recent IMF gold sales, with the expectationthat
members would transfer their share or otherwise
make a new contribution of an equivalent amount to
support concessional lending to low-income
countries. The distribution will be effected only after
the Fund has received satisfactory assurances from
members of PRGT subsidy contributions equivalent to
at least 90 percent of the amount distributed—i.e.
SDR 630 million(about US$1 billion).
Q. Why can't the IMF use the gold sales profits for
low-income country lending directly instead of
making a distribution to member countries and
then asking them to transfer their share or
contribute equivalent amounts?
• The Fund does not have the authority to use
resources in the GeneralResources Account (GRA),
including profits from the sale of post-Second
Amendment gold, directly to provide subsidies for
concessional lending to low-income countries, as the
use of GRA resources for the benefit of only low-
income countries would not be consistent with the
requirement of uniformity of treatment of all IMF
member countries. Making profits linked to gold sales

availablefor the PRGT therefore requires an indirect
approach involving:
i. A distribution of reserves attributed to a part of
gold windfall profits to all IMF member countries
in proportion to their quota shares, and
ii. Voluntary transfers by members of their share
directly to the PRGT or otherwise new subsidy
contributions to the PRGT.
Q. What were the proceeds from the sales?
• The Fund's gold sales program generated total
proceeds of SDR 9.5 billion(about $15 billion). As
required under the Articles of Agreement, all sales
were conducted at market prices, including direct
sales to official holders.
Q. How was disruption of the gold market
avoided?
• The IMF's Executive Board reaffirmed the long-
standing principle that the Fund has a systemic
responsibility to avoid causing disruptions that would
adversely affect gold holders and gold producers, as
well as the functioning of the gold market. Hence, the
Executive Board adopted modalities for the gold sales
consistent with guidelines it endorsed in February
2008 to safeguard against market disruption:
i. Sales should be strictly limited to the amount of
gold that the Fund had acquired since the Second
Amendment of the Articles of Agreement
(12,965,649 fine troy ounces or 403.3 metric
tons, which represented one-eighth of the Fund's
total holdings).

ii. The Fund's gold sales should not add to the
announced volume of sales from official sources.
(Participants in the Central Bank Gold
Agreement renewed in 2009 noted that the
Fund's sales could be accommodated under the
announced ceilings, ensuring that on-market
gold sales by the Fund would not add to the
announced volume of sales from official sources.)
iii. The scope for sales of gold to one or more official
holders should be explored. This would be
advantageous because such transactions would
redistribute official gold holdings without
changing total officialholdings. There would also
be the practicaladvantage that the Fund could
receive sales proceeds earlier,thereby beginning
to generate income from an endowment sooner.
iv. Absent sufficient interest from other official
holders to purchase gold directly from the Fund,
phased on-market sales would represent the
most appropriate modality for potential gold
sales. This would follow the approach adopted
successfully over a number of years by current
Central Bank Gold Agreement participants.
v. A strong governance and control framework,
together with a high degree of transparency,
would be essential for gold sales conducted by
the Fund. A clear,transparent communications
strategy, including regular external reporting on
sales, should be adopted, in order to assure
markets that the gold sales are being conducted
in a responsible manner.
Q. How did the on-market sales occur?

• To avoid any risk of disruption to the gold market,
the on-market sales were conducted in a phased
manner over time, an approach successfully adopted
by central banks participating in the Central Bank
Gold Agreement.
• The initiation of on-market sales did not preclude
further off-market gold sales directly to interested
central banks or other official holders. Such sales
reduced the amount of gold that was subsequently
placed on the market.
• The IMF provided regular updates on progress with
the gold sales through its normal reporting channels.
IMF Announces Sale of 200 metric tons of Gold to
the Reserve Bank of India
November 2, 2009
The International Monetary Fund announced today
the sale of 200 metric tons of gold to the Reserve
Bank of India. This amount represents almost half of
the total sales volume of 403.3 metric tons that was
approved by the Executive Board in September.
“I strongly welcome this transaction with the Reserve
Bank of India,” Managing Director Dominique
Strauss-Kahn stated. “This transaction is an important
step toward achieving the objectives of the IMF’s
limited gold sales program, which are to help put the
Fund’s finances on a sound long-term footing and
enable us to step up much-needed concessional
lending to the poorest countries”

8. The IMF and the World Bank
The InternationalMonetary Fund (IMF) and the World
Bank are institutions in the United Nations system.
They share the same goal of raising living standards in
their member countries. Their approaches to this goal
are complementary, with the IMF focusing on
macroeconomic issues and the World Bank
concentrating on long-term economic development and
poverty reduction.
What are the purposes of the Bretton Woods
Institutions?
The International Monetary Fund and the World
Bank were both created at an international
conference convened in Bretton Woods, New
Hampshire, United States in July 1944. The goal of the
conference was to establish a frameworkfor
economic cooperationand development that would
lead to a more stable and prosperous global economy.
While this goal remains central to both institutions,
their work is constantly evolving in response to new
economic developments and challenges.
The IMF’s mandate.
The IMF promotes international monetary
cooperationand provides policy advice and technical
assistance to help countries build and maintain
strong economies. The IMF also makes loans and
helps countries design policy programs to solve
balance of payments problems when sufficient
financing on affordable terms cannot be obtained to

meet net international payments. IMF loans are short
and medium term and funded mainly by the pool of
quota contributions that its members provide. IMF
staff is primarily economists with wide experience in
macroeconomicand financial policies.
The World Bank’s mandate.
The World Bank promotes long-term economic
development and poverty reduction by providing
technical and financial support to help countries
reform particular sectors or implement specific
projects—such as, building schools and health
centers, providing water and electricity,fighting
disease, and protecting the environment. World Bank
assistance is generally long term and is funded both
by member country contributions and through bond
issuance. World Bank staff are often specialists in
particular issues, sectors, or techniques.
Framework for cooperation
The IMF and World Bank collaborateregularly and at
many levels to assist member countries and work
together on several initiatives. In 1989, the terms for
their cooperationwere set out in a concordat to
ensure effective collaborationin areas of shared
responsibility.
High-level coordination.
During the Annual Meetings of the Boards of
Governors of the IMF and the World Bank, Governors
consult and present their countries’ views on current
issues in international economics and finance. The
Boards of Governors decide how to address

international economic and financial issues and set
priorities for the organizations.
A group of IMF and World Bank Governors also meet
as part of the Development Committee, whose
meetings coincide with the spring and Annual
Meetings of the IMF and the World Bank. This
committee was established in 1974 to advise the two
institutions on criticaldevelopment issues and on the
financial resources required to promote economic
development in low-income countries.
Management consultation.
The Managing Director of the IMF and the President
of the World Bank meet regularly to consult on major
issues. They also issue joint statements and
occasionallywrite joint articles, and have visited
several regions and countries together.
Staff collaboration.
IMF and Bank staffs collaborateclosely on country
assistance and policy issues that are relevant for both
institutions. The two institutions often conduct
country missions in paralleland staff participate in
each other’s missions. IMF assessments of a country’s
general economic situation and policies provide input
to the Bank’s assessments of potential development
projects or reforms. Similarly,Bank advice on
structural and sectorialreforms is taken into account
by the IMF in its policy advice. The staffs of the two
institutions also cooperate on the
conditionality involved in their respective lending
programs.

The 2007 external review of Bank-Fund collaboration
led to a Joint Management Action Plan on World
Bank-IMF Collaboration(JMAP) to further enhance
the way the two institutions work together. Under the
plan, Fund and Bank country teams discuss their
country-level work programs, which identify macro-
criticalsectorial issues, the division of labor, and the
work needed in the coming year. A review of Bank-
Fund Collaborationunderscored the importance of
these joint country team consultations in enhancing
collaboration.
Reducing debt burdens.
The IMF and World Bank have also worked together
to reduce the external debt burdens of the most
heavily indebted poor countries under the Heavily
Indebted Poor Countries (HIPC) Initiative and
the MultilateralDebt Relief Initiative (MDRI). They
continue to help low-income countries achieve their
development goals without creating future debt
problems. IMF and Bank staff jointly prepare country
debt sustainability analyses under the Debt
Sustainability Framework(DSF) developed by the
two institutions.
Reducing poverty.
In 1999, the IMF and the World
Bank launched the Poverty Reduction Strategy Paper
(PRSP) approach as a key component in the process
leading to debt relief under the HIPC Initiative and an
important anchor in concessional lending by the
Fund and the Bank. While PRSPs continue to
underpin the HIPC Initiative, the World Bank and the

IMF adopted in July 2014 and July 2015, respectively,
new approaches to country engagement that no
longer requires PRSPs. The IMF streamlined its
requirement for poverty reduction documentation for
programs supported under the Extended Credit
Facility (ECF) or the PolicySupport Instrument (PSI).
Setting the stage for the 2030 development
agenda.
Since 2004, the IMF and the Bank have jointly
published the annual Global Monitoring
Report (GMR), which so far has assessed the progress
towards the Millennium Development Goals (MDGs).
The IMF and the Bank have also been actively
engaged in the globaleffort to implement the 2030
development agenda. Each institution has committed
to new initiatives, within their respective remits, to
support member countries in reaching their
sustainable development goals. They are also working
together to better assist the joint membership,
including by an enhanced support of stronger tax
systems in developing countries.
Assessing financial stability.
The IMF and the World Bank are also working
together to make financial sectors in member
countries resilient and well regulated. The Financial
Sector Assessment Program (FSAP) was introduced in
1999 to identify the strengths and vulnerabilitiesof a
country's financial system and recommend
appropriate policy responses.

8.1. What is the difference between
International Monetary Fund and the World
Bank?
The primary difference between the International
Monetary Fund, or IMF, and the World Bank lies in
their respective purposes and functions. The IMF
exists primarily to stabilize exchange rates, while the
World Bank’s goal is to reduce poverty. Both
organizations were established as part of the Bretton
Woods Agreement in 1945.
The international monetary fund promotes
monetary cooperationinternationally and offers
advice and assistance to facilitate building and
maintaining a country’s economy. The IMF also
provides loans and helps countries develop policy
programs that solve balance of payment problems if a
country cannot obtain financing sufficient to meet its
international obligations. The loans offered by the
IMF, however, are loaded with conditions. Often, a
loan provided by the IMF as a form of "rescue" for
countries in serious debt ultimately only stabilizes
international trade and eventually results in the
country repaying the loan at rather hefty interest
rates. For this reason, the IMF has many critics
worldwide.
The World Bank's purpose is to aid long-term
economic development and reduce poverty in

developing countries. It accomplishes this by making
technical and financial support availableto countries.
The bank initiallyfocused on rebuilding
infrastructure in Western Europe followingWorld
War II, and then turned its operational focus to
developing countries. World Bank support helps
countries reform inefficient economicsectors and
implement specific projects, such as building health
centers and schools or making cleanwater and
electricitymore widely available.World Bank
assistance is typically long term, funded by countries
that are members of the bank through the issuing of
bonds. The World Bank also has a pool of about $200
billionwith which to offer aid to less-developed
countries. The bank’s loans, however, are not used as
a type of bailout, as in IMF style, but as a fund for
projects that help develop an underdeveloped or
emerging market nation and make it more productive
economically.
9. SOME COUNTRY’S MEMBER ANDTHEIR
RELATIONS WITH IMF.
9.1. IMF IN INDIA
India's Relations with the IMF
 Current IMF membership: 189 countries
 India Joined on December 27, 1945; ArticleVIII
 Total Quota: SDR 4,158.20 million
 Outstanding loans: None

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