The document discusses the International Monetary Fund (IMF), including its functions, benefits of membership, and special drawing rights (SDRs). When countries join the IMF, they must contribute a quota based on the size of their economy. In return, they gain access to financing, technical assistance, and influence over other members' economic policies. The IMF also issues SDRs, an international reserve asset whose value is based on a basket of currencies and which pays interest to members based on their allocated amounts.

2. GROUP 3
SHAMEER KK
SHEEBA
RANJINI
NEETHU THOMAS
HARIS CY
LITHIN

3. INTRODUCTION
 On joining the IMF, each country pledges to cooperate
with all other member countries in resolving
international monetary problems.
 Members are required to share information on
financial, fiscal, economic, and exchange policies that
have international importance.
 They pledge themselves to pursue economic policies
that will encourage employment and international
trade to the benefit of the entire world economic
community.

4. Obligations of Membership
 Agree to the code of conduct found in the IMF Articles
of Agreement
 Pay a quota subscription
 Refrain from restrictions on exchange of foreign
currency
 Strive for openness in economic policies affecting
other countries.

5. Benefits of Membership
 Access to information on economic policies of all
member countries
 Opportunity to influence members’ economic policies
 Access to technical assistance in banking, fiscal
affairs, and exchange matters
 Financial support in times of payment difficulties
 Increased opportunity for trade and investment

6. Quotas
 Each member country's quota broadly reflects the size
of its economy: the larger a country's economy in
terms of output and the larger and more variable its
trade, the larger its quota tends to be.
 For example, the world's biggest economy, the United
States, has the largest quota in the IMF.

7.  Quotas, together with the equal number of basic votes
each member has, determine countries' voting power.
 They also help determine how much countries can
borrow from the IMF and their share in allocations of
special drawing rights or SDRs

8.  Countries pay 25 percent of their quota subscriptions
in SDRs or major currencies, such as U.S.
Dollars, Euros, Pounds sterling, or Japanese yen. They
pay the remaining 75 percent in their own currencies.
 The IMF's lending resources come mainly from the
money that countries pay as these quota subscriptions
when they become members.

9. Quota reviews
 Quotas are normally reviewed every five years and can
be increased when deemed necessary by the Board of
Governors.
 The 14th 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 476.8 billion.

10. Recent reforms
 In recent years, the IMF began a number of reforms
related to rebalancing members' quotas to ensure they
continue to broadly reflect countries' relative size in
the world economy.
 In 2011, the number of basic votes was nearly
tripled, which helped to ensure poorer countries
maintained a say in running the institution.

11. How member countries’ quotas are determined
 When a country joins the IMF, it is assigned an initial
quota in the same range as the quotas of existing
members that are broadly comparable in economic
size and characteristics.
 The IMF uses a quota formula to guide the assessment
of a member’s relative position.

12.  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).

15. Functions of quota
 Subscriptions (quota share). A member's quota
subscription determines the maximum amount of
financial resources the member is obliged to provide to
the IMF.
 Voting power (voting share). The quota largely
determines 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
 Access to financing. The amount of financing a
member can obtain from the IMF (its access limit) is
based on its quota

16. Special Drawing Rights
 The Special Drawing Right (SDR) is an international
reserve asset, created by the IMF in 1969 to
supplement the existing official reserves of member
countries.
 Special drawing rights (SDRs) are supplementary
foreign exchange reserve assets defined and
maintained by the International Monetary Fund
(IMF).
 Not a currency, SDRs instead represent a claim to
currency held by IMF member countries for which
they may be exchanged.

17.  As they can only be exchanged for euros, Japanese
yen, pounds sterling, or US dollars, SDRs may actually
represent a potential claim on IMF member countries'
nongold foreign exchange reserve assets, which are
usually held in those currencies.
 While they may appear to have a far more important
part to play or, perhaps, an important future
role, being the unit of account for the IMF has long
been the main function of the SDR

18. Value definition of SDR
 The value of the SDR is determined by the value of
several currencies important to the world’s trading and
financial systems.
 Initially its value was fixed, so that 1 SDR = 1 US
dollar, but this was abandoned in favour of a currency
basket after the 1973 collapse of the Bretton Woods
system of fixed exchange rates.

19. Interest rate
 Special drawing rights carry a weekly determined
interest rate, but no party pays interest if an IMF
member country maintains the amount of SDRs
allocated to it.
 Based on "a weighted average of representative interest
rates on short-term debt in the money markets of the
SDR basket currencies"
 Interest is paid by an IMF member country if it holds
less SDRs than it was allocated, and interest is paid to a
member country if it holds more SDRs than the
amount it was allocated