International

Monetary
Fund
Submitted by:-
INTERNATIONAL MONETARY FUND
• IMF
International monetary fund is a organization that oversees
the global financial system by following the macroeconomic
policies of its member countries, in particular those with an
impact on exchange rate and the balance of payments.
• It is an organization formed with a stated objective of stabilizing
international exchange rates and facilitating development through
the enforcement as a condition for loans, restructuring or aid and
to expand international liquidity.

• IMF is a forum of national economic policies, international

monetary and financial systems, which involves active dialogue
with each member country.
• Five largest shareholders:
United States, Japan, Germany, France, United Kingdom.

• The IMF was created to support orderly international currency

exchange and to help nations having balance of payment problems
through short term loans of cash.
HISTORY
• IMF was formed in 1944 and started functioning from
27th Dec 1945.
• IMF started to make service with IBRD
(International Bank of Reconstruction and Development)
in 1947.
• The International Monetary Fund was created in 1944, at
the Bretton Woods conference, 44 founding member
countries sought to build a framework for international
economic cooperation.
• To prevent the kinds of chain reaction in the economic
system that caused world currencies to collapse like in
the Great Depression of 1930s.
 MEMBERS

Member
Countries

Board of
Governors

First Deputy Deputy Deputy

Managing Managing Managing
Director Director Director
Board of Governors: It consists of one governor and one
alternate governor for each member country. Each member
country appoints its two governors.
 Ministerial Committees: The Board of Governors is advised by
two ministerial committees,
 Executive Board: It is 24-member Executive Board elected by
the Board of Governors.
IMF Management: IMF’s Managing Director is both chairman
of the IMF’s Executive Board and head of IMF staff. The
Managing Director is appointed by the Executive Board by
voting or consensus.

IMF Institute Training at

Headquarters
(HQ), Washington, D.C.,
United States.
IMF Members: Any other state, whether or not a member of
the UN, may become a member of the IMF in accordance with
IMF Articles of Agreement and terms prescribed by the Board of
Governors.
• Membership in the IMF is a prerequisite to membership in the IBRD.
• Pay a quota subscription: On joining the IMF, each member country
contributes a certain sum of money, called a quota subscription, which is
based on the country’s wealth and economic performance (Quota
Formula).
 Membership
• Original Members • Ordinary Member
All those countries whose All those who became its
representative took part in Bretton members subsequently.
Woods Conference and who
agreed to be the members of the
fund prior to 31st Dec, 1945.

• Bank has the authority to suspend any member and similarly

member is free to resign.
 GROWTH IN IMF MEMBERSHIP
• Start with 29 member countries that agreed to bound to this
treaty. It began its financial operations on 1st March 1947.
• Today, the IMF works to achieve sustainable growth and
prosperity for all of its 190 member countries.
• the IMF's 2,400 employees from more than 160 countries, are
expected to observe the highest ethical and workplace
standards of conduct.
 PURPOSES OF THE IMF
• To ensure stability to Foreign Exchange Rate.
• To reduce Disequilibrium in Balance Of Payment.
• To secure multilateral convertibility.
• To eliminate the control of exchange rate from the hands of
powerful countries
• To improve and promote global monetary cooperation of the
world and Expansion of international trade.
 FUNCTIONS OF IMF
• IMF mainly focuses on supervising the international monetary system
along with providing credits to the member countries. The functions
of the International Monetary Fund can be categorized into three
types:
1. Regulatory functions: IMF functions as a regulatory body and as per
the rules of the Articles of Agreement, it also focuses on administering
a code of conduct for exchange rate policies and restrictions on
payments for current account transactions. 
 Fixation of par value of currencies in terms of Gold | Dollar.
 Regulates exchange rate practices in international payment.
 Fix alteration limit within par value of currencies.
2. Financial functions: IMF provides financial support and resources to
the member countries to meet short term and medium term Balance
of Payments (BOP) disequilibrium.
 IMF offers short term & medium term loans to make up their Balance of
payment Deficits.
 Maintain liquidity of Fund’s Resources.
3. Consultative fun­ctions: IMF is a Centre for international
cooperation for the member countries. It also acts as a source of
counsel and technical assistance.
 Technical Assistance & Training in a wide range of area, such as central
banking, exchange rate, policy fixation, etc.
 Provide expertise to consult economy decision.
 Economic Surveillance.
WHERE DOES THE IMF GET IT’S MONEY
FROM ?
• Most loans are provided by member countries, determined by
their quota, which is calculated based upon a country’s
relative size in the world economy.

• For a closer look at the Member Quota we can reference with

the IMF website.

• Upon joining, the 25% of the quota is paid in some major

currency US Dollar, British Pound, Yen while the remaining
75% is paid in their own currency.
 INDIA AND IMF
• India is a founder member of the IMF. India’s Union Finance Minister
is the Ex Officio Governor on the IMF’s Board of Governors. Each
member country also has an alternate governor. The alternate
governor for India is the Governor of the RBI. There is also an
Executive Director for India who represents the country at the IMF.

• India’s quota in the IMF is SDR 13,114.4 million that gives India a
shareholding of 2.76%. This makes India the eight largest quota
holding country at the organization.

• In 2000, India completed the repayment of all the loans it had taken
from the IMF.
• Now, India is a contributor to the IMF.
• In 1981, India was given a massive loan of about Rs. 5,000 crores
to overcome foreign exchange crisis resulting from persistent
deficit in balance of payments on current account.

• India has availed of the services of specialists of the IMF for the

purpose of assessing the state of the Indian economy. In this way
India has had the benefit of independent scrutiny and advice.

• The balance of payments position of India having gone utterly out

of gear on account of the oil price escalation since October 1973,
the IMF has started making available oil facility by setting up a
special fund for the purpose.
• Early 1990s when foreign exchange reserves – for two weeks’
imports as against the generally accepted 'safe minimum
reserves' of three month equivalent — position were terribly
unsatisfactory.
• Government of India's immediate response was to secure an
emergency loan of $2.2 billion from the International Monetary Fund
by pledging 67 tons of India's gold reserves as collateral security.
• India promised IMF to launch several structural reforms (like
devaluation of Indian currency, reduction in budgetary and fiscal
deficit, cut in government expenditure and subsidy, import
liberalization, industrial policy reforms, trade policy reforms, banking
reforms, financial sector reforms, privatization of public sector
enterprises, etc.) in the coming years.
• The foreign reserves started picking up with the onset of the liberalization
policies.

• India has occupied a special place in the Board of Directors of the Fund.

Thus, India had played a creditable role in determining the policies of the
Fund. This has increased the India’s prestige in the international circles.

• India has not taken any financial assistance from the IMF since 1993.

• Repayments of all the loans taken from the International Monetary Fund
were completed on 31 May 2000.

• The IMF praised the country as we were able to able the ASIAN
FINANCIAL CRISIS in 1999 and was also able to maintain the average rate
of growth of its economy.

• International Monetary Fund said that the reasons behind the economy
growth of India are that the RBI has been able to control inflation and has
also handled its monetary policies very skillfully.
 HOW DOES THE IMF HELP POOR
COUNTRIES ?

• Most of the IMF’s loans to low-income countries are made on concessional

terms, under the Poverty Reduction and Growth Facility.

• Under a mechanism introduced by the IMF in 2005– the Policy Support

Instrument– countries can request that the IMF regularly and frequently
review their economic programs to ensure that they are on track.

• The success of a country’s program is assessed against the goals set forth in
the country’s poverty Reduction Strategy, and the IMF’s assessment can be
made public if the country wishes.
• To ensure that developing countries reap full benefit from the
loans and debt relief they receive, in 1999 the IMF and the
world Bank introduced a process known as the Poverty
Reduction Strategy Paper (PRSP) process.

• The IMF also participates in Debt Relief efforts for poor

countries that are unable to reduce their debt to a sustainable
level even after benefiting from aid, concessional loans, and
the pursuit of sound policies.
 CONCLUSION
• The IMF’s primary purpose is to safeguard the stability of the international
monetary system– the system of exchange rates and international payments
that enables countries (and their citizens ) to buy goods and services from
each other. This is essential for achieving sustainable economic growth and
raising living standards.

• Providing advice to members on adopting policies that can help them

prevent or resolve a financial crisis, achieve macroeconomic stability,
accelerate economic growth, and alleviate poverty.

• Making financing temporarily available to member countries to help them

address balance of payments problems—that is, when they find themselves
short of foreign exchange because their payments to other countries exceed
their foreign exchange earnings.

• Offering technical assistance and training to countries at their request, to

help them build the expertise and institutions they need to implement
sound economic policies.