PRESENTATION ON

International Monitory Fund

BY.. ROSHNI.K.U

IMF

The International Monetary Fund (IMF) is an international organization that provides financial assistance and advice to member countries.

IMF is an administrative unit that is international in nature and whose objective is to regulate and administer the financial system of the world.

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HISTORY OF IMF
The International Monetary Fund was established, along with the World Bank, at a conference in Bretton Woods, New Hampshire, USA, in the closing stages of World War II. Since the Second World War, the International Monetary Fund has provided loans to governments facing economic crises. The loans have come to be known as structural adjustment loans because they aim to help borrowing governments adjust the structure of economic activity. IMF started to make service with IBRD (international bank of reconstruction and development) in 1947.

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(History Cont)
The presence of the IMF as an international lending institution continues to evolve with the changing conditions of globalization. Most recently the IMF has begun to focus its policy-making strategies to incorporate poverty reduction policies in addition to creating economic stability. The IMF was created to support orderly international currency exchanges and to help nations having balance of payment problems through short term loans of cash.

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THE BRETTON WOODS AGREEMENT

The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression. The IMF came into formal existence in December 1945, when its first 29 member countries signed its Articles of Agreement. It began operations on March 1, 1947. Later that year, France became the first country to borrow from the IMF.

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ABOUT IMF
IMF headquarters is in Washington , U.S.A Five largest shareholders are United States, Japan, Germany, France, United Kingdom. China, Russia, and Saudi Arabia have their own seats on the Board. 16 other Executive Directors are elected for two year terms by groups of countries, known as Constituencies. Total quotas of $312 billion; outstanding loans of $71 billion to 82 countries (According to the report of August 31, 2005). The International Monetary Fund (IMF) is an organization of 188 countries.
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MANAGEMENT
The IMF is led by a Managing Director, who is head of the staff and Chairman of the Executive Board. The Managing Director is assisted by a First Deputy Managing Director and three other Deputy Managing Directors. Christine Lagarde , a French national, joined the IMF as Managing Director in July 2011. Before coming to the IMF, she was France's Minister for Economy, Finance and Industry.
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MD.CHRISTINE LAGARDE

(The Executive Board of the IMF. Consisting of 24 member countries)

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Administrative Structure of the IMF

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WHAT THE IMF DOES (functions)

Surveillance:

Technical assistance

Lending:

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OTHER KEY IMF ACTIVITIES

The IMF supports its membership by providing:

Policy advice to governments and central banks based on analysis of economic trends and cross-country experiences;

Research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets;
Loans to help countries overcome economic difficulties;

Concessional loans to help fight poverty in developing countries; and

Technical assistance and training to help countries improve the management of their economies.
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IMF promote international monetary cooperation . expansion and balanced growth of international trade. IMF promote exchange rate stability . help establish multilateral system of payments and eliminate foreign exchange restrictions. IMF make resources of the Fund available to members. Foster economic growth and high levels of employment. IMF can make the price of foreign money to be safe. IMF can solve the problem of countries that doesnt want to allow the foreign money to make their currencys value higher.

GROWTH IN IMF MEMBERSHIP (1945-2012)

In the beginning 29` member countries Today, 188 member countries. Staff of about 2680 persons. Headquarters in Washington, D.C.

200 180 160 140 120 100 80 60 40 20 0 1945195519651975198519952012

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HOW DOES IT WORK?

The IMF gets its money from quota subscriptions paid by member states. The size of each quota is determined by how much each government can pay according to the size of its economy. The quota in turn determines the weight each country has within the IMF - and hence its voting rights - as well as how much financing it can receive from the IMF. Twenty-five percent of each country's quota is paid in the form of special drawing rights (SDRs), which are a claim on the freely usable currencies of IMF members.
The SDR is not a currency; it is a unit of account by which member states can exchange with one another in order to settle international accounts. The IMF may also borrow funds, if necessary, under two separate agreements with member countries. In total, it has SDR 212 billion (USD 290 billion) in quotas and SDR 34 billion (USD 46 billion) available to borrow.
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Tranche
If an IMF member faces balance of payments difficulties
Can automatically borrow one fourth of its quota in the form of a reserve tranche When the IMF lends to a member country, what actually happens is domestic country purchases international reserves from the IMF using its own domestic currency reserves

Member country is then obliged to repay IMF by repurchasing its own domestic currency reserves with international reserve assets IMF lending is known as a purchase-repurchase arrangement
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Tranche
Credit tranches
Originally, each were equal to of the members quotas In the late 1970s, credit tranches were increased to 37.5% of quota Now effective limits that a member countrys credit to 150 percent of its quota As IMF evolved, it created a number of special credit facilities that extend potential credit beyond 150% level Drawings on IMF by its members have to be repaid Five-year limit was established

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IMF Lending

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SDR
The Special Drawing Right (SDR) is an international reserve asset, created by. the IMF in 1968.
The SDR is neither a currency, nor a claim on the IMF. It is a potential claim on the freely usable currencies of IMF members. 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. The value of the SDR is adjusted daily against a basket of currencies, which currently includes the U.S. dollar, the Japanese yen, the euro, and the British pound.

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IMF AND GOLD RESERVES

The IMF holds a relatively large amount of gold among its assets, not only for reasons of financial soundness, but also to meet unforeseen contingencies. The IMF holds about 90.5 million ounces, or 2,814.1 metric tons, of gold at designated depositories. The IMF's total gold holdings are valued on its balance sheet at about $4.9 billion (SDR 3.2 billion) on the basis of historical cost. The IMF's holdings amount to about $160 billion (as determined by end-February 2012 market prices).

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INDIA AND IMF

India joined the IMF on December 27, 1945, as one of the IMF's original members. Financial Assistance: In 1981-82, India borrowed SDR 3.9 billion under an Extended Fund Facility, the largest arrangement in IMF history at the time. In 1991-93, India borrowed a total of SDR 2.2 billion under two stand by arrangements, and in 1991 it borrowed SDR 1.4 billion under the Compensatory Financing Facility. Technical Assistance: Since 1981 the IMF Institute has provided training to Indian officials in national accounts, tax administration, balance of payments compilation, monetary policy, and other areas.

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At a Glance : India's Relations with the IMF

Current IMF membership: 188 countries. India Joined on December 27, 1945; Article VIII Quota: SDR 4,158.20 million Outstanding loans: None The last Article IV Executive Board Consultation was on April 18, 2012 (Country Report No. 12/96

India - SDR 4,158.20 (in millions)- 2.44% of Total- Chidambaram(governor alternate)Duvvuri Subbarao- votes total58,952 - %2.34

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RESIDENT REPRESENTATIVE OFFICE IN INDIA

Resident Representative Office in India

Thomas Richardson Senior Resident Representative in New Delhi

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ACCOUNTABILITY

The IMF is accountable to its 188 member governments, and is also scrutinized by multiple stakeholders, from political leaders and officials to, the media, civil society, academia, and its own internal watchdog. The IMF, in turn, encourages its own members to be as open as possible about their economic policies to encourage their accountability and transparency.

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INDEPENDENT EVALUATION OFFICE

The Independent Evaluation Office (IEO) was established in 2001 to conduct independent and objective evaluations of Fund policies and activities. Under its Terms of Reference, it is fully independent from the Management of the IMF and operates at arm's length from the Board of Executive Directors.

The IEO's mission is to:

Enhance the learning culture within the Fund, Strengthen the Fund's external credibility, Promote greater understanding of the work of the Fund, and Support institutional governance and oversight.

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For more information log on to: www.imf.org