IMF STUDY NOTES
The international monetary
fund(IMF) came into official existence on December 27, 1945, when 29 countries
signed its articles of agreement(it’s charter) agreed a conference held in
Bretton woods, new Hampshire USA, from July 1-22, 1944. The IMF commenced
financial operations on March 1, 1947.
fund(IMF) came into official existence on December 27, 1945, when 29 countries
signed its articles of agreement(it’s charter) agreed a conference held in
Bretton woods, new Hampshire USA, from July 1-22, 1944. The IMF commenced
financial operations on March 1, 1947.
Headquarters: Washington, D.C, U.S.
Membership: 189 countries
Official language: English
Managing director: Kristalina
Georgieva
Georgieva
Staff: 2400
Website: www.imf.org
SOME IMPORTANT POINT:
·
IMF was established with
IBRD (INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT) also known as
world bank at the conference of 144 nations held at Bretton woods new
hemisphere USA July 1944.
IMF was established with
IBRD (INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT) also known as
world bank at the conference of 144 nations held at Bretton woods new
hemisphere USA July 1944.
·
IMF came into force on
27th December 1945.
IMF came into force on
27th December 1945.
· Member countries are 189
last Nauru has joined it.
last Nauru has joined it.
·
India is a founder member
of the IMF.
India is a founder member
of the IMF.
·
Managing director is Kristalina Georgieva.
Managing director is Kristalina Georgieva.
·
IMF is controlled and
managed by a board of directors.
IMF is controlled and
managed by a board of directors.
· Each governer has got
the right of 250 votes on the basis of the membership and one additional vote
for each SDR 100000 of quotas.
the right of 250 votes on the basis of the membership and one additional vote
for each SDR 100000 of quotas.
·
Special drawing right is
also known as paper gold.
Special drawing right is
also known as paper gold.
·
Since 1st
January 2011 the value of SDR is being
determined by the basket of 4 currencies- 1). Euro-34% 2). Japenese yen-11% 3).
Pound sterling-11% 4). US dollar-44%.
Since 1st
January 2011 the value of SDR is being
determined by the basket of 4 currencies- 1). Euro-34% 2). Japenese yen-11% 3).
Pound sterling-11% 4). US dollar-44%.
·
IMF financial year is
from 1st May to 30th April.
IMF financial year is
from 1st May to 30th April.
·
India’s 13th
place in IMF quota.
India’s 13th
place in IMF quota.
·
The financial minister
is the ex-officio governor in the IMF board of governors.
The financial minister
is the ex-officio governor in the IMF board of governors.
·
ESAF(enhanced structural
adjustment facility) was established in 1987 to help low income and debt burden
countries.
ESAF(enhanced structural
adjustment facility) was established in 1987 to help low income and debt burden
countries.
·
IMF was established to
provide short term assistance to correct the balance of payment disequilibrium.
IMF was established to
provide short term assistance to correct the balance of payment disequilibrium.
·
IMF fund regarded as
guardian of good conduct in the area of balance of payment.
IMF fund regarded as
guardian of good conduct in the area of balance of payment.
·
IMF controlled and management
by the board of governors, executives board, managing director, secretariat, the interim committee, development committee.
IMF controlled and management
by the board of governors, executives board, managing director, secretariat, the interim committee, development committee.
ORIGINS OF IMF
The need for an organization
like the IMF became evident during the great depression that ravaged the world economy in 1930. A widespread lack of confidence in paper money led
to a spurt in the demand for gold and severe devaluation in the national
currencies.
like the IMF became evident during the great depression that ravaged the world economy in 1930. A widespread lack of confidence in paper money led
to a spurt in the demand for gold and severe devaluation in the national
currencies.
In 1940, harry dexter (US)
and john Maynard Keynes (UK) put forward proposals for a system that would
encourage the unrestricted of one currency into another, establish a clear and
unequivocal value for each currency and eliminate restrictions and practices
such as competitive devaluation.
and john Maynard Keynes (UK) put forward proposals for a system that would
encourage the unrestricted of one currency into another, establish a clear and
unequivocal value for each currency and eliminate restrictions and practices
such as competitive devaluation.
The IMF began operations in
Washington DC in May 1946. It then had 39 members. The IMF membership now is
189.
Washington DC in May 1946. It then had 39 members. The IMF membership now is
189.
Also Read : Special Drawing Rights
OBJECTIVES OF IMF
§ To promote international monetary co-operation.
§ To ensure balanced international trade.
§ To ensure exchange rate stability.
§ To eliminate & minimize exchange restrictions by
promoting the system of multilateral payment.
promoting the system of multilateral payment.
§ To grant economic assistance to member countries for
elimination of the adverse imbalance of
BOP.
elimination of the adverse imbalance of
BOP.
§ To minimize imbalance in quantum & duration of international
trade.
trade.
FINANCIAL ASSISTANCE: IMF
landing facility
The IMF lends money only to
member countries with balance of payments problems. A member country with a
payments problem can immediately withdraw from the IMF the 25 percent of its
quota
member countries with balance of payments problems. A member country with a
payments problem can immediately withdraw from the IMF the 25 percent of its
quota
A member in greater difficulty
may request for more money from the IMF and can borrow up to three times its
quota provided the member country undertakes to initiate a series of reforms
and uses the borrowed money effectively. The frequently used mechanisms by the
IMF to lend money is-
may request for more money from the IMF and can borrow up to three times its
quota provided the member country undertakes to initiate a series of reforms
and uses the borrowed money effectively. The frequently used mechanisms by the
IMF to lend money is-
1)
Standby arrangement
Standby arrangement
2) Extended arrangements
3) Structural adjustment mechanism(with low-interest rates).
Standby facility:
The SBA is designed to help
countries address the short-term balance of payments problems. Program targets are
designed to address these problems and disbursements are made conditional on
achieving these targets. the length of an SBA is typically 12-24 months, and
payment is due within 3- 5 years of disbursement.
countries address the short-term balance of payments problems. Program targets are
designed to address these problems and disbursements are made conditional on
achieving these targets. the length of an SBA is typically 12-24 months, and
payment is due within 3- 5 years of disbursement.
Extended fund facility:
The extended fund facility
(EFF) provides long-term assistance to support members structure reforms to
address balance of payments difficulties of a long-term character. Drawing
under extended arrangements are repayable in 12 semiannual installments 4 and
half to 10 years after disbursement.
(EFF) provides long-term assistance to support members structure reforms to
address balance of payments difficulties of a long-term character. Drawing
under extended arrangements are repayable in 12 semiannual installments 4 and
half to 10 years after disbursement.
Structural adjustment facility:
The structural adjustment
facility (SAF) was created in 1986 to provide concessional financing to assist
LOW-INCOME COUNTRIES in addressing balance of payments financing needs arising
from structural weaknesses. The SAF was financed by reflows of trust fund
repayments and its loans were extended on the same terms with a 5 and half
years grace period and repayable in 10 years and at the interest rate of ½
percent per annum.
facility (SAF) was created in 1986 to provide concessional financing to assist
LOW-INCOME COUNTRIES in addressing balance of payments financing needs arising
from structural weaknesses. The SAF was financed by reflows of trust fund
repayments and its loans were extended on the same terms with a 5 and half
years grace period and repayable in 10 years and at the interest rate of ½
percent per annum.