1425483 file ifi briefs imf final

7/31/2019 1425483 File Ifi Briefs Imf Final

http://slidepdf.com/reader/full/1425483-file-ifi-briefs-imf-final 1/4

Membership e IMF is owned by 187 member countries. Eachcountry is a shareholder of the institution and is assigned aquota which determines its nancial contribution, votingpower, and how much nancing it can receive from theIMF. e size of a country’s quota is based roughly on thesize of its economy and (for high-income countries) thehistorical capital lent to the IMF.

e United States is the largest single shareholder, with16.5 percent of votes, followed by Japan (6.2 %),Germany (5.8%), the United Kingdom (4.3%) andFrance (4.3%). e remaining shares are divided amongthe other member countries in smaller increments (see

table 1). Together, all developing-country borrowers have37 percent of the voting share. e 48 sub-SaharanAfrican nations share less than 6 percent of the votes.

Where Does the IMF operate? e IMF is headquartered in Washington, D.C., andemploys about 2,400. IMF staff members are primarily economists with wide experience in macroeconomic and

nancial policies. Most work at the headquarters, but afew serve in small overseas offices around the world.

Governance e organizational leadership structure at the IMF ismade up of the board of governors, the executive board,and the managing director. e board of governors is thehighest decision-making body and consists of onegovernor for each member country, generally a membercountry’s minister of nance. ey meet once a year atthe annual meetings of the IMF and World Bank Group. e governors delegate day-to-day authority over operational policy, lending, and other businessmatters to members of the executive board, who work

on-site at the institution’s headquarters. ere are 24members on the executive board, representing all 187member countries.

e managing director of the IMF is responsible for theoverall management of the institution and serves as thechair of the executive board. Historically, selection of thmanaging director is based on an unwritten, informal

The primary role of the International Monetary Fund (IMF) is to promotestability of the international monetary system, the system of exchangerates and international payments that enables countries to transact withone another. To do so, the IMF provides financial assistance in the form of loans to help member countries address balance-of-payments problems,stabilize their economies, and restore sustainable economic growth. TheIMF also carries out technical assistance and surveillance activities that helpstrengthen underlying economic fundamentals of member countries andthe global financial systems at large.

CGD Brief International Monetary Fund Jenny Ottenhoff

I n t e r n a t i o n a l M o n e t a r y F u n d

Table 1Quota and Voting SharesTop 10 IMF Shareholders

1 United States

2 Japan

3 Germany

4 France

5 United Kingdom

6 China

7 Italy

8 Saudi Arabia

9 Canada

10 Russia

Quota(% of total)

Votes(% of total)

17.72 16.77

6.57 6.24

6.13 5.82

4.52 4.30

4.52 4.30

4.01 3.82

73.32 3.16

82.94 2.81

2.68 2.56

2.50 2.39



understanding between the United Statesand Europe. Under this arrangement, which dates to the creation of the twoinstitutions in 1944, the Europeangovernments nominate the managingdirector of the IMF. Formally, thenominated leader is approved andappointed by the executive board to serveup to two ve-year terms.

Funding Te IMF gets most of its nancialresources from quota subscriptions paid inby member countries. Quota subscriptionsdetermine the maximum nancial

contribution a member country is obligedto provide. Te United States is currently the largest member of the IMF with aquota of about $68 billion.

Lending Te IMF provides loans through severaldifferent instruments, called facilities, which are tailored to address the differentneeds of borrowing countries. Te mainlending facilities are nonconcessional andcarry market-based interest rates for short-to medium-term loans. Tese facilities aregenerally used by middle-income membercountries to boost foreign exchange

reserves. Other facilities provide lines of credit to countries with a track record of strong economic policies and performancto prevent or mitigate the effects of anexternal shock and reassure nancialmarkets and investors (table 2).

Te IMF also maintains concessionallending facilities that provide low- and nointerest loans to low-income membercountries. Tese facilities help protectdeveloping countries against the severeimpact of the global nancial crisis andevents beyond their control, such as tradeshocks and natural disasters.

Membership

Headquarter

Staff

Funding

Recipientsof Funding

Biggest Borrowers(FY2010)

Focus

Purpose

IMF

187 member countries

Washington, D.C.

2,400

Subscribed quotas $376 billion (as of 5/25/11)

All member countries

Greece, Portugal, Ireland

Macroeconomics and global financial stability

World Bank

187 member countries

Washington, DC

10,000

Subscribed capital of $189 billion

Middle- and low-income

countries

India, Mexico, South Africa (IBRD)India, Vietnam, Tanzania (IDA)

Long-term poverty reductionand sustainable development

*Provide long-term loans, technical support, andexpertise for development assistance in middle-andlow-income countries

*Oversea the international monetary systems*Maintain stability of exchange rates*Provide short-term loans for general budget support

Distinguishing the IMF from the World BankThe IMF and the World Bank are distinct institutions withvery different roles in the global community. While theyshare a few similarities—they are both headquartered inWashington, D.C., and they both provide financial assistanceto member countries—they differ in size, scope, andmandate. The IMF focuses on maintaining and promotingglobal financial stability while the World Bank focuses onpoverty reduction and development. The IMF offers short-

term loans to financially distressed countries for generalbudget support while the World Bank offers long-termloans to poorer countries for development. In addition, theWorld Bank also offers financial assistance in the form of nonconcessional loans and grants to poorer countries whilethe IMF does not. See the table below for more comparisonsbetween the two international financial institutions.



Both nonconcessional and concessionalIMF loans are often linked to conditionsthat aim to adjust borrowing country’seconomic policies and correct underlyingeconomic or structural problems.

e amount of lending the IMF providesdepends on demand and varies widely from year to year. Before the 2008 global

nancial crisis, total IMF lending wasabout $14 billion, its lowest level since1975. By 2011, lending had reachedaround $280 billion, the largest amountever committed by the IMF (see gure 1).

Surveillance and Technical Assistance e IMF does more than lending; it alsocarries out nancial surveillance andprovides technical assistance to helpcountries keep their nancial houses inorder. IMF surveillance continually monitors national, regional, and global

nancial developments and providespolicy advice to member countries tohelp maintain stability and prevent crisesin the international monetary system.

It focuses on macroeconomicdevelopments and provides regularassessments of global nancial marketsand regional economic outlooks.

e IMF also offers technical assistanceand training to help member countriesstrengthen their capacity to design andimplement effective nancial policies. Technical assistance is offered in severalareas, including tax policy andadministration, expenditure management,

300

250

200

150

100

50

02008 2009 2010 2011

IMF Loans Committed,FY2008–2011 (billions USD)

Issues for CongressOversight: Congress exercisesoversight of U.S. participation inthe IMF through legislativemandates, which can influence

certain institutional policies andwithhold funding unless certaininstitutional reforms are met.

Economic Recovery: IMFsurveillance tracks economic andfinancial developments worldwideso that it can help policymakerswith the latest forecasts andanalysis of developments in thefinancial markets.

Effectiveness: The effectiveness of the IMF in spurring economicrecovery and reform in financiallydistressed countries is debated,particularly issues related totransparency, efficiency, andcontrol over leveraging of funds. Asthe largest single shareholder of the IMF, the United States exercisesconsiderable influence overreforms to improve these areas.

Type

Stand-by agreements

Flexible Credit Line

Precautionary Credit Line

Extended Fund Facility

Extended Credit Facility

Standby Credit Facility

Rapid Credit Facility

Terms

Nonconcessional

Nonconcessional

Nonconcessional

Nonconcessional

Concessional

Concessional

Concessional

Duration

1–2 years

1–2 years

1–2 years

3 + years

3 years

1–2 years

1 disbursement

Use

Most common nonconcessional lending to countries with

short-term balance of payment problems.

For countries with strong financial track records. Used primarilyfor crisis prevention or mitigation.

Only used for crisis prevention by countries with soundfinancial fundamentals and policies.

Used for longer-term balance of payment problems andfundamental economic reform.

Medium-term support to LIC's.

Short-term support to LIC's. Can be used on a precautionary basis.

Rapid financial assistance to LIC's.

Table 2

IMF Lending Facilities



monetary and exchange-rate policies,banking and nancial-system supervisionand regulation, legislative frameworks,and statistics.

Who Borrows from the IMF?

Any member country may borrow fromthe IMF. Governments request IMF assistance when they nd themselves inan economic crisis, whether caused by orpoor macroeconomic planning or a suddenshock to their economy. In FY2011, thelargest borrowers were Greece, Portugal,and Ireland.

Recent Reforms and Future Outlook

e IMF is implementing a number of reforms to improve governance, enhance itslending facilities, and preserve availableresources. In 2010, the IMF adjusted votingshares to increase the representation of emerging markets and developing countries.In addition, upon her appointment in 2011,

managing director Christine Lagardappointed a former deputy governor of thePeople’s Bank of China as one of four IMF deputy managing directors—the rst timethat a Chinese official has held such a post. e IMF has also signi cantly increasedlending to help member countries cope withthe 2008 nancial crisis, including a sharprise in concessional lending to low-incomecountries. To improve and sustain theseefforts, the IMF created new lending facilitiesto better meet countries’ needs and increasedits lending through bilateral loans withmember countries totaling over $250 billion. e IMF is also working closely withgovernments and other international

institutions to improve risk analysis andprevent future crises. As the impact of thenancial crisis continues to be weighed, the

United States and other nations have acommon interest in ensuring that the IMF isboth well managed and well funded.

Endnotes

Jenny Ottenhoff is a policy outreach associate at thCenter for Global Development. She bene tted frominsights and feedback from Lawrence MacDonald,Liliana Rojas-Suarez, and Todd Moss during thedrafting of this br ief, which draws on previously pu

lished work, including the 2010 IMF annual report.

The ABCs of the IFIs: Understanding the U.S.Role in Shaping Effective International Financial Institutions forthe 21st CenturyThe International Financial Institutions (IFIs) are major sources of financialand technical support for developing countries and play a critical role inpromoting economic development and global stability. As the interests of high-income and developing countries become more linked, the role of the

IFIs will become even more prominent.

The United States and other nations have a common interest in ensuringthat the IFIs are well managed and well funded. This CGD brief is one of sixon the financial and governance issues facing the IFIs. Please [email protected] to receive any of the others:

• The World Bank• The International Monetary Fund• The International Finance

Corporation

• The Regional Development Banks• Leadership Selection at the IFIs• The ABCs of the General Capital

Increase

1800 Massachusetts Avenue NWThird FloorWashington DC 20036Tel 202.416.4000

2011. Some rights reserved.BY-NC 3.0

1425483 file ifi briefs imf final

Documents