INTERNATIONAL MONETARY FUND (IMF)

PRESENTED BY

Soumik Mukherjee(4018)Saurabh Singh(4010)Vipul Bharatwal(4067)

WHAT IS IMF

“It is an organization of 186 countries ,working to foster global monetary cooperation , secure financial stability ,facilitate international trade ,promote high employment and sustainable economic growth and reduce poverty” .

The IMF is the most detailed attempt to organize the conduct of international monetary affairs.

The International Monetary Fund was created in July 1944, originally with 45 members, with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. (Condon, 2007)Headquarters in Washington D.C.

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn (R) briefs journalists on the outcomes of the International Financial Monetary and Financial Committee meeting with Egyptian Finance Minister and International Monetary and Financial Committee (IMFC) Chairman Youssef Boutros-Ghali (M), and IMF First Deputy Managing Director John Lipsky (L); April 25, 2009 at IMF Headquarters in Washington, DC.

Who runs the IMF?Member Countries

IMF Managing Directors

Executive Board

Board of Governors

First Deputy Managing DirDeputy Managing

DirDeputy Managing

Dir

MEMBERSHIP

There are two types of members:

1) ORIGINAL MEMBERS: All those countries whose representatives took part in BRETTONWOODS CONFERENCE and who agreed to be the members of the fund prior to 31st December,1945.

2) ORDINARY MEMBERS: All those who became its members subsequently.

*BANK has the authority to suspend any member and similarly every member is free to resign.

RESOURCES OF THE FUND

QUOTAS AND THEIR FIXATION: The fund has general account based on quotas allocated to its members .when a country joins the fund, it is assigned a quota that governs the size of its subscription, its voting power and its drawing rights .

FUND BORROWING: It was in force from October 1962 to December 1998 .At that time its total borrowing was SDR 17 billion .

OBJECTIVES OF THE IMF

INTERNATIONAL MONETARY CO OPERATION

TO FACILITATE EXPANSION AND BALANCED GROWTH OF INTERNATIONAL TRADE

TO PROMOTE EXCHANGE STABILITY GENERATING HIGHER EMPLOYMENT

AND INCOME ABOLITION OF EXCHANGE

RESTRICTION AID TO MEMBERS DURING

EMERGENCY TO SHORTEN THE DURATION AND

LESSEN THE DEGREE OF DISEQUILIBRIUM IN THE INTERNATIONAL BALANCE OF PAYMENTS OF MEMBERS.

MAIN FUNCTIONS OF THE FUND

DETERMINING THE RATE OF

EXCHANGE BY EVERY COUNTRY

FUND LENDING

CREDIT TRANCHES

A CENTRAL BANK’S BANK

TRAINING AND TECHNICAL ASSISTANCE

CONSULTANCY ROLE

ACHIEVEMENTS OF THE IMF

INTERNATIONAL MONETARY CO-OPERATION

EXCHANGE STABILITY

CHECKING COMPETITIVE DEPRECIATION

INCREASED ASSISTANCE

INCREASE IN CAPITAL RESOURCES

EXPANSION OF TRADE

GURANTEE AGAINST COMPETITIVE DEVALUATION

Criticism Many observers comment on the fact that the IMF has a

”one size fits all” mentality, that whatever the situation the IMF prescribes basically the same set of policies.

IMF does not adequately monitor the impact of its decisions on the poor.

Some of U.S. critics say, IMF is an incredibly wasteful organization that takes valuable funds and pours it down the drain of developing economies whose leaders become fabulously rich off the money without any intention of ever helping out anyone.

the IMF has no effective authority over the domestic economic policies of its members.

ADVANTAGES TO INDIA OF THE MEMBERSHIP OF IMF

FINANCIAL ASSISTANCE FROM THE FUND

loan given by IMF to INDIA

HELPS IN FOREIGN EXCHANGE CRISIS

FREEDOM FROM STERLING

MEMBERSHIP OF THE WORLD BANK

ECONOMIC CONSULTATION

YEAR 1991 1994 1996 1998 2000

IN MILLION $ 2,623 5,040 2,374 664 26

The relationship between the IMF and India has grown strong over the years. In fact, the country has turned into a creditor to the IMF. India and IMF must continue to boost their relationship this way, as it will prove to be advantageous for both. The International Monetary Fund, or IMF, predicted lower growth in India and economic contractions in the US, Japan and euro region next year, calling for further interest rate cuts and fiscal stimulus.India recorded a GDP growth of 9.8% in 2006 and 9.3% in 2007. Its estimate for India’s growth in 2009 is now 6.3%.

The current relationship between IMF and India

Cont..

An economist said India could grow faster than IMF’s estimate. “Growth next year will definitely be slower than this year, but it may still touch 7%. New oil refineries coming up next year will also boost GDP (gross domestic product). I agree with IMF that growth momentum will slow further, but it may pick up towards the end of next year,” said Dharmakirti Joshi, principal economist with credit rating agency Crisil Ltd.

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; and

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.