UGC NET : International Monetary Fund (IMF)
UPSC : International Monetary Fund (IMF)
International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an organization of 189 countries
- Bretton Woods is a place in New Hampshire State of USA
- In 1944, President Roosevelt hosted a conference here, to rebuild the world economy, after Second World War.
- Delegates of 44 allied nations came to participate (India was represented by Sir D. Deshmukh, the first Indian Governor of RBI)
- Officially known as United Nations Monetary and Financial Conference, commonly known as Bretton Woods because of the place where it was held.
This conference resulted into creation of four important organizations viz.
- IMF (International monetary fund)
- World Bank
- GATT (later becomes WTO in 1995)
- Fixed Exchange Rate system (Discarded in 1970s)
International Monetary Fund
- HQ – Washington
- Official language – Chinese, English, French, Russian, Spanish, Arabic
- Formally created in 1945 by 29 member countries
- Stated goal was to assist in the reconstruction of world’s international payment system post World War II
- Countries contribute funds to a pool through a quota system from which countries with payment imbalances temporarily can borrow money and other resources.
International Monetary Fund (IMF)
Organization’s objectives as stated in the Articles of Agreement
- To promote international economic co-operation
- To promote international trade
- To promote employment and exchange-rate stability
- Make financial resources available to member countries to meet balance of payments needs
- Foster global monetary cooperation
- Secure financial stability
- Facilitate international trade
- Promote high employment and sustainable economic growth
- And reduce poverty around the world
- To oversee the fixed exchange rate arrangements between countries
- To provide short-term capital to aid balance of payments
- Provides Financial Assistance
- IMF Surveillance
- Capacity Development: IMF also helps countries to make progress towards the Sustainable Development Goals (SDGs)
Board of Governors: It consists of one governor and one alternate governor for each member country. Each member country appoints its two governors.
- Board of Governors is advised by two ministerial committees
- the International Monetary and Financial Committee (IMFC)
- Development Committee
- Boards of Governors of the IMF and the World Bank Group normally meet once a year, during the IMF–World Bank Annual Meetings, to discuss the work of their respective institutions
- International Monetary and Financial Committee (IMFC): IMFC has 24 members, drawn from the pool of 189 governors, and represents all member countries.
- It discusses the management of the international monetary and financial system.
- It also discusses proposals by the Executive Board to amend the Articles of Agreement.
- And any other matters of common concern affecting the global economy.
- Development Committee: is a joint committee(25 members from Board of Governors of IMF & World Bank), tasked with advising the Boards of Governors of the IMF and the World Bank on issues related to economic development in emerging market and developing countries.
- It serves as a forum for building intergovernmental consensus on critical development issues.
Executive Board: 24 member Executive Board is elected by the Board of Governors.
- The IMF’s 24-member Executive Board conducts the daily business of the IMF and exercises the powers delegated to it by the Board of Governors, as well as those powers conferred on it by the Articles of Agreement
- It discusses all aspects of the Fund’s work, from the IMF staff’s annual health checks of member countries’ economies to policy issues relevant to the global economy.
- The Board normally makes decisions based on consensus, but sometimes formal votes are taken.
- The votes of each member equal the sum of its basic votes (equally distributed among all members) and quota-based votes. Therefore, a member’s quota determines its voting power.
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 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
INDIA & 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.
- 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 2.75%
- India is 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.
UGC NET JULY 2018
Select the correct code of the following statements being correct or incorrect.
Statement (I): International liquidity encompasses the international reserves only.
Statement (II): International liquidity covers only official holdings of gold, foreign exchange, SDRs and reserve position in the IMF available for the settlement of the international transactions.
(A) Both the statements are correct.
(B) Both the statements are incorrect.
(C) Statement (I) is correct while Statement (II) is incorrect.
(D) Statement (I) is incorrect while Statement (II) is correct.
Which one of the following is not correct?
(A) IMF’ headquarters is in Washington, DC
(B) IMF has 198 countries as its members
(C) IMF is an outcome of the Bretton Woods Conference
(D) IMF was found on July 7, 1944
Any Country consistently facing balance of payment deficiency can approach
(A) The World Bank
(D) The IMF and the IBRD
In which year the IMF introduced the Special drawing Right to its member countries
If a member has less currency with the IMF than its quota, the difference is called
(C) Reserve Tranche
(D) Reserve Margin
Which of the following statement is NOT correct regarding the membership of the IMF?
(a) Currently its membership is 189
(b) All “member countries” of the IMF are members of the United Nations
(c) All member countries of the IMF are not sovereign states
(d) Nauru is the latest member of the IMF
Explanation: All member countries of the IMF are not sovereign states therefore all “member countries” of the IMF are not members of the United Nations.
The value of Special Drawing Right (SDR) is determined by the basket of ____currencies.
Explanation: The currencies are, US Dollar, Japanese Yen, British Pound, Chinese Yuan and Euro.
Which of the following is known as the Paper Gold?
(a) US Dollar
(c) Demand draft
(d) Special Drawing Right