Imf 2019
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The International Monetary Fund (IMF) is an organization of 189 countries that works to facilitate global monetary cooperation and financial stability. It provides policy advice and financing to member countries facing economic difficulties. The IMF was created in 1945 at the Bretton Woods conference to avoid competitive currency devaluations and promote international trade. It is governed by the 189 member countries and aims to foster global economic growth, secure financial stability, facilitate international trade, and reduce poverty worldwide.
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Imf 2019
- 1. INTERNATIONAL MONETARY FUND Presented by: Aakansh Agarwal(FA18001) Abhishek kr Chandan(FA18004) Pushpendra Singh(FA18040) Rijul Chopra(FA18043) 1
- 2. Overview Ch 1 2 The International Monetary Fund (IMF) is an organization of 189 countries, working to facilitate global monetary cooperation, secure financial stability, facilitate international trade, promote high employment, sustainable economic growth, and reduce poverty around the world. The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.
- 3. Contd.. Created in 1945, The IMF is governed by and accountable to the 189 countries that make up its near-global membership. South Sudan is the 188th country to join IMF in 2012. Nauru becomes 189th member of IMF, World Bank. The Republic of Nauru, a tiny South Pacific island nation in Pacific Ocean became the 189th member of the International Monetary Fund (IMF) and World Bank i.e. Bretton-Woods institutions. India joined the IMF in 1945 (when it was created). The resources for IMF loans are member countries themselves. IMF collects funds from member countries
- 4. Why IMF was created The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944. The 44 countries at that conference sought to build a framework for economic cooperation to avoid a repetition of the competitive devaluations that had contributed to the Great Depression of the 1930s.
- 5. Facts about IMF Membership: 189 countries Headquarters: Washington, D.C. Executive Board: 24 Directors each representing a single country or a group of countries Staff: Approximately 2,700 from 148 countries Total quotas: US$675 billion
- 6. Objective of IMF International Monetary Co-Operation: The most important objective of the Fund is to establish international monetary co-operation amongst the various member countries through a permanent institution that provides the machinery for consultation and collaborations in various international monetary problems and issues. Ensure Exchange Stability: Another important objective of the Fund is to ensure stability in the foreign exchange rates by maintaining orderly exchange arrangement among members and also to rule out unnecessary competitive exchange depreciations
- 7. Contd.. Balanced Growth of Trade: IMF has also another important objective to promote international trade so as to achieve its required expansion and balanced growth. This would ensure development of production resources and thereby promote and maintain high levels of income and employment among all its member countries. Correction of BOP Maladjustments: IMF also helps the member countries in eliminating or reducing the disequilibrium or maladjustments in balance of payments. Accordingly, it gives confidence to members by selling or lending Fund’s foreign currency resources to the member nations.
- 8. Structure It has three tiered system of functioning: Board of directors All nations(189) Finance minister/Central Bank governor Annual meetings Executive Board: They look after daily work. They have 24 members. 5 seats are reserved : USA, UK, JAPAN,GERMANY,FRANCE Managing Director Appointed for 5 years Can be reappointed Ch 1 8
- 9. She was named as the Managing Director of the IMF for a five-year term, starting on 5 July 2011. She was re-elected by consensus for a second five-year term, starting 5 July 2016, being the only candidate nominated for the post of Managing Director. Christine Lagarde MD of IMF
- 10. Special Drawing Rights The SDR was created as a supplementary international reserve asset. The SDR serves as the unit of account of the IMF and some other international organizations. Value of SDR is based on basket of major currencies. Weights assigned show relative importance. Dollar–41.73; EURO-30.93; YEN–8.33; POUND-8.09 Yuan-10.92 • 1 SDR = 98.81 rupees ( as on 19th feb 2019)
- 11. Finances Ch 1 11 Quotas: The IMF's resources come mainly from the money that countries pay as their capital subscription when they become members. Quotas broadly reflect the size of each member's economy: the larger a country's economy in terms of output and the larger and more variable its trade, the larger its quota tends to be. They also help determine how much countries can borrow from the IMF and their share in allocations of special drawing rights or SDRs (the reserve currency created by the IMF in 1969). Gold: The IMF holds a relatively large amount of gold among its assets, for reasons of financial soundness, also to meet unforeseen contingencies. The IMF holds 90.5 million ounces (2,814.1 metric tons) of gold, worth about $120.1 billion, making it the third-largest official holder of gold in the world.
- 12. History of IMF
- 13. 1.Cooperation and reconstruction (1944–71): Ch 1 13 •The breakdown of international monetary cooperation during the Great Depression of the1930s & WW2 led the IMF's founders to plan an institution charged with overseeing the international monetary . The new global entity would ensure exchange rate stability •The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar and, in the case of the United States, the value of the dollar in terms of gold) pegged at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement. •This par value system—also known as the Bretton Woods system—prevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.
- 14. 2.The end of the Bretton Woods System(1972-81): By the early 1960s, the U.S. dollar's fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued. The system dissolved between 1968 and 1973. Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish. Many feared that the collapse of the Bretton Woods system would bring the period of rapid growth to an end. In fact, the transition to floating exchange rates was relatively smooth, and it was certainly timely: flexible exchange rates made it easier for economies to adjust to more expensive oil, when the price suddenly started going up in October 1973. Floating rates have facilitated adjustments to external shocks ever since.
- 15. 3.Debt and painful reforms (1982–89) The oil shocks of the 1970s, which forced many oil-importing countries to borrow from commercial banks, and the interest rate increases in industrial countries trying to control inflation led to an international debt crisis. when interest rates began to soar in 1979, the floating rates on developing countries' loans also shot up. Higher interest payments are estimated to have cost the non-oil-producing developing countries at least $22 billion during 1978–81. At the same time, the price of commodities from developing countries slumped because of the recession brought about by monetary policies. The IMF's initiatives calmed the initial panic and defused its explosive potential.
- 16. 4. ASEAN Crisis (Late 90s): The late 1990s Asian meltdown was caused in large part by South Korea, Thailand, the Philippines, Malaysia and Indonesia's heavy reliance on short-term foreign loans and openness to hot money. When it became apparent in 1997 that private enterprises in those nations would not be able to meet their payment obligations, international currency markets panicked. Currency traders sought to convert their Asian money into dollars, and the Asian currencies plummeted. That made it harder for the Asian countries to pay their loans, and it made imports suddenly very expensive Having contributed in important ways to the development of the crisis, the IMF proceeded to make it worse.
- 17. Contd.. The IMF treated the Asian financial crisis like other situations where countries could not meet their balance of payment obligations. The Fund made loan arrangements to enable countries to meet foreign debt payments (largely to private banks in these cases) on the condition that the recipient countries adopt structural adjustment policies. But the Asian crisis differed from the normal situation of countries with difficulties paying off foreign loans. For example, the Asian governments were generally not running budget deficits. Yet the Fund instructed them to cut spending - - a recessionary policy that deepened the economic slowdown.
- 18. IMF & INDIA Date of Membership: December 27, 1945 Latest Country Assessment/Country Report: February 22, 2017 Special Drawing Rights (SDR): 1062.76 million Quota (SDR): 13114.4 million Number of Arrangements since membership: 7 ◦ 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. ◦ In 1991 it borrowed SDR 1.4 billion under the Compensatory Financing Facility
- 19. Contd.. India gets more voting rights in IMF reforms: India’s voting rights increase to 2.6 per cent from the current 2.3 per cent, and China’s, to 6 per cent from 3.8, as per the new division. The reforms bring India and Brazil into the list of the top 10 members of IMF, along with the U.S, Japan, France, Germany, Italy, the United Kingdom, China and Russia. India-born Harvard professor Gita Gopinath joins IMF as first woman Chief Economist. India urges IMF to implement quota reforms.
- 20. Publications of IMF 1. World Economic Outlook 2. Global Financial Stability Report. 3. Fiscal Monitor
- 21. Thank You! Ch 1 21