Final Project IMF

8/6/2019 Final Project IMF

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INTERNATIONALINTERNATIONALMONETARY FUNDMONETARY FUND

Presented by:

Rachit Sahaye

(09)Kapil Jain (18)

Ketan Shah (45)


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Introduction

IMF is an InternationalForum of187 countries, working

towards:

Fostering globalmonetary cooperation

Securing financialstability

Facilitating Internationaltrade

Promoting highemployment

Promoting sustainableeconomic growth


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History of IMF

IMF was created in 1946, as an outcome of

Bretton Woods Conference. Bretton Wood Agreement was contracted in 1944

and IMF was created in 1946.

IMF started collaborative services with IBRD

(International Bank for Reconstruction andDevelopment) in 1947.

IMF was created to support orderly internationalcurrency exchanges, and to help the nationshaving balance of payment problems, through

short term cash loans.

IMF headquarter is in Washington D.C., U.S.A.

Five largest shareholders are Japan, UnitedStates, Germany, France and United Kingdom

The current head of IMF is Dominique Strauss-


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Membership & Governance

E sta b lish e d w ith 2 9 m e m b e r

co u n trie s ,To d a y 1 8 7 m e m b e rco u n trie s

IM F is a cco u n ta b le to its,m e m b e r cou n trie s a n d is

:G ove rn ed b y 1 M a n a g in g D ire cto r( -Dominique Strauss

)K a h n

(E xecu tive B oa rd 2 4)m em b ers (B oa rd o f G ove rn ors 1

)fro m e a ch cou n try S taff of ab ou t 2 6 8 0

, -p e rson s tw o th ird

( -embership Growth 1945 2003


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Functions of IMF

Surveillance

Gathering data and assessing economic policiesof countries

Establishing multilateral system of

payments Eliminate foreign exchange restrictions

Technical Assistance

Strengthening human skills and institutionalcapacity of countries

IT provides practical guidance and training

on how to upgrade institutions, and designappropriate macroeconomic, financial, and


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Functions of IMF (Contd.)

Financial Assistance

Lending to countries to support reforms

Making loans available to countries thathave trouble

meeting their international payments andcannot otherwise find sufficient financing onaffordable terms


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Membership & Quotas

Q u o ta s re fle ct th e size o f e a ch m e m b e rs.e co n o m y

Q u otas a n d eq u al n u m b er of b asic votes e ach

.m e m b e r h a s d e te rm in e co u n trie s vo tin g p o w e rQ u o ta a lso h e lp s d e te rm in e h o w m u ch

.co u n trie s ca n b o rro w fro m th e IM F

,In A p ril 2 0 0 8 th e IM F's m e m b e r co u n trie s a g re e d,th a t th e q u o ta s o f e m e rg in g m a rke t co u n trie s

.sh o u ld b e in cre a sed

Q u o ta s a re re vie w e d e ve ry five ye a rs a n d ca n b ein c re a se d w h e n d e e m e d n e c e ssa r b th e


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p e cia l D ra w in g R ig h t , ,In 1 9 6 0 s d u rin g ex p a n sion o f w o rld e con om y U S

.D o lla rs a n d G o ld w a s th e re serve u sed b y IM F B u t, .la te r S p e cia l D ra w in g R ig h t w a s cre a te d

( )T h e S p e cia l D ra w in g R ig h t S D R is an in te rn a tio n a l; .re se rve a sset it is ju st a u n it o f a cco u n t It is n o t

.a co in o r p a p e r cu rre n cy Th e valu e of th e S D R is ba sed on a b asket of key- , ,in te rn a tio n a l cu rre n cie s E u ro Ja p a n e se Ye n

, . .Po u n d S te rlin g a n d U S D o lla r

W e ig h te d a ve ra g e o f a ll fo u r cu rre n cie s is

ta ke n to d e te rm in e S D R .To d a y S D R a re u sed ve ry le ss S D R a re la rg e ly u se d

to settle th e B a la n ce o f Pa ym e n t d e ficit a m o n g.th e co u n trie s


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o ld R e se rv e s T h e IM F h o ld s a re la tive ly la rg e a m o u n t o f g o ld

a m o n g its a sse ts to m e e t u n fo re see n.co n tin g e n cie s

. ( ,T h e IM F h o ld s 1 0 3 4 m illio n o u n ce s 3 2 1 7 m e tric

) , -to n s o f g o ld w o rth a b o u t $ 8 3 b illio n a s of e n d, -A u g u st 2 0 0 9 m a kin g it th e th ird la rg e st o fficia l.h o ld e r o f g o ld in th e w o rld

Pa r V a lu e S yste m

T h e se llin g o f g o ld b y th e IM F is ra re a s it re q u ire sa n E xe cu tive B o a rd d e cisio n w ith a n 8 5 p e rce n t

.m a jo rity o f th e to ta l vo tin g p o w e r T h e la st tim e

, .g o ld w a s so ld w a s in A p ril 2 0 0 1 w ith 1 2 9 m illio n


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o rro w in g A rra n g e m e n ts IM F h a s e n te re d in to tw o sta n d in g m u ltila te ra l

b o rro w in g a rra n g e m e n ts a n d o n e b ila te ra l.b o rro w in g a g re e m e n t

( )U n d er N ew A rran g em en ts to B orrow N A B an d th e

( ),G e n e ra l A rra n g e m e n ts to B o rro w G A B a n u m b e ro f m e m b e r co u n trie s a n d in stitu tio n s sta n d re a d y.to le n d a d d itio n a l fu n d s to th e IM F

G A B a llo w s IM F to b o rro w fro m 1 1 in d u stria lcou n trie s an d u n d e r N A B it ca n b o rro w fro m 2 6.co u n trie s

C u rre n tly 5 1 b illio n U S D is a llo w e d u n d e r th e se

.arrangem ents


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n co m e M o d e l IM F s m a in sou rce o f in co m e is fro m le n d in g

.o p e ra tio n s ,H o w e ve r th is w a s n o t a su sta in a b le sou rce o f

re ve n u e a n d in 2 0 0 7 a co m m itte e w a s fo rm e d toreco m m en d an d in trod u ce n ew sou rce of re ve n u e

fo r IM F :S o m e o f th e re com m e n d a tio n s w e re

E xp a n sio n o f in ve stm e n t a ctivitie s C re a tio n o f e n d o w m e n t fu n d C h a rg e s fo r th e se rvice s p ro vid e d d ire ctly to

m e m b e r co u n trie s1.

2.


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u rre n t C h a lle n g e s W ith tra d e a n d ca p ita l flo w p lu m m e tin g a ro u n d th e,w o rld IM F is fo re se e in g p ro b le m s fo r m a n y

.co u n trie s It is se e kin g to a d d to its re so u rce s a n d h a s a lre a d y

m a d e b o rro w in g a rra n g e m e n ts w ith sev e ra l

.co u n trie s (A g re e m e n ts are a lre a d y in p la ce w ith Ja p a n $ 1 0 0

), ( ), ( .b illio n C a n a d a $ 1 0 b illio n a n d N o rw a y $ 4 5),b illio n a n d a n u m b e r o f o th e r co u n trie s h a ve

, , .co m m itte d fu n d s th ro u g h lo a n s to IM F IM F is a lso tra ck in g e co n o m ic a n d fin a n cia l

d e ve lo p m e n t w o rld w id e a n d is p ro vid in g p o licym a ke rs w ith la te st fo re ca st a n d a n a lysis o f

.d e ve lo p m e n t in fin a n cia l m a rke ts


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M F s R o le in F in a n cia l-risis 2 0 0 8 0 9 IM F h e lp e d se ve ra l co u n trie s d u rin g th e w o rld

.e co n o m ic crisis T h is is re fle cte d in le n d in g b y th eIM F to m e m b e r co u n trie s

58.7

20.6

14.4

60.0

$0

$10

$20

$30

$40

$50

$60

$70

End of 2005 End of 2006 End of 2007 Jan. 2009

USDbillions

IMFCredit: Amounts Outstanding and undrawn balances

Source: IMFFinancial Resources and Liquidity PositionTarget for IMFlendable resources: $500 bn

Managing Director: 2/13/09


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MF s Role in Financial Crisis- ( .)008 09 Contd An Interagency Group on Economic and Financial

,Statistics was formed under the chair of the IMF, , , , ,along with the BIS ECB Eurostat OECD the UN and

,the World Bank with a purpose to draft a framework:forIncreasing assets to capital ratios of

financial institutions Tackling imbalances in current accounts Servicing fiscal deficits

,In April 2009 the Group of Twenty industrializedand emerging market economies agreed to triple the

,IMF s lending capacity to $750 billion enabling itto inject extra liquidity into the world economy.during the time of crisis

IMF especially financed several low income countries,during the crisis and advised them on how to

tackle the situation through various monetary and.fiscal policies


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India and IMF

India joined IMF in 1945, hence becoming itsfounder member

India has a quota of SDR 4158.20 Million

In the past, IMF has provided a lot of financialassistance to boost the Indian economy,

especially during economic reforms of 1990s

During the Dominique Strauss-Kahns visit toIndia in December 2010, he recognised India asplaying an important role in the Group of 20

leading economies, by being an importantrapidly emerging economy, driven by:

Significant technological advances which isbuttressed by Indias commitment to

excellence in higher education Its focus on inclusive rowth b aimin to


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India and IMF (Contd.)

IMF has suggested that India can become afinancial superpower by bringing in someeconomic reforms, and by having a consistentgrowth of 8%

The required economic reforms are with

respect to controlling inflation and fiscalconsolidation

The Indian authorities have also requested theIMF to carry out another FSAP (Financial Sector

Assessment Program) with RBI


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&M F W o rld B a n k a t a G la n ceInternational Monetary FundOversees the international monetarysystemPromotes exchange stability andorderly exchange relations among itsmember countriesAssists all members that findthemselves in temporary balance ofpayments difficulties by providing shortto medium term credits

Supplements the currency reserves ofits members through the allocation ofSDRs (special drawing rights)

World BankSeeks to promote the economicdevelopment of the world'spoorer countriesAssists developing countriesthrough long-term financing ofdevelopment projectsProvides to the poorestdeveloping countries whose percapita GNP is less than $865 a

year special financial assistancethrough the InternationalDevelopment Association (IDA)


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&M F W o rld B a n k a t a G la n ce( . )ontdInternational Monetary FundDraws its financial resources principallyfrom the quota subscriptions of itsmember countriesHas at its disposal fully paid-in quotasnow totaling SDR 145 billion (about$215 billion)Has a staff of 2,300 drawn from 182member countries

World BankEncourages private enterprises indeveloping countries through itsaffiliate, the International FinanceCorporation (IFC)Acquires most of its financialresources by borrowing on theinternational bond marketHas an authorized capital of $184billion

Has a staff of 7,000 drawn from180 member countries


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riticism o f IM F,O ve r tim e th e IM F h a s b e e n su b je ct to a ra n g e o f

:criticism s ,In e a rlie r d a ys th e IM F h a ve b e e n criticise d fo r

a llo w in g in fla tio n a ry d e va lu a tio n s ,In th e p a st th e IM F h a s a lso b e e n criticise d fo r

su p p o rtin g m ilita ry d icta to rsh ip s in B ra zil a n dA rg e n tin a

IM F is criticise d fo r m a kin g lo a n s co n d itio n a l o n th eim p le m e n ta tio n o f ce rta in e co n o m ic p o licie s o f

stru ctu ra l a d ju stm e n ts an d m a cro e co n o m ic,in te rve n tio n w h ich o fte n m a ke th e situ a tio nw orse for a country

A s w e ll a s b e in g criticise d fo r im p le m e n tin g 'fre e ,m a rke t re fo rm s o th e r criticise th e IM F fo r b e in g

to o in te rve n tio n ist


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mportance of IMF for&ountries MNEsBeing a member of IMF is one of the ways for

countries to increase their sphere of influence

Countries also benefit from the expert domainknowledge that they get on crafting their monetary

and financial policies ,It s especially beneficial for developing nations by

means of financial help provided in case of crisisMNEs wanting to enter a country can get to know the

,financial conditions there from various reportsthat IMF generates

,In terms of trade MNEs can also get to know theexchange rate stability scenario of a prospective,country and its BOP standing and what measures are

being taken for the same , ,MNEs especially financial institutions can benefit

from various projects being undertaken by IMF in apotential host country


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THANK YOU!THANK YOU!

Final Project IMF

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