2. IMF or International Monetary Fund was established way back in 1944 with a
vision to improve as well as stabilize world economy. Keeping in mind the
economic crisis that the world has experienced during the Great Depression
and World War II, the representatives of 45 countries assembled in Bretton
Woods, New Hampshire in the United States to create a new economic
framework to avoid such crisis in future.
The International Monetary Fund was established by an international
treaty in 1945 to help promote the health of the world economy. Headquartered
in Washington,D.C.,it is governed by its almost global membership of 184
countries.
The IMF is the central institution of the international monetary system-
the system of international payments ands exchange rates among national
currencies that enable business to take place between countries.
3. The
Origins of
the IMF
The new monetary system initiated at the conference became known
as Bretton Wood system. International Monetary Fund, the brain
child of this conference came into being in July, 1944, and started its
operation in 1947 with the membership of 30 countries. Though
Bretton Wood system collapsed, IMF is still instrumental in carrying
out its financial operation, and is headquartered in Washington, D.C.,
USA.
4. OBJECTIVES OF IMF (PURPOSES)
International Monetary Fund (IMF) is an international financial institution that
promotes economic cooperation among the member countries for ensuring
rapid economic development throughout the world. The purposes of the
International Monetary Fund are:
1.To promote international monetary cooperation through a a permanent
institution which provide the machinery for consultation and collaboration on
international monetary problems.
2. Another important objective is the expansion of global trade, which in turn
will not only promote high level of employment and income, but would also be
able to sustain it. IMF also intends to promote international trade by removing
foreign exchange restrictions. It aims at maintaining balanced growth of the
world economy.
3.To provide confidence to members by making general resources of the Fund
temporarily available to them under adequate safeguards, thus providing them
with an opportunity to correct maladjustments in their balance of payments
without resorting to measures destructive of national or international
prosperity.
5. INTERNATIONAL MONETARY
FUND ORGANISATION CHART
International
Monetary and
Financial
Committee
Board of
Governors
Executive
Board
MANAGING
DIRECTOR
Deputy Managing
Directors
Joint IMF-World
Bank Development
Committee1
Independent
Evaluation Office
Investment Office-
Staff Retirement
Plan
Office of
Budget &
Planning
Office of
Internal Audit
and Inspection
6. Organization
of
IMF
The IMF is accountable to its member countries, and this
accountability is essential to its effectiveness.
The day-to-day work of the IMF is carried out by an Executive
board, representing the IMF’s 184 members, and an internationally
recruited staff under the leadership of a Managing Director and
three Deputy Managing Directors – each member of this
management team being drawn from a different region of the world.
The powers of the Executive Board to conduct the business of the
IMF are delegated to it by the Board of Governors, which ultimate
oversight rests.
7. Board of
Governors
The Board of Governors are represented by all member
countries and it is the highest authority governing the
IMF . It usually meets once a year, at the Annual
Meetings of the IMF and the World Bank. Each
member country appoints a Governor – usually the
country’s minister of finance or the governor of its
central bank – and an Alternative Governor. The Board
of Governors decides on major policy issues but has
delegated day-to-day decision-making to the Executive
Board.
8. Executive Board
It consists of 24 Executive Directors, with the
Managing Director as Chairman. The Executive Board
usually meets three times a week, in full-day sessions,
and more often if needed, at the organization’s
headquarters in Washington, D.C. The IMF’s five
largest shareholders-the United States, Japan,
Germany, France, and the United Kingdom-along with
China, Russia, and Saudi Arabia, have their own seats
on the Board. The other 16 Executive Directors are
elected for two-year terms by groups of countries ,
known as constituencies.
9. Managing
Director
The Executive Board selects the Managing Director, who besides serving as
the chairman of the Board, is the chief of the IMF staff and conducts the
business of the IMF under direction of the Executive Board. Appointed for a
renewable five-year term, the Managing Director is assisted by a First Deputy
Managing Director and two other Deputy Managing Directors.
IMF employees are international civil servants whose responsibility is to the
IMF, not to the national authorities. The organization has about 2,800
employees recruited from 141 countries. About two-third of their professional
staff are economists. The IMF maintains offices in Paris and Tokyo for
liaison with other international and regional institution, and with
organizations of civil society. It also has offices in New York and Geneva,
mainly for liaison with other institutions in the UN system.
10. The IMF supports its membership by providing
policy advice to governments and central banks based on
analysis of economic trends and cross-country experiences;
research, statistics, forecasts, and analysis based on tracking
of global, regional, and individual economies and markets;
loans to help countries overcome economic difficulties;
concessional loans to help fight poverty in developing
countries; and
technical assistance and training to help countries improve the
management of their economies.
Key IMF
activities
11. Financing of the
IMF
The IMF’s resources come mainly from the quota (or capita) subscription
that countries pay when they join the IMF, or following periodic reviews in
which quotas are increased. Countries pay 25% of their quota subscription
in Special Drawing Rights (SDR’s) or major currencies, such as U.S. dollars
or Japanese yen; the IMF can call the remainder, payable in the member’s
own currency, to be made available for lending as needed. Quotas
determine not only a country’s subscription payments, but also the amount
of financing that it can receive from IMF, and its share in SDR allocations.
Quota also are the main determinant of countries’ voting power in the IMF.
Quotas are intended broadly to reflect members’ relative size in the
world economy: the larger a country’s economy in terms of output, and the
larger and more variable its trade, the higher its quota tends to be.
12. Cont………..
Example:
The United States of America, the
world’s largest economy, contributes most to
the IMF, 17.5% of the total quotas; palau, the
world’s smallest, contributes 0.001% . If
necessary, the IMF may borrow to
supplement the resources available from the
quotas .
13. Determination of Member Country’s Quota
A member quota is broadly determined by its economic position relative to
other members . When a country joins the IMF , it is assigned an initial
quota in the same range as the quotas of existing members considered by
the IMF to be broadly comparable in economic size and characteristics.
Quotas are denominated in Special Drawing Rights (SDR’s).
Functions of Quotas
A member’s quota delineates basic aspect of its financial and organizational
relationship with the IMF, including:
1. Subscriptions: A member’s quota subscription determines the maximum
amount of financial resources the member is obliged to provide to the
IMF.A member must pay its subscription in full upon joining the Fund; 25 %
must be paid in SDRs or widely accepted currencies (such as US dollar,
the euro, the yen, or the pound sterling), while the rest paid in the
member’s own currencies .
14. Cont…………
2. Voting power: The quota largely determines a member’s voting power
in IMF decisions. Each IMF member has 250 basic votes plus one
additional vote for each SDR 100,000 of quota.
Example:
Accordingly, the United States has 371,743 votes(17.1% of the
total) and Palau has 281 votes (0.013% of the total)
3. Access to Financing: The amount of financing a member can obtain
from the IMF (its access limit) is based on its quota.
4. SDR allocation : A member share of the general SDR allocations
established in proportion to its quota.
15. Role of IMF in serving its Members
1.Advice in Policies and Global oversight: The IMF’s Articles of Agreement
calls for it to oversee the international monetary system, including by
exercising firm “surveillance” – that is , overlooking – over its member
countries’ exchange rate policies. It conducts three ways:
(a) Country surveillance
(b) Global surveillance
(c) Regional surveillance
2.Lending to Help Countries in Difficulty: The IMF lends foreign exchange to
countries with balance of payment problems.
3. Technical Assistance and Training: The IMF shares its expertise with
member countries on a regular basis by providing technical assistance
and training in a wide range of areas.
4. Reducing Debt Burdens: In 1996, the world bank and the IMF
unveiled the HIPC initiative to reduce the debt burdens of the world’s
poorest countries.
16. Criticism of IMF
It is said that IMF policy makers support
capitalist dictatorship, and is friendly to
American and European corporations. The
IMF frequently advocates currency
devaluations, criticized by proponents of
supply – side economics as inflationary .
Secondly, they link higher taxes under
“austerity program’s “ with economic
contraction.
17. Relationship Between IMF And
India
India & IMF Relations:
India joined International Monetary Fund (IMF) on 27 December,
1945. The relationship between India and the IMF dates back to
the time when India needed economic reform packages to
strengthen its international reputation and fiscal policy. It is among
one of the developing economies that effectively employed the
various Fund programmes to fortify its fiscal structure. Through
productive engagement with the IMF, India formulated a
consistent approach to expand domestic and global assistance for
economic reforms. Whenever India underwent balance of
payments crises, it sought the help of IMF and in turn the
internationally recognized reserve willingly helped India to
overcome the difficulties.
18. The Current Relationship
Between IMF and India
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
and has stopped taking loans from it. India
and IMF must continue to boost their
relationship this way, as it will prove to be
advantageous for both.
19. International Bank For Reconstruction and
Development (World Bank)
The world bank is one of the world’s largest sources of finance and knowledge
to its member countries to improve the condition of health centers, provide
water and electricity , fight disease , and protect the environment.
In June 1994, 17 countries met in Atlantic City, USA to prepare the agenda
for the Bretton Woods Conference, and 44 countries which signed the final
agreement established the bank. India was one of the 17 countries and one of
the 44 countries which signed the agreement. It was India which suggested the
name “International Bank For Reconstruction and Development” (IBRD) to the
drafting committee . The India delegation was led by Sir Jeremy Raisman,
Finance Member of the GOVT. of India and included Sir C.D. Deshmukh , Sir
Theodore Gregory , Sir R.K. Shanmugan Chetty, Mr. A.D. Shroff and Mr. B.K.
Madan.
Besides , it also has three affiliates named :
1. The International Finance Corporation ( IFC) .
2. The International Centre For Settlement of Investment Disputes (ICSID).
3. The Multilateral Investment Guarantee Agency (MIGA).
20. The IBRD is the main lending organization of the World Bank Group
and, like its sister institution, the International Monetary Fund (IMF),
was born of the Allies' realization during World War II that
tremendous difficulties in reconstruction and development would face
them in the postwar transition period, necessitating international
economic and financial cooperation on a vast scale. The IBRD,
frequently called the "World Bank," was conceived in July 1944 at the
United Nations Monetary and Financial Conference in Bretton
Woods, New Hampshire, US.
IBRD
21. IBRD (World Bank)
All five of these institutions together make up the World Bank Group. Total
member countries in each institutions :
1. The International Bank for Reconstruction and Development (IBRD) = 184
2. The International Development Association(IDA) = 165
3. The International Finance Corporation (IFC) = 178
4. The Multilateral Investment Guarantee Agency (MIGA) = 167
5. The International Centre For Settlement Of Investment Disputes (ICSID) =
142
22. COMMON LOGO
UNBALANCED
SCALE
Purpose of
Organization
Although one of the Bank's early functions was to assist in bringing about a
smooth transition from wartime to peaceful economies, economic development
soon became the Bank's main object. Today, the goal of the World Bank is to
promote economic development that benefits poor people in developing
countries. Loans are provided to developing countries to help reduce poverty
and to finance investments that contribute to economic growth. Investments
include roads, power plants, schools, and irrigation networks, as well as
activities like agricultural extension services, training for teachers, and
nutrition-improvement programs for children and pregnant women. Some
World Bank loans finance changes in the structure of countries' economies to
make them more stable, efficient, and market oriented. The World Bank also
provides technical assistance to help governments make specific sectors of
their economies more efficient and more relevant to national development
goals
23. Organization of World Bank (Structure)
Board of Governors :
All powers of the Bank are vested in its Board of Governors, composed of one governor and
one alternate from each member state. Ministers of Finance, central bank presidents, or
persons of comparable status usually represent member states on the Bank's Board of
Governors. The board meets annually.
The Bank is organized somewhat like a corporation. According to an agreed-upon formula,
member countries subscribe to shares of the Bank's capital stock. Each governor is entitled
to cast 250 votes plus 1 vote for each share of capital stock subscribed by his country.
Executive Directors
The Bank's Board of Governors has delegated most of its authority to 24 executive
directors. According to the Articles of Agreement, each of the five largest shareholders—
the United States, Japan, Germany, France and the United Kingdom—appoints one
executive director. The other countries are grouped in 19 constituencies, each represented
by an executive director who is elected by a group of countries. The number of countries
each of these 19 directors represents varies widely. For example, the executive directors
for China, the Russian Federation, and Saudi Arabia represent one country each, while
one director speaks for 24 Francophone African countries and another director represents
22 mainly English-speaking African countries.
24. Cont…….
President and Staff
The president of the Bank, elected by the executive directors, is also their chairman,
although he is not entitled to a vote, except in case of an equal division. Subject to their
general direction, the president is responsible for the conduct of the ordinary business of
the Bank. Action on Bank loans is initiated by the president and the staff of the Bank. The
amount, terms, and conditions of a loan are recommended by the president to the
executive directors, and the loan is made if his recommendation is approved by them.
According to an informal agreement, the president of the Bank is a US national, and the
managing director of the IMF is a European. The president's initial term is for five years; a
second term can be five years or less. Past presidents of the Bank include Robert S.
McNamara (1968–81), A. W. Clausen (1981–86), Barber B. Conable (1986–91), and
Lewis T. Preston (1991–95). James D. Wolfensohn became president on 1 June 1995.
On September 27, 1999, Mr. Wolfensohn was unanimously reappointed by the Bank's
Board of Executive Directors to a second five-year term as president beginning June 1,
2000. He is the third president in World Bank history to serve a second term. He heads a
staff of more than 8,000 persons from over 130 countries.
The IBRD's headquarters are at 1818 H Street, N.W., Washington, DC 20433 .
25. Basics Facts about World
Bank
Established on: July, 1944,Bretton
Woods, New Hampshire
Headquarters: Washington DC
President : Paul Wolfowitz
Membership: 184
Affiliates: IDA, IFC, MIGA, ICSID
26. Budget :
A total administrative budget of US $1,924 million was
approved for fiscal year 2002 .
27. Activities
A. FUND GENERATION:
IBRD finance by selling AAA-rated bonds in the
world’s financial markets . While IBRD earns a small margin on this lending,
the greater proportion of its income comes from lending out its own capital.
The capital consists of reserves built up over the years and money paid in the
bank’s 184 member country shareholder.
Additional funds are regenerated through repayments of loan principal on
35- to- 45 year, no interest loans, which are then available for relending. IDA
accounts for nearly 40 %of our lending.
B. LOANS:
IBRD offers two basic types of loans and credits.
Investment loans are made to countries for goods, works and services in support
of economic and social development projects in a broad range of economic
and social sectors.
Development policy loans provide quick-disbursing financing to support
countries’ policy and institutional reforms.
The Bank may guarantee, participate in, or make loans to any member or any
political sub-division thereof and any business, industrial, and agricultural
enterprise in the territories of a member.
28.
29. C. GRANTS:
Grants are given for development projects by encouraging
innovation, co-operation between organization and local stakeholders’
participation in projects. In recent years, grants have been used for numerous
purposes . Some of them are:
1.Relieve the debt burden of heavily indebted poor countries.
2. Improve sanitation and water supplies.
3. Support civil society organization.
D. ANALYTIC AND ADVISORY SERVICES:
IBRD also provides analysis,
advice and information to member countries. IBRD has a big knowledge bank
which contains wealth of contacts, knowledge , information and experience that
it has acquired over the years, country by country, and project by project.
Following are some ways through which it provides analyses, advice and
knowledge to members:
1. Sector Reports
2. Poverty Assessment
3. Knowledge Sharing
4. Public Expenditure Review
30. International Development Association
(IDA)
The IDA is the soft loan section of the World Bank established in 1960. Its
loans are different from World Bank loans in several manners. It provides
concessional loans which have maturity of up to 40 years compared with 15 to
25 years maturities of IBRD. The IDA can also grant grace period of 10 years
before repayment of principal or interest begins, whereas the grace period of
World Bank usually does not exceed 5 years.
31. International Finance Corporation (IFC)
IFC was established in July 1956 to help strengthen the private sector in
developing countries, through the provision of long term loans, equity
investment, guarantees, risk management and quasi- equity instruments such as
subordinated loans, preferred stock and income notes, through advice and
technical assistance to business and government.
32. Multilateral Investment Guarantee
Agency(MIGA)
It was established in 1988, with an objective to create an attractive investment
climate and to encourage equity investment and other direct investment flows to
developing countries . To promote FDI, MIGA provides three services:
1. Political Risk Insurance: To promote foreign investment in developing
countries.
2. Technical Assistance: To promote and create conducive climate for foreign
investment and to established new investment opportunity in developing
countries.
3. Dispute Mediation: It provides dispute mediation services to remove obstacles
and to unlock bottlenecks in the way of foreign investment.
33. International Centre Of Settlement of
Investment Disputes(ICSID)
It comes into existence in 1996 with an objective to work as a facilitator in
settlement of investment disputes between government and foreign investors.
ICSID has an Administrative Council and Secretariat. The President of the
World Bank is also the chairpersons of Administrative Council. All the
members of ICSID are also the member of World Bank.
34. Asian Development Banks(ADB)
The ADBs equivalent of the World Bank’s concessionary – finance arm IDA is
called the Asian Development Fund(ADF) and the Bank is known as Asian
Development Bank.
ADBs development work is aimed at improving the welfare of the
people of Asia and the Pacific, especially of the 690 million poor living on less
than a dollar a day.
ADB has the following objectives:
1. Economic Growth
2. Human Development
3. Gender and Development
4. Environment Protection and so on.
35. The South Asian Association for Regional
Cooperation(SAARC)
The South Asian Association for Regional Cooperation(SAARC) was
established on December 8, 1985. It involves seven states of the Indian sub-
continent- Bangladesh ,Bhutan, India, Maldives, Nepal, Pakistan and Sri
Lanka.
AREAS of Cooperation:
SAARC seeks cooperation in the following thrust areas:
1.Energy
2. Tourism
3.Transport
4. Women, youth and Children and so on.
36. The Association of Southeast Asian
Nations (ASEAN)
The Association of Southeast Asian Nations (ASEAN) is a primary
multinational trade group of Asia. The goals of this group are economic
integration and cooperation through complementary industry programmes.
It was established on August 8,1967 in Bangkok by the five original
member countries, namely, Indonesia, Malaysia, Philippines , Singapore and
Thailand.
37. South Asian Preferential
Arrangement(SAPTA)
South Asian Preferential Arrangement(SAPTA) was signed by SAARC
members on April 11, 1993 and came into force in December 1995. The
objective of SAPTA is the creation of trade among the SAARC countries
through the reduction of tariffs and on preferential basis.
Basic principles underlying SAPTA are:
1. recognition of the special needs of the Least Developed States and
agreement on concrete preferential measures in the favour ;and
2. Inclusion of all products, manufactures and commodities in their raw,
semi- processed and processed forms.
