1. Roll No. : 1801305006
Course : MBA (ITLM)
Semester : 2nd
Subject : International
Business
Presented by Hari Shanker
2. Introduction
o The International Monetary
Fund is an international
organization that was initiated in
1944 at the Bretton Woods
Conference.
o It was established by 45
countries.
o Its headquarter is in
Washington, D.C., United States.
o The IMF currently has 189
members.
3. HISTORY
• In the 1930’s the world was overtaken
with financial turmoil of the Great
Depression. The IMF was conceived in
July 1944 at the United Nations Bretton
Woods Conference in New Hampshire, to
protect the world from a similar blow
and hasten financial recovery in war-torn
nations.
• Cooperation and reconstruction after
WW2.
• Societal change for Eastern Europe and
Asian upheaval.
• Promote international monetary
cooperation, facilitate the expansion and
balanced growth of international trade,
promote exchange stability
4. The Organization
• The Board of Governors is the highest decision-
making body of the IMF.
• The head of the IMF staff is the Managing Director,
who also acts as Chairman of the Executive Board
and serves a five year term. The present Managing
Director is Christine Lagarde of France. The
Executive Board Members monitor the day to day
work with the guidance of the International
Monetary and Financial Committee.
• The International Monetary and Financial
Committee meets twice a year.
• Executive Board contains 24 Directors each
representing a single country or groups of
countries
• Staff : Approximately 2,700 from 150 countries
5. Responsibilities of IMF
The IMF's primary mission is to ensure the stability of the
international monetary system i.e., the system of exchange
rates and international payments that enables countries
and their citizens to transact with each other.
It does so in three ways:
SURVEILLIANCE
LENDING
TECHNICAL ASSISTANCE
6. Special Drawing Rights
• The SDR is an international reserve asset,
created by the IMF in 1969 to supplement its
member countries’ official reserves.
• The value of the SDR is based on a basket of
5 currencies : The U.S Dollar, The Euro, The
Chinese Renminbi, The Japanese Yen & The
British Pound.
• The SDR is neither a currency nor a claim on
the IMF. Rather, it is a potential claim on the
freely usable currencies of IMF members.
SDRs can be exchanged for these currencies.
• 1 SRD = 96.38 Rupee
7. Surveillance
• In order to maintain stability and prevent crises in the
international monetary system, the IMF monitors member
country policies as well as national, regional, and global economic
and financial developments through a formal system known
as surveillance .
• The IMF provides advice to member countries and promotes
policies designed to foster economic stability, reduce vulnerability
to economic and financial crises, and raise living standards.
• It also provides periodic assessments of global prospects in
its World Economic Outlook , of financial markets in its Global
Financial Stability Report of public finance developments in
its Fiscal Monitor , and of external positions of the largest
economies in its External Sector Report in addition to a series of
regional economic outlooks.
8. Lending
• The IMF provides loans to member
countries experiencing actual or potential
balance of payments problems to help
them rebuild their international reserves,
stabilize their currencies, continue paying
for imports, and restore conditions for
strong economic growth, while correcting
underlying problems.
• In response to the global economic crisis, in
April 2009 the IMF strengthened its lending
capacity and approved a major overhaul of
its financial support mechanisms, with
additional reforms adopted in subsequent
years.
• The largest borrowers: Argentina, Ukraine,
Greece, Egypt. The largest number of IMF
loans have gone to the African Continent.
9. Technical Assistance
The IMF works with
governments around the world
to modernize their economic
policies and institutions, and
train their people. This helps
countries strengthen their
economy, improve growth and
create jobs.
This includes, designing and
implementing more effective
policies for taxation and
administration, expenditure
management, monetary and
exchange rate policies, banking
and financial system supervision
and regulation, legislative
frameworks, and economic
statistics.
10. GOALS
To promote international monetary cooperation and facilitate a
balanced growth of international trade
To promote exchange stability, to maintain exchange agreements
among members, and to avoid competitive exchange depreciation
To assist in the establishment of a multilateral system of
payments in respect of current transactions between members
and in the elimination of foreign exchange restrictions which
hampers the growth of world trade.
To make the general resources of the IMF temporarily available
to member countries, under adequate safeguard.
Sustainable Development Growth
11. IMF and India
India joined IMF on December 27,
1945.
During the Crisis of 1991, India had
a fixed exchange rate system
which lead to balance of payment
crisis.
Got a bailout package from IMF for
$1.8 Billion.
Resource allocation shifted from
public sector to privatization.
The Indian Economy became an
open end economy.
12. IMF’s Review on GST
• The GST is an indirect tax levied on the supply of
goods and services in India. It came into effect on July
1, 2017.
• IMF described the Goods and Services Tax (GST) as a
"milestone reform" in India's tax policy, but pushed
for a simplified structure, saying the multiple rate
structure and other features could give rise to high
compliance and administrative.
• The IMF said that with the consumption basket of the
rich taxed at higher rates than that of the poor, the
GST as presently designed has an effective tax rate
rising with household consumption. A revenue-neutral
reduction in the number of rates would.
• The goods and services tax should improve
productivity and boost medium term potential
growth, while also creating room for the government
to increase much needed social and infrastructure
spending.
13. CRITICISM
oIt is argued that the conditions of IMF
loans cause more harm than good.
• Reducing government borrowing : Higher
taxes and lower spending
• Higher interest rates to stabilize the
currency.
• Allow failing firms to go bankrupt.
• Structural adjustment. Privatization,
deregulation, reducing corruption and
bureaucracy.
o There is also criticism of neo-liberal
policies such as privatization. These
free-market policies were not always
suitable for the situation of the
country. E.g. : privatization can create
lead to the creation of private
monopolies who exploit consumers.
o Takes away political autonomy. Countries such as
Jamaica, argue that the IMF take away the ability for
countries to decide national policy.
o Devaluations In earlier days, the IMF have been
criticized for allowing inflationary devaluations.
o There is also a criticism that bailing out countries with
large debt create moral hazard. Because of the
possibility of getting bailed out, it encourages
countries to borrow more.
o The IMF has been criticized for supporting military
dictatorships in Brazil and Argentina, such as Castello
Branco in 1960s received IMF funds denied to other
countries.
o Lack of transparency and involvement :The IMF has
been criticized for imposing policy with little or no
consultation with the affected countries.
14. CONCLUSION
Institutions such as IMF perform economic surveillance over most of the
world's economy, a valuable task that no other international or private
organization could perform with such skill.
IMF also serve as a store of expert knowledge and wisdom for countries
throughout the world that lack trained specialists.
IMF has almost failed in meeting the lofty goals of their founders.
