The IMF plays several key roles in the global economy and with its member countries. It aims to ensure exchange rate and financial stability, gives policy advice, provides financing during economic crises, and helps set international standards. For poorer countries, the IMF assists with development goals through concessional loans and debt relief. In India, the IMF has provided economic assistance and consultancy over the decades. However, some criticize that IMF policies can burden poorer nations with debt and that it lacks accountability.

1. ROLE OF IMF IN
INDIA’S ECONOMIC
DEVELOPMENT

2. ROLE OF IMF . . .
• The IMF is the world central organization for international monetary
cooperation
• The IMF’s primary purpose is to ensure the stability of the
international monetary system (IMS).
• IMS is the system of exchange rates and international payments that
enables countries (and their citizens) to buy goods and services from
each other.
• The IMF provides technical assistance and training to help countries
when they need for economic stability and growth.
 provides advice to its 184 member countries
 Encourage them to adopt policies that foster economic
stability, reduce their vulnerability to economic and
financial crises, raise living standards, and
 Makes financing temporarily available to member
countries to help them address balance of payments
and/or foreign trade balance problems

3. Why do we need the IMF?
Smoothing the bumps in the flow of
foreign exchange
Before buy or sell anything there is a basic problem i.e. Buyers have
to be able to change their money from their country's currency to the
seller's national currency. This is called "foreign exchange.
 This is the "exchange rate." Without a reliable supply of foreign
exchange and relatively stable exchange rates, world trade would drop
drastically.
The IMF was founded over 50 years ago to allow currency to be
exchanged freely and easily between member countries. They ensure
that members always have enough foreign.

4. HISTORY OF THE IMF
• IMF was introduced as there arouse a need for International
cooperation in economics, trade and balance of payment affairs.
• United States made a proposal for establishment of International
Stabilization Fund. It was known as White plan.
• The IMF was established in July 1944 by 45 government
representatives in Bretton Woods town, New Hempshire (USA).
• They agreed on a framework for international economic cooperation.
• It was believed that such a framework was necessary to avoid a
repetition of disastrous economic policies that had contributed to the
Great Depression of thee 1930s.
• Thus IMF came in to existence to promote economic and financial
co-operation among the member countries.

5. ORGANIZATIONAL
STRUCTURE
BOARD OF •Interim
GOVERNORS Committee
•Development
committee
EXECUTIVE BOARD OF
DIRECTORS
MANAGING
DIRECTOR
IMF SECRETARIAT

6. Growth in IMF’s membership
• In the beginning 29
member countries
• Today,185 member
Countries
• Staff of about 2680
persons
• Two-thirds are
economists in 139
countries
• Headquarters in
Washington, D.C.

7. IMF MAIN BUSINESS : MACROECONOMIC
AND FINANCIAL SECTOR POLICIES
I. Macroeconomic policies relating to the government’s budget,
the management of money and credit, and the exchange rate.
II. Macroeconomic performance – government and consumer
spending, business investment, exports and imports, output
(GDP), employment, and inflation.
III. Balance of payments - that is, the balance of a country’s
transactions with the rest of the world.
IV. Financial sector policies, including the regulation and
supervision of banks and other financial institutions.
V. Structural policies that affect macroeconomic performance
such as those governing labor markets, the energy sector, and

8. KEY MEMBERS
Quota: Millions of SDRs
IMF Member Country Quota: Percentage
Australia 3236.4 1.49
Belgium 4605.2 2.12
USA 37149.5 17.09
United Kingdom 10738.5 4.94
4158.3 1.91
India
3036.1 1.4
Brazil

9. LARGEST CONTRIBUTORS TO IMF
18.3
20
Percent of Total
Quotas
15
10 5.7 5.7 5.1 5.1
5
0
US Germany Japan Britain France

10. PRINCIPAL DUTIES OF IMF
 SURVEILLANCE ( Like a Doctor ):- Help in providing policy advise
to low income countries by:-
i. Establishing Economic Frameworks that support sustained
growth and poverty reduction.
ii. Identify and manage sources of macroeconomic risk and
vulnerabilities.
iii. Strengthen institutions and policies that underline sound
macroeconomic management.
Progress report is annually published in Global Monitoring Report
by IMF and World Bank.

11.  Technical Assistance (like a teacher) :-
•Strengthening human skills and institutional capacity of countries
•Helps members in strengthening their policy formulation and
implementation, and the legal, institutional, and market frameworks
within which they operate.
•It also constitutes an important complement to IMF surveillance and
lending operations in member countries.
 Financial Assistance (like a banker) :-
• Lending to countries to support reforms
•Improving financial sector surveillance.
•Development of standards and codes of good practice.
•Enhancement of transparency in the IMF and its member countries.
Involvement of the private sector in crisis resolution

12. HOW IS IMF FINANCED?
• The IMF is financed by member countries who contribute funds on
joining or from existing members
• IMF stands at $300 billion financed from its 183 member countries
• The U.S deposited the largest amount.
• Quota subscriptions generate most of the IMF's financial resources.
• Each member country of the IMF is assigned a quota, based broadly
on its relative size in the world economy.
• A member's quota determines its maximum financial commitment to
the IMF and its voting power, and has a bearing on its access to IMF
financing.
• A new country is assigned an initial quota in the same range as the
quotas of existing members

13. IMF MEMBERS WITH LARGEST QUOTA SHARES
(as of April 2007)
Member Quota share (%) Votes (% of
total)
United States 17.14 16.83
Japan 6.14 6.04
Germany 6.00 5.90
France 4.95 4.87
United Kingdom 4.95 4.87
Italy 3.26 3.21
Saudi Arabia 3.22 3.17
China 3.73 3.67
Canada 2.94 2.89
Russia 2.74 2.70 13

14. IMF LENDING FACILITIES
• Stand-By-Arrangements as designed to deal with short term balance
of payments problems
• The IMF introduced the Extended Fund Facility to help countries
address balance of payment difficulties related partly to structural
problems that may take longer to correct than macroeconomic
imbalance
• Under its Poverty Reduction and Growth Facility, the IMF provides
concessional loans – loans with an annual interest rate of 0.5 percent
and a maturity of 10 years - to its poorest member countries.
• The IMF provides Emergency Assistance to countries coping with
balance of payments problems caused by natural disasters or military
conflicts. The interest rates are subsidized for low-income countries.
• The Trade Integration Mechanism allows the IMF to provide loans
under one of its facilities to a developing country whose balance of
payments suffers.

15. IMF vs. WORLD BANK
•World Bank provides long-term loans for promoting balanced economic
development, while IMF provides short-term loans to member countries
for eliminating BOP disequilibrium.
•Both these institutions are complementary to each other. Few
economists have even suggested that the two organizations should be
merged.
•IMF and World bank collaborate regularly and are involved in several
joint initiatives.
•The IMF and the World Bank introduced the concept of Aid for Trade
for the least developed countries

16. HOW DOES THE IMF HELP POOR
COUNTRIES
 The quota allotted by the IMF to each member country has to be
deposited partly in the member’s own currency and the remainder
in the form of foreign exchange.
 IMF's loans to low-income countries are made on concessional
terms, under the Poverty Reduction and Growth Facility.
 IMF introduced in 2005—the Policy Support Instrument, countries
can request that the IMF regularly and frequently review their
economic programs to ensure that they are on track.
 The IMF also participates in debt relief efforts for poor countries
that are unable to reduce their debt to a sustainable level even after
benefiting from aid, concessional loans, and the sound policies.

17. ROLE TOWARDS MEMBER
NATIONS
The financial assistance and advice the IMF offers to its poorest
members are geared partly to helping them achieve these goals :-
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development

18. ROLE OF IMF IN INDIA
•Joined IMF on 27 DEC, 1945
•India borrowed SDR 3.9 billion (1981-82) & SDR 2.2 billion (1991-93).
• In recent years, the fund provided to India was in government
securities, foreign exchange market, public expenditure management &
tax & custom administrations.
Current scenario
SDR (Net cumulative allocation)- 681.17 m
Holdings - 6.78 m
Outstanding purchases & loans - None
•By James Gordon (Washington based multilateral institution's
representative)
―India does not need any financing from IMF considering that
the country had crossed $103 billion of FOREX reserves‖
Emerging market economy Feb 13, 2004
Acc to indiatimes - India borrowed from IMF in crisis of 1990’s & fully
repaid its loan.
•So now India has that potential to be include into IMF financial
transactions plan (40 countries)
By P Uaidynathan Iyer in New Delhi Jan 19, 2004

19. IMF & INDIA
India’s current quota in the IMF is SDR 4158.2 millonin the total quota of SDR
213 billion, giving it a shareholding of 1.95 per cent. India’s relative position
based on quota is 13th. However, based on voting share, India (together with its
constituent countries, viz., Bangladesh, Bhutan and Sri Lanka) is ranked 21st in
the list of 24 constitutencies.
The IMF members can either retain SDRs, use them in payments etc. or sell
them to other member countries.
IMF has played an important role in Indian economy. IMF has provided
economic assistance from time to time to India and has also provided
appropriate consultancy in determination of various policies in the country.
Till 1970, India was among the first five nations having the highest quota with
IMF and due to this status India was allotted a permanent place in Executive
Board of Directors.
In July 2004, India and IMF joint training programme at the National Institute of
Bank Management, Pune was established.

20. India’s relation with IMF
• Provides financial assistance to
boost our economy
• IMF suggests that India can become
a financial superpower by bringing in
reforms in the economic policies.
• India has become a creditor and
stopped taking loans from it.

21. CRISIS MANAGEMENT BY THE
IMF
• Many observers thought the collapse of the Bretton Woods system in
1973 would diminish the role of the IMF within the international
monetary system
• However, the activities of the IMF have expanded due to the periodic
financial crises since 1973
• IMF deals with three challenges
– currency crises
– banking crises
– foreign debt crises

22. CURRENCY CRISIS
• Speculative attack on a currency’s exchange rate value results in:
– a sharp depreciation in the value of the currency
– forcing authorities/central bank to defend its currency and the
prevailing exchange rate by:
• expending international currency reserves
• sharply increasing interest rates
BANKING CRISIS
• The loss of confidence in the banking system that leads to a run on
banks, as individuals and companies withdraw their deposits

23. FOREIGN DEBT CRISIS
• Country cannot service its foreign debt obligations, whether private-
sector or government debt
• Usually the result of macroeconomic causes:
– high relative price inflation
– a widening current account deficit
– excessive expansion of domestic borrowing
– asset price inflation

24. CRITICISMS OF THE IMF
 The IMF has created an immoral system of modern day
colonialism that drains the poor
 The IMF serves wealthy countries and Wall Street
 The IMF is a secretive institution with no accountability
 IMF says, it makes loans in exchange for policy reform,it has not
been successful in turning countries to the free market. Instead,the
fund has created loan addicts, ―more than 70 nations have depended
on imf aid for 20 or more years,24 countries have received IMF
creidts for 30 or more years.
 One of the biggest critiques of the IMF and world bank is that they
hardly ever co-ordinate their activities