A PRESENTATION

ON IMF

PRESENTED BY
Hemlata Yadav, Shahida, Neha Singh,
Sanya Singh and Premlata
 What is IMF ?
The International Monetary Fund (IMF) is an organization of
189 countries, working to foster global monetary
cooperation, secure financial stability, facilitate international
trade, promote high employment and sustainable economic
growth, and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to

the 189 countries that make up its near – global
membership.
 ESTABLISHMENT OF IMF

IMF was founded on 27th december, 1945. During the closing

years of World War Second, different countries realized that there
must be a common International Forum for achieving economy
cooperation, promoting International Trade and providing help to
needy nations during emergency. So IMF was formed for this
purpose.

World War Second has its adverse effect on global economy. To

remedy the situation, an international monetary conference was
convened in 1944, at Britton Woods in America.
It was attended by the representatives of 44 countries.
India also participated therein.

It was decided in this conference to set up IMF for the

economic development of all countries.
 MEMBERSHIP
•There are two types of members:

1. ORIGINAL MEMBERS: All those countries whose

representatives took part in BRETTONWOODS CONFERENCE and
who agreed to be the members of the fund prior to 31st
December, 1945.

2. ORDINARY MEMBERS: All those who became its members

subsequently.

• BANK has the authority to suspend any member and similarly

every member is free to resign.
 OBJECTIVES OF IMF
1. Encouragement of international monetary co-
operation.
2. To provide financial help.
3. Removal of exchange control.
4. Removal of disparities the international
payment.
5. To encourage the international trade.
6. To assist in balanced economic development.
7. Productive Capital investment.
8. To bring stability in exchange rate.
Where the IMF gets its money
Most comes from the quota subscriptions
• The money each member contributes when joining the IMF. The
capital resources of the fund are subscribed by the various
member countries by way of their respective quotas. Each
member country is required to subscribe its quota partly in gold
and partly in its own national currency.

General Arrangements to Borrow (1962)

•Line of credit set up with several governments and banks
throughout the world
 Special Drawing Right (SDRs)

SDR is an invented currency

•Its value is based on the worth of the world’s five major currencies
US Dollar, French France, Pound Sterling, Japanese Yen, Deutsche
Mark

Countries add SDRs to their holdings of foreign

currencies
•Keep available for need of payments that must be made in foreign
exchange
 Advantage of the International
Monetary Fund

1.setting-up of multicultural trade and payment system.

2.Stability in foreign exchange rates.
3.No interference in Domestic economic affairs.
4.Establishment of a monetary resource fund.
5.Improvement in short-term disequilibrium in balance
of payment.
6.Gains of gold standard.
7.Check on competitive currency devaluation.
 FAILURES OF IMF
1. Lack of stability in exchange rate
2. Lack of stability in the price of gold
3. Inability to remove restrictions on foreign trade
4. Rich national club
5. No help for development projects
6. No solution of international liquidity
7. Interference in domestic economies
8. Inability to tackle the monetary crisis of august 1971
9. Less aid for developing countries
10. High rate of interest
ROLES OF INTERNATIONAL
MONETARY FUND
1. Lending for meeting temporary unfavourable balance of
payments position
The IMF does not lend for developmental projects.
The financial assistance provided by IMF enables the members to
reduce its deficit of balance of payments and other short- term
external laibilities. These lending’s are to be paid back in three to
five years.

2. Bank of central banks

The fund is called the bank of the central banks of different
member countries of the world. Just as a central bank holds the
cash of the commercial banks of the country, likewise IMF also
holds reserves of the member countries.
 3. Technical Assistance
The fund also provides technical assistance to its member countries.
The fund sends its experts on deputation to member countries to
advise them on matters like exchange control, foreign payments,
credit control, central banking and economic policy etc. The fund
also publishes many technical journals and magazines.

4. Imparts training
It also imparts training to the representatives of member countries.
This training is imparted to the senior officers of the central banks
and finance departments. In 1975, a training centre was set up to
impart training to policy makers of different nations.
5. Special lending facilities of IMF:
a) Compensatory and Contingency Financing Facility(C.C.F.F.):
Under this scheme, special financial assistance is provided to the
member nations for compensating them for shortfall in exports,
because of some contingencies like food, earthquakes, drought etc.

b) Buffer Stock Financing Facility(B.S.F.F.):

Under this scheme, special financial assistance is provided to member
nations maintain buffer stocks ( Reserve stock ) of primary products
like food grains.

c) Structural adjustment Facility(S.A.F.):

Under this scheme, concessional loans are provided by IMF to least
developed member nations for meeting deficit in balance of
payments. Under this scheme, the rate of interest is between 0.5% to
1% p.a.
d) Enhanced Adjustment Facility(E.A.F.):
It is also known as Enlarged Access policy. Under this scheme,
enhanced loans are provided to least developed member nations
with heavy debt burdens for making economic reforms. Under this
scheme, a member country can take loans upto 425% of its quota.

6. Research Functions:
IMF has setup a separate statistical bureau for conducting research
regarding BOP, money and fiscal policy etc. IMF publishes report of
such research work. Its main publications are – Finance and
Development, IMF Survey, BOP year Book, Direction of Trade,
International Financial Statistics, etc. These publications are useful
for member nations for framing economic policies.
7. Change in Exchange rate
a) If any country wants to change its exchange rate from 11 to 20
percent, no prior permission is needed from IMF. Simply intimation to
IMF will be sufficient.

b) If any country wants to change its exchange rate from 11 to 20

percent, prior permission of IMF is required for such change.

c) If the country wants to change its exchange rate by more than 20

percent, then such decision is taken with the consent of 2/3 of its
members. At present, determination of exchange rate and change in
exchange rate are decided by the market forces, i.e. now a country
cannot decide the par value of its currency, the exchange rate is
decided by the demand and supply of that currency in the foreign
exchange market.
8. Increases International Liquidity
IMF has increased international liquidity by creating a new currency
in the form of SDR. IMF also lends foreign currency to member
countries. All this increases international liquidity.

9. Purchase and Sales of Foreign currency

The fund buys and sells the currencies of the member countries.
Whenever a country buys the currency of another country from the
fund, the latter makes it available by purchasing the same from the
country concerned, of which it constitutes the national currency. In
any one year a member country can purchase from the fund foreign
currency up to the maximum of 25% of its quota. But in some cases
IMF can raise this limit to even 100 percent of quota.
10. Facilities during Emergency
Although IMF is opposed to any sort of controls either on foreign
exchange or on foreign trade, yet member countries have been give
the right to these controls during emergency in the hope that they
will lift it as the situation warrants.

11. Poverty Reduction

For helping low income countries having extreme poverty, IMF has
set up a special fund. In this fund, contribution is received from
developed nations and from emerging developing nations. India is
also contributing U$$1 million per year in this fund.
Thanks you….