International Monetary Fund (IMF)
International Monetary Fund (IMF)
The formation of the IMF was
initiated in 1944 at the Bretton Woods Conference. IMF came into operation on
27th December 1945 and is today an international organization that consists of
189 member countries. Headquartered in Washington, D.C., IMF focuses on
fostering global monetary cooperation, securing financial stability,
facilitating and promoting international trade, employment, and economic growth
around the world. The IMF is a specialized agency of the United Nations.
Formation
of IMF
The breakdown of international
monetary cooperation during the Great Depression led to the development of the
IMF, which aimed at improving economic growth and reducing poverty around the
world. The International Monetary Fund (IMF) was initially formed at the
Bretton Woods Conference in 1944. 45 government representatives were present at
the Conference to discuss a framework for postwar international economic
cooperation.
The IMF became operational on 27th
December 1945 with 29 member countries that agreed to bound to this treaty. It
began its financial operations on 1st March 1947. Currently, the IMF consists
of 189 member countries.
The IMF is regarded as a key
organisation in the international economic system which focuses on rebuilding
the international capital along with maximizing the national economic
sovereignty and human welfare.
Organizational Structure of
International Monetary Fund (IMF)
The United Nations is the
parent organization that handles the proper functioning and administration of
the IMF. The IMF is headed by a Managing Director who is elected by the
Executive Board for a 5-year term of office. The International Monetary Fund
(IMF) consists of the Board of Governors, Ministerial Committees, and the
Executive Board.
To know more about the
organizational structure of IMF, refer to the table below:
|
Structure of the International Monetary Fund (IMF) |
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Governing Bodies of IMF |
Roles and Responsibilities |
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Board of Governors |
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Ministerial Committees
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Executive Board |
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Objectives of the IMF
IMF was developed as an
initiative to promote international monetary cooperation, enable international
trade, achieve financial stability, stimulate high employment, diminish poverty
in the world, and sustain economic growth. Initially, there were 29 countries
with a goal of redoing the global payment system. Today, the organization has
189 members. The main objectives of the International Monetary Fund (IMF) are
mentioned below:
- To improve and
promote global monetary cooperation of the world.
- To secure financial
stability by eliminating or minimizing the exchange rate stability.
- To facilitate a
balanced international trade.
- To promote high
employment through economic assistance and sustainable economic growth.
- To reduce poverty
around the world.
What are the functions of the
IMF?
IMF mainly focuses on
supervising the international monetary system along with providing credits to
the member countries. The functions of the International Monetary Fund can be
categorized into three types:
- Regulatory functions: IMF functions as a regulatory body and as per
the rules of the Articles of Agreement, it also focuses on administering a
code of conduct for exchange rate policies and restrictions on payments
for current account transactions.
- Financial functions: IMF provides financial support and resources
to the member countries to meet short term and medium term Balance of
Payments (BOP) disequilibrium.
- Consultative functions: IMF is a centre for international cooperation
for the member countries. It also acts as a source of counsel and
technical assistance.
India & IMF
India is a founder member of
the IMF. India’s Union Finance Minister is the Ex Officio Governor on the IMF’s
Board of Governors. Each member country also has an alternate governor. The
alternate governor for India is the Governor of the RBI. There is also an
Executive Director for India who represents the country at the IMF.
- India’s quota in the
IMF is SDR 13,114.4 million that gives India a shareholding of 2.76%.
Read about the Special Drawing Rights – Created in 1969 by
International Monetary Fund (IMF) at the linked article.
- This makes India the
eight largest quota holding country at the organization.
- In 2000, India
completed the repayment of all the loans it had taken from the IMF.
- Now, India is a
contributor to the IMF.
The emerging economies have
gained more influence in the governance architecture of the International
Monetary Fund (IMF).
- The reforms were
agreed upon by the then 188 members of the IMF in 2010, in the aftermath
of the global financial meltdown.
- More than six
percent of the quota shares will shift to emerging and developing
countries from the U.S. and European countries.
Which countries gained?
- India’s voting
rights increased to 2.63 percent from the current 2.3 percent, and China’s
to 6.08 percent from 3.8. Russia and Brazil are the other two countries
that gain from the reforms.
Why delay the reforms?
- Among the reasons
for the delay has been the time it took the U.S Congress to approve the
changes.
- Though the country
holds veto power, Republicans have been agitated over “declining U.S
power.”
Advantages
- For the first time,
the Executive Board will consist entirely of elected executive directors,
ending the category of appointed executive directors. Currently, the
members with the five largest quotas appoint an executive director, a
position that will cease to exist.
- The significant
resource enhancement will fortify the IMF’s ability to respond to crises
more effectively.
- These reforms will
reinforce the credibility, effectiveness, and legitimacy of the IMF.
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