International Monetary Fund

The International Monetary Fund is an international monetary organization established on 27 December 1945 under the Bretton Woods Agreement of 1944, whose purpose is to maintain monetary stability by helping countries with unfavorable balance of payments by providing short-term loans.

Objective

1. promote international monetary cooperation
2. Promote balanced development of international trade
3. Financial help in times of adverse balance of payments problem
4. Maintaining the exchange rate by managing international capital flows
5. arranging for multilateral cooperation in the case of an adverse balance of payments
6. Striving for poverty alleviation in the world
7. To cooperate between international organizations to prevent money laundering and the financing of terrorism
8. Facilitating international trade among all member countries for economic development

Administrative Structure of the International Monetary Fund

Board of Governors

It is the highest judicial body of the International Monetary Fund, represented by all 190 of its members.

Meetings and Discussions

1. IMF and World Bank meet once a year.
2. The International Monetary and Financial Committee (IMFC), which advises the IMF’s Board of Governors, meets twice a year in the months of April and September-October.
3. Most of the powers of the IMF are exercised by the Board of Governors, such as not admitting new members, making new laws, amendments, allocation of Special drawing Rights (SDR), etc.

Executive Board 

1. There are 24 executive directors in total to look after the day to day activities.
2. All 190 countries are represented in it.

• Committees of the Cabinet to advise the Board of Governors

1. International Monetary and Financial Committee
2. development committee

Membership of the International Monetary Fund

1. Any sovereign nation can get membership of the IMF.
2. Upon receipt of IMF membership, relations between the IMF and that country are established on the basis of the quota assigned to the country, which includes contributions, voting power, and access to finance.
3. Subscription is a mandatory payment of membership of the IMF
4. The economic resources a member country receives from the International Monetary Fund are determined through the specified quota of that country.

Loan Arrangement by the International Monetary Fund

International Monetary Fund provides financial assistance to deal with the problem of balance of payments

There are two types of this.

1. non concessional loan
2. concessional loan

Non-concessional loans for short and medium term are given to developing and developed countries to solve the problem of balance of payments.

Least developed countries are given concessional loans to solve the problem of balance of payments and to encourage economic development (exemption from interest payment only principal amount deposit)

International Monetary Fund’s report

• World Economic Outlook Report
• Global Financial Stability Report

General Terms of the International Monetary Fund 

1. reducing fiscal deficit
2. reducing the number of government employees
3. promote privatization
4. Adoption of floating (free from control) currency system
5. cut subsidies

Arguments against and  in favor of the terms of IMF

Recipient Country(Opposition)

1. Obstacles in the process of social and human development
2. Same conditions for all countries even if the problem is different.

IMF (side)

1. It is essential for economic growth and development.

India and International Monetary Fund

1. India is one of the founding members of the International Monetary Fund, it joined the IMF on 27 December 1945.
2. In 1991-92, loan was made available to India by the International Monetary Fund to solve the problem of balance of payments, but at present India is included in major countries who funds IMF.
3. At present, India’s quota has increased to 2.76% and voting share is 2.63%, India is the eighth highest quota holder and voting share nation of the International Monetary Fund.
4. During 1991, a new economic policy was implemented in India under the influence of IMF.
5. Although the relations between India and the International Monetary Fund are friendly, yet India has been continuously demanding for quota and administrative reforms of the International Monetary Fund.

Demand for reform of the International Monetary Fund 

Criticism

1. The dominance of the US and Western countries on the IMF.
2. Indirect dominance of America.
3. Strict and multiple conditions of the International Monetary Fund.
4. Appointment of Managing Director of International Monetary Fund from Western European countries.
5. Giving less quota to many developing countries including India than their contribution and participation in world economy
6. Failed to accurately predict the 2008 global economic recession.

IMF reform requires 70% votes, due to the apathy of developed countries, banks like BRICS Bank and AIIB are being created.

This article is compiled by Sarvesh Nagar.( NET-JRF).

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