THE CHANGING ROLE OF INTERNATIONAL MONETARY FUND

(IMF) IN GLOBAL SCENARIO

WHAT IS IMF

• “It is an organization of 186 countries ,working to foster

global monetary cooperation , secure financial stability

,facilitate international trade ,promote high employment

and sustainable economic growth and reduce poverty” .

• The IMF is the most detailed attempt to organize the

conduct of international monetary affairs.

The International Monetary Fund was created in July 1944,

originally with 45 members, with a goal to stabilize

exchange rates and assist the reconstruction of the world's

international payment system. Countries contributed to a

pool which could be borrowed from, on a temporary basis,

by countries with payment imbalances. (Condon, 2007)

Headquarters in Washington D.C.

International Monetary Fund (IMF) Managing Director

Dominique Strauss-Kahn (R) briefs journalists on the

outcomes of the International Financial Monetary and

Financial Committee meeting with Egyptian Finance

Minister and International Monetary and Financial

Committee (IMFC) Chairman Youssef Boutros-Ghali (M),

and IMF First Deputy Managing Director John Lipsky (L);

April 25, 2009 at IMF Headquarters in Washington, DC.

WHO RUNS THE IMF?

Member Countries

IMF Managing Directors

Executive Board

Board of Governors

First Deputy Managing Dir

Deputy Managing

Dir

Deputy Managing

Dir

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.

RESOURCES OF THE FUND

• QUOTAS AND THEIR FIXATION: The fund has

general account based on quotas allocated to its

members .when a country joins the fund, it is

assigned a quota that governs the size of its

subscription, its voting power and its drawing rights .

• FUND BORROWING: It was in force from October

1962 to December 1998 .At that time its total

borrowing was SDR 17 billion .

OBJECTIVES OF THE IMF

• INTERNATIONAL MONETARY CO OPERATION

• TO FACILITATE EXPANSION AND BALANCED GROWTH OF

INTERNATIONAL TRADE

• TO PROMOTE EXCHANGE STABILITY

• GENERATING HIGHER EMPLOYMENT AND INCOME

• ABOLITION OF EXCHANGE RESTRICTION

• AID TO MEMBERS DURING EMERGENCY

• TO SHORTEN THE DURATION AND LESSEN THE DEGREE

OF DISEQUILIBRIUM IN THE INTERNATIONAL BALANCE OF

PAYMENTS OF MEMBERS.

MAIN FUNCTIONS OF THE FUND

• DETERMINING THE RATE OF EXCHANGE BY EVERY

COUNTRY

• FUND LENDING

• CREDIT TRANCHES

• A CENTRAL BANK’S BANK

• TRAINING AND TECHNICAL ASSISTANCE

• CONSULTANCY ROLE

ACHIEVEMENTS OF THE IMF

• INTERNATIONAL MONETARY CO-OPERATION

• EXCHANGE STABILITY

• CHECKING COMPETITIVE DEPRECIATION

• INCREASED ASSISTANCE

• INCREASE IN CAPITAL RESOURCES

• EXPANSION OF TRADE

• GURANTEE AGAINST COMPETITIVE DEVALUATION

THE CHANGING ROLE OF IMF IN THE GLOBAL SCENARIO

• IMF has to Tackle Global Monetary Problems

• Reduction of IMF’s Role as a Monetary Organisation

• The second Amendment and conditionalities

• The Emergence of Three Groups of Countries

• Building up Foreign Exchange Reserves to Tackle Crises

Situation

• Allocation of SDR’s

• Limitation of Funds

CriticismMany observers comment on the fact that the IMF has a

”one size fits all” mentality, that whatever the situation the

IMF prescribes basically the same set of policies.

IMF does not adequately monitor the impact of its

decisions on the poor.

Some of U.S. critics say, IMF is an incredibly wasteful

organization that takes valuable funds and pours it down

the drain of developing economies whose leaders become

fabulously rich off the money without any intention of ever

helping out anyone.

The IMF has no effective authority over the domestic

economic policies of its members.

ADVANTAGES TO INDIA OF THE

MEMBERSHIP OF IMF

FINANCIAL ASSISTANCE FROM THE FUND

loan given by IMF to INDIA

HELPS IN FOREIGN EXCHANGE CRISIS

FREEDOM FROM STERLING

MEMBERSHIP OF THE WORLD BANK

ECONOMIC CONSULTATION

YEAR 1991 1994 1996 1998 2000

IN MILLION $ 2,623 5,040 2,374 664 26

The relationship between the IMF and India has grown strong

over the years. In fact, the country has turned into a creditor to

the IMF. India and IMF must continue to boost their relationship

this way, as it will prove to be advantageous for both.

The International Monetary Fund, or IMF, predicted lower growth

in India and economic contractions in the US, Japan and euro

region next year, calling for further interest rate cuts and fiscal

stimulus.

India recorded a GDP growth of 9.8% in 2006 and 9.3% in 2007.

The current relationship between IMF

and India

CONT..

• An economist said India could grow faster than IMF’s

estimate. “Growth next year will definitely be slower

than this year, but it may still touch 7%. New oil

refineries coming up next year will also boost GDP

(gross domestic product). I agree with IMF that

growth momentum will slow further, but it may pick

up towards the end of next year,”

said “Dharmakirti Joshi, principal economist with credit

rating agency Crisil Ltd.”

CONCLUSION

• IMF has the potential to play a strategic and crucial

role in stabilizing and supervising the global economy,

it has its limitations due to the dynamic changes which

are happening around the world financial markets.

• Since the countries have shifted to the flexible

exchange rate system, financial independence and

autonomy has increased.

• This development is bound to make the role of IMF

ineffective.