internatinal imf
TRANSCRIPT
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ROAD MAP
Introduction
The Gold & Gold Bullion Standards
Gold Exchange System
The Two-Tier System
The Bretton Woods System IMF
SDR
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International Monetary System
INTERNATIONAL MONETARY
SYSTEM are the rules and procedures by
which different national currencies are
exchangedfor each other in world trade.
Such a system is necessary to define a
common standard of value for the world'scurrencies.
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The Gold and Gold Bullion
Standards
The first modern international monetary systemwas the gold standard
Prevalent in the late 19th and early 20th centuries
Gold was the only standard of value A major defect in such a system was its inherentlack of liquidity
The international gold standard broke down in1914
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Continued
During the 1920s the gold standard was replaced
by the gold bullion standard
This system, too, was abandoned in the 1930s
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The Gold-Exchange System Nations fix the value of their currencies not with
respect to gold, but to some foreign currency,
which is in turn fixed to and redeemable in gold
United States, was known as the KeyCurrency"
country
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The Two-Tier System During the 1960s a severe drain on U.S. gold
reserves developed
Two-tier system was created in 1968
The value of gold was set at $35 an ounce forCentral bank gold holders
Gold payments to non-central bankers wereprohibited
In the free-market tier consisting of all non-governmental gold traders, gold was completelydemonetized
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Bretton Woods system Established the rules for commercial and financial
relations among the world's major industrial states
730 delegates from all 44 Allied nations
United Nations Monetary and Financial
Conference
Established the International Bank for
Reconstruction and Development (IBRD) and theInternational Monetary Fund(IMF).
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Chief features of the Bretton
Woods system An obligation for each country to adopt a
monetary policy that maintained the exchange rate
of its currency within a fixed value plus or minus
one percent in terms of gold The ability of the IMF to bridge temporary
imbalances of payments
The system collapsed in 1971 following theUnited States suspension of convertibility from
dollars to gold
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International Monetary Fund
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International Monetary Fund
Apex Body For IMS
Established In 1945
International Organization of 184 Member
countries
Promote
International Monetary Co-operation
Exchange Stability
Orderly Exchange Arrangement
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Growth in IMF Membership, 1945
2005 (number of countries)
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OBJECTIVES
To promote International Monetary Co-operation
To facilitate the Expansion & Balanced Growth of
International Trade
To promote exchange stability
To assist in the establishment of a Multilateral
System of Payment
To achieve BOP Equilibrium
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Activities
Promotes Global Economic Stability
To resolve economic crises
To reduce Poverty
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Fast Facts on the IMF Current membership: 184 countries
Staff: approximately 2,716 from 165 countries
Total Quotas: $317 billion (as of 7/31/06)
Loans outstanding: $28 billion to 74 countries, of which $6 billionto 56 on concessional terms (as of 7/31/06)
Technical Assistance provided: 429.2 person years during
FY2006
Surveillance consultations concluded: 128 countries during
FY2006, of which 122 voluntarily published information on their
consultation.
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Special Drawing Rights
Source of augmenting International liquidity.
An asset specially intended to take place of gold and as suchcalled paper gold.
Each SDR is equal to 0.88671 grams of gold , equivalent toone dollar in 1971 and 1973.
During 1974 to 1980 the value of SDR was fixed on daily
basis as a weighed average value of a basket of 16 currenciesof countries with more than 1 % of world trade.
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SDR
Reserve assets created as part of long-term strategy of
augmenting world liquidity .
Unconditional acceptance.
Option to join SDR by Fund members.
115 members joined originally in 1970- now all its
members have accepted and are allocated to SDR
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SDR
SDR accounts are kept separate from the General Account of the Fund.
It is like coupon or credit facility.
Holders of the SDR-the governments of countries.
SDRs are a liability .
There is limit on the use of facility .
Obligation on the members using SDRs.
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SDR Allocation
Starting with June 1970- SDRs were allocated to allmember countries of the IMF who accepted the SDRscheme.
First SDr allocation-for each of the years 1970-81 totalling SDR 12 billion.
In Sep 1997, a special one time allocation of SDR 21.4billion was made.
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Limitations to SDR
SDRs cannot be used directly as reserves.
They have to be converted into reserves of one or
other currency before use for payments.
They are not money as such but are comparable to
near money or credit instruments.
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Uses of SDR
Countries have made considerable use of credit facilities.
Swap arrangements
Forward operations
Currency peg.
Security of pledge.
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SDRs in India
India was allocated SDRs in the name of the
Govt. of India since Jan 1970.
SDRs do not enter into the accounts of RBI.
India had total allocation of about SDR 681
million during 1970-81.
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Additional SDRs
SDRs allocation to India was increased in 1997 by
an additonal 240 million SDRs.
Benefit to India.
Increase in the total IMF quota by 45%.
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Thank You
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Surveillance
To encourage a dialogue among its member
countries on the national and international
consequences of their economic and financial
policies, to promote external stability. The regular dialogue and policy advice that the
IMF offers to each of its members.
This process of monitoring and consultation,normally referred to as "surveillance"
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Technical Assistance To help member countries strengthen their
capacity to design and implement effective
policies.
Offered in several areas, including fiscal policy,monetary and exchange rate policies, banking and
financial system supervision and regulation, and
statistics.
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Financial Assistances
A policy program supported by IMF financing is
designed by the national authorities in close cooperation
with the IMF, and continued financial support is
conditional on effective implementation of this program.
To correct balance of payments problems.
This financial assistance enables countries to rebuild their
international reserves; stabilize their currencies; continue
paying for imports; and restore conditions for strongeconomic growth.
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The Poverty Reduction and Growth Facility
(PRGF)
The Exogenous Shocks Facility (ESF)
Debt Relief Heavily Indebted Poor Countries (HIPC) Initiative
The Multilateral Debt Relief Initiative (MDRI)
Poverty Reduction Strategy Papers (PRSP)