Unit 7 IMF

•US Delegation – IMF a bank so member countries could repay debts
oOutcome? •US platform is model for how economic crises have been handled since WWII
Growth in IMF Membership, 1945 – 2005
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Reasons for frequency of use
o External conditions outside IMF’s control
• declines in trades, rising foreign interest rates, and debt service political instability, endemic corruption, lack of civil authority
•Access to Financing: Amount of financing a member country can obtain from IMF, its access limit
•SDR (Special Drawing Rights) Locations: A member’s share established in proportion to its quota
185 countries
IMF Resources - Quotas
o based on a member country’s relative size to the world economy o determine a member’s maximum financial commitment to the IMF o total quotas = $338.3 billion (September 2007) o main functions: •Subscriptions: Financial resources provided by member countries •Voting Power : Based largely on members’ quotas
Structural Organization
International Monetary and Financial Committee Board of Governors Joint IMF – World Bank Development Committee
Executive Board
Independent Evaluation Office
Managing Director Deputy Managing Directors
Area Departments
Functional & Special Serv. Departments Investment Office Staff
Information & Liaison
Support Services
o Streamlining of surveillance practices
o New form of multilateral surveillance
o New precautionary financing for eligible
countries • Eligibility based on how prudent their
• • • Promote global monetary and exchange stability Facilitate the expansion and balanced growth of international trade Assist in the establishment of a multilateral system of payments for current transactions Surveillance: Monitoring of economic and financial developments,
o Combat economic instability through:
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Infrequent users
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Who needs the IMF?
Assistance from private capital markets not sufficient
Frequent users
o Reasons nations run the risk of facing balance of payment crises in the future include
Office of Budgeting & Planning
Office of Internal Audit v & Inspection
Office of Technical Assistance Management
What does the IMF do?
o Three major objectives:
policies are
o Reform of the distribution of Fund
quotas
The End!
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Inadequate support of economic reforms from member countries
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Is the IMF outdated?
IMF’s reforms and ability to adapt
oImpending financial problem of Fund itself • Lending decrease = interest income decrease
and the provision of policy advice, aimed especially at crisisprevention Lending: Provides temporary financing and support policies aimed at correcting the underlying problems in countries with balance of payments difficulties Technical Support: Provides countries with technical assistance and training in its areas of expertise
• • • • severe budget deficits rampant inflation strict price controls significantly over-valued or under-valued currencies
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Mismanagement of macroeconomic policies Instability Less access to capital markets
International Monetary Fund
/external/about/whatwedo.htm
History of the IMF
oEstablished in 1944 at Bretton Woods conference in New Hampshire oAt conference, government officials concerned about rebuilding Europe and the global economic system after WWII oKey debate between US and British delegations •British Delegation – IMF a cooperative fund where members could consult for the maintenance of economic activity and