General Knowledge

INTERNATIONAL MONETARY FUND (IMF)

This is a international organization  headquartered in Washington, D.C., 189 countries working to foster global monetary cooperation.

 Formed in 1944 at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international payment system.

It now plays a central role in the management of balance of payments difficulties and international financial crises. 

Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money. 

1). The International Monetary Fund (IMF) is an international organization of 188 countries working together to

  • Foster global monetary co-operation
  • Secure financial stability
  • Facilitate international trade
  • Promote high employment and sustainable economic growth
  • Reduce poverty around the world

2). It was formed in 1944 at the Bretton Woods Conference

3). Established on 27th December 1945, with 29 member countries initially

4). Headquarters – Washington DC

5). Managing Director – Christine Lagarde

6). Regional offices – Paris and Geneva

7). It was formed with the following objectives

  • To stabilize exchange rates
  • Assist the reconstruction of the world’s international payment system post the World War II

8).Now the role of IMF is much more active managing the economic policy instead of just exchange rates

9). Low income countries can borrow on concessional terms i.e., there is a period of time with no interest rates through the

  • Extended Credit Facility (ECF)
  • Standby Credit Facility (SCF)
  • Rapid Credit Facility (RCF)

10). IMF also provides non-concessional loans which has interest rates as follows

  • Standby Arrangements (SBA)
  • Flexible Credit Line (FCL)
  • Precautionary and Liquidity Line (PLL)
  • Extended Fund Facility (EFF)

11). IMF provides emergency assistance to all its members facing urgent balance of payment needs through the newly introduced Rapid Financing Instrument(RFI)

12).To become a member of IMF, a country must apply and then be accepted by a majority of the existing 188 members

  • Each member is assigned a quota based on its relatve size of their economy upon joining
  • A member’s quota determines the maximum amount of finanacial resources
  • A member must pay its subscription – 25% and the remaining 75% in the member’s own currency called as special Drawing Rights (SDR) and the remaining 75%in the member’s own currency