Development Banks

International Monetary Fund

Submitted By : Pavak Patel (2057) & Saaransh Kumar (2075)

What is IMF?
The International Monetary Fund is a
global organisation founded in 1944. It
aims was to help stabilise exchange rates
and provide loans to countries in need.
Nearly all members of the United Nations
are members of the IMF with a few
exceptions such as Cuba, Lichtenstein
and Andorra.

The IMF is independent of the World Bank

although both are United Nations agencies and
both are aiming to increase living standards.
The World Bank concentrates on long term
loans to developing countries.

Functions of IMF

International Monetary Cooperation.

Promote Exchange rate stability.

To help deal with Balance of Payments Adjustments

To help deal with Economic Crisis by providing with

internation coordination.

What does IMF do?

Economic Surveillance : IMF produces reports on member countries

economies and suggest areas of weakness / possible danger. The idea is to
work on crisis prevention by highlighting areas of economic imbalance.

Loans to Country;s with financial crisis : The IMF has $300 billion of loanable
funds. This comes from member countries who deposit certain amount on
joining. In times of financial / economic crisis, the IMF may be willing to
make available loans as part of a financial readjustment.

The IMF has arranged more than $180 billion in bailout packages
since 1997.

Technical assistance and economic training : The IMF produce many reports
and publications. They can also offer support for local economies.

How is the IMF Financed?

The IMF is financed but member countries who contribute

funds on joining. they can also increase this throughout their
membership. The IMF can also ask its member countries for
more money. IMF financial resources from contributions
from its 183 members. This initial amount depends on the
size of the countries economy.

The US currently has 16% of voting rights Loans amount

with the IMF. The UK has 4% of IMF voting rights, Loans are
also available to developing countries to deal with poverty
reduction.

India and The IMF

India and the IMF has a positive relationship. The IMG has provided
financial assistance to India, which as helped in boosting the Countrys
economy.

The IMG praised the country for it was able to avoid Asian Financial
Crisis in 1999 and was able to maintain the average rate of growth of
its economy.

The managing Director of International Monetary Fund Rodrigo De

Rato visited India in May 2005.

In 2005, the IMF said that the budget of India is very positive for it
points that the economy of the country will grow at the rate of 6.7%.

India and The IMF

IMF said that the reasons behind the economy growth

of India is that the RBI has been able to control
inflation and has also handled its monetary policies
very skilfully.

The IMF has suggested that India can become a

financial superpower by bringing in more reforms in
its economic policies that will increase its growth rate
to 8%.

Iceland and IMF 2008

Problems of Iceland

Collapse in Icelandic banks led to loss of confidence in

Icelandic economy

Withdrawal of Money caused depreciation in currency.

Large current account deficit and external debt,

suggested economy living beyond means in era of
tighter capital flows.

Rescue package for Iceland

$2.1billion loan to Iceland. This represents 1,190
percent of Icelands quota.
The loan is part of a package aiming at:
restoring confidence in financial sector.
stabilising Icelandic krona.
Stabilising Icelandic fiscal position.

Criticism of IMF

Conditions of Loans

On giving loans to countries, the IMF make the loan

conditional on the implementation of certain economic
policies. These policies tend to involve:

Reducing government borrowing Higher

taxes and lower spending

Higher interest rates to stabilise the

currency.

Allow failing firms to go bankrupt.

Structural adjustment. Privatisation,

deregulation, reducing corruption and bureaucracy.

Criticism of IMF

Exchange rate reforms

Devaluation

Neo Liberal Criticism

Free Market Criticism of IMF

Lack of transparency and

involvement

Supporting Military
Dictatorship

Conclusion

-The IMF works to foster global growth and economic stability. It

provides policy advices and financing to member in economic
difficulties. It also works with developing nations to help them
achieve MACROECONOMIC stability and REDUCE poverty.

Thank You