International Financial Institutions: International Monetary Fund IMF

1. International Financial Institutions: International Monetary Fund (IMF) by Veronika Pinkerton

2. Address 700 19th St. NW, Washington, DC 20431

3. Purposes To promote international monetary cooperation To facilitate the expansion and balanced growth of international trade To promote exchange stability To assist in the establishment of a multilateral system of payments in respect of current transactions between members To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members. In short the activity of IMF consists on Surveillance – to assure, that the members are being treated fairly, Financial assistance – the most known activity which I will talk more lately and Technical assistance – providing tools and information to the members on transactions.In short the activity of IMF consists on Surveillance – to assure, that the members are being treated fairly, Financial assistance – the most known activity which I will talk more lately and Technical assistance – providing tools and information to the members on transactions.

4. Structure ·  Governing Bodies: Board of Governors, International Monetary and Financial Committee, Executive Board. Managing Director: Horst Köhler, a German national. Accounting Unit: Special Drawing Rights (SDR). Total Quotas: SDR 212.4 billion (US$ 265 billion) Staff: Approximately 2,650 from 140 countries.

5. Quotas Quotas (capital subscriptions) are the primary source of IMF resources. Each member of the IMF is assigned a quota, which is expressed in Special Drawing Rights (SDRs). A member's quota is broadly determined by its economic position relative to other members. A variety of economic factors are considered in determining quotas, including GDP, current account transactions, and official reserves. When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members considered by the IMF to be broadly comparable in economic size and characteristics. A member's quota delineates basic aspects of its financial and organizational relationship with the IMF, including: Subscriptions. A member's subscription to IMF resources is equal to its quota and determines the maximum amount of financial resources the member is obliged to provide to the IMF. Voting power. The quota defines a member's voting power in IMF decisions. Each IMF member has 250 basic votes plus one additional vote for each SDR 100,000 of quota. Accordingly, the United States has 371,743 votes (17.16 percent of the total), and Palau has 281 votes (0.013 percent). Access to financing. The amount of financing a member can obtain from the IMF (access limits) is based on its quota.

6. As of February 28, 2002, the IMF held about 103 million ounces (3,217 metric tons) of gold at designated depositories. The IMF acquired virtually all its holdings of gold through four main types of transactions under the original Articles of Agreement: Subscriptions. The original Articles of Agreement prescribed that 25 percent of initial subscriptions and quota increases was normally to be paid in gold. Payment of charges. Originally, all charges, i.e., interest on members' outstanding use of IMF credit, were normally payable in gold. Purchases. A member wishing to obtain the currency of another member could acquire it by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970-71. Repurchases. Members could use gold to repay the IMF for credit previously extended. Gold holdings

7. The IMF's Poverty Reduction and Growth Facility (PRGF) As of March 2001, a total of 77 low-income member countries are eligible for PRGF assistance. Eligibility is based principally on a country's per capita income and eligibility under the International Development Association (IDA) An eligible country may borrow up to a maximum of 140 percent of its IMF quota, although this limit may be increased under exceptional circumstances to a maximum of 185 percent of quota Loans under the PRGF carry an annual interest rate of 0.5 percent, with repayments made semiannually, beginning five-and-a-half years and ending 10 years after the disbursement.

8. Debt Relief under the Heavily Indebted Poor Countries (HIPC) Initiative To qualify for assistance, the country must adopt adjustment and reform programs supported by the IMF and the World Bank and establish a satisfactory track record. A debt sustainability analysis will be carried out to determine the current external debt situation of the country. Once eligible for support under the Initiative, the country must establish a further track record of good performance under IMF/World Bank-supported programs. Both the World Bank and the IMF are expecting to provide "interim relief" between the decision and completion points, and other multilateral creditors are considering also to advance some of the assistance from the completion point. Remaining assistance will be provided at this point First phase. To qualify for assistance, the country must adopt adjustment and reform programs supported by the IMF and the World Bank and establish a satisfactory track record. Decision point. At the end of the first phase, a debt sustainability analysis will be carried out to determine the current external debt situation of the country. If the external debt ratio for that country after traditional debt relief mechanisms is above 150 percent for the net present value of debt to exports, it qualifies for assistance under the Initiative. At the decision point, the Executive Boards of the IMF and World Bank will formally decide on a country's eligibility, and the international community will commit to provide sufficient assistance by the completion point for the country to achieve debt sustainability calculated at the decision point. The delivery of assistance committed by the Fund and Bank will depend on satisfactory assurances of action by other creditors. Second phase. Once eligible for support under the Initiative, the country must establish a further track record of good performance under IMF/World Bank-supported programs. The length of this second period under the enhanced framework is not time bound, but depends on the satisfactory implementation of key structural policy reforms agreed at the decision point, the maintenance of macroeconomic stability, and the adoption and implementation of a poverty reduction strategy developed through a broad-based participatory process. Both the World Bank and the IMF are expecting to provide "interim relief" between the decision and completion points, and other multilateral creditors are considering also to advance some of the assistance from the completion point. Completion point. Remaining assistance will be provided at this point. First phase. To qualify for assistance, the country must adopt adjustment and reform programs supported by the IMF and the World Bank and establish a satisfactory track record. Decision point. At the end of the first phase, a debt sustainability analysis will be carried out to determine the current external debt situation of the country. If the external debt ratio for that country after traditional debt relief mechanisms is above 150 percent for the net present value of debt to exports, it qualifies for assistance under the Initiative. At the decision point, the Executive Boards of the IMF and World Bank will formally decide on a country's eligibility, and the international community will commit to provide sufficient assistance by the completion point for the country to achieve debt sustainability calculated at the decision point. The delivery of assistance committed by the Fund and Bank will depend on satisfactory assurances of action by other creditors. Second phase. Once eligible for support under the Initiative, the country must establish a further track record of good performance under IMF/World Bank-supported programs. The length of this second period under the enhanced framework is not time bound, but depends on the satisfactory implementation of key structural policy reforms agreed at the decision point, the maintenance of macroeconomic stability, and the adoption and implementation of a poverty reduction strategy developed through a broad-based participatory process. Both the World Bank and the IMF are expecting to provide "interim relief" between the decision and completion points, and other multilateral creditors are considering also to advance some of the assistance from the completion point. Completion point. Remaining assistance will be provided at this point.

9. Achievements A recent review of social spending in a representative sample of 32 low-income countries that received IMF support for the period 1985-99 indicated that these countries have made progress in raising public social expenditures and improving social indicators. On average per capita real spending on education and health increased at an annual rate of 3.4 percent and 3.3 percent respectively A recent review of social spending in a representative sample of 32 low-income countries that received IMF support for the period 1985-99 indicated that these countries have made progress in raising public social expenditures and improving social indicators. On average per capita real spending on education and health increased at an annual rate of 3.4 percent and 3.3 percent respectively, although smaller gains in education spending were recorded in Africa, overall primary school enrollment improved by 0.9 percent; female primary and secondary enrollment by 1.2 percent and 1.3 percent, respectively; infant mortality by 1.8 percent; under-five mortality by 2.2 percent; births attended by skilled staff by 1.7 percent; and contraceptive prevalence by 5.3 percent. A recent review of social spending in a representative sample of 32 low-income countries that received IMF support for the period 1985-99 indicated that these countries have made progress in raising public social expenditures and improving social indicators. On average per capita real spending on education and health increased at an annual rate of 3.4 percent and 3.3 percent respectively, although smaller gains in education spending were recorded in Africa, overall primary school enrollment improved by 0.9 percent; female primary and secondary enrollment by 1.2 percent and 1.3 percent, respectively; infant mortality by 1.8 percent; under-five mortality by 2.2 percent; births attended by skilled staff by 1.7 percent; and contraceptive prevalence by 5.3 percent.

10. Future The IMF is still in the learning process in the social policy area. The IMF has taken concrete initiatives to address the social content of reform programs. The IMF is still in the learning process in the social policy area. In many cases, weak administrative structures and lack of appropriate social policy instruments have made it difficult to strengthen public spending on social sectors and implement social safety nets. In addition, IMF staff is often constrained by lack of data, which makes it difficult to assess the effectiveness of poverty-reducing spending. The IMF has taken concrete initiatives to address the social content of reform programs. For example, staff has improved their collection of data on government social expenditures, and the monitoring of social output indicators in member countries-particularly the heavily indebted and poor countries. Work on the PRSP process is still evolving, and is expected to forge a stronger link between social spending and social indicators, as well as focus attention more closely on how to assist the poor. The IMF is still in the learning process in the social policy area. In many cases, weak administrative structures and lack of appropriate social policy instruments have made it difficult to strengthen public spending on social sectors and implement social safety nets. In addition, IMF staff is often constrained by lack of data, which makes it difficult to assess the effectiveness of poverty-reducing spending. The IMF has taken concrete initiatives to address the social content of reform programs. For example, staff has improved their collection of data on government social expenditures, and the monitoring of social output indicators in member countries-particularly the heavily indebted and poor countries. Work on the PRSP process is still evolving, and is expected to forge a stronger link between social spending and social indicators, as well as focus attention more closely on how to assist the poor.

11. Source: www.imf.orgSource: www.imf.org