Membership
There are two types of members of the International Monetary Fund:
1.Original Members
2.Ordinary Members
All those countries whose representatives whose representatives took part in Bretton woods Conference and who agreed to be the member off Fund prior to 31st December,1945 are called the original members of the Fund. All those countries who became its member subsequently are called ordinary members.Any country can cease to be its member after giving a notice in writing to that effect.Fund can terminate the membership of such a country, which does not observe its rules.In 1945,the number of member countries was 44,in year 2009 the number of member countries was 186.
Organization and management
In order to manage the fund,the following administrative boards have been set up:
1) Board of Governors:
The Board of Governors is the highest decision-making body of the IMF. It consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the head of the central bank.
2) Ministerial Committees
The IMF Board of Governors is advised by two ministerial committees, the International Monetary and Financial Committee(IMFC) and the Development Committee. The IMFC has 24 members, drawn from the pool of 187 governors. Its structure mirrors that of the Executive Board and its 24 constituencies. As such, the IMFC represents the entire member countries of the Fund.The IMFC meets twice a year, during the Spring and Annual Meeting. The Committee discusses matters of common concern affecting the global economy and also advises the IMF on the direction its work. At the end of the Meetings, the Committee issues a joint communiqué summarizing its views. These communiqués provide guidance for the IMF’s work program during the six months leading up to the next Spring or Annual Meetings. There is no formal voting at the IMFC, which operates by consensus.
3.The Executive board
The IMF’s 24-member Executive Board takes care of the daily business of the IMF. Together, these 24 board members represent all 188 countries. Large economies, such as the United States and China, have their own seat at the table but most countries are grouped in constituencies representing 4 or more countries. The largest constituency includes 24 countries.The Board discusses everything from the IMF staff’s annual health checks of member countries’ economies to economic policy issues relevant to the global economy. The board normally makes decisions based on consensus but sometimes formal votes are taken. At the end of most formal discussions, the Board issues what is known as a summing up, which summarizes its views. Informal discussions may be held to discuss complex policy issues still at a preliminary stage.
The main functions of International Monetary Fund
1.Lending for meeting temporary Unfavourable Balance of Payments Position
The IMF lends o member countries that havetemporary balance of payment problems. The IMF does not lend for developmental projects.The financial assistance provided by IMF enables the members to reduce its deficit of balance of payments and other short-term external liabilities.These lendings are to be paid back in three to five years.
2. Purchase and Sale of foreign Currency
The fund buys and sells the currencies of the member countries.Whenever a country buys the currency of another country from the Fund,the latter makes it available by purchasing the same from the country concerned,of which it constitutes the national currency.In any one year a member country can purchase from the Fund foreign currency up to the maximum of 25% of its quota.But in some cases IMF can raise this limit to even 100 per cent of quota.
3. Bank of Central Banks
The fund is called the bank of the central banks of different member countries of the world.Just as a central bank holds the cash of the commercial banks of the country,likewise IMF also holds reserves of the central banks of the member countries.
4. Technical Assistance
The fund also provides technical assistance to its member countries.The fund sends its experts on deputation to member countries to advise them on matters like exchange control,foreign payments,credit control,central banking and economic policy etc.The fund also publishes many technical journals and magazines.
5. Imparts training
It also imparts training to the representatives of member countries.This training is imparted to the senior officers of the central banks and finance departments.In 1975,a training centre was set up to impart training to policy makers of different nations.
6. Facilities during Emergency
Although IMF is opposed to any sort of controls either on foreign exchange or on foreign trade,yet member countries have been given the right to resort to these controls during emergency in the hope that they will lift it as early as the situation warrants.
7. Increases International Liquidity
IMF has increased international international liquidity by creating a new currency in the form of SDR.IMF also lends foreign currency to member countries.All this increases international liquidity.
8. Determining Exchange rate for every member country
When a country becomes member of the fund,it has to declare par value of its currency in terms of dollar or gold. This facilities multilateral convertibility of that currency.But now exchange rate is determined by market forces of demand and supply,so this function has been dropped.
9. Poverty Reduction
For helping low income countries having extreme poverty,IMF has set up a special fund.In this fund,contribution is received from developed nations and from emerging developing nations.India is also contributing US$1 million per year in this fund.
10. Change in Exchange rate
i. If any country wants to change its exchange rate from 11 to 20 percent, no prior permission is needed from IMF. Simply intimation to IMF will be sufficient.
ii. If any country wants to change its exchange rate from 11 to 20 percent,prior permission of IMF is required for such change.
iii. If the country wants to change its exchange rate by more than 20 percent,then such decision is taken with the consent of 2/3 of its members.At present determination of exchange rate and change in exchange rate are decided by the market forces,i.e. now a country cannot decide the par value of its currency,the exchange rate is decided by the demand and supply of that currency in the foreign exchange market.
11. Research Functions:
IMF has setup a separate statistical bureau for conducting research regarding balance of payments,money and banking,finance and fiscal policy etc. IMF publishes report of such research work.Its main publications are-Finance and Development,IMF Survey,Balance of Payments year Book,Direction of Trade,International Financial Statistics,etc.These publications are useful for member nations for framing economic policies.
12. Special Lending facilities of IMF: Following are the main lending facilities provided by IMF to member nation:
i. Compensatory and Contingency Financing Facility(C.C.F.F.)
Under this scheme,special financial assistance is provided to the member nations for compensating them for shortfall in exports,because of some contingencies like flood,earthquakes,drought etc.
ii. Buffer stock Financing Facility(B.S.F.F):
Under this scheme,special financial assistance is provided to member nations for maintain buffer stocks(Reserve stock) of primary products like foodgrains.
iii. Structural adjustment Facility(S.A.F):
Under this scheme concessional loans are provided by IMF to least developed member nations for meeting deficit in balance of payments.Under this scheme,the rate of interest is between 0.5% to 1% p.a.
iv. Enhanced Adjustment Facility (S.A.F.)
It is also known as Enlarged Access policy.Under this scheme,enhanced loans are provided toleast developed member nations with heavy debt burdens for making economic reforms. Under this scheme,a member country can take loans upto 425% of its quota.