INTRODUCTION

About IMF – The International Monetary Fund (IMF) is an organization of 189 countries, working to
foster global monetary cooperation, secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-
global membership.

The IMF's primary purpose is to ensure the stability of the international monetary system—the system
of exchange rates and international payments that enables countries (and their citizens) to transact with
each other. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector
issues that bear on global stability.

Through the fund, and other activities such as the gathering of statistics and analysis, surveillance of its
members' economies and the demand for particular policies, the IMF works to improve the economies
of its member countries. The organisation's objectives stated in the Articles of Agreement are: to
promote international monetary co-operation, international trade, high employment, exchange-rate
stability, sustainable economic growth, and making resources available to member countries in financial
difficulty. IMF funds come from two major sources:quotas and loans. Quotas, which are pooled funds of
member nations, generate most IMF funds. The size of a member's quota depends on its economic and
financial importance in the world. Nations with larger economic importance have larger quotas. The
quotas are increased periodically as a means of boosting the IMF's resources.
The current Managing Director (MD) and Chairwoman of the International Monetary Fund is noted
French lawyer and former politician, Christine Lagarde, who has held the post since 5 July 2011.

HISTORY-
The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire,
United States, in July 1944. The 44 countries at that conference sought to build a framework for
economic cooperation to avoid a repetition of the competitive devaluations that had contributed to the
Great Depression of the 1930s.

The IMF has played a part in shaping the global economy since the end of World War II.

Cooperation and Reconstruction (1944–71)

As the Second World War ends, the job of rebuilding national economies begins. The IMF is charged
with overseeing the international monetary system to ensure exchange rate stability and encouraging
members to eliminate exchange restrictions that hinder trade.
The End of the Bretton Woods System (1972–81)
After the system of fixed exchange rates collapses in 1971, countries are free to choose their exchange
arrangement. Oil shocks occur in 1973–74 and 1979, and the IMF steps in to help countries deal with the
consequences.
Debt and Painful Reforms (1982–89)
The oil shocks lead to an international debt crisis, and the IMF assists in coordinating the global
response.
Societal Change for Eastern Europe and Asian Upheaval (1990–2004)
The IMF plays a central role in helping the countries of the former Soviet bloc transition from central
planning to market-driven economies.
Globalization and the Crisis (2005 - present)
The implications of the continued rise of capital flows for economic policy and the stability of the
international financial system are still not entirely clear. The current credit crisis and the food and oil
price shock are clear signs that new challenges for the IMF are waiting just around the corner.

WHAT IMF DO?

The IMF’s fundamental mission is to ensure the stability of the international monetary system. It does so
in three ways: keeping track of the global economy and the economies of member countries; lending to
countries with balance of payments difficulties; and giving practical help to members.

Economic Surveillance

The IMF oversees the international monetary system and monitors the economic and financial policies
of its 189 member countries. As part of this process, which takes place both at the global level and in
individual countries, the IMF highlights possible risks to stability and advises on needed policy
adjustments.

Example is the case of Vietnam.

Why is IMF monitoring important?

Vigilant monitoring by the IMF is essential to identifying stability and growth risks that may require
remedial policy adjustments. Moreover, international cooperation on these efforts is critical in today’s
globally integrated economy, in which the problems or policies of one country can affect many others.
IMF membership, which includes all but a handful of the world’s nations, can facilitate this cooperation.
IMF monitoring includes both bilateral surveillance, focused on individual member countries, and
multilateral surveillance, or oversight of the global economy.

Consulting with member states

IMF monitoring typically involves annual visits to member countries. During these visits IMF staff engage
government and central bank officials in discussions about risks to domestic and global stability. These
discussions focus on exchange rate, monetary, fiscal, and regulatory policies, in addition to macro-
critical structural reforms. IMF staff also attempt to meet with other stakeholders, including members of
the legislature and representatives from the business community, labor unions, and civil society, among
other groups. Comprehensive discussions with a broad array of groups leads to better evaluations of
each country’s economic policies and outlook.

Upon completion of their evaluation IMF staff present a report to the Executive Board for discussion.
The Board’s views on the report are then transmitted to the country’s authorities, concluding a process
known as an Article IV consultation. In recent years, surveillance has become more transparent and
most member countries now publish a press release summarizing the staff report and accompanying
analysis, as well as the views of the Board.

Global oversight

The IMF also monitors regional and global economic trends and analyzes the impact that member
country policies may have on neighboring countries and the global economy. It issues periodic reports
on these trends and analysis. The World Economic Outlook provides detailed analysis of the global
economy and its growth prospects, addressing issues such as the macroeconomic effects of global
financial turmoil and the potential for global spillovers, especially those that may result from the
economic, fiscal, and monetary policies of large, globally central economies such as the United States,
China, and the euro area. The Global Financial Stability Report assesses global capital markets and
financial imbalances and vulnerabilities that pose potential risks to financial stability. The Fiscal
Monitorupdates medium-term fiscal projections and assesses developments in public finances. The IMF
also publishes Regional Economic Reports that provide detailed analysis of major regions of the world.

The IMF cooperates closely with other groups, including the Group of Twenty industrialized and
emerging market economies, and since 2009 has supported the G20’s efforts to sustain international
economic cooperation through its mutual assessment process. The IMF analyzes member country
policies to determine how consistent they are with the goal of sustained and balanced global
growth. External Sector Reports analyze and assess the external positions of 29 of the world’s largest
economies, plus the euro area. The analysis systematically assesses current accounts, exchange rates,
external balance sheet positions, capital flows, and international reserves. Twice a year the IMF issues
a Global Policy Agenda that pulls together the key findings and policy advice from multilateral reports
and proposes a future policy agenda for the IMF and its members.

Lending
The IMF provides loans to member countries experiencing actual or potential balance of payments
problems to help them rebuild their international reserves, stabilize their currencies, continue paying for
imports, and restore conditions for strong economic growth, while correcting underlying problems.

Example is the case of Ireland.

How IMF lending helps

IMF lending aims to give countries breathing room to implement adjustment policies in an orderly
manner, which will restore conditions for a stable economy and sustainable growth. These policies will
vary depending upon the country’s circumstances. For instance, a country facing a sudden drop in the
prices of key exports may need financial assistance while implementing measures to strengthen the
economy and widen its export base. A country suffering from severe capital outflows may need to
address the problems that led to the loss of investor confidence—perhaps interest rates are too low;
the budget deficit and debt stock are growing too fast; or the banking system is inefficient or
poorly regulated.

In the absence of IMF financing, the adjustment process for the country could be more abrupt and
difficult. For example, if investors are unwilling to provide new financing, the country would have no
choice but to adjust—often through a painful compression of government spending, imports and
economic activity. IMF financing facilitates a more gradual and carefully considered adjustment. As IMF
lending is usually accompanied by a set of corrective policy actions, it also provides a seal of approval
that appropriate policies are taking place.

The IMF’s various lending instruments are tailored to different types of balance of payments need as
well as the specific circumstances of its diverse membership (see table). Low-income countries may
borrow on concessional terms through facilities available under the Poverty Reduction and Growth Trust
(PRGT;see IMF Support for Low-Income Countries ), currently at zero interest rates. Historically, for
emerging and advanced market economies in crises, the bulk of IMF assistance has been provided
through Stand-By Arrangements (SBAs) to address short-term or potential balance of payments
problems. The Standby Credit Facility (SCF)serves a similar purpose for low-income countries.
The Extended Fund Facility (EFF) and the corresponding Extended Credit Facility (ECF) for low-income
countries are the Fund’s main tools for medium-term support to countries facing protracted balance of
payments problems. Their use has increased substantially in since the global financial crisis, reflecting
the structural nature of some members’ balance of payments problems.

To help prevent or mitigate crises and boost market confidence during periods of heightened
risks, members with already strong policies can use the Flexible Credit Line (FCL) or the Precautionary
and Liquidity Line (PLL).

The Rapid Financing Instrument (RFI) and the corresponding Rapid Credit Facility(RCF) for low-income
countries provide rapid assistance to countries with urgent balance of payments need, including from
commodity price shocks, natural disasters, and domestic fragilities.
IMF lending in action
The IMF provides financial support for balance of payments needs upon request by its member
countries. Unlike development banks, the IMF does not lend for specific projects. Following such a
request, an IMF staff team holds discussions with the government to assess the economic and financial
situation, and the size of the country’s overall financing needs, and agree on the appropriate policy
response.

Typically, a country’s government and the IMF must agree on a program of economic policies before
the IMF provides lending to the country. A country’s commitments to undertake certain policy actions,
known as policy conditionality, are in most cases an integral part of IMF lending (see table). This policy
program underlying an arrangement is in most cases presented to the Fund’s Executive Board in a
“Letter of Intent” and further detailed in a “Memorandum of Understanding”.

Progress is typically reviewed by monitoring the implementation of the policy actions. However, for
some arrangements, countries can use IMF resources with no or limited conditionality as they have
already established their commitment to sound policies (FCL, PLL) or where they are designed for
urgent and immediate needs, for instance, because of the transitory and limited nature of the shock or
where policy implementation capacity is limited, including due to fragilities (RFI, RCF). In general, a
country’s return to economic and financial health ensures that IMF funds are repaid so that they can
be made available to other member countries.

Once an understanding has been reached on policies and a financing package, a recommendation is
made to the IMF’s Executive Board to endorse the country’s policy intentions and extend access to IMF
resources. This process can be expedited under the IMF’s Emergency Financing Mechanism.
Capacity Development
The IMF works with governments around the world to modernize their economic policies and
institutions, and train their people. This helps countries strengthen their economy, improve growth and
create jobs.

Example is the case Colombia.

How IMF Capacity Development Benefits Countries

It helps raise public revenues so governments can provide better services for their people — such as
schools, roads and hospitals.

For instance: The IMF’s work in Colombia helped build modern tax structures that created more jobs in
the formal sector, which meant higher wages and more job security. This helped reduce income
inequality and raised public revenues for greater investments in healthcare and infrastructure.
 It helps create a stable economic and monetary ecosystem — e.g. efficient tax structures, sustainable
debt, reliable data, sound regulatory framework — which enables transparency, stimulates private
sector development and leads to greater and more equitable economic growth.

For instance: When Kosovo wanted to rebuild its post-conflict economy, it worked with the IMF to set
up its central banking operations such as payment systems. IMF’s efforts paved the way for
establishment of commercial banks that provided basic financial services to people and stimulated
private sector development.

The IMF and SDGs

The IMF is committed, within the scope of its mandate, to the global partnership for sustainable
development. The IMF has launched a number of initiatives to enhance its support for its member
countries in crucial ways as they pursue the SDGs. Specifically, the IMF:

 has expanded financial support for low-income developing countries, including: (i) a 50 percent increase
in access norms and limits for all IMF concessional financing; (ii) zero percent interest rate on a
permanent basis for IMF lending under the Rapid Credit Facility, (ii) an increase in access limits under
the emergency financing instruments for countries hit by large natural disasters; and (iv) an extension of
the zero percent interest rate to all other IMF concessional loans until at least end-2018;

 is scaling up support for developing countries to boost domestic revenue mobilization, including by
collaborating with other international organizations through the new Platform for Collaboration on Tax .
The IMF provides technical assistance on tax policy and administration to over 100 countries every year
and is scaling up its support for developing countries, including, where needed, the coverage of
international tax issues;

 is providing support—through an Infrastructure Policy Support Initiative—to member countries seeking

to increase public investment in infrastructure. The initiative seeks to deepen the IMF’s macroeconomic
policy advice and capacity building work to help countries tackle large infrastructure gaps without
endangering public debt sustainability. Several such pilot programs are underway in a number of
member countries. Moreover, the IMF’s new debt limits policy adds flexibility to manage financing
needs to support growth and investment while maintaining prudent debt levels. The IMF is also
reforming the debt sustainability framework for low-income developing countries to better guide
countries’ borrowing decisions and maintain public debt on a sustainable path;

 is bolstering its support to fragile and conflict states to address their specific challenges and wide and
persistent capacity building needs, including through the new Capacity Building Framework , which
seeks to support institution building goals, strengthen outcome monitoring, and enhance coordination
with other partners; and

 is deepening policy advice on aspects of inclusion and environmental sustainability and bringing this
advice to its operational work where relevant.

To deepen IMF engagement with its member countries on key SDGs, the IMF is weaving lessons
from policy-oriented research on a number of development issues into its operational work in a targeted
manner. These include:
 the role of diversification and structural transformation in sustained growth in developing countries—
and the polices needed to support this change. Key policies include those to strengthen infrastructure in
a cost-effective manner, support financial deepening, and boost agricultural productivity;

 tackling income and gender inequality and promoting economic and financial inclusion by promoting job
creation, enhancing the redistributive role of fiscal policy in an efficient manner, and boosting access to
financial services while preserving financial stability; and

 promoting environmental sustainability by reforming energy and enhancing resilience to climate-related

events.

Role of IMF in India:

It is good that India joined the IMF. There is no doubt that this membership has been greatly beneficial
to India.

(i) International regulation by IMF in the field of money has certainly contributed towards expansion of
international trade and thus prosperity. India has, to that extent, benefitted from these fruitful results.

(ii) Large Financial Assistance. Not only indirectly but directly also, her membership has been of great
advantage. We know how, in the post-partition period, India had serious balance of payments deficits,
particularly with the dollar and other hard currency countries. it could not possibly reduce her imports,
since these consisted of essential foodstuffs, capital equipment and industrial raw materials. Her
exports, on the other hand, could not be immediately expanded since under conditions of limited
production in the country, increased exports were sure to create serious internal shortages. Under such
difficult circumstance, it was the IMF that came to her rescue. Subsequently, India has been one of the
most frequent borrowers from the IMF. From the inception of IMF up to March 31, 1971, India
purchased foreign currencies of the value of Rs. 817.5 crores from the IMF, and the same have been
fully repaid. Recently,since 1970, the assistance that India, as other member countries of the IMF, can
obtain from it has been increased through the setting up of the Special Drawing Rights (SDRs). India had
recourse to borrowing from the Fund in the wake of the steep rise in the prices of its imports, food, fuel
and fertilizers. A total of Rs. 753.8 crores had been drawn till the end of August 1975, when the second
oil facility drawing of Rs. 207 crores took place. In November 1981, India was given a massive loan of
about Rs. 5,000 crores to overcome foreign exchange crisis resulting from persistent deficit in balance of
payments on current account.

(iii) The total figures of borrowings by India from the IMF do not convey the extent of the support that it
extended to her. What are of greater significance are the crucial timings of and special circumstances
under which such assistance was availed of. Such help was forthcoming when the country was faced
with critical foreign exchange situations.

(iv) Aid from World Bank and Other International Financial Agencies. The membership of the IMF has
benefited India in yet another important way. India wanted large foreign capital for her various river
projects, land reclamation schemes and for the development communications. Since private foreign
capital was not forthcoming, the only practicable method of obtaining the necessary capital was to
borrow from the International Bank for Reconstruction and Development (i.e. World Bank).The
membership of the IMF is a necessary condition precedent to the membership ofthe World Bank. Thus,
India’s membership of the IMF has entitled her to be a member of the World Bank and its affiliates viz.,
International Finance Corporation (IFC) and International Development Association (IDA). In fact, in
absolute figures though not on per capita basis, India has been the largest borrower from the World
Bank group.

CRITCISM
 Developed countries were seen to have a more dominant role and control over less
developed countries (LDCs).
 The Fund worked on the incorrect assumption that all payments disequilibria were caused
domestically. The Group of 24 (G-24), on behalf of LDC members, and the United Nations
Conference on Trade and Development (UNCTAD) complained that the IMF did not
distinguish sufficiently between disequilibria with predominantly external as opposed to
internal causes. This criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs
found themselves with payments deficits due to adverse changes in their terms of trade,
with the Fund prescribing stabilisation programmes similar to those suggested for deficits
caused by government over-spending. Faced with long-term, externally generated
disequilibria, the G-24 argued for more time for LDCs to adjust their economies.
 Some IMF policies may be anti-developmental; the report said that deflationary effects of
IMF programmes quickly led to losses of output and employment in economies where
incomes were low and unemployment was high. Moreover, the burden of the deflation is
disproportionately borne by the poor.
 The IMF's initial policies were based in theory and influenced by differing opinions and
departmental rivalries. Critics suggest that its intentions to implement these policies in
countries with widely varying economic circumstances were misinformed and lacked
economic rationale.

BIBLIOGRAPHPHY
1. Official website of IMF https://www.imf.org/en/About

2.Some online content on chrome and various news paper articles

3.Articles published by IMF and UN

4. various research papers published on IMF
https://www.nber.org/papers/w7724.pdf https://www.nber.org/papers/w2909.pdf
LIST OF CONTENTS
1. INTRODUCTION
2. HISTORY
3. WHAT IMF DO-
a. Economic surveillance
b. Lending
c. Capacity development
4. IMF AND SDG
5. ROLE OF IMF IN INDIA
6. CRTICISM
7. BIBLIOGRAPHY