International Monetary Fund

The International Monetary Fund is a specialized agency of the

United Nations Britton Woods system, established under an
international treaty in 1944 to promote the safety of the global
economy.
The headquarters of the Fund is located in Washington, DC, and
is administered by its members, covering almost all the
countries of the world, with 188 countries
Establishment of the Fund
The International Monetary Fund (IMF) was established at the
end of the Second World War in the quest to build a new, more
stable international economic order and to avoid the mistakes
of previous decades that have resulted in heavy losses over the
past 70 years. The Fund has been in a state of constant change
and adaptation, but since its inception it has been shaped by
historical events and influenced by the prevailing economic and
political ideas over the years.
When delegates from 44 countries in Britton Woods, New
Hampshire, met in July 1944 to establish two institutions
governing international economic relations in the aftermath of
the Second World War, their focus was on avoiding the
repetitions of the failures of the Paris Peace Conference that
ended World War I,
And the establishment of an international monetary fund would
help to restore currency exchangeability and multilateral trading
activity, For John Maynard Keynes, the head of the British
delegation, and Harry Dexter White, who contributed most to
the drafting of the Fund's founding agreement, the Fund's
founding principle was to achieve economic growth after the
Second World War by creating an institution that would prevent
a reversal of Shut-off protection, not only avoid the recurrence
of the Great Depression crisis
Role of the Fund

• What is the meaning of International Monetary Fund?

• What is the function of the International Monetary Fund?
• What is the World Bank and International Monetary Fund?
• How much money is in the International Monetary Fund?
• How many countries are members of the IMF?
• What is the role of the International Monetary Fund?

• How does the International Monetary Fund work?

• Who owns the International Monetary Fund?

• What is the main function of the World Bank?

• What is the purpose of the International Monetary Fund?

• What is the difference between the World Bank and the International Monetary
Fund?
What is the International Monetary Fund?

The International Monetary Fund (IMF): is an international

organization headquartered in Washington, D.C., 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
Role and function of IMF.

International Monetary Fund ( IMF): is the intergovernmental

organization that oversees the global financial system by
following the macroeconomic policies of its member countries,
in particular those with an impact on exchange rate and the
balance of payments
What is the World Bank and International Monetary
Fund?

Known collectively as the Britton Woods Institutions after

the remote village in New Hampshire, U.S.A., where they
were founded by the delegates of 44 nations in July 1944,
the Bank and the IMF are twin intergovernmental pillars
supporting the structure of the world's economic and
financial order
International Monetary Fund (IMF)
The foundation stone of the World Bank and the International
Monetary Fund was laid in 1944 during a conference of world
leaders in Bretton Woods, New Hampshire, USA. The purpose
of the Bretton Woods institutions was to put the international
economy on the right track after World War II
The work of the Bank and the Fund is complementary to each other, but the role
of each institution is different.
• The World Bank is a lending institution whose purpose is to help countries
integrate their economies into the global economy and to promote long-term
economic growth that helps alleviate poverty in developing countries.
• World Bank loans are earmarked for policy reform and project financing

• While the IMF works to maintain a consistent system of payments among all
countries.
• The Fund also lends money to member countries that face serious balance of
payments deficits and have a short-term problem in meeting foreign payment
requirements.
What is the International Monetary Fund?
• It is the central institution of the international monetary system - that
is, the system of international payments and currency exchange rates
that allows trade transactions between different countries to proceed
smoothly.
• It oversees this system and provides the global institutional
framework through which countries cooperate in international
monetary affairs.
goals of the International Monetary Fund
1- Encouraging international cooperation in the monetary field
through a permanent body that provides means for consultation and
synergy with regard to international monetary problems.
2- Facilitating the expansion and balanced growth of international
trade, thus contributing to achieving and maintaining high levels of
employment and real income, and to developing the productive
resources of all member countries, provided that this is one of the
basic objectives of their economic policy.
3- Work to achieve stability in exchange rates, maintain regular
exchange arrangements among member countries, and avoid
competitive devaluation of currencies.
4- Helping to establish a multilateral payment system with regard to
the current transactions between member countries, and to abolish
restrictions imposed on exchange operations that impede the growth
of world trade.
5- Strengthening the confidence of member countries, allowing them
to use their public resources temporarily with sufficient guarantees, in
order to be able to correct the imbalances in their balance of payments
without resorting to measures harmful to national or international
prosperity.
6- Working, in accordance with the aforementioned objectives, to
shorten and mitigate the imbalance in the balance of payments of the
member country.
Fund's area of ​expertise
• In its oversight of member countries' economic policies, the IMF is
concerned with the performance of the economy as a whole - often
referred to as macroeconomic performance. This performance
includes aggregate spending (and its main components such as
spending and investment), employment and inflation, as well as the
country's balance of payments.
• The Fund focuses primarily on countries' macroeconomic policies—
that is, policies related to the government balance, cash, credit, and
exchange rate management—and financial sector policies, including
regulation and oversight of banks and other financial institutions. In
addition, the IMF pays attention to structural policies that affect the
performance of the economy. Macro - including labor market policies
that affect employment behavior and wages, and the Fund advises on
how to improve its policy in these areas, lower inflation, and achieve
sustainable economic growth - that is, growth that can continue
without leading to difficulties such as inflation and balance of
payments problems .
What is the role of the International Monetary Fund?

To achieve the above objectives, the fund will do the following:

1.Following up the Qatari and global economies and issuing warning
signals when sensing signs of danger
2. Providing advice to its members on economic policies, and working
to establish new standards for economic policies and the banking and
financial system
3. Lending to member countries that are experiencing economic
difficulties to facilitate the necessary correction and help them
address long-term economic problems through reforms.
4. Providing technical assistance and training to the governments and
central banks of member countries
• ** The International Monetary Fund is the main forum in which
countries discuss their economic policies in a global context, as well
as issues of importance to the stability of the international monetary
and financial system.
Who is the decision maker in the IMF?
The International Monetary Fund is accountable to its member
countries, a responsibility that is a necessary element to achieve its
effectiveness. The Fund's day-to-day business is carried out by an
Executive Board representing the 183 member countries, an
international staff body led by the Director-General and three Deputy
Managing Directors—each member of the management team drawn
from a different region of the world. The powers delegated to the
Executive Council in the conduct of the Fund's business come from the
Board of Governors, which has the highest supervisory authority
The Board of Governors
The Board of Governors, which includes representatives from all
member countries, is the ultimate governing body of the IMF, and it
usually meets once a year during the annual meetings of the IMF and
World Bank. Each member country appoints a governor—usually the
minister of finance or the governor of that country's central bank—and
an alternate governor. The Board of Governors decides on major policy
issues, but delegates the Executive Board to make decisions about the
Fund's day-to-day business.
The Executive Board
The Executive Board is composed of 24 directors, and is headed by the
Director General of the Fund; The Executive Board normally meets
three times a week in one-day sessions, and additional meetings may
be held if necessary, at the Fund's headquarters in Washington, DC.
Independent seats on the Executive Board are allocated to the five
largest contributors - the United States, Japan, Germany, France and
the United Kingdom - along with China, Russia and Saudi Arabia. The
other sixteen directors are elected by groups of countries known as
constituencies for two-year terms
Unlike some other international organizations that work on the basis of
each country having one vote, (such as the United Nations General
Assembly), the International Monetary Fund applies a weighted voting
system, the greater the share of a member country in the Fund - and
the share is generally determined on the basis of its economic size -
the more The number of its votes is greater, but the Executive Council
rarely takes decisions by formal vote, but rather takes most of its
decisions based on consensus among its members, and these decisions
are unanimously supported.
The Executive Board selects the Director General, who assumes the
presidency of the Board in addition to his leadership of the Fund's
experts and employees, and the conduct of its work under the
direction of the Executive Board. The Director General is appointed for
a period of five years, subject to renewal, and he is assisted in his work
by a first deputy and two other deputies.
Staff members of the International Monetary Fund are
international employees of the Fund, not of their national
authorities. It employs about 2,800 employees based in 133
countries. Economists are roughly two-thirds of the fund's
technical staff. 22 departments and offices headed by
managers before the Director General. Work in the business
field in Washington, DC.
Fund financial resources
• Most of the Fund's resources for lending come from its member countries,
particularly their payments for quotas. Bilateral and multilateral borrowing
agreements are another back-up tool for the Fund's resources
• But the main source is the quota contributions made by countries upon joining
the Fund or following periodic reviews in which quotas are increased.
• Quotas determine not only the contribution payments required of a member
country, but also the number of its votes and the amount of funding available to
it from the fund.
quota system
• Each member country in the Fund is allocated a specific membership
quota, which is generally determined according to its relative size in
the global economy, and on the basis of which it determines its
maximum contribution to the Fund's financial resources. When a
country becomes a member of the fund, it usually pays up to a
quarter of its quota in the form of widely tradable foreign currencies
(such as US dollars, euros, yen or sterling) and the remaining three-
quarters of its quota is paid in the member's currency.
• Quotas are reviewed at least every five years.
Quotas are generally intended to serve as a mirror of a member's
relative size in the global economy. The larger a member's economy in
terms of output and the greater the breadth and diversity of its trade,
the greater will be its share in the Fund. The United States of America,
the largest economy in the world, contributes the largest share to the
International Monetary Fund, with its share of 17.6% of the total
shares.
23 COUNTRY QUOTA / VOTING SHARE

• U.S. 16.77
• JAPAN 6.02
• GERMANY 5.88
• FRANCE 4.86
• U.K. G-5
• TOTAL 38.39
24 COUNTRY QUOTA / VOTING SHARE
• ITALY
4.11
• CANADA
3.66
• BELGIUM
5.14
• NETHERLANDS
4.79
• SWEDEN
3.44
• SWITZERLAND
2.79
• SPAIN
4.45
• CHINA
3.67
• INDONESIA
3.52
• SOUTH KOREA
• EGYPT
3.20
• SAUDI ARABIA
3.16
• SIERRA LEONE
3.02
• RUSSIA
2.69
• IRAN
2.43
• BRAZIL
• INDIA
2.35
• ARGENTINA
1.97
• RWANDA
1.35
• OTHER TOTAL
61.61
Borrowing from the International Monetary Fund

The International Monetary Fund provides loans in foreign currencies

to countries facing balance-of-payments problems. These loans would
ease the difficulty of the adjustment that the country has to make to
reconcile its spending and income in order to address the problems it
faces at the level of balance of payments. These loans also target policy
support, including structural reforms, that can improve the balance of
payments position and growth prospects
-Any member country can turn to the International Monetary Fund to
obtain the necessary financing for balance of payments purposes, that
is, if it needs an official loan to be able to make its external payments
and maintain an adequate level of reserves.
- In order for the fund to provide the required financing, it must reach
agreement with the authorities on a policy program aimed at achieving
specific quantitative targets for external health, financial and monetary
stability, and sustainable growth. The details of this program are
clarified in a "letter of intent" addressed by the government to the
fund's general manager.
- National authorities work closely with IMF staff in formulating a
resource-supported program that is tailored to meet the specific needs
and circumstances of the country. This is essential for the effectiveness
of the program and for the government to gain national support for it.
Such endorsement - or what we might call "local ownership" of the
program - is one of the elements vital to ensuring its success.
- Each program is designed flexibly, so that it can be reviewed during
implementation and modifications made if conditions change. In fact,
many programs are modified during implementation.
How is compliance with program terms assessed?
Most of the IMF's financing is characterized by the disbursement of
resources in tranches that are linked to a member's demonstrable
economic policy actions. Program reviews provide a framework for the
Executive Board to use in a role assessment of whether a program
supported by UNFPA resources is on track and whether adjustments
should be made to achieve its objectives.
The reviews combine evaluation from a retrospective
perspective (have the program conditions been met according
to the agreed timetable) and a forward-looking perspective
(does the program need to be modified in light of
developments). Funding resources under the Fund's programs
can only be disbursed upon approval by the Executive Board
or completion of reviews.
Program approval or reviews are based on various policy
commitments agreed with country authorities. These obligations can
take various forms:
1. Prior Actions: Measures that a member country agrees to take
before the Executive Board approves funding or before it completes
the review. These measures ensure that the necessary foundation is in
place for the success of the program, or put it back on track if it
deviates from agreed policies. Examples of these measures include
canceling price restrictions or formally approving the preparation of a
budget consistent with the public financial framework specified in the
program
2.Quantitative Performance Standards: These are specific and
measurable conditions that must be met to complete the review. These
criteria always refer to macroeconomic policy variables controlled by
national authorities, such as international reserves, public financial
balances, or external borrowing. For example, the program may include
a minimum level of net international reserves, a maximum level of net
domestic assets with the central bank, or a maximum level of
government borrowing.
3. Structural Standards: Reform measures (often not
quantifiable) that are critical to achieving program objectives,
and are intended as benchmarks in evaluating program
implementation during the review process. These rules vary
across programs, such as measures to improve financial sector
operations, build social safety nets, or strengthen public
financial management.
The most important features of lending provided by the Fund
1.The International Monetary Fund is not an aid agency or a
development bank. It provides loans to help its member countries
address balance-of-payments problems and restore sustainable
economic growth. The foreign exchange provided, the maximum limits
of which are set according to the member country's share in the fund,
is deposited with the central bank of the country concerned to support
its international reserves and thus give general support to the balance
of payments. Unlike loans provided by development agencies, IMF
funds are not provided to finance specific projects or activities
2.Fund loans are conditional on policies, meaning that the
borrowing country must adopt policies that correct the balance
of payments problem. The conditionality of IMF loans helps
ensure that a country does not use IMF loans just to delay
tough tests and create more debt, and that it can boost its
economy and repay the amount borrowed. The borrowing
country and the International Monetary Fund must agree on
the necessary economic policy measures
3. The Fund's loans are temporary; According to the lending
facility used, loans can be disbursed over periods that may be
as short as six months or as long as four years. The repayment
period ranges from 3.25 to 5 years for short term loans or 4.5
to 10 years for medium term financing. The repayment period
for loans to low-income countries under the concessional
lending facility known as the Poverty Reduction and Growth
Facility (PRGF) is 10 years, with a grace period of five and a half
years for principal repayment.
4. The fund expects borrowers to give priority to repaying its loans.
The borrowing country must repay the IMF loan on time, so that funds
are available to lend to other countries that need financing for balance
of payments purposes. The Fund applies deterrent measures to
prevent the accumulation of arrears or non-payment of payments or
interest fees. But most of all is the weight that the international
community gives to the IMF's position as an excellent creditor; It
ensures that the Fund is among the first lenders to be repaid, although
it is usually the last lender to provide money to countries after the
country's ability to meet its obligations is clearly in doubt.
5. When the Fund lends, in most cases it provides only a small
percentage of the external financing needs of the country in question.
But because the Fund's approval to grant loans is a sign that the
economic policies in the concerned country are on the right track, it
reassures investors and official circles and helps generate additional
funding from these sources. Thus, the financing provided by the Fund
can be an important tool or incentive to attract more financing. The
Fund's ability to play this catalytic role is based on the confidence of
other lenders in its operations, particularly in the credibility of the
conditionality of lending policies.
IMF lending tools
The International Monetary Fund provides loans under a variety of
policies or “facilitations” that have developed over the years to meet
the needs of member countries. The duration and terms of repayment
and lending in each of these facilities vary according to the types of
problems facing the balance of payments and the circumstances that
the concerned facility deals with.
The Fund provides most of the financing to member countries through different
types of lending policies:
1. Credit Standby Agreements, which form the core of the Fund's lending policies.
It was first used in 1952, and its primary purpose is to address short-term balance
of payments problems.
2. Extended Medium-Term Agreements, under the Extended Fund Facility, are for
countries experiencing balance-of-payments difficulties related to structural
problems, which may take longer to correct than for macroeconomic weaknesses.
Structural policies associated with extended agreements include reforms aimed at
improving the way the economy operates, such as tax and financial sector
reforms, privatization of public institutions, and measures to enhance labor
market flexibility.
3. Since the late 1970s, the Fund has been providing soft loans
to help its poorest member countries secure the soundness of
their external positions, achieve sustainable economic growth,
and improve living standards. Through the so-called Poverty
Reduction and Growth Facilitation (PRGF), poverty reduction
and economic growth have become the primary objectives of
the policy programs of the respective countries.
4. In the late 1990s, the Fund introduced facilities designed to help
countries cope with a sudden loss of market confidence, and to
prevent crisis “contagion”—that is, the spread of financial crises to
countries with sound economic policies. The Fund also provides loans
to help countries cope with balance-of-payments problems beyond
their control resulting from natural disasters, the effects of military
conflicts, and temporary shortages in export earnings (or temporary
increases in grain import costs).
- Credit Stand - By Agreement: The stand-by agreement allows the
Fund to quickly respond to countries’ external financing needs and
support policies designed to help countries emerge from crises and
restore growth.
- Eligibility: All member countries that require external financing are
eligible for SBAs, while adhering to all relevant IMF policies. However,
these agreements are generally used more intensively by middle-
income member countries, as low-income countries have a customized
suite of concessional lending instruments to meet their needs.
- Duration: There is flexibility in defining the term covered by credit
readiness agreements, and it usually ranges between 12 and 24
months and does not exceed 36 months, as is appropriate to
addressing the balance of payments problems in the short term.
- Borrowing conditions: The determination of the utilization of the
Fund’s financial resources under credit readiness agreements is guided
by the member country’s need for financing, its ability to repay, and its
previous record of using the Fund’s resources. Within these guidelines,
SBAs provide flexibility in terms of loan size and timing, in order to
contribute to meeting the borrowing needs of member countries.
-Repayment: Resources borrowed under SBAs are due within
3.25 to 5 years of disbursement, meaning that each disbursed
amount is repaid in eight equal quarterly installments.
-Lending rate: The lending rate is linked to the interest rate set
by the Fund
"Rapid Credit Facility "RCF
• Purpose: The Rapid Credit Facility provides a limited amount of quick
and easy financial assistance to countries whose balance of payments
faces urgent financing needs, without the need to set conditions
within economic programs with the Fund. Support in this facility is
provided on a flexible basis to suit a wide range of different
circumstances, including shocks, natural disasters and fragility
emergencies.
• Eligibility: The Rapid Credit Facility allows immediate resources to be
released to member countries when their balance of payments faces
pressing financing needs, and when the implementation of an
integrated economic program is not necessary (for example, due to
the transient and limited nature of the shock) or not possible (for lack
of capacity). or because of the fragility of various aspects of the local
economy, for example).
- Lending on highly concessional terms: the financing is provided
through the "quick credit facility" at a zero interest rate until the end of
2013, and the repayment period is five and a half years, while the final
maturity is 10 years.
-Limited conditionality: The Fund provides support to member
countries under the Rapid Credit Facility in the form of immediate
disbursement of resources without specific conditions or programmatic
reviews with the Fund. The economic policies supported by the
resources of this facility should aim to address the fundamental
problems in the balance of payments.
structural adjustment policies
These policies are based on market mechanisms and limit the role of
the state in economic life
The structural adjustment programs include the following policies:
1- Liberalizing prices: based on the belief that the state’s intervention in
setting prices leads to creating distortions in price relations and what
results in low production efficiency and a reduction in the flexibility of
the production apparatus. Therefore, structural adjustment measures
to reallocate resources seek to liberalize prices, whether to raw
materials or commodities Finally, we are working to cancel support
These procedures aim to achieve two goals:
First: Reducing the burden on the state budget by lifting price subsidies
on production or its requirements
Second: Granting the price system the possibility of stimulating
economic growth until the possibility of increasing commodity supply is
realized in light of the growth of demand in accordance with market
mechanisms.
2- Privatization: with the aim of moving the state away from the ownership of
capital assets and transferring them to the private sector. The objectives of the
transfer of ownership are limited to two main directions:
-Reducing government spending and reducing various forms of support, thus
relieving the pressure on the state budget and the balance of payments
- Increasing economic efficiency as a result of moving away from various forms of
support and protection.
3- Trade Liberalization: Trade liberalization policies aim to encourage
exports on the grounds that these economies suffer from a shortage of
foreign exchange, and this deficiency is supposed to be compensated
through export earnings and not through external borrowing.
• Raising the competitive competencies of exports requires making
changes in the relations between economic sectors through reducing
customs duties, removing subsidies or protection, and moving away
from the policy of violating imports.