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8/14/2019 Internatinal IMF

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ROAD MAP

Introduction

The Gold & Gold Bullion Standards

Gold Exchange System

The Two-Tier System

The Bretton Woods System IMF

SDR


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International Monetary System

INTERNATIONAL MONETARY

SYSTEM are the rules and procedures by

which different national currencies are

exchangedfor each other in world trade.

Such a system is necessary to define a

common standard of value for the world'scurrencies.


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The Gold and Gold Bullion

Standards

The first modern international monetary systemwas the gold standard

Prevalent in the late 19th and early 20th centuries

Gold was the only standard of value A major defect in such a system was its inherentlack of liquidity

The international gold standard broke down in1914


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Continued

During the 1920s the gold standard was replaced

by the gold bullion standard

This system, too, was abandoned in the 1930s


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The Gold-Exchange System Nations fix the value of their currencies not with

respect to gold, but to some foreign currency,

which is in turn fixed to and redeemable in gold

United States, was known as the KeyCurrency"

country


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The Two-Tier System During the 1960s a severe drain on U.S. gold

reserves developed

Two-tier system was created in 1968

The value of gold was set at $35 an ounce forCentral bank gold holders

Gold payments to non-central bankers wereprohibited

In the free-market tier consisting of all non-governmental gold traders, gold was completelydemonetized


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Bretton Woods system Established the rules for commercial and financial

relations among the world's major industrial states

730 delegates from all 44 Allied nations

United Nations Monetary and Financial

Conference

Established the International Bank for

Reconstruction and Development (IBRD) and theInternational Monetary Fund(IMF).


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Chief features of the Bretton

Woods system An obligation for each country to adopt a

monetary policy that maintained the exchange rate

of its currency within a fixed value plus or minus

one percent in terms of gold The ability of the IMF to bridge temporary

imbalances of payments

The system collapsed in 1971 following theUnited States suspension of convertibility from

dollars to gold


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International Monetary Fund


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International Monetary Fund

Apex Body For IMS

Established In 1945

International Organization of 184 Member

countries

Promote

International Monetary Co-operation

Exchange Stability

Orderly Exchange Arrangement


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Growth in IMF Membership, 1945

2005 (number of countries)


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OBJECTIVES

To promote International Monetary Co-operation

To facilitate the Expansion & Balanced Growth of

International Trade

To promote exchange stability

To assist in the establishment of a Multilateral

System of Payment

To achieve BOP Equilibrium


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Activities

Promotes Global Economic Stability

To resolve economic crises

To reduce Poverty


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Fast Facts on the IMF Current membership: 184 countries

Staff: approximately 2,716 from 165 countries

Total Quotas: $317 billion (as of 7/31/06)

Loans outstanding: $28 billion to 74 countries, of which $6 billionto 56 on concessional terms (as of 7/31/06)

Technical Assistance provided: 429.2 person years during

FY2006

Surveillance consultations concluded: 128 countries during

FY2006, of which 122 voluntarily published information on their

consultation.


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Special Drawing Rights

Source of augmenting International liquidity.

An asset specially intended to take place of gold and as suchcalled paper gold.

Each SDR is equal to 0.88671 grams of gold , equivalent toone dollar in 1971 and 1973.

During 1974 to 1980 the value of SDR was fixed on daily

basis as a weighed average value of a basket of 16 currenciesof countries with more than 1 % of world trade.


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SDR

Reserve assets created as part of long-term strategy of

augmenting world liquidity .

Unconditional acceptance.

Option to join SDR by Fund members.

115 members joined originally in 1970- now all its

members have accepted and are allocated to SDR


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SDR

SDR accounts are kept separate from the General Account of the Fund.

It is like coupon or credit facility.

Holders of the SDR-the governments of countries.

SDRs are a liability .

There is limit on the use of facility .

Obligation on the members using SDRs.


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SDR Allocation

Starting with June 1970- SDRs were allocated to allmember countries of the IMF who accepted the SDRscheme.

First SDr allocation-for each of the years 1970-81 totalling SDR 12 billion.

In Sep 1997, a special one time allocation of SDR 21.4billion was made.


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Limitations to SDR

SDRs cannot be used directly as reserves.

They have to be converted into reserves of one or

other currency before use for payments.

They are not money as such but are comparable to

near money or credit instruments.


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Uses of SDR

Countries have made considerable use of credit facilities.

Swap arrangements

Forward operations

Currency peg.

Security of pledge.


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SDRs in India

India was allocated SDRs in the name of the

Govt. of India since Jan 1970.

SDRs do not enter into the accounts of RBI.

India had total allocation of about SDR 681

million during 1970-81.


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Additional SDRs

SDRs allocation to India was increased in 1997 by

an additonal 240 million SDRs.

Benefit to India.

Increase in the total IMF quota by 45%.


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Thank You


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Surveillance

To encourage a dialogue among its member

countries on the national and international

consequences of their economic and financial

policies, to promote external stability. The regular dialogue and policy advice that the

IMF offers to each of its members.

This process of monitoring and consultation,normally referred to as "surveillance"


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Technical Assistance To help member countries strengthen their

capacity to design and implement effective

policies.

Offered in several areas, including fiscal policy,monetary and exchange rate policies, banking and

financial system supervision and regulation, and

statistics.


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Financial Assistances

A policy program supported by IMF financing is

designed by the national authorities in close cooperation

with the IMF, and continued financial support is

conditional on effective implementation of this program.

To correct balance of payments problems.

This financial assistance enables countries to rebuild their

international reserves; stabilize their currencies; continue

paying for imports; and restore conditions for strongeconomic growth.


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The Poverty Reduction and Growth Facility

(PRGF)

The Exogenous Shocks Facility (ESF)

Debt Relief Heavily Indebted Poor Countries (HIPC) Initiative

The Multilateral Debt Relief Initiative (MDRI)

Poverty Reduction Strategy Papers (PRSP)

Documents

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