The International Monetary Fund (IMF) works to achieve

sustainable growth and prosperity for all of its 190

member countries. It does so by supporting economic
policies that promote financial stability and monetary
cooperation, which are essential to increase productivity,
job creation, and economic well-being. The IMF is
governed by and accountable to its member countries.
The IMF has three critical missions: furthering
international monetary cooperation, encouraging the
expansion of trade and economic growth, and
discouraging policies that would harm prosperity. To
fulfill these missions, IMF member countries work
collaboratively with each other and with other
The IMF or International Monetary Fund is an international bodies.
organization with 190 member countries that aims to Formation of IMF
attain sustainable growth and profitability for the The breakdown of international monetary cooperation
members. It supports economic policies that are focused during the Great Depression led to the development of
on promoting economic balance and pecuniary the IMF, which aimed at improving economic growth
cooperation. The IMF is governed by and accountable to and reducing poverty around the world. The International
the member countries. The IMF is a specialized agency Monetary Fund (IMF) was initially formed at the Bretton
of the UN, with headquarters in Washington D.C. Woods Conference in 1944. 45 government
Due to the Great Depression of the 1930s, international representatives were present at the Conference to discuss
monetary cooperation collapsed and the global economy a framework for postwar international economic
was shaken due to economic setbacks. The Bretton cooperation.
Woods Conference of 1944 brought 45 government The IMF became operational on 27th December 1945
representatives together to have a discussion on postwar with 29 member countries that agreed to bound to this
international economic cooperation. This conference treaty. It began its financial operations on 1st March
gave rise to the origin of the International Monetary 1947. Currently, the IMF consists of 189 member
Fund. The IMF is an important topic for the UPSC Exam. countries.
It is frequently in the news and hence IAS aspirants must The IMF is regarded as a key organisation in the
be aware of the structure, significance, members, and international economic system which focuses on
other details of the organization. rebuilding the international capital along with
International Monetary Fund (IMF) maximizing the national economic sovereignty and
The IMF or International Monetary Fund is an human welfare.
organization with 190 member countries that aims to Detailed information on the IMF can be checked in the
attain sustainable growth and profitability for the video below –
members. It supports economic policies that are focused Organizational Structure of International Monetary
on promoting economic balance and pecuniary Fund (IMF)
cooperation. The IMF is governed by and accountable to The United Nations is the parent organization that
the member countries. The IMF is a specialized agency handles the proper functioning and administration of the
of the UN, with headquarters in Washington D.C. IMF. The IMF is headed by a Managing Director who is
Due to the Great Depression of the 1930s, international elected by the Executive Board for a 5-year term of
monetary cooperation collapsed and the global economy office. The International Monetary Fund (IMF) consists
was shaken due to economic setbacks. The Bretton of the Board of Governors, Ministerial Committees, and
Woods Conference of 1944 brought 45 government the Executive Board.
representatives together to have a discussion on postwar To know more about the organizational structure of IMF,
international economic cooperation. This conference refer to the table below:
gave rise to the origin of the International Monetary Objectives of the IMF
Fund. IMF was developed as an initiative to promote
international monetary cooperation, enable international
The formation of the IMF was initiated in 1944 at the trade, achieve financial stability, stimulate high
Bretton Woods Conference. IMF came into operation on employment, diminish poverty in the world, and sustain
27th December 1945 and is today an international economic growth. Initially, there were 29 countries with
organization that consists of 189 member countries. a goal of redoing the global payment system. Today, the
Headquartered in Washington, D.C., IMF focuses on organization has 189 members. The main objectives of
fostering global monetary cooperation, securing financial the International Monetary Fund (IMF) are mentioned
stability, facilitating and promoting international trade, below:
employment, and economic growth around the world. 1. To improve and promote global monetary
The IMF is a specialized agency of the United Nations. cooperation of the world.
 2. To secure financial stability by eliminating or financial policies so that they can cope with the
minimizing the exchange rate stability. crisis.
3. To facilitate a balanced international trade.  Recently, the IMF has also started providing
4. To promote high employment through economic capacity development on cyber-risk and fintech.
assistance and sustainable economic growth. Legal Framework
5. To reduce poverty around the world. The IMF also guides the countries to align their legal and
What are the functions of the IMF? governance framework with international standards to
IMF mainly focuses on supervising the international support financial reforms, address the issues of money
monetary system along with providing credits to the laundering and black money, etc.
member countries. The functions of the International Statistics
Monetary Fund can be categorized into three types:  It also helps the countries in the compilation,
Surveillance Function management, and analysis of financial and
 The primary function of the IMF is to monitor macroeconomic data.
the international monetary system along with the  This helps the countries to better understand the
economic and financial policies of the 190 economy and formulate more effective economic
member countries. This surveillance process policies that can cater to the needs of the
happens at regional, global, and country levels. economy.
 The International Monetary Fund (IMF) analyzes What are the IMF Quotas?
stability and growth risks and suggests and When the country joins the International Monetary Fund
assists countries in essential policy adjustments (IMF), it is assigned a quota based on the economic size
for sustainable economic growth and financial of the country in relation to the global economy and the
and economic stability. existing member countries. Quotes are provided in the
Financial Function denominations of the Special Drawing Rights (SDRs).
 Economic crises can arise at anytime in any  The review of these quotes is conducted usually
form. It can be a balance of payment crisis, after every five years through which the IMF
high fiscal deficits or debts, etc. looks at the adequacy of quotes according to the
 The International monetary fund provides needs of the member countries for liquidity and
financial assistance to countries that are hit by financial stability. The quota of the member
the crisis and help them to restore economic countries determines the voting power of each
stability in the country. member and its access to IMF financing.
 It also provides precautionary financial advice to  250 basic votes are provided to each member
the members to prevent and get prepared for the plus one additional vote for each SDR 100,000
crisis. quota. India holds the position of eighth-highest
Technical or Capacity Development Function quota-holding member of the IMF.
The International Monetary Fund also provides Structure of the International Monetary Fund
training and capacity development assistance to the The highest decision-making authority is possessed by
central banks, tax authorities, finance ministers, and the Board of Governors of the International Monetary
economic institutions of the member countries. These Fund [IMF]. Each citizen of the country comprises one
efforts help the countries to achieve the objectives of governor and one alternate governor. The member of the
sustainable growth and development. The capacity countries leads to the appointment of the Minister of
development efforts of the IMF focus mainly on the Finance or the head of the central bank. Two ministerial
following parameters: committees, the International Monetary and Financial
Public Finance Committee and the Development Committee have the
 IMF guides the countries on the better responsibility of advising the Board of Governors.
mobilization of revenues and effective  The Board of Governors have consigned most of
management of expenditure by using fiscal their authorities to the Executive Board of the
instruments such as tax & custom duties, budget International Monetary Firm and keeps back the
management, public finance, debt management, authority to approve the quotas, and allocations
etc. of the SDR [special drawing right], admit new
 The training helps the countries to improve the members, and mandatorily withdraw the
infrastructure of the country such as better members and alterations or amendments of the
schools, hospitals, roads, etc, attract foreign Articles of Bylaws and Agreements.
direct investments, ensure fiscal health, foster  The International Monetary Fund’s executive
transparency, mitigate the risk of climate change, board comprises 24 members. The Board of
and reduce the risks of exchange rate Governors plays an instrumental role in electing
fluctuations, etc. the Executive Board. It directs the daily affairs of
Monetary and Financial Policies the IMF and exerts the powers consigned to it by
 The IMF works with the central banks of the the Board of Governors and the authorities
countries on modernizing the monetary and provided to it by the Articles of Agreements. The
 Board puts forth on the basis of consensus,  The IMF also offers technical support and
sometimes the votes are taken. capacity building to developing and
Special Drawing Rights (SDR) of IMF impoverished countries.
The Special Drawing Right [SDR] has been established  IMF laid assistance to India during a post-
by the International Monetary Fund. It is an international partition crisis.
reserve asset that is interest-bearing. The SDR  The International Monetary Fund allocated funds
corresponds to the plethora of international currencies to India when it was facing an economic crisis
consisting of the dollars of the United States, Japanese during the Indo-Pak conflict of 1965 and 1971.
yen, Euro, Chinese Renminbi, and pound sterling. The The aid that India can attain through IMF has
SDR value of a currency is determined by the value of surged due to the SDR. India has also attained a
dollars in the United States. position on the Board of Directors.
 It is also elicited by the market exchange rates, of  The country plays an instrumental role in
an SDR basket of currencies. The Special specifying the policies of the IMF. India has also
Drawing Rights are also evaluated over the span taken assistance to track the status of the Indian
of five years. The SDR possesses the claim of economy. Since 1933 India has not taken any
freely usable currencies of the members of the economic aid from the IMF and the repayment of
International Monetary Funds, this is not just a loans finished on 31 May 2000.
currency.  The Finance Minister of India is part of the ex-
 The Special Drawing Rights are only allocated to officio Governor on the Board of Governors of
the members of the International Monetary the International Monetary Fund. The Governor
Funds who make active participation in the SDR of the Reserve Bank of India is the alternate
department. governor at the International Monetary Fund.
 As of now, all the members of the Special  Each member country also has an alternate
Drawing Rights are a part of the SDR governor. The alternate governor for India is the
Department. India possesses the current quota of Governor of the RBI. There is also an Executive
SDR to be 5,821.5 million, leading it to be called Director for India who represents the country at
the 13th largest quota-handling country at the IMF.
International Monetary Funds and providing its  India’s quota in the IMF is SDR 13,114.4 million
shareholdings at 2.44%. that gives India a shareholding of 2.76%. Read
Criticism of IMF about the Special Drawing Rights – Created in
The criticism of the IMF is widely publicized as they are 1969 by International Monetary Fund (IMF) at
more, outnumbered the success of the organization in the linked article.
recent years. The main areas of criticism are:  This makes India the eight largest quota holding
 Conditions associated with the loans are country at the organization.
obtrusive and compromise the economic and  In 2000, India completed the repayment of all the
political sovereignty of the receiving countries. loans it had taken from the IMF.
 The policies of the International Monetary Fund  Now, India is a contributor to the IMF.
are imposed without comprehending the definite Who runs the IMF?
features of the respective countries.  The IMF is accountable to its member country
 The organization allows for inflationary governments. At the top of the organizational
devaluations structure is the Board of Governors, consisting of
 The IMF policies are implemented all at go. It one governor and one alternate governor from
does not follow an adequate sequence. each member country, usually the top officials
IMF and India from the central bank or finance ministry. The
India is one of the founding members of the Board of Governors meets once a year at
International Monetary Fund. On May 31, 2000, India the IMF–World Bank Annual Meetings. Twenty-
paid off all loans to the International Monetary Fund. The four of the governors serve on the International
Finance Minister of India serves as the ex-officio Monetary and Financial Committee, or IMFC,
Governor on the Board of Governors. Also, the Governor which advises the IMF's Executive Board.
of the Reserve Bank of India acts as the Alternate  The day-to-day work of the IMF is overseen by
Governor. Dr. Rakesh Mohan, Executive Director of its 24-member Executive Board, which
India at the IMF, also represents Bangladesh, Sri Lanka, represents the entire membership and is
and Bhutan. supported by IMF staff. The Managing Director
 Following the footsteps of the Bretton Woods is the head of the IMF staff and Chair of the
System, the IMF now assists countries Executive Board and is assisted by four Deputy
experiencing a balance-of-payments problem. Managing Directors.
Moreover, it also supports governments in How is the IMF funded?
dealing with multiple economic issues. IMF funds come from three sources: member quotas,
credit arrangements, and bilateral borrowing agreements.
MEMBER QUOTAS countries to strengthen their economic
Member quotas are the primary source of IMF funding. A institutions and policies.
member country’s quota reflects its size and position in 4. Promoting International Monetary
the world economy. Read more on the IMF regularly Cooperation: The IMF fosters collaboration
reviews quotas. among countries, promotes exchange rate
stability, and facilitates the smooth functioning
NEW ARRANGEMENTS TO BORROW of the international monetary system.
New Arrangements to Borrow (NAB) between the IMF Structure of the IMF
and a group of members and institutions are the main The IMF has a hierarchical structure that includes the
backstop for quotas. In January 2020, the IMF Executive following components:
Board agreed to double the size of the NAB to SDR 365 1. Board of Governors: Consisting of
billion, or $504 billion. representatives from each member country, the
Board of Governors is the highest decision-
BILATERAL BORROWING AGREEMENTS making body in the IMF. It meets once a year to
Member countries also have committed resources discuss key policy issues.
through bilateral borrowing agreements (BBAs). In 2. Executive Board: Comprising 24 Executive
2020, the IMF Executive Board approved a new round of Directors, the Executive Board is responsible for
BBAs, totaling SDR 138 billion, or $190 billion. day-to-day operations. It discusses policy
Frequently Asked Questions matters, approves financial assistance, and
conducts evaluations.
3. Managing Director: The Managing Director
heads the IMF and is elected by the Executive
Board. They oversee the organization’s activities,
represent the IMF in international forums, and
coordinate policy implementation.
4. IMF Staff: A team of economists, researchers,
and experts supports the IMF’s operations,
including conducting economic analyses,
providing technical assistance, and managing
financial programs.
Significance of the IMF
The IMF plays a vital role in the global economy, and its
VISIT - https://www.imf.org/en/About/Factsheets/IMF- significance can be understood through the following
at-a-Glance points:
Do Study SDR – special drawing rights 1. Crisis Prevention and Resolution: The IMF
IMF TIMELINE - helps prevent and manage financial crises by
https://www.imf.org/en/About/Timeline providing financial assistance and policy advice,
ensuring stability in member countries and the
The International Monetary Fund (IMF) plays a crucial global financial system.
role in the global financial system. It is an international 2. Promoting Economic Growth: Through its
organization that aims to promote global monetary surveillance and policy advice, the IMF supports
cooperation, secure financial stability, facilitate member countries in implementing sound
international trade, foster economic growth, and reduce economic policies, fostering sustainable
poverty. In this blog, we will delve into the functions, economic growth, and reducing poverty.
structure, and significance of the IMF in the international 3. Global Financial Stability: The IMF promotes
financial landscape. financial stability by monitoring global economic
The Functions of the IMF and financial developments, identifying risks,
1. Surveillance and Economic Analysis: The IMF and recommending policies to mitigate them.
monitors the economic and financial 4. Facilitating International Trade: The IMF’s
developments of its member countries, providing work on exchange rates and international
policy advice and conducting assessments to monetary cooperation helps facilitate trade by
ensure stability and sustainable growth. promoting stable exchange rate regimes and
2. Financial Assistance: The IMF provides reducing trade barriers.
financial support to member countries facing 5. Addressing Global Challenges: The IMF
balance of payments difficulties. These financial addresses various global challenges, including
programs come with policy conditions aimed at income inequality, climate change, and the
addressing underlying economic issues. impact of technological advancements, to
3. Technical Assistance and Capacity promote inclusive and sustainable growth.
Development: The IMF offers technical Conclusion
expertise, training, and advice to member
The International Monetary Fund (IMF) is a key global
institution that plays a pivotal role in ensuring financial
stability, fostering economic growth, and facilitating
international cooperation. Through its surveillance,
financial assistance, and technical expertise, the IMF
contributes to the stability and prosperity of its member
countries. Understanding the functions and significance
of the IMF is essential for comprehending the dynamics
of the international financial system.
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monetary-fund-imf/