Overview

• IMF is a Bretton Woods institution responsible for promoting global monetary cooperation, financial stability, and orderly exchange arrangements.
• It serves as the central institution of the international monetary system, facilitating cooperation among member countries.

Establishment and Background

• Established in 1944 at the Bretton Woods Conference in New Hampshire, USA.
• Began operations in 1945.
• Created in the aftermath of the Great Depression and World War II to prevent competitive devaluations and financial instability.

Membership and Headquarters

• Membership consists of 190 countries.
• Headquarters located in Washington, D.C., United States.
• Each member country is represented on the Board of Governors.

Objectives

• Promote international monetary cooperation.
• Ensure exchange rate stability and avoid competitive currency devaluations.
• Facilitate balanced growth of international trade.
• Provide temporary financial assistance to countries facing balance of payments crises.
• Promote macroeconomic stability and sustainable economic growth.

Core Functions

• Surveillance
  
  • Monitors global, regional, and national economic developments.
  • Conducts Article IV Consultations with member countries to assess economic policies.
• Financial Assistance
  
  • Provides loans to countries experiencing balance of payments problems.
  • Aims to restore macroeconomic stability, not to finance long-term development projects.
• Capacity Development
  
  • Offers technical assistance and training in fiscal policy, monetary policy, taxation, banking regulation, and statistics.

IMF Lending Instruments

• Stand-By Arrangement (SBA)
  
  • Short- to medium-term support for balance of payments needs.
• Extended Fund Facility (EFF)
  
  • Long-term assistance for structural economic problems.
• Rapid Financing Instrument (RFI)
  
  • Emergency assistance without full-fledged programmes.
• Poverty Reduction and Growth Trust (PRGT)
  
  • Concessional lending for low-income countries.

Quota System

• Each member is assigned a quota, based on its relative size in the global economy.
• Quotas determine:
  • Financial contribution to IMF.
  • Voting power.
  • Access to IMF financing.
• Major economies hold greater voting power, leading to debates on representation.

Governance Structure

• Board of Governors
  
  • One governor from each member country, usually finance minister or central bank governor.
• Executive Board
  
  • 24 Executive Directors responsible for day-to-day operations.
• Managing Director
  
  • Chief executive officer and chair of the Executive Board.

IMF and India

• India is a founding member of the IMF.
• IMF has supported India during balance of payments crises, notably in 1991, linked with economic reforms.
• IMF regularly conducts Article IV consultations with India, assessing growth, inflation, fiscal balance, and external sector stability.

Criticism and Challenges

• Conditionalities attached to IMF loans may lead to austerity measures, impacting social spending.
• Perceived dominance of developed countries in decision-making.
• One-size-fits-all policy prescriptions criticized for ignoring country-specific contexts.

Contemporary Role

• Crisis response during:
  • Global Financial Crisis (2008).
  • COVID-19 pandemic.
  • Debt distress in developing and low-income countries.
• Increasing focus on climate risks, inequality, digital currencies, and global debt sustainability.

Conclusion

The International Monetary Fund remains a cornerstone of global financial governance, balancing crisis management, policy surveillance, and capacity building, while continuously adapting to evolving economic and geopolitical challenges.