International Monetary Fund & The World Bank "Impact On World Trade & Economy"

International Monetary Fund
&
The World Bank
“Impact on World Trade
&
Economy”
Presented by: Devleena

Chakravorty
International
Monetary
Fund
International Monetary Fund:
Conceived in the year 1944, at Bretton woods in

New Hampshire.
Aimed to provide stability for the International

monetary framework.
Now it is an organization consisting of 186

countries.
It works to foster Global Monetary Co-operation

Secure financial stability.
Sustainable Economic growth is also promoted.
Reduces poverty around the world.

♣ What it does ?
Promotes International Monetary Co-
operation.
Brings about Exchange rate stability.
Facilitates balanced growth of international

trade.
Provides resources to help members in

balance of payment difficulties or to assist
with poverty reduction.
Membership:
186 countries are members.
Specialized agency of United Nations.
Has its own charter.
It has its own governance (governing

structure) and finances.
Member represented through a quota system on
their relative size in the global economy.
♣How is it done?
Through its economic surveillance. The IMF
keeps track of the economic health of its member
nations.
 Alerting them to risks on the horizons&
providing policy advice.
Provide technical assistance & training to help

countries improve economic management.
This work is backed by IMF research &
statistics.
♣ Collaborating with others:

Works with other organizations for promoting
growth.
Interacts with Think tanks, civil society& the
media on daily basis.
♣Organization & finance:

Has a management team & 17 departments
which carry out its country policy analytical
&technical works.
One department is charged with managing
IMF’s resources.
It also explains where IMF gets its resources &
how are they used.
A. Management:
• Managing director & staff, Chairman of
Executive board.
• Assisted by a first Managing Director & two
deputy Managing Directors.
B. Staff & International Civil servants:
• Employees come from all over the world.
• They are responsible to IMF & not to the
countries of which they are citizens.
• The IMF staff is organized mainly into
following areas;
Functional, Informative, Liasions &
support responsibilities.
C. Quotas:
• The IMF’s resources mainly comes from
money that the countries pay as their
capital subscription when they become
members.
•It also includes Special Drawing Rights.
♣Special Drawing Rights:

An SDR is an international reserve asset
created by IMF in the year 1969 to
supplement its member countries’ official
reserves.
 Its value is based on a basket of four

International currencies. SDRs can be
exchanged for freely usable currencies.
With general SDR allocation that took effect on
28 August & a special allocation on September 9
2009.
Amount of these SDRs increased from 21.4

billion in2005 to SDR 204.1 billion.
♣The role of SDRs:

SDRs are potential claim on the freely usable
currencies of IMF members.
Holders of SDRs can obtain these currencies in
exchange of these SDRs in two ways;
• First, through the arrangement of voluntary
exchange among members.
• By IMF designating members with strong external

positions purchasing the SDRs of members with
weak external positions.
In addition to its role as a supplementary reserve

asset, SDR serves as the unit of account of the IMF
& some other international organizations.
Where does IMF gets its money from?
The main role IMF plays for supporting nations

economically is through loans.
Most resources for IMF loans are provided by the

member nations through their payment of quotas.
A number of bilateral loans &purchase agreements

are signed by IMF in due course of 2009.
All this has been don e to bolster the capacity to

support member countries during the global economic
crisis.
Multilateral borrowing arrangements provide further

backstop to fund resources.
Concessional lending& debt relief for low income

countries through separate contribution based trust
funds.
♣The Quota System:

Based on the size of the economy each member nation
of IMF is assigned a quota.
One quarter of this quota is paid while joining the
organization
This quota is paid in the form of widely accepted

currencies(for example the US dollar, Euro, Yen or
Pound sterling.) or Special Drawing Rights
(SDRs) or even in the form of Gold.
The remaining three quarters are paid in the form

of country’s own currency.
Quotas are reviewed every five years. In 1998 the

quota was reviewed which led to a 45%increment
In quotas.
While in2003 &2008 no change was brought about

in the quotas.
Initial ad-hoc quota increases of 1.8% were agreed

in 2006 as first step in two year program of quota &
voice reforms.
Further ad hoc quota increases were approved by

board of governors on April 28th 2008 which raised
quotas by 9.55%.
The World Bank
♣ Introduction:
 Official name The International Bank of
Reconstruction & Development.
Year of Inception:1944.
Purpose of construction; To aid the countries
suffering from destruction & devastation caused by
war.
But now it has assumed the role of authority aiding
world development.
♣Major Contributions made by the
Organization:
Efforts were made to assist fledging economies to

participate in a modern economic trade framework.
It actively participates in the resolution of debt

problems along with IMF of the developing world.
It plays a major role in in bringing a market economy

to the former member of Eastern bloc.
♣Debatable Issues related to The World Bank:
The effectiveness of World Bank has always been

questioned.
 In 1970s & 1980s major funds were invested into

infrastructure projects in developing countries.
Many such funds were squandered by corrupt

regimes, Yielding little in terms of economic progress.
Some of the projects had severe negative impact on

recipient nations.
♣Recent endeavors of the World Bank:
The World bank is now trying to reorient its

outlook towards development of nations.
It is trying to focus more on institution building.
It prioritizes development of human capital

through investments in education & health.
Thank You

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International Monetary Fund

Presented by: Devleena

Conceived in the year 1944, at Bretton woods in

Aimed to provide stability for the International

Now it is an organization consisting of 186

It works to foster Global Monetary Co-operation

Sustainable Economic growth is also promoted.

Reduces poverty around the world.

Brings about Exchange rate stability.

Facilitates balanced growth of international

Provides resources to help members in

186 countries are members.

Specialized agency of United Nations.

Has its own charter.

It has its own governance (governing

Provide technical assistance & training to help

♣ Collaborating with others:

♣Organization & finance:

♣Special Drawing Rights:

 Its value is based on a basket of four

Amount of these SDRs increased from 21.4

♣The role of SDRs:

• By IMF designating members with strong external

In addition to its role as a supplementary reserve

The main role IMF plays for supporting nations

Most resources for IMF loans are provided by the

A number of bilateral loans &purchase agreements

All this has been don e to bolster the capacity to

Multilateral borrowing arrangements provide further

Concessional lending& debt relief for low income

♣The Quota System:

This quota is paid in the form of widely accepted

The remaining three quarters are paid in the form

Quotas are reviewed every five years. In 1998 the

While in2003 &2008 no change was brought about

Initial ad-hoc quota increases of 1.8% were agreed

Further ad hoc quota increases were approved by

Efforts were made to assist fledging economies to

It actively participates in the resolution of debt

It plays a major role in in bringing a market economy

The effectiveness of World Bank has always been

 In 1970s & 1980s major funds were invested into

Many such funds were squandered by corrupt

Some of the projects had severe negative impact on

The World bank is now trying to reorient its

It is trying to focus more on institution building.

It prioritizes development of human capital

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