1. A Brief Introduction to the IMF
A Brief Introduction to the IMF
Kyung Kwak
Counsel
Legal Department
International Monetary Fund

2. Outline Purposes and Functions of the IMF Membership and Capital
Organs of the IMF
Surveillance
Financial Assistance
Technical Assistance
The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management.

3. PURPOSES AND FUNCTIONS
Legal Status of the IMF
Articles of Agreement = International Treaty
UN “Specialized Agency”?
Different from the World Bank
Purposes
Article I of the Articles of Agreement
Guardian of the international monetary system.
Main Functions: Surveillance, Financial Assistance, Technical Assistance

4. MEMBERSHIP AND CAPITAL
MEMBERSHIP AND CAPITAL
Only countries = members (185)
Member quotas
Each member assigned a quota
Broadly determined by economic position relative to other members
Economic considerations include the member’s GDP, volume of current account transactions, and official reserves
Determines a member’s maximum financial commitment to the Fund, voting power and size of its access to financial resources

5. Reviewed every 5 years
Voting power
Each member has 250 basic votes, plus
One additional vote for each SDR 100,000 of quota
85% of total voting power required for change in quotas (US alone has 17.14%)
Ongoing quota and voice reform under the Medium-Term Strategy

6. Quotas Distributed Among Regions

7. Subscriptions
Equal to a member’s quota
Up to 25 percent of subscription must be paid in reserve assets specified by the IMF – foreign currencies acceptable to the IMF or “Special Drawing Rights”. The balance of a member’s subscription may be paid in the member’s own currency
Member’s subscriptions are the primary source of funds that finances IMF financial assistance to its members

8. Borrowing
Borrowing from governments is an additional source of financing
General Arrangements to Borrow - $23 billion
Additional $2 billion through an associated agreement with Saudi Arabia
New Arrangements to Borrow - $21 billion
Could borrow from private parties, but has not done so

9. ORGANS OF THE IMF
Organizational Structure of the IMF (Chart)

11. Board of Governors Highest policy making body of the IMF
One governor and one alternate governor appointed by each member
Usually finance ministers or central bank chiefs
Serve without compensation from the IMF
Hold Annual Meetings

12. The Executive Board
Responsible for conducting the business of the IMF and exercising power delegated by the Board of Governors
24 Executive Directors; each ED appoints one alternate
5 EDs each appointed by the 5 members with the largest quotas (at present USA, UK, Germany, France, and Japan); 19 elected by the other members for two year terms;
Executive Board meets in continuous session
Voting – most decisions by a simple majority of votes cast, other decisions when specified in the Articles of Agreement; some 70% or 85% of total voting power
Voting is rare; most decisions by consensus

14. The Managing Director
The Managing Director is appointed by the Executive Board; term of 5 years
Chairman of the Executive Board and chief of the staff
Presides over Executive Board meetings
MD assisted by First Deputy Managing Director and 2 Deputy Managing Directors

15. Rodrigo de Rato, John Lipsky, Takatoshi Kato, Murilo Portugal

16. The Staff of the IMF
International civil servants; owe duty entirely to the IMF
Staff is appointed from member countries on as wide a geographical basis as possible
Majority of professional staff are economists

17. Three Functions of the IMF
Surveillance
Technical Assistance
Financial Assistance

18. SURVEILLANCE Major part of the IMF’s work
Stems from Article IV of the Articles of Agreement
“The Fund shall oversee the international monetary system in order to ensure its effective operation...the Fund shall exercise firm surveillance over the exchange rate policies of members.”
Surveillance at the global, regional and country levels
Medium Term Strategy –making surveillance more effective

19. FINANCIAL ASSISTANCE For balance of payments adjustment
Available under a number of policies and facilities depending on the type of underlying balance of payments problem to be addressed. For example,
Stand-by arrangement
Emergency assistance
Poverty Reduction and Growth Facility

20. Provided under adequate safeguards – achieved through the member implementing a program of economic reform dealing with problem
Access level
Conditionality as a means to safeguard
Principle of uniform treatment – Similarly situated members should be treated similarly

21. Some legal issues relating to IMF-supported programs
Programs, as described in a member’s letter of intent and memorandum of economic policies, are those of members
IMF financing arrangements are not “contracts”
No breach of obligation results from a member’s failure to carry out conditionality

22. TECHNICAL ASSISTANCE Article V, Section 2(b)
“...the Fund may decide to perform financial and technical services, including the administration of resources contributed by members, that are consistent with the purposes of the Fund....”

23. Provision of technical assistance to members
Fiscal affairs, e.g., drafting of tax legislation
Statistics, e.g., framework for collection and analysis of data
Banking sector reform, e.g., banking laws, supervision matters, financial sector restructuring
Law reform, e.g., anti-money laundering/countering financing of terrorism (AML/CFT), corporate insolvency.