IMF today (finished) Flashcards
Members of the Executive board
24 directors
The US, China, France, Germany and Japan have their own seat due to being the biggest shareholders
What are the key functions of the IMF today?
Surveillance
Financial Assistance (loans)
Technical assistance
Which has the highest policy-making authority in the IMF?
Board of Governors
How does IMF use surveillance to promote international monetary stability?
By supervising the economic and financial policies of its members, it can highlight possible risks to domestic and external stability and the IMF can advise the governments on how to adjust to the problems.
Essentially, the IMF will pressure the governments to implement and adopt policies according to the risks and trends that the IMF is observing in the international market.
How does loans from the IMF assist in the promotion of international monetary stability?
The IMF loans are directed at paying for necessary imports or servicing their debt payments. The loans enables countries to stabilize their economics, whilst implementing new economic reforms at the will of the IMF. The IMF disburses its loans in phases, after verifying that the conditions and reforms have been met.
Basically, the IMF lends money to those who are willing to adopt the policies of the IMF, if not then they payments stop. This is how the IMF uses loans to promote stabilization.
How does the technical assistance help promote international monetary stability?
The technical assistance of the IMF helps its member countries to design and implement effective economic policies. It helps with monetary, fiscal and management reforms.
By assisting the MS with the adopting and implementing the reforms the IMF can control and unify policies across borders, creating more international stability
How is the IMF organized?
Three-tiered governance:
- The Board of Governors (all MS represented)
- Executive Board (24 members)
- Managing Director
What are the tasks of the Board of Governors?
Delegate tasks to the Executive Board
Approve quota increase
Allocate or cancle Special Drawing Rights (SDR)
Approve new members
What are the tasks of the Executive Board?
Approve loans, policy decisions by simple majority vote.
To approve MAJOR IMF decisions require a supermajority, so at least 70% of the votes.
The US has veto over major policy decisions due to its large quota.
Where does the IMF get its money from?
Primary source is the quota subscription of its member states, these are decided by the IMF itself.
How is the quota subscription of the members decided?
A country’s proportion of quota reflect the its weight in the global economy, so large economies have a larger quota. The larger the quota, the more voting power a country has.
They are reviewed every 5 years
What is Special Drawing Rights (SDRs)?
Special drawing rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund. SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged.
How has the highest levels of outstanding finances to the IMF?
Argentina, Egypt, Ukraine, Pakistan, Sri Lanka and Ecuador
China’s position in the IMF
Over the past several decades, the balance of global economic power has been shifting from the United States and Europe to China and a number of other fast developing countries.
Related to these shifts are a significant expansion of trade and global value chains among developing countries (South South trade). Commensurate with its larger global economic presence, China is playing a larger role at the IMF Chinese staff now have a larger presence within the IMF, and in 2016, the IMF included the renminbi, China’s currency (AKA yuan), in the basket of currencies that make up the Special Drawing Rights.
Name the 4 most prevalent negative results of IMF policies:
The industry of poor countries cannot compete with the imported goods, leading to local industries going bankrupt
High interest rates leads to slow economic growth
The free capital market destroys local banks, farmers and businesses.
Money is not directed towards health, education and social safety
