International Monetary Fund

The Appointments Committee of the Cabinet has appointed Parameswaran Iyer as the new Executive Director, representing India at IMF’s Executive Board.

  • Established: 1944, at the Bretton Woods Conference
  • Headquarters: Washington, D.C., USA
  • Members: 190 countries
  • Objectives of IMF –
    • Promote international monetary cooperation among member nations.
    • Ensure financial stability and prevent economic crises.
    • Facilitate international trade by maintaining stable exchange rates.
    • Support high employment and sustainable economic growth.
    • Reduce poverty worldwide through financial assistance.
  • Functions of IMF –
    • Economic Surveillance: Monitors global economic trends and advises member countries.
    • Financial Assistance: Provides loans to countries facing balance-of-payments crises.
    • Capacity Development: Offers technical assistance and training to strengthen economic policies.
    • Exchange Rate Stability: Helps maintain stable exchange rates and prevent currency crises.
  • IMF Lending Programs –
    • Stand-By Arrangements (SBA): Short-term financial assistance for economic stabilization.
    • Extended Fund Facility (EFF): Long-term support for structural reforms.
    • Rapid Financing Instrument (RFI): Emergency funding for economic shocks.
    • Poverty Reduction and Growth Trust (PRGT): Low-interest loans for developing nations.
  • Special Drawing Rights (SDR) –
    • Introduced: 1969 to supplement global reserves.
    • Value Determination: Based on a basket of five currencies (USD, EUR, CNY, JPY, GBP).
    • Usage: Countries can exchange SDRs for freely usable currencies.
  • India’s Membership: Founding member since 1944.
  • IMF’s Role in India: Provides policy advice, financial assistance, and economic monitoring.
  • Recent Developments: India has advocated for reforms in IMF’s quota system to reflect emerging economies’ influence.
  • Conditionality Issues: IMF loans often come with strict economic policy conditions.
  • Western Dominance: Voting power is skewed towards developed nations.
  • Impact on Sovereignty: IMF-imposed austerity measures can affect domestic policies.
  • Debt Burden: Some countries struggle with IMF loan repayments.

Source: IE


Previous Year Question

Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR?

[UPSC Civil Services Exam – 2016 Prelims]

(a) Rouble
(b) Rand
(c) Indian Rupee
(d) Renminbi

Answer: (d)


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