• The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C
  • Its stated mission is “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
  • IMF was formed in 1944, at the Bretton Woods Conference and came into formal existence in 1945 with the goal of reconstructing the International Monetary system


Functions of IMF

  • The fund pursues its mission in three fundamental ways:
    • Surveillance
      • The IMF collects massive amounts of data on national economies, international trade, and the global economy in aggregate.
      • The organization also provides regularly updated economic forecasts at the national and international levels.
      • These forecasts, published in the World Economic Outlook, are accompanied by lengthy discussions on the effect of fiscal, monetary, and trade policies on growth prospects and financial stability
    • Capacity Building
      • The IMF provides technical assistance, training, and policy advice to member countries through its capacity building programs
      • These programs include training in data collection and analysis, which feed into the IMF’s project of monitoring national and global economies
    • Lending
      • The fund gives loans to member countries that are struggling to meet their international obligations
      • But these loans are provided in return for implementing specific IMF conditions designed to put government finances on a sustainable footing and restore growth
      • Known as “structural adjustment,” these policies have included balancing the budget, removing state subsidies, privatizing state enterprises, liberalizing trade and currency policy, and removing barriers to foreign investment and capital flows



  • Board of Governors
    • These consists of one governor and one alternate governor for each member country
    • The Board normally meets once a year and is responsible for electing or appointing an executive director to the executive board
    • The Board of Governors is advised by the International Monetary and Financial Committee(IMFC) and the Development Committee
    • The Board of Governors reports directly to the managing director of the IMF


  • Executive Board
    • 24 Executive Directors make up the executive board.
    • The executive directors represent all 189 member countries in a geographically based roster.
      • Countries with large economies have their own executive director, but most countries are grouped in constituencies representing four or more countries
  • Managing Director
    • The IMF is led by a managing director, who is head of the staff and serves as Chairman of the executive board
    • Historically, the IMF’s managing director has been a European citizen

Voting Power

  • Each IMF member country is assigned a quota that determines its financial commitment to the IMF, as well as its voting power
  • The roles of Quotas are as described under:

Notable Contributions of IMF in World History


Date/DurationIssues/ChallengesAction by IMF
1956Suez Crisis§  Conflict over Suez Canal, involving Egypt, France, Israel, and the United Kingdom, touches off international political crisis with major economic repercussions

§  This led to early test of IMF’s crisis management role and leads to first large burst of lending by IMF to the four countries involved

1971OPEC oil embargo·         In wake of Arab-Israeli war, OPEC members announce embargo against United States, Canada, Japan, United Kingdom, and Netherlands, leading to surge in global oil prices.

·         IMF creates new tools to help countries facing an energy emergency, in line with the Fund’s role to help smooth shocks and prevent harmful spill-overs

1978Flexible exchange rates·         In 1971, USA suspends convertibility of dollar into gold, ending system of fixed exchange rates created at Bretton Woods

·         IMF acknowledges right of members to adopt exchange-rate arrangements of their choice.

1982Mexico defaults·         Renunciation of foreign debt marks beginning of debt crisis across Latin America. IMF takes on role of international crisis manager

·         Further, IMF establishes facility to lend to low-income developing countries at below-market rates.

1991Dissolution of Soviet Union·         Twenty formerly communist nations soon join the IMF, the biggest expansion of its membership since the 1960s.

·         It was at this time, that IMF plays a central role in helping them manage transition from centrally planned to market-driven economies with policy advice, technical assistance, and financial support.

1991Indian Economic Crisis·          Indian economic crisis was an crisis in India resulting from a balance of payments deficit due to excess reliance on imports and other external factors

·         IMF provided an emergency loan of $2.2 billion with certain conditionalities

1997Asian financial crisis·         Thailand devalues baht, marking beginning of Asian crisis

·         IMF announces $17 billion program for Thailand, followed by packages of $23 billion for Indonesia and $57 billion for South Korea

·         Asian crisis spreads to Russia, already hobbled by severe budget deficits, causing plunge in Russian stocks, bonds, and ruble. IMF and international lenders provide $22.6 billion to help stabilize country’s economy.

1999Assessment of members’ financial systems·         IMF and World Bank, drawing on experience of Asian crisis, create Financial Sector Assessment Program to gauge resilience of members’ financial systems
2008Lehman Brothers declares bankruptcy·         Collapse of US investment bank marks beginning of global financial crisis. In following decade, IMF provides financing of about $500 billion to 90 countries and injects $250 billion into global financial system, helping avert another Great Depression and enabling recovery of global economy
2010-13European sovereign debt crisis·         Soaring budget deficits sow doubt about ability of several European countries to repay debts. Government bailouts of ailing banks add to pressure, temporarily shaking investor confidence in viability of euro.

·         IMF joins European Central Bank and European Commission in providing emergency loans to Cyprus, Greece, Ireland, and Portugal.

2011-2014Arab Spring·         Unrest and civil conflict sweep across Middle East, removing rulers in Egypt, Libya, and Yemen. IMF provides $37 billion in loans to stabilize and reform region’s economies and technical assistance on taxation, monetary policy, and public finances, among other areas.
2020COVID-19: The Great Lockdown·         For mitigative action, the IMF’s Fiscal Affairs Department developed and published a set of guidance, called Special Series on COVID-19, oriented to assist countries in their responses to the pandemic


India and IMF

  • India became a founder member of IMF in December 1945 even before Independence
  • India currently holds 2.75% of SDR quota, and 2.63% of votes in the IMF
  • SDR is one of the components of the Foreign Exchange Reserves (FER) of India
    • The International Monetary Fund (IMF) has made an allocation of Special Drawing Rights (SDR) 12.57 billion to India. (approx USD 17.86 billion).
    • With this, the total SDR holding of India has gone upto SDR 13.66 billion (equivalent to around USD 19.41 billion)
  • As part of its mandate for international surveillance under the Articles of Agreement, the IMF conducts what is known as Article-IV consultations to review the economic status of member countries
    • IMF has projected India’s real GDP at 9% for 2022
  • The Board of Governors of the IMF consists of one Governor and one Alternate Governor from each member country.
    • For India, the Finance Minister is the ex-officio Governor on the Board of Governors of the IMF.
    • Governor, RBI is India’s Alternate Governor
  • India has got the following benefits being the IMF members as well:
    • Independence of the Indian Rupee
      • Before the establishment of the IMF, the Indian rupee was linked with the British Pound Sterling. But Indian rupee has become independent after the establishment of IMF. Its value is expressed in terms of gold
      • It means that Indian rupee is easily convertible into the currency of any other country.
    • Availability of Foreign Currencies
      • The Government of India has been purchasing foreign currencies from the Fund from time to time to meet the requirements of development activities.
      • The large amount of availability of foreign currencies has greatly promoted the economic development of the country
    • Reputation in International Circle
      • After joining IMF, India had played a credible role in determining the policies of the Fund. This has increased India’s prestige in the international circles
    • Guidance and Advice
      • Being member of the Fund, India got the expert opinion from the Fund for solving its economic problems. The attitude of the Fund towards India has always remained sympathetic
      • The Fund has given valuable advice to the Government of India with regard to the financing of the Five-Year Plans
    • Help during Emergency
      • Also, India has got a large amount of financial assistance from the Fund to solve its economic crisis arising due to natural calamities like flood, earthquakes, famines etc.
  • Borrowings by India
    • During 1991 to 1993, India borrowed an amount of SDR 3.56 billion (SDR 1351.98 million under the Compensatory and Contingency Financing Facility and SDR 2207.925 million under Standby Arrangement).
      • With India’s foreign exchange reserves at $1.2 billion in January 1991, India was only weeks away from defaulting on its external balance of payment obligations.
      • It was at this time that the Government of India’s immediate response was to secure an emergency loan of $2.2 billion from the International Monetary Fund by pledging 67 tons of India’s gold reserves as collateral security

India: History of Lending Commitments

IMF: Criticisms

  • Structural under-representation of the Global South
    • One of the central criticisms of the IMF relates to the political power imbalances in their governance structures where, as a result of voting shares being based principally on the size and ‘openness’ of countries’ economies, poorer countries – often those receiving assistance from IMF – are structurally under-represented in decision-making processes
  • Undermining democratic ownership
    • The issue of political power imbalances is exacerbated by another long-standing critique of IMF is that the economic policy conditions they promote – often attached or ‘recommended’ as part of loans – undermine the sovereignty of borrower nations, limiting their ability to make policy decisions and eroding their ownership of national development strategies
  • Weak ability to learn from past mistakes
    • The IMF’s Independent Evaluation Office (IEO) was set up in 2001 to conduct evaluations of the policies and functionalities of the institution with the aim of enhancing the learning culture, strengthening credibility, and supporting institutional governance and oversight
    • However, the IMF has been criticised for failing to implement the recommendations
  • Neo-Liberal Criticisms
    • IMF conditionalities have also been widely debated.
    • Critics contend that IMF policy prescriptions provide uniform remedies that are not adequately tailored to each country’s unique circumstances.
    • These standard, austere loan conditions reduce economic growth and deepen and prolong financial crises, creating severe hardships for the poorest people in borrowing countries and strengthening local opposition to the IMF.

Way forward

  • While reforms in countries are happening in different stages, the global institutions have remained the way they have been for the last several decades
  • Going further, there is a desperate need for all IMF to be more transparent, representative and speak for countries which don’t get adequate representation
  • The IMF should focus on lower income countries and support other developing countries’ market funds raising activities, as its Article IV consultation reports are utilised by credit rating agencies, impacting the fund raising capacity of countries like India
  • With a continuing trend of emerging markets increasing their share in global output or GDP over the years, many experts have called for alignment of quotas and the accompanying lending windows of the IMF to reflect the changed economic positions of countries