International Monetary Fund (IMF) ( UPSC Prelims)

News Context

India's Concerns Over IMF Lending to Pakistan
  ● IMF's Executive Board completed the initial review of Pakistan's economic reform program, which is backed by the Extended Fund Facility (EFF) Arrangement.  
 Key Points:
      ○ The IMF approved the release of approximately $1 billion (equivalent to 760 million Special Drawing Rights (SDR)) under the EFF.
    ● Extended Fund Facility (EFF): Designed to support countries facing significant payment imbalances due to structural challenges, slow growth, or a fundamentally weak balance-of-payments situation.  
    ● Special Drawing Rights (SDR): An international reserve asset established by the IMF in 1969 to enhance the official reserves of its member countries.  
          ○ Not a currency, but acts as the unit of account for the IMF and other international bodies.
          ○ Its value is determined by a basket of five currencies: US Dollar, Euro, Chinese Renminbi, Japanese Yen, and British Pound Sterling.
      ● SDRs cannot be held by individuals or private entities.  

International Monetary Fund (IMF)

 ● Genesis:  
        ○ Established during the United Nations Monetary and Financial Conference in 1944, also known as the Bretton Woods Conference, alongside the World Bank.
        ○ The IMF and World Bank are collectively known as Bretton Woods Institutions.
  ● Mandate:  
        ○ Promote global macroeconomic and financial stability.
        ○ Offer short- and medium-term loans to nations facing balance of payments issues.
        ○ Provide technical assistance and training to aid governments in implementing improved economic policies.
  ● Membership:  
        ○ Comprises 191 countries, including India.
        ○ To join the World Bank, a country must first become a member of the IMF.
  ● Organizational Structure:  
    ● Board of Governors: The highest decision-making body, consisting of one governor and one alternate governor from each member country.  
    ● Executive Board: A 25-member board responsible for overseeing daily operations. Decisions are typically made by consensus, but formal votes occur occasionally.  
        ○ Voting power is determined by a combination of basic votes and quota-based votes. India's quota is 2.75% (8th largest), while the US's quota is about 17%.
    ● International Monetary and Financial Committee (IMFC): A 25-member advisory body representing member countries or groups of countries.  
  ● Key Reports:  
    ● World Economic Outlook, Global Financial Stability Report, among others.