International Monetary Fund (IMF) IBT Lecture Notes PDF

**SPECIAL DRAWING RIGHT (SDR**) is known as Paper Gold. The currency having the highest weightage in the determination of the value of SDR is US dollar. The US Dollar has a weight of 43.38% in the SDR basket. The other currencies in the SDR basket are: - Euro -- 29.31% - Chinese renminbi -- 1...

**SPECIAL DRAWING RIGHT (SDR**) is known as Paper Gold. The currency having the highest weightage in the determination of the value of SDR is US dollar. The US Dollar has a weight of 43.38% in the SDR basket. The other currencies in the SDR basket are: - Euro -- 29.31% - Chinese renminbi -- 10.92% - Japanese Yen -- 8.18% - Pound Sterling -- 8.09% - Special Drawing Rights (SDR) -- 0.63% The weight of the currencies in the SDR basket are reviewed and adjusted every five years. The SDR is a basket of currencies that is used by the International Monetary Fund (IMF) as a reserve currency. The SDR is not a physical currency, but it is a unit of account that can be used to denominate loans and other financial transactions. The value of Special Drawing Right is determined by the basket of 5 currencies: US Dollar, Japanese Yen, British Pound, Chinese Yuan, and Euro. **International Monetary Fund (IMF)** -- headquarters is located at Washington DC in the US. It was founded in 1944. - IMF is an organization of 190 countries - It is working to secure financial stability, facilitate international trade, promote high employment and economic growth and reduce poverty around the world. - The IMF helps in correcting the Balance of Payment of the member countries. Its another goal is to ensure exchange rate stability. - The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. - IMF came into operation on 27^th^ December 1945 and is today an international organization that consists of 189 member countries - The IMF officially began operating on March 1, 1947, when the first 29 countries signed its Articles of Agreement. - All member countries of the IMF are not sovereign states therefore all "member countries" of the IMF are not members of the United Nations. - Headquartered in Washington DC, IMF focuses on fostering global monetary cooperation, securing financial stability, and facilitating and promoting international trade, employment and economic growth around the world. - The IMF is a specialized agency of the United Nations. - Countries were not eligible for membership in the International Bank for Reconstruction and Development (IBRD) unless they were members of IMF. - India holds 2.75% of SDR quota, and 2.63% of votes in the IMF - China has third highest quota in the IMF. At present Chinese share in the IMF quota s 6.49%. Germany is at the fourth position having quota of 5.67%. - International Bank of Reconstruction and Development (IBRD) is popularly known as World Bank which was also set up in 1944 under the Bretton Woods Conference along the IMF. - Hence these two are known as sister institutions or Bretton Woods' twins. - World Bank is also headquartered in Washington DC and has 189 members - The World Bank focuses on making loans to governments in order to rebuild railroads, highways, and other infrastructure i.e. the areas where private sector enterprises do not take interest. - The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and states. - ICSID is part of and funded by the World Bank Group, headquartered in Washington DC in the United States. - In the 1940s, it was the US bypassing these institutions through the Marshall Plan and regional schemes - In the 1950s and 1960s, the United States used the IMF to ball out sterling, the currency of its close ally Great Britain, and the World Bank to promote its modernization schemes. - Representation within the Bretton Woods institution is established by the size of the financial contribution. - America used this policy and contribution to controlling the world monetary system when the gold standard system was replaced. **Bretton Woods Agreement and System** - Approximately 730 delegates representing 44 countries met in Bretton Woods in July 1944 with the principal goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth. - The Bretton Woods Agreement and system were central to these goals - The Bretton Woods Agreement also created two important organizations -- the IMF and World Bank