Question

Search on YouTube for three different videos explaining how the IMF works. You can use whatever search terms you like, so long as you report these in the assignment. For each video that you find, I want you to briefly report on how the IMF is being represented – for example, which aspects of the IMF’s operations or history are being emphasized, what is being explained or critiqued in the video, is the video primarily negative, positive, or neutral in its depiction of the IMF. Most importantly I want you to compare the different videos that you find.

Answer 1

I have watched three videos on youtube about its origin and operations. Two videos that i have watched were in the favour of IMF and one video also explain the critique of it. So, the main tenets of the IMF are in the following ways, the gist of IMF is in the following ways:

THE INTERNATIONAL MONETARY FUND (IMF)

The International Monetary Fund (IMF) is an organization of 189 countries, 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. Created in 1945, IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. It does so in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.

Main functions

1. Economic Surveillance

The IMF oversees the international monetary system and monitors the economic and financial policies of its 189 member countries. As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments.(e.g., how the IMF helped Vietnam)

2. Lending

The IMF provides loans to member countries experiencing actual or potential balance of payments problems to help them rebuild their international reserves, stabilize their currencies, continue paying for imports, and restore conditions for strong economic growth, while correcting underlying problems.(e.g., how the IMF helped India)

3. Capacity Development

The IMF works with governments around the world to modernize their economic policies and institutions, and train their people. This helps countries strengthen their economy, improve growth and create jobs.

Management of IMF

The IMF has a management team and 17 departments that carry out its country, policy, analytical, and technical work. One department is charged with managing the IMF’s resources. This section also explains where the IMF gets its resources and how they are used. The IMF has a Managing Director, who is head of the staff and Chairperson of the Executive Board. The Managing Director is appointed by the Executive Board for a renewable term of five years and is assisted by a First Deputy Managing Director and three Deputy Managing Directors. The IMF’s employees come from all over the world; they are responsible to the IMF and not to the authorities of the countries of which they are citizens. The IMF staff is organized mainly into area; functional; and information, liaison, and support responsibilities.

IMF Resources

1. Quota Contribution

Most resources for IMF loans are provided by member countries, primarily through their payment of quotas. Quota subscriptions are a central component of the IMF’s financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy.

2. Special Drawing Rights (SDR)

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The SDR was created as a supplementary international reserve asset in the context of the Bretton Woods fixed exchange rate system. The collapse of Bretton Woods system in 1973 and the shift of major currencies to floating exchange rate regimes lessened the reliance on the SDR as a global reserve asset. Nonetheless, SDR allocations can play a role in providing liquidity and supplementing member countries’ official reserves, as was the case with the 2009 allocations totaling SDR 182.6 billion to IMF members amid the global financial crisis.The SDR serves as the unit of account of the IMF and some other international organizations.The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.

The SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies. The SDR basket is reviewed every five years, or earlier if warranted, to ensure that the SDR reflects the relative importance of currencies in the world’s trading and financial systems. The reviews cover the key elements of the SDR method of valuation, including criteria and indicators used in selecting SDR basket currencies and the initial currency weights used in determining the amounts (number of units) of each currency in the SDR basket. These currency amounts remain fixed over the five-year SDR valuation period but the actual weights of currencies in the basket fluctuate as cross-exchange rates among the basket currencies move. The value of the SDR is determined daily based on market exchange rates. The reviews are also used to assess the appropriateness of the financial instruments comprising the SDR interest rate (SDRi) basket.

During the last review concluded in November 2015, the Board decided that the Chinese renminbi (RMB) met the criteria for inclusion in the SDR basket. Following this decision, the Chinese RMB joined the US dollar, euro, Japanese yen, and British pound sterling in the SDR basket, effective October 1, 2016.

Under the Articles of Agreement, when certain conditions are met, the IMF may allocate SDRs to members participating in the SDR Department in proportion to their quotas (known as a general allocation). A special one-time allocation in 2009 enabled countries that joined the IMF after 1981 (i.e., after previous allocations) to participate in the SDR system on an equitable basis. The SDR mechanism is self-financing and levies charges on allocations which are then used to pay interest on SDR holdings. Members can buy and sell SDRs in the voluntary market. If required, the IMF can also designate members to buy SDRs.

3. Gold

Gold remains an important asset in the reserve holdings of several countries, and the IMF is still one of the world’s largest official holders of gold.

History

In 1944, representatives of 44 nations met in Bretton Woods, New Hampshire, to draw up a plan for the post-World War II economic order. Their goal was to avoid a repetition of the destructive policies that could spark another conflict. So they created the IMF to promote international monetary cooperation. Ever since, the IMF has played a vital role in maintaining global economic stability and ensuring broadly shared prosperity.

A brief history of IMF activities till date is summarized below:

JULY 1944, Bretton Woods Conference

As World War II draws to a close, Allied leaders draft plans for a postwar economic order Representatives of 44 Allied nations, seeking to avoid the mistakes that led to Depression and World War II, meet to plan a new economic order built on global cooperation. They set up a system of exchange rates linked to the dollar to be supervised by the IMF, and they give the Fund three critical missions: promoting international monetary cooperation, supporting the expansion of trade and economic growth, and discouraging policies that would harm prosperity.

MAY 8, 1945

Germany surrenders to Allied forces, ending war in Europe.

MARCH 1947

IMF begins operations. Membership starts at 40 and grows to 189 by 2016, with the entry of Nauru.

JUNE 1948

Soviet Union begins blockade of West Berlin, which is to last until May 12, 1949, in first major Cold War confrontation.

1950s / Cold War

Communist nations, dominated by the Soviet Union and China, withdraw from the global economic system

MARCH 1950

Poland withdraws from IMF. Eastern bloc nation acts under pressure from USSR as Cold War intensifies. Poland will be readmitted in 1986.

OCTOBER 1956

Conflict over Suez Canal, involving Egypt, France, Israel, and the United Kingdom, touches off international political crisis with major economic repercussions.Suez Crisis is an early test of IMF’s crisis management role and leads to first large burst of lending by IMF to the four countries involved.

1960s / Decolonization of Africa

Under pressure from independence movements, France, United Kingdom, and other European powers give up their colonies.

1961

IMF creates Africa Department. Only three of IMF’s original members were in sub-Saharan Africa: Egypt, Ethiopia, and South Africa. By end of 1969, another 34 have joined.

1970s / Vietnam War and Oil Shocks

US spending on Vietnam War and domestic social programs leads to inflation and overvaluation of dollar.

AUGUST 1971

1) Gold convertibility ends.US President Richard Nixon suspends convertibility of dollar into gold, ending system of fixed exchange rates created at Bretton Woods.

2) OPEC 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 spillovers.

APRIL 1978

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

1980s / International Debt Crisis

Banks use “petrodollars”—profits of oil-producing countries—to increase lending to developing nations.

AUGUST 1982

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

MARCH 1986

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

NOVEMBER 1989

Fall of Berlin Wall. Collapse of communism in Europe ends postwar division of the continent.

DECEMBER 1991

Soviet Union dissolved. Twenty formerly communist nations soon join the IMF, the biggest expansion of its membership since the 1960s. Fund plays a central role in helping them manage transition from centrally planned to market-driven economies with policy advice, technical assistance, and financial support.

DECEMBER 1994

Mexican crisis. Mexico devalues peso against dollar, prompting investors to withdraw funding. IMF participates in $50 billion program to stabilize Mexico’s economy. It also provides financial assistance to Russia, Brazil, and other emerging markets.

1996

Debt relief. IMF and World Bank launch Initiative for Heavily Indebted Poor Countries to ensure that no low-income country bears a debt burden it cannot manage. Debt relief for 36 countries comes to almost $77 billion by 2017.

JULY 1997

Asian financial crisis. Thailand devalues baht, marking beginning of Asian crisis.

AUGUST 1997

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

1998

Crisis in Russia. 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.

1999

IMF and World Bank, drawing on experience of Asian crisis, create Financial Sector Assessment Program (FSAP) to gauge resilience of members’ financial systems.

JANUARY 1999

Euro is born. Euro is initially used as unit of account to replace European currency unit, or ECU. Euro notes and coins begin to circulate January 1, 2002. European Central Bank granted observer status at IMF.

JANUARY 2001

IMF and World Bank announce that 22 countries, including 18 in Africa, qualify for debt relief.

DECEMBER 2001

China joins WTO. Entry into World Trade Organization marks China’s integration into global economy.

SEPTEMBER 2008

Lehman 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.

NOVEMBER 2008

G20 Washington summit. Leaders of Group of 20 major advanced and emerging market economies lay foundation for reforms to strengthen global financial system. In years that follow, IMF works with standard-setting bodies to improve surveillance and strengthen supervision and regulation of financial firms. G20 nations agree to undergo mandatory financial sector assessments by IMF.

DECEMBER 2010

Governance reform .IMF board approves far-reaching changes that give greater say in decisions to China, India, Mexico, Brazil, and other emerging market economies.

2010-13

European 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.

2011-2014

Arab 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.

2014-15

Ebola response. IMF is one of first international financial institutions to respond, delivering $130 million to three countries in September 2014, and another $160 million in February 2015.

SEPTEMBER 2016

Renminbi joins currency basket. Chinese currency added to IMF’s currency basket alongside dollar, euro, pound, and yen in sign of China’s growing importance in global economy.

APRIL-JUNE 2018

Argentine crisis. IMF approves $50 billion loan, later increased to $57 billion, to help Argentina’s economy in the face of destabilizing market conditions.

Country Representation

Unlike the General Assembly of the United Nations, where each country has one vote, decision making at the IMF was designed to reflect the relative positions of its member countries in the global economy. The IMF continues to undertake reforms to ensure that its governance structure adequately reflects fundamental changes taking place in the world economy.