Question

Provide a brief summary of the IMF, including its purpose, Special Drawing Rights (SDR), and the Jamaica agreement as well as any other pertinent information

Answer 1

International Monetary Fund (IMF), United Nations (UN) specialized agency, founded at the Bretton Woods Conference in 1944 to secure international monetary cooperation, to stabilize currency exchange rate, and to expand international liquidity (access to hard currencies).

The first half of the 20th century was marked by two world wars that caused enormous physical and economic destruction in Europe and a Great Depression that wrought economic devastation in both Europe and the United States. These events kindled a desire to create a new international monetary system that would stabilize currency exchange rates without backing currencies entirely with gold; to reduce the frequency and severity of balance-of-payments deficits (which occur when more foreign currency leaves a country than enters it); and to eliminate destructive mercantilist trade policies, such as competitive devaluations and foreign exchange restrictions—all while substantially preserving each country’s ability to pursue independent economic policies. Multilateral discussions led to the UN Monetary and Financial Conference in Bretton Woods, New Hampshire, U.S., in July 1944. Delegates representing 44 countries drafted the Articles of Agreement for a proposed International Monetary Fund that would supervise the new international monetary system. The framers of the new Bretton Woods monetary regime hoped to promote world trade, investment, and economic growth by maintaining convertible currencies at stable exchange rates. Countries with temporary, moderate balance-of-payments deficits were expected to finance their deficits by borrowing foreign currencies from the IMF rather than by imposing exchange controls, devaluations, or deflationary economic policies that could spread their economic problems to other countries.

After ratification by 29 countries, the Articles of Agreement entered into force on December 27, 1945. The fund’s board of governors convened the following year in Savannah, Georgia, U.S., to adopt bylaws and to elect the IMF’s first executive directors.

Purpose :- The 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. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.

Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.
An SDR is essentially an artificial currency instrument used by the IMF, and is built from a basket of important national currencies. The IMF uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries' governments. The makeup of the SDR is re-evaluated every five years.

The SDR was formed with a vision of becoming a major element of international reserves, with gold and reserve currencies forming a minor incremental component of such reserves. To participate in this system, a country was required to have official reserves. This consisted of central bank or government reserves of gold and globally accepted foreign currencies that could be used to buy the local currency in foreign exchange markets to maintain a stable exchange rate.

Since cooperation with the IMF began in 2016, Jamaica has reduced its debt-to-GDP ratio to 94%, versus a peak of 135% in 2013, and achieved 1.9% growth in 2018, versus an average of 0.7% in the five preceding years.The Director General of the Planning Institute of Jamaica, Wayne Henry highlighted the importance of maintaining macroeconomic policy stability as a safeguard against slower global growth.

Domestically, there is also a risk of contract instability in the aluminium sector. There is a possibility for environmental disputes in the Cockpit Country boundaries, which are backed by the main opposition People's National Party (PNP). Furthermore, the USD360-million aluminium refinery in St Elizabeth, owned by Chinese company JISCO, faces labor-strike risks and subsequent operational disruptions over dismissals in July 2019, as well as contract reviews over its financial stability.We expect several additional public-private partnerships to take place in the short term through the Development Bank of Jamaica.

Tax changes likely to be narrow and project-specific ahead of 2021 elections. To consolidate its popularity ahead of the general elections in 2021, the ruling Jamaica Labor Party (JLP) government is likely to introduce only very limited and project-specific taxes so as to seek to generally promote new business in Jamaica. For example, the government said in July that it would be likely to impose fees on Airbnb (and not on Airbnb property operators), for which it has signed a memorandum of understanding that includes co-operation to promote and protect the tourism sector.
Confirmation of successful tenders for the privatization of previously state-owned assets, increasing probability of economic diversification and stabilized growth by increasing financing for important infrastructure projects.