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Unit 9: International Financial Institutions-I

notes

Notes The IMF came into existence in December 1945, and it announced its readiness
to commence exchange transactions in March 1947

membership of imf

There are two types of members of the fund:
1. Original Members: All those countries whose representatives took part in Bretton Woods
Conference and who agreed to be the member of the Fund prior to 31st December, 1945,
are called the original members of the Fund.
2. Ordinary Members: All those who became its member subsequently are called ordinary
members.

Any country can cease to be its member after giving a notice in writing to that effect. Fund can
terminate the membership of such a country which does not observe its rules. The number of
member-countries from 40, in 1947, has risen to 187 countries in 2010.
organization and management

In order to manage the fund, the following administrative boards have been set up:
1. Board of Governors: It consists of one Governor and an Alternate Governor for each
member country. It meets once a year. The board of governors frames the policies of the
Fund.
2. Board of Directors: It conducts day-to-day affairs of the Fund. It consists of 21 directors, 7
of whom are permanent and others being temporary directors. Permanent directors belong
to those countries that have the largest quotas in the Fund. Currently, these countries are
United States, Japan, Germany, France, China, Italy and Saudi Arabia. Fourteen other
directors are elected by other member countries. India is one of the elected directors. The
managing director may appoint three deputy managing directors instead of one, w.e.f.
June, 1994.
capital resources of the fund

The capital resources of the fund are subscribed by the various member-countries by way of their
respective quotas. Each member’s quota is determined before its enrolment as a member. The
quota of each member is fixed in terms of SDRs. Each country has to give 25% of its quota amount
in terms of reserve assets, like SDRs or any other usable currency and 75 per cent in terms of its
own currency. A country’s relations with the fund are determined by the amount of its quota.

Example: (a) Voting powers of a member-country depends upon the amount of its quota.
Each country has 250 minimum votes. Besides, on each lakh of SDRs, one vote is increased.
(b) The maximum limit of the financial assistance from the Fund to the member country to correct
its balance of payments depends on the amount of its quota. (c) Share of a country in the allocation
of SDRs depends on the amount of its quota.
Changes in the amount of quota of Fund are made after every five years. The fund has made
changes in the quotas of member-countries at different times. In 2010, the quota raised by the
Fund was approximately 238.4 billion SDRs. Three things are clear from the quota of a member
country:

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