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International Monetary and Financial Com

  Jun 16, 2020

International Monetary and Financial Committee (IMFC) Annual Meeting: Basics and Outcomes

What is International Monetary and Financial Committee (IMFC)?

The IMFC advises and reports to the IMF Board of Governors on the supervision and management of the international monetary and financial system. IMFC has no formal decision-making powers.

The IMFC usually meets twice a year, at the Bank-Fund Annual (usually October) and Spring Meetings. 

The IMFC has 24 members who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the Fund’s 189 member countries.

2019 Annual Meetings of the World Bank Group and the International Monetary Fund Washington, D.C. were held in October 2019 and Spring Meetings in April. 

What is the Development Committee?

It advises the Boards of Governors of the IMF and World Bank on development issues and on the financial resources required to promote economic development in developing countries. The Committee usually meets twice a year following the IMFC meeting.

Who are the heads of IMF and the World Bank Group?

  • Kristalina Georgieva is the IMF Managing Director
  • David Malpass is the World Bank Group’s President

What is the primary function of the IMF?

It is to lend to the member countries who have severe shortage of foreign exchange reserves like gold and US dollar. 

Where does IMF’s financial resources come from?

They come from

  • Contribution of member countries by way of quotas
  • Through the New Arrangements to Borrow (NAB) a number of member countries and institutions stand ready to lend additional resources to the IMF. 
  • Bilateral loans

Can you elaborate on quotas?

Quotas are the IMF’s main source of financing. Each member of the IMF is assigned a quota, based broadly on its relative position in the world economy.

The IMF regularly conducts general reviews of quotas to assess the adequacy of overall quotas and their distribution among members. The latest review (the 14th Review) was concluded in 2010.The 15th Review is under way.

How does the IMF decide on the quota of each country?

On the basis of four yardsticks as shown below:

  • Member country’s GDP, 
  • Its economic openness, 
  • Its “economic variability” and 
  • International reserves.

While the other three criteria are self-explanatory, variability needs explanation. It is calculated on the basis of current receipts and net capital flows. 

Are the quotas reviewed periodically?

Quotas are generally to be reviewed every five years. The 14th review was completed in 2010 came into force in 2016. India’s vote share increased marginally. The 15th quota review is currently underway.

Where does India stand in quota structure and how is quota important?

India’s quota is 2.76% and China’s is 6.41%, while the U.S.’s quota is 17.46 % (converts to a vote share of 16.52%) giving it veto power over crucial decisions at the IMF, many of which require a supermajority of 85%.

What is quota reform?

In the present regime, the new and emerging global economic power structure is not reflected. Countries like India are grossly underrepresented. Therefore, they want a review. It also reflects on pace of governance reforms.

Who is resisting it and why?

US is the primary opponent as its voice gets reduced and that of China’s increases. US is in general opposed to multilateralism.

What was the outcome of the 40th Meeting of the International Monetary and Financial Committee in October?

It decided to 

  • Maintain its funding at $ 1 trillion 
  • Postpone changes to its voting structure- the voice each member has in decision making.

The agreed package will leave IMF quotas unchanged till the end of 2023.

What is Global Policy Agenda?

Managing Director of the International Monetary Fund (IMF) presents the 2019 Global Policy Agenda annually.

What are the publications of the IMF?

IMF flagship reports are published twice a year: 

  • World Economic Outlook (WEO), 
  • Global Financial Stability Report (GFSR), and 
  • Fiscal Monitor (FM).

What are the flagship publications of the World Bank Group?

  • World Development Report (WDR); 
  • Global Economic Prospects (GEP), 
  • Doing Business (DB), and 
  • Poverty and Shared Prosperity (PSP)