International Monetary Fund (IMF) — Functions and India

4.1 IMF — Background and Structure

The International Monetary Fund (IMF) was established at Bretton Woods in 1944 and became operational in March 1947. It is a cooperative international institution with 190 member countries as of 2024 (South Sudan, the newest member, joined 2012; Cuba, US, and Russia are all members). Headquartered in Washington D.C. Current Managing Director: Kristalina Georgieva (Bulgaria) — since October 2019.

IMF Governance:

• Board of Governors: Each member country represented by Governor (typically Finance Minister or Central Bank Governor); supreme decision-making body
• Executive Board: 24 Executive Directors managing day-to-day operations; major shareholders have their own ED; India is part of a constituency
• Quota System: Each member's quota determines: (a) voting power, (b) access to IMF financing, (c) SDR allocation. Quotas are denominated in SDRs. India's quota: SDR 13,114.4 million (2.75% share — 13th largest)

Quota Review: The 16th General Review of Quotas was completed in December 2023 — overall quotas increased by 50%; India pushed for quota reform to better reflect economic realities. The review realigned some quotas toward dynamic emerging economies.

4.2 IMF's Core Functions

Function 1: Surveillance (Economic Health Monitoring)

• Article IV Consultations: Annual bilateral consultation with each member; IMF staff assessment of economic policies
• World Economic Outlook (WEO): Semi-annual publication projecting global and country-level growth, inflation
• Global Financial Stability Report (GFSR): Assesses financial system risks semi-annually
• Fiscal Monitor: Annual assessment of fiscal positions globally
• IMF's April 2025 WEO: Global growth 2.8% (2025), 3.0% (2026); India 6.2% for 2025-26; US tariff uncertainty major downside risk

Function 2: Financial Assistance (Lending)
IMF provides financing to member countries facing balance of payments (BoP) difficulties:

Facility	For Whom	Terms	Conditionality
Stand-By Arrangement (SBA)	Countries with short-term BoP problems	12-24 months; market rates	Structural adjustment conditions
Extended Fund Facility (EFF)	Structural balance of payments problems	3-4 years; below market	Medium-term reform programme
Flexible Credit Line (FCL)	Countries with strong fundamentals	Precautionary; no conditionality	Pre-qualification criteria
Poverty Reduction and Growth Trust (PRGT)	Low-income countries	Concessional; ZIRP	Poverty reduction strategy
Resilience and Sustainability Trust (RST)	Climate-vulnerable members	Long-term; concessional	Climate/pandemic resilience

India's IMF Emergency Financing History:

• India borrowed from IMF in 1981 (Extended Fund Facility, $5.8 billion) — Indira Gandhi government, oil price shock
• India pledged gold to Bank of England and Union Bank of Switzerland in 1991 (68 tonnes) to tide over BoP crisis — did not formally borrow; the gold was repaid within months
• India has NOT been under IMF programme since 1993 — a matter of national pride and economic self-reliance

Function 3: Technical Assistance and Capacity Development
IMF provides technical assistance (TA) on: tax policy and administration, expenditure management, monetary and exchange rate policy, banking supervision, statistics. India receives TA on tax administration (GST implementation was partly supported by IMF expertise sharing).

4.3 Special Drawing Rights (SDR)

What is SDR?
SDR (Special Drawing Right) is an international reserve asset created by IMF in 1969 to supplement official reserves of member countries. SDR is NOT a currency — it is a claim on freely usable currencies of IMF members.

SDR Basket (Review every 5 years):

Currency	Weight
US Dollar	43.38%
Euro	29.31%
Chinese Yuan (Renminbi)	12.28%
Japanese Yen	7.59%
British Pound Sterling	7.44%

Chinese Yuan was included in SDR basket in October 2016 — reflecting China's growing share in global trade and finance. The yuan's inclusion was a major milestone for China's financial globalisation.

2021 SDR Allocation — Largest in History:
In August 2021, IMF allocated SDR 456.5 billion (approximately $650 billion) to all member countries in proportion to their IMF quotas — to boost global reserves during COVID-19 recovery. This was the largest SDR allocation in IMF's history (previous was SDR 182.6 billion in 2009 during GFC).

India's SDR Allocation (2021): India received SDR 12.57 billion (~$17.86 billion) — credited to RBI's reserves; this boosted India's forex reserves and SDR holdings.

Rechannelling SDRs: Rich countries pledged to rechannell their unused SDR allocations to developing countries through IMF's Resilience and Sustainability Trust (RST) and PRGT. India pledged to rechannell SDR 500 million to RST.

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