International Monetary Fund, IMF Functions Powers and Organization

Functions Powers and Organization International Monetary Fund, IMF

The International Monetary Fund was established in Washington on December 27, 1945, based on the International Monetary Fund Agreement signed at the Bretton Woods Conference in July 1944. It was established at the same time as the World Bank and is listed as the world's two largest financial institutions. Its responsibilities are to monitor currency exchange rates and trade conditions of various countries, provide technical and financial assistance, and ensure the normal operation of the global financial system. Its headquarters is in Washington, DC. The special drawing rights we often hear was created by the organization in 1969.

The International Monetary Fund issued an official communiqué on the morning of April 6, 2015. 

In the communiqué, IMF President Lagarde confirmed that the Greek side has agreed to repay its due IMF on April 9, 2015, i.e. the period loan.

On October 1, 2015, China declared its foreign exchange reserves to the International Monetary Fund for the first time.

After the International Monetary Fund (IMF) 's 2010 quota and governance reform program was delayed for many years, it was finally approved by the US Congress at the end of 2015, ushering in the dawn of the coming into force.

According to the plan, the IMF's share will double, and about 6% of the share will be transferred to dynamic emerging markets and underrepresented developing countries. 

As a result, China ranks as the third largest member of the IMF, while India, Russia, and Brazil have also entered the top ten.

On January 27, 2016, the International Monetary Fund (IMF) announced that the IMF's 2010 share and governance reform plan had officially come into effect, which meant that China officially became the third largest shareholder of the IMF.

China's share will rise from 3.996% to 6.394%, ranking from sixth to third, second only to the United States and Japan.

Organization name	International Monetary Fund
Abbreviation	IMF
Established	December 27, 1945
Headquarters	Washington, America
Current President	Kristalina Georgieva

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On March 4, 2016, the International Monetary Fund (IMF) stated that it will list RMB assets separately in its official foreign exchange reserve database from October 1, 2016, to reflect the holding of RMB-denominated reserves by IMF members.

Development path of the International Monetary Fund, IMF

In 1944, the United Nations-sponsored financial conference was held in Bretton Woods, New Hampshire, United States.

On July 22, 1944, an agreement to establish an international monetary fund was signed at the meeting. 

The main designers of the International Monetary Fund are John Maynard Keynes, a member of the Fabian Society, and Harry Dexter White, deputy US Treasury secretary.

On December 27, 1945, the terms of the agreement came into effect.

In 1945, the International Monetary Fund was formally established as part of a reconstruction plan after the end of World War II.

It was officially put into operation on March 1, 1947.

Institutional setting of the International Monetary Fund, IMF

The highest authority of the IMF is the Council, which is composed of a member and a deputy director of each member country, and is generally served by the finance minister of each country or the governor of the central bank.

A meeting is held in September each year, and each council independently exercises its own voting rights (the size of each country’s voting rights is determined by the amount of fund shares it pays).

The executive board is responsible for the daily work of the township and exercises all the powers entrusted by the council. 

It consists of 24 executive directors, 8 of which are from the 5 countries with the largest fund shares.

Organizational Structure of the International Monetary Fund

Home (US, Japan, Germany, France, UK) and 3 other countries (China, Russia, Saudi Arabia) appointed.

The remaining 16 executive directors are elected by 16 constituencies from other member states. China is a separate constituency and also has a seat.

Executive directors are elected every two years. The president is elected by the executive board and is responsible for the fund’s business.

The term of office is 5 years and can be reappointed. The current president is Christina Lagarde, and there are four vice presidents.

The organization’s interim committee is regarded as the decision-making and guiding body of the International Monetary Fund, one of the world’s two largest financial institutions.

The committee will play a full role in policy cooperation and coordination, especially in formulating medium-term strategies.

The committee consists of 24 executive directors. The International Monetary Fund holds an annual meeting with the World Bank every year.

Organization purpose of the International Monetary Fund, IMF

The purpose of the organization is to promote international currency cooperation through a permanent body and provide methods for consultation and collaboration on international currency issues.

Through the expansion and balanced development of international trade, the promotion and maintenance of employment, development of production resources and real income of member countries.

The high and low levels are the primary objectives of economic policy:

Stabilizing the international exchange rate, maintaining orderly exchange rate arrangements among member countries, and avoiding the depreciation of competitive exchange rates.

Assist member countries to establish a multilateral payment system for recurring transactions and eliminate foreign exchange controls that impede world trade.

With appropriate guarantees, the IMF temporarily provides ordinary funds to member countries to make them confident to use this opportunity to correct the balance of payments imbalance, without taking measures that endanger national or international prosperity.

In accordance with the above purpose, shorten the time of member countries’ balance of payments imbalances, and reduce the degree of imbalances.

Main Function of the IMF

1. Formulate and supervise exchange rate policies and current account payment and currency exchangeability rules among member countries.
2. Provide emergency financing to member countries with balance of payments difficulties when necessary to avoid other countries from being affected by it.
3. Provide member countries with relevant international currency cooperation and consultation venues
4. Promote international cooperation in the financial and monetary fields
5. Promote the pace of international economic integration
6. Maintain international exchange rate order;
7. Assisting member countries to establish regular multilateral payment systems, etc.

Aid mission

The mission of the International Monetary Fund is to provide assistance to countries in serious economic difficulties. 

For countries with severe fiscal deficits, the fund may provide financial assistance or even assist in the management of national finances. Recipients need reforms, see the Washington Consensus.

How to get Membership of the IMF?

The application for joining the International Monetary Fund will first be considered by the fund’s board of directors.

Afterwards, the board of directors will submit a report on the Membership Resolution to the Governance Committee.

The report will recommend how many quotas and terms the applicant country can receive from the fund.

After the Governance Committee accepts the application, the country needs to revise the law, confirm the signed membership documents, and promise to abide by the rules of the fund. 

Moreover, the currency of a member state cannot be linked to gold (it cannot be exchanged for gold reserves in that country).

The quota of member states determines a country's dues, voting power, share of financial assistance received, and the number of SDRs. China is one of the founding countries of the organization.

On April 17, 1980, the International Monetary Fund officially restored China's representation. At that time, China’s share in the organization was 8.089 billion special drawing rights, accounting for 4% of the total share (the data comes from the data released on the IMF official website on June 19, 2012).

On November 6, 2010, the Executive Board of the International Monetary Fund approved a reform plan, and China's share of the plan was increased from 4% to 6.39%.

China restored its seat in the IMF in 1980 and formed a separate constituency and appointed an executive director.

In 1991, the organization established a permanent representative office in Beijing.

The International Monetary Fund is an "organization involving 189 countries, committed to promoting global financial cooperation, strengthening financial stability, promoting international trade, and helping countries achieve high employment rates and sustainable development."

Among the United Nations members, North Korea, Liechtenstein, Cuba, Andorra and Monaco are not members of the International Monetary Fund, and non-United Nations members Kosovo are members of the International Monetary Fund.

IMF Rules of procedure

The IMF's rules of procedure are very distinctive, and a weighted voting system is implemented. 

Voting rights consist of two parts, each member state has 250 basic voting rights, and weighted voting rights based on the shares paid by each country.

Since the basic votes are the same in all countries, it is the weighted voting rights that play a decisive role in actual decision-making.

The weighted voting right is proportional to the share paid by each country, and the share is determined based on various factors such as the gross national income of a country, the degree of economic development, and the extent of pre-war international trade.

The voting power of the IMF is in the hands of the United States and the European Union.

The United States is the largest shareholder of the IMF, with a share of 17.69%, and China only accounts for 4%. Obviously, it cannot accurately reflect China's increasing importance in the world economy.

The IMF's practice of dividing the voice and voting rights of member countries by economic power is clearly contrary to the basic principles of traditional international law, which has caused dissatisfaction among many countries, especially developing countries.

According to statistics, basic voting rights used to exceed 15% of all voting rights in the IMF, but due to the expansion of the IMF, it now accounts for only 2% of the total.

In 2010, the IMF Executive Board passed a reform proposal, and China's share plan was raised from 3.65% to 6.19%. On March 11, 2013, the US Congress rejected the proposal.

Special Power

Special drawing right (SDR) is a reserve asset and bookkeeping unit created by the International Monetary Fund, also known as "Paper Gold". It is a right to use funds allocated by the IMF to Member States.

When a member country has a balance-of-payments deficit, it can use it to exchange foreign exchange with other member countries designated by the IMF in order to repay the balance-of-payments deficit or repay the Fund’s loans.

It can also serve as an international reserve like gold and freely convertible currencies.

However, because it is only a bookkeeping unit, not a real currency, it must be replaced with other currencies before it can be used directly for trading or non-trade payments.

Because it is a supplement to the original general drawing rights of the International Monetary Fund, it is called special drawing rights (SDR).

The SDR is not a tangible currency, it is invisible and intangible, but only a book asset.

On January 1, 2011, the IMF's "basket" of currencies accounted for the U.S. dollar (41.9%), the euro (37.4%), the yen (9.4%), and the pound (11.3%).

On November 30, 2015, the IMF adjusted the weight of basket currencies to: 

1. USD accounted for 41.73%
2. Euro accounted for 30.93%
3. RMB accounted for 10.92% 
4. Yen accounted for 8.33%
5. Sterling accounted for 8.09%

Working Capital

The organization's funds come from the shares subscribed by each member. Members have the right to withdraw funds, that is, borrow foreign exchange according to a certain percentage of the shares paid.

In 1969, a "special drawing rights" currency (bookkeeping) unit was created as a supplement to the international circulation method to alleviate the international income deficit of some members.

Members are obliged to provide economic information and accept the supervision of the organization in terms of foreign exchange policy and management.

Fund Function

Financial Intermediation

Member countries can apply for loans to foreign exchange funds when the balance of payments is difficult.

However, its use is limited to the imbalance of short-term economic revenues and expenditures.

Member States can use the funds of the fund, and the maximum limit is twice the country’s assessment, and within this limit, only 25% of the assessment can be used for one year.

Later, the Fund has gradually relaxed the restrictions on the use of funds by Member States to meet actual needs.

Related measures

Regulate the exchange rate, movement of funds and other foreign exchange control measures of each Member State:

Member States ’balance of payments shall not arbitrarily adjust the parity of their national currencies unless a basic imbalance occurs.

The so-called basic imbalance refers to the imbalance in the balance of payments except for short-term factors such as seasonality, speculation, and economic cycles.

For the movement of funds, the fund stipulates that: Member States shall not use the funds of the fund to pay for huge or continuous capital outflows.

Member States may control such capital outflows, but they must not impede the external payment of economic transactions.

Organizational role

The role of providing information and advice to member countries: China has a long history in the fund. 

The 1944 Bretton Woods Conference was one of the 44 countries participating in the conference.

As a big country, its assessment is very large, second only to the United States with 27.5 billion US dollars, the United Kingdom's 13 billion US dollars, and 5.5 billion US dollars. 

Also, the United States, Britain, France, India and included in the country with the largest assessment.

When the fund was increased in 1959, due to various reasons, China's assessment did not increase, so it could not be included in the five countries with the largest assessment.

In 1961, the qualification for appointing an executive director alone was replaced by West Germany. In the past, China’s qualifications in the International Monetary Fund were represented by the Kuomintang government authorities.

Since China’s restoration of the United Nations legal seat, the International Monetary Fund reinstated China’s membership in April 1980 by disqualifying the Taiwan authorities.

Fund evaluation

The International Monetary Fund adopts a parity system for foreign exchange rates, which requires each member state to set the parity of its own currency.

Article 4 of the Fund stipulates that the parity of the currencies of Member States shall be expressed in terms of 1 ounce of gold (British) equal to 35 US dollars.

The foreign exchange purchase and sale prices of various countries shall not change more than 1% of the parity.

After the Smithsonian Agreement was established in 1971, the fluctuation of this spot exchange rate has been expanded to 2.25% above and below parity, and the standard for determining "parity" has also been changed from gold to special drawing rights.

As for the parity announced by the fund, it cannot be changed without the consent of the fund.

However, if the balance of payments of the Member States is basically unbalanced, the fund may be required to adjust the parity.

If the whole range is within 10% of the parity, the Member States may make adjustments by themselves and the Fund will approve them.

If it exceeds 10%, it must be approved by the fund before adjustment. Such a parity system is "adjustable pegged exchange rate".

Although it is quite close to the gold exchange standard system, the parity of the fund is determined by the fund and the member states, and the gold exchange standard system is determined by the gold content ratio.

Organization Structure of the International Monetary Fund, IMF

The organizational structure of the IMF consists of the board of directors, the executive board, the president, and permanent functions.

Council

The Council is the highest decision-making body of the IMF. It consists of one director and one deputy director from each member country, and the term of office is 5 years.

Directors usually make up the minister of finance of the member country or the governor of the central bank has the right to vote.

The deputy director only has the right to vote when the director is absent.

The main functions and powers of the Council are:

1. To approve the admission of new member states; to approve the size of the IMF's shares and the allocation of special drawing rights
2. Approve general surveys on the currency parity of member states

The council usually holds an annual meeting, which is usually held jointly with the annual meeting of the World Bank Council.

Board of Directors

The Executive Board is a permanent body of the IMF that is responsible for handling daily business tasks. It consists of 24 executive directors for a two-year term.

Executive directors include designation and selection. The five executive members holding the largest share of the fund, namely the United States, Britain, Germany, France, and Japan, each have one member, and China, Russia, and Saudi Arabia each have one member.

The directors are selected by other member countries in turn according to the constituency.

The functions and powers of the executive board include: accepting the commission’s entrustment to deal with various policies and administrative affairs on a regular basis, submitting annual reports to the council, and conducting comprehensive research on major economic issues of member countries, especially those related to international finance.

The executive board convenes at least three formal meetings every week to perform the functions and powers specified in the fund agreement and the council.

When the board of directors needs to vote on relevant issues, the executive directors vote according to the voting rights of the country or constituency they represent.

President

The president is the chief executive of the IMF, and its vice president assists.

The president is responsible for managing the daily affairs of the IMF and is elected by the executive board and concurrently serves as the chairman of the executive board for a term of 5 years.

The president can attend the board of directors and the executive board of directors, but usually does not have the right to vote. 

Only when the executive board has the same number of votes, can a decisive vote be cast.

Although the IMF and the World Bank are global institutions, both are still under the control of Western countries.

The president of the IMF is usually a European, while the president of the World Bank is an American. 

Since the establishment of the International Monetary Fund Agreement in 1944 in December 1945, a total of 12 Europeans have served as IMF presidents, including 4 French.

Permanent department

IMF has 16 functional departments responsible for operating business activities. 

In addition, IMF has two permanent overseas business institutions, namely the European office (located in Paris) and the Geneva office.

Institutional flaws of IMF

(1) The organization of the IMF is controlled by the United States and the European Union.

(2) The fund share and voting rights of the IMF are unreasonably distributed. In the major decisions of the IMF, the United States has a veto power.

(3) The IMF strives to maintain the hegemony of the US dollar as the main international reserve currency and ignores the role of the super-sovereign reserve currency.

(4) The IMF's insufficient ability to adjust the balance of payments has led to serious imbalances in the global balance of payments.

President of International Monetary Fund, IMF

According to unwritten rules, the president of the International Monetary Fund comes from a European country.

Current president of the International Monetary Fund

On October 1, 2019, Kristalina Georgieva became the president of the IMF for a five-year term.

Previous Presidents of the International Monetary Fund

1. Camille Gutt May 6, 1946-May 5, 1951 Belgian citizenship

2. Ivar Rooth, August 3, 1951-October 3, 1956, Swedish

3. Per Jacobsson (Per Jacobsson) November 21, 1956-May 5, 1963 Swedish nationality

4, Pierre-Paul Schweitzer (Pierre-Paul Schweitzer) September 1, 1963-September 1, 1973 French nationality

5. Hendrikus Johannes Witteveen (Hendrikus Johannes Witteveen) September 1, 1973-June 17, 1978 Dutch citizenship

6. Jacques de Larosière de Champfeu June 17, 1978-January 15, 1987 French nationality

7, Michel Camdessus (Michel Camdessus) January 16, 1987-February 14, 2000 French nationality

8. Horst Köhler May 1, 2000-March 4, 2004 German citizenship

Acting Anne Osborn Krueger March 4, 2004-June 7, 2004 American

9. Rodrigo de Rato y Figaredo June 7, 2004-November 1, 2007 Spanish

10. Dominique Strauss-Kahn (Dominique Strauss-Kahn) November 1, 2007-May 18, 2011 French nationality

Agent John Phillip Lipsky (May 19, 2011-July 4, 2011)

11. Christine Madeleine Odette Lagarde July 5, 2011-July 2, 2019 French nationality

Agent David Lipton July 2, 2019-October 1, 2019 US citizenship

12. Kristalina Ivanova Georgieva-Kinova October 1, 2019-present Bulgarian citizenship

Publications of the IMF

1. World Economic Outlook
2. International Financial Statistics (monthly)
3. Overview of the International Monetary Fund (monthly)
4. Balance of Payments Statistics (monthly)
5. Government Financial Statistics Yearbook

China Development by IMF

China is one of the founding countries of the IMF. After the birth of the new China, seats have long been used by the Taiwan authorities.

In 1950, Zhou Enlai, Prime Minister and Minister of Foreign Affairs, called the IMF and solemnly declared that the People’s Republic of China is the only legal government representing China and demanded that China’s legal seat be restored.

However, due to the constraints of the international political environment, the issue of China’s representation in the IMF has not been resolved for a long time.

In October 1971, the 26th UN General Assembly passed a resolution to restore the legitimate seat of the People’s Republic of China in the United Nations, which created conditions for China to restore its seats in the specialized agencies under the UN sequence.

In 1978, the resolution of the Third Plenary Session of the 11th Central Committee of the Party on reform and opening up created a favorable internal environment for China's accession to international financial organizations.

In January 1979, the external conditions for China and the United States to establish diplomatic relations and join international financial organizations eventually matured.

During March 1980, the IMF sent a delegation to China to negotiate with us. On April 17, the IMF's executive board of directors passed a resolution on behalf of China by the government of the People's Republic of China, restoring the legal seat of the People's Republic of China in the IMF.

In September, The IMF passed a resolution to increase China’s share from 550 million SDRs to 1.2 billion SDRs.

During November, China’s share was further increased to 1.8 billion SDRs along with the IMF’s general capital increase.

In February 5, 2001, China’s share increased to 6.396 billion special drawing rights, which accounted for 2.98% of the total share, rose to eighth place, and voting rights also increased to 2.95%.

China also obtained a separate constituency in the IMF status, and thus the right to elect its own executive director.

After the IMF reform in 2008, China's share increased to 8.901 billion special drawing rights, and its share was second only to the five major shareholder countries of the United States, Japan, Germany, Britain, and France, and the voting power rose to 3.65%.

On October 10-12, 2014, a series of annual meetings of the International Monetary Fund and the World Bank were held in Washington, USA.

The Governor of the People's Bank of China Zhou Xiaochuan led a Chinese government delegation to attend the meeting and delivered a speech on China's economic situation at the 30th Ministerial Conference of the International Monetary and Financial Committee (IMFC).

On October 1, 2015, China began to declare its foreign exchange reserves to the International Monetary Fund for the first time.

This was a landmark event in which China disclosed an important economic data to the outside world.

On November 30, 2015, the IMF Executive Board approved the RMB to join the Special Drawing Rights (SDR) currency basket.

The new currency basket will take effect on October 1, 2016.

On December 18, 2015, the US Congress passed the allocation for fiscal year 2016 on the 18th.

The bill also announced that the IMF’s five-year-long quota reform was finally completed. 

IMF President Lagarde welcomed the statement, and China will also become the third largest member of the IMF after the United States and Japan.

On January 27, 2016, the International Monetary Fund (IMF) announced that the IMF's 2010 share and governance reform plan had officially come into effect, which meant that China officially became the third largest shareholder of the IMF.

The IMF said in a statement that the IMF's "Board Reform Amendment" entered into force on January 26, and that the amendment is part of the IMF's share and governance reform. 

According to the plan, about 6% of the share will be transferred to dynamic emerging markets and developing countries.

China’s share will rise from 3.996% to 6.394%, ranking third from sixth place, third only to the United States and Japan.

The International Monetary Fund announced on January 27, 2016 that the IMF's 2010 share and governance reform plan has officially come into effect, which means that China has officially become the third largest shareholder of the IMF.

The IMF's "Board Reform Amendment" came into effect on January 26, and the amendment is part of the IMF's share and governance reform.

According to the plan, about 6% of the share will be transferred to dynamic emerging markets and developing countries.

China’s share will rise from 3.996% to 6.394%, ranking third from sixth place, third only to the United States and Japan.

The four emerging economies of China, Brazil, India and Russia are among the top ten shareholders of the IMF.

On March 4, 2016, the International Monetary Fund (IMF) announced that, starting October 1, 2016, the IMF will list RMB separately in its quarterly survey of "Official Foreign Exchange Reserve Currency Composition" (COFER) to reflect the IMF The holding of members' RMB-denominated reserves.

In fact, October 1 is also the date when the latest SDR (Special Drawing Rights) basket becomes effective.

At that time, the renminbi will become one of the five major currencies of the SDR. Is reflected in.

Criticism of the IMF

Since the late Cold War, the role of the Bretton Woods institutions has been cited.

Dispute

Some critics pointed out that the fund favors capitalist military dictators who have good relations with European and American companies. 

Other critics said that the International Monetary Fund does not attach importance to democracy, human rights and labor rights.

These criticisms aroused social discussion and promoted the anti-globalization movement.

Contrary to the opinion, the International Monetary Fund’s ability to democratize the country is limited, and its purpose does not specify that it should do so.

Some supporters pointed out that economic stability is a prerequisite for democracy.

Some economists criticized that the economic assistance of the International Monetary Fund was approved conditionally:

The recipient countries need to implement the economic reforms recommended by the fund.

Economists believe that doing so will affect the social stability of the country, which is actually counterproductive.

Generally speaking, the International Monetary Fund and its supporters promote Keynesianism. 

As a result, supporters of the supply school often contradict the International Monetary Fund. 

The International Monetary Fund advocates devaluation of currencies, and criticism from the supply school will cause inflation.

Most organizations that oppose economic globalization, such as ATTA, believe that the IMF deepens poverty and increases the debt burden of third-world countries and developing countries.

Organizations opposed to the IMF have different positions. For example, the supply school believes that the policy proposed by ATTAP is similar in concept to the IMF.

Argentina is regarded as a model country by the IMF for adopting the economic policies proposed by the Bretton Woods institutions.

However, in 2001, there was a catastrophic financial crisis in the country, and many people believed that it was caused by the IMF's austerity budget and privatization of important resource development projects.

Tight budgets have weakened the government's ability to maintain infrastructure, welfare, and education services.

The financial crisis in Argentina has deepened the resentment of South American countries towards the IMF. 

They accused the fund of being responsible for the economic problems in South America.

Affected by the economic crisis in Argentina, the government of South America is now gradually taking a left-center route and is committed to getting rid of the pressure of commercial enterprises on economic policies.

The Central Bank of Nya controlled the flow of currency in the country. After the IMF provided assistance, it demanded that monetary policy be relaxed.

After the adjustment, not only did foreign investment drop sharply, but under the corruption of corrupt officials, Kamlesh Manusuklal Damji Pattni lost billions of Kenyan shillings (for the Goldenenberg scandal). Kenya’s financial situation was worse than before.

The International Monetary Fund’s remedial actions have affected its reputation: often when the country has been hit hard by the economy, the IMF reaches out for assistance.

In fact, economic problems in these countries are usually the result of decades of poor management and are not known to the outside world.

Mismanagement has led the country to economic difficulties for many years.

The IMF usually provides assistance at this time, and people associate the economic collapse with the IMF’s involvement. Criminal politicians are good at diverting their attention, using nationalism and people’s bad impression of the IMF, and using the IMF as their scapegoat.

Although the IMF was established to help stabilize the global economy, since the 1980s, more than 100 countries have experienced the collapse of the banking system and reduced GDP by more than 4%. This is unprecedented.

The slow response of the IMF to the crisis and the practice of fixing the situation have made many economists propose to reform the IMF.

Despite the mixed reputation of Western society for the International Monetary Fund, research by the Research Center shows that more than 60% of Asians and 70% of Africans believe that the IMF and the World Bank have a "positive" impact on their countries.

The documentary 'Life and Debt' describes critically the impact of IMF policies on Jamaica.

The news that the International Monetary Fund President Lagarde admitted to misjudge the British economy has been widely disseminated by the world ’s major media, and the British local media have been more active and continue to speculate on this matter. They also praise the development of the British economy and look forward to it. Future economic prospects.

There is no doubt that the IMF misjudged it. At present, the British economy has successfully overcome difficulties, the total economic volume has returned to the level before the international financial crisis. 

The unemployment rate has dropped to 6.8%. Also, the speed of economic development ranks first among the seven industrial countries. 

The economic development has sufficient stamina and the economy is in the medium and long term development plans are working.

Lagarde also admitted that as investment becomes another engine of economic growth, the UK’s economic outlook is more sustainable.

Trade difference

The main role of the International Monetary Fund is an auditor, whose job is to record trade figures between countries and debts between countries, and to preside over the formulation of international monetary and economic policies.

As for the World Bank, it mainly provides long-term loans. The World Bank works like an investment bank, issuing bonds to companies, individuals or governments, and lending the proceeds to recipient countries.

The purpose of the IMF was to stabilize the currencies of various countries and monitor the foreign exchange market. Since the IMF is not a bank, it will not lend money.

However, the International Monetary Fund has reserves for borrowing by the country to stabilize the currency in a short period of time; the practice is similar to overdraft in current accounts.

The borrowed money must be paid off within 5 years.

Related Reports

U.S. refuses RMB to enter IMF SDR currency basket

According to Xinhua News Agency, US Treasury Secretary Jacob Lu has recently rejected the entry of RMB into the International Monetary Fund (IMF) Special Drawing Right (SDR) currency basket.

Lu's reason is that, although progress has been made in the liberalization of Renminbi, there is still a need for "further liberalization and reform to meet IMF standards."

However, IMF President Christina Lagarde said that the IMF welcomes and shares China's goal of renminbi entry into the SDR.

Yi Gang, deputy governor of the People's Bank of China, stated that it is necessary to be calm about whether the renminbi can join the SDR. 

"Whenever China joins or does not join the SDR, China's financial reform and opening up process will continue to move forward."

RMB joins SDR currency basket

On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) approved the RMB to join the Special Drawing Rights (SDR) currency basket. The new currency basket will be officially effective on October 1, 2016.

The IMF issued a statement on the same day saying that the Executive Board completed the five-year SDR currency basket review on the same day and believed that the renminbi met all existing standards for "entry basket".

Since October 1, 2016, the RMB has been recognized as a freely usable currency, and will form an SDR currency basket along with the US dollar, Euro, Japanese yen, and British pound.

The IMF believes that the RMB entering the basket will diversify the currency basket and better represent the world's major currencies, thereby helping to increase the attractiveness of SDR as a reserve asset.

The IMF also adjusted the weight of basket currencies to:

USD accounted for 41.73%

Euro accounted for 30.93%

RMB accounted for 10.92%

Yen accounted for 8.33%

Sterling accounted for 8.09%.

IMF President Lagarde said after the end of the Board of Directors that day, the renminbi "entry into the basket" is an important milestone in the integration of China's economy into the global financial system, and also the IMF's recognition of China's progress in reforming its currency and financial system in the past few years.

3.16 Paris IMF office explosion

On March 16, 2017, an explosion occurred in the IMF's office, causing one person to be slightly injured.