IMF Financial Operations November 2016

Front Matter

• Preface
• Acknowledgments
• Abbreviations

Chapter 1: Overview of theIMF as a Financial Institution

The International Monetary Fund was founded some 70 years ago near the end of World War II. Th e founders aimed to build a framework for economic cooperation that would forestall the kinds of economic policies that contributed to the Great Depression of the 1930s and the global confl ict that ensued. The world has changed dramatically since 1944, bringing extensive prosperity to many countries and lift ing millions out of poverty. The IMF has evolved as well, but in many ways its main purpose—to support the global public good of fi nancial stability and prosperity—remains the same today as when the organization was established.

Chapter 2: Nonconcessional Financial Operations

The IMF resources are held in the General Department, which consists of three separate accounts: the General Resources Account (GRA), the Special Disbursement Account (SDA), and the Investment Account (IA). Th e GRA is the principal account of the IMF and handles by far the largest share of transactions between the IMF and its members. The GRA can best be described as a pool of currencies and reserve assets largely built from members’ fully paid capital subscriptions in the form of quotas

Chapter 3: Financial Assistance for Low-Income Countries

Concessional lending began in the 1970s and has expanded since. In July 2009, the IMF’s Executive Board approved a comprehensive reform of the IMF’s concessional facilities. Such assistance is now provided through the facilities of the Poverty Reduction and Growth Trust (PRGT), which assists eligible countries in achieving and maintaining a stable and sustainable macroeconomic position consistent

Chapter 4: Special Drawing Rights

Special drawing rights (SDRs) were created in 1969 as an international reserve asset to supplement other reserve assets whose growth was seen as inadequate to fi nance the expansion of international trade and fi nances under the Bretton Woods system in the postwar period and to support the Bretton Woods fi xed exchange rate system. Th e creation of the SDR was intended to make the regulation of international liquidity subject, for the fi rst time, to international consultation and decision. Th e SDR is not a currency, nor is it a claim on the IMF. Instead, it is a potential claim on the freely usable currencies of IMF members. Th e IMF may allocate SDRs unconditionally to members (participants) who may use them to obtain freely usable currencies in order to meet a balance of payments need without undertaking economic policy measures or repayment obligations.

Chapter 5: The IMF’s Income Model

This chapter explains the sources of income for the IMF. It elaborates on how the IMF has adapted its fi nancial structure to fi nance its administrative expenditures. Th e IMF’s income is generated primarily through its lending and investing activities

Chapter 6: Financial Risk Management

The IMF’s Articles of Agreement call for adequate safeguards for the temporary use of its resources.1 Risks stem from interactions with the membership in fulfi llment of the IMF’s mandate as a cooperative international organization that makes its general resources available temporarily to its members. Th e IMF has an extensive risk-management framework in place, including procedures to mitigate traditional fi nancial risks as well as strategic and operational risks. Th e latter risks are addressed by a variety of processes, including surveillance reviews, lending policies and operations, capacity building, standards and codes of conduct for

Appendix 1: IMF Membership: Quotas, and Allocations and Holdings of SDRs

Appendix 2: Special Voting Majorities for Selected Financial Decisions

Appendix 3: Administered Accounts

Appendix 4: Disclosure of Financial Position with the IMF in the Balance Sheet of a Member’s Central Bank

Glossary