Fondo Monetario Internacional

1. What kinds of problems prompt countries to borrow from the IMF?
When a member country took the option to borrow from the IMF, is normally because this country has a problem in its balance of payments and the country doesn’t have enough resources to afford its international payments.
Another problem that a country faced to borrow from the IMF is a natural disaster or when the country isemerging from a conflict.
The countries borrow from the IMF when they are not in good shape, and they are running into important financial problems.
The loan of the IMF gives more flexibility to the policies of adjustment and reforms that helps the country to correct their problem.

2. How do countries borrow from the IMF?

To obtain an IMF borrow, the country needs to make an arrangementcalled Letter of Intent. This documents specified the conditions for of the borrow. Conditions depend on the characteristics of the country economy and the quotas that the country gives to the organization. The document also includes the credit limit and the time that the country has to conclude the loan.

The arrangement includes the specific policies than a country will implement to resolve theirpayment issues.

This Letter of Intent is presented to the Fund Executive Board. Once it is approved, the loan is released as had been agreed in the arrangement.

The credit limit that a country can get in loan from the IMF varies with the type of loan, but generally it is a multiple of the quota that the country contributes to the IMF. When a country has necessities of financing in greatscale, as in the case of a crisis of the capital account, the loans of the IMF can exceed these limits, and are subject to the policies of "extraordinary access".

3. Where does the IMF get money to lend?

There are different sources where the IMF gets money to lend. The general resources of the IMF come mainly from the subscriptions, representing the main source from the IMF. To each countrymember a quota is assigned and its subscription is equal to the quota. This quota is assigned based in the country size relative to the world economy. The countries that joined the IMF pay 25% of the subscription quota with gold or international currency as U.S dollars or yens and the 75% with their own currency.

A second important source of IMF resources is the interest paid by countries thathave a loan with the IMF and a third source could be and IMF loan. This third source is limited and the source could be privated sector or commercial banks.

4. How is power distributed within the IMF (e.g., among the Board of Governors, Executive Board, Managing Director, etc.)? What is the basis for voting power?

The IMF is carried out by a Board of Governors, where the 184 IMF membersare represented and an international staff under the leadership of a Managing Director and three Deputy Managing Directors. This executive board is the highest decision making body of the IMF.
The Board of Governors meets once a year, when each member country appoints a Governor and an Alternate Governor and decides on major policy issues. The governor of the country is usually the Minister ofFinance or the Governor of the Central Bank of each country.
The powers of the Board of Governors to conduct the business of the IMF are delegated to the Executive Board which consists of 24 Executive Directors and usually meets three times a week, in full-day sessions, and more often if needed, at the organization's headquarters in Washington, D.C.
The IMF's five largest shareholders (the UnitedStates, Japan, Germany, France, and the United Kingdom along with China, Russia, and Saudi Arabia, have their own seats on the Board). The other 16 Executive Directors are elected for two-year terms by groups of countries, known as constituencies.
The IMF has a weighted voting system: the larger a country's quota in the IMF determined broadly by its economic size the more votes it has.

5....