International Monetary Fund
Role
The IMF monitors international trade and investment transactions and consults with its members on ways they can contribute to a fluid and more stable global monetary system. The IMF also offers technical assistance in macroeconomic management. For the IMF to do its job properly, the majority of the world's countries must participate in its work. 185 countries are members of the IMF.
The main functions of the IMF are to:
- promote international monetary cooperation;
- facilitate the expansion and balanced growth of international trade;
- promote exchange stability;
- assist in the establishment of a multilateral system of payments; and
- make its resources available (with adequate safeguards) to members experiencing balance of payments difficulties.
Organisation Structure
Board of Governors
The highest authority of the IMF is the Board of Governors. Each member country appoints a Governor and Alternate, usually the Minister of Finance, Treasurer, or central bank Governor. The New Zealand Governor has traditionally been the Treasurer/Minister of Finance, and the Alternate Governor is the Governor of the Reserve Bank of New Zealand. The Board of Governors meets twice a year as the IMF Committee (IMFC) to review the work of the Fund and may meet or vote by mail at other times.
Board of Executive Directors
The Board of Governors has delegated many of its powers to an Executive Board. The Executive Board has day-to-day responsibility for the IMFs operations, policies, surveillance, provision of IMF financial assistance to member countries, consultations with members, and comprehensive studies on important issues.
The Executive Board also selects the Managing Director of the IMF, who serves as its Chairman. The Managing Director is Dominique Strauss-Kahn from France who was appointed in November 2007.
There are 24 Executive Directors, five of whom are appointed by the members having the largest number of shares of capital stock (Germany, Japan, USA, UK, and France). The remaining 19 Executive Directors represent groupings of countries and are each elected by the Governors representing the constituent member countries.
Voting Power
The IMF's decisions are made by majority vote. Voting power is determined by the relative size of the member's economy as reflected in that member's quota of SDRs 1. Each member of the IMF has a quota, expressed in SDRs, which is equal to its subscription in the IMF. Every member has 250 basic votes, plus 1 extra vote for every 100,000 SDRs in its quota. The quota also determines access to the IMF's financial resources, and its share in any one-off allocation of SDRs by the Fund.
Constituency Membership
The IMF has 185 member countries divided into 24 constituencies. New Zealand is in a constituency with 13 other members at the IMF. These groups are usually regionally or geographically grouped. The members of New Zealand's constituency are:
| Country | Voting % as at November 20008 |
Voting % once Quota and Voice Reforms enacted |
|---|---|---|
| Australia | 1.47 | 1.31 |
| Korea | 1.33 | 1.37 |
| New Zealand | 0.41 | 0.38 |
| Papua New Guinea | 0.07 | 0.08 |
| Mongolia | 0.03 | 0.05 |
| Samoa | 0.02 | 0.03 |
| Seychelles | 0.02 | 0.03 |
| Soloman Islands | 0.02 | 0.03 |
| Vanuatu | 0.02 | 0.04 |
| Kiribati | 0.01 | 0.03 |
| Marshall Islands | 0.01 | 0.03 |
| Micronesia, Federated States of | 0.01 | 0.03 |
| Palau | 0.01 | 0.03 |
| Total | 3.85 | 3.87 |
Financial Transactions Plan
The IMF provides financial assistance to members by selling to members the currency of other members. These transactions are known as "financial transactions" payments, formerly known as "operational budget" payments. Only those members whose currencies are deemed financially strong enough have their currencies included in the Financial Transaction Plan (38 members, including New Zealand, are currently included). The quarterly budget is advised to members at the beginning of each quarter.
Payments are made by encashing promissory notes that New Zealand has issued in favour of the IMF as part of its quota contribution. The Treasury pays NZ dollars into the IMF's account at the Reserve Bank. The Reserve Bank makes a corresponding reduction in the number of promissory notes outstanding.
1. A member country's quota is measured in Special Drawing Rights (SDRs). An SDR is a currency created by the IMF and allocated to IMF member countries. A member's SDR quota has been paid for, and is an asset. The IMF rules allow members to borrow against this asset. Membership carries the right to borrow SDRs - this is called a member's allocation. If members' take up their allocation, then this is borrowing - the allocation is borrowed from the IMF, and interest is payable. In short, member countries purchase SDRs on joining, and can then choose to borrow their allocation of SDRs. An SDR's value is based on a weighted basket of the five main international currencies.
