The IMF was established on December 27, 1945 in Washington on the recommendations of Bretton Woods Conference. But it started working on March 1, 1947. The fund has 185 member countries accounting for more than 80 per cent of total world production and 90 per cent of world trade.
The purpose of the Fund is to promote international monetary cooperation, to facilitate the expansion and balanced growth of international trade, to promote exchange stability and to prevent unnecessary exchange depreciations, to remove all exchange controls and restrictions and to establish multi-convertibility of all currencies and lastly to help member countries with funds to correct maladjustments in their balance of payments.
The fund of the IMF is SDRs 216.75 billion and to replenish its resources it borrows from the world financial markets and member countries. IMF’s own fund is contributed by member countries.
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Each member country has a quota based on its economic and financial strength its national income, share in world trade and monetary gold held by it. The quota also determines the voting power of a member country and its borrowing power.
India is a founder member of the fund. India’s original subscription quota was SDR (Special Drawing Rights) 400 million. The initial par value of rupee was Rs 3.30 per US dollar but, subsequently, the rupee was devalued a number of times till it stood at Rs 8.25 in 1978. At present, the external value of the rupee is not fixed but allowed to fluctuate according to market condition of demand and supply.
India has been able to borrow from the fund to overcome her balance of payments difficulties. India borrowed $ 100 million from the fund during 1948-49 but paid back the amount by 1956- 57.
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Since then India has been borrowing from IMF at regular intervals in order to overcome its balance of payments difficulties. In 1981, India borrowed a massive amount of SDR 5,000 million (or Rs 5,000 crore) to overcome its external balance of payments arising basically from oil imports. India had to borrow again from IMF because of serious adverse balance of payments during 1990-91. After 1994-95 India’s loan from IMF has been declining.