INTERNATIONAL MONETARY FUND-:

IMF is referred to as the twin sister of the World Bank. However, the function of the IMF is completely different from the World Bank. The most important responsibility of the IMF is to provide short-term loans to the member countries in the Balance of Payment crisis situation. 
The other responsibilities are to promote a single international accounting system to ensure financial cooperation among the member countries, to ensure a stable exchange rate of different domestic currencies, and to also promote private investment in the member countries.
The highest decision-making body in IMF is the Board of Governors (BoG). The BoG consists of the Finance Minister of all the member countries. It also has an alternate Governor who is the Governor of the Central Bank of the respective countries. For any decision to be taken at least 114 countries should vote in favor of the proposal. At the same time, at least 85% of the total
votes should be polled in favor of the proposal.

Since IMF is not an egalitarian body. The weightage of all member countries is not the same. Different countries have differential weightage in which the GDP of the country plays the most important role. Along with this, the contribution made by that country to IMF also plays an important role. Based on this, presently the vote of the USA has a weightage of 17.44%, whereas the vote of India has a weightage of 2.76%. Therefore, the USA, alone can reject any proposal
placed in IMF. That is the reason why the demand to reform IMF has continuously been made. In order to lend to member countries, in case of the BoP crisis, IMF uses its own accounting unit, which is referred to as the Special Drawing Right (SDR). It is also termed the currency of the IMF. Since it is accepted by all the member countries, it is known as Paper Gold.
SDR is not a claim over IMF, but it serves as a claim over all the member countries i.e., the loan taken in the form of any currency, can be repaid in the form of SDR and the member countries will have to accept it. The exchange rate of SDR is determined against a basket of currencies. In this basket prior to 1 October 2016 USD, Yen, Pound, and Euro were included. On 1st October 2016, even the Chinese currency Yuan/Renminbi has been added to the basket.

While including currency in this basket, several factors are seen. They are:-
1. Foreign exchange reserve of the country.
2. Share of that country in the world trade.
3. Stability in the exchange rate of that currency.
4. GDP of the country/size of the economy.
SDR was introduced in 1969 for the first time. During that time the price of 1 SDR and 1 Dollar was equivalent to the value of 0.888gm Gold. This system of Price Determination with respect to Gold was known as Bretton Woods System. But later in 1973, this system was discontinued. The IMF started using the currency basket for the price determination of SDR.
Whenever IMF provides a loan to a member country it imposes certain conditions so that the country may not fall into crisis. 
These conditions are:-
● Instructing the government to downsize the Bureaucracy.
● Downsize the Ministries.
● Adopt austerity measures in public expenditures.
● Discontinue welfare schemes that are irrelevant.
● Eliminate subsidies.
● Encourage privatization.

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