The IMF and the World Bank are in practice completely independent, although they are formally counted as specialized bodies under the auspices of the United Nations Economic and Social Council (ECOSOC). They are not subject to the UN General Assembly and they decide on their own budget. Almost all countries in the world are members of the IMF; at the beginning of 2009 the number of members was 185.
The IMF’s highest decision-making body is the Board of Governors, where all member countries are represented. Usually a country is represented by its Minister of Finance or Governor. For Sweden, the Governor of the Riksbank is governor. The Board normally meets once a year, at the annual meeting of the IMF and the World Bank. Decisions are made by a simple majority, but a country’s voting power is weighted according to its economic strength. The voting power is determined by the country’s so-called quota, which also determines the size of the fee that the country pays into the IMF (see Budget: Financing).
The system means that some of the smallest member states in March 2009 had 0.01 percent of the vote, while the United States, which is the largest alone, had 17 percent. Sweden had just over 1 percent of the vote. The Board of Governors decides, among other things, on the adoption of new member states and on changes to quotas. The governors also appoint the members of the executive board, who handle the day-to-day work. The Executive Board, which normally meets several times a week, consists of 24 members.
By virtue of economic and political importance, eight countries have their own representatives: the United States, Japan, Germany, the United Kingdom, France, Russia, China and Saudi Arabia. The other 16 members represent the remaining 177 member countries. The voting power is also determined here by the quotas. Sweden is part of a Nordic-Baltic group consisting of eight countries and in 2009 had a voting power of close to 3.5 percent. One member represents 23 countries in sub-Saharan Africa and has the lowest voting power of all, or just under 1.4 per cent at the beginning of 2009.
The work of the IMF is led by a CEO who is traditionally always from Europe (while the head of the World Bank is always an American). Former French Finance Minister Dominique Strauss-Kahn took over as CEO in November 2007. The IMF chief heads a staff of about 2,600 employees from about 150 countries. The majority work at the IMF’s headquarters in Washington DC, but the IMF also has regional offices in Europe, Tokyo and at the UN headquarters in New York.
In addition to the IMF’s actual structure, the International Monetary and Financial Affairs Committee (formerly the so-called Interim Committee) is an advisory body. The committee, which has the same composition as the Executive Board, has, among other things, the task of monitoring the development of the international currency system and making recommendations on various issues.
According to estatelearning, the largest part of the IMF’s resources consists of the member countries’ capital contributions to the fund. The contributions – how much money a country makes available to the fund – are determined by the country’s so-called quota. The ratio is based on the country’s economic strength based on factors such as gross domestic product (GDP), foreign exchange reserves and trade balance.
The contribution is paid at three quarters in the country’s currency. The remaining quarter is paid either in any major international currency or in SDR (Special Drawing Right), which is the IMF’s own currency. The value of the SDR is determined by weighting the daily exchange rates of the four largest currencies (euro, US dollar, British pound and Japanese yen). In April 2009, an SDR was worth approximately SEK 12.4.
The quota also determines a country’s voting power, how much money the country can borrow and how many SDRs it gets when the IMF decides to distribute new ones. At least every five years, the quotas are reviewed, so that, if necessary, they are adapted to current conditions in the world economy and in the individual countries. The quotas were increased by about 45 percent in 1999, but were not revised in the following two reviews. The most recent, the IMF’s 13th in the series, was completed in January 2008. In total, the quotas then consisted of just over 217 billion SDRs.
If the IMF’s money at some point is not enough, the organization can borrow from a number of the strongest economically member countries, according to three special borrowing arrangements.
The oldest, General Arrangements to Borrow (GAB), was established in 1962 when ten industrialized countries, including Sweden, promised to lend money to other members of the group if necessary. The Ten Group, as it is called despite the fact that Switzerland eventually became the eleventh member, has committed to lending the IMF up to 17 billion SDRs.
In November 1998, the new borrowing arrangement NAB entered into force. Through NAB, the IMF can, under special conditions, borrow up to 34 billion SDRs from 26 member countries (ten groups and 15 more). This means a doubling of available funds compared to GAB. NAB does not replace GAB but is the arrangement that should primarily be used when extra resources are needed. The total amount that the IMF can borrow under NAB and GAB must not exceed SDR 34 billion.
In February 2009, the IMF signed a bilateral agreement with Japan (part of the Ten Group) which pledged to provide up to US $ 100 billion, to strengthen the IMF’s lending opportunities during the current global financial crisis.