With reference to the International Monetary and Financial Committee (IMFC), consider the following statements:

1. IMFC discusses matters of concern affecting the global economy and advises the International Monetary Fund (IMF) on the direction of its work.
2. The World Bank participates as an observer in IMFC’s meetings.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Explanation

Statement 1 is correct

• The IMF is led by a Managing Director, elected for a 5-year term by the Executive Board. The Board of Governors, Ministerial Committees, and Executive Board make up the International Monetary Fund (IMF).
• Board of Governors:
  • The Board of Governors is the highest decision-making body of the IMF. It consists of one Governor and one Alternate Governor from each member country.
  • The member country appoints the governor, usually the Minister of Finance or the Head of the Central Bank.
  • For India, the Finance Minister is the ex-officio Governor on the Board of Governors of the IMF.
  • The Governor of RBI is India’s Alternate Governor.
  • The Board of Governors usually meets once a year in September/October to discuss the work of the respective institutions at the Annual meetings.
  • Two ministerial committees, the International Monetary and Financial Committee (IMFC) and the Development Committee, advise the Board of Governors.
• IMFC:
  • Advises and reports to the IMF Board of Governors on the supervision and management of the international monetary and financial system, including on responses to unfolding events that may disrupt the system.
  • Although the IMFC has no formal decision-making powers, in practice, it has become a key instrument for providing strategic direction to the work and policies of the Fund.
  • The IMFC has 24 members (India is one of the current members) who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the IMF’s 191 member countries.

Statement 2 is correct

• The IMFC operates by consensus, including on the selection of its chair.
• While there are no formal rules on term limits, since 2007 IMFC chairs have been appointed for a term of three years.
• A number of international institutions, including the World Bank, participate as observers in the IMFC’s meetings.

Answer: (c) Both 1 and 2; Difficulty Level: Hard