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GEOPOLITICS
Effective Date of
Membership
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
(December 27, 1945)
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
December 27, 1945
Iraq
Luxembourg
Netherlands
Norway
Philippines
South Africa
United Kingdom
United States
(Yugoslavia)
Dominican Republic
Ecuador
Guatemala
Paraguay
Iran, Islamic
Republic of (Iran)
Chile
Mexico
Peru
Quota
Quota subscriptions are a central component of the
IMFs financial resources.
Each member country of the IMF is assigned a quota,
based broadly on its relative position in the world
economy.
A member countrys quota determines its maximum
financial commitment to the IMF, its voting power, and
has a bearing on its access to IMF financing. (Access
Limits)
Director
Alternate
Vacant
Sunil Sabharwal
Casting Votes of
Percent
of Fund
Total2
United States
831,405
831,405
16.54
309,668
309,668
6.16
Jin Zhongxia
Ping Sun
China
306,292
306,292
6.09
Menno Snel
Willy Kiekens
Oleksandr Petryk
Armenia
Belgium
Bosnia and
Herzegovina
Bulgaria
Croatia
Cyprus
Georgia
Israel
Luxembourg
Macedonia, former
Yugoslav Republic
of
Moldova
2,751
65,570
4,115
10,426
8,637
4,501
3,567
20,672
14,681
2,866
QUOTA
Member
Pakistan3
VOTES
Number2
Percent
of Total1
21,773
0.43
1,494
0.03
Palau3
3.1
Panama3
376.8
5,231
0.10
Paraguay3
201.4
3,477
0.07
14,808
0.29
21,892
0.44
Peru3
1,334.5
Philippines3
2,042.9
Process of Lending
Upon request by a member country, IMF resources are usually made
available under a lending arrangement, which may, depending on the
lending instrument used, specify the economic policies and measures a
country has agreed to implement to resolve its balance of payments
problem.
The economic policy program underlying an arrangement is formulated
by the country in consultation with the IMF and is in most cases
presented to the Funds Executive Board in a Letter of Intent and is
further detailed in the annexed Memorandum of Understanding.
Once an arrangement is approved by the Board, IMF resources are
usually released in phased installments as the program is implemented.
Conditionality
When a country borrows from the IMF, its
government agrees to adjust its economic policies to
overcome the problems that led it to seek financial
aid from the international community. These loan
conditions also serve to ensure that the country will
be able to repay the Fund so that the resources can
be made available to other members in need.
Non-Concessional Lending
All non-concessional facilities are subject to the IMFs marketrelated interest rate, known as the rate of charge, and large
loans carry a surcharge. The maximum amount that a country
can borrow from the IMF, known as its access limit, varies
depending on the type of loan, but is typically a multiple of the
countrys IMF quota.
The IMFs instruments for non-concessional loans are Stand-By
Arrangements (SBA); the Flexible Credit Line (FCL); the
Precautionary and Liquidity Line (PLL); for medium-term needs,
the Extended Fund Facility (EFF); and for emergency assistance
to members facing urgent balance of payments needs, the
Rapid Financing Instrument (RFI).
Non-Concessional Lending
[Stand-by Arrangements (SBA)]
The SBA is designed to help countries address shortterm balance of payments problems. SBAs may be
provided on a precautionary basis where countries
choose not to draw upon approved amounts but
retain the option to do so if conditions deteriorate.
The length of a SBA is typically 1224 months, and
repayment is due within 3-5 years of disbursement
Non-Concessional Lending
[Flexible Credit Line (FCL)]
Non-Concessional Lending
Non-Concessional Lending
Non-Concessional Lending
Concessional Lending
These loans are allocated for Low income countries (LIC)
under the Poverty Reduction and growth trust (PRGT). These
are loans that are extended on terms substantially more
generous than market loans. The concessionality is achieved
either through interest rates below those available on the
market or by grace periods, or a combination of these.
Concessional loans typically have long grace periods.
Financing terms have been made more concessional, and
the interest rate is reviewed every two years
Concessional Lending
Concessional Lending
Concessional Lending
Issues
Governance
Highly advanced economy countries dominate decision-making in the IMF
Uneven voting power
Voting power is determined by the amount of money that each country pays into
the IMF's quota system. The disproportionate amount of power held by wealthy
countries means that the interests of bankers, investors and corporations from
industrialized countries are put above the needs of the world's poor majority.
Conditions inclined to capitalist and hurt workers
The conditions in the arrangements when borrowing loans from IMF may weaken
the labor laws to attract investors which in turn will inject money in that country,
contribute to its economic growth but at the expense of the workers.
The Role of
Geopolitics in
IMF
What is Geopolitics?
The study of the effects of geography on international politics and
international relations. Geopolitics is a method of studying foreign policy to
understand, explain and predict international political behavior through
geographical variables.
Geopolitics traditionally indicates the links and causal relationships
between political power and geographic space; in concrete terms it is often
seen as a body of thought assaying specific strategic prescriptions based on
the relative importance of land power (Osterud, 1988).
In the working paper, the authors use four areas or geopolitical determinants
which significantly affects and relevant to the lending decision of the IMF;
Energetic area, Nuclear area, Military area and Geographic area.
Energetic area
There are many resources that might be a significant
geopolitical factor but a source of energy is what
makes an industry function, hence its the oil that
fuels the machine (industry). Oil and Gas reserves of
a country, with or without the capability to utilize the
resource, is considered as a geopolitical importance
or potential - (if incapable to utilize the resource).
Nuclear area
This area is in a cross-section of an energetic area
and military area because a country can derive
energy from it or can be used to develop military
grade nuclear weapon. That is why the approval of
loan for these countries is very meticulous. The nonallocation of an IMF loan may be seen by dominant
countries willing to retain their position as a tool to
counteract the rising power of nuclear powers.
On the other hand, the international community may
be interested in ensuring the economic stability of
nuclear powers in order to reduce the risk that they
Military area
To explain this clearly, the author used US involvement
as an example. US dominates the Funds decision
making process. Its deployment of troops and
establishment of bases throughout the regions of the
world becomes a factor in the lending decision of IMF.
The US and its military allies influence loan decisions in
order to favor countries where their troops are present.
Another example is treaties towards peace like Nonproliferation treaties signals cooperative behavior of a
country which may impact positively on the odds of
obtaining an IMF loan, thus lessening their threat to the
Geographic Area
This is purely about geographic characteristic of a country that
affect the lending decision of IMF. (i.e desert, mountains)
All geographical factors that are expected to influence positively
will contribute on the probability to receive IMF loans.
The transport of resources also serves as a factor to determine
the geopolitical importance of a country. This means, even if you
do not have the resources but these resources needs to transit
via your country (i.e Pipelines or road routes) to be able to enter
the market, you possess a geopolitical importance.
Findings
Robustness
Checks
Robustness Checks
Importance of Political Factors
Voting in line with the US and the UN General Assembly
positively influence IMF loan decisions
Holding a non-permanent seat in the UN Security Council
positively related to the probability to get IMF money
Entering a program after, but not before elections
Robustness Checks
Importance of Factors of Aid Flows (less robust)
Level of democracy and corruption in the recipient countries, as
well as the former colonial link between countries are strong
determinants of bilateral aid decisions (non-concessional)
Only level of democracy index is significant to PRGF but other
factors are not.
Multilateral aid decisions have settled by international
institutions to help non-geopolitical important countries but
results shown that it is not consistent with what the aid
literature had assumed.
Robustness Checks
Importance of Recidivism
Results have shown that SBA/EFF are found to be rather
persistent
Robustness Checks
On the Factor Analysis: Testing the variables entering the
factor
All variables, except UN Military strength, are significant and
positively linked to the decision and the amount to lend through
SBA/EFF.
In PRGF, the only significant variables are the oil reserves,
nuclear plant, and nuclear weapon. It is because the Fund lend
to countries with small endowment in resource which is in line
with its (PRGF) development objective and without nuclear civil
and military power. (Poor countries are economically not enough
to build up nuclear power i.e. Pakistan)
Results have shown that it is robust in SBA/EFF
Conclusion
Conclusion
Can Geopolitics influence the IMF decision?
YES.