Question 71 from UPSC CSE 2016 - Economy

Question

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?

Accepted Answer

Correct Option: C. Both 1 and 2

Strategy: Analyze the first statement about the IMFC's function based on its role as an IMF advisory body. Analyze the second statement about IMF-World Bank observation practices based on their relationship as sister institutions. Conclude on the correctness of both statements by evaluating their alignment with known facts of global financial governance.

Key Info: **International Monetary and Financial Committee (IMFC)**
* The IMFC is a key advisory body of the Board of Governors of the International Monetary Fund (IMF).
* It has 24 members, who are governors of central banks, ministers of finance, or other officials of comparable rank, representing the 190 member countries of the IMF.
* The committee discusses matters of common concern affecting the global economy and advises the IMF on the direction of its work, including the supervision and management of the international monetary and financial system.
* While the IMFC has no formal decision-making powers, in practice, it has become a crucial instrument for providing strategic direction to the work and policies of the IMF.
* It meets twice a year, during the IMF-World Bank Annual and Spring Meetings.
* A number of international institutions, including the World Bank, the United Nations, the Bank for International Settlements (BIS), the Organization for Economic Cooperation and Development (OECD), and the World Trade Organization (WTO), participate as observers in IMFC's meetings.

**International Monetary Fund (IMF)**
* The IMF is an international organization, headquartered in Washington, D.C., consisting of 190 countries.
* It was conceived in 1944 at the Bretton Woods Conference and formally created in 1945.
* Its primary mission is to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

**World Bank**
* The World Bank is an international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects.
* It was also created at the 1944 Bretton Woods Conference.
* It is distinct from the IMF, though they are often referred to as 'sister institutions' due to their common origin and complementary goals in global economic stability and development.

Answer

Option A: 1 only

Answer

Option B: 2 only

Answer

Option D: Neither 1 nor 2