Summary: The International Monetary Fund's (IMF) financial operations are supported by quota contributions of its members, special drawings rights, and gold holdings. To supplement these resources, IMF has access to credit lines with member countries, and it can borrow from sovereign governments, central banks, or private entities. For the financial year ended April 10, 1999, IMF had about $287 billion in resources consisting primarily of currency holdings of members' national currencies, special drawing rights, and gold holdings. Of this amount, about $195 billion was considered usable, that is, was from members that were strong enough economically to allow their currencies to be used for IMF operations. IMF has not drawn from its working balance reserve in more than 20 years. Consequently, its resources available for lending may be greater than reported. With the end of the gold standard in the early 1970s and the passage of the second amendment to IMF's Articles of Agreement in 1978, gold's formal role in IMF and in international currency transactions was eliminated. IMF's gold holdings had a market value of $30 billion as of April 1999. In 1995, IMF examined the effect of selling its gold and investing the proceeds in interest-bearing financial instruments. The decision to hold gold has cost IMF tens of billions of dollars in foregone gains and investment income since 1980. IMF has never formally adopted a method for determining members' initial quotas and subsequent quota increases because it believes that quantitative measures cannot fully reflect the considerations that appropriately bear on each member's position or on the total size of IMF's resources. As a result, its decisions on quota increases have been matters of judgment that involve quantitative, qualitative, and political considerations. Historically, quota increases have almost always been lower than the increase recommended by IMF staff. As part of its role in the international monetary system, IMF provides balance-of-payments assistance to members when needed. Since the late 1970s, there has been an increase in arrears. However, IMF has successfully reduced the number of countries in arrears to five as of April 1999. Also, there has been a greater concentration of IMF's resources provided to a smaller number of countries since the late 1970s. The Year 2000 problem affects nearly every aspect of the international financial systems. Although IMF has taken steps to mitigate potential damage, it still faces challenges in providing more complete assurance that its internal business processes will continue to function at the date change at the end of the year.
