International Monetary Fund (IMF)

The International Monetary Fund (IMF) was established at the Bretton Woods Conference in 1944 and began operations in 1945, headquartered in Washington, D.C. It was designed to prevent a repeat of the competitive currency devaluations and exchange restrictions of the 1930s.

Objectives:

• To promote international monetary cooperation.
• To facilitate the expansion and balanced growth of international trade.
• To promote exchange-rate stability and avoid competitive currency depreciation.
• To assist in establishing a multilateral system of payments and eliminate foreign-exchange restrictions.
• To give member countries confidence by making its resources available, under adequate safeguards, to correct short-term balance-of-payments difficulties.

Organisational structure: The Board of Governors (one governor per member country, usually the finance minister or central bank chief) is the highest authority, meeting annually. Day-to-day work is run by an Executive Board. Each member is assigned a quota, subscribed mainly in its own currency and partly in Special Drawing Rights or reserve currencies — the quota determines both a country's voting power and how much it can borrow from the Fund. Larger economies (e.g., the USA) therefore hold proportionately larger quotas and voting shares.

Functions:

• Financial assistance — short- and medium-term loans to members facing balance-of-payments difficulties, usually tied to policy conditions (a "conditionality" programme of fiscal/monetary reform).
• Special Drawing Rights (SDRs) — an international reserve asset created by the IMF (1969) that member countries can use to supplement their official reserves; its value is based on a basket of major currencies.
• Surveillance — regular monitoring of member economies' policies and exchange-rate arrangements, and advising on macroeconomic stability. …