The International Monetary Fund

The International Monetary Fund, or IMF, is a global financial system that oversees the international monetary system while working towards monetary cooperation, financial stability, increased trade, high employment levels, and low poverty of every member state. With 184 member nations represented at the official headquarters in Washington, D.C., the IMF monitors the exchange rates and balances-of-payment1 of its participants, as well as offering assistance to its member countries in times of balance-of-payment difficulties. The IMF also stabilizes exchange rates in accordance to the gold standard in order to promote international trade. The IMF monitors economic financial developments and avoids competitive devaluations of currencies. The IMF is working towards a more prosperous economy for the entire world.

History

In the 1930s and early 1940s, the world financial system was shattered by World War II. Foreign import amounts were cut back, currencies were devalued, restrictions were placed on foreign exchange accounts, and employment and living standards reduced greatly. When World War II came to a close, governments realized that the world was in need of plans to restore its economy. In July of 1944, the United Nations Monetary and Financial Conference took place in Bretton Woods, New Hampshire. One outcome of said conference was the plan to found the United Nations’ “International Monetary Fund”. The Fund officially came into existence in December of 1945, when 29 countries signed the Articles of Agreement, becoming the first member states involved. These Articles of Agreement came into play on December 27, 1945. The organization was established on May 1, 1946, and began financial operations on March 1, 1947.

Since the creation of the International Monetary Fund, world economy has seen an increase in prosperity, a lack of global depression, improvement of economic policies and a major growth in trade. The IMF seemed to have smoothed the cycle of “boom and bust”. Other arrangements came into effect later on in the history of the IMF, such as Standby Arrangements in 1954 (which allowed nations to negotiate lines of credit to prepare for upcoming needs), General Arrangements to Borrow in 1961 (allowing the creation of standby credit for emergencies), and the Compensatory Financing of Export Fluctuations in 1963 (which permitted developing countries to cope with sudden drop in export income without injuring their economy. In October of 1969, Special Drawing Rights were approved. These Special Drawing Rights (or SDRs) allow nations to acquire foreign reserves with a wide range of transactions. With SDRs, a nation can enlarge its subscription quota without draining its economy of gold or currency. By the 1980s, the number of members of the IMF had increased from 29 to 143. Today, the IMF maintains the same principles as it did at its founding, but now oversees the financial situations of 184 countries.