Download (IMF) International Monetary Fund

(IMF)
International Monetary Fund
I
INTRODUCTI
ON
International Monetary Fund (IMF), international economic organization whose purpose
is to promote international monetary cooperation to facilitate the expansion of
international trade. The IMF operates as a United Nations specialized agency and is a
permanent forum for consideration of issues of international payments, in which member
nations are encouraged to maintain an orderly pattern of exchange rates and to avoid
restrictive exchange practices. The IMF was established, along with the International
Bank for Reconstruction and Development, at the UN Monetary and Financial
Conference held in 1944 at Bretton Woods, New Hampshire. The IMF began operations
in 1947. Membership is open to all independent nations and included 183 countries in
2001.
II
ACTIVIT
IES
Members undertake to keep the IMF informed about economic and financial policies that
impinge on the exchange value of their national currencies so that other members can
make appropriate policy decisions. On joining the fund, each member is assigned a quota
in special drawing rights (SDRs), the fund’s unit of account, whose value is based on the
weighted average value of five major currencies. (In October 2001 the SDR was worth
about U.S. $1.29.) Each member’s quota is an amount corresponding to its relative
position in the world economy. As the world’s leading economy, the United States has
the largest quota. In 2001 the U.S. quota was about SDR 37.1 billion. The smallest quota,
that of the Republic of Palau, was about SDR 3.1 million. The amount of the quota
subscription determines how large a vote a member will have in IMF deliberations, how
much foreign exchange it may withdraw from the fund, and how many SDRs it will
receive in periodic allocations.
Members who have temporary balance-of-payments difficulties may apply to the
fund for needed foreign currency from its pool of resources, to which all members
have contributed through payment of their quota subscriptions. The member may
use this foreign exchange for a certain time (up to about five years) to extricate
itself from its balance-of-payments problem, after which the currency is to be
returned to the IMF’s pool of resources. The borrower pays a below-market rate
of interest for the IMF resources it uses; the member whose currency is used
receives almost all of these interest payments; the remainder goes to the fund for
operating expenses.
III
ORGANIZATI
ON
The board of governors, made up of leading monetary officials from each of the member
nations, is the highest authority in the IMF. Day-to-day operations are the responsibility
of the 24-member executive
board, which represents member nations individually (for larger countries) or in groups.
The managing director serves as chairperson of the executive board. The IMF has its
main headquarters in Washington, D.C.
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