What Is The International Monetary Fund (IMF)
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The International Monetary Fund (IMF)
First Published: ADawnJournal.com May 8, 2010
Whether you know it or not, there is an organization that has a huge impact on your life and while you probably have heard of it, you may not truly realize all that the International Monetary Fund (IMF) does for you. The IMF is an international organization that looks over the global financial system by applying the policies of macroeconomics to the countries that are members of the Fund. This includes overseeing the exchange rates of countries, as well as the balance of payments within these countries.
The IMF was formed with the objective of stabilizing international exchange rate, while also helping countries develop financially through liberalized economic policies as well as providing loans, aid and restructuring finances. In addition, the IMF offers leveraged loans to poorer countries in order to help them out.
Headquartered out of Washington D.C., the IMF was formed in July of 1944 by the 45 original members during the United Nations Monetary and Financial Conference at the Mount Washington Hotel in New Hampshire. Everything was officially organized on December 27, 1945 when the first 29 countries signed the Articles of Agreement. During the Second World War, the world’s finances were in a chaotic state and it was the purpose of the IMF to help aid in the reconstruction of the international payment system of the world, as well as stabilize the exchange rates that were fluctuating widely at the time. At the time, countries would contribute into a pool that they could temporarily borrow from.
The IMF currently has 186 countries in its membership which work together to create global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, while reducing poverty, in the words of the IMF itself.
All UN member states, with the exception of Taiwan, North Korea, Cuba, Andorra, Monaco, Liechtenstein, Tuvalu and Nauru, are members of the IMF.
All of these member states are represented by a 24-member Executive Board. There are five Executive Directors, which are appointed by the five members that have the largest quotas. The rest are made of Executive Directors that have been elected by the remaining members. All the members of the IMF then appoint a Governor to the IMF Board of Governors.
The influence of the IMF has increased greatly over the global economy as the numbers of members have increased over the years. Many cite the IMF as a contributing factor to the political independence of many developing countries, as well as helping usher in the end of the Cold War with the collapse of the Soviet Union.
Of course, things have not always been rosy for the IMF. In 2008, when the financial crisis was just beginning, the IMF decided to sell some of its gold reserves. In addition, the IMF has decided to implement a new framework for the organization to help deal with a $400 million budget deficit. By 2011, it is estimated that there will be roughly $100 million in spending cuts and the removal of 380 staff positions in order to help save money.
This was not the end to the changes implemented within the IMF. At the 2009 G-20 London Summit, the IMF decided it would need more financial resources to meet the needs of its member countries as a result of the huge financial toll the global financial crisis was taking. To help, the G-20 leaders, who represent the 20 largest economies on Earth, pledged to increase the supplemental cash to the IMF from $50 billion to $500 billion, while allocating an additional $250 billion to member countries.
Through thick and thin, boom and bust, financial turmoil and recessions, the IMF has been a constant that, in various ways, is trying to make the world a better place. The lack of wars between its member countries on the whole seems to show that it has been a success at this.
