IMF (International Monetary Fund)
█ STEPHANIE WATSON
The International Monetary Fund (IMF) is an economic organization that promotes financial cooperation, economic stability, and fair trade among its 184 member nations and provides temporary monetary assistance to countries in need.
In its role as global economic watchdog, the IMF must continually keep an eye out for illegal activities. Following the events of September 11, 2001, that role took on an even greater urgency. Since then, the organization has launched a global effort to combat money laundering and to cut off funding to terrorist groups.
The need for a new world economic order. In the early 1940s, the world was still reeling from the financial turmoil of the Great Depression. As markets in the United States and around the world collapsed, countries sought to protect their weakened economies by closing their doors to foreign imports and restricting their citizens from making purchases abroad. The result was catastrophic; world trade nearly ground to a halt. In order to protect the world economy from suffering another similar blow, and to hasten financial recovery among war-torn nations, leaders from forty-five countries came together during the summer of 1944; their historic meeting in Bretton Woods, New Hampshire, established a new international system of economic collaboration called the IMF. The Bretton Woods Conference also launched the IMF's sister organization, the International Bank for Reconstruction and Development (IBRD), or World Bank. On December 27, 1945, representatives from twenty-nine member nations signed the Articles of Agreement, formally bringing the IMF into existence. The initial goals of the organization were to expand international trade, and to protect the stability of international currencies and exchange rates.
The IMF today. The IMF currently has three main responsibilities: surveillance, financial assistance, and technical assistance. The IMF keeps a watchful eye over its member nations throughout the year, monitoring each country's exchange rate and economic policies to protect the stability of the world economy. All member countries are entitled to financial assistance to help them recover from an economic crisis or to pay off foreign debt. By 2003, the IMF had about $88 billion in outstanding loans to eighty-eight nations. Because strategies of the IMF hold that one of the keys to worldwide economic stability is financial self-sufficiency, it has programs in place to teach countries how to plan and implement their own monetary, tax, and exchange rate policies.
With the increasing trend toward globalization (the merging of international markets), the IMF has turned its focus to emerging markets such as Asia and Latin America. By supporting economic growth and fostering the development of stable financial systems in these nations, the IMF hopes to avert an international financial crisis such as the worldwide depression of the late 1920s and 1930s, and to further strengthen the world economy.
Today, the IMF is headquartered in Washington, D.C., and staffed by a team of more than 2,500 people from nearly 140 countries. At the helm is the Board of Governors, composed of banking leaders and ministers of finance from each member country. The Board of Governors comes together once a year at the IMF-World Bank meeting, but much of the substantial operations are carried out by the twenty-four Executive Directors of the Executive Board. The Managing Director of the IMF serves as Chairman of the Executive Board. Corresponding to each Executive Director is one Governor from the International Monetary and Financial Committee (IMFC). This committee meets twice a year to advise the IMF on issues related to the international monetary system.
A country's voting power is based on the size of its economy and on the amount of the quota (subscription fee) it pays when it joins the IMF, however most decisions are based on a member consensus, rather than on a vote. The United States has the largest quota, contributing nearly 18% of the IMF's total funding.
█ FURTHER READING:
Danaher, Kevin, ed. Fifty Years is Enough: The Case Against the World Bank and the International Monetary Fund. Cambridge, MA: South End Press, 1994.
Harper, Richard H.R. Inside the IMF. San Diego, CA: Academic Press, 1998.
Stiglitz, Joseph E. Globalization and its Discontents. New York: W.W. Norton & Co., 2002.
Garritsen De Vries, Margaret. "The IMF Fifty Years Later." Finance & Development June 1995: 43—47.
The International Monetary Fund. < http://www.imf.org > (January 31, 2003).