Λόгoσ. Online Λόгoσ. Online: Heoretical Basis Of Creation And Development Of The International Foreign Currency Fund

Міжнародний науковий електронний журнал International scientific e-journal
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№4 ‖ Грудень, 2019 №4 ‖ December, 2019
ECONOMICS
UDC 399.9 EOI 10.11232/2663-4139.04.38
T
HEORETICAL BASIS OF CREATION AND
DEVELOPMENT OF THE INTERNATIONAL
FOREIGN CURRENCY FUND
ORCID ID: 0000-0001-8501-3107 AMELNYTSKA Maria
applicant for higher education at the Faculty of Economics and Management
Donetsk National Technical University
SCIENTIFIC ADVISOR:
ORCID ID: 0000-0002-1723-3498 KATRANZHY Leonid

Ph.D., Associate Professor, Associate Professor of the
Department of Management and Financial and Economic Security
Donetsk National Technical University
UKRAINE
Abstract. The article analyzes the historical prerequisites for the creation and development of the
International Monetary Fund, which is one of the structural elements of the international
monetary system based on the concept of freedom of economic circulation. the goals,
principles and legal regime of the IMF's activity are examined, its structure is analyzed. The
basic types and forms of activity of the International Monetary Fund are examined in the
present conditions, deficiencies in its functioning are determined.
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Keywords: IMF; world monetary and financial systems; financial department; sanctions; inspection.
Relevance of the research topic. The international economy is based mainly on the
concept of freedom of economic circulation. And this freedom generally defines the nature
of the world economic order as an open-ended order.
In 1944, at the International Conference in Bretton Woods (USA), monetary and
financial relations were institutionalized by the creation of the International Monetary Fund
(IMF), whose main focus is the regulation and protection of the world monetary and financial
system. In the event of a negative balance of payments, a Member State of that Fund may,
by agreement with it, resort to the use of its reserves in the form of special loans subject to
certain requirements.
In this regard, it is of particular importance to study the international legal aspects of
the IMF's activities, which involves studying a number of theoretical and practical problems
related to determining the specificity and legal status of the IMF's activities and regulating
its relations with member states.
© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

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© Amelnytska M., 2019 http://eoi.citefactor.org/10.11232/2663-4139.04.38
ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019


Literature review on the topic of research. Studies of the history, legal status and
activities of the IMF have been carried out by a number of authors, in particular:
S. Ya. Borynets, VA Vasilenko, VN Denisov, OO Kharchuk, VG Butkevych,
VI Ya. Muravyov, VP Kolosov; OO Shibaeva, TM Neshatayeva, OG Zaitseva,
VS Kuznetsov,. M. Kolosov, J. Gold, D. Driscoll, V. Ebke, H. Kelsen, E. Kraas, M. Medina,
D. Mitrani, K. Nadi, P. Pescator, V. Moravetsky and others. Significant contribution to the
development of problematic issues of activity of the object of study, in particular, made
R. Stone, J. Stiglitz, J. Gray, IV Burakovskaya, NV Starikov.
The purpose of the study is is to provide a comprehensive analysis of the work and
structure of the IMF.
The International Monetary Fund, in the form of an international monetary and financial
organization, was formed on the basis of the agreements reached at the Bretton Wood
Conference in July 1944, but its creation was preceded by the existence of two world
monetary systems.
The first world monetary and financial system was the gold standard system, which
was started in the XVIII century. Great Britain and was eventually recognized by other
leading countries at that time [1]. The gold standard system provided for the fulfillment of
the function of money by gold in the countries where it was adopted. Three forms of the
world monetary system of the gold standard are considered in the international legal
literature: gold coin, gold and gold, gold and currency (gold) [1, 2, 3].
After the end of World War I, there was a need to rebuild the world economy, which
was impossible without international monetary and financial stability, however, a complete
restoration of the gold coin standard system was no longer possible. Accordingly, some
countries in Western Europe, such as the United Kingdom, France, Germany, Belgium, the
Netherlands and others. began the introduction of the system "gold-gold standard", which
became a transitional form of gold standard or "cut" system of gold standard [1].
At the United Nations Monetary and Financial Conference in Bretton Woods (USA), on
July 22, 1944, the IMF Agreement was signed. The entry into force of the IMF Agreement
required that the founding countries pay 65% of the total amount of the Fund's subscription.
The authorized capital of the IMF was initially set at $ 8.799 million. This amount consisted
of the sum of the quotas of the Member States attending the Bretton Woods Conference.

The country's quota depended on its national income, its foreign exchange reserves, its
average import value, and its maximum export value. In practice, this formula did not work,
as most countries could not provide relevant information, and sometimes provided
information that was not true [4]. The US $ 2 750 million quota was in fact individually
proclaimed and non-negotiable at the Bretton Woods Conference. The US quota has
become a benchmark for determining the quotas of other participants [5]. For countries that
joined the IMF later, the quota was calculated based on their economy. The size of the quota
was compared with the quotas of countries with similar economies. For countries that joined
the IMF later, the quota was calculated based on their economy. The size of the quota was
compared with the quotas of countries with similar economies. The size of the quota was
considered by the Directorate, which imposed a resolution on acceptance or non-
acceptance and submitted the arguments to the Board of Governors.
The creation of the IMF was of interest to all signatories to the treaty, since it had, to a
certain extent, legally regulated the post-war destroyed international monetary and credit
relations. Countries whose economies were severely destroyed and undermined by the war
needed external resources for their balance of payments and national monetary systems.
Thus, by providing cheap credit, the source of which was contributions from member
countries, the IMF has to some extent met these needs.

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Thus, the Third International Monetary System was created to ensure a stable balance
of the international exchange system based on fixed exchange rates, to restore international
economic and trade ties, and to provide for countries in the balance of payments to provide
loans to address them [2]. However, the establishment of the IMF on such principles most
satisfied the interests of the United States, as a significant number of provisions of its Charter
provided the United States both direct and indirect advantages. For example, this concerned
the role of gold, since the United States at this time belonged to 75%, whereas in the United
Kingdom only 4% of the official gold reserves of the capitalist world [1]. Having a significant
role in the world economy, the United States has achieved its goal of creating an
international organization such as the IMF that is in their interests and under their control.
34.7% of the US vote in the IMF gave the right to oblige the borrowing countries to provide
detailed information about the country's economy, its gold and foreign currency reserves,
and to follow the IMF's recommendations regarding the domestic and foreign policy of the
country.
The IMF's official goals are:
- promote the development of international monetary and monetary cooperation within
the framework of the Permanent Mission, which provides a mechanism for consultation and
joint work on international monetary problems;
- to facilitate the process of expansion and balanced growth of international trade and
thereby achieve and maintain a high level of employment and real incomes, as well as the
development of the productive resources of all Member States, considering these actions
as a priority objective of economic policy;
- promote currency stability, maintain an orderly currency regime among Member
States, and avoid using currency devaluation to gain competitive advantage;
- to assist in the establishment of a multilateral system of current account transactions
between Member States, as well as in the removal of currency restrictions that impede the
growth of world trade;
- by temporarily providing the Fund's general resources to Member States, subject to
adequate safeguards, to create a state of assurance in them, thereby providing an
opportunity to correct imbalances in their balance of payments without the use of measures
that could harm welfare at national or international level;

- reduce the duration of equilibrium disturbances in Member States' external payments
and reduce the magnitude of those violations.
The organizational structure, that is, the system of permanent governing bodies that
make up the cooperation mechanism of the Fund and the Member States within an
international organization, is one of the important characteristics of this organization [9].
Describing the organizational structure of the IMF, we can distinguish the following
features:
- largely extracurricular regulation of the formation of management bodies and
definition of their competence; presence of a limited membership body;
- voting when making decisions on the principle of "weighted votes";
- sufficiently branched structure;
- the existence of gaps and shortcomings in the legal regulation of the procedure for
the creation, distribution and exercise of competence by the Fund's management bodies;
- the presence of numerous advisory bodies and their significant impact on the work of
the IMF.
The Fund includes a number of committees, the Technical Assistance Secretariat and
the following departments:

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- 6 Territorial Departments (Department of Africa; Department of Asia Pacific;

European Department; Branch in Europe; Department of Middle East and Central Asia;
Department of Western Hemisphere);
- Finance Department;
- Law Department;
- External Relations Department
- Human Resources Department;
- Department for Budgetary Issues;
- Department of monetary and financial systems;
- Department for Policy Development and Analysis;
- Research Department;
- Statistics Department;
- Department for International Capital Markets.
In addition to the Departments, the Fund's structure includes 4 institutes, including 3
regional ones (Joint Institute for Africa, Joint Vienna Institute, Singapore Regional Training
Institute) and a major IMF institute, located in Washington, DC, which organizes refresher
courses and seminars qualifications of civil servants from the member countries of the Fund.
In general, the problematic issues are the fuzzy division of competence between the
governing bodies and the granting of the executive bodies the right to resolve important
issues, which, in the author's opinion, should be the competence of the representative
bodies.
In the current environment, the activity of the institution is mostly associated with its
financial and credit functions. However, the functioning of the fund is characterized by a
much larger number of forms of activity (Fig. 1).
inspection consultations provision of financing

services
annual Certificatio direct

n training
additional support preferential
gradually
special informing
special
Fig. 1. Forms of the IMF [11]
The emergence of such a form of inspection activity is associated with the transition
from a parity-based, modern, open currency exchange system. The Fund should expand its

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operations beyond the value of exchange, which is, after all, the result of a range of
economic activities, study all areas of the economies of the countries that determine the
value, and impartially evaluate the economic performance of the countries for the entire
community of members. This form of activity was defined by the IMF itself as an "inspection"
or oversight of the exchange policies of members of the organization.
Counseling is also one of the permanent forms of activity of the Fund. In consultation
with its members, the institution receives information on how responsibly and openly a
country operates in establishing the conditions on which governments and individuals in
other countries buy and sell its currency, as well as information on the general state of affairs
in the country.
In general, the IMF conducts three types of consultations:
- annual consultations. Annually, a group of 4-5 IMF experts comes to the capital of a
particular country and gathers information and discusses the country's economic policies
with officials for about two weeks. After these two stages, the group, already at its
headquarters, prepares a detailed report for discussion at the Directorate. The conclusions,
recommendations and suggestions developed as a result of this discussion are submitted
to the Government of the country;
- additional consultations may be organized by the Fund's Managing Director in cases
where a country unexpectedly finds itself in a difficult economic situation, or is suspected
that its actions are contrary to the "code of conduct" and may harm other states;
- The IMF conducts special consultations with those countries whose economic
policies largely determine the state of the world economy.
Services to IMF member countries are provided in the following forms;
- improving the skills of national personnel. Since 1964, the IMF Institute has been
operating at the headquarters of the organization in Washington, which trains national
cadres of all countries through special programs;
- technical assistance provided by experts from the staff of the Fund;
- information service. Publication of annual and monthly statistical materials,
publication of series of special brochures, and other types of information activity [12].

The most well-known and significant form of IMF activity is financing. The IMF provides
financial assistance to member countries through a variety of funding mechanisms, differing
mainly in the type of balance of payments issues they are intended to address and the terms
of the loans and are determined according to a logical program selection model [13].
A serious and significant measure of influence is the temporary deprivation of the
offending State in its decision-making. Such a sanction shall apply to a State which has
already been deprived of the right to use the Fund's common resources. In order to apply
such a sanction, a majority of 70% of the total number of votes must be cast in favor. This
means that the country deprived of the right to vote will not: participate in the adoption of the
proposed amendment to the Articles of the IMF Agreement or be taken into account in the
total number of Member States for this purpose, except where the adoption of the
amendment requires the consent of all Member States or exclusively concerns the
Department of Special borrowing rights; appoint or participate in the appointment of a
manager or a deputy manager, appoint or participate in the appointment of members of the
Board or deputy members of the board, or appoint, elect or participate in the election of the
executive director; votes cast to such a State will not participate in the total vote count,
except for the purpose of adopting a proposed amendment that applies exclusively to the

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SDR Department; a supervisor and an alternate supervisor appointed by such Member State
shall be dismissed. During the period of such suspension, the Fund may at any time suspend
the suspension by securing a majority of 70% of the total number of votes cast.
Unless, in spite of the Fund's use of appropriate measures of influence, a State
violating the rules of the Fund's legal system does not align its monetary and financial
system with the Fund's requirements and continues to fail to fulfill any of its obligations under
the Agreement, the Fund shall, at the discretion of the Board of Governors, adopted by a
majority of managers, with 85% of the total number of votes, can apply the most serious
sanction - to request withdrawal from the membership of the Fund. As the practice of the
Fund's activity shows, such responsibility has been repeatedly used, so in 1950
Czechoslovakia was deprived of membership of the Fund for late payment of its quota.
However, the expulsion from IMF members does not mean that this state cannot re-join the
Fund like Czechoslovakia did on September 20, 1990.
Analyzing the rules of the IMF legal system, as enshrined in the Articles of the IMF
Agreement governing legal relations related to international responsibility, we can draw the
following conclusions. The assessment of the actions of the state and the determination of
the presence or absence of the offense of the state in the monetary and financial sphere,
the assessment of its public danger and the application of the type of sanction are solely the
competence of the IMF, which acts at its own discretion. The rules and sanctions for states'
breach of their obligations to the Fund are contained solely in the Articles of the IMF
Agreement, and the obligations are not only contained in this Agreement, but may also be
contained in decisions, rules, instructions adopted by the Fund.
REFERENCES:
[1] Дзюблюк, О. В. (ред.) (2012). Банківська система України: становлення і розвиток в умовах глобалізації економічних
процесів: монографія. Тернопіль: Астон.
[2] Патика, Н. І. (2012). Міжнародні валютно-кредитні відносини: навч. посібник. К.: Знання.
[3] Козак, Ю. Г., Логвінова, Н. С., Барановська, М. І. (ред.) (2011). Міжнародні фінанси: навч. посібник. К.: ЦНЛ.
[4] Кузнецов, В.С. (2001). МВФ и мирохозяйственные связи. М.: РОССПЭН.

[5] Convenio Constitutivo del Fondo Monetario Internacional. (1968). Washington. Вилучено з
https://www.theverge.com/2018/1/28/ 16932738/alexa-waze-ford-sync-ecosport-suv-hands-on.
[6] Шибаева, Е. А., Поточный, М. Л. (1988). Правовые вопросы структуры и деятельности международных организаций. (
2-е изд..). М.: МГУ.
[7] Сулакшин, С. С. (2012). Политическое измерение мировых финансовых кризисов. Феноменология, теория,
устранение: монография. М.: Научный эксперт.
[8] Герчикова, І. М. (2001). Міжнародні економічні організації: регулювання світогосподарських зв'язків та
підприємницької діяльності: навч. посібник. К.: АТ «Консалтбанкір».
[9] Офіційний веб-сайт Міжнародного валютного фонду. Вилучено з: http://www.imf.org.

6


ТЕОРЕТИЧНІ ОСНОВИ СТВОРЕННЯ І РОЗВИТКУ МІЖНАРОДНОГО ВАЛЮТНОГО ФУНДУ
АМЕЛЬНИЦЬКА Марія Іванівна, здобувач вищої освіти факультету економіки та менеджменту

Донецький національний технічний університет
НАУКОВИЙ КЕРІВНИК:
КАТРАНЖИ Леонід Леонідович, канд. екон. наук, доцент, доцент кафедри управління і фінансово-економічної безпеки
Донецький національний технічний університет
УКРАЇНА
Анотація. У статті проаналізовано історичні передумови створення та розвитку Міжнародного валютного фонду, який є
одним із структурних елементів міжнародної валютної системи на основі концепції свободи економічного обігу.
вивчаються цілі, принципи та правовий режим діяльності МВФ, аналізується його структура. Досліджено
основні види та форми діяльності Міжнародного валютного фонду в сучасних умовах, визначено недоліки в
його функціонуванні.
Ключові слова: МВФ; світові валютно-фінансові системи; фінансовий відділ; санкції; огляд.

7

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Міжнародний науковий електронний журнал International scientific e-journal

ΛΌГOΣ. ONLINE ΛΌГOΣ. ONLINE

UDC 399.9 EOI 10.11232/2663-4139.04.38

ORCID ID: 0000-0002-1723-3498 KATRANZHY Leonid

All rights reserved (CC BY 4.0) ‖ КВ №20521-13361Р (02.07.2018)

© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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All rights reserved (CC BY 4.0) ‖ КВ №20521-13361Р (02.07.2018)

© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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- 6 Territorial Departments (Department of Africa; Department of Asia Pacific;

inspection consultations provision of financing

annual Certificatio direct

All rights reserved (CC BY 4.0) ‖ КВ №20521-13361Р (02.07.2018)

additional support preferential

Fig. 1. Forms of the IMF [11]

© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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All rights reserved (CC BY 4.0) ‖ КВ №20521-13361Р (02.07.2018)

© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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ТЕОРЕТИЧНІ ОСНОВИ СТВОРЕННЯ І РОЗВИТКУ МІЖНАРОДНОГО ВАЛЮТНОГО ФУНДУ

АМЕЛЬНИЦЬКА Марія Іванівна, здобувач вищої освіти факультету економіки та менеджменту

All rights reserved (CC BY 4.0) ‖ КВ №20521-13361Р (02.07.2018)

© Амельницька М.І., 2019 https://ojs.ukrlogos.in.ua/index.php/2663-4139

ОПУБЛІКОВАНО / PUBLISHED : 28.12.2019

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