The

International

Monetary

Fund
Introduction

The International Monetary Fund (IMF)

came into official existence on December
27, 1945, when 29 countries signed its
Articles of Agreement at a conference held
in Bretton Woods, New Hampshire, USA,
from July 1-22, 1944. The IMF began
financial operations on March 1, 1947.

Created in 1944, at the Bretton Woods

onference to prevent the kinds of chain c
reaction in the economic system that
caused world currencies to collapse like in
the Great Depression of the 1930s

How the IMF Came About

The International Monetary Fund (IMF or Fund) and

the International Bank for Reconstruction and
Development (IBRD or World Bank) were both
established at the United Nations Monetary and
Financial Conference, held at Bretton Woods, New
Hampshire, on July 1-22, 1944. The two were
created to oversee stability in international
monetary affairs and to facilitate the expansion of
world trade.Membership in the World Bank requires

membership in the IMF, and they are

membership in the IMF, and they are
both specialized agencies of the United
both specialized agencies of the United
Nations. The World Bank was given
Nations.

PURPOSE OF IMF

. The IMF purposesare outlined in Article I of the

. The IMF purposes are outlined in Article I of the
IMF Articles of Agreement.
IMF Articles of Agreement.

They are the promotion of international monetary
They are the promotion of international monetary
cooperation.
cooperation.
The expansion and balanced growth of international
The expansion and balanced growth of international
trade.
trade.

Exchange rate stability.
Exchange rate stability.

The elimination of restrictions on the international
The elimination of restrictions on the international
flow of capital.
flow of capital.

The orderly adjustment of balance of payment
The orderly adjustment of balance of payment
(BOP)
imbalances.
(BOP)
imbalances.
TECHNICAL ASSISTANCE

IMF offers advices to the member countries regarding the

formulation and implementation of ‘economic
formulation and implementation of ‘economic
management’.
management’.
The fund provided the training course on ‘financial
The fund provided the training course on ‘financial
analysis and policy’,fiscal policy etc.It provides training on
analysis and policy’,fiscal policy etc.It provides training on
‘balance of payments methodology’,public finance,central
‘balance of payments methodology’,public finance,central
banking services,organisationand administration of central
banking services,organisationand administration of central
bank.
bank.
It sends teams of experts to various developing countries
It sends teams of experts to various developing countries
in order to provide training,conducting
in order to provide training,conducting
surveys,formulation of monetary policy etc.
surveys,formulation of monetary policy etc.

IMF AND INDIA

A core responsibility of the IMF is to provide loans to countries

experiencing balance of payments problems.
experiencing balance of payments problems.
The financial assistance enables countries to rebuild there
The financial assistance enables countries to rebuild there
international reserves, continue paying for imports and restore
international reserves, continue paying for imports and restore
conditions for strong economic growth.
conditions for strong economic growth.
Unlike development banks,the IMF doesn’t lend for specific
Unlike development banks,the IMF doesn’t lend for specific
projects.
projects.
An IMFloan is usually provided under an arrangement which
An IMFloan is usually provided under an arrangement which
stipulates the specific policies and measures a country has
stipulates the specific policies and measures a country has
agreed to implement to resolve its balance of payments
agreed to implement to resolve its balance of payments
problems.
problems.
Once an arrangement is approved by the board ,the loan is
Once an arrangement is approved by the board ,the loan is
released in phased installments as the program is carried out.
released in phased installments as the program is carried out.

CRITICISM REGARDING
IMF

The united states is the biggest shareholders

inthe IMF,holding nearly 18% in shares,and
inthe IMF,holding nearly 18% in shares,and
the IMF is generally considered a tool of the
the IMF is generally considered a tool of the
U.S.treasury.
U.S.treasury.
IMF steps in and provide money,reform are
IMF steps in and provide money,reform are
not forthcoming.forexample-despite a post-
not forthcoming.forexample-despite a post-
crisis recovery in some asian
crisis recovery in some asian
countries,fundamental strutural reform has
countries,fundamental strutural reform has
not taken place in any of of the asians
not taken place in any of of the asians
countries.
Countries

IMF says, it makes loans in exachange for

IMF says, it makes loans in exachange for
policy reform,it has not been successful in
policy reform,it has not been successful in
turning countries to the free
turning countries to the free
market.Instead,the fund has created loan
market.Instead,the fund has created loan
addicts, “more than 70 nations have
addicts, “more than 70 nations have
depended on imf aid for 20 or more
depended on imf aid for 20 or more
years,24 countries have received IMF
years,24 countries have received IMF
creidts for 30 or more years.
creidts for 30 or more years.

Operations
Monitoring economic and financial developments ƒ
and policies, in member countries and at the
global level, giving policy advice to its members
based on its more than fifty years of experience.

Lending to member countries with balance of ƒ

payments problems, supporting adjustment and
reform policies aimed at correcting the underlying
problems.

Providing the governments and central banks of ƒ

its member countries with technical assistance
and training in its areas of expertise.

IMF looks at the performance of the economy as ƒ

a whole (macroeconomic performance)

Focuses also on the financial sector policiesƒ

Ex: regulation and supervision of banks and other
financial institutions.

Pays attention to structural policies that affect ƒ

macroeconomic performance.
Ex: labor market policies (affect employment and
wage behavior

Speculations about the IMF

Debt is an efficient tool. It ensures access “

raw materials and ’ peoples to other

infrastructure on the cheapest possible

terms.”