IMF

The International Monetary Fund (IMF) was created to promote international monetary cooperation; to facilitate the expansion and balanced growth of international trade; to promote exchange stability; to assist in the establishment of a multilateral system of payments; to make its general resources temporarily available to its members experiencing balance of payments difficulties under adequate safeguards; and to shorten the duration and lessen the degree of lack of equilibrium in the international balances of payments of members.

On December 27, 1945, the IMF was established at the United Nations Monetary and Financial Conference, held at Bretton Woods, New Hampshire. At its birth, it was to oversee stability in international monetary affairs and to facilitate the expansion of world trade. Also created to aid these purposes was the International Bank for Reconstruction and Development (World Bank). Both were specialized agencies of the United Nations, and membership in the World Bank required countries to first be members of the IMF. The World Bank was given control over long-term financing for nations in need, while the IMF’s responsibility was to monitor exchange rates, provide short-term

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The IMF was in an intense position and as a result met this time of economic uncertainty with an increase of interest rates and reducing the amounts of imports. At the time the developing countries were in a compromising position that was seen in higher oil prices, higher interest rates from the industrial countries, and a decrease in markets for their exports. Through the Structural Adjustment Facility or the Enhanced Structural Adjustment Facility facilitated these extended arrangements along with other medium-term programs.

The beginning of the IMF can be traced to March 1st 1947 where it first began its financial operations. The focus of the IMF on the industrial economies was being criticized for lack of care and concern for the well being of the developing economies. This occurred in the 1980’s and eventually many were unable to meet the terms of the agreement. As more and more developing countries adopted structural adjustment programs, conditionality came under intense analysis. The effectiveness of this debt strategy is still under examination and it has not been fully determined whether this tactic will be success or failure. The 1980’s brought about a time of greater responsibility for the IMF not only as a salvation to desperate members, but also as broker with debtor countries in relation to private banks and creditor nations.

Over time, the IMF gradually became more of a lending establishment than had been predicted. financing for balance of payments adjustments, provide a forum for discussion about international monetary concerns, and give technical assistance to member countries. During the oil crisis of the early-mid 70’s the Organization of the Petroleum Exporting Countries (OPEC) quadrupled the price of crude oil and at the same time industrial countries were undergoing a period of inflation. Between 1947 and 1948 drawings were made on fund reserves by eleven countries and in subsequent years very few were made.

During the mid 1980’s the lending operations of the Fund increased dramatically when stand-by arrangements, usually lasting for a period of two to three years, were extended for longer periods due to the debt crisis. The first Article in the Agreement outlines the purposes of the Fund and, although the Articles have been amended three times in the course of the last 47 years prior to 1998, the first Article has never been altered.

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