International Monetary Fund (Imf)

International Monetary Fund (Imf)

Introduction

The IMF is an intergovernmental institution established by an international treaty in 1945 to create a framework for international economic cooperation focusing on balance of payment problems and the stability of currencies.

IMF headquarters is in Washington D.C, U.S.A

History / establishment of IMF:

IMF was founded on 27th December, 1945. During the closing years of world war second, different countries realized that there must be a common International Forum for achieving economy cooperation, promoting International Trade and providing help to needy nations during emergency. So IMF was formed for this purpose.

World War Second has its adverse effect on global economy. To remedy the situation, an international monetary conference was convened in 1944, at Bretton Woods in America.

It was attended by the representatives of 44 countries. It was decided in this Conference to set up IMF for the economic development of all countries.

Problems:

Three main problems are:

▪ Economic order and piece

▪ Reconstruction of economies

▪ Stable world piece

Role:

The IMF was intended to play two major roles in the Bretton Woods System:

o The fund should discourage aggressive exchange rate behavior by members and help them manage their balance of payments efficiently;

o The fund was given resources to lend international reserves to countries with balance of payments difficulties.

Purposes/ objectives

The purposes of the International Monetary Fund are:

• To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
• To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
• To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
• To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.
• To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
• In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

Organizational Structure:

Board of Governors:

The Board of Governors, the highest decision-making body of the IMF, consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the governor of the central bank. All powers of the IMF are vested in the Board of Governors. The Board of Governors may delegate to the Executive Board all except certain reserved powers. The Board of Governors normally meets once a year.

Executive Board:

The Executive Board (the Board) is responsible for conducting the day-to-day business of the IMF. It is composed of 24 Directors, who are appointed or elected by member countries or by groups of countries, and the Managing Director, who serves as its Chairman. The Board usually meets several times each week. It carries out its work largely on the basis of papers prepared by IMF management and staff.

Managing Director

The Executive Board shall select a Managing Director who shall not be a Governor or an Executive Director. The Managing Director shall be chairman of the Executive Board,

The Managing Director shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund.

International Monetary Fund Organization Chart

Functions of the World Bank

After World War II the original purpose of the World Bank was to assist helping the implementation of the Marshall plan – providing financing aid and programs to support the rebuilding of Europe. Soon its financials were insufficient. For these reasons it shifted towards backing up the development of nonindustrial countries and their economics.

Functions of the General Agreement on Tariffs and Trade

In the beginning there was the International Trade Organization (ITO) with its purpose to reduce tariffs. When it died in 1948, the General Agreement on Tariffs and Trade (GATT) has risen instead, focusing on bringing down trade barriers progressively. Therefore, countries will meet periodically and negotiate. It has been very successful thus far, but ignored the sectors of agriculture, textiles and apparel. One indicator given is “that international trade has grown over the last fifty years from 5 percent of world GDP to over 31 percent in 2011”.