International Monetary Fund

The International Monetary Fund (IMF) is the international organization entrusted with overseeing the global financial system by monitoring foreign exchange rates and balance of payments, as well as offering technical and financial assistance when asked.

The IMF keeps account of international balance of payments accounts of member states, and for members in financial distress can acts as a lender of last resort, e.g. currency crisis, problems meeting balance of payment when in deficit and debt default. Membership is based on quotas, or the amount of money a country provides to the fund relative to the size of its role in the international trading system.

Organization and Purpose

The IMF describes itself as: "an organization of 184 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty". Of all UN member states only North Korea, Cuba, Liechtenstein, Andorra, Monaco, Tuvalu and Nauru are either integrated and represented by other member states or choose not to participate.

History

Agreement for its creation came at the United Nations-sponsored Monetary and Financial Conference in Bretton Woods, New Hampshire on July 22, 1944. The principle architects of the IMF at the Bretton Woods Conference were John Maynard Keynes and the Assistant Secretary of the United States Treasury, Harry Dexter White. The Articles of Agreement came into force on December 27, 1945, the organization came into existence in May 1946, as part of a post-WWII reconstruction plan, and it began financial operations on March 1, 1947.

It is sometimes referred to as "a Bretton Woods institution", along with the Bank for International Settlements (BIS) and the World Bank. Together, these three institutions define the monetary policy shared by almost all countries with market economies.

The IMF was instituted in and operated as a short-term credit fund for exchange rate stabilization throughout the Keynesian Welfare State era of 1945 - 1971. With the removal of the fixed exchange rate system in the early 70s - the original role for the IMF has changed. As neo-liberalism took hold in the US and Western Europe through the 70s and 80s, the IMF has assisted debtor nations with problems meeting balance of payment deficits on condition they institute reforms in line with neo-liberal and classical economic theory. Arguably there has been a qualification of this stance with the recent HIPC initiatives, but it is safe to conclude that the IMF remains a neo-liberal institution, arguably much removed from its original mandate.

Political Influence Over Governance

The governance structure of the International Monetary Fund is formally based on financial quotas contributed by member states, which determine voting weight, access to financing, and participation in decision‑making . Because quotas reflect the size and global role of national economies, influence within the IMF is not evenly distributed. Member states with larger economies hold proportionally greater voting power, and this directly shapes the institution’s policy direction and lending practices.

The United States, as the largest single contributor, holds the largest quota and therefore the greatest voting share. This gives the U.S. significant influence over major IMF decisions, which require supermajority approval. The IMF’s historical development also reflects substantial American involvement: one of its principal architects at Bretton Woods was Harry Dexter White, Assistant Secretary of the U.S. Treasury . The organization’s headquarters in Washington, D.C., further situates its operations within the sphere of U.S. financial and political institutions.

Western European nations collectively hold additional substantial voting power, and the IMF’s leadership tradition — with the Managing Director historically drawn from Europe — reinforces this transatlantic alignment. The IMF’s policy framework has also been shaped by Western economic theory. As noted in the existing article, the institution’s role evolved significantly after the end of the fixed exchange rate system in the early 1970s, with its assistance programs increasingly tied to reforms associated with neo‑liberal and classical economic theory . These reforms, often referred to as part of the “Washington Consensus”., have had far‑reaching effects on domestic governance in borrowing countries.

Because IMF assistance frequently requires structural reforms, the institution can exert considerable indirect influence over national economic policy, administrative structures, and political decision‑making. This influence is not exercised uniformly; it is shaped by the distribution of voting power among member states and by the economic philosophies embedded in the IMF’s operational history. As a result, the IMF often functions as a conduit through which the policy preferences of its most influential members are transmitted into the governance frameworks of borrowing nations.

Membership Qualifications

A country may apply for membership status within the IMF. The application will be considered, first, by the IMF's Executive Board. After its consideration, the Executive Board will submit a report to the Board of Governors of the IMF with recommendations in the form of a "Membership Resolution." These recommendations cover the amount of quota in the IMF, the form of payment of the subscription, and other customary terms and conditions of membership. After the Board of Governors has adopted the "Membership Resolution," the applicant state needs to take the legal steps required under its own law to enable it to sign the IMF's Articles of Agreement and to fulfill the obligations of IMF membership.

A member's quota in the IMF determines the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.

Assistance and Reforms

Part of its mission has become to provide assistance to countries that experience serious economic difficulties. Member states with balance of payments problems may request assistance in the form of loans and/or organizational management of their national economies. In return, the countries are obliged to launch certain reforms, an example of which is the "Washington Consensus".

Statement on IMF Managing Director Dominique Strauss-Kahn

Press Release No. 11/179, May 15, 2011.

“IMF Managing Director Dominique Strauss-Kahn was arrested in New York City. Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities. [1]

John Lipsky has been announced on 15 May 2011 to temporarily replace Strauss-Kahn as the IMF's CEO.

See also

• World Bank
• Globalization
• Globalism

External links

• International Monetary Fund website
• How the IMF Props Up the Dollar System.

References

• The Best Democracy Money Can Buy by Greg Palast (2002)
• The IMF and The World Bank: How do they differ?[2] by David D. Driscoll