Post 1930 Era was impacted by The Great Depression & World War II.

During the Great Depression the countries were trying to shore up their falling
economies by
1. sharply raising barriers to foreign trade
2. devaluing their currencies to compete against each other for export
markets
3. curtailing their citizens' freedom to hold foreign exchange

Countries affected by World War II desperately required

Economic Reconstruction (for well developed nations)
Economic Development (for less developed nations)

World trade declined sharply (see chart below), and employment and living
standards plummeted in many countries.
This breakdown in international monetary cooperation led the IMF's
founders to plan an institution charged with overseeing the international
monetary systemthe system of exchange rates and international
payments that enables countries and their citizens to buy goods and
services from each other.

The Bretton Woods agreement

The IMF was conceived in July 1944,

Representatives of 45 countries met in the town of Bretton Woods,

New Hampshire, in the Northeastern United States, agreed on a
framework for international economic cooperation.
The IMF came into formal existence in December 1945, when its first
29 member countries signed its Articles of Agreement
It began operations on March 1, 1947. Later that year, France became
the first country to borrow from the IMF.
Par value system (Bretton Woods system)
Initially, member countries agreed to peg their currencies in US Dollar
terms and for US, the value of Dollar in terms of Gold-to correct
Fundamental Disequilibrium.

SURVEILLANCE

Keeping track of the global economy and

the economies of member countries

LENDING

Lending to countries with balance of

payments difficulties
Financial assistance to countries to meet
International Payments

TECHNICAL
ASSISTANCE

To assist mainly low- and middle-income

countries in effectively managing their
economies

Greatest Loan is on :
Highest Loan as % of GDP:
Greatest amount to be Paid Back by:

Mexico and Greece

Liberia (8.5%) and Iceland (7.4%)
Iceland and Ireland

 Membership: 187 countries

Headquarters: Washington, D.C.

Executive Board: 24 Directors representing countries or groups of

countries
Staff: Approximately 2,470 from 141 countries
Total Quotas : US$ 383 billion
Biggest Borrowers : Greece , Portugal ,Ireland (as of 18/08/2011)
The members of the IMF are 186 members of the UN (all UN member
states but 7) and Republic of Kosovo.
Apart from Cuba, the other six member states of the UN not
belonging to the IMF are: North Korea, Andorra, Monaco,
Liechtenstein, Nauru and South Sudan.

 All member states participate directly in the IMF.

24-member executive board Five executive directors are appointed by the five members
with the largest quotas,
Nineteen executive directors are elected by the remaining
members.
all members appoint a Governor to the IMF's board of
governors.
The powers of the other countries are represented on a
proportional scale to their population and economic rank in the
world.
The Executive board are the general owners of the IMF and can
control major decisions.
All members of the IMF are also International Bank for
Reconstruction and Development (IBRD) members and vice versa

Where does IMF get the money from?

Most resources for IMF loans are provided by member countries,
primarily through their payment of quotas.

Since early 2009, the IMF has signed a number of new bilateral,
Multilateral loan and note purchase agreements to bolster its
capacity to support member countries during the global economic
crisis.
Concessional lending and debt relief for low-income countries are
financed through separate contribution-based trust funds.

The IMFs gold holdings amount to about 90.5 million troy ounces
(2,814.1 metric tons), making the IMF the third largest official holder of gold in
the world.
The limited sales program covering 403.3 metric tons of gold, to safeguard
from market disruption, and Gold sales were at market prices.
Profits on the sale will fund an endowment as part of the IMFs new income
model, agreed to put the institutions finances on a sustainable footing.
The IMF can use its quota-funded holdings of currencies of financially
strong economies to finance lending

The Special Drawing Right (SDR) is an international reserve asset, created by

the IMF in 1969 to supplement the existing official reserves of member
countries.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential
claim on the freely usable currencies of IMF members.
Holders of SDRs can obtain these currencies in exchange for their SDRs in two
ways:
1. Through the arrangement of voluntary exchanges between members
2. By the IMF designating members with strong external positions to
purchase SDRs from members with weak external positions.

SDR also serves as the unit of account of the IMF and some other
international organizations.

IMF has been bailing out several countries from crisis situations over a period of
time. However there has been some criticism too regarding its policies. In this
section we see the bailouts and the associated criticism.

ASIAN CRISIS
Financial crisis broke out in Asia in 1997
-large declines in currencies, stock markets, and other asset prices
Affected emerging markets outside of Asia
IMF arranged programs of economic stabilization and reform with
Indonesia, Korea, and Thailand
ACTIONS TAKEN BY IMF
Temporary tightening of monetary policy

Correct the weaknesses in the financial system

Remove features of the economy that were impediments to growth
Assist in reopening lines of external financing
Maintaining a sound fiscal policy

Asian Financial Crisis

Thailand, Indonesia, South Korea
The IMF insisted on fiscal
restraint lower spending, higher
taxes and privatisation.
Contractionary fiscal policy
caused the economic downturn
to exacerbate and the economy
plunged into recession.

IMF Sank Argentina

Fixed rate of 1 peso for 1 U.S.
dollar (overvalued) , Instructed
by IMF.

Conditions of Loans by IMF

country's exports too expensive,

and its imports artificially cheap.

Austerity Package imposed by

IMF
Reducing government borrowing

record $400 billion trade deficit.

Need for large reserves of dollars

Bankruptcies increased
confidence evaporated causing a
flight of investors

Greek Crisis

Higher taxes
lower spending
To reduce deficit spending

IMF's role arranged massive

amounts of loans $40 billion.

Higher interest rates to stabilise

the currency.

Bailout Conditionalities on Pakistan

IMF approved US$7.6 billion loan to Pakistan in 2008
Conditionalities included Eliminating all Government subsidies.
Slashing government spending
Raising Taxes
Impact
GDP Declined from 7.4 % to 4.2% in 2008-09.
Economists claim that conditionalities (economic performance
targets established as a precondition for IMF loans) retard social
stability and hence inhibit the stated goals of the IMF.

Problem Of Governance
IMF is driven by collective will of G-7 countries
It is dominated not merely by wealthy, industrialized nations,
but also by commercial and financial interest of these nations.
Capital Market Liberalization
IMF pressures countries that petition for IMF loans to open
their markets to outside capital investment.
Investors invest huge sums in a country only to pull those
investments at a moments notice, causing acute economic
crisis.
Destabilizes the economy.

 Certain policies of IMF are criticized ; however there are more examples of
cases of success than failure and clearly the existence of a global economic
body is desired.
The focus should be to make crisis resolution more country specific and
keeping in mind the various economic circumstances especially for
developing countries.
The surveillance of trade exchange rates and monitoring of related policies
is needed especially since Asian economies like that of Chinas and India are
growing strong and thus IMF plays an important role keeping a track.
With the kind of disasters and adversaries being faced by several countries, a
body to help such economies out is required and that is where IMF comes
into spot light.

http://www.imf.org/external/about/ourwork.htm
http://www.imf.org/external/np/exr/facts/sdr.htm
http://en.wikipedia.org/wiki/International_Monetary_Fund
http://ucatlas.ucsc.edu/sap/history.php
http://www.buzzle.com/articles/history-of-imf-international-monetaryfund.html
http://www.imf.org/external/np/exr/chron/chron.asp