International Monetary Fund was conceived in July 1944 during the United Nations Monetary and Financial Conference. The representatives of 45 governments met in the mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with the delegates to the conference agreeing on a framework for international economic cooperation. The IMF was formally organized on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The statutory purpose of the IMF today are the same as when they were formulated in 1943.
The International Monetary Fund was created with a goal to stabilize exchange rates and assist the re-construction of the world’s international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. The IMF was important when it was first created because it helped the world to stabilize the economic system. The IMF is still important because it works to improve the economics of its member countries.
The IMF describes itself as “an organization of 186 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty”. The IMF was established to promote economic and financial co-operation among its members in order to facilitate the expansion and balanced growth of world trade. It started functioning from March 1, 1947. In June 1996, the Fund had 182 members.
Objectives of International Monetary Fund (IMF)
- To promote international monetary co-operation through a permanent institution, this provides machinery for consumption and collaboration in international monetary problems.
- To facilitate the expansion of balanced growth of international trade, and to contribute to high levels of employment, real incentive, and productive capacity.
- To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
- To foster a multilateral system of payments and transfers while eliminating exchange restrictions.
- To make financial resources available to members.
- To seek reduction of payment imbalances.
Role/ Functions of International Monetary Fund
- Regulatory Functions: In its regulatory aspect, the IMF administers a code of goods behaviour in international payments. It regulates exchange rate practices and international payments.
- Consultative Functions: As a consultant, the IMF provides a forum for international cooperation and is a source of counsel and technical assistance to its members.
- Financial Functions:
I) The voting power of members.
II) Their contribution to fund resources.
III) Their access to these resources, and their share in the allocation of SDRs.
International Monetary Fund may borrow from its industrial member countries under certain conditions as set forth in the “General Arrangement to Borrow’.