International Monetary Fund

Official Logo for the IMF
Formation	Adopted: July 22, 1944; 80 years ago (1944-07-22) Entered into force: December 27, 1945; 78 years ago (1945-12-27)
Type	International Economic Organization
Headquarters	Washington, D.C. United States
Membership	185 Nations (Founding); 187 Nations (To Date)
Official language	English, French, and Spanish
Managing Director	Christine Lagarde
Main organ	Board of Governors
Website	http://www.imf.org

The International Monetary Fund (IMF) is an international organization that was conceived on July 22, 1944 originally with 45 members and came into existence on December 27, 1945 when 29 countries signed the agreement,^[1] with a goal to stabilize exchange rates and assist the reconstruction 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 works to improve the economies of its member countries.^[2] The IMF describes itself as “an organization of 187 countries (as of July 2010), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.” The organization's stated objectives are to promote international economic cooperation, international trade, employment, and exchange rate stability, including by making resources available to member countries to meet balance of payments needs.^[3] Its headquarters are in Washington, D.C..

The International Monetary Fund was originally created as part of the Bretton Woods system exchange agreement in 1944^[4] . During the Great Depression, countries sharply raised barriers to foreign trade in an attempt to improve their failing economies. This led to the devaluation of currencies and a decline in world trade^[5]. This breakdown in international monetary cooperation created a need for oversight. 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 to be established post World War II. The participating countries were concerned with the rebuilding of Europe and the global economic system after a devastating war^[6] .

There were two views on the role the IMF should assume as a global economic institution. John Maynard Keynes, from Britain, imagined that the IMF should be a cooperative fund which member states could draw upon to maintain economic activity and employment through periodic crises. This view suggested an IMF helping governments to act as the US government had during the New Deal in response to the great recession of the 1930s. Harry Dexter White, the US delegate, foresaw an IMF more like a bank, making sure that borrowing states could repay their debts on time ^[7] . Most of White’s plan was incorporated into the final acts adopted at Bretton Woods.

The IMF was formally organized on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The International Monetary Fund was of the key organizations of the international economic system; its design allowed for the balance of the rebuilding of international capitalism and the maximization of national economic sovereignty and human welfare, also known as embedded liberalism ^[8].

In 1947, France was the first country to borrow from the IMF^[9]. The IMF’s influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by many developing countries in Africa and more recently the dissolution in 1991 of the Soviet Union. Most countries in the Soviet Sphere of influence did not join^[10].

The Bretton Woods system prevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold^[11]. As of August 2010, Romania ($13.9 billion), Ukraine ($12.66 billion), Hungary ($11.7 billion), and Greece ($30 billion) are the largest borrowers of the fund.^[12]

The members of the IMF are 186 members of the UN (all the UN member states but seven) and Republic of Kosovo^[a].^[14][15]. All members of the IMF are also International Bank for Reconstruction and Development (IBRD) members and vice versa.^{[citation needed]} Former members are Cuba (which left in 1964)^[16] and the Republic of China which was ejected from the UN after losing support of then U.S. President Jimmy Carter, and replaced by the People's Republic of China in 1980.^[17].

In order to become a member of the IMF, a country’s application will be considered first by the IMF’s Executive Board. After its consideration, the 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. A majority of the existing members must accept the new country. 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 ^[18] .

Any country may apply to be a part of the IMF. Post-IMF formation, in the early postwar period, rules for IMF membership were left relatively loose. They were to make periodic membership payments (towards their quota), to refrain from currency restrictions unless granted IMF permission, to abide by the Code of Conduct in the IMF Articles of Agreement, and to provide national economic information. However, stricter rules were imposed on governments that applied to the IMF for funding. ^[19]

The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates secured at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement^[20] .

• Access to information on economic policies of all member countries • Opportunity to influence members’ economic policies • Access to technical assistance in banking, fiscal affairs, and exchange matters • Financial support in times of payment difficulties • Increased opportunity for trade and investment ^[21]

The IMF is led by a Managing Director, who is head of the staff and Chairman of the Executive Board. The Managing Director is assisted by a First Deputy Managing Director and three other Deputy Managing Directors. The Management team oversees the work of the staff and maintains high-level contacts with member governments, the media, non-governmental organizations, think tanks, and other institutions^[22] .

The Board of Governors consists of one governor and one alternate governor for each member country and the governor is appointed by the member country. They normally meet once a year. The Board of Governors is advised by the International Monetary and Financial Committee and the Development Committee. The International Monetary and Financial Committee has 24 members and monitors developments in global liquidity and the transfer of resources to developing countries^[23] . The Development Committee has 25 members and advises on critical development issues and on financial resources required to promote economic development in developing countries. They also advise on trade and global environmental issues^[24] . While the Board of Governors are responsible for approving quota increases, special drawing right allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the Articles of Agreement and By-Laws, they have delegated most of their powers to the IMF's Executive Board. The Board of Directors are responsible for electing or appointing executive directors^[25].

The IMF's 24-member Executive Board represents all 187 countries. Large economies, such as the United States and China, have a own member but most countries are grouped in constituencies representing 4 or more countries. The largest constituency includes 24 countries^[26].

Dates	Name	Nationality
May 6, 1946 – May 5, 1951	Camille Gutt	Belgium
August 3, 1951 – October 3, 1956	Ivar Rooth	Sweden
November 21, 1956 – May 5, 1963	Per Jacobsson	Sweden
September 1, 1963 – August 31, 1973	Pierre-Paul Schweitzer	France
September 1, 1973 – June 16, 1978	Johannes Witteveen	Netherlands
June 17, 1978 – January 15, 1987	Jacques de Larosière	France
January 16, 1987 – February 14, 2000	Michel Camdessus	France
May 1, 2000 – March 4, 2004	Horst Köhler	Germany
June 7, 2004 – October 31, 2007	Rodrigo Rato	Spain
November 1, 2007 – May 18, 2011	Dominique Strauss-Kahn	France
July 5, 2011 –	Christine Lagarde	France

In 1995 the International Monetary Fund began work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public. The International Monetary and Financial Committee (IMFC) endorsed the guidelines for the dissemination standards and they were split into two tiers: The General Data Dissemination System (GDDS) and the Special Data Dissemination Standard (SDDS).

The International Monetary Fund executive board approved the SDDS and GDDS in 1996 and 1997 respectively, and subsequent amendments were published in a revised “Guide to the General Data Dissemination System.” The system is aimed primarily at statisticians and aims to improve many aspects of statistical systems in a country. It is also part of the World Bank Millennium Development Goals and Poverty Reduction Strategic Papers.

The IMF established a system and standard to guide members in the dissemination to the public of their economic and financial data. Currently there are two such systems: GDDS and its superset SDDS, for those member countries having or seeking access to international capital markets.

The primary objective of the GDDS is to encourage IMF member countries to build a framework to improve data quality and increase statistical capacity building. This will involve the preparation of meta data describing current statistical collection practices and setting improvement plans. Upon building a framework, a country can evaluate statistical needs, set priorities in improving the timeliness, transparency, reliability and accessibility of financial and economic data.

Some countries initially used the GDDS, but later upgraded to SDDS.

Some entities that are not themselves IMF members also contribute statistical data to the systems:

•  Palestinian Authority – GDDS
•  Hong Kong – SDDS
•  Macau - GDDS^[27]
•  European Union institutions:
  • the European Central Bank for the Eurozone – SDDS
  • Eurostat for the whole EU – SDDS, thus providing data from  Cyprus (not using any DDSystem on its own) and  Malta (using only GDDS on its own)

The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution’s 187 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including covering the cost of importing basic goods and services. In return, countries are usually required to launch structural adjustment programs (SAPs), which have often been dubbed the Washington Consensus.

These reforms are thought to be beneficial to countries with fixed exchange rate policies that may engage in fiscal, monetary, and political practices that may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly overvalued or undervalued currencies run the risk of facing balance-of-payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.

Following the recent ^[timeframe?] economic crisis, the IMF has attempted to help emerging economies deal with large capital outflows.^[28]

Two criticisms from economists have been that financial aid is always bound to so-called Conditionalities, including SAPs. It is claimed that conditionalities (economic performance targets established as a precondition for IMF loans) retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programs lead to an increase in poverty in recipient countries.^[29]

The IMF sometimes advocates “austerity programmes,” cutting public spending and increasing taxes even when the economy is weak, in order to bring budgets closer to a balance, thus reducing budget deficits. Countries are often advised to lower their corporate tax rate. In Globalization and Its Discontents, Joseph E. Stiglitz, former chief economist and senior vice president at the World Bank, criticizes these policies.^[30] He argues that by converting to a more monetarist approach, the purpose of the fund is no longer valid, as it was designed to provide funds for countries to carry out Keynesian reflations, and that the IMF “was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community.”^[31]

Overseas Development Institute (ODI) research undertaken in 1980 pointed to five main criticisms of the IMF. Firstly, developed countries were seen to have a more dominant role and control over less developed countries (LDCs) primarily due to the Western bias towards a capitalist form of the world economy with professional staff being Western trained and believing in the efficacy of market-oriented policies.

Secondly, the Fund worked on the incorrect assumption that all payments disequilibria were caused domestically. The Group of 24 (G-24), on behalf of LDC members, and the United Nations Conference on Trade and Development (UNCTAD) complained that the Fund did not distinguish sufficiently between disequilibria with predominantly external as opposed to internal causes. This criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs found themselves with payments deficits due to adverse changes in their terms of trade, with the Fund prescribing stabilisation programmes similar to those suggested for deficits caused by government over-spending. Faced with long-term, externally-generated disequilibria, the Group of 24 argued that LDCs should be allowed more time to adjust their economies and that the policies needed to achieve such adjustment are different from demand-management programmes devised primarily with internally generated disequilibria in mind.

The third criticism was that the effects of Fund policies were anti-developmental. The deflationary effects of IMF programmes quickly led to losses of output and employment in economies where incomes were low and unemployment was high. Moreover, it was sometimes claimed that the burden of the deflationary effects was borne disproportionately by the poor.

Fourthly is the accusation that harsh policy conditions were self-defeating where a vicious circle developed when members refused loans due to harsh conditionality, making their economy worse and eventually taking loans as a drastic medicine.

Lastly is the point that the Fund's policies lack a clear economic rationale. Its policy foundations were theoretical and unclear due to differing opinions and departmental rivalries whilst dealing with countries with widely varying economic circumstances.

ODI conclusions were that the Fund’s very nature of promoting market-oriented economic approach attracted unavoidable criticism, as LDC governments were likely to object when in a tight corner. Yet, on the other hand, the Fund could provide a ‘scapegoat service’ where governments could take loans as a last resort, whilst blaming international bankers for any economic downfall. The ODI conceded that the fund was to some extent insensitive to political aspirations of LDCs, while its policy conditions were inflexible.^[32]

Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the Bretton Woods institutions, experienced a catastrophic economic crisis in 2001,^[33] which some believe to have been caused by IMF-induced budget restrictions—which undercut the government’s ability to sustain national infrastructure even in crucial areas such as health, education, and security—and privatization of strategically vital national resources.^[34] Others attribute the crisis to Argentina’s misdesigned fiscal federalism, which caused subnational spending to increase rapidly.^[35] The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region’s economic problems.^[36] The current—as of early 2006—trend toward moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis.

In an interview, the former Romanian Prime Minister Călin Popescu-Tăriceanu claimed that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances."^[37]

The delay in the IMF’s response to any crisis, and the fact that it tends to only respond to them rather than prevent them, has led many economists to argue for reform. In 2006 an IMF reform agenda called the Medium Term Strategy was widely endorsed by the institution’s member countries. The agenda includes changes in IMF governance to enhance the role of developing countries in the institution’s decision-making process and steps to deepen the effectiveness of its core mandate, which is known as economic surveillance or helping member countries adopt macroeconomic policies that will sustain global growth and reduce poverty. On June 15, 2007, the executive board of the IMF adopted the 2007 Decision on Bilateral Surveillance, a landmark measure that replaced a 30-year-old decision of the Fund’s member countries on how the IMF should analyze economic outcomes at the country level.

The role of the Bretton Woods institutions has been controversial since the late Cold War period, due to claims that the IMF policy makers supported military dictatorships friendly to American and European corporations and other anti-communist regimes. Critics also claim that the IMF is generally apathetic or hostile to their views of human rights, and labor rights. The controversy has helped spark the Anti-globalization movement.

Arguments in favor of the IMF say that economic stability is a precursor to democracy; however, critics highlight various examples in which democratized countries fell after receiving IMF loans.^[38]

A number of civil society organizations^[39] have criticized the IMF’s policies for their impact on people’s access to food, particularly in developing countries. In October 2008, former U.S. president Bill Clinton presented a speech to the United Nations World Food Day, which criticized the World Bank and IMF for their policies on food and agriculture:

We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was president. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture.

— Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October 16, 2008^[40]

In 2008 a study by analysts from Cambridge and Yale universities published on the open-access Public Library of Science concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%.^[41]

In 2009, a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the IMF has Undermined Public Health and the Fight Against AIDS, claimed that the IMF’s monetarist approach towards prioritizing price stability (low inflation) and fiscal restraint (low budget deficits) was unnecessarily restrictive and has prevented developing countries from being able to scale up long-term public investment as a percent of GDP in the underlying public health infrastructure. The book claimed the consequences have been chronically underfunded public health systems, leading to dilapidated health infrastructure, inadequate numbers of health personnel, and demoralizing working conditions that have fueled the “push factors” driving the brain drain of nurses migrating from poor countries to rich ones, all of which has undermined public health systems and the fight against HIV/AIDS in developing countries.^[42]

IMF policies have been repeatedly criticized for making it difficult for indebted countries to avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal, and forest-destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice repeatedly in order to pursue the protection of its rain forests, though paradoxically this need was cited in IMF argument to support that country. The IMF acknowledged this paradox in a March 2010 staff position report ^[43] which proposed the IMF Green Fund, a mechanism to issue special drawing rights directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other environmental finance.

While the response to these moves was generally positive ^[44] possibly because ecological protection and energy and infrastructure transformation are more politically neutral than pressures to change social policy. Some experts voiced concern that the IMF was not representative, and that the IMF proposals to generate only US$200 billion a year by 2020 with the SDRs as seed funds, did not go far enough to undo the general incentive to pursue destructive projects inherent in the world commodity trading and banking systems—criticisms often leveled at the World Trade Organization and large global banking institutions.

In the context of the May 2010 European banking crisis, some observers also noted that Spain and California, two troubled economies within Europe and the United States respectively, and also Germany, the primary and politically most fragile supporter of a euro currency bailout would benefit from IMF recognition of their leadership in green technology, and directly from Green Fund–generated demand for their exports, which might also improve their credit standing with international bankers.^{[citation needed]}

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF.^[who?] The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary.

Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity.^[45]

Historically the IMF’s managing director has been European and the president of the World Bank has been from the United States. However, this standard is increasingly being questioned and competition for these two posts may soon open up to include other qualified candidates from any part of the world.^[46][47] Executive directors, who confirm the managing director, are voted in by finance ministers from countries they represent. The first deputy managing director of the IMF, the second in command, has traditionally been (and is today) an American.

The IMF is for the most part controlled by the major Western powers, with voting rights on the executive board based on a quota derived from the relative size of a country in the global economy. Critics claim that the board rarely votes and passes issues contradicting the will of the U.S. or Europeans, which combined represent the largest bloc of shareholders in the Fund. By contrast, executive directors that represent emerging and developing countries have many times strongly defended the group of nations in their constituency. Alexandre Kafka, who represented several Latin American countries for 32 years as Executive Director (including 21 as the dean of the Board), is a prime example.

EU ministers agreed on the candidacy of Dominique Strauss-Kahn, Socialist Party MP and former finance minister in France,^[48] as managing director of the IMF at the Economic and Financial Affairs Council meeting in Brussels on July 10, 2007. On September 28, 2007, the International Monetary Fund’s 24 executive directors elected Dominic Strauss-Kahn as new managing director, with broad support including from the United States and the 27-nation European Union. Strauss-Kahn succeeded Spain's Rodrigo Rato, who retired on October 31, 2007.^[49]

The only other nominee was Josef Tošovský, a late candidate proposed by Russia. Strauss-Kahn said: "I am determined to pursue without delay the reforms needed for the IMF to make financial stability serve the international community, while fostering growth and employment."^[50]

In April 2011, press reports linked the former United Kingdom prime minister Gordon Brown with the role as the next managing director of the International Monetary Fund. However, these reports received mixed reception. Ed Miliband, who succeeded Brown as the Labour Party’s leader after their 2010 general election defeat, backed Brown for the role as his handling of the global economic crisis three years earlier had been “outstanding.” However, the new Conservative prime minister David Cameron spoke of the possibility that he would veto Brown from taking the position.^[51][52]

The IMF announced on May 15, 2011 that John Lipsky had become acting managing director.^[53] This was because of Strauss-Kahn's arrest in connection with charges of sexually assaulting a New York room attendant. Strauss-Kahn subsequently resigned his position on May 18.^[54]

On June 14, the IMF announced two candidates had been shortlisted for the post. These were Agustín Carstens, governor of the Mexican central bank, and Christine Lagarde, French finance minister.^[55]

Early in the contest the world's largest developing countries, the BRIC nations, issued an unusual statement declaring that the tradition of appointing a European as managing director undermined the legitimacy of the IMF and called for the appointment to be merit-based.^[47][56]

The Wall Street Journal noted that the U.S. faced a delicate dilemma in backing a candidate. On the one hand it had advocated for more emerging-market representation and governance reform, a position favoring Agustin Carstens. On the other hand, it would wish to maintain its hold on its appointment of the No. 2 spot at the fund and its selection of the head of the World Bank, a position favoring Christine Lagarde.^[57]

In the event, the U.S. came out in favour of Lagarde, along with the BRIC nations Brazil, Russia, India and China, and on June 28 Lagarde was accordingly confirmed Managing Director of the IMF for a five-year term, starting on July 5, 2011.^[58][59]

The head of the IMF's European department is António Borges of Portugal, former deputy governor of the Bank of Portugal. He was elected October 2010.^[60]

The computer systems of the IMF were breached by hackers on 12 June 2011 after an assault lasting several months. The chief information officer of the IMF stated in an internal memo that they "have no reason to believe that any personal information was sought for fraud purposes." ^[61] The US Federal Bureau of Investigation (FBI) is investigating the attacks, which officials from the IMF said was conducted by "hackers believed to be connected to a foreign government."^[62]

Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica and its economy from a critical point of view. Debtocracy, a 2011 independent Greek documentary film, also takes a look into the IMF and its tactics when it comes to providing financial help to endebted nations, taking a negative stand against the organization.

• African Monetary Fund
• Bank for International Settlements
• Group of Thirty
• World Bank

Notes:

References:

63. http://www.clarin.com/politica/gobierno/FMI-advirtio-sancion-Argentina-mostrar_0_349165280.html

• Bordo, M. D. "The Bretton Woods International Monetary System: A Historical Overview", in "A Retrospective on the Bretton Woods System, edited by M. D. Bordo and B. Eichengreen. London:1993;
• Boughton, J. M. "Silent Revolution: The International Monetary Fund 1979-1989", Washington DC, 2001.
• James, H. "International Monetary Cooperation since Bretton Woods", Oxford, 1996.
• Joicey, N. and Pickford, S. "The International Monetary Fund and Global Economic Cooperation" in Nicholas Bayne and Stephen Woolcock, "The New Economic Diplomacy: Decision-Making and Negotiation in International Relations", (Ashgate Publishing, 2011).
• Keynes, J. M. "The Collected Writings, Vol.XXVI. Activies 1941-1946: Shaping the Post-War World: Bretton Woods and Reparations", Cambridge, 1980.
• Moschella, M. Governing Risk: The IMF and Global Financial Crises (Palgrave Macmillan; 2010).
• Skidelsky, R. "John Maynard Keynes: Fighting for Britain", London, 2000.
• Truman, E. Strengthening IMF Surveillance: A Comprehensive Proposal, Policy Brief 10-29, Peterson Institute for International Economics, 2010.
• Woods, N. "The Globalizers:The IMF, the World Bank, and Their Borrowers", Ithaca, 2006

Wikimedia Commons has media related to International Monetary Fund.

• Official website
• IFIWatchNet (Web resource for analysis and commentary critical of the IMF and similar institutions)
• IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries, from the Center for Economic and Policy Research, October 2009