International Monetary Fund

The International Monetary Fund (IMF) is an international financial organization based in the United States in Washington, DC. It emerged from the 1944 conference that was held at Bretton Woods, New Hampshire, and attended by delegates from forty-four countries. The first twenty-nine countries to sign the IMF's Articles of Agreement did so in December 1945. The principal aims of the IMF included international monetary cooperation, global economic growth, stable exchange rates, and assistance to countries with balance-of-payments deficits.

The Bretton Woods conference established a new institutional framework for the international economy at the end of the World War II. It led to the formation of the World Bank as well as the IMF. Today the World Bank and the IMF remain important—and very controversial—parts of a loose system of international economic governance.

Ultimately the IMF is controlled by its member states. The Board of Governors is the chief policy-making body of the IMF, and it consists of one representative from each of the 184 member states. The Executive Board handles the day-to-day operations of the IMF, and it consists of twenty-four Executive Directors. The following countries are represented by one Executive Director each: China, France, Germany, Japan, Russia, Saudi Arabia, United Kingdom, and United States. The other sixteen directors represent regional groups of the remaining member states.

The IMF is financed by quota subscriptions from each member state. The quota amount is based on the size of the country's economy. Countries pay twenty-five percent of their quota in Special Drawing Rights (SDR) or a major currency: SDR is a unit of account within the IMF, and its value is set daily by an adjusted average of four currencies: the U.S. dollar, the euro, the Japanese yen, and the British pound sterling. Quotas then determine both the amounts that individual countries can borrow from the IMF and their voting rights within the IMF. Hence the voting rights of a member state loosely correspond to its economic strength. The United States—the world's largest economic power—has the largest quota and so the highest percentage of the votes—17.5 percent of the total amount. Critics argue that this voting structure gives wealthy states too much control.

Member states with balance-of-payments deficits can borrow from the IMF under a variety of loan programs. One program is a standby arrangement that provides a loan to deal with a short-term balance-of-payments problem. Another program is an extended fund facility for medium-term relief. The IMF also provides poverty reduction and growth facility for the poorest members. It has a supplemental reserve facility for short-term deficits caused by a lack of market confidence. In addition, it offers emergency assistance for balance-of-payments problems caused by natural disasters or military conflict.