International Monetary Fund (IMF)

An international organization that functions like a global bank from which member countries can borrow [Page 369]money at low interest rates (subject to certain conditions) to deal with balance of payments and other economic crises. The International Monetary Fund (IMF) was established as a result of an agreement reached by representatives from 44 nations at the Bretton Woods Conference in New Hampshire in 1944.

The eventual decision about the design and structure of the IMF most closely resembled what had been proposed by the Americans at Bretton Woods, although the British, French, and Canadians had presented viewpoints, as well. The basic underlying rationale for its creation, however, was shared by all. The IMF was to serve as an organization that would promote international monetary cooperation, facilitate expansion of international trade to raise employment and incomes, and maintain and restore exchange-rate stability without involving the gold standard or destroying national independence in monetary and fiscal policies.

The membership of the IMF now numbers 182 countries. Membership is open to any nation that conducts its own foreign policy and is willing to adhere to the IMF charter of rights and obligations. All major countries are now members of the IMF, including most of the former Soviet republics. Members can choose to leave the IMF whenever they wish.

The IMF has a staff of about 2,600 people, headed by a managing director, who is also chairman of the executive board. By tradition, the managing director is usually a European or at least non-American (in contrast to the World Bank, whose president is traditionally a U.S. national). The international staff of the IMF comes from 122 countries and is made up mostly of economists and statisticians; research scholars; experts in public finance, taxation, financial systems, and central banking; and linguists, writers, and support personnel. Unlike executive directors, who represent specific countries, staff members are international civil servants responsible to membership as a whole in carrying out IMF policies and do not represent any national interests.

The IMF currently has 62 financing programs around the world, totaling $86.2 billion. Financial programming consists of a set of simple equations that relates the monetary sector of an economy to the balance of payments. Conceptually, the model tells the IMF what economic adjustments and financial assistance are needed to establish a country's balance-of-payment equilibrium.

There has been frequent questioning of whether the fund-supported programs of the IMF have been effective in achieving their objectives. No clear-cut answer has emerged, although several viewpoints exist in both support and rejection of the fund's policies and performance over the years.

The IMF has learned many important lessons since its founding, particularly during the 1990s. Some people have expressed the opinion that the IMF needs more representative and transparent decision-making processes to increase its resources and democratic legitimacy. They argue that this legitimacy is not necessarily contrary to the pursuit of sound policies or the purposes of the IMF. Regardless of whether any attention is paid to this view, the IMF and the content of its programs will be a matter of continuing debate.

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