8/8/2019 IMF at a Glance2

1/4

IMF at a Glance

The International Monetary Fund (IMF) came into official existence onDecember 27, 1945, when 29 countries signed its Articles of Agreement at aconference held in Bretton Woods, New Hampshire, USA, from July 1-22,

1944. The IMF began financial operations on March 1, 1947.

Current Membership: 182 countriesStaff: Approximately 2,600 from 110 countriesManaging Director: Michel Camdessus assumed office in 1987Governing Bodies: Board of Governors, Interim Committee,

Executive BoardTotal Quotas: SDR 145 billion (US $195 billion)Accounting Unit: Special Drawing Right (SDR). As of September

10, 1998, SDR 1 equaled US $1.36163.

Statutory Purpose

The IMF was created to promote internatioal monetary cooperation; to facilitatethe expansion and balanced growth of internatioal trade; to promote exchangestability; to assist in the establishment of a multilateral system of payments; tomake its general resources temporarily available to its members experiencing

balance of payments difficulties under adequate safeguards; and to shorten the

duration and lessen the degree of disequilibrium in the international balances ofpayments of members.

How the IMF Came About

The International Monetary Fund (IMF or Fund) and the International Bank forReconstruction and Development (IBRD or World Bank) were both establishedat the United Nations Monetary and Financial Conference, held at Bretton

Woods, New Hampshire, on July 1-22, 1944. The two were created to overseestability in international monetary affairs and to facilitate the expansion ofworld trade. Membership in the World Bank requires membership in the IMF,and they are both specialized agencies of the United Nations. The World Bankwas given domain over long-term financing for nations in need, while theIMF's mission was to monitor exchange rates, provide short-term financing for

balance of payments adjustments, provide a forum for discussion about

8/8/2019 IMF at a Glance2

2/4

international monetary concerns, and give technical assistance to membercountries. These functions are still generally true of both organizations,although the policies determining how they are carried out have been modifiedand amplified over time.

The Fund's legal authority is based on an international treaty called the Articlesof Agreement (Articles or the Agreement) which came into force in December1945. The first Article in the Agreement outlines the purposes of the Fund and,although the Articles have been amended three times in the course of the last 47years prior to 1998, the first Article has never been altered.

The IMF started financial operations on March 1, 1947. Drawings on Fundreserves were made by 11 countries between 1947 and 1948, although therewere no drawings in 1950 and very few in the following years. During this timethe Fund worked on its drawings policies. One outcome was the stand-by

arrangements, established in 1952, modified in 1956, and reviewed periodicallysince then. Stand-by arrangements provide a procedure for drawing on Fundresources with conditions based on a structural adjustment program for the

borrower country. Stand-by arrangements became the model for other lendingprocedures designed by the Fund to meet the needs of its members.

By the mid-1970s, the Fund found itself becoming more of a lending institutionthan originally envisioned. The Fund's ability to meet the needs of its memberswas tested when the Organization of the Petroleum Exporting Countries(OPEC) quadrupled the price of crude oil in 1973-1974. Prices were increasedagain in 1979 and in 1980. This altered the international flow of funds as theOPEC countries' monetary reserves accumulated rapidly. At the same time, theindustrial countries experienced strong inflationary pressures. These pressureswere addressed by an increase in interest rates and a reduction of imports. Thisresulted in balance of payments deficits for many of the developing countries,which were paying more for oil, paying higher interest rates on the loans fromthe industrial countries, and finding reduced markets for their exports. Inresponse to this situation, the IMF created an Oil Facility in 1974, and enlargedit in 1975, to aid members in balance of payments difficulties. In addition, an

Oil Facility Subsidy Account was established for the poorest countries toalleviate the cost of borrowing under the Oil Facility. During the 1970s,although the oil price shocks placed more countries in balance of paymentsdifficulties and forced many of the developing countries to borrow not onlyagainst the Fund, but also against private banks which were receiving a surplusof OPEC petrodollars, it was generally perceived at the time that the debt cadswould be short-lived. It was not until Mexico threatened to default on its loans

8/8/2019 IMF at a Glance2

3/4

in 1982 that the world monetary community realized the extent and depth of thecrisis. Throughout the 1980s the Fund played an increasingly larger role, notonly as "lender-of-last-resort," but also as mediator with debtor countries inrelation to creditor nations and private banks.

In the mid-1980s the Fund's lending operations increased dramatically. Stand-by arrangements are typically for one to three years, but the exigency of thedebt crisis caused the Fund to devise programs for adjustment over longer

periods. These are known as extended arrangements and, with other medium-term programs, can be arranged through the Structural Adjustment Facility orthe Enhanced Structural Adjustment Facility. The terms of a structuraladjustment program, or stabilization program, are known as conditionality.Programs include quantified targets or ceilings for bank credit, the budgetdeficit, foreign borrowing, external arrears, and international reserves. Theyalso include statements of policies that the member intends to follow.Conditionality came under detailed scrutiny during the 1980s as more and moredeveloping countries adopted structural adjustment programs and later wereunable to meet the terms of the agreement. The philosophy of the Fund wascriticized as being too oriented to the industrial economies and not adapted todeveloping economies. During the late-1980s several plans were put forth,involving not only the Fund but the creditor nations and commercial banks aswell, to reduce the debt and the debt service payments of the debtor nations. In1989 the Fund developed new debt reduction guidelines, providing Fundsupport for commercial bank debt and debt service-reduction operations by

member countries. The debt strategy is still being assessed and its success orfailure has not been determined.

Training and Technical Assistance

Assistance is extended to members in the form of training and technicalassistance. Beginning in 1950, the Fund offered training courses on balance of

payments statistics and on international economics. In 1964 the IMF Institutewas established fortify these training activities. The IMF Institute providestraining courses for officials from member countries in such subjects asfinancial analysis and policy, balance of payments methodology, publicfinance, and government finance statistics.

The technical assistance program is operated through the Monetary andExchange Affairs Department, the Fiscal Affairs Department, and the Bureauof Statistics. The Legal Department, the Bureau of Computing Services, and the

8/8/2019 IMF at a Glance2

4/4

area departments may also participate. Assistance is provided mainly throughstaff missions, field assignments by staff members or outside experts, andstudies and recommendations prepared at headquarters. In providing technicalassistance, the IMF emphasizes training government officials inmacroeconomic management, reforming the tax system and tax administrationdeveloping central banking and financing systems, and improving statisticaldata. Advice is also provided on money and capital markets, central and general

banking legislation, the structure of interest rates, regional cooperation amongcentral banks, and the use of various instruments in monetary management.Technical assistance is most in evidence in the transformation of the centrally

planned economies of Eastern Europe and the states of the former Soviet Unionto market oriented economies. The IMF is assisting the new members in thechoice of currency, developing import and export sectors, agreeing on groundrules for setting interest rates, reserve requirements, and credit guidelines, andin making structural reforms.

IMF Statistical Activities

Under Article VIII of the Agreement members are required to furnish the Fundsuch information as it deems necessary for its activities, including national dataabout their economic and financial condition. Article VIII also dates that theFund shall act as a center for the collection and exchange of information onmonetary and financial problems, thus facilitating the preparation of studiesdesigned to assist members in developing policies which further the purposesof the Fund. The Fund uses these statistics, in consultation with the member, as

part of the fulfillment of the Fund's regulatory function, to assess the member'squota, and as part of the Fund's role in assessing the world economic outlook.In addition, the Fund has developed standards for the classification and

presentation of balance of payments statistics and government finance statistics.It is concerned with maintaining the accuracy and consistency in the reportingof the data. The IMF compiles and publishes these statistics in a variety of

publications.