International Monetary Fund
I -INTRODUCTION
International Monetary Fund (IMF), international economic organization whose purpose is to promote international monetary cooperation to facilitate the expansion of international trade. The IMF operates as a United Nations specialized agency and is a permanent forum for consideration of issues of international payments, in which member nations are encouraged to maintain an orderly pattern of exchange rates and to avoid restrictive exchange practices. The IMF was established, along with the International Bank for Reconstruction and Development, at the UN Monetary and Financial Conference held in 1944 at Bretton Woods, New Hampshire. The IMF began operations in 1947. Membership is open to all independent nations and included 183 countries in 2001.
II -ACTIVITIES
Members undertake to keep the IMF informed about economic and financial policies that impinge on the exchange value of their national currencies so that other members can make appropriate policy decisions. On joining the fund, each member is assigned a quota in special drawing rights (SDRs), the fund's unit of account, whose value is based on the weighted average value of five major currencies. (In October 2001 the SDR was worth about U.S. $1.29.) Each member's quota is an amount corresponding to its relative position in the world economy. As the world's leading economy, the United States has the largest quota. In 2001 the U.S. quota was about SDR 37.1 billion. The smallest quota, that of the Republic of Palau, was about SDR 3.1 million. The amount of the quota subscription determines how large a vote a member will have in IMF deliberations, how much foreign exchange it may withdraw from the fund, and how many SDRs it will receive in periodic allocations.
Members who have temporary balance-of-payments difficulties may apply to the fund for needed foreign currency from its pool of resources, to which all members have contributed through payment of their quota subscriptions. The member may use this foreign exchange for a certain time (up to about five years) to extricate itself from its balance-of-payments problem, after which the currency is to be returned to the IMF's pool of resources. The borrower pays a below-market rate of interest for the IMF resources it uses; the member whose currency is used receives almost all of these interest payments; the remainder goes to the fund for operating expenses.
III -ORGANIZATION
The board of governors, made up of leading monetary officials from each of the member nations, is the highest authority in the IMF. Day-to-day operations are the responsibility of the 24-member executive board, which represents member nations individually (for larger countries) or in groups. The managing director serves as chairperson of the executive board. The IMF has its main headquarters in Washington, D.C.