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International Monetary Fund Essay

1942 words - 8 pages

International Monetary Fund

Intro:

In July 1944, the United Nations Monetary and Financial Conference met
in Bretton Woods, New Hampshire, to find a way to rebuild and
stabilize the world economy that had been severely devastated by World
War II. One result of the conference was the founding of the
International Monetary Fund (IMF) through the signing of its Articles
of Agreement by 29 countries.

The stated purposes of the IMF were to create international monetary
cooperation, to stabilize currency exchange rates, to facilitate the
expansion and balanced growth of international trade, and to make the
IMF's general resources temporarily available to its members
experiencing balance of payments difficulties under adequate
safeguards. There were 143 member nations in the IMF in the early
1980's. Most of the Communist countries, including the Soviet Union,
did not join; and, of the Western nations, Switzerland has not
participated (Compton's Interactive Encyclopedia, 1996). However,
there are now 184 members (www.imf.org).

On joining the IMF, each member country contributes a certain sum of
money which is known as a quota subscription, as a sort of credit
union deposit (www.imf.org). The IMF appraises its members' exchange
rate policies within the framework of a comprehensive analysis of the
general economic situation and the policy strategy of each member.
?The IMF fulfills its surveillance responsibilities through: annual
bilateral Article IV consultations with individual countries;
multilateral surveillance twice a year in the context of its World
Economic Outlook (WEO) exercise; and precautionary arrangements,
enhanced surveillance, and program monitoring, which provide a member
with close monitoring from the IMF in the absence of the use of IMF
resources? (www.imf.org).

The IMF makes its financial resources available to member countries
through a variety of financial windows. Except for the Enhanced
Structural Adjustment Facility (ESAF) drawings, which are loans of
other members? currencies, members benefit themselves of the IMF?s
financial resources by drawing on other members' currencies, or SDRs,
with an equivalent amount of their own currencies. The IMF levies
charges on these drawings and requires that members repay their own
currencies from the IMF over a specified time. There is no debate as
to whether there should be a global organization to deal with these
sorts of things, but is the IMF the appropriate body to patrol these
areas? More importantly, does the IMF have the right to institute
policies and unleash its bureaucratic entities upon these sovereign
states?

Pros:

Though, it is important to note that the IMF?s main goal and purpose
is to create a simple international trade by the exchange of foreign
currencies. Currencies have a value in terms of other currencies and
what others are willing to pay for it. The IMF has effectively
eliminated the restrictions on buying...

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