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Roles Of International Financial Institutions Essay

1031 words - 4 pages

The International Monetary FundThe original policies and goals created in 1944 by the International Monetary Fund (IMF) differ little from the main focus of the organization at present. The IMF was created to rebuild and stabilize the world economy after World War II. And to this day it continues in its efforts to support and stabilize the economies of its member nations.Initially the IMF was created to help ward off what was thought to be an imminent post war depression. It was founded at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire in July of 1944. The conference focused on several conditions which member nations would have to comply with. Each would agree to set a par value for its currency. This meant a fixed value would be given to each member's unit of currency to halt great fluctuations in their prices in relation to each other. An agreement was also made to apply the principle of convertible currencies. Each nation could now freely trade currencies with assurances that it could be bought and sold at a standard, set value. Member nations were also obliged to contribute to the running costs of the International Monetary Fund. The payments would be based on a certain countries' national income, international trade and international reserve holdings. Countries with larger subscriptions would be allowed more power within the organization through more eligible votes. The IMF was created as an attempt to make trade easier and more accessible, stabilizing economies after the 2nd World War.The Articles of Agreement, to create the IMF, were signed by 29 countries on December 27, 1945. The head office was to be placed in Washington D.C. It would begin financial operations on March 1, 1947. Since then, 153 more countries have joined the IMF which now totals 182 member nations. In 1971, the United States informed the IMF that it would no longer buy and sell gold to settle international transactions. Par values for currencies could not exist, and this system was abolished. Currencies have since been allowed to float in relation to each other. A system based on economic performance and where the price of a currency is allowed to rise and fall; although, the system is still very flexible and currencies can be converted easily. After the creation of the International Monetary Fund, membership grew and it remains one of the most important financial organizations in the world.Today, the International Monetary Fund has 3 areas of activity in an attempt provide assistance effectively and efficiently. Financial assistance is endowed to member nations for "balance-of-payment" problems. These problems are mainly based on falling prices of a countries' currency and a countries' inability to pay off debt. Considering that a bankrupt economy would be terrible for the world financially, financial assistance is necessity and funds are given out as credit or loans. Secondly, the IMF allots technical assistance to nations...

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