Important Details you should know about International Monetary Fund (IMF)

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The International Monetary Fund (IMF), also called as the Fund, is an international institution established by 44 nations under the Bretton Woods Agreement (you can check details of it below this post)) of July 1944. The IMF was established to promote economic and financial cooperation among its members in order to facilitate the expansion and balanced growth of world trade. It started functioning from 1st March 1947 (formally formed on 27th December 1945). At present, 188 nations are members of the IMF. South Sudan became the newest member on 18th April 2012.

Objectives of IMF

1. Promotion of International Monetary co-operation.
2. Facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
3. Promotion of exchange rate stability and avoidance of competitive currency depreciation.
4. Expansion of international trade by removal of all exchange controls and restrictions and provide for multilateral convertibility of expediencies.
5. To help member countries with fund during the periods of temporary difficulties in respect of balance payments. 

What is Bretton Woods Agreement ?

This is an agreement which was signed at the Bretton Woods Conference (formally known as the United Nations Monetary and Financial Conference), a gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States, to regulate the international monetary and financial order after the conclusion of World War II. This agreement leads to the establishment of IMF (International Monetary Fund) and IBRD (International Bank for Reconstruction and Development).

During the World War II, almost all the countries involved in the war directly or indirectly introduced and practiced a rigorous system of exchange controls.

With the establishment of the IMF under the Bretton Woods Agreement after world war II, exchange rates between countries were set or pegged in terms of gold or the US dollar at $ 35 per ounce of gold. This related to a fixed exchange within a band of one percent. But this was only allowed when the country could convince the IMF authorities that there was a fundamental disequilibrium in its balance of payments. This system is known as Bretton Woods System.

The Bretton Woods system collapsed in 1971 when US dollar was made as in-convertible into gold at the Federal Reserve System.

The Jamaica Agreement of January 1976 formalized the regime of floating exchange rates under the auspices of the IMF. A number of factors forced the majority of member countries of the IMF to float their currencies.

By the Second Amendment of the IMF charter in 1978, the member countries are not expected to maintain and establish par values with gold or dollar. The system of floating exchange rates is not one of free flexible exchange rates but managed floating.

Fast Facts on the IMF

• Head Quarters : Washington, D.C., United States
• Managing Director : Christine Lagarde
• Current Membership : 188 Countries
• Founding Countries - 29
• Member Countries - 188
• Newest Member : South Sudan on 18th April 2012
• Staff - 2,400 (approx)

That's all for now friends. In our next post we shall discuss about IMF Quotas, Functions and the relation between India and IMF. Happy Reading :)

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