Among the other “gifts” of the Bretton Woods system, the International Monetary Fund, which plays a significant role in the modern world, was founded in 1944. The attitude to this organization among the participating countries and world analysts is very ambiguous, and in order to understand what place it occupies in the financial system of the world, you should carefully study it.
Goals and Functions of the International Monetary Fund
Created during the period of active hostilities on the fields of the Second World War, the International Monetary Fund He was called to restore and strengthen the economies of the countries after its completion. A huge contribution to the creation of this organization was made by the British economist J.M. Keynes and US spokesman G.D. White, who developed the basis for the prevention of economic crises arising from the use of devaluations.
Today, the International Monetary Fund is a specialized financial and credit organization, of which 184 countries are members. In order to understand why this fund was created, it is enough to list its main goals:
- regulation of balanced economic growth;
- maintaining a stable exchange rate ;
- prevention of so-called “Competitive devaluation”;
- providing monetary and consulting assistance in resolving the problems of the balance of payments of a particular state.
To implement their World Monetary Fund, the actual carries out the following actions:
- monitors the financial activities of member states;
- on the basis of the received data, develops recommendations on eliminating deficiencies and preventing violations in the existing financial management system;
- if necessary, offers technical assistance through the training of highly qualified personnel in the field of economic management;
- provides loans.
The latter is by far the most important function, because together with the receipt of funds, the debtor country will be obliged to implement all recommendations for optimizing the state budget.
International Monetary Fund - Structure and Financing
For an organization that includes most of the countries of the world, the presence of a governance structure is completely characteristic. In it, a special dominant place is taken by the Board of Governors. The purpose of his activity is to develop tactics for resolving emerging or existing problems. But the direct implementation of the governing decisions adopted by the Council lies with the Executive Committee. This body consists of 24 members, eight of which are permanent, and 16 operate on a rotational basis every two years.
The World Monetary Fund also has two major committees - the International Monetary and Financial (IMFC) and the Development Committee. The first considers issues related only to the state of the foreign exchange market (see goals 2 and 3), and the second directs its efforts to help developing countries. Moreover, the latter, it is worth noting, is a joint body with another brainchild of the Bretton Woods system - the International Bank.
To finance the activities of the organization in question, a special quota system was created, based on special drawing rights of the so-called an international reserve asset that provided a break from the gold standard. The second source of financing activities was loans obtained under General loan agreements and New loan agreements. All funds that the International Monetary Fund receives are cash loans received from state-owned banks of strictly specified countries and Swiss financial institutions. These sources of financing allow you to effectively redistribute cash flows, thereby ensuring the fulfillment of the goals of this financial organization.
Today, the International Monetary Fund is a powerful financial institution, capable of effectively influencing the economic situation in almost any country that is a member of it through its bodies and the powers granted to it.