History of IMF (International Monetary Fund)

The early years of the 20th century witnessed the 'Great Depression' of the 1930s and the two World Wars. This resulted in the collapse of the total global economic system, thereby affecting international trade. As a result, all the countries were reeling with unemployment and plummeting living standards. Anglo-American discussions during the period of World War II reflected the demand for an organization to take care of the international monetary cooperation and promote the growth of international trade.

Bretton Woods Conference

A meeting of 730 delegates, from the 44 allied nations, was held at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States. The meeting lasted for 22 days - July 1 to July 22, 1944, and the main issue was regulation of the post-war international monetary and financial order. The main debate was between the U.S. and U.K. delegations, regarding the nature of the impending organization. The British delegation argued for a fund which could help the member nations economically, during the times of crisis, whereas the U.S. delegation wanted a bank-like institution, from where the member countries could borrow money, which would have to be repaid in time. Finally, the U.S. view was accepted.

Formation of IMF

During the Bretton Woods Conference, agreements were signed to establish the International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD or World Bank), and the General Agreement on Tariffs and Trade (GATT).

The International Monetary Fund came into existence on December 27, 1945, when 29 countries signed the treaty called Articles of Agreement. In 1946, the board of governors convened the first meeting of the IMF in Savannah, Georgia, U.S., to elect its executive directors and decide the location of the organization's permanent headquarters and to draft the bylaws. They decided to select Washington D.C. as the permanent headquarters of the IMF. The financial operations of the IMF started on March 1, 1947. The statutory goals of the IMF are to oversee exchange rates, giving financial and technical assistance to the member countries and to address global economic problems.

IMF, which started with 29 countries as its members, now has a membership of 182. Countries seeking membership of the IMF have to deposit a particular amount as subscription fee to the fund and has to comply with the stipulated conditions. The other sources of income are loan repayments from debtor countries, gold reserves and requested resources from its shareholders. This amount is used by the IMF in providing financial assistance. In 1952, IMF had effected some changes to its drawing policies. The concept of structural adjustment loans that helped the borrowing government to adjust the economic structure, was introduced, and was modified in 1956. From 1956 till date, lending operations remain to be one of the main functions of the IMF and various changes have been incorporated to its drawing policies.

Since its inception, the IMF has provided financial aid to various countries facing economic problems. The organization still adheres to its objectives and tries to bring about a positive change in the global economic scenario.