International Monetary Fund

1220 Words May 31st, 2014 5 Pages
The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with one other. This system is essential for promoting sustainable economic growth, increasing living standards, and reducing poverty. The Fund’s mandate has recently been clarified and updated to cover the full range of macroeconomic and financial sector issues that bear on global stability.
The IMF was established at the Bretton Woods conference in 1944 to provide short term financial assistance to countries experiencing problems with their trade deficit or other Balance of Payments issues, so they could maintain stability in exchange
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The IMF Board of Governors is composed of representatives of the 185 member countries. The Executive Board has 24 members that usually represent a coalition of like-minded countries in one representative. Lending decisions are made with consensus in a simple majority vote. Structural decisions require 60% majority where, G-5 countries collectively can nearly veto since they currently have 38% vote. Fundamental structural decisions e.g. changes in voting power require 85% majority; US has enough voting power to veto (>15%).
Economic nationalists would say that the IMF voting structure enables powerful countries to promote their own national interests. Structuralists would say rich capitalist countries have the most voting power which is to the detriment of the developing countries. Embedded liberals would say that the type of conditions IMF imposes and the aid it provides helps troubled countries get back on track, stimulates their economy and gets the trade balance in equilibrium.
In December 1997 the IMF announced a $57 billion loan package to bail South Korea out of its financial crisis accompanied by strict conditions. Some short term conditions were to reduce government spending, increase taxes and raise interest rates. Longer term structural reforms were also mandated: liberalizing foreign investment policies, opening domestic financial markets, implementing western lending standards, closing insolvent banks, reforming labor laws and reducing import
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