IMF (International Monetary Fund)

The International Monetary Fund, based in Washington, D.C., is an international, intergovernmental organization overseeing the global financial system.

Definition

The IMF defines itself as follows: “The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world”.

The IMF’s main goal is global economic growth and stability. It provides advice and financing to members whose economies are in trouble. It also works with developing countries in order to keep their economies stable and reduce poverty. It enjoys a relatively high amount of global influence, therefore it is often subject to criticism.

Aims of the IMF

According to Article I of the Articles of Agreement, the aims of the IMF are as follows:

promoting international monetary cooperation;
facilitating the expansion and balanced growth of international trade;
promoting exchange stability;
assisting in the establishment of a multilateral system of payments; and
making resources available (with adequate safeguards) to members experiencing balance of payment difficulties

Members of the IMF

The IMF currently has 187 members. There are two countries that ceased to be IMF member states – Cuba and the Republic of China (Taiwan). Other countries not participating in the International Monetary Fund include North Korea, Andorra, Monaco, Liechtenstein and Vatican City, among others.

All members of the IMF are also members of the International Bank for Reconstruction and Development.

History of the IMF

The IMF was established in July 1944 in Bretton Woods, New Hampshire during a United Nations conference by 44 governments seeking a platform for economic cooperation. It was formally founded December 27, 1945 when the first 29 countries signed the Articles of Agreement. After the 1940s the number of member states increased fourfold, reflecting the end of colonialism and the independence of many countries as well as the collapse of the Soviet Empire and its division into several countries.

As of August 18, 2011 the biggest borrowers of the IMF are Greece, Portugal and Ireland.

Organization of the IMF

Executive Board: Consists of 24 Executive Directors and one Managing Director. Five of the Executive Directors are appointed by the five members with the biggest voting power (United States, Japan, Germany, France and United Kingdom) and the other 19 by other member states. The Executive Board meets for day-to-day management and the Managing Director serves as its chairman. It meets a few times a week and bases its work on documents prepared by IMF management and staff.
Board of Governors: Made up of one governor and one alternate governor for each member state. They are appointed by each country and are usually a minister of finance or central bank head. The Board of Governors is the most important board of the IMF. It usually meets once a year.
Independent Evaluation Office: Conducts independent and objective analysis and evaluations. Its mission is to “Enhance the learning culture within the Fund, strengthen the Fund's external credibility, promote greater understanding of the work of the Fund, and support institutional governance and oversight.”

The International Monetary Fund employs more than 2,450 people.

Heads of the IMF

Date	Name
May 6, 1946 - May 5, 1951	Camille Gut
August 3, 1951 - October 3, 1956	Ivar Rooth
November 21, 1956 - May 5, 1963	Per Jacobsson
September 1, 1963 - August 31, 1973	Pierre-Paul Schweitzer
September 1, 1973 - June 16, 1978	H. Johannes Witteveen
June 17, 1978 to January 15, 1987	Jacques de Larosiere
January 16, 1987 - February 14, 2000	Michel Camdessus
May 1, 2000 - March 4, 2004	Mr. Horst Kohler
June 7, 2004 - October 31, 2007	Rodrigo de Rato
November 1, 2007 - May 18, 2011	Dominique Strauss-Kahn
July 5, 2011 -	Christine Lagarde

Gold and the IMF

Gold played a crucial role in the IMF until the collapse of the Bretton Woods System in 1973. Since then its role has been significantly reduced. Nonetheless, it is still viewed as an important asset today, especially taking into account the deteriorating financial stability in the world.

As of August 31, 2011 IMF gold reserves were 90.5 million ounces. On the balance sheet they are valued based on their historical cost of about $5 billion. Their market price at the end of August 2011 was $164.1 billion.

The IMF has acquired gold through four types of transactions:

First, when it was founded, 25% of the initial quota subscription and later increases in quota were paid in gold. This is the largest source of gold.
Second, all interest on credit from the IMF were usually paid in gold.
Third, one member state wanting to purchase the currency of another member could do so by selling gold. A notable example can be the sale of gold by South Africa in 1970-71.
Finally, members could use gold to repay their credit or loan.

IMF’s Gold Sales

On September 18, 2009 the Executive Board decided to sell 403.4 metric tons of gold (almost 13 million ounces), which was roughly one eighth of the IMF’s reserves. In the first phase, in August 2010, gold was sold off-market – 200 metric tons to the Reserve Bank of India, 2 metric tons to the Bank of Mauritius and 10 metric tons to the Central Bank of Sri Lanka. The remaining 191.3 metric tons were sold on-market over a longer period of time in order to avoid disruption in gold price. In September 2010 the IMF sold 10 metric tons to the Bangladesh Bank, thereby reducing the amount to be sold on the market and in December 2010 ended the sales program.