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Unit 12: International Monetary Fund

economy; world trade declined sharply, as did employment and living standards in many Notes
countries.
As World War II came to a close, the leading allied countries considered various plans to restore
order to international monetary relations, and at the Bretton Woods conference the IMF emerged.
The country representatives drew up the charter (or Articles of Agreement) of an international
institution to oversee the international monetary system and to promote both the elimination
of exchange restrictions relating to trade in goods and services, and the stability of exchange
rates.
The IMF came into existence in December 1945, when the first 29 countries signed its Articles of
Agreement.

12.1.2 The IMF's Purposes

The purposes of the International Monetary Fund are:
1. To promote international monetary cooperation through a permanent institution which
provides the machinery for consultation and collaboration on international monetary
problems.
2. To 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. To promote exchange stability, to maintain orderly exchange arrangements among
members, and to avoid competitive exchange depreciation.
4. To assist in the establishment of a multilateral system of payments in respect of current
transactions between members and in the elimination of foreign exchange restrictions,
which hamper the growth of world trade.
5. To provide confidence to members by making general resources of the Fund temporarily
available to them under adequate safeguards, thus providing them with an opportunity to
correct maladjustments in their balance of payments without resorting to measures
destructive of national or international prosperity.

Notes The IMF’s Main Business: Macroeconomic and Financial Sector Policies
The IMF focuses mainly on a country’s macroeconomic policies—that is, policies relating
to the government’s budget, the management of interest rates, money, and credit, and the
exchange rate—and financial sector policies, including the regulation and supervision of
banks and other financial institutions. In addition, the IMF pays due attention to structural
policies that affect macroeconomic performance—including labor market policies that
affect employment and wage behaviour. The IMF advises each member on how its policies
in these areas may be improved to allow the more effective pursuit of goals such as high
employment, low inflation, and sustainable economic growth—that is, growth that can be
sustained without leading to such difficulties as inflation and balance of payments
problems.

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