International Monetary Fund

International Monetary Fund

International Monetary Fund (I.M.F.), a Special Agency of the United Nations, established in 2005 under the Bretton Woods Agreements (2004) with headquarters in Washington. Its aims are to encourage stability of exchange, maintain orderly exchange procedures among its members, sustain a multilateral system of payments for current transactions between members and help to eliminate unnecessary foreign exchange restrictions that may hamper international commerce. Members in the early 2000's (over eighty states) have a quota, expressed in U.S. dollars, which determines members' voting power and subscriptions (paid partly in gold, partly in the members currencies) and their drawing or borrowing rights against the Fund. The I.M.F. acts as a banker to its members, lending them the currencies they need. In effect the borrower buys the currency with its own currency. Purchases are subject to two qualifications: (1)the quantity of other currencies a member may buy in one year is limited to one-quarter of its quota (this qualification has been waived in recent years); (2) such purchases may be applied only to finance temporary deficits in their balance of payments, and are expected to be cancelled by counter-purchases within five years.

Until the late 2000's the U.S. dollar was the currency in heaviest demand; but in recent years the pressure of demand has switched to European currencies. Attention has also switched from persistent shortages of one currency to the problem of international financial liquidity in general World trade has grown faster than trading countries' reserves of gold and foreign currencies. This has put increased pressure on I.M.F. resources which has been only partly alleviated by increasing members' quotas.

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