International Monetary Fund

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The International Monetary Fund (IMF) or in English: International Monetary Fund; IMF, is an international financial organization headquartered in Washington D.C. (United States). It was born in 1944 in the Bretton Woods agreements, mainly from the ideas of Harry Dexter White and John Maynard Keynes, in a meeting of 730 delegates from 44 World War II allied countries, officially entering into force on December 27, 1945. with 29 member countries with the aim of rebuilding the international monetary system. After 1976 and the disappearance of the fixed exchange system, the IMF takes a leading role in granting credits to States in exchange for them implementing its recommendations. In 2010, during the 14th general review of quotas the financial funds available from the IMF stood at 755.7 billion U.S. dollars.

Through the fund and other activities such as the collection of statistics and data, monitoring of the economic activities of member countries, and the demand for concrete policies, the IMF claims to work to improve the economy of its member countries. The objectives proclaimed by the organization are: promoting international monetary cooperation, international trade, reducing unemployment, achieving sustainable exchange rates, achieving economic growth, and granting reasonable resources to member countries in economic difficulties. The IMF is financed with two great tools: installments and loan. Quotas are contributions made by member countries to the common fund of the organization. Larger economies make proportionally larger contributions than smaller economies. In addition, quota obligations increase periodically as a way of increasing the resources available to the IMF in the form of special drawing rights.

Creation

The second headquarters of the International Monetary Fund (IMF).

The IMF was created in July 1944 during the Bretton Woods conference of agreements in order to guarantee the stability of the International Monetary System after World War II. It officially came into existence on December 27, 1945, when the first 29 countries ratified the corresponding convention.

The new economic order proposed by the US representative and, as it turned out later, communist and spy for the Soviet Union, Harry Dexter White, rested on three rules:

Each State should define its currency in relation to gold or the US dollar.
The value of the currency should fluctuate only in a margin of 1 % relative to its official parity.
Each State was responsible for defending this parity by ensuring the balance of payments.

Therefore, the role of the international monetary system is to promote monetary orthodoxy so that a favorable context for the development of world trade is maintained, after granting loans to some countries in difficulties in the context of reconstruction after the Second World War World. According to its statutes, its objectives are “to promote international monetary cooperation; facilitate the expansion and balanced growth of international trade; promote exchange rate stability; help establish a multilateral payment system for current transactions between member countries and eliminate exchange restrictions that hinder the expansion of world trade; instill confidence in the member countries by making the resources of the Fund available to them temporarily and with adequate guarantees, thus giving them the opportunity to correct the imbalances in their balance of payments without resorting to measures that are harmful to national or international prosperity, to shorten the duration and reduce the imbalance of their balance of payments".

The IMF is more or less complementary to other large economic institutions of the time such as the World Bank, the IBRD (International Bank for Reconstruction and Development), created at the same time, and the GATT General Agreement on Tariffs signed shortly after after.

During the Bretton Woods negotiations, the British representative, the economist John Maynard Keynes, suggested the creation of a more important institution, a true World Central Bank that would issue an international currency: the “bancor”. This proposal was rejected because it would have meant for the United States a loss of influence with the dollar.

Granting of financial resources

The new economic order proposed by the US representative and, as it turned out later, communist and spy for the Soviet Union, Harry Dexter White, rested on three rules:

Each State should define its currency in relation to gold or the US dollar.
The value of the currency should fluctuate only in a margin of 1 % relative to its official parity.
Each State was responsible for defending this parity by ensuring the balance of payments.

Granting of financial resources

Temporarily grants financial resources to members experiencing balance of payments problems.

A member country has automatic access to 25% of its quota if it experiences balance of payments difficulties. If you need more funds, you have to negotiate a stabilization plan. It is hoped that any member who receives a loan pays it back as soon as possible so as not to limit access to credit to other countries. Before this can happen, the credit-applying country must indicate how it intends to solve its balance of payments problems so that it can repay the money in a repayment period of three to five years, although sometimes it is as long as fifteen years.

IMF Financial Services

Stand-By Arrangements form the core of IMF credit policy. A Stand-By Arrangement provides security to the member country that it will be able to draw up to a certain amount, usually over a period of 12 to 18 months, to deal with a short-term balance of payments problem.

Extended Facility from the IMF. IMF support to a member under the Extended IMF Facility provides the assurance that the member will be able to draw up to a certain amount, typically over a period of three to four years, to help solve structural economic problems that are causing serious deficiencies in the balance of payments.

Facility for Growth and Poverty Reduction (replaced the Enhanced Structural Adjustment Facility in November 1999). A service that charges low interest rates to help poorer member countries facing persistent balance of payments problems (see “New Approach to Poverty Reduction” on page 46). The cost paid by the borrowers is subsidized by the proceeds obtained from the sale of gold owned by the IMF, plus loans and donations that member countries grant to the IMF for that purpose.

Service of complementation of reservations. It offers member countries additional short-term financing if they experience exceptional balance of payments difficulties due to a sudden and threatening loss of market confidence leading to an outflow of capital. The interest rate for loans under this facility carries a premium over the usual IMF credit level.

Emergency assistance. Window opened in 1962 to help member countries overcome balance of payments problems due to sudden and unpredictable natural catastrophes; The service was extended in 1995 to take into account certain situations arising in a member country after a conflict that has altered its institutional and administrative capacity.

IMF Managing Directors

Historically, the managing director of the IMF has always been a European and the president of the World Bank has always been an American. However, this tradition is increasingly challenged, and the competition for these two positions can be opened to include other qualified candidates from anywhere in the world. The executive directors, who make up the managing director, are chosen by the finance ministers of the countries they represent. The IMF's first Deputy Managing Director, the second in command, has traditionally been (and is today) an American.

Kristalina Gueorguieva, current director of the International Monetary Fund

Dates	Name	Nationality
6 May 1946 - 5 May 1951	Camille Gutt	Belgium
3 August 1951 - 3 October 1956	Ivar Rooth	Sweden
21 November 1956 - 5 May 1963	Per Jacobsson	Sweden
1 September 1963 - 31 August 1973	Pierre-Paul Schweitzer	France
1 September 1973 - 16 June 1978	Johannes Witteveen	Netherlands
17 June 1978 - 15 February 1987	Jacques de Larosière	France
16 February 1987 - 14 February 2000	Michel Camdessus	France
1 May 2000 - 4 March 2004	Horst Köhler	Germany
4 March 2004 - 7 June 2004 (intern)	Anne Osborn Krueger	United States
7 June 2004 - 31 October 2007	Rodrigo Rato	Spain
1 November 2007 - 18 May 2011	Dominique Strauss-Kahn	France
18 May 2011 - 5 July 2011 (internal)	John Lipsky	United States
July 5, 2011 - September 12, 2019	Christine Lagarde	France
July 2, 2019 - October 1, 2019 (internal)	David Lipton	United States
1 October 2019 - current	Kristalina Gueorguieva	BulgariaBulgaria

Executive Directors and Voting Power

Country groups elect an executive director to vote for them. 24 directors in total.

Each country has a certain voting power within the organization, depending on the size of its economy (GDP), current account, international reserves and other economic variables. Decisions are made by a supermajority of 70%, although some larger decisions (16 out of 40) are made by a supermajority of 85%. Since the United States owns 16.74%, this system gives it de facto veto power over the decisions made by the financial body, since its vote against or abstention prevents the adoption of important decisions that require 85% of majority.

In total, there are 24 executive directors chosen from among the Fund's member countries. Only the United States, Japan, Germany, France, and the United Kingdom can elect a director without help from any other country. China, Saudi Arabia and Russia de facto elect one director each. The other 16 directors are elected by blocks of countries. Each director has a voting right that can go from 16.74% (United States) to 1.34% (of 24 countries in Africa combined).

Percentage of vote per country
Group	Percentage of voting (%)	Countries
1	5.13	Austria Belgium Belarus Czech Republic Hungary Kazakhstan Luxembourg Slovakia Slovenia Turkey
2	4.77	Armenia Bosnia and Herzegovina Bulgaria Croatia CyprusGeorgia Israel Northern Macedonia Moldova Montenegro Netherlands Romania Ukraine
3	4.44	Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Spain Venezuela
4	4.10	Albania Greece Italy Malta Portugal San Marino East Timor
5	3.65	China
6	3.63	Antigua and Barbuda Bahamas Barbados Belize Canada Dominica Grenada Ireland Jamaica San Cristóbal y Nieves Saint Lucia Saint Vincent and the Grenadines
7	3.52	Brunéi Cambodia Fiyi Philippines Indonesia Laos Malaysia Burma Nepal Singapore Thailand Tonga Vietnam
8	3.44	Australia South Korea Marshall Islands Solomon Islands Kiribati Micronesia Mongolia New Zealand Palaes Papua Samoa Seychelles Vanuatu
9	3.43	Denmark Estonia Finland Iceland Latvia Lithuania Norway Sweden
10	3.19	Baréin EAU Egypt Iraq Jordan Kuwait Lebanon Libya Maldives Oman Qatar Syria Yemen
11	3.16	Saudi Arabia
12	3.01	Angola Botswana Burundi Eritrea Ethiopia Gambia Kenya Lesoto Liberia Malaui Mozambique Namibia Nigeria Sierra Leone South Africa Sudan Swaziland Tanzania Uganda Zambia
13	2.78	Azerbaijan Kyrgyzstan Poland Serbia Switzerland Tajikistan Turkmenistan Uzbekistan
14	2.69	Russia
15	2.42	Afghanistan Algeria Ghana Iran Morocco Pakistan Tunisia
16	2.42	Brazil Colombia Ecuador Guyana Haiti Panama Dominican Republic Suriname Trinidad and Tobago
17	2.35	Bangladés Bhutan India Sri Lanka
18	1.95	Argentina Bolivia Chile Paraguay Peru Uruguay
19	1.34	Benin Burkina Faso Cameroon Cape Verde Chad Comoros Ivory Coast Djibouti Gabon Guinea Guinea-Bissau Equatorial Guinea Madagascar Mali Mauritius Niger Central African Republic Republic of the Congo Democratic Republic of the Congo Rwanda Sao Tome and Principe Senegal Togo
20	4.85	United Kingdom
21	4.85	France
22	5.87	Germany
23	6.01	Japan
24	16.74	United States

Resurgence

At the 2009 G20 summit, the IMF quadrupled its financial capacity to $1 trillion. In addition, he was tasked with overseeing whether countries are sufficiently stimulating their economies and reforming their regulatory systems, as well as warning about financial problems. Nearly 500,000 million dollars will be allocated to bail out troubled economies and the agency has a line of credit that does not require debtors to carry out unpopular economic reforms, such as reducing fiscal spending, although only some countries qualify for that type of credit. For other countries, the fund will force that fiscal expenses be reduced or interest rates raised, although they will try to protect the programs for the poorest.

In March 2008 the voting shares of developing countries in the IMF grew by 5.4 percentage points. For Brazil that means 1.7%. China's share is 3.8%. These marginal increases have yet to take effect. During the IMF meeting in April, countries charged it with the mission of combating the current global recession and preventing new recessions from occurring. For the latter, it is conducting a test of the early warning system, giving warnings and dictating policies to countries privately.

On September 5, 2011, the then director of the IMF Christine Lagarde warned of the imminent risk of a global recession, dragging the stock markets to serious falls all over the world that same day.

Reforms

Modernizing conditionality: the conditions of loans will be of precise objectives and the criteria for structural implementation will be eliminated from all programmes.
Flexible Credit Line: for countries with strong political and economic foundations. They are not subject to the policy objectives agreed upon by the country. Its reimbursement deadlines will be 3 years and a quarter to 5 years, will be renewable and can be used for balance of payments and quotas.
Strengthen the agreements stand-by: with greater flexibility.
Duplication of the limits of access to finance: the new annual and cumulative limits of access to non-concessionary financing of the IMF are 200 % and 600 % of the quota, respectively.
Simplify costs and maturity
Simplify services: Unused services that will be included in the LCF (flex credit lines) will be eliminated.
Services reform for low-income countries.

IMF Reports

2013: Confiscation of private savings to reduce debt in rich countries

In a 2013 working paper, by the authors Carmen M. Reinhart and Kenneth S. Rogoff, the need to forgive public debts -sovereign debts- is raised, in addition to expropriating part of the savings of individuals and families with the aim of reducing the public debt of developed countries -basically the countries of Europe, Japan and the United States-. The IMF already indicated in October 2013 the possibility of establishing a corralito and the consequent confiscation of private savings in up to 10% of family assets in order to reduce public debt to 2007 figures - prior to the 2008 financial crisis and the subsequent great recession.

Main IMF interventions

1994: Mexico Mexico; economic crisis in Mexico; $18 billion.
1997: Asia; Asian financial crisis; $36 billion.
1998: Russia Russia; Russian financial crisis; $22.6 billion.
1998: BrazilBrazil; $41.5 billion.
2000: TurkeyTurkey; $11 billion.
2001: Argentina; Argentine economic crisis (1998-2002); $21.6 billion.
2010: GreeceGreece; financial crisis in Greece; 110 billion euros ($139,730 million).
2011: Portugal; financial crisis in Portugal; 78,000 million euros ($99,080 million).
2018: Argentina; Argentine economic crisis (2018-present); $57.1 billion.

Criticism

Technical: insufficient analysis and lack of monitoring methods

A team of IMF officials meets, generally every year, with government and central bank officials (unions, employers' associations, academics, legislative bodies, and financial operators) from each of the member countries. In order to examine the evolution and the political and economic of the country. In order to supervise the countries, an IMF team visits the country, obtains economic and financial information, and discusses with the national authorities recent events in the economic sphere and monetary and fiscal policies, as well as structural measures. Normally, the officials prepare a final statement that summarizes what was discussed with the member country, leaving it in the hands of the authorities who have the option of publishing it. At the global level, the Board of Executive Directors draws heavily on reports produced by technical officers on the outlook for the world economy and financial markets. However, an independent report prepared by a team from the IMF Independent Evaluation Office '(OIE) for the period (2004-2007), which preceded the economic crisis of 2008 pointed out the IMF's inability to foresee the crisis during these years. The report notes that during this period "the constantly repeated message was one of permanent optimism" and the IMF shared the widespread idea that "a serious crisis in the main industrialized countries was unlikely." Until the first moments of the crisis and even in April 2007, "the IMF message... presented a favorable international economic environment". The IMF had paid little attention to deteriorating financial sector balance sheets, possible links between monetary policy and global imbalances, and credit expansion. The IMF had not seen the main underlying components of the crisis in the making. Russian President Vladimir Putin has also highlighted this problem, calling for a reform of the IMF to make it faster in making effective decisions in a rapidly changing financial environment.

In the United States, the IMF did not analyze the degradation of the rules for granting mortgages, nor the risk of this situation for financial institutions and "remained optimistic about the propensity for securitization to dilute risks& #3. 4;. In February 2006 the so-called "Financial Sector Assessment Scheme (PESF) dealing with the United Kingdom affirms that "banks' mortgage loan portfolios do not appear to represent a significant source of direct vulnerability". As for Iceland, where the growth of the banking sector rose from 100% to 1,000% of GDP in 2003, IMF surveillance "has egregiously failed to flag the dangers of an oversized banking system". In 2007, IMF reports state that "Iceland's medium-term prospects remain enviable." The IMF hailed the "financial innovations" and recommended to other advanced countries the use of the same methods as the United States and the United Kingdom. In this context, the IMF criticized Germany and Canada in 2006. For the latter country, it stated that "the timid strategies of Canada's banking system offered much lower returns on assets than in the United States." IMF advice to these countries specifically targeted against "structural barriers, some of which have helped protect these countries from the factors that triggered the crisis".

If the spring 2008 report "On World Financial Stability" (GFSR), reported that major financial institutions could have solvency problems in the summer of 2008, the IMF "emphasized that the crisis was under control". In May 2008 in the Belgian capital of Brussels, Dominique Strauss-Kahn said about the financial sector that "the worst news is behind us".

The OIE report explains the IMF's inability to identify risks and provide warnings through several factors:

Methods of incomplete analysis and a "high degree of doctrinal thought".
The prevailing view that "the self-regulation of markets would be sufficient to eliminate any major problems of financial institutions."
Insufficient link between macroeconomic and financial sector analysis.
Lagoons in internal governance.

About the so-called structural adjustment conditions to access credit

Other critics of the IMF think that the conditions negotiated with it, an international entity, in the form of structural adjustment plans limit the capacity of the State that receives the credit to direct the national economy.

Criticism of the IMF

Critics of the IMF argue that due to the dominant role that developed countries have within the organization, the IMF directs its global policies towards the promotion of free market capitalism. because it has imposed on developing countries —and more recently some European countries— their economic programs based on the Washington Consensus that consist of reducing the deficit and public spending and consequently social services and benefits, based on monetarist policies and theories and on the principle of free market, which must be carried out as conditions of the loans made and which according to its critics have caused a widening of the gap between rich and poor and a worsening of public services, such as health. Critics maintain that the approach of the IMF's free market contributes to social inequality, regressions in the distribution of income and damages to social policies. Some of the best-known criticism in academia has come from the social democratic economist Joseph Stiglitz, Chief Economist of the World Bank from 1997 to 2000 and the 2001 Nobel Prize in Economics.

The IMF is also criticized for having supported and financed military dictatorships in Latin America and Africa. Other sources have criticized its policies on the environment and food.

Some of the criticized policies are:

Sanitation of the public budget at the expense of social spending. The IMF points out that the State should not grant subsidies or assume expenses for groups that can pay for their benefits, although in practice this results in the decline in social services to sectors that are not in a position to pay them.
Generation of primary surplus to cover external debt commitments.
Elimination of subsidies, both in productive activity and in social services, together with the reduction of tariffs.
Restructuring the tax system. In order to increase tax collection, it has generally boosted the introduction of easily perceived regressive taxes (such as the Added Value Tax)
The concept of servicesin the interpretation of the IMF, it extends to include areas that are traditionally interpreted as fundamental rights assurance structures, such as education, health or social welfare.
Labour flexibility policies, understood as labour market liberalization.

These points were central in the IMF negotiations in Latin America as conditions for the access of the countries of the region to credit, in the eighties. It is argued that they caused a slowdown in industrialization, or deindustrialization in most cases. The recessions in various Latin American countries at the end of the 1990s and financial crises like the one in Argentina at the end of 2001 are used as examples of the failure of the policies of the International Monetary Fund, since these countries determined their economic policy on the basis of agency recommendations.

The IMF and Libya

Other critics of the IMF point out that it also reaches agreements with dictators regardless of their ideological persuasion. On November 18, 2008, then-IMF director Dominique Strauss-Kahn summed up his meeting with Libyan leader Muammar al-Qaddafi as follows: "The meetings we have held are proof of our common point of view." on Libya's achievements and on the main challenges it faces. Ambitious reforms in recent years have produced strong growth […]. The main challenge is to keep pace with the ongoing reforms with a view to reducing the size of the state".

This economic analysis was confirmed six days after the start of the riots in Benghazi that signify the beginning of the Libyan War on February 15, 2011. An IMF report praises the good economic management of Colonel Gaddafi's Libya, encourages him to "continue to improve the economy," citing his "ambitious reform programme".

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