Prepared by: Azhibekova AlmiraInternational Relations C*(13)

Almaty, 2015

Agenda

HistoryBretton Woods AgreementIMF OrganizationIMF aimsMembershipGold StandardSpecial Drawing Rights

IMF History

Great Depression of the 1930s

Breakdown in International Monetary Cooperation

The Bretton Woods Agreement(BWA)

IMF was formed through the BWA:

BWA was conceived in July 1944

International Monetary Fund (IMF) formal

existence was in December 1945

Par value system

The End of the BWA

End of Bretton Woods system (1972–81) :

The system dissolved between 1968-1973.

Since the collapse of the Bretton Woods system,

IMF members have been free to choose any

form of exchange arrangement they wish

IMF Becoming an Universal Institution

The fall of the Berlin wall in 1989

Expansion to fulfill responsibilities

Soviet Block Transition

Debt relief for poor countries

IMF Organization

MF is an organization of 185 countries

Their primary purpose is to preserve the

stability of the international monetary system

Helps the governments of these countries

manage economic difficulties and benefit from

opportunities of globalization

What Does IMF Do?

Surveillance

Lending

Technical assistance

IMF How Do They Do?

Keeps track of the economic health of its member countries through its

economic surveillance

Alerts them to risk on the horizon and provide policy

advise

Lends to countries in difficulty

Provides technical assistance and training to help improve economic

management

IMF Membership

IMF has 188 member countries

Its members are represented through a quota system broadly

based on their relative size in the global economy

Charter

It is a specialized agency of UN having its own

Finance

Governing structure

The IMF works with other international

org. to promote growth and poverty

reduction

It also interacts with think tanks, civil

society and the media on a daily basis

IMF Collaboration

When a country can borrow from IMF?

A member country may request from IMF financial assistance if it has a balance of payments need when it can not find sufficient financing on affordable terms to meet its net international payments. An IMF loan eases the adjustment policies and reforms that a country must make to correct its balance of payments problem and restore conditions for strong economic growth.

The gold standard

The gold standard essentially involved a commitment by the participating countries to fix the price of their currencies in terms of a specific amount of gold• The price was maintained by buying/ selling gold at that price

The value of gold relative to other goods does not change much over long period of time, that helps in maintaining monetary discipline & ensures long run price stability• Concept of fat money – gold standard

The gold standard from 1925 -1944

The gold standard broke down during World War I, and was briefly re-instated between 1925-31 as gold exchange standard

Under this system, only US & Britain were allowed to hold gold reserves while other could hold both gold, dollars &/ or pound reserves

1931 – Britain departed from Gold standard due to high influx of gold & capital, this led to devaluation of many currencies which in turn led to trade wars, some economists even blame the protectionist regimes of triggering the great depression

Special Drawing Right (SDR)

The IMF supplemented its foreign exchange by creating a new reserve asset, (named SDR).

It serves as the IMF’s unit of account It is a weighted average of the currencies of five

nations (US, Germany, France, Japan & Great Britain)

The weights, which are based on the relative importance of each country in international trade are updated periodically