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International Monetary Fond - Essay Example

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International Monetary Fund The great depression ranks as the most devastating in history of the world and its end came as relief to those who survived. The effects of the depression outline the economic catastrophe that was at time and highlights the economic and social strains experienced…
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In the period leading to the conclusion of the World War II, allied countries hoped to restore sanity to international monetary relations and as such, an international institution would serve to oversee foreign trade. In efforts to alleviate the devastation and possibly avoid the repeat of such economic hardships, an exchange agreement was reached at a United Nations conference in Bretton Woods. The agreement sought to smoothen out disastrous economic policies in order to avoid major contributions to the events leading to the great depression of the 1930s. Various country representatives in attendance formulated the charter that aimed at eliminating exchange restrictions with regard to trade and promoting stability of exchange rates. While an agreement to set up the institution was formulated in 1944, the International Monetary Fund came to existence in December 1945 with 29 countries signing the relevant Articles of Agreement (Clift 2001, p.9). The membership of IMF experienced a steady growth with a total of 188 countries currently enrolled as members working together to facilitate international economic stability (IMF, 2012). Over the years, the statutory mandate of the IMF remains largely unchanged from the initial agreement signed in 1944. The IMF’s primary objective is to foster cooperation among different countries in order to establish a balanced expansion of the world’s economy. A balanced expansion of the international economy entails the sustainability of high employment levels that translates to substantial income for IMF members (Brown Consultancy Services, n.d). This way, equal opportunities at an international level are established for members to delve into favourable trading environments. The establishment of bilateral agreements among members under the mentorship of the IMF facilitates unique opportunities where economic and financial advancements are possible. The IMF functions to monitor such developments and economic policies that govern relations among member countries and in its capacity, seeks to eliminate restrictions that are perceived unfavourable for international trade. The IMF’s oversight role in formulation of economic policies by members is based on the performance of the economy. As such, macroeconomic performance plays a critical role in the determination of policies that are fair in order to balance a nation’s transactions with the rest of the world. In addition, the IMF provides monetary aid to members with balance of payments problems, which is usually a short-term resolve in times of emergencies. Similarly, IMF lends to its members in an effort to finance development projects and finance various programs to facilitate growth in emerging economies. The provision of such funds is often based on long-term commitments that have been deemed profitable to citizens and favourable to international objectives. The lending also involves a countries currency to other members, which serves to facilitate foreign exchange transactions and maintain stability of exchange rates. This is among the mandate of IMF and serves as a critical step towards alleviating competitive devaluations that characterised the great depression. The IMF also provides technical assistance to its members in terms of policy formulation and implementation based on the institution’s goals. This is essential in strengthening a nation into conforming to international standards of trade. As an Read More
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