The IMF is controlled by its 187 member-countries, each of whom appoints a representative to the IMF’s Board of Governors. The Board of Governors, most of whom are the finance ministers or heads of the central bank of the members, meet once per year to discuss and is possible achieve consensus on major issues. In the meantime, day-to-day operations are managed by a 24-person executive board. The world’s major economic and political powers—the United States (the IMF’s largest shareholder), Great Britain, Japan, Germany, France, China, Russia, and Saudi Arabia—each have permanent seats on the executive board, while the 16 other directors are elected for two-year terms by groups of countries divided roughly by geography, e.g., Caribbean, Africa, Southeast Asia, etc. The executive board, in turn, is run by the managing director, who is elected for renewable five-year terms.
The IMF also has an International Monetary and Financial Committee of 24 representatives of the member-countries that meets twice yearly to provide advice on the international monetary and financial system to the IMF’s staff.
In all of its operations, voting power is weighted based on the size of the economy and therefore the quota allocation of each country. Decisions are usually taken by consensus, but the United States, as the IMF’s major shareholder, has the most influence in the institution’s policy-making.
The Fund’s current acting managing director is Ms. Christine Lagarde of France, who took office on June 28, 2011. Each members of the executive board runs a particular department of the IMF. There are offices devoted to
a) particular regions of the world, such as Europe, Africa, Middle East, Western Hemisphere, and Asia/Pacific;
b) functions, such as finance, technical assistance, fiscal planning, capital markets, research, and statistics; and, c) administrative functions of the IMF itself.
The IMF has a total of 2,600 employees, mostly based in its Washington, D.C. headquarters.
|Board of Governors: 187 Finance Ministers of Heads of Central Banks. Meets once a year to make deicsion on major issues|
|Managing Director (by tradition from Europe): elected every 5 years|
|Executive Board: 24 persons: Permanent Members: U.S., China, Japan, Germany, Great Britain, France, Russia, Saudi Arabia, and 16 rotating directors, who are elected every two years and represent all non-permanent members.
The Board runs the day-to-day operations of the IMF. Each board member runs a department, i.e. research, finance, or technical assistance
|International Finance and Monetary Committee: 24 representatives from member countries. It meets twice a year to provide advice to IMF staff.|
The Bretton Woods Conference set out six goals for the IMF in its Articles of Agreement. Those goals, as shown in the accompanying box, remain the guiding principles of the Fund today.
|(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
(ii) 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.
(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
(iv) To assist in the establishment of a multilateralmultiple countries working together to on a specific issue system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions that hamper the growth of world trade.
(v) To give confidence to members by making the general resources of the IMF temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.
In simpler terms, the goals are to:
- Facilitate the cooperation of countries on monetary policy, including providing the necessary resources for both consultation and the establishment of monetary policy in order to minimize the effects of international financial crises.
- Assist the liberalization of international trade by helping countries increase their real incomes while lowering unemployment.
- Help to stabilize exchange rates between countries. Especially after the global depression of the 1930s, it was considered vital to establish currencies that could hold their value, serve as mediums of international exchange, and resist any speculative attacks.
- Maintain a multilateralmultiple countries working together to on a specific issue system of payments that eliminates foreign exchange restrictions. Countries are thus free to trade with each other without worrying about the effects of interest rates and currency depreciation on their payments.
- Provide a safeguard to members of the IMF against balance of payments crises, i.e., when governments cannot balance the money they have with the money they owe to other countries. IMF members can have the confidence to adjust the imbalances in their national accounts without resorting to painful measures that would hamper their prosperity, such as devaluing their currency in relation to other countries’.
- Try to reduce the effects of volatility in countries’ balance of payments accounts, the IMF helps assure that global trade and financial relationships can continue at a steady rate without the risks of global depressions like that of the 1930s.
When founded, the IMF also operated the system of international exchange on the basis of gold reserves that its member countries pledged to it. In 1971, however, the U.S. government under President Nixon eliminated the connection between the U.S. dollar and gold as a means to resolve a domestic monetary crisis. By allowing the dollar’s value to “float” as opposed to having it pegged to gold, the U.S. government was able to adjust its monetary policy to deal with changes in the American economy. Subsequently, the IMF eliminated its use of gold, and all other members were allowed to “float” their currencies as well.
To learn more about IMF reform, please read “Is IMF Reform Possible.”