The trinidad Guardian / Few acronyms elicit as wide a variety of reactions across the globe as the letters IMF. Conceived in 1944 at a United Nations conference in Bretton Woods, New Hampshire, the International Monetary Fund, was set up with an initial membership of 44 countries who sought to build a framework for international economic cooperation.
These countries wanted to globally stabilise exchange rates and financial communication between countries, especially following the disastrous Great Depression and World War II According to its website, the IMF’s primary mission is to “ensure the stability of the international monetary system-the system of exchange rates and international payments that enables countries and their citizens to transact with each other.”
In order to maintain stability and prevent crises in the international monetary system, the IMF, also referred to as “The Fund” and the “Lender of Last Resort” monitors member country policies as well as national, regional, and global economic and financial developments through a formal system known as surveillance.
The Fund, with a current membership of 189 countries, also provides technical advice designed to foster economic stability and reduce vulnerability to economic and financial crises. Along with advice, the IMF also provides loans to countries that find themselves in economic despair.
When countries approach the IMF to borrow, after exhausting all other borrowing options, the loans make up part of what is formally referred to as a Structural Adjustment program. Such lending comes with IMF designed conditionalities. In essence, in order for member countries to access the funds, they must agree to make certain economic policy changes intended to restructure their economies and put them back on a more sustainable path.
In order to fund its lending program, all IMF members are required to make membership payments, or quotas, which are assigned to individual countries based on their economic size and stipulate how much they contribute.
These quotas are larger for more powerful economies, and they form a pool from which countries in need can take loans.
The IMF issues an international reserve asset known as Special Drawing Rights, or SDRs, that can supplement the official reserves of member countries.
In terms of governance, the IMF is accountable to its member country governments.
At the top of its organizational structure is the Board of Governors, consisting of one governor and one alternate governor from each member country, usually the top officials from the central bank or finance ministry.
The day-to-day work of the IMF is overseen by its 24-member Executive Board, which represents the entire membership and is supported by the IMF staff. The Managing Director, currently Christine Lagarde, is the head of the IMF staff and Chair of the Executive Board and is assisted by four Deputy Managing Directors.
Many small countries in the Caribbean have ended up knocking on the IMF’s doors for financial assistance. Because of the strict conditionalities tied to IMF funds, ending up in the clutches of the IMF has historically been politically unpopular.
T&T has had its own experience with the IMF, ending up in its hands in the 1980’s when oil and gas prices collapsed. Reductions in wages and salaries and in transfers to State Enterprises and utilities were the IMF conditionalities imposed, as well as a reduction in number of items subjected to price controls.
Though painful,the structural adjustment of the period rebalanced the economy, and opened the path for solid economic growth in the decades that followed.