What Is The Background Of The International Monetary Fund?

On July 1, 1944 the U. S. invited 44 countries to attend united Monetary and Financial conference at Bretton Woods, New Hampshire.  The conference prepared not only the articles of the proposed IMF but also the World Bank (IBRD).  The agreement was signed by 27 countries and became effective on December 27, 1945.  In May, 1946 the IMF became operational.  The articles were amended in 1969, 1978 and 1992 following the collapse of fixed exchange rates system and oil price crisis in early 70s.  The first amendment gave rise to the creation of Special Drawing Rights (SDR).  The second amendments were on the review of the IMF's responsibilities.  The third was on empowering the Fund to suspend the membership of its member that failed to fulfil its obligations.   In mid 90s the IMF squeezed its financial resources.  The group of seven summits in Halifax arranged in June 1995 recommended to double the IMF's general arrangement to borrow up to $55 million.

IMF has adopted a strategy to lend to those countries on following conditions:

1. Public spending cuts including defence expenditure.
2. Credit controls.
3. Trade liberalization.

The fund is run by a bound of governors consisting of one governor from each member country.  The member is either a finance minister or the governor of the central bank.