The International Monetary Fund and World Bank Group

Topics: International Monetary Fund, United Nations, World Bank Pages: 4 (1154 words) Published: January 10, 2014
The International Monetary Fund and World Bank Group
The International Monetary Fund (IMF) and the World Bank Group are two global institutions created to assist nations in becoming and remaining economically viable. Each plays an imporant role in the environment of international trade by helping maintain stability in the financial markets and by assisting countries that are seeking economic development and restructuring. Inadequate monetary reserves and unstable currencies are particularly vexing problems in global trade. So long as these conditions exist, world markets cannot develop and function as effectively as they should. To overcome these particular market barriers that plagued international trading before World War II, the International Monetary Fund (IMF) was formed. Originally 29 countries signed the agreement; now 184 countries are members. Among the objectives of the IMF are the stabilization of foreign exchange rates and the establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade. Member countries have voluntarily joined to consult with one another to maintain a stable system of buying and selling their currencies so that payments in oreign money can take place between countries smoothly and without delay. The IMF also lends money to members having trouble meeting financial obligations to other members. Argentina, Turkey, and Greece have recently received such help from the IMF, but the results have been mixed. To cope with universally floating exchange rates, the IMF developed special drawing rights (SDRs), one of its more useful inventions. Because both gold and the U.S. dollar have lost their utility as the basic medium of financial exchange, most monetary statistics relate to SDRs rather than dollars. The SDR is in effect “paper gold” and represents an average base of value derived from the value of a group of major currencies. Rather than being denominated in the currency of any...
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