International Monetary Fund (IMF)

International Monetary Fund

The International Monetary Fund was to be a lender to the central bank of countries which were experiencing a deficit in the balance of payments.  By lending money to that country’s central bank, the IMF provided currency, allowing the underdeveloped country to continue in business, building up its export base until it achieved a positive balance of payments.  Then, that nation’s central bank could repay the money borrowed from the IMF, with a small amount of interest, and continue on its own as an economically viable nation.  If that country experienced an economic contraction, the IMF would be standing ready to make another loan to carry it through.

By giving all countries access to a pool of international currencies, exchange rates could be stabilised, and nations could receive lines of credit to help them expand their economies.  The purpose of the Bretton Woods Programme, utilising the IMF and the World Bank, was to give debtor nations an opportunity to continue smooth growth without sudden contractions (depression) when balance-of-payments deficits went up.  The idea was to avoid the “boom/bust” economic cycles of pre-WWII.

(ADD IMF Revisited)