Introduction
The agreement reached at Bretton Woods established two multinational institutions — the World Bank and the International Monetary Fund (IMF).Since WWII, both institutions have played an important role in the world economy.
The International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an organization of 187 countries, working to foster :
→ Global monetary cooperation
→ Secure financial stability
→ Facilitate international trade
→ Promote high employment and sustainable economic growth and
→ Reduce poverty around the world.
Role of the IMF
The role of the IMF is to maintain order in the international monetary system:
- To avoid a repetition of the competitive devaluations of the 1930s, and
- To control price inflation by imposing monetary discipline on countries.
The Special Drawing Right (SDR)
→ The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.
→ The SDR is neither a currency, nor a claim on the IMF.
→ Rather, it is a potential claim on the freely usable currencies of IMF members.
→ Holders of SDRs can obtain these currencies in exchange for their SDRs.
→ The value of the SDR is based on a basket of key international currencies—the euro, Japanese yen, pound sterling, and U.S. dollar.
→ The U.S. dollar-value of the SDR is posted daily on the IMF’s website.
The World Bank
The World Bank is a vital source of financial and technical assistance to developing countries around the world.The World Bank, established in 1944, is headquartered in Washington, D.C.
It is not a bank in the common sense; It is made up of two unique development institutions owned by 187 member countries:
- The International Bank for Reconstruction and Development (IBRD) and
- The International Development Association (IDA)
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