INTERNATIONAL MONETARY FUND

(IMF), specialized agency of the United Nations, founded at the Bretton Woods Conference in 1944 to secure international monetary cooperation, stabilize exchange rates, and expand international liquidity (convertibility to cash). Membership in the IMF subsequently grew as former colonies gained independence. Headquarters of the IMF are in Washington, D.C. Members are pledged to orderly currency exchange arrangements, a reduction in the role of gold in international monetary transactions, and expansion of the Fund's capability to carry out its original goals. The continuous liaison maintained between the monetary authorities of the member states has made the IMF a convenient instrument of consultative cooperation and an outstanding centre of research and statistical information on international monetary questions. Operating funds are subscribed by member governments according to the volume of their international trade, their national income, and their international reserve holdings. Members with temporary difficulties in their international balances of payments may purchase from the IMF, with their own national currencies, the foreign exchange they need. The expansion of international liquidity that results from these drawings is eliminated as they are repaid. Additional devices to assist members in temporary balance-of-payments difficulties included the Standby Arrangements, introduced in 1952, enabling members to negotiate lines of credit in anticipation of actual needs; the General Arrangements to Borrow, based on an agreement in 1961 of 10 countries to provide standby credit; and Compensatory Financing of Export Fluctuations, introduced in 1963 and liberalized in 1966, enabling developing countries to cope with a sudden fall of export receipts without imposing exchange restrictions or severe deflation. The increasing volume of international transactions and successive financial crises created a demand for additional reserves that could be used in settlement of international balances. Special Drawing Rights, which permanently expanded the supply of international liquidity, were approved at the annual meeting of the IMF in October 1969. Special Drawing Rights in effect enlarged members' quotas without any additional subscription either in gold or in national currencies. In 1986 the IMF and the International Bank for Reconstruction and Development began a new multibillion-dollar lending pool to serve the world's poorest nations.