THE INTERNATIONAL MONETARY FUND

The IMF,Like the world bank,grew out of the 1944 international conferences.It hoped to secure the advantage of the gold standard without its disadvantage;e.g.,exchange rates were in the beginning envisaged to be relativity stable,but with international cooperation to replace the previous automatic mechanism.Also,countries were to be spared the need to make adjustments by deflating themselves into drastic unemployment.And the IMF still hopes to lessen the need for important controls.Ordinarily,a country pays for its imports by means of its exports or long-term borrowing.Suppose a country,say,England,is in need of short-term credit from the IMF.How exactly does the IMF enable such a debtor country to get hold of dollars?It does this by extending "purchasing rights" It simply lets the British but with British currency some of the Fund ’s own holdings of dollars.After the British balance of payments has improved, Britain is expected to buy back with gold or dollars (or,as we will see,with SDRs or "paper gold" )the pounds it has sold to the fund.