"Defends US interests": International Monetary Fund was founded 75 years ago

The International Monetary Fund (IMF) was founded on December 27, 1945.

Several dozen countries signed an agreement on the creation of an international monetary organization.

The decision was taken following a conference in Bretton Woods (USA), held in July 1944.

States have pledged to ensure currency convertibility, maintain a stable exchange rate, remove major trade restrictions and balance foreign trade budgets.

At the same time, the British authorities insisted on postponing all measures for the countries participating in the fund for five years from the end of the Second World War.

The principles of the future fund were discussed at the Bretton Woods International Conference in July 1944.

The result of these negotiations was the creation of not only the IMF, but also the International Bank for Reconstruction and Development (IBRD) to provide loans for post-war reconstruction.

Discussions about the formation of such a structure were conducted back in the 1920s at the Brussels and Genoa conferences.

However, then this idea was not crowned with success.

• Opening of the Bretton Woods Conference, 1944

• AFP

• © US NATIONAL ARCHIVES / INTERNATIONAL MONETARY FUND

After World War II, the United States took the lead in creating a global financial regulator.

According to experts, this step was facilitated by the fact that during the war years, the American economy has noticeably strengthened and developed.

Last hope fund

The postwar monetary system was based on the concept of the American economist Harry White, who represented the United States at Bretton Woods.

At the center of this plan was the idea of ​​creating an international currency and stabilizing the exchange rates of countries.

This, in turn, meant the elimination of currency risks in international financial and economic relations.

An alternative to White's plan was the concept of the famous British economist John Keynes.

Keynes proposed creating such a system in which creditor countries with a positive budget balance would invest in the development of lagging economies.

Because, according to him, the existence of countries with high external debt and a deficit budget threatens the stability of the entire world economic system and carries the threat of new crises.

Keynes proposed not only creating a world bank, but also a new world currency that would circulate along with national currencies.

This currency - bankor - would become the unit of payment between states.

Each country would receive an open overdraft with an international bank.

In accordance with the annual budget indicators, countries would have to devalue or revalue their currencies in order to stimulate the export or, on the contrary, the import of capital.

This would help maintain a balance in the global economy and prevent large-scale crises.

However, in the end, White's plan was taken as the basis for the IMF, not Keynes's, although some of the British proposals were nevertheless taken into account.

According to the adopted charter, the weight of each country in the IMF is determined by the number of its votes in the organization, the entrance fee and contribution to the world economy.

Based on these parameters, the United States received 30% of all votes in the IMF and the IBRD.

This distribution of votes did not correspond to the interests of the USSR, whose economy at that time was undermined by the Second World War.

Therefore, although Moscow initially signed the constituent documents establishing the IMF and the IBRD, in the end the Soviet Union refused to ratify the treaty.

Russian membership in the IMF began only in 1992, after the collapse of the USSR.

• Harry Dexter White

• Gettyimages.ru

• © Bettmann

Today, the IMF has 190 countries, over which the fund monitors and gives them advice.

For each member country of the IMF, quotas are established, which are calculated based on the weighted average of national GDP, international reserves, economic volatility and openness.

Quotas are expressed in special drawing rights (international reserve asset) and are revised every five years.

Today, the United States holds the largest share of reserve assets.

As stated on the organization's website, the main goal of the IMF is the stability of the international monetary system, which allows countries to conduct international transactions.

Also, after 2012, the fund's mandate includes macroeconomic and financial sector issues related to global stability.

As the doctor of economic sciences, professor of the department of international economic relations of the RUDN University Inna Andronova explained in an interview with RT, the IMF was created for

regulation of international monetary and credit relations.

“The main task of the fund today is to help IMF member countries when they are experiencing serious foreign exchange difficulties, the financial crisis caused by the balance of payments deficit, when the country's expenses sharply exceed its income, as a result of which it has nothing to pay with foreign creditors.

We can consider that in such situations the IMF is the last hope, ”the expert noted.

In turn, a country's access to the fund's loans depends on its willingness to accept its terms.

The set of measures that the IMF requires of its debtors took shape in the late 1980s and was called the Washington Consensus.

At that time, the fund's recommendations were universal and most often included eliminating budget deficits, cutting subsidies and other government spending, as well as privatization, foreign trade liberalization and deregulation.

In the early 2000s, this document was replaced by the Monterrey Consensus.

However, many of the previous recommendations have been preserved in the new directive, experts say.

The "Washington Consensus" consisted of ten specific tough points that the borrowing country had to include in its economic stabilization program.

After the crisis in Southeast Asia in 1997-1998, the IMF replaced the previous document with the Monterrey Consensus, since it became clear that one template cannot be applied to all countries, "Inna Andronova explained.

In practice, however, the Monterrey Consensus differs little from its predecessor.

Although the document does not spell out the previous hard points, they are simply masked by broader wording, the expert added.

Debt pit

Russia began to cooperate with the IMF later than many other countries - the partnership began only after the collapse of the USSR.

However, today experts assess this experience negatively.

Throughout the 1990s, the IMF provided loans to Russia totaling $ 22 billion. The funds went to support reforms and cover the balance of payments deficit.

At the same time, the fund put forward a number of requirements aimed at opening the Russian market for foreign manufacturers, as well as facilitating the export of resources and valuables abroad.

In particular, the fund demanded the elimination of export duties on gas and oil with an increase in excise taxes, the abolition of the pre-customs examination of goods exported from the country, the lowering of customs duties for imports and the lifting of restrictions on the import of alcohol.

• Rally in the framework of the All-Russian protest action of trade unions "No to disastrous economic reforms", 1998

• © Wikimedia Commons

In the early 2000s, there were calls in Russia to curtail cooperation with the fund.

In 2005, Russia repaid the IMF loan ahead of schedule - at that time, the debt was $ 3.3 billion.

“All scientists then knew how the fulfillment of the IMF requirements could end for Russia, but the Russian leadership since 1991 stubbornly neglected these estimates.

Yes, in the short term, cooperation with the fund had a good effect on the country's economy, the IMF helped to put things in order in the financial system.

But in the long term, his recommendations were destructive, ”stressed Inna Andronova.

But not all IMF borrowers manage to break free of credit bondage.

On the contrary, most often the problem of debt only gets worse, debts accumulate like a snowball, experts say.

In such a situation, the fund's tranches are used to pay off previously taken loans, and not to develop the national economy.

Argentina is a prime example of such a debtor.

At the beginning of the 20th century, the country was one of the richest countries in the world, but over the past decades, Buenos Aires has experienced more than one default.

Close cooperation with the IMF has not yet helped the country to get out of a series of crises.

In February 2020, Argentina's Vice President Cristina Kirchner announced that the fund would not receive payments on previously issued loans until the country emerges from the economic recession.

However, in August Buenos Aires was forced to negotiate with the IMF on the provision of a new assistance program.

According to experts, the IMF has played an ambiguous role in the fate of Argentina.

As the professor of the Department of World and National Economy of the All-Russian Academy of Foreign Trade, Alexander Belchuk, noted in a commentary to RT, the fact that Argentina is in a difficult economic situation is also the fault of the fund.

“Undoubtedly, this is the fault of the IMF, since the fund first drags the country into debt, then begins to command it.

In fact, the state, which has found itself in a large debt to the IMF, falls under its control.

As it happened with Argentina.

However, the fund also plays a positive role for several countries.

For example, from time to time he puts things in order in international settlements and foreign exchange relations between states, ”the expert said.

Speaking about Argentina, Inna Andronova recalled that the first global debt crisis that gripped the countries of Latin America occurred in 1982.

“Many states, including Argentina, were forced to agree to the terms of the IMF, they had no other choice.

But the programs adopted then destroyed the national economies of a number of countries, ”the expert noted.

• Gettyimages.ru

Ukraine became another regular client of the IMF.

The country's cooperation with the foundation began in the 1990s.

In 2010, Kiev signed an agreement with the IMF to provide a loan of $ 15 billion. However, the fund was reluctant to provide financial tranches, since the Ukrainian authorities were in no hurry to fulfill its conditions.

At the end of November 2013, having received a refusal from the IMF to provide funds, Kiev turned to Moscow for help.

Russia has pledged to provide the neighboring country with $ 15 billion in credit.

However, the agreement was destroyed by "Euromaidan" and a coup d'etat in Ukraine.

Over the past years, the country has been in serious financial dependence on the IMF tranches.

Under pressure from the fund, the Ukrainian authorities are carrying out unpopular reforms and cutting off social support for the population.

Dual role

Although the IMF was created to equalize payment imbalances and maintain order in international economic relations, in practice, the fund often draws countries into projects that are beyond their power, experts say.

“This tactic often leads to an increase in the country's debt to the fund.

And the debtor is obliged first of all to pay the debts to the IMF and only then to other creditors.

The danger lies in the fact that if a country violates the rules of the fund, other structures will also refuse loans to it, ”explained Alexander Belchuk.

• IMF Managing Director Kristalina Georgieva

• AFP

• © NICHOLAS KAMM

At the same time, there are no real alternatives to the IMF, other financial institutions cannot compete with the fund.

“The IMF plays a dual role.

On the one hand, the fund still performs the functions of maintaining order in international economic relations and provides assistance to countries.

But on the other hand, he primarily defends the interests of the United States and other Western countries.

In addition, from time to time by his actions, he "opens" poor countries for Western trade expansion, "the expert said.

Inna Andronova adheres to a similar point of view.

“The Fund has gained a reputation as an institution that destroys the economies of borrowing countries, because it gives loans only on certain conditions.

However, poor countries continue to cooperate with the IMF, since its loans are supplemented by loans from developed countries and the World Bank, because it is on the IMF's assessments that other creditors will work with this or that country.

As for other options, the BRICS New Development Bank was recently established.

However, in terms of the volume of financial resources, it has not yet come close to the IMF.

Therefore, the IMF has no alternative yet, ”the expert summed up.