International Trade and America's Place in the Global Economy - The International Monetary Fund

At the Bretton Woods conference near the end of World War II, forty-five countries negotiated the creation of the International Monetary Fund (IMF). The IMF, now consisting of 184 member countries, extends short-term loans to members experiencing economic instability. As a condition of receiving its credit assistance, the IMF requires the debtor country to enact significant reform of its economic structure, and often of its political structure as well, eliminating corruption and establishing effective institutions such as courts. The conditions for being granted a loan can include drastic cuts in government spending; privatizing government-owned enterprises, such as railroads and utilities; establishing higher interest rates; increasing taxes; and eliminating subsidies on such necessities as food and fuel. According to the IMF, "The conditionality associated with IMF lending helps to ensure that by borrowing from the IMF, a country does not just postpone hard choices and accumulate more debt, but is able to strengthen its economy and repay the loan" (http://www.imf.org/external/pubs/ft/exrp/what.htm). However, critics have maintained that the austerity demanded by the IMF can have devastating social consequences, including severe unemployment, crippling price increases in the cost of basic goods, and political instability resulting from widespread dissatisfaction.