MF, towards the end of the war. The institution became a reality in December 1945, when the thirtieth nation signed the Agreement. Actual financial operations were com menced by the IMF in early 1947.
The Bretton Woods Agreement charged the IMF with responsi bilities to (1) encourage international monetary cooperation, (2) encourage the removal of foreign exchange restrictions, (3) stabilize currency exchange rates, and (4) facilitate multi lateral payments between member nations.
2J. K. Horsefield, The International Monetary Fund, 1945 1965: Twenty Years of International Monetary Cooperation (Wash ington: International Monetary Fund, 1969), 5.
3D. D. Driscoll, (ed.), The International Monetary Fund:Its Evolution, Organization, and Activities (Washington: Inter national Monetary Fund, 1984), 1.
4H. R. Heller, The International Monetary Fund (New York: McGraw Hill Book Company, 1982), 51.
In its dealings with the developing countries, the IMF employs a protocol known as conditionality. Conditionality, as used by the IMF, refers to policies that member nations are expected (by the IMF) to agree to implement and observe, as a requirement, before a balance of payments loan is extended from any of the organization's special financing facilities.Agreeing to abide by these IMF developed conditions is also usually required by private sector lenders.
The nature of the conditions imposed by the IMF vary from case to case. Conditions, however, are expected to "provide confidence that the borrowing member will overcome its balance of payments difficulties and be able to repurchase its currency from the Fund without undue strain during the specified per iod."5 When extremely serious problems are involved, conditions may not attempt to impose a return to a balance of payments surplus position during the term of the loan.
More often than not, conditions established by the IMF emphasize measures which affect ba...