ABSTRACT

assigned a par value expressed in terms of gold and members were under a duty to maintain this value. Changes in par value could only be made to correct serious balance of payment crises and required the agreement of the IMF. By the late 1960s the fixed exchange rates were becoming increasingly difficult to maintain and in 1973 the Articles of Agreement were amended to allow for floating exchange rates. The IMF is financed through subscription by its members. Each member is allocated a subscription quota which is based on a number of criteria relating to the strength of its economy. The size of a state’s quota affects its voting rights at meetings of the IMF. The IMF operates a system of weighted voting which gives those states with the strongest economies the biggest voice. As a result the IMF, which now has over 150 members, has always been heavily influenced by the Western industrialised nations. The size of the quota also influences a state’s Special Drawing Rights. The Special Drawing Rights allow member states to draw currency from the IMF to correct temporary balance of payments problems. It amounts to a sort of overdraft facility for members. It was envisaged that the provision of Special Drawing Rights would remove the need for states to resort to protectionism in times of economic crisis. For the first 30 years of the IMF currency transactions and payments into the fund were calculated by reference to the official price of gold. In 1978 the Articles of Agreement were amended with the effect of abolishing this gold standard and since that time transactions have been valued on the basis of a ‘weighted basket’ of the five principal currencies (USA dollar, Deutschmark, yen, French franc, and pound sterling).