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Managing Director
The IMF is led by a Managing Director, who is head of the staff and serves as Chairman of the Executive Board. The Managing Director is assisted by a First Deputy Managing Director and three other Deputy Managing Directors. Historically the IMF’s managing director has been European and the president of the World Bank has been from the United States. However, this standard is increasingly being questioned and competition for these two posts may soon open up to include other qualified candidates from any part of the world. In 2011 the world's largest developing countries, the BRIC nations, issued a statement declaring that the tradition of appointing a European as managing director undermined the legitimacy of the IMF and called for the appointment to be merit-based. The head of the IMF's European department is António Borges of Portugal, former deputy governor of the Bank of Portugal. He was elected in October 2010.
On June 28, 2011, Christine Lagarde was named Managing Director of the IMF, replacing Dominique Strauss-Kahn.
Previous Managing Director Dominique Strauss-Kahn was arrested in connection with charges of sexually assaulting a New York room attendant. Strauss-Kahn subsequently resigned his position on May 18. On June 28, 2011 Christine Lagarde was confirmed as Managing Director of the IMF for a five-year term starting on July 5, 2011.
Functions
The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. The rationale for this is that private international capital markets function imperfectly and many countries have limited access to financial markets. Such market imperfections, together with balance of payments financing, provide the justification for official financing, without which many countries could only correct large external payment imbalances through measures with adverse effects on both national and international economic prosperity. The IMF can provide other sources of financing to countries in need that would not be available in the absence of an economic stabilization program supported by the Fund.
Upon initial IMF formation, its two primary functions were: to oversee the fixed exchange rate arrangements between countries, thus helping national governments manage their exchange rates and allowing these governments to prioritize economic growth, and to provide short-term capital to aid balance-of-payments. This assistance was meant to prevent the spread of internationaleconomic crises. The Fund was also intended to help mend the pieces of the international economy post the Great Depression and World War II.
The IMF’s role was fundamentally altered after the floating exchange rates post 1971. It shifted to examining the economic policies of countries with IMF loan agreements to determine if a shortage of capital was due to economic fluctuations or economic policy. The IMF also researched what types of government policy would ensure economic recovery. The new challenge is to promote and implement policy that reduces the frequency of crises among the emerging market countries, especially the middle-income countries that are open to massive capital outflows. Rather than maintaining a position of oversight of only exchange rates, their function became one of “surveillance” of the overall macroeconomic performance of its member countries. Their role became a lot more active because the IMF now manages economic policy instead of just exchange rates.
In addition, the IMF negotiates conditions on lending and loans under their policy of conditionality, which was established in the 1950s. Low-income countries can borrow on concessional terms, which means there is a period of time with no interest rates, through the Extended Credit Facility (ECF), the Standby Credit Facility (SCF) and the Rapid Credit Facility (RCF). Nonconcessional loans, which include interest rates, are provided mainly through Stand-By Arrangements (SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and the Extended Fund Facility. The IMF provides emergency assistance via the newly introduced Rapid Financing Instrument (RFI) to all its members facing urgent balance of payments needs.
IMF and globalization
Globalization encompasses three institutions: global financial markets and transnational companies, national governments linked to each other in economic and military alliances led by the US, and rising “global governments” such as World Trade Organization (WTO), IMF, and World Bank. Charles Derber argues in his book People Before Profit, "These interacting institutions create a new global power system where sovereignty is globalized, taking power and constitutional authority away from nations and giving it to global markets and international bodies." Titus Alexander argues that this system institutionalises global inequality between western countries and the Majority World in a form of global apartheid, in which the IMF is a key pillar.
The establishment of globalized economic institutions has been both a symptom of and a stimulus for globalization. The development of the World Bank, the IMF. regional development banks such as the European Bank for Reconstruction and Development (EBRD), and, more recently, multilateral trade institutions such as the WTO indicates the trend away from the dominance of the state as the exclusive unit of analysis in international affairs. Globalization has thus been transformative in terms of a reconceptualizing of state sovereignty.
Following U.S. President Bill Clinton's administration’s aggressive financial deregulation campaign in the 1990s, globalization leaders overturned long-standing restrictions by governments that limited foreign ownership of their banks, deregulated currency exchange, and eliminated restrictions on how quickly money could be withdrawn by foreign investors.