The IMF was to be responsible for currency stablisation and and provided credit for countries experiencing balance of payments difficulties. The World Bank was to undertake investment.

What was the Bretton Woods conference? In 1944 the 44 delegates of the United and Associated Nations met in New Hampshire in the United States at a conference organised by the US. They established an international economic order based loosely on currency stabilisation and liberalisation of international trade, which became known as the Bretton Woods system.

The system established clear and unequivocal values for each currency, and eliminated practices, such as competitive devaluations, that had brought investment and trade to a virtual standstill during the 1930s. After much negotiation under difficult wartime conditions, the international community accepted the system and an organization to supervise it.

How is the IMF run? The Washington-based IMF is run by a board of 24 directors and employs 2,700 staff, headed by Horst Kohler, the managing director.

Which countries control the organisation? Membership numbers 182 countries and is open to any state that can adhere to the IMF charter of rights and obligations. Votes are based on the contributions made to IMF reserves with contribution quotas determined by a country's national income. The US has by far the largest quota followed by France, Germany, Japan and UK.

Board appointments are made on the same basis. The US, UK, Germany, France, Japan, Russia, Saudi Arabia and China each appoint one executive; the other 16 executives are elected in groups by the remaining countries.

Traditionally, Western European members appoint the managing director.

Has this arrangement ever caused problems? The selection of the present managing director caused a protracted row during the past year. The post had been held by a Frenchman since 1960, except for a five-year interlude in the 1970s. When Michel Camdessus announced his resignation as managing director, Gerhard Schroeder, the German chancellor, nominated Caio Koch-Weser, a German finance ministry official, to succeed him.

The other European member states reluctantly backed Mr Schroeder's choice, but the US objected that Mr Koch-Weser was not enough of a political heavyweight.

Months of argument followed, during the course of which Japan put forward its own candidate, Eisuke Sakakibara, and a coalition of African countries nominated Stanley Fischer, Mr Camdessus's well-respected American deputy. Eventually, Mr Schroeder replaced Mr Koch-Weser with another German candidate. This broke the impasse. Horst Kohler, the former head of the European Bank of Reconstruction and Development, was installed as IMF managing director in March 2000.

This bungled selection process led to calls for an end to the European monopoly on the top job, and for reform of the voting rights system, particularly from Asian members.

What does the IMF do? The IMF's constitution charges it with promoting international monetary co-operation by providing the machinery for consultation and collaboration.

It should facilitate the expansion and growth of international trade, particularly through the elimination of foreign exchange restrictions, and push exchange stability as well as helping to establish a multilateral system of payments between members.

The fund aims to make resources available to members, providing them with opportunities to correct maladjustments in their balance of payments without resorting to destructive measures. This function is fulfilled by an array of different funding mechanisms, including short-term standby arrangements (SBAs), three-year extended fund facilities (EFFs) and the even longer-running structural adjustment facilities (SAFs) and extended structural adjustment facilities (ESAFs), which are designed to finance radical structural reforms.

From where does the money come? The IMF's ordinary resources are composed of gold, subscriptions from member countries and the profits those generate.

In theory these resources are now worth about $300bn. In practice, because countries pay subscriptions in their own currencies, about half of this amount is used as IMF borrowers prefer strong and easily tradable currencies.

Does the IMF get funds from anywhere else? Yes. Members lend additional resources via two forms of borrowing arrangement: Special Drawing Rights (SDRs) and the General Arrangement to Borrow (GAB).

What is a SDR? Introduced in 1970, Special Drawing Rights are international reserve assets to supplement existing reserves. They enable member governments to add to their foreign reserves. SDRs are not backed by hard currency or gold reserves, but are book entries maintained by the fund. The value of the SDR is determined daily using a basket of currencies.

IMF members who have balance of payment difficulties often use SDRs to acquire foreign currency. Under this system, the IMF designates members with healthy reserve allocations and balance of payments to provide hard currency in exchange for SDRs.

What about the GAB? The General Arrangements to Borrow agreement was concluded in 1962 to give the IMF borrowing resources. Under GAB, the world's 11 wealthiest nations (G11) undertake to lend the fund as much as SDR17bn in their own currencies. They also assist in fulfilling balance of payment requirements of IMF group members if payment problems threaten global monetary stability.

In addition, the 1994 Mexican financial crisis forced the seven wealthiest countries to initiate a supplementary set of credit arrangements. The New Arrangements to Borrow (NAB) came into force in 1998, bringing the total funds available to SDR34bn (US$46bn).

Why has the IMF been criticised recently? The organisation has come under fire from a range of protest groups, many of whom are taking part in a counter-summit and other demonstrations timed to coincide with the IMF meeting in Prague (see the Protest Action in Prague article for more information).

The main thrust of the activists' argument is that the structural adjustment programmes it imposes on poorer countries, intended to filter out prolonged economic inefficiencies, often have harsh social side effects.

Nigeria's wranglings with the IMF illustrate this concern.

In June 2000, President Olusegun Obasanjo attempted to abolish a state subsidy worth 50 per cent of the price of petrol, in preparation for the tough conditions the IMF was expected to attach to the country's $1bn standby arrangement.

A national strike forced Mr Obasanjo to reverse the decision, casting doubt on his ability to push through structural reforms. Industrial and civil unrest continued until the credit facility was agreed in August 2000.

In March 2000, a commission appointed by the US Congress, and headed by Allan Meltzer, the US economist, said that the IMF's activities had become over-extended, and recommended that it restrict its role to that of short-term crisis lender.

Horst Kohler denied that the fund was in need of such radical reform, but called in July for the streamlining of its operations. He repeated the charge of "mission creep", which had been leveled at the IMF by critics who believe longer-term structural development work should be left to the World Bank.