International Monetary Fund
The IMF, also known as the “Fund,” was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, United States, in July 1944. The 44 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations that had contributed to the Great Depression of the 1930s.
The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with one other. This system is essential for promoting sustainable economic growth, increasing living standards, and reducing poverty. The Fund’s mandate has recently been clarified and updated to cover the full range of macroeconomic and financial sector issues that bear on global stability.
To maintain stability and prevent crises in the international monetary system, the IMF reviews country policies, as well as national, regional, and global economic and financial developments through a formal system known as surveillance. Under the surveillance framework, the IMF provides advice to its 188 member countries, encouraging policies that foster economic stability, reduce vulnerability to economic and financial crises, and raise living standards. It provides regular assessment of global prospects in its World Economic Outlook, financial markets in its Global Financial Stability Report, and public finance developments in its Fiscal Monitor, and publishes a series of regional economic outlooks.
The key findings and policy advice from the various multilateral products, as well as the Managing Director’s priorities are pulled together in the Global Policy Agenda. The Executive Board of the IMF adopted a new Decision on Bilateral and Multilateral Surveillance, also known as the Integrated Surveillance Decision. The decision provides guidance to the Fund and member countries on their roles and responsibilities in surveillance and took effect on January 18, 2013. More broadly, in response to the Triennial Surveillance Review completed in October 2011, efforts are underway to better integrate multilateral, financial, and bilateral surveillance, including through: additional work on interconnections, clusters, and spillovers; greater use of in-depth risk assessments; renewed emphasis on external stability, with an External Sector Report that presents a broad and multilaterally consistent analysis for the world’s largest economies; and steps to increase the traction of IMF policy advice.
IMF financing provides member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditioned on effective implementation of this program. In an early response to the recent global economic crisis, the IMF strengthened its lending capacity and approved a major overhaul of the mechanisms for providing financial support in April 2009, with further reforms adopted in August 2010 and December 2011.
In the most recent reforms, IMF lending instruments were improved further to provide flexible crisis prevention tools to a broad range of members with sound fundamentals, policies, and institutional policy frameworks. In low-income countries, the IMF doubled loan access limits and is boosting its lending to the world’s poorer countries, supported by the windfall profits from gold sales, with interest rates set at zero through end-2014.
The IMF issues an international reserve asset known as Special Drawing Rights (SDRs) that can supplement the official reserves of member countries. Two allocations in August and September 2009 increased the outstanding stock of SDRs almost ten-fold to total about SDR 204 billion (US$310 billion). Members can also voluntarily exchange SDRs for currencies among themselves. In a 2011 paper, IMF staff explore options to enhance the role of the SDR to promote stability of the international monetary system.
The IMF provides technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including tax policy and administration, expenditure management, monetary and exchange rate policies, banking and financial system supervision and regulation, legislative frameworks, and statistics.
The IMF’s resources are provided by its member countries, primarily through payment of quotas, which broadly reflect each country’s economic size. At the April 2009 G-20 Summit, world leaders pledged to support a tripling of the IMF's lending resources from about US$250 billion to US$750 billion. To deliver on this pledge, the then current and new participants in the New Arrangements to Borrow (NAB) agreed to expand the NAB to about US$560 billion, which became effective on March 11, 2011 following completion of the ratification process by NAB participants. When concluding the 14th General Review of Quotas in December 2010, Governors agreed to double the IMF’s quota resources to approximately US$720 billion and a major realignment of quota shares among members. When the quota increase becomes effective, there will be a corresponding rollback in NAB resources. In mid-2012, member countries announced additional pledges to increase the IMF’s resources by $461 billion to help strengthen global economic and financial stability.
Historically, the annual expenses of running the Fund have been met mainly by interest receipts on outstanding loans, but the membership agreed in 2012 to adopt a new income model based on a range of revenue sources better suited to the diverse activities of the Fund.
The IMF is accountable to the governments of its member countries. At the top of its organizational structure is the Board of Governors, which consists of one Governor and one Alternate Governor from each member country. The Board of Governors meets once each year at the IMF-World Bank Annual Meetings. Twenty-four of the Governors sit on the International Monetary and Financial Committee (IMFC) and normally meet twice each year.
The day-to-day work of the IMF is overseen by its 24-member Executive Board, which represents the entire membership; this work is guided by the IMFC and supported by the IMF staff. In a package of reforms approved by the Governors in December 2010, the Articles of Agreement will be amended so as to facilitate a move to a more representative, all-elected Executive Board. The Managing Director is the head of the IMF staff and Chairman of the Executive Board, and is assisted by four Deputy Managing Directors.