Loading the player...

What is the 'International Monetary Fund - IMF'

The International Monetary Fund is an international organization that aims to promote global economic growth and financial stability, to encourage international trade, and to reduce poverty.

BREAKING DOWN 'International Monetary Fund - IMF'

The International Monetary Fund (IMF) is based in Washington, D.C. and currently consists of 189 member countries, each of which has representation on the IMF's executive board in proportion to its financial importance, so that the most powerful countries in the global economy have the most voting power.

The IMF's website describes its mission as "to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world."

IMF Activities

The IMF's primary methods for achieving these goals are monitoring, capacity building, and lending.

Surveillance

The IMF collects massive amounts of data on national economies, international trade, and the global economy in aggregate, as well as providing regularly updated economic forecasts at the national and international level. These forecasts, published in the World Economic Outlook, are accompanied by lengthy discussions of the effect of fiscal, monetary and trade policies on growth prospects and financial stability.

Capacity Building

The IMF provides technical assitance, training and policy advice to member countries through its capacity building programs. These programs include training in data collection and analysis, which feed into the IMF's project of monitoring national and global economies.

Lending

The IMF makes loans to countries that are experiencing economic distress in order to prevent or mitigate financial crises. Members contribute the funds for this lending to a pool based on a quota system. These funds total around SDR 475 billion ($645 billion) as of Sept. 2017 (IMF assets are denominated in special drawing rights, a kind of quasi-currency that is comprised of set proportions of the world's reserve currencies).

IMF funds are often conditional on recipients making reforms to increase their growth potential and financial stability. Structural adjustement programs, as these conditional loans are known, have attracted criticism for exacerbating poverty and reproducing the structures of colonialism.

History of the IMF

The IMF was originally created in 1945 as part of the Bretton Woods agreement, which attempted to encourage international financial cooperation by introducing a system of convertible currencies at fixed exchange rates, with the dollar redeemable for gold at $35 per ounce. The IMF oversaw this system: for example, a country was free to readjust its exchange rate by up to 10% in either direction, but larger changes required the IMF's permission.

The IMF also acted as a gatekeeper: countries were not eligible for membership in the International Bank for Reconstruction and Development (IBRD) – a World Bank forerunner that the Bretton Woods agreement created in order to fund the reconstruction of Europe after World War II – unless they were members of the IMF.

Since the Bretton Woods system collapsed in the 1970s, the IMF has promoted the system of floating exchange rates, meaning that market forces determine the value of currencies relative to one another. This system continues to be in place today.

RELATED TERMS
  1. General Agreements To Borrow - ...

    General Agreements to Borrow (GAB) refers to a lending medium ...
  2. Credit Tranche

    Credit tranches are phased loans from the International Monetary ...
  3. IMF Nonfuel Commodity Index

    The IMF Nonfuel Commodity Index, also called the Primary Commodity ...
  4. Reserve Tranche

    The reserve tranche is a segment of an International Monetary ...
  5. Super Currency

    A super currency would replace the U.S. dollar as the world's ...
  6. International Bank Of Reconstruction ...

    The International Bank Of Reconstruction and Development is one ...
Related Articles
  1. Insights

    An Introduction To The International Monetary Fund (IMF)

    Chances are you've heard of the IMF. But what does it do, and why is it so controversial?
  2. Insights

    IMF, WTO and World Bank: How Do They Differ?

    Understand what IMF, WTO and the World Bank are, how they differ, and why some people question their motives.
  3. Insights

    IMF Grants Egypt $12 Billion Bailout

    The IMF has agreed on a $12B bailout for Egypt
  4. Insights

    IMF on the 4 Headwinds of U.S. Economic Growth

    Explore the four major economic headwinds that the International Monetary Fund (IMF) identifies as principal obstacles to strong U.S. economic growth.
  5. Investing

    IMF Or ETF: Which Is Right For You?

    Here's what the professionals think about these similar, but critically different, investment vehicles.
  6. Investing

    The Week Ahead: April 11-15, 2016

    Market Volatility reared its head again on Thursday, the VIX rallying 10% as stock markets and interest rates fell sharply amidst global growth concerns.
  7. Trading

    Bretton Woods: How It Changed the World

    While the Bretton Woods system is no longer in place, it fundamentally changed the international monetary order.
  8. Insights

    Could Ukraine's Debt Crisis Destabilize The EU?

    A financial crisis in Ukraine could be a bigger threat to European security than the current financial crisis in Greece.
  9. Insights

    The World's Fastest Growing (and Shrinking) Economies

    The IMF cut its forecast for 2016 global economic growth Tuesday, estimating that GDP would expand at a rate of 3.2%, rather than the 3.4% forecast in January.
  10. Personal Finance

    What Is the Bank for International Settlements?

    Headquartered in Basel, Switzerland, Founded in the 1930's the Bank for International Settlements (BIS), is a bank for central banks.
RELATED FAQS
  1. What countries have the largest gold reserves?

    Find out which countries have the largest gold reserve stockpiles, and why governments still feel that it's necessary to ... Read Answer >>
  2. How Are Global and International Funds Different?

    In English, 'global' and 'international' tend to be used interchangeably—hence the confusion. Read Answer >>
  3. In what ways does Bayesian probability support the probability default model when ...

    Learn what happened in the European debt crisis. It became a heated argument between the hawks and doves who argued the merits ... Read Answer >>
  4. How does the balance of payments impact currency exchange rates?

    Take a brief look at the relationship between a nation's balance of payments and the exchange rate value of its currency ... Read Answer >>
Trading Center