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. Credit Tranche

    Credit tranches are phased loans from the International Monetary ...
  2. International Finance

    International finance is a section of financial economics that ...
  3. Fiscal Effort

    Fiscal effort is the amount of revenue collected by a government, ...
  4. Structural Adjustment

    A structural adjustment is a loan provided to a country by the ...
  5. Conditionality

    Conditionality refers to conditions attached to the provision ...
  6. Monetary Reserve

    A monetary reserve is a central bank's holdings of a country’s ...
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

    Can The IMF Solve Global Economic Problems?

    The IMF is an important tool to help struggling countries, but it's not without its problems.
  3. Insights

    IMF Cuts Global Growth Forecast as Brexit Hits UK

    The IMF cut global growth today. The UK and Nigeria were the two countries that suffered the biggest downgrades
  4. Insights

    IMF Calls For 6-Step Solution to the Euro Crisis

    Discover six points the International Monetary Fund believes the European Union must address in order to continue economic recovery.
  5. Insights

    IMF: Greek Debt 13 Years Away from Exploding

    The IMF’s annual review of Greece's economic policies warns that the country’s debt is unsustainable and 13 years away from exploding.
  6. Investing

    IMF Or ETF: Which Is Right For You?

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

    IMF Chief Suggests IMFCoin Cryptocurrency as Possibility

    The organization is considering replacing its special drawing rights (SDR) reserve currency with a global digital currency.
  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

    IMF Pressures Eurozone On Greek Debt Deal

    IMF is putting pressure on the Eurozone to strike a deal for Greece to meet their debt obligations
  10. Insights

    What Is the World Bank?

    You've heard of the World Bank, now find out how it functions and why some groups oppose it.
RELATED FAQS
  1. What are the advantages and disadvantages of the International Monetary Fund?

    Learn about some of the main advantages and disadvantages of the International Monetary Fund and why the IMF's mission is ... Read Answer >>
  2. The Difference Between the International Monetary Fund and the World Bank

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ... Read Answer >>
  3. What country has the wealthiest overall population?

    Find out which country has the wealthiest overall population, based on per capita income. Discover how this wealth was created ... Read Answer >>
  4. How Are Global and International Funds Different?

    In English, 'global' and 'international' tend to be used interchangeably—hence the confusion. Read Answer >>
Hot Definitions
  1. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  2. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  3. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  4. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  5. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  6. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
Trading Center