What is the International Monetary Fund (IMF)?

What is the International Monetary Fund (IMF)?

The International Monetary Fund (IMF) is an international organization that promotes global economic growth and financial stability, promotes international trade, and reduces poverty.

Member country quotas are a key factor in voting rights in IMF decisions. Votes include one vote per 100,000 Special Drawing Rights (SDR) of quota plus base votes. SDRs are an international type of reserve currency created by the IMF to supplement member countries’ existing monetary reserves.

The IMF’s mission is to promote global economic growth and financial stability, promote international trade, and reduce poverty around the world.

The IMF was originally established in 1945 as part of the Bretton Woods Agreement, which sought to promote international financial cooperation through the introduction of a system of convertible currencies at fixed exchange rates.

Joined the International Monetary Fund

Any country can apply to join the International Monetary Fund and be accepted by the majority of existing countries. In the early years of the IMF’s inception, membership rules were relatively lax, making it easy for countries to join.

Members had to abide by the code of conduct, refrain from currency restrictions, provide their national economic information, and make periodic payments to a quota. However, the IMF has imposed onerous regulations on countries that have joined the organization in order to receive funding.

Upon joining the IMF, a member receives an initial quota equal to the quotas of existing member countries of comparable economic size. Quotas are larger for more powerful countries with strong economies, and their contributions form a pool from which other needy member countries can borrow.

See also :  What is Fiat Money?

The member countries not only receive money from the International Monetary Fund, but also have access to the economic data of all member countries. They also get technical assistance on tax matters, expanded trade and investment opportunities, and the ability to influence the economic policies of other member countries.

International Monetary Fund Activities

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

 The reports the IMF published on its monetary surveillance include the “World Economic Outlook,” the “Global Financial Stability Report,” and the Fiscal Monitor.

Surveillance

The IMF collects massive amounts of data on national economies, international trade, and the global economy in aggregate. The organization also provides regularly updated economic forecasts at the national and international levels.

These forecasts, published in the World Economic Outlook, are accompanied by lengthy discussions on the effect of fiscal, monetary, and trade policies on growth prospects and financial stability.

Capacity Building

The IMF provides technical assistance, 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 to prevent or mitigate financial crises. Members contribute the funds for this lending to a pool based on a quota system. In 2019, loan resources in the amount of SDR 11.4 billion (SDR 0.4 billion above target) were secured to support the IMF’s concessional lending activities into the next decade.

See also :  What is Economic Profit?

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