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What is the International Monetary Fund (IMF)?

2016-12-02T10:05:59+00:00

The term 'International Monetary Fund (IMF)' is included in the Economics edition of the Financial Dictionary. Get yours now on mazon in ebook or paperback format. Read more here...

The International Monetary Fund represents an international organization with membership of 189 different countries. As such it counts nearly all countries of the world among its almost global membership. This IMF seeks to achieve financial stability, helps to encourage worldwide monetary cooperation, pushes for economic growth that is sustainable and for high unemployment, helps to facilitate international trade, and attempts to lessen poverty throughout the world.

Members of the United Nations created the International Monetary Fund back in 1945 as a result of the idea initially conceived of at the important Bretton Woods UN conference held in New Jersey in the United States in July of 1944. Originally 44 nations attended this conference and looked for ways to rebuild the global economy. They wanted to create a way of fostering economic cooperation. The group collectively hoped to not repeat the mistakes of the 1930s. A currency devaluing race to the bottom had led to the Great Depression in those years.

There were a number of original goals for the IMF. The organization was to encourage stability of exchange rates and monetary cooperation on an international scale. They were to promote and aid in the growth of a balanced international trade. IMF also had to help build up a system for balance of payments that was multilateral in scope. They also were designed to provide emergency resources to member states that suffered from problems with their balance of payments. Safeguards on the resources loaned out would b required.

With the early 1970’s dissolution of the fixed exchange rates based on the gold standard set up at the Bretton Woods conference, their role changed some. They were no longer responsible for stable exchange rates and a balance of payments system based on pegged exchange rates. They became more of an organization that helps out member states in emergency economic need.

Today the IMF counts among its largest emergency borrowers Greece, Portugal, Ukraine, and Ireland. It also issues precautionary loans to members who may need to borrow based on particular conditions within their countries. The countries with the largest precautionary loan amounts agreed on include Poland, Mexico, Colombia, and Morocco. Between the two groups, the IMF has committed itself to $163 billion. Of this amount $137 billion has not yet been drawn.

The International Monetary Fund still works to safeguard the global monetary system. They watch over the system of international payments and free floating exchange rates so that nations and their populations can engage in transactions with each other. In 2012, the fund received an expanded mandate in part as a result of the chaos in the Great Recession. This bigger mandate includes all issues pertaining to the financial sectors and all macroeconomic issues that have to do with global stability.

The International Monetary Fund has its headquarters in Washington, D.C. Their governance is by an executive board. The board is made up of 24 directors. Each of these directors represents either a group of nations or a single nation. The IMF maintains a global staff of 2,600 individuals who hail from 147 different countries.

The majority of the IMF’s money comes from its quota system. Every member is given a quota that they must contribute. This amount is based on the nation’s economic size in the global economy. The member state’s maximum contributions are limited to this quota. When countries join, they pay as much as one-quarter of their quota in a widely traded foreign currency like the pound, euro, dollar, or yen or as SDR Special Drawing Rights made up of a basket of these currencies. The other three-quarters they pay from their own currency.

The term 'International Monetary Fund (IMF)' is included in the Economics edition of the Financial Dictionary. You can get your copy on mazon in Kindle or Paperback version. See more details here.