The IMF The International Monetary Fund

The IMF The IMF is the world's central organization for international monetary cooperation. It is an organization in which almost all countries in the world work together to promote the common good. 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 buy goods and services from each other. This is essential for sustainable economic growth and rising living standards.

The IMF cont. To maintain stability and prevent crises in the international monetary system, the IMF reviews national, regional, and global economic and financial developments. It provides advice to its 184 member countries, encouraging them to adopt policies that foster economic stability, reduce their vulnerability to economic and financial crises, and raise living standards, and serves as a forum where they can discuss the national, regional, and global consequences of their policies. The IMF also makes financing temporarily available to member countries to help them address balance of payments problems—that is, when they find themselves short of foreign exchange because their payments to other countries exceed their foreign exchange earnings.

Who runs the IMF? The IMF is governed by, and is accountable to, its member countries through its Board of Governors. There is one Governor from each member country, typically the finance minister or central bank governor. The Governors usually meet once a year, in September or October, at the Annual Meetings of the IMF and the World Bank. Key policy issues related to the international monetary system are considered twice a year by a committee of Governors called the International Monetary and Financial Committee, or the IMFC. A joint committee of the Boards of Governors of the IMF and the World Bank—the Development Committee—advises and reports to the Governors on development policy and other matters of concern to developing countries.

Membership The IMF is an international organisation of 185 member countries. The IMF formed in July 1944 when representatives of 45 governments agreed on a framework for international economic cooperation. Growth in IMF membership, (number of countries)

What the IMF does The work of the IMF is of three main types: Surveillance involves the monitoring of economic and financial developments, and the provision of policy advice, aimed especially at crisis-prevention. The IMF also lends to countries with balance of payments difficulties, to provide temporary financing and to support policies aimed at correcting the underlying problems; loans to low-income countries are also aimed especially at poverty reduction. Thirdly, the IMF provides countries with technical assistance and training in its areas of expertise. Supporting all three of these activities is IMF work in economic research and statistics.

Examples The IMF lends money to countries which are in deep economic trouble, for example : Mexico in the 1980s Mexico again in 1995 South East Asia and Russia in the late 1990s Argentina in 2001.

Criticisms The Fund is accused of enforcing one-size-fits-all recommendations that are too harsh in certain areas including budget cuts and inflation. Many developing nations are in debt and poverty partly due to the policies of international institutions such as the International Monetary Fund (IMF) and the World Bank. Their programs have been heavily criticised for many years for resulting in poverty. In addition, for developing or third world countries, there has been an increased dependency on the richer nations. This is despite the IMF and World Bank’s claim that they will reduce poverty.

Examples of activities/ policies Most of the IMF's loans to low-income countries are made on concessional terms, under the Poverty Reduction and Growth Facility. They are intended to ease the pain of the adjustments these countries need to make to bring their spending into line with their income and to promote reforms that foster stronger, sustainable growth and poverty reduction. An IMF loan also encourages other lenders and donors to provide additional financing, by signaling that a country's policies are appropriate.

Activities and policies cont. Perhaps the most devastating criticism of the IMF in the present situation of the Asian crisis, is that its policies imposed on South Korea, Thailand and Indonesia are wrongly designed and have further worsened the situation. Instead of quietly encouraging the international banks and the rich countries to extend more credit to the affected countries and boost investor confidence, the IMF chose to squeeze the countries further, thus driving their banks and corporations to deeper crisis, and worsening investor confidence.

Roles of the imf Since the dissolution of the Bretton Woods regime, the IMF has assumed various new roles to remain a significant international institution, an economic equivalent of the United Nations. Its surveillance function has expanded greatly, especially in the provision of data and forecasts. This role is consistent with the original mandate. However, many of the new roles of the IMF are inconsistent with the original mandate. The fund's function as lender of short term finance was meant to fix balance of payments problems, but has expanded so much that the IMF can now be seen as an aid agency.