The International Monetary Fund or IMF is a US-based organization that promotes a healthy global economy and has 190 member states.
It provides loans to struggling countries and facilitates currency exchange and international trade. However, its conditionalities have been criticized for being exploitative and dictating national policy.
Nearly every country in the world is in the IMF, and the handful of countries that don’t belong are usually indirectly represented. In its day-to-day operations, the IMF works closely with the International Bank for Reconstruction and Development, more commonly known as the World Bank.
Key facts about the International Monetary Fund IMF
- The International Monetary Fund (IMF) also known as FMI, is an international financial institution founded in 1945 and headquartered in Washington, D.C. (USA). It currently has 190 member countries.
- The primary goals are to promote international monetary cooperation, facilitate international trade, promote employment and sustainable economic growth, and reduce poverty worldwide.
- It monitors economic and financial developments and provides policy advice to its member countries. It also provides loans to countries experiencing balance of payments problems to help them stabilise their economies.
- The IMF gets its funding from quota subscriptions paid by member countries. Its economic size and strength determine the size of each country’s quota. The U.S. spends the largest quota.
- It’s governed by its Board of Governors and Executive Board. The Board of Governors consists of one governor from each member country. The Executive Board has 24 Directors representing 190 members.
- The IMF plays a crucial role in shaping the global monetary system. It implements a system of exchange rates and international payments and provides loans to countries in economic distress.
- It has faced criticism over the years for being too influential over weaker economies and imposing strict austerity measures on countries receiving loans.
- The current IMF Managing Director is Kristalina Georgieva of Bulgaria, since October 2019.
The groundwork for the establishment of the International Monetary Fund was laid at the Bretton Woods conference in 1944. The nations at the conference agreed that a swift plan needed to be put in place to promote economic recovery in the wake of World War II. The goal was to make funds readily available for rebuilding and rebuilding key economies that had been devastated by war and, from there, the IMF naturally expanded into an organization with international reach.
Key Roles of the IMF
One of the IMF’s key roles in the global economy is as a lender to economically struggling nations.
The IMF makes loans with funds invested by its member countries. The Fund also facilitates smooth exchange of currency around the world and promotes international trade by keeping a close eye on the health of the international economy and holding regular meetings with its member states to discuss important issues.
Each IMF member nation is allocated a quota based on factors such as the strength of its economy and the stability of its government.
The quota determines the weight the member nation has in the IMF and the amount of money the nation can borrow. Each country is also assigned a number of special drawing rights (SDRs) based on its quota. SDRs allow member countries to draw on the IMF’s foreign exchange reserve and are routinely used in international accounting. Indeed, SDRs sometimes come very close to an international currency.
Criticism about IMF
The IMF’s work is sometimes criticized by people concerned about developing nations.
IMF loans usually come with terms known as conditionalities that some people deem to be exploitative or non-productive.
Conditionalities can place what is perceived as an unfair burden on IMF borrowers, or they can dictate national policy in a way that does not always benefit the population.
In particular, the IMF usually imposes structural adjustment programs that force its beneficiaries to open up to free trade, sometimes on terms that are not very favourable.
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