The International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an international financial institution that ensures the stability of the international monetary and financial system. It is based in Washington and governed by its 186 member countries, to which it is accountable.
Instruments of the IMF
The IMF essentially has three types of instrument for performing its mission of providing stability to the international monetary and financial system:
- the monitoring of the economic policies of member countries, also known as "Consultation Article IV" in reference to the corresponding article of the IMF statutes.
- technical assistance to member countries in its area of expertise.
- loans to member countries experiencing difficulties balancing their payments.
Quotas generate most the IMF's financial resources. Each member country is allocated a quota based on its relative importance in the global economy. For each country, this quota determines:
- the amount of its financial contribution to the IMF
- the amount it can borrow from it
- the number of votes allocated to it.
The highest decision-making body in the IMF is its Board of Governors. The Board is composed of the Governors of the central banks of the 186 member countries and meets once a year.
An International Monetary and Financial Committee, composed of 24 ministers or governors of central banks, formulates opinions for the Board of Governors. It meets twice a year.
The Executive Board is responsible for the day-to-day management of the IMF. It currently comprises 24 Executive Directors, each of whom is at the head of a group of countries (constituency).
The Managing Director of the IMF chairs the Executive Board and leads the Fund's administration.
The International Monetary Fund (IMF) was founded during the Bretton Woods conference in July 1944. The 45 governments represented wanted to establish a cooperation framework to prevent a return to the disastrous economic policies that contributed to the Great Depression of the 1930s. The first Managing Director of the IMF was the Belgian Camille Gutt, who perform this role from 1946 to 1951.
The Bretton Woods monetary system was called into question in 1971 when it was decided to unpeg the dollar from gold. However, the dollar remained the main international reserve asset.
The debt crisis in the 1980s meant that the IMF had to make increasing numbers of loans to countries experiencing financial problems. These loans came with major and extensive reform conditions (called structural adjustment programmes), and were criticised for their nature, which was often considered excessive.
After a significant reduction in the first half of the 2000s, IMF loans increased significantly following the 2008 economic and financial crisis.
In terms of governance, over the last few years the IMF has embarked on a reform process to increase the representation of emerging countries. This reform process accelerated with the financial and economic crisis and the measures taken in the context of the G20.