The International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an international financial institution responsible for maintaining the stability of the international monetary and financial system. Based in Washington, it is governed by its 186 member countries, to which it is accountable.
Basically, the IMF has three types of instruments available to carry out its mission of ensuring the stability of the international monetary and financial system:
- Surveillance of the economic policies of IMF member countries, also known as "Article IV consultations" in reference to the corresponding article in the IMF’s Articles of Agreement.
- Technical assistance to member countries in the IMF’s field of expertise.
- Loans to member countries that are facing balance of payments difficulties.
Quota subscriptions generate most of the IMF’s financial resources.
Each member country of the IMF is assigned a quota based on its relative size in the world economy.
For each country, the quota determines:
- its financial contribution to the IMF;
- the amount of financing it can obtain from the IMF;
- its voting power.
The Board of Governors is the highest decision-making body of the IMF. It is composed of the heads of the central banks of the 186 member countries and meets once a year.
The International Monetary and Financial Committee consists of 24 ministerial-level members or heads of central banks. It advises the Board of Governors and meets twice a year.
The Executive Board takes care of the daily business of the IMF. It is currently composed of 24 Executive Directors, each of whom represents a group of countries known as a “constituency”.
The Managing Director presides over the Executive Board and conducts the ordinary business of the IMF.
The International Monetary Fund was conceived in July 1944 when representatives of 45 countries meeting in the town of Bretton Woods agreed on a framework for international economic cooperation to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s.
The first Managing Director of the IMF was the Belgian Camille Gutt, who held this post from 1946 to 1951.
When it was first set up, the principal aim of the IMF was to ensure the smooth operation of the Bretton Woods monetary system, i.e. a fixed exchange-rate system whereby member countries agreed to set the value of their currencies in terms of gold or in terms of the U.S. dollar. In 1969, the IMF created a new reserve instrument: the so-called Special Drawing Rights (SDRs). These are allocated to member countries proportionally to their quotas and are also used as an accounting unit by the IMF.
The Bretton Woods monetary system was called into question in 1971 with the suspension of official convertibility of the dollar into gold.
In January 1976, the members of the IMF concluded the Jamaica Agreement, which introduced floating exchange rates. The initial task of the IMF – to maintain a fixed exchange rate system – was no longer required. However, the dollar continued to be the main global reserve currency.
With the debt crisis in the 1980s, the IMF was led to increase its lending to countries that were experiencing financial difficulties. These loans were subject to the implementation of far-reaching economic reforms (known as structural adjustment programmes) which were sometimes criticised as being excessive.
Following a sharp decrease in the early 2000s, IMF lending again increased considerably in 2008 as result of the economic and financial crisis.
In recent years the IMF has implemented a package of reforms to enhance the institution's governance and expand the role played by emerging countries. This reform process has speeded up as a result of the economic and financial crisis and the measures agreed upon by the G20.
A further reform of the quota system is in preparation. The way in which the IMF is financed, the terms and conditions for IMF loans, and the amounts granted to borrowing countries have also been reviewed.