The International Monetary Fund (IMF) is a global organization that promotes financial stability, economic growth and international trade. It also aims to reduce poverty around the world. The IMF describes its mission as “to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
The IMF was originally founded in 1945 to support expansion of trade and economic growth, discouraging policies that hampered international relations and promoting international monetary cooperation. From the 1970s the IMF has promoted floating exchange rates, meaning that market forces determine the currency value relative to one another. It is based in Washington, D.C and started with just 40 member countries. Today, it has 189 member countries. Each of the member countries have a representation proportional to its financial power on the IMF’s executive board. Quotas of member countries are a key determinant of the voting power in IMF decisions. They are based on something called special drawing right (SDR). SDRs are an international type of monetary reserve currency created by the IMF as a supplement to the existing money reserves of member countries. Votes comprise one vote per 100,000 special drawing right (SDR) of quota plus basic votes.
The IMF carries out 3 main operations to attain their goals. These are:
Surveillance- Large amounts of data are collected on a country’s international trade, state of global economy and provides regular economic forecasts. They also advise on how the current fiscal, monetary and trade polices will affect the country’s financial stability and its foreign relations.
Lending- The IMF often gives out loans to countries that are in serious debt or in some other economic predicament. This is so that they don’t fall into a financial crisis. Member countries pool in funds to form the loan. In 2019, the total loan amount the IMF had was $11.4 billion. However, these loans are not unsecured. It is almost always conditional on the country making some serious financial reforms to increase their potential for growth.
Capacity development- Member countries are given training, advice on policy decisions through capacity development programs. These programs include training in data collection and its analysis, which feed into the IMF’s role of monitoring national and global economies.
The IMF is accountable to its member country governments. At the top of the organization structure is the Board of Governors, consisting of one governor and one alternate governor from each member country, usually the top officials from the central bank or finance ministry. The Board of Governors meets once a year at the World Bank Annual Meetings. The executive board has 24 members and they oversee the day to day operations. The total staff in the IMF amounts to over 2,700 and they come from more than 150 different countries.