IMF - The International Monetary Fund

The International Monetary Fund (IMF) was created in 1944 to help the world avoid another Great Depression. Its goal was to help countries maintain the value of their currencies without resorting to trade barriers and high interest rates.

Today, the IMF has over 180 member countries, which it helps by:

• Surveying global economic conditions.
• Advising member countries on methods to improve their economy.
• Providing short-term loans to avoid currency instability.

The importance of the IMF has increased since the global financial crisis started in 2007. The IMF has been called upon more and more to provide global economic surveillance. It is in the best position to do so because of its membership requirements. The 180 member countries have already agreed to subject their economic policies to IMF scrutiny. They committed to:

• Pursue policies that are conducive to reasonable price stability.
• Avoid manipulating exchange rates for unfair competitive advantage.
• Provide the IMF with data about its economy.

An IMF surveillance report warned about the economic crisis, but was ignored.

Since the Mexican peso crisis of 1994–95 and the Asian crisis of 1997–98, the IMF has taken a more active role to help countries prevent financial crises. It develops standards that countries should follow, such as providing adequate foreign exchange reserves in good times to help provide for increased spending during recessions. It reports on members countries' observance of these standards. It also issues member country reports that investors use to make well-informed decisions, improving the functioning of financial markets, and reducing potential financial shocks.

The IMf provides loans to help its members tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. Unlike the World Bank and other development agencies, the IMF does not finance projects.

Most IMF borrowers are developing countries which have only limited access to international capital markets, partly because of their economic difficulties. Since IMF lending signals that a country's economic policies are on the right track, it reassures investors and can act as a catalyst for attracting funds from other sources.

The IMF is governed by its member countries through its Board of Governors, which is usually the finance minister or central bank. They meet annually, in conjunction with the World Bank. The International Monetary and Financial Committee, or the IMFC, meets twice a year to review the international monetary system. The day-to-day work of the IMF is carried out by the Executive Board, who appoints the IMF's Managing Director to a renewable five-year term.