International Monetary Fund (IMF)
Fonds monétaire international (FMI)
Fondo Monetario Internacional (FMI)
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Establishted 22 July 1944, Bretton Woods NH (USA), by representatives of the 45 countries which negotiated details of the Articles of Agreement/Charter. Came into being on 27 Dec 1945, with a membership of 29 of these countries, after acceptance of the Charter for ratification. Commercial operations commenced 1 Mar 1947.
Promote international monetary cooperation, the expansion of international trade and exchange rate stability; assist in the removal of exchange restrictions and the establishment of a multilateral system of payments; alleviate any serious disequilibrium in members' international balance of payments by making the financial resources of the IMF available to them, usually subject to economic policy conditions to ensure the revolving nature of IMF resources.Available with paid subscription only.
Original impetus was to combat conditions contributing to and prolonging the depression of the 1930s. Functions have evolved in response to changing needs of members and of the international monetary system. Currency inconvertibility and lack of a standard for determining the value of national currencies (owing to the collapse of the gold standard) were identified by British economist John Maynard Keynes and US Treasury official Harry Dexter White as the major issues to address. Prospective members had therefore to set down a par value (ie a value in terms of a certain weight of gold) for their currencies and make every effort to eliminate restrictions on the conversion of their currencies into other currencies. Par values were finally established by the 1960s and most major currencies had become convertible. SDR, created in 1969, added necessary liquidity to the international monetary system. In 1971 the USA suspended convertibility of the dollar for gold and several other countries allowed their currencies to float away from par value. Attempts to re-establish the par value system failed; but IMF charter was amended in 1978 and a revised monetary system put in place. Under this present system, members are still obliged to strive for convertibility; but, since par values have been abolished, members can choose any exchange regime they wish (eg floating rates, rates tied to other currencies or to a standard such as the SDR), except to value their currencies in terms of gold. IMF is no longer monitoring a system of par values but is authorized to exercise firm surveillance over exchange rate policies of members.
Current activities emphasize strengthening global growth through: surveillance and crisis prevention; crisis resolution; lending policies and practices; combating poverty in low-income countries; technical assistance and training; transparency. IMF Institute, set up 1964, provides training in economic management to officials of member countries. Joint Vienna Institute (JVI) trains officials from formerly centrally planned economies in various aspects of public administration and economic management. Independent Evaluation Office (IEO), set up July 2001, conducts objective and independent assessment of issues related to IMF's mandate.
'Quotas' IMF's main financial role is to provide temporary credits to members experiencing balance-of-payments difficulties. In return, members borrowing from IMF agree to undertake policy reforms to correct problems underlying these difficulties. Amounts that members may borrow are limited to their quotas, assigned on joining the Fund and based on economic strength. Members pay a subscription equal to their quota into a common pool of currencies from which, with the approval of the Executive Board, they and other members may draw during periods of balance-of-payment difficulty. The size of the quota determines:
• The cumulative amount of loan a member country can have outstanding from IMF at any one time;
• The member's voting power over IMF policies - each member country has 250 votes plus one additional vote for each SDR 100,000 of its quota;
• How many SDRs the member receives whenever a distribution of SDRs is made.
Quotas are reviewed every 5 years and may be adjusted to reflect expansion in the world economy or changes in the economies of individual member countries. Following a 45% quota increase effective 22 Jan 1999, under the 11th General Review of Quotas, total quotas in the Fund are SDR 212,000 million (almost US$ 270,000 million). As of 2010, the IMF Executive Board approved a set of measures to transform the IMF over time into a more effective and legitimate multilateral institution. The Board agreed to a significant shift of quota share toward countries that have been under-represented in the governance of the institution, especially those countries that have grown rapidly and taken on a central role in the global economy over the past decade.
'Borrowing' If resources seem likely to fall short of members' needs then they may be supplemented through borrowing. Temporary supplements include bilateral loan agreements, issuing notes to the official sector and enlarging existing borrowing arrangements. General Arrangements to Borrow (GAB), adopted 5 Jan 1962, under Revised General Arrangements to Borrow, enables IMF to borrow specified amounts of currencies from 11 industrial countries (or their central banks), under certain circumstances, at market-related rates of interest. Potential amount of credit available to IMF under GAB total SDR 17,000 million, with an additional SDR 1,500 million available under an associated arrangement with Saudi Arabia. New Arrangements to Borrow (NAB), approved 27 Jan 1997 and in effect in 1998, is is the facility of first and principal recourse vis-à-vis GAB and comprises a set of credit arrangements between IMF and 26 member countries and institutions Maximum amount of resources available to the IMF under the NAB and GAB is SDR 34,000 million. These credit arrangements provide supplementary resources to the IMF to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system. In Apr 2009, Group of Twenty (G20) agreed to increase lending resources available to IMF by up to US$ 500,000 million, in 2 steps: immediate bilateral financing from IMF member countries; incorporating this financing into an expanded and more flexible NAB increased by up to US$ 500,000 million. This objective was achieved by Sep 2009.
'Bilateral loans' - a member normally commits to allow the Fund to make drawings up to a specified ceiling during the period for which drawings can be made.
'IMF notes' - a framework for issuing notes to the official sector, approved 2009, enabling members to invest in IMF paper while providing an immediate supplement to IMF resources for financial assistance to members.
Main IMF Facilities:
'Stand-By Arrangements (SBAs)' - provide short-term balance-of-payments assistance for deficits of a temporary or cyclical nature. These must be repaid within 3.25-5 years - or 2.25-4 years if the country's external position allows these shorter repayment terms. Interest surcharge on high levels of credit outstanding: 100-200 basis points. The 'Flexible Credit Line (FCL)', introduced in 2009, for country with strong fundamentals, policies and track records of policy implementation. Disbursements under FCL would not be phased or subject to conditionality.
'Extended Fund Facility (EFF)' - supports medium-term programmes aimed at overcoming balance-of-payments difficulties due to macroeconomic or structural problems. Such financial assistance must be repaid within 4.5-10 years, which may be shortened to 7 years if the country's external position allows these shorter repayment terms. Interest surcharge on high levels of credit outstanding: 100-200 basis points.
Poverty Reduction and Growth Facility (PRGF) - a concessional facility to assist low-income member countries with loans carrying an annual interest of 0.5%, repayments half-yearly from 5.5 to 10 years after disbursement. PRGF makes poverty reduction a more explicit element of the growth strategy for low-income countries than did the previous Enhanced Structural Adjustment Facility (ESAF). Members qualifying for PRGF funding may borrow up to 140% (under exceptional circumstances, 185%) of their quota under a 3-year PRGF arrangement.
'Compensatory Financing Facility' - timely financing for members experiencing temporary export shortfalls or excesses in cereal import costs.
'Supplementary Reserve Facility (SRF)' - provides financial assistance for exceptional balance-of-payments difficulties due to sudden and disruptive loss of market confidence in financial crises. Repayments normally in 1-1.5 years but may be extended to 2-2.5 years. Early repayment encouraged through interest surcharge of 200-500 basis points.
Enhanced Heavily Indebted Poor Countries Initiative (HIPC Initiative) - a comprehensive approach to debt relief, assisting heavily indebted poor countries (HIPCs) with sound financial policies by providing exceptional assistance for eligible countries to reduce external debts to sustainable levels. Involves multilateral, Paris Club of Industrial Country Creditors and other official bilateral and commercial creditors.
Africa Capacity-Building Initiative aims to enable African countries to design and implement poverty-reducing strategies and to improve coordination of capacity-building technical assistance in the Poverty Reduction Strategy Paper (PRSP) process. It includes African Regional Technical Assistance Centres (AFRITACs) in Dar es Salaam and Abidjan (Côte d'Ivoire), IMF's contribution to New Partnership for Africa's Development (NEPAD).
'Surveillance of Exchange Rate Policies' - conducts comprehensive analysis and assessment of the general economic situation and policies of each member through annual consultations with individual countries and through twice-yearly multilateral surveillance through discussions with regional groupings in the context of the World Economic Outlook exercise. IMF also provides precautionary arrangements, enhanced surveillance and programme monitoring.
'Technical Assistance' - supports the development of the productive resources of member countries by helping them to manage their economic policy and financial affairs more effectively. Provides technical assistance in its areas of core expertise: macroeconomic policy, tax policy and revenue administration, expenditure management, monetary policy, exchange rate system, financial sector sustainability, amd macroeconomic and financial statistics. About 90% goes to low and lower-middle income countries. Operates 7 regional technical assistance centres: Pacific (Fiji); Caribbean (Barbados); Africa (Gabon, Mali, Tanzania UR); Middle East (Lebanon); Central America (Guatemala).
As a cooperative monetary institution, IMF is neither primarily a lending institution nor a multilateral development institution, the latter role having been assigned to its sister institution, International Bank for Reconstruction and Development (IBRD), unofficially referred to as 'World Bank', in the international economic order established at Bretton Woods. The two are often referred to collectively as Bretton Woods Institutions (BWIs). Executive Directors, Alternate Directors, and Governors of the Fund in some cases also serve in the same capacity for the Bank. The annual meeting of the Board of Governors jointly with the Board of Governors of the 'World Bank' constitutes a meeting of the important financial officials of member countries. Management and staff of the IMF collaborate with opposite numbers in the 'World Bank'. To be eligible to apply for membership of the Bank a country must first be a member of IMF. However, while the Bank may lend only to poor countries, the IMF may lend to any member country lacking sufficient foreign currency to cover short-term obligations to creditors in other countries. Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee) was set up on 2 Oct 1974 and, from 1 Apr 1989, the 'World Bank' requires IMF approval for some of its loans to developing countries. The Joint Committee normally meets the day after the International Monetary and Financial Committee.
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Relations with Inter-Governmental Organizations
Relations with 50 inter-governmental organizations.
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Relations with Non-Governmental Organizations
Relations with 2 non-governmental organizations.
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PublicationsAvailable with paid subscription only.
Members in 186 countries
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Type I ClassificationAvailable with paid subscription only.
Type II ClassificationAvailable with paid subscription only.
- International Relations
- United Nations
UN Sustainable Development Goals **
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