International Monetary Fund (IMF)

Since its creation during the post-Great Depression era, the International Monetary Fund (IMF) has been a prominent figure in global finance. With the objective of promoting global currency and economic stability, it influences financial governance worldwide.

Creation At Bretton Woods

In July 1944, delegates from 44 countries met at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire. They investigated the pressing issues of the day, such as exchange rate stability and exploding international debt. At Bretton Woods, the concept of the IMF was developed as a solution to these challenges and then introduced to the world.

Along with the International Bank for Reconstruction and Development (World Bank Group), the IMF was created to be a mechanism for economic and monetary cooperation between competing world powers. At Bretton Woods, the Articles of Agreement for the IMF were crafted. Initial plans to balance post-WWII debt obligations and mandate that members adopt a fixed exchange rate within one percent of gold were outlined. In 1945, the 29-country entity became an official body.[1]

Since then, the IMF has been a prominent figure in crisis resolution and global economic management. From the end of the Bretton Woods System in 1971 to the Global Financial Crisis of 2008, the IMF has influenced the policies of countries around the globe.

The IMF's Form And Function

The IMF is an international organisation that aspires to promote financial stability, economic growth and cooperation among its members. Headquartered in Washington D.C., it is made up of 189 member countries.

The policy-making body of the IMF is the Board of Governors, which is commissioned with ensuring the structure and function of the IMF remains uncompromised. It is made up of one representative and alternate from each member country.

The entity tasked with executing day-to-day operations is known as the Executive Board, which is made up of 24 elected directors, each with voting rights proportional to the economic size and scope of the home nation.[2]

The self-stated mission of the IMF is multi-fold and is as follows:

  • Promote international monetary cooperation
  • Facilitate global trade
  • Promote employment and sustainable economic growth
  • Reduce poverty worldwide[3]

In an attempt to address issues such as global poverty and sustainable economic growth, the IMF performs several core functions on a routine basis:

  • Surveillance: The IMF closely monitors the economic situation of each member nation on a single, regional and global basis. Throughout this process, forthcoming risks to stability are identified. In response, policy recommendations are made at both the country and global level. IMF publications such as the World Economic Outlook, Fiscal Monitor and Global Financial Stability Report are issued periodically to address evolving financial conditions.[4]
  • Lending: The IMF issues loans to member countries in need of financial assistance. Terms vary, but in times of imminent crisis, emergency lines of credit may be extended at a 0% interest rate.[5] IMF financing is meant to aid in the payment of international creditors, preserve domestic stability and foster future economic growth. The IMF often acts as a lender-of-last-resort for countries that are unable to secure affordable financing on the world's capital markets. Example nations in 2018 include Greece, Kosovo, Bangladesh and Yemen.[6]
  • Technical Assistance/Training: Member nations are the regular recipients of IMF expertise pertaining to finance and economics. Extensive training and assistance are provided in the areas of banking, monetary policy, public fund management and tax policies.[7]

The primary objective served by each of these functions is crisis aversion. By monitoring, advising and extending credit, the IMF aspires to reduce systemic risks facing member nations while promoting broad-based economic health.

IMF: Membership And Quotas

The IMF has extended membership to countries in every geographic locale. Whether a nation has a developing economy or is an established economic superpower, it may seek membership.

In order to gain and maintain acceptance by the IMF, a country must satisfy the following ongoing requirements:

  • Pay a "quota" subscription fee
  • Direct domestic economic policy toward the primary goals of pricing stability and orderly growth
  • Avoid exchange rate manipulation to gain unfair competitive advantages
  • Disseminate information and data that may impact international economics in the spirit of cooperation[8]

The IMF is a quota-based institution, which means that individual quotas are assigned to each member and are representative of that nation's global economic standing. Quotas are derived via a mathematical formula that incorporates factors such as GDP, reserves and variability.[9]

At the IMF, quotas are denominated in terms of Special Drawing Rights (SDRs). An SDR is an international reserve asset created by the IMF in 1969, that serves as a unit of measure. Its value is representative of a basket of global currencies, including the United States dollar (USD), euro (EUR), Chinese yuan renminbi (CNY, RMB), Japanese yen (JPY) and British pound (GBP).[10]

In respect of their SDR qualifications, larger countries receive larger quotas while smaller members are allocated smaller quotas in the much the same fashion. The IMF uses quotas to determine benefits and obligations designated for member nations. This is accomplished in several ways:

  • Contributions: A country's maximum financial obligation to the IMF is determined by quotas.
  • Voting Rights: The number of votes given to members is determined according to quotas.
  • Available Financing: The amount of IMF financing a member may obtain (under normal circumstances) is based on quotas.
  • Special Drawing Rights (SDR): Quotas are used to decide a member's share of the IMF's aggregate SDR holdings.[9]

The IMF quota system is designed to ensure that member countries are treated fairly and receive any assistance that may be needed. In this fashion, an economic superpower such as the U.S. or U.K. is able to secure ample resources in a similar manner as those in smaller, developing nations.


Since its inception, the IMF has been an integral part of the global monetary and financial system. Through monitoring, extending credit and educating member nations, the IMF has built a truly international body representing 189 of the 195 officially recognised countries.

However, the IMF is also a controversial figure. High-profile partnerships with member nations such as Iceland and Greece have prompted voracious debate over the role of international lending in contemporary finance. Concerns pertaining to the negative impacts of globalisation, as well as nation building, are frequently cited by critics. In addition, widespread criticisms of the quota and SDR system have been prevalent over the course of its history.

In spite of its detractors, the IMF is a viable entity. Given the levels of membership and resources, it is poised to remain at the forefront of global finance for decades to come.