What is the IMF and what does it do?

The global economy is expected to grow by 3% in 2025 and 3.1% in 2026, says the International Monetary Fund (IMF). The IMF also expects global inflation to fall, but US inflation to stay above target. So, what is the IMF and why does it make such predictions?

The IMF is a global organisation with 191 member countries. It focuses on increasing monetary cooperation between countries and works to bring about financial stability and ease trade worldwide. So, the IMF is like a financial safety net for the world. It gives countries in need a platform to seek financial help. It was introduced during the Bretton Woods Conference of 1944 to prevent an economic crisis like the one in the 1930s from recurring.

The IMF’s main role is to ensure the stability of the international monetary system. This is the system of exchange rates and international payments that allows countries to conduct financial transactions with each other. By monitoring economies and providing financial support, the International Monetary Fund helps mitigate financial crises, support sustainable economic growth, and reduce global poverty.

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What does the International Monetary Fund do?

As mentioned above, the IMF’s main job is to ensure global economic stability. It fulfills this responsibility in 3 ways.

First, the IMF monitors its member countries’ economies and the global economy. This surveillance includes regular economic check-ups and a thorough analysis of each member country’s fiscal, monetary, and financial policies. It then publishes its findings in reports, like the World Economic Outlook, which offer valuable forecasts and insights.

Second, when a member country faces a ‘balance of payments’ crisis, meaning it can’t afford to pay for its imports or repay its foreign debts, the International Monetary Fund steps in. It provides short- and medium-term loans to help the country stabilise its currency, rebuild its reserves, and implement corrective policies. However, these loans tend to come with conditions that the borrowing country has to fulfil, such as economic reforms.

Lastly, the IMF provides technical assistance and training to help countries build stronger economic institutions and policies. This includes advising on issues like central bank operations, tax administration, and financial supervision.

How does the IMF impact global economies?

Since the IMF acts as a financial safety net, it can prevent a crisis in one country from spreading to others. This helps to stabilise the entire global system. The policy reforms that the IMF requires when it gives a loan are meant to correct underlying problems within an economy, such as high debt or inflation. The IMF’s programmes can impact both developed and developing nations by influencing their fiscal policies, exchange rates, and overall economic direction. For example, a country in a recession might have to undertake austerity measures to receive an IMF loan. This could affect its government spending and social programmes.

How does the IMF affect the global markets?

The International Monetary Fund’s actions and reports affect the global markets, especially currency stability and foreign exchange rates. When a country receives an IMF loan, investors tend to believe that the nation’s economic situation is being managed. This can restore confidence in the domestic currency and stabilise it. However, a request for an IMF loan can also be seen as a sign of economic problems. This could lead the currency to weaken in the short term.

The IMF’s data and forecasts, such as those published in its Global Financial Stability Report, are closely followed by investors to understand global market risks.

How is the IMF different from the World Bank?

Did you know that both the IMF and the World Bank were founded at the Bretton Woods Conference? Both are also headquartered in Washington, DC. But their roles are very different.

History of the IMF

The IMF was established in 1944 to bring about international economic cooperation following the impact of the Great Depression and World War II. The organisation started operations in 1945 with 29 member countries. Over the decades, it has grown to include 191 members. The International Monetary Fund's leadership consists of a Managing Director, who serves as the head of the organization, supported by a staff of economists and other experts. The head of the International Monetary Fund, as of 2025, is Kristalina Georgieva. She was appointed to the position in 2019 and is known for her work on poverty and sustainable development.

The most famous head of the IMF is generally considered to be Christine Lagarde. She served as Managing Director from 2011 to 2019 before becoming President of the European Central Bank. She led the IMF during the European debt crisis, and her efforts to address global economic challenges were appreciated worldwide.

How traders can use IMF data to make investment decisions

Investors closely follow the IMF's reports to gain insights into the health of the global economy. These reports, especially the World Economic Outlook and the Global Financial Stability Report, contain important economic forecasts and risk assessments. For example, if an IMF report highlights that inflation could slow growth in the US, some traders might short the USD. A positive forecast for a region could signal a good investment opportunity.

Understanding and analysing this data is vital for making informed decisions and managing risks in volatile markets. Learn more about risk management in trading.

Exploring demo and live accounts

The IMF’s reports give traders valuable information for fundamental analysis. By tracking these announcements and reports, you can anticipate potential market movements. For those new to trading, a demo account offers a risk-free environment to practice making decisions based on these reports. A demo account mimics real market conditions, so that you can practice without using real money.

When you are ready to use IMF data in your trading strategy, create a live account to explore the financial markets.

FAQs

What is the IMF and what does it do?

The International Monetary Fund (IMF) is a global organisation with 191 member countries. Its main purpose is to ensure the stability of the international monetary system.

How does the IMF impact global economies?

The IMF helps stabilise economies by providing loans to countries facing financial crises. These loans often come with conditions designed to address economic problems. This influences the borrowing country’s fiscal policies and exchange rates.

What is the difference between the IMF and the World Bank?

The IMF focuses on short-term macroeconomic stability and balance of payments issues. The World Bank focuses on long-term economic development and poverty reduction through loans for specific projects.

How do IMF policies influence the financial markets?

IMF policies and reports can affect market sentiment, currency stability, and foreign exchange rates. A loan can restore investor confidence in an economy, while a negative report can signal potential risks.

Who is the head of the IMF?

As of 2025, the head of the International Monetary Fund is Kristalina Georgieva.