What is the International Monetary Fund (IMF)?

The IMF is an international financial institution with the stated goals of “fostering global cooperation, securing financial stability, facilitating international trade, promoting high employment and sustainable economic growth while reducing poverty around the world.”

The IMF was created in 1944 in the wake of World War II, along with its sister organisation the World Bank. The two institutions were formed during the Bretton Woods conference, which also signalled the end of the ‘gold standard’ – a form of commodity money in which the value of each nation’s currency was based on the purchasing power of gold.

The 44 allied countries in attendance wanted to reduce the competitive currency devaluations that had contributed greatly to the Great Depression through economic cooperation and global monetary stability. Currently, the organisation is administered by its 190 member countries.

Who are the members of the IMF?

To further define what the International Monetary Fund is, you should take a closer look at its member countries. While most United Nations (UN) members are also part of the IMF, membership of the IMF is not a prerequisite to being a UN member country.

Some notable UN members that are not part of the IMF are Cuba, Lichtenstein, Monaco and North Korea. It is also worth noting that not all members of the IMF are considered full-fledged countries by all other members. Hong Kong, while not officially recognised as a separate country by a majority of other members, is a member of the IMF, as are Macau and Kosovo, among others.

What does the IMF do?

In its early days, the IMF focused on the maintenance of fixed exchange rates, which were agreed on by its members. Currently, the IMF operates under the assumption that capital markets do not operate on a level playing field, specifically for countries in economic crisis or for those lacking access to global investment markets.

With that in mind, the organisation has shifted its focus to maintaining stability in the global economy through economic surveillance and publication of economic data in an effort to promote debate regarding the success of specific policy decisions. It utilises the data collected to make recommendations to member countries on economic and monetary policies. It also provides loans to struggling economies through emergency lending facilities and capacity-building programmes.

There is some controversy surrounding the organisation, as most credit extended to underdeveloped countries comes with many prerequisite requirements. Many of these requirements involve aspects such as opening up to foreign investment, privatisation of public institutions and other capitalistic terms dictated by the larger members of the organisation.

Economic critics suggest that many countries end up worse off after assistance from the IMF, while on the opposite side, it is viewed as a stabilising entity for global poverty alleviation. While opposing sides may not agree on the methods of the group, there are many factors – both political and financial – that contribute to the long-term success of a struggling economy. In many cases, the IMF is the only option some economies have for accessing capital.