International Monetary Fund (IMF)
The International Monetary Fund (IMF) is the international organisation of more than 190 countries that monitors the global monetary system, lends to members that cannot meet their external payments, and issues the Special Drawing Right.
Also called: IMF · the Fund
The IMF was agreed at the Bretton Woods conference in 1944 and began operating in 1947. Each member pays in a quota based broadly on the size of its economy. Quotas determine how much a country contributes, how much it can borrow and how many votes it has.
The Fund does three things. It conducts surveillance, reviewing each member's economy and exchange-rate policies. It lends to countries in balance-of-payments difficulty, usually on condition that they adopt agreed policy changes. And it provides technical assistance on central banking, statistics and financial regulation. Its published reviews are a primary source on a country's reserves, exchange controls and financial-sector weaknesses.
For payments businesses the IMF matters in two ways. An IMF programme often comes with exchange-rate unification and changes to currency controls, which can transform a corridor quickly. And its annual report on exchange arrangements is the standard reference for which restrictions each country applies.
Commonly confused with
| Term | How it differs |
|---|---|
| World Bank | The World Bank finances long-term development projects. The IMF deals with short-term external payment problems and monetary stability. |
See also
- Special Drawing RightThe Special Drawing Right (SDR) is an international reserve asset created by the IMF. It is not a currency and cannot be spent directly; it is a claim that a member country can exchange for US dollars, euros, yen, sterling or renminbi.
- Bretton Woods SystemThe Bretton Woods system was the international monetary order agreed in 1944, under which currencies were fixed to the US dollar and the dollar was convertible into gold at US$35 an ounce. It created the IMF and the World Bank and ended in 1971.
- Reserve AdequacyReserve adequacy is the judgement of whether a country's foreign exchange reserves are large enough for the shocks it could plausibly face. It is assessed with several ratios together, because no single number captures every way reserves can drain.
- Bank for International SettlementsThe Bank for International Settlements (BIS) is an international institution in Basel, owned by central banks, that provides banking services to them and hosts the committees that write global standards for bank capital and payment infrastructure.
- Currency ConvertibilityCurrency convertibility is the ability to exchange a currency for foreign currency without official restriction. A currency may be convertible for trade payments but restricted for investment flows, and a legal right to convert does not guarantee the foreign currency is available.