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The International Monetary Fund (IMF) is a major financial agency of the
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
, and an
international financial institution An international financial institution (IFI) is a financial institution that has been established (or chartered) by more than one country, and hence is subject to international law. Its owners or shareholders are generally national governments, al ...
, headquartered in
Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle, Jefferson Memorial, White House, Adams Morgan, ...
, consisting of 190 countries. Its stated mission is "working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce
poverty Poverty is the state of having few material possessions or little income. Poverty can have diverse social, economic, and political causes and effects. When evaluating poverty in ...
around the world." Formed in 1944, started on 27 December 1945, at the
Bretton Woods Conference The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, Unite ...
primarily by the ideas of
Harry Dexter White Harry Dexter White (October 29, 1892 – August 16, 1948) was a senior U.S. Treasury department official. Working closely with the Secretary of the Treasury Henry Morgenthau Jr., he helped set American financial policy toward the Allies of World W ...
and
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the
international monetary system An international monetary system is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between states that have d ...
. It now plays a central role in the management of
balance of payments In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...
difficulties and international financial crises. Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money. , the fund had XDR 477 billion (about US$667 billion). The IMF is regarded as the global lender of last resort. Through the fund and other activities such as the gathering of statistics and analysis, surveillance of its members' economies, and the demand for particular policies, the IMF works to influence the economies of its member countries. The organization's objectives stated in the Articles of Agreement are: to promote international monetary co-operation,
international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
, high employment, exchange-rate stability, sustainable economic growth, and making resources available to member countries in financial difficulty. IMF funds come from two major sources: quotas and
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that d ...
s. Quotas, which are pooled funds of member nations, generate most IMF funds. The size of a member's quota depends on its economic and financial importance in the world. Nations with greater economic significance have larger quotas. The quotas are increased periodically as a means of boosting the IMF's resources in the form of
special drawing rights Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
. The current managing director (MD) and Chairwoman of the IMF is
Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedon ...
n
economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
Kristalina Georgieva Kristalina Ivanova Georgieva-Kinova ( bg, Кристалина Иванова Георгиева-Кинова; ; born 13 August 1953) is a Bulgarian economist serving as managing director of the International Monetary Fund since 2019. She was t ...
, who has held the post since October 1, 2019. Indian-American economist
Gita Gopinath Gita Gopinath (born 8 December 1971) is an Indian-American economist who has served as the first deputy managing director of the International Monetary Fund (IMF), since 21 January 2022. She had previously served as chief economist of the IMF be ...
, who previously served as Chief Economist, was appointed as First Deputy Managing Director, effective January 21, 2022.
Pierre-Olivier Gourinchas Pierre-Olivier Gourinchas is a French economist who currently works as S.K. and Angela Chan Professor of Management at the University of California, Berkeley, where he also directs the Clausen Center for International Business and Policy and is af ...
replaced Gopinath as Chief Economist on January 24, 2022.


Functions

According to the IMF itself, it works to foster global growth and
economic stability Economic stability is the absence of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronou ...
by providing policy advice and financing the members by working with
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
to help them achieve macroeconomic stability and reduce poverty. The rationale for this is that private international capital markets function imperfectly and many countries have limited access to financial markets. Such market imperfections, together with balance-of-payments financing, provide the justification for official financing, without which many countries could only correct large external payment imbalances through measures with adverse economic consequences. The IMF provides alternate sources of financing such as the
Poverty Reduction and Growth Facility The Poverty Reduction and Growth Facility (PRGF) is an arm of the International Monetary Fund which lends to the world's poorest countries. It was created on September 16, 1999, replacing the Enhanced Structural Adjustment Facility The Enhanced Str ...
. Upon the founding of the IMF, its three primary functions were: *to oversee the
fixed exchange rate A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another m ...
arrangements between countries, thus helping national governments manage their
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
s and allowing these governments to prioritize economic growth, and *to provide short-term capital to aid the
balance of payments In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...
and prevent the spread of international
economic crises A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
. *to help mend the pieces of the international economy after the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
and
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
as well as to provide capital investments for economic growth and projects such as
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
. The IMF's role was fundamentally altered by the
floating exchange rate In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange mar ...
s after 1971. It shifted to examining the economic policies of countries with IMF loan agreements to determine whether a shortage of capital was due to economic fluctuations or economic policy. The IMF also researched what types of government policy would ensure economic recovery. A particular concern of the IMF was to prevent financial crises, such as those in
Mexico Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
in 1982,
Brazil Brazil ( pt, Brasil; ), officially the Federative Republic of Brazil (Portuguese: ), is the largest country in both South America and Latin America. At and with over 217 million people, Brazil is the world's fifth-largest country by area ...
in 1987,
East Asia East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea and ...
in 1997–98, and
Russia Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
in
1998 1998 was designated as the ''International Year of the Ocean''. Events January * January 6 – The '' Lunar Prospector'' spacecraft is launched into orbit around the Moon, and later finds evidence for frozen water, in soil in permanently ...
, from spreading and threatening the entire global financial and currency system. The challenge was to promote and implement a policy that reduced the frequency of crises among emerging market countries, especially the middle-income countries which are vulnerable to massive capital outflows. Rather than maintaining a position of oversight of only exchange rates, their function became one of surveillance of the overall macroeconomic performance of member countries. Their role became a lot more active because the IMF now manages economic policy rather than just exchange rates. In addition, the IMF negotiates conditions on lending and loans under their policy of
conditionality In political economy and international relations, conditionality is the use of conditions attached to the provision of benefits such as a loan, debt relief or bilateral aid. These conditions are typically imposed by international financial institu ...
, which was established in the 1950s.
Low-income countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
can borrow on concessional terms, which means there is a period of time with no interest rates, through the Extended Credit Facility (ECF), the Standby Credit Facility (SCF) and the Rapid Credit Facility (RCF). Non-concessional loans, which include interest rates, are provided mainly through the Stand-By Arrangements (SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and the Extended Fund Facility. The IMF provides emergency assistance via the Rapid Financing Instrument (RFI) to members facing urgent balance-of-payments needs.


Surveillance of the global economy

The IMF is mandated to oversee the international monetary and financial system and monitor the economic and financial policies of its member countries. This activity is known as surveillance and facilitates international co-operation. Since the demise of the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
of fixed exchange rates in the early 1970s, surveillance has evolved largely by way of changes in procedures rather than through the adoption of new obligations. The responsibilities changed from those of guardians to those of overseers of members' policies. The Fund typically analyses the appropriateness of each member country's economic and financial policies for achieving orderly economic growth, and assesses the consequences of these policies for other countries and for the
global economy The world economy or global economy is the economy of all humans of the world, referring to the global economic system, which includes all economic activities which are conducted both within and between nations, including production, consumption, ...
. For instance, The IMF played a significant role in individual countries, such as Armenia and Belarus, in providing financial support to achieve stabilization financing from 2009 to 2019. The maximum sustainable debt level of a polity, which is watched closely by the IMF, was defined in 2011 by IMF economists to be 120%. Indeed, it was at this number that the Greek economy melted down in 2010. In 1995, the International Monetary Fund began to work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public. The International Monetary and Financial Committee (IMFC) endorsed the guidelines for the dissemination standards and they were split into two tiers: The General Data Dissemination System (GDDS) and the
Special Data Dissemination Standard Special Data Dissemination Standard (SDDS) is an International Monetary Fund standard to guide member countries in the dissemination of national statistics to the public. It was established in April 1996. Members There are currently 65 members. ...
(SDDS). The executive board approved the SDDS and GDDS in 1996 and 1997, respectively, and subsequent amendments were published in a revised ''Guide to the General Data Dissemination System''. The system is aimed primarily at statisticians and aims to improve many aspects of statistical systems in a country. It is also part of the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
Millennium Development Goals The Millennium Development Goals (MDGs) were eight international development goals for the year 2015 that had been established following the Millennium Summit of the United Nations in 2000, following the adoption of the United Nations Millenniu ...
(MDG) and Poverty Reduction Strategic Papers (PRSPs). The primary objective of the GDDS is to encourage member countries to build a framework to improve data quality and statistical capacity building to evaluate statistical needs, set priorities in improving timeliness, transparency, reliability, and accessibility of financial and economic data. Some countries initially used the GDDS, but later upgraded to SDDS. Some entities that are not themselves IMF members also contribute statistical data to the systems: *
Palestinian Authority The Palestinian National Authority (PA or PNA; ar, السلطة الوطنية الفلسطينية '), commonly known as the Palestinian Authority and officially the State of Palestine,
– GDDS *
Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
– SDDS *
Macau Macau or Macao (; ; ; ), officially the Macao Special Administrative Region of the People's Republic of China (MSAR), is a city and special administrative region of China in the western Pearl River Delta by the South China Sea. With a pop ...
– GDDS * Institutions of the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
: ** The
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's Big Four (banking)#Intern ...
for the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies ...
– SDDS **
Eurostat Eurostat ('European Statistical Office'; DG ESTAT) is a Directorate-General of the European Commission located in the Kirchberg, Luxembourg, Kirchberg quarter of Luxembourg City, Luxembourg. Eurostat's main responsibilities are to provide statis ...
for the whole EU – SDDS, thus providing data from Cyprus (not using any DDSystem on its own) and Malta (using only GDDS on its own) A 2021 study found that the IMF's surveillance activities have "a substantial impact on sovereign debt with much greater impacts in emerging than high-income economies."


Conditionality of loans

IMF conditionality is a set of policies or conditions that the IMF requires in exchange for financial resources. The IMF does require
collateral Collateral may refer to: Business and finance * Collateral (finance), a borrower's pledge of specific property to a lender, to secure repayment of a loan * Marketing collateral, in marketing and sales Arts, entertainment, and media * ''Collate ...
from countries for loans but also requires the government seeking assistance to correct its macroeconomic imbalances in the form of policy reform. If the conditions are not met, the funds are withheld. The concept of conditionality was introduced in a 1952 executive board decision and later incorporated into the Articles of Agreement. Conditionality is associated with economic theory as well as an enforcement mechanism for repayment. Stemming primarily from the work of Jacques Polak, the theoretical underpinning of conditionality was the "monetary approach to the balance of payments".


Structural adjustment

Some of the conditions for structural adjustment can include: * Cutting expenditures or raising revenues, also known as
austerity Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spend ...
. * Focusing economic output on direct export and
resource extraction Extractivism is the process of extracting natural resources from the Earth to sell on the world market. It exists in an economy that depends primarily on the extraction or removal of natural resources that are considered valuable for exportation w ...
, *
Devaluation In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curren ...
of currencies, *
Trade liberalisation Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...
, or lifting import and export restrictions, * Increasing the stability of investment (by supplementing
foreign direct investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct co ...
with the opening of facilities for the domestic market), * Balancing budgets and not overspending, * Removing
price control Price controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of good ...
s and state
subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
, *
Privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
, or
divestiture In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment. Divestiture is a ...
of all or part of state-owned enterprises, * Enhancing the rights of
foreign investors Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
vis-a-vis national laws, * Improving
governance Governance is the process of interactions through the laws, social norm, norms, power (social and political), power or language of an organized society over a social system (family, tribe, formal organization, formal or informal organization, a ...
and fighting corruption, These conditions are known as the
Washington Consensus The Washington Consensus is a set of ten economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such as the International Monet ...
.


Benefits

These loan conditions ensure that the borrowing country will be able to repay the IMF and that the country will not attempt to solve their balance-of-payment problems in a way that would negatively impact the international economy. The incentive problem of
moral hazard In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk ...
—when
economic agents In economics, an agent is an actor (more specifically, a decision maker) in a model of some aspect of the economy. Typically, every agent makes decisions by solving a well- or ill-defined optimization or choice problem. For example, ''buyers'' (c ...
maximise their own
utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosopher ...
to the detriment of others because they do not bear the full consequences of their actions—is mitigated through conditions rather than providing collateral; countries in need of IMF loans do not generally possess internationally valuable collateral anyway. Conditionality also reassures the IMF that the funds lent to them will be used for the purposes defined by the Articles of Agreement and provides safeguards that country will be able to rectify its macroeconomic and structural imbalances. In the judgment of the IMF, the adoption by the member of certain corrective measures or policies will allow it to repay the IMF, thereby ensuring that the resources will be available to support other members. , borrowing countries have had a good track record for repaying credit extended under the IMF's regular lending facilities with full interest over the duration of the loan. This indicates that IMF lending does not impose a burden on creditor countries, as lending countries receive market-rate interest on most of their quota subscription, plus any of their own-currency subscriptions that are loaned out by the IMF, plus all of the reserve assets that they provide the IMF.


History


20th century

The IMF was originally laid out as a part of the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
exchange agreement in 1944. During the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
, countries sharply raised barriers to trade in an attempt to improve their failing economies. This led to the
devaluation In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curren ...
of national currencies and a decline in world trade. This breakdown in international monetary cooperation created a need for oversight. The representatives of 45 governments met at the
Bretton Woods Conference The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, Unite ...
in the Mount Washington Hotel in
Bretton Woods, New Hampshire Bretton Woods is an area within the town of Carroll, New Hampshire, Carroll, New Hampshire, United States, whose principal points of interest are three leisure and recreation facilities. Being virtually surrounded by the White Mountain National Fo ...
, in the United States, to discuss a framework for postwar international economic cooperation and how to rebuild Europe. There were two views on the role the IMF should assume as a global economic institution. American delegate
Harry Dexter White Harry Dexter White (October 29, 1892 – August 16, 1948) was a senior U.S. Treasury department official. Working closely with the Secretary of the Treasury Henry Morgenthau Jr., he helped set American financial policy toward the Allies of World W ...
foresaw an IMF that functioned more like a bank, making sure that borrowing states could repay their debts on time. Most of White's plan was incorporated into the final acts adopted at Bretton Woods. British economist
John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
, on the other hand, imagined that the IMF would be a cooperative fund upon which member states could draw to maintain economic activity and employment through periodic crises. This view suggested an IMF that helped governments and to act as the United States government had during the New Deal to the great recession of the 1930s. The IMF formally came into existence on 27 December 1945, when the first 29 countries
ratified Ratification is a principal's approval of an act of its agent that lacked the authority to bind the principal legally. Ratification defines the international act in which a state indicates its consent to be bound to a treaty if the parties inte ...
its Articles of Agreement. By the end of 1946 the IMF had grown to 39 members. On 1 March 1947, the IMF began its financial operations, and on 8 May France became the first country to borrow from it. The IMF was one of the key organizations of the international economic system; its design allowed the system to balance the rebuilding of international capitalism with the maximization of national economic sovereignty and human welfare, also known as
embedded liberalism Embedded liberalism is a term in international political economy for the global economic system and the associated international political orientation as they existed from the end of World War II to the 1970s. The system was set up to support a c ...
. The IMF's influence in the global economy steadily increased as it accumulated more members. The increase reflected, in particular, the attainment of political independence by many African countries and more recently the 1991
dissolution of the Soviet Union The dissolution of the Soviet Union, also negatively connoted as rus, Разва́л Сове́тского Сою́за, r=Razvál Sovétskogo Soyúza, ''Ruining of the Soviet Union''. was the process of internal disintegration within the Sov ...
because most countries in the Soviet sphere of influence did not join the IMF. The Bretton Woods exchange rate system prevailed until 1971 when the United States government suspended the convertibility of the US$ (and dollar reserves held by other governments) into gold. This is known as the Nixon Shock. The changes to the IMF articles of agreement reflecting these changes were ratified in 1976 by the
Jamaica Accords The Jamaica Accords were a set of international agreements that ratified the end of the Bretton Woods monetary system. They took the form of recommendations to change the "articles of agreement" that the International Monetary Fund (IMF) was founded ...
. Later in the 1970s, large commercial banks began lending to states because they were awash in cash deposited by oil exporters. The lending of the so-called money center banks led to the IMF changing its role in the 1980s after a world recession provoked a crisis that brought the IMF back into global financial governance.


21st century

The IMF provided two major lending packages in the early 2000s to Argentina (during the
1998–2002 Argentine great depression The Argentine Great Depression was an economic depression in Argentina, which began in the third quarter of 1998 and lasted until the second quarter of 2002. It followed the fifteen years stagnation and a brief period of free-market reforms. ...
) and Uruguay (after the
2002 Uruguay banking crisis The Uruguay banking crisis was a major banking crisis that hit Uruguay in July 2002. In this, a massive run on banks by depositors (most of them from neighboring Argentina) caused the government to freeze banking operations. The crisis was caused b ...
). However, by the mid-2000s, IMF lending was at its lowest share of world GDP since the 1970s. In May 2010, the IMF participated, in 3:11 proportion, in the first Greek bailout that totaled €110 billion, to address the great accumulation of public debt, caused by continuing large public sector deficits. As part of the bailout, the Greek government agreed to adopt austerity measures that would reduce the deficit from 11% in 2009 to "well below 3%" in 2014. The bailout did not include debt restructuring measures such as a
haircut A hairstyle, hairdo, haircut or coiffure refers to the styling of hair, usually on the human scalp. Sometimes, this could also mean an editing of facial or body hair. The fashioning of hair can be considered an aspect of personal grooming ...
, to the chagrin of the Swiss, Brazilian, Indian, Russian, and Argentinian Directors of the IMF, with the Greek authorities themselves (at the time, PM
George Papandreou George Andreas Papandreou ( el, Γεώργιος Ανδρέας Παπανδρέου, , shortened to ''Giorgos'' () to distinguish him from his grandfather; born 16 June 1952) is a Greek politician who served as Prime Minister of Greece from ...
and Finance Minister
Giorgos Papakonstantinou Giórgos Papakonstantínou ( el, Γιώργος Παπακωνσταντίνου; born 30 October 1961) in Athens, Greece, is a Greek economist and politician and former Minister for the Environment, Energy and Climate Change of Greece and former ...
) ruling out a haircut. A second bailout package of more than €100 billion was agreed over the course of a few months from October 2011, during which time Papandreou was forced from office. The so-called
Troika Troika or troyka (from Russian тройка, meaning 'a set of three') may refer to: Cultural tradition * Troika (driving), a traditional Russian harness driving combination, a cultural icon of Russia * Troika (dance), a Russian folk dance Pol ...
, of which the IMF is part, are joint managers of this programme, which was approved by the executive directors of the IMF on 15 March 2012 for XDR 23.8 billion and saw private bondholders take a
haircut A hairstyle, hairdo, haircut or coiffure refers to the styling of hair, usually on the human scalp. Sometimes, this could also mean an editing of facial or body hair. The fashioning of hair can be considered an aspect of personal grooming ...
of upwards of 50%. In the interval between May 2010 and February 2012 the private banks of Holland, France and Germany reduced exposure to Greek debt from €122 billion to €66 billion. , the largest borrowers from the IMF in order were Greece, Portugal, Ireland, Romania, and Ukraine. On 25 March 2013, a €10 billion international
bailout A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global sys ...
of Cyprus was agreed by the
Troika Troika or troyka (from Russian тройка, meaning 'a set of three') may refer to: Cultural tradition * Troika (driving), a traditional Russian harness driving combination, a cultural icon of Russia * Troika (dance), a Russian folk dance Pol ...
, at the cost to the Cypriots of its agreement: to close the country's second-largest bank; to impose a one-time
bank deposit levy A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...
on Bank of Cyprus uninsured deposits. No insured deposit of €100k or less were to be affected under the terms of a novel
bail-in A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global syst ...
scheme. The topic of sovereign debt restructuring was taken up by the IMF in April 2013, for the first time since 2005, in a report entitled "Sovereign Debt Restructuring: Recent Developments and Implications for the Fund's Legal and Policy Framework". The paper, which was discussed by the board on 20 May, summarised the recent experiences in Greece, St Kitts and Nevis, Belize, and Jamaica. An explanatory interview with Deputy Director Hugh Bredenkamp was published a few days later, as was a deconstruction by Matina Stevis of ''
The Wall Street Journal ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
''. In the October 2013, Fiscal Monitor publication, the IMF suggested that a
capital levy A capital levy is a tax on capital rather than income, collected once, rather than repeatedly (regular collection would make it a wealth tax). For example, a capital levy of 30% will see an individual or business with a net worth of $100,000 pay a ...
capable of reducing Euro-area government debt ratios to "end-2007 levels" would require a very high tax rate of about 10%. The Fiscal Affairs department of the IMF, headed at the time by Acting Director Sanjeev Gupta, produced a January 2014 report entitled "Fiscal Policy and Income Inequality" that stated that "Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more
progressive taxation A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
... Property taxes are equitable and efficient, but underutilized in many economies ... There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument." At the end of March 2014, the IMF secured an $18 billion bailout fund for the provisional government of Ukraine in the aftermath of the
Revolution of Dignity The Revolution of Dignity ( uk, Революція гідності, translit=Revoliutsiia hidnosti) also known as the Maidan Revolution or the Ukrainian Revolution,
.


Response and analysis of coronavirus

In late 2019, the IMF estimated global growth in 2020 to reach 3.4%, but due to the coronavirus, in November 2020, it expected the global economy to shrink by 4.4%. In March 2020,
Kristalina Georgieva Kristalina Ivanova Georgieva-Kinova ( bg, Кристалина Иванова Георгиева-Кинова; ; born 13 August 1953) is a Bulgarian economist serving as managing director of the International Monetary Fund since 2019. She was t ...
announced that the IMF stood ready to mobilize $1 trillion as its response to the
COVID-19 pandemic The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
. This was in addition to the $50 billion fund it had announced two weeks earlier, of which $5 billion had already been requested by
Iran Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...
. One day earlier on 11 March, the UK called to pledge £150 million to the IMF catastrophe relief fund. It came to light on 27 March that "more than 80 poor and middle-income countries" had sought a bailout due to the coronavirus. On 13 April 2020, the IMF said that it "would provide immediate debt relief to 25 member countries under its
Catastrophe Containment and Relief Trust The Catastrophe Containment and Relief Trust is a bailout fund of the International Monetary Fund. History On 13 April, the IMF announced that 25 member countries had applied to the CCRT fund for relief of the COVID-19 pandemic The COVID-1 ...
(CCRT)" programme. In November 2020, the Fund warned the economic recovery may be losing momentum as COVID-19 infections rise again and that more economic help would be needed.


Member countries

Not all member countries of the IMF are sovereign states, and therefore not all "member countries" of the IMF are members of the United Nations. Amidst "member countries" of the IMF that are not member states of the UN are non-sovereign areas with special jurisdictions that are officially under the sovereignty of full UN member states, such as
Aruba Aruba ( , , ), officially the Country of Aruba ( nl, Land Aruba; pap, Pais Aruba) is a constituent country of the Kingdom of the Netherlands physically located in the mid-south of the Caribbean Sea, about north of the Venezuela peninsula of ...
,
Curaçao Curaçao ( ; ; pap, Kòrsou, ), officially the Country of Curaçao ( nl, Land Curaçao; pap, Pais Kòrsou), is a Lesser Antilles island country in the southern Caribbean Sea and the Dutch Caribbean region, about north of the Venezuela coast ...
, Hong Kong, and
Macao Macau or Macao (; ; ; ), officially the Macao Special Administrative Region of the People's Republic of China (MSAR), is a city and special administrative region of China in the western Pearl River Delta by the South China Sea. With a pop ...
, as well as
Kosovo Kosovo ( sq, Kosova or ; sr-Cyrl, Косово ), officially the Republic of Kosovo ( sq, Republika e Kosovës, links=no; sr, Република Косово, Republika Kosovo, links=no), is a partially recognised state in Southeast Euro ...
. The corporate members appoint ''ex-officio'' voting members, who are listed below. All members of the IMF are also
International Bank for Reconstruction and Development The International Bank for Reconstruction and Development (IBRD) is an international financial institution, established in 1944 and headquartered in Washington, D.C., United States, that is the lending arm of World Bank Group. The IBRD offers l ...
(IBRD) members and vice versa. Former members are
Cuba Cuba ( , ), officially the Republic of Cuba ( es, República de Cuba, links=no ), is an island country comprising the island of Cuba, as well as Isla de la Juventud and several minor archipelagos. Cuba is located where the northern Caribbea ...
(which left in 1964), and
Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the nort ...
, which was ejected from the IMF in 1980 after losing the support of then United States President
Jimmy Carter James Earl Carter Jr. (born October 1, 1924) is an American politician who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party, he previously served as th ...
and was replaced by the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
. However, "Taiwan Province of China" is still listed in the official IMF indices. Apart from Cuba, the other UN states that do not belong to the IMF are
Liechtenstein Liechtenstein (), officially the Principality of Liechtenstein (german: link=no, Fürstentum Liechtenstein), is a German-speaking microstate located in the Alps between Austria and Switzerland. Liechtenstein is a semi-constitutional monarchy ...
,
Monaco Monaco (; ), officially the Principality of Monaco (french: Principauté de Monaco; Ligurian: ; oc, Principat de Mónegue), is a sovereign city-state and microstate on the French Riviera a few kilometres west of the Italian region of Lig ...
and
North Korea North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korea, Korean Peninsula and shares borders with China and Russia to the north, at the Yalu River, Y ...
. However,
Andorra , image_flag = Flag of Andorra.svg , image_coat = Coat of arms of Andorra.svg , symbol_type = Coat of arms , national_motto = la, Virtus Unita Fortior, label=none (Latin)"United virtue is stro ...
became the 190th member on 16 October 2020. The former
Czechoslovakia , rue, Чеськословеньско, , yi, טשעכאסלאוואקיי, , common_name = Czechoslovakia , life_span = 1918–19391945–1992 , p1 = Austria-Hungary , image_p1 ...
was expelled in 1954 for "failing to provide required data" and was readmitted in 1990, after the
Velvet Revolution The Velvet Revolution ( cs, Sametová revoluce) or Gentle Revolution ( sk, Nežná revolúcia) was a non-violent transition of power in what was then Czechoslovakia, occurring from 17 November to 28 November 1989. Popular demonstrations agains ...
.
Poland Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populous ...
withdrew in 1950—allegedly pressured by the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen national ...
—but returned in 1986.


Qualifications

Any country may apply to be a part of the IMF. Post-IMF formation, in the early postwar period, rules for IMF membership were left relatively loose. Members needed to make periodic membership payments towards their quota, to refrain from currency restrictions unless granted IMF permission, to abide by the Code of Conduct in the IMF Articles of Agreement, and to provide national economic information. However, stricter rules were imposed on governments that applied to the IMF for funding. The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates secured at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement.


Benefits

Member countries of the IMF have access to information on the economic policies of all member countries, the opportunity to influence other members' economic policies,
technical assistance Development aid is a type of foreign/international/overseas aid given by governments and other agencies to support the economic, environmental, social, and political development of developing countries. Closely-related concepts include: developm ...
in banking, fiscal affairs, and exchange matters, financial support in times of payment difficulties, and increased opportunities for trade and investment.


Leadership


Board of Governors

The Board of Governors consists of one governor and one alternate governor for each member country. Each member country appoints its two governors. The Board normally meets once a year and is responsible for electing or appointing an executive director to the executive board. While the Board of Governors is officially responsible for approving quota increases, special drawing right allocations, the admittance of new members, compulsory withdrawal of members, and amendments to the Articles of Agreement and By-Laws, in practice it has delegated most of its powers to the IMF's executive board. The Board of Governors is advised by the
International Monetary and Financial Committee The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
and the Development Committee. The International Monetary and Financial Committee has 24 members and monitors developments in global liquidity and the transfer of resources to
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
. The Development Committee has 25 members and advises on critical development issues and on financial resources required to promote economic development in developing countries. They also advise on trade and
environmental issues Environmental issues are effects of human activity on the biophysical environment, most often of which are harmful effects that cause environmental degradation. Environmental protection is the practice of protecting the natural environment on t ...
. The Board of Governors reports directly to the managing director of the IMF, Kristalina Georgieva.


Executive Board

24 Executive Directors make up the executive board. The executive directors represent all 189 member countries in a geographically based roster. Countries with large economies have their own executive director, but most countries are grouped in constituencies representing four or more countries. Following the ''2008 Amendment on Voice and Participation'' which came into effect in March 2011, seven countries each appoint an executive director: the United States, Japan, China, Germany, France, the United Kingdom, and Saudi Arabia. The remaining 17 Directors represent constituencies consisting of 2 to 23 countries. This Board usually meets several times each week. The Board membership and constituency is scheduled for periodic review every eight years.


Managing Director

The IMF is led by a managing director, who is head of the staff and serves as Chairman of the executive board. The managing director is the most powerful position at the IMF. Historically, the IMF's managing director has been a
European citizen European Union citizenship is afforded to all citizens of member states of the European Union (EU). It was formally created with the adoption of the 1992 Maastricht Treaty, at the same time as the creation of the EU. EU citizenship is additio ...
and the president of the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
has been an
American citizen Citizenship of the United States is a legal status that entails Americans with specific rights, duties, protections, and benefits in the United States. It serves as a foundation of fundamental rights derived from and protected by the Constituti ...
. However, this standard is increasingly being questioned and competition for these two posts may soon open up to include other qualified candidates from any part of the world.. In August 2019, the International Monetary Fund has removed the age limit which is 65 or over for its managing director position. In 2011, the world's largest developing countries, the
BRIC BRIC is a grouping acronym referring to the developing countries of Brazil, Russia, India, and China, which are identified as rising economic powers. It is typically rendered as "the BRIC," "the BRIC countries," "the BRIC economies," or alte ...
states, issued a statement declaring that the tradition of appointing a European as managing director undermined the legitimacy of the IMF and called for the appointment to be merit-based.


List of Managing Directors

Former managing director
Dominique Strauss-Kahn Dominique Gaston André Strauss-Kahn (; born 25 April 1949), also known as DSK, is a French economist and politician who served as the tenth managing director of the International Monetary Fund (IMF), and was a member of the French Socialist P ...
was arrested in connection with charges of sexually assaulting a New York hotel room attendant and resigned on 18 May. The charges were later dropped. On 28 June 2011
Christine Lagarde Christine Madeleine Odette Lagarde (; née Lallouette, ; born 1 January 1956) is a French politician and lawyer who has been serving as President of the European Central Bank since 2019. She previously served as the 11th managing director of the ...
was confirmed as managing director of the IMF for a five-year term starting on 5 July 2011. She was re-elected by consensus for a second five-year term, starting 5 July 2016, being the only candidate nominated for the post of managing director.


First Deputy Managing Director

The managing director is assisted by a First Deputy managing director (FDMD) who, by convention, has always been a citizen of the United States. Together, the managing director and their First Deputy lead th
senior management of the IMF
Like the managing director, the First Deputy traditionally serves a five-year term.


List of First Deputy Managing Directors


Chief Economist

The chief economist leads the research division of the IMF and is a "senior official" of the IMF.


List of Chief Economists


Voting power

Voting power in the IMF is based on a quota system. Each member has a number of basic votes, equal to 5.502% of the total votes, plus one additional vote for each special drawing right (SDR) of 100,000 of a member country's quota.. The SDR is the unit of account of the IMF and represents a potential claim to currency. It is based on a basket of key international currencies. The basic votes generate a slight bias in favour of small countries, but the additional votes determined by SDR outweigh this bias. Changes in the voting shares require approval by a super-majority of 85% of voting power. In December 2015, the United States Congress adopted a legislation authorising the 2010 Quota and Governance Reforms. As a result, * all 190 members' quotas will increase from a total of about XDR 238.5 billion to about XDR 477 billion, while the quota shares and voting power of the IMF's poorest member countries will be protected. * more than 6 percent of quota shares will shift to dynamic emerging market and developing countries and also from over-represented to under-represented members. * four emerging market countries (Brazil, China, India, and Russia) will be among the ten largest members of the IMF. Other top 10 members are the United States, Japan, Germany, France, the United Kingdom and Italy.


Effects of the quota system

The IMF's quota system was created to raise funds for loans. Each IMF member country is assigned a quota, or contribution, that reflects the country's relative size in the global economy. Each member's quota also determines its relative voting power. Thus, financial contributions from member governments are linked to voting power in the organization. This system follows the logic of a shareholder-controlled organization: wealthy countries have more say in the making and revision of rules. Since decision making at the IMF reflects each member's relative economic position in the world, wealthier countries that provide more money to the IMF have more influence than poorer members that contribute less; nonetheless, the IMF focuses on redistribution.


Inflexibility of voting power

Quotas are normally reviewed every five years and can be increased when deemed necessary by the Board of Governors. IMF voting shares are relatively inflexible: countries that grow economically have tended to become under-represented as their voting power lags behind. Currently, reforming the representation of
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
within the IMF has been suggested. These countries' economies represent a large portion of the global economic system but this is not reflected in the IMF's decision-making process through the nature of the quota system.
Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
argues, "There is a need to provide more effective voice and representation for developing countries, which now represent a much larger portion of world economic activity since 1944, when the IMF was created." In 2008, a number of quota reforms were passed including shifting 6% of quota shares to dynamic emerging markets and developing countries.


Overcoming borrower/creditor divide

The IMF's membership is divided along income lines: certain countries provide financial resources while others use these resources. Both
developed country A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
"creditors" and
developing country A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
"borrowers" are members of the IMF. The developed countries provide the financial resources but rarely enter into IMF loan agreements; they are the creditors. Conversely, the developing countries use the lending services but contribute little to the pool of money available to lend because their quotas are smaller; they are the borrowers. Thus, tension is created around governance issues because these two groups, creditors and borrowers, have fundamentally different interests. The criticism is that the system of voting power distribution through a quota system institutionalizes borrower subordination and creditor dominance. The resulting division of the IMF's membership into borrowers and non-borrowers has increased the controversy around conditionality because the borrowers are interested in increasing loan access while creditors want to maintain reassurance that the loans will be repaid.


Use

A recent source revealed that the average overall use of IMF credit per decade increased, in real terms, by 21% between the 1970s and 1980s, and increased again by just over 22% from the 1980s to the 1991–2005 period. Another study has suggested that since 1950 the continent of Africa alone has received $300 billion from the IMF, the World Bank, and affiliate institutions. A study by Bumba Mukherjee found that developing democratic countries benefit more from IMF programs than developing autocratic countries because policy-making, and the process of deciding where loaned money is used, is more transparent within a democracy. One study done by
Randall Stone Randall Warren Stone (born February 21, 1966) is an American political scientist and a professor at the University of Rochester, notable for his studies on international political economy, international relations, and Russian and European politics. ...
found that although earlier studies found little impact of IMF programs on balance of payments, more recent studies using more sophisticated methods and larger samples "usually found IMF programs improved the balance of payments".


Exceptional Access Framework – sovereign debt

The Exceptional Access Framework was created in 2003 when
John B. Taylor John Brian Taylor (born December 8, 1946) is the Mary and Robert Raymond Professor of Economics at Stanford University, and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution. He taught at Columbia Univer ...
was Under Secretary of the
US Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and th ...
for International Affairs. The new Framework became fully operational in February 2003 and it was applied in the subsequent decisions on Argentina and Brazil. Its purpose was to place some sensible rules and limits on the way the IMF makes loans to support governments with debt problem—especially in emerging markets—and thereby move away from the bailout mentality of the 1990s. Such a reform was essential for ending the crisis atmosphere that then existed in emerging markets. The reform was closely related to and put in place nearly simultaneously with the actions of several emerging market countries to place
collective action clause A collective action clause (CAC) allows a supermajority of bondholders to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring. Bondholders generally opposed such cla ...
s in their bond contracts. In 2010, the framework was abandoned so the IMF could make loans to Greece in an unsustainable and political situation. The topic of sovereign debt restructuring was taken up by IMF staff in April 2013 for the first time since 2005, in a report entitled "Sovereign Debt Restructuring: Recent Developments and Implications for the Fund's Legal and Policy Framework". The paper, which was discussed by the board on 20 May, summarised the recent experiences in Greece, St Kitts and Nevis, Belize, and Jamaica. An explanatory interview with Deputy Director Hugh Bredenkamp was published a few days later, as was a deconstruction by Matina Stevis of ''
The Wall Street Journal ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
''. The staff was directed to formulate an updated policy, which was accomplished on 22 May 2014 with a report entitled "The Fund's Lending Framework and Sovereign Debt: Preliminary Considerations", and taken up by the executive board on 13 June."The Fund's Lending Framework and Sovereign Debt – Preliminary Considerations" 22 May 2014
(also bears date June 2014; team of 20 led by
Reza Bakir Reza is a Persian name, originating from the Arabic word , ''Riḍā'', which literally means "the fact of being pleased or contented; contentment, approval". In religious context, this name is interpreted as ''satisfaction'' or "''perfect content ...
and supervised by
Olivier Blanchard Olivier Jean Blanchard (; born December 27, 1948) is a French economist and professor who is a senior fellow at the Peterson Institute for International Economics. He was the chief economist at the International Monetary Fund from September 1, 20 ...
,
Sean Hagan Sean, also spelled Seán or Séan in Irish English, is a male given name of Irish origin. It comes from the Irish versions of the Biblical Hebrew name ''Yohanan'' (), Seán (anglicized as ''Shaun/Shawn/ Shon'') and Séan (Ulster variant; angliciz ...
, Hugh Bredenkamp, and
Peter Dattels Peter may refer to: People * List of people named Peter, a list of people and fictional characters with the given name * Peter (given name) ** Saint Peter (died 60s), apostle of Jesus, leader of the early Christian Church * Peter (surname), a sur ...
)
The staff proposed that "in circumstances where a (Sovereign) member has lost market access and debt is considered sustainable ... the IMF would be able to provide Exceptional Access on the basis of a debt operation that involves an extension of maturities", which was labeled a "reprofiling operation". These reprofiling operations would "generally be less costly to the debtor and creditors—and thus to the system overall—relative to either an upfront debt reduction operation or a bail-out that is followed by debt reduction ... (and) would be envisaged only when both (a) a member has lost market access and (b) debt is assessed to be sustainable, but not with high probability ... Creditors will only agree if they understand that such an amendment is necessary to avoid a worse outcome: namely, a default and/or an operation involving debt reduction ...
Collective action clause A collective action clause (CAC) allows a supermajority of bondholders to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring. Bondholders generally opposed such cla ...
s, which now exist in most—but not all—bonds would be relied upon to address collective action problems."


Impact

According to a 2002 study by Randall W. Stone, the academic literature on the IMF shows "no consensus on the long-term effects of IMF programs on growth". Some research has found that IMF loans can reduce the chance of a future banking crisis, while other studies have found that they can increase the risk of political crises. IMF programs can reduce the effects of a currency crisis. Some research has found that IMF programs are less effective in countries which possess a developed-country patron (be it by foreign aid, membership of postcolonial institutions or UN voting patterns), seemingly due to this patron allowing countries to flaunt IMF program rules as these rules are not consistently enforced. Some research has found that IMF loans reduce economic growth due to creating an economic
moral hazard In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk ...
, reducing public investment, reducing incentives to create a robust domestic policies and reducing private investor confidence. Other research has indicated that IMF loans can have a positive impact on economic growth and that their effects are highly nuanced.


Criticisms

Overseas Development Institute ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the p ...
(ODI) research undertaken in 1980 included criticisms of the IMF which support the analysis that it is a pillar of what activist Titus Alexander calls
global apartheid Global apartheid is a term used to describe how Global North countries are engaged in a project of "racialization, segregation, political intervention, mobility controls, capitalist plunder, and labor exploitation" affecting people from the Global ...
. * Developed countries were seen to have a more dominant role and control over
less developed countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
(LDCs). * The Fund worked on the incorrect assumption that all payments disequilibria were caused domestically. The
Group of 24 The Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development, or The Group of 24 (G-24) was established in 1971 as a chapter of the Group of 77 in order to help coordinate the positions of developing countries on ...
(G-24), on behalf of LDC members, and the
United Nations Conference on Trade and Development The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...
(UNCTAD) complained that the IMF did not distinguish sufficiently between disequilibria with predominantly external as opposed to internal causes. This criticism was voiced in the aftermath of the
1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had supp ...
. Then LDCs found themselves with payment deficits due to adverse changes in their
terms of trade The terms of trade (TOT) is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An i ...
, with the Fund prescribing stabilization programmes similar to those suggested for deficits caused by government over-spending. Faced with long-term, externally generated disequilibria, the G-24 argued for more time for LDCs to adjust their economies. * Some IMF policies may be anti-developmental; the report said that
deflationary In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
effects of IMF programmes quickly led to losses of output and employment in economies where incomes were low and unemployment was high. Moreover, the burden of the deflation is disproportionately borne by the poor. * The IMF's initial policies were based in theory and influenced by differing opinions and departmental rivalries. Critics suggest that its intentions to implement these policies in countries with widely varying economic circumstances were misinformed and lacked economic rationale. ODI conclusions were that the IMF's very nature of promoting market-oriented approaches attracted unavoidable criticism. On the other hand, the IMF could serve as a scapegoat while allowing governments to blame international bankers. The ODI conceded that the IMF was insensitive to political aspirations of LDCs while its policy conditions were inflexible. Argentina, which had been considered by the IMF to be a model country in its compliance to policy proposals by the
Bretton Woods Bretton Woods can refer to: *Bretton Woods, New Hampshire, a village in the United States **Bretton Woods Mountain Resort, a ski resort located in Bretton Woods, New Hampshire *The 1944 Bretton Woods Conference, also known as the "United Nations Mo ...
institutions, experienced a catastrophic economic crisis in 2001, which some believe to have been caused by IMF-induced budget restrictions—which undercut the government's ability to sustain national infrastructure even in crucial areas such as health, education, and security—and
privatisation Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of strategically vital national
resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their a ...
. Others attribute the crisis to Argentina's misdesigned fiscal federalism, which caused subnational spending to increase rapidly. The crisis added to widespread hatred of this institution in Argentina and other South American countries, with many blaming the IMF for the region's economic problems. The current—as of early 2006—trend toward moderate left-wing governments in the region and a growing concern with the development of a regional economic policy largely independent of big business pressures has been ascribed to this crisis. In 2006, a senior
ActionAid ActionAid is an international non-governmental organization whose stated primary aim is to work against poverty and injustice worldwide. ActionAid is a federation of 45 country offices that works with communities, often via local partner organis ...
policy analyst Akanksha Marphatia stated that IMF policies in Africa undermine any possibility of meeting the Millennium Development Goals (MDGs) due to imposed restrictions that prevent spending on important sectors, such as education and health. In an interview (2008-05-19), the former Romanian Prime Minister
Călin Popescu-Tăriceanu Călin Constantin Anton Popescu-Tăriceanu (; born 14 January 1952) is a Romanian politician who was Prime Minister of Romania from 29 December 2004 to 22 December 2008. He was also president of the National Liberal Party (PNL) and the vice-pre ...
claimed that "Since 2005, IMF is constantly making mistakes when it appreciates the country's economic performances". Former Tanzanian President
Julius Nyerere Julius Kambarage Nyerere (; 13 April 1922 – 14 October 1999) was a Tanzanian anti-colonial activist, politician, and political theorist. He governed Tanganyika as prime minister from 1961 to 1962 and then as president from 1962 to 1964, aft ...
, who claimed that debt-ridden African states were ceding sovereignty to the IMF and the World Bank, famously asked, "Who elected the IMF to be the ministry of finance for every country in the world?" Former chief economist of IMF and former
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
(RBI) Governor
Raghuram Rajan Raghuram Govind Rajan (born 3 February 1963) is an Indian economist and the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. Quote: "I am an Indian citizen. I have always b ...
who predicted the
financial crisis of 2007–08 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
criticised the IMF for remaining a sideline player to the developed world. He criticised the IMF for praising the monetary policies of the US, which he believed were wreaking havoc in emerging markets. He had been critical of "ultra-loose money policies" of some unnamed countries. Countries such as
Zambia Zambia (), officially the Republic of Zambia, is a landlocked country at the crossroads of Central Africa, Central, Southern Africa, Southern and East Africa, although it is typically referred to as being in Southern Africa at its most cent ...
have not received proper aid with long-lasting effects, leading to concern from economists. Since 2005, Zambia (as well as 29 other African countries) did receive debt write-offs, which helped with the country's medical and education funds. However, Zambia returned to a debt of over half its GDP in less than a decade. American economist
William Easterly William Russell Easterly (born September 7, 1957) is an American economist, specializing in economic development. He is a professor of economics at New York University, joint with Africa House, and co-director of NYU’s Development Research Insti ...
, sceptical of the IMF's methods, had initially warned that "debt relief would simply encourage more reckless borrowing by crooked governments unless it was accompanied by reforms to speed up economic growth and improve governance", according to ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Econo ...
''.


Conditionality

The IMF has been criticised for being "out of touch" with local economic conditions, cultures, and environments in the countries they are requiring policy reform. The economic advice the IMF gives might not always take into consideration the difference between what spending means on paper and how it is felt by citizens. Countries charge that with excessive conditionality, they do not "own" the programmes and the links are broken between a recipient country's people, its government, and the goals being pursued by the IMF.
Jeffrey Sachs Jeffrey David Sachs () (born 5 November 1954) is an American economist, academic, public policy analyst, and former director of The Earth Institute at Columbia University, where he holds the title of University Professor. He is known for his work ...
argues that the IMF's "usual prescription is 'budgetary belt tightening to countries who are much too poor to own belts. Sachs wrote that the IMF's role as a generalist institution specialising in macroeconomic issues needs reform.
Conditionality In political economy and international relations, conditionality is the use of conditions attached to the provision of benefits such as a loan, debt relief or bilateral aid. These conditions are typically imposed by international financial institu ...
has also been criticised because a country can pledge collateral of "acceptable assets" to obtain waivers—if one assumes that all countries are able to provide "acceptable collateral". One view is that conditionality undermines domestic political institutions. The recipient governments are sacrificing policy autonomy in exchange for funds, which can lead to public resentment of the local leadership for accepting and enforcing the IMF conditions. Political instability can result from more leadership turnover as political leaders are replaced in electoral backlashes. IMF conditions are often criticised for reducing government services, thus increasing unemployment. Another criticism is that IMF policies are only designed to address poor governance, excessive government spending, excessive government intervention in markets, and too much state ownership. This assumes that this narrow range of issues represents the only possible problems; everything is standardised and differing contexts are ignored. A country may also be compelled to accept conditions it would not normally accept had they not been in a financial crisis in need of assistance. On top of that, regardless of what methodologies and data sets used, it comes to same the conclusion of exacerbating income inequality. With Gini coefficient, it became clear that countries with IMF policies face increased income inequality. It is claimed that conditionalities retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programmes lead to an increase in poverty in recipient countries.Hertz,
Noreena __NOTOC__ ''Thereus'' is a genus of gossamer-winged butterflies (family (biology), family Lycaenidae). Among these, it belongs belong to the tribe (biology), tribe Eumaeini of the subfamily Theclinae. These small butterflies occur essentially a ...
. ''The Debt Threat''. New York:
Harper Collins Publishers HarperCollins Publishers LLC is one of the Big Five English-language publishing companies, alongside Penguin Random House, Simon & Schuster, Hachette, and Macmillan. The company is headquartered in New York City and is a subsidiary of News Corp ...
, 2004.
The IMF sometimes advocates " austerity programmes", cutting public spending and increasing taxes even when the economy is weak, to bring budgets closer to a balance, thus reducing
budget deficit Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
s. Countries are often advised to lower their corporate tax rate. In ''
Globalization and Its Discontents ''Globalization and Its Discontents'' is a book published in 2002 by the 2001 Nobel laureate Joseph E. Stiglitz. The title is a reference to Freud's Civilization and Its Discontents. The book draws on Stiglitz's personal experience as chairman ...
'',
Joseph E. Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
, former chief economist and senior vice-president at the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
, criticises these policies.Stiglitz, Joseph. ''Globalization and its Discontents''. New York: WW Norton & Company, 2002. He argues that by converting to a more
monetarist Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation. Monetarist theory asserts that variations in the money supply have major influences on national ...
approach, the purpose of the fund is no longer valid, as it was designed to provide funds for countries to carry out
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and ...
reflations, and that the IMF "was not participating in a conspiracy, but it was reflecting the interests and ideology of the Western financial community." Stiglitz concludes, "Modern high-tech warfare is designed to remove physical contact: dropping bombs from 50,000 feet ensures that one does not 'feel' what one does. Modern economic management is similar: from one's luxury hotel, one can callously impose policies about which one would think twice if one knew the people whose lives one was destroying." The researchers
Eric Toussaint The given name Eric, Erich, Erikk, Erik, Erick, or Eirik is derived from the Old Norse name ''Eiríkr'' (or ''Eríkr'' in Old East Norse due to monophthongization). The first element, ''ei-'' may be derived from the older Proto-Norse ''* ain ...
and Damien Millet argue that the IMF's policies amount to a new form of colonisation that does not need a military presence: International politics play an important role in IMF decision making. The clout of member states is roughly proportional to its contribution to IMF finances. The United States has the greatest number of votes and therefore wields the most influence. Domestic politics often come into play, with politicians in developing countries using conditionality to gain leverage over the opposition to influence policy.


Reform


Function and policies

The IMF is only one of many
international organisations An international organization or international organisation (see spelling differences), also known as an intergovernmental organization or an international institution, is a stable set of norms and rules meant to govern the behavior of states an ...
, and it is a generalist institution that deals only with macroeconomic issues; its core areas of concern in
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
are very narrow. One proposed reform is a movement towards close partnership with other specialist agencies such as
UNICEF UNICEF (), originally called the United Nations International Children's Emergency Fund in full, now officially United Nations Children's Fund, is an agency of the United Nations responsible for providing Humanitarianism, humanitarian and Devel ...
, the
Food and Agriculture Organization The Food and Agriculture Organization of the United Nations (FAO)french: link=no, Organisation des Nations unies pour l'alimentation et l'agriculture; it, Organizzazione delle Nazioni Unite per l'Alimentazione e l'Agricoltura is an intern ...
(FAO), and
the United Nations Development Program The United Nations Development Programme (UNDP)french: Programme des Nations unies pour le développement, PNUD is a United Nations agency tasked with helping countries eliminate poverty and achieve sustainable economic growth and human deve ...
(UNDP).
Jeffrey Sachs Jeffrey David Sachs () (born 5 November 1954) is an American economist, academic, public policy analyst, and former director of The Earth Institute at Columbia University, where he holds the title of University Professor. He is known for his work ...
argues in ''
The End of Poverty ''The End of Poverty: Economic Possibilities for Our Time'' () is a 2005 book by American economist Jeffrey Sachs. It was a ''New York Times'' bestseller. In the book, Sachs argues that extreme poverty—defined by the World Bank as incomes of ...
'' that the IMF and the World Bank have "the brightest economists and the lead in advising poor countries on how to break out of poverty, but the problem is development economics".
Development economics Development economics is a branch of economics which deals with economic aspects of the development process in low- and middle- income countries. Its focus is not only on methods of promoting economic development, economic growth and structural ...
needs the reform, not the IMF. He also notes that IMF loan conditions should be paired with other reforms—e.g., trade reform in
developed nations A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
,
debt cancellation Debt relief or debt cancellation is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particu ...
, and increased financial assistance for investments in basic infrastructure. IMF loan conditions cannot stand alone and produce change; they need to be partnered with other reforms or other conditions as applicable.


US influence and voting reform

The scholarly consensus is that IMF decision-making is not simply technocratic, but also guided by political and economic concerns.. The United States is the IMF's most powerful member, and its influence reaches even into decision-making concerning individual loan agreements.. The United States has historically been openly opposed to losing what Treasury Secretary
Jacob Lew Jacob Joseph Lew (born August 29, 1955) is an American attorney and politician who served as the 76th United States Secretary of the Treasury from 2013 to 2017. A member of the Democratic Party, he also served as the 25th White House Chief of S ...
described in 2015 as its "leadership role" at the IMF, and the United States' "ability to shape international norms and practices". Emerging markets were not well-represented for most of the IMF's history: Despite being the most populous country, China's vote share was the sixth largest; Brazil's vote share was smaller than Belgium's. Reforms to give more powers to emerging economies were agreed by the
G20 The G20 or Group of Twenty is an intergovernmental forum comprising 19 countries and the European Union (EU). It works to address major issues related to the global economy, such as international financial stability, climate change mitigation, ...
in 2010. The reforms could not pass, however, until they were ratified by the
US Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washingto ...
, since 85% of the Fund's voting power was required for the reforms to take effect, and the Americans held more than 16% of voting power at the time. After repeated criticism, the United States finally ratified the voting reforms at the end of 2015. The
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
countries maintained their overwhelming majority of voting share, and the United States in particular retained its share at over 16%. The criticism of the American-and-European dominated IMF has led to what some consider 'disenfranchising the world' from the governance of the IMF.
Raúl Prebisch Raúl Prebisch (April 17, 1901April 29, 1986) was an Argentine economist known for his contributions to structuralist economics such as the Prebisch–Singer hypothesis, which formed the basis of economic dependency theory. He became the executiv ...
, the founding secretary-general of the
UN Conference on Trade and Development The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...
(UNCTAD), wrote that one of "the conspicuous deficiencies of the general economic theory, from the point of view of the periphery, is its false sense of universality."


Support of dictatorships

The role of the
Bretton Woods institutions The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bret ...
has been controversial since the late
Cold War The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because the ...
, because of claims that the IMF policy makers supported
military dictatorship A military dictatorship is a dictatorship in which the military exerts complete or substantial control over political authority, and the dictator is often a high-ranked military officer. The reverse situation is to have civilian control of the m ...
s friendly to American and European corporations, but also other
anti-communist Anti-communism is Political movement, political and Ideology, ideological opposition to communism. Organized anti-communism developed after the 1917 October Revolution in the Russian Empire, and it reached global dimensions during the Cold War, w ...
and
Communist Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, a s ...
regimes (such as Mobutu's Zaire and Ceaușescu's Romania, respectively). Critics also claim that the IMF is generally apathetic or hostile to human rights, and
labour rights Labor rights or workers' rights are both legal rights and human rights relating to labor relations between workers and employers. These rights are codified in national and international labor and employment law. In general, these rights influen ...
. The controversy has helped spark the
anti-globalization movement The anti-globalization movement or counter-globalization movement, is a social movement critical of economic globalization. The movement is also commonly referred to as the global justice movement, alter-globalization movement, anti-globalis ...
. An example of IMF's support for a dictatorship was its ongoing support for
Mobutu Mobutu Sese Seko Kuku Ngbendu Wa Za Banga (; born Joseph-Désiré Mobutu; 14 October 1930 – 7 September 1997) was a Congolese politician and military officer who was the president of Zaire from 1965 to 1997 (known as the Democratic Republic o ...
's rule in
Zaire Zaire (, ), officially the Republic of Zaire (french: République du Zaïre, link=no, ), was a Congolese state from 1971 to 1997 in Central Africa that was previously and is now again known as the Democratic Republic of the Congo. Zaire was, ...
, although its own envoy,
Erwin Blumenthal Erwin may refer to: People Given name * Erwin Chargaff (1905–2002), Austrian biochemist * Erwin Dold (1919–2012), German concentration camp commandant in World War 2 * Erwin Hauer (1926–2017), Austrian-born American sculptor * Egon Erwin Kis ...
, provided a sobering report about the entrenched corruption and embezzlement and the inability of the country to pay back any loans. Arguments in favour of the IMF say that economic stability is a precursor to democracy; however, critics highlight various examples in which democratised countries fell after receiving IMF loans. A 2017 study found no evidence of IMF lending programs undermining democracy in borrowing countries. To the contrary, it found "evidence for modest but definitively positive conditional differences in the democracy scores of participating and non-participating countries." On 28 June 2021 the IMF approved a US$1 billion loan to the Ugandan government despite protests from Ugandans who protested in Washington, London and South-Africa.


Impact on access to food

A number of
civil society Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.Bill Clinton William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
delivered a speech to the United Nations on
World Food Day World Food Day is an international day celebrated every year worldwide on October 16 to commemorate the date of the founding of the United Nations Food and Agriculture Organization in 1945. The day is celebrated widely by many other organization ...
, criticising the World Bank and IMF for their policies on food and agriculture: The FPIF remarked that there is a recurring pattern: "the destabilization of peasant producers by a one-two punch of IMF-
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
structural adjustment programs that gutted government investment in the countryside followed by the massive influx of subsidized U.S. and European Union agricultural imports after the
WTO The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
's Agreement on Agriculture pried open markets."


Impact on public health

A 2009 study concluded that the strict conditions resulted in thousands of deaths in Eastern Europe by
tuberculosis Tuberculosis (TB) is an infectious disease usually caused by '' Mycobacterium tuberculosis'' (MTB) bacteria. Tuberculosis generally affects the lungs, but it can also affect other parts of the body. Most infections show no symptoms, in ...
as
public health care Publicly funded healthcare is a form of health care financing designed to meet the cost of all or most healthcare needs from a publicly managed fund. Usually this is under some form of democratic accountability, the right of access to which are se ...
had to be weakened. In the 21 countries to which the IMF had given loans,
tuberculosis Tuberculosis (TB) is an infectious disease usually caused by '' Mycobacterium tuberculosis'' (MTB) bacteria. Tuberculosis generally affects the lungs, but it can also affect other parts of the body. Most infections show no symptoms, in ...
deaths rose by 16.6%. A 2017 systematic review on studies conducted on the impact that
Structural adjustment programs Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their purpose is to adjust the coun ...
have on child and maternal health found that these programs have a detrimental effect on maternal and child health among other adverse effects. In 2009, a book by Rick Rowden titled ''The Deadly Ideas of
Neoliberalism Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent fa ...
: How the IMF has Undermined Public Health and the Fight Against AIDS'', claimed that the IMF's monetarist approach towards prioritising price stability (low inflation) and fiscal restraint (low budget deficits) was unnecessarily restrictive and has prevented developing countries from scaling up long-term investment in public health infrastructure. The book claimed the consequences have been chronically underfunded public health systems, leading to demoralising working conditions that have fuelled a " brain drain" of medical personnel, all of which has undermined public health and the fight against
HIV/AIDS Human immunodeficiency virus infection and acquired immunodeficiency syndrome (HIV/AIDS) is a spectrum of conditions caused by infection with the human immunodeficiency virus (HIV), a retrovirus. Following initial infection an individual ...
in developing countries. In 2016, the IMF's research department published a report titled "Neoliberalism: Oversold?" which, while praising some aspects of the "
neoliberal Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent fa ...
agenda", claims that the organisation has been "overselling" fiscal
austerity Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spend ...
policies and financial deregulation, which they claim has exacerbated both financial crises and
economic inequality There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of we ...
around the world.


Impact on environment

IMF policies have been repeatedly criticised for making it difficult for indebted countries to say no to environmentally harmful projects that nevertheless generate
revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive reven ...
s such as
oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
, coal, and forest-destroying lumber and agriculture projects. Ecuador, for example, had to defy IMF advice repeatedly to pursue the protection of its
rainforest Rainforests are characterized by a closed and continuous tree canopy, moisture-dependent vegetation, the presence of epiphytes and lianas and the absence of wildfire. Rainforest can be classified as tropical rainforest or temperate rainfores ...
s, though paradoxically this need was cited in the IMF argument to provide support to Ecuador. The IMF acknowledged this paradox in the 2010 report that proposed the IMF Green Fund, a mechanism to issue
special drawing rights Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other
environmental finance Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impac ...
. While the response to these moves was generally positive possibly because ecological protection and energy and infrastructure transformation are more politically neutral than pressures to change social policy, some experts voiced concern that the IMF was not representative, and that the IMF proposals to generate only US$200 billion a year by 2020 with the SDRs as seed funds, did not go far enough to undo the general incentive to pursue destructive projects inherent in the world
commodity trading A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing i ...
and banking systems—criticisms often levelled at the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
and large global banking institutions. In the context of the
European debt crisis The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, is a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone membe ...
, some observers noted that Spain and California, two troubled economies within respectively the European Union and the United States, and also Germany, the primary and politically most fragile supporter of a
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
currency bailout would benefit from IMF recognition of their leadership in
green technology Environmental technology (envirotech) or green technology (greentech), also known as ''clean technology'' (''cleantech''), is the application of one or more of environmental science, green chemistry, environmental monitoring and electronic device ...
, and directly from Green Fund-generated demand for their exports, which could also improve their
credit ratings A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. ...
.


IMF and globalization

Globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...
encompasses three institutions: global financial markets and
transnational companies A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
, national governments linked to each other in economic and military alliances led by the United States, and rising "global governments" such as
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
(WTO), IMF, and
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
.
Charles Derber Charles Derber is an American Professor of Sociology at Boston College. Derber's work focuses on the crises of capitalism, globalization, corporate power, American militarism, the culture of hegemony, the climate crisis, and the new peace and gl ...
argues in his book ''People Before Profit,'' "These interacting institutions create a new global power system where sovereignty is globalized, taking power and constitutional authority away from nations and giving it to global markets and international bodies". Titus Alexander argues that this system institutionalises global inequality between western countries and the Majority World in a form of
global apartheid Global apartheid is a term used to describe how Global North countries are engaged in a project of "racialization, segregation, political intervention, mobility controls, capitalist plunder, and labor exploitation" affecting people from the Global ...
, in which the IMF is a key pillar. The establishment of globalised economic institutions has been both a symptom of and a stimulus for globalisation. The development of the World Bank, the IMF, regional development banks such as the
European Bank for Reconstruction and Development The European Bank for Reconstruction and Development (EBRD) is an international financial institution founded in 1991. As a multilateral developmental investment bank, the EBRD uses investment as a tool to build market economies. Initially focus ...
(EBRD), and multilateral trade institutions such as the WTO signals a move away from the dominance of the state as the primary actor analysed in international affairs. Globalization has thus been transformative in terms of limiting of
state sovereignty Westphalian sovereignty, or state sovereignty, is a principle in international law that each state has exclusive sovereignty over its territory. The principle underlies the modern international system of sovereign states and is enshrined in the Un ...
over the economy.


Impact on gender equality

The IMF says they support women's empowerment and tries to promote their rights in countries with a significant gender gap.


Scandals

Managing Director Lagarde (2011-2019) was convicted of giving preferential treatment to businessman-turned-politician
Bernard Tapie Bernard Roger Tapie (; 26 January 1943 – 3 October 2021) was a French businessman, politician and occasional actor, singer, and TV host. He was Minister of City Affairs in the government of Pierre Bérégovoy. Life and career Tapie was bor ...
as he pursued a legal challenge against the French government. At the time, Lagarde was the French economic minister. Within hours of her conviction, in which she escaped any punishment, the fund's 24-member executive board put to rest any speculation that she might have to resign, praising her "outstanding leadership" and the "wide respect" she commands around the world. Former IMF Managing Director
Rodrigo Rato Rodrigo de Rato y Figaredo (born 18 March 1949) is a Spanish politician who served in the Council of Ministers from 1996 to 2004. He also served as the ninth managing director of the International Monetary Fund (IMF) from 2004 to 2007 and the p ...
was arrested in 2015 for alleged
fraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compens ...
,
embezzlement Embezzlement is a crime that consists of withholding assets for the purpose of conversion of such assets, by one or more persons to whom the assets were entrusted, either to be held or to be used for specific purposes. Embezzlement is a type ...
and
money laundering Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...
. In 2017, the
Audiencia Nacional The Audiencia Nacional (; en, National Court) is a centralised court in Spain with jurisdiction over all of the Spanish territory. It is specialised in a certain scope of delinquency, having original jurisdiction over major crimes such as those ...
found Rato guilty of embezzlement and sentenced him to 4 years' imprisonment. In 2018, the sentence was confirmed by the
Supreme Court of Spain The Supreme Court ('', TS'') is the highest court in the Kingdom of Spain. Originally established pursuant to Title V of the Constitution of 1812 to replace —in all matters that affected justice— the System of Councils, and currently regulat ...
.


Alternatives

In March 2011, the Ministers of Economy and Finance of the
African Union The African Union (AU) is a continental union consisting of 55 member states located on the continent of Africa. The AU was announced in the Sirte Declaration in Sirte, Libya, on 9 September 1999, calling for the establishment of the Africa ...
proposed to establish an
African Monetary Fund The Africa Monetary Fund is a planned African Union financial institution, though in time its responsibilities will be transferred to the African Central Bank. This institution is one of the three financial institutions of the future African Union ...
. At the
6th BRICS summit The 6th BRICS summit was the sixth annual diplomatic meeting of the BRICS, a grouping of major emerging economies that includes Brazil, Russia, India, China and South Africa. It was hosted by Brazil, as the first host country of the current five ...
in July 2014 the
BRICS BRICS is an acronym for five leading emerging economies: Brazil, Russia, India, China, and South Africa. The first four were initially grouped as "BRIC" (or "the BRICs") in 2001 by Goldman Sachs economist Jim O'Neill, who coined the ter ...
nations (Brazil, Russia, India, China, and South Africa) announced the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$100 billion, a framework to provide liquidity through
currency swap In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. I ...
s in response to actual or potential short-term balance-of-payments pressures. In 2014, the China-led
Asian Infrastructure Investment Bank The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to improve economic and social outcomes in Asia. The bank currently has 105 members, including 14 prospective members from around the world. The br ...
was established.


In the media

''
Life and Debt ''Life and Debt'' is a 2001 American documentary film directed by Stephanie Black. It examines the economic and social situation in Jamaica, and specifically how the International Monetary Fund and the World Bank's structural adjustment polic ...
'', a documentary film, deals with the IMF's policies' influence on Jamaica and its economy from a critical point of view. ''
Debtocracy ''Debtocracy'' ( el, Χρεοκρατία ''Chreokratía'') is a 2011 left-wing documentary film by Katerina Kitidi and Aris Chatzistefanou. The documentary examines the causes of the Greek debt crisis in 2010 and advocates for the default of ...
'', a 2011 independent Greek documentary film, also criticises the IMF. Portuguese musician
José Mário Branco José Mário Branco (25 May 1942 – 19 November 2019) was a Portuguese singer-songwriter, actor, and record producer. Biography José Mário Branco was born in Porto, the son of primary school teachers, and became politically involved in the ...
's 1982 album '' FMI'' is inspired by the IMF's intervention in Portugal through monitored stabilisation programs in 1977–78. In the 2015 film, '' Our Brand Is Crisis'', the IMF is mentioned as a point of political contention, where the Bolivian population fears its electoral interference.


See also

* * * * * * * * * * * *


Notes


References


Footnotes


Bibliography

* * * * * * * * *


Further reading

* * Copelovitch, Mark. 2010. '' The International Monetary Fund in the Global Economy: Banks, Bonds, and Bailouts''. Cambridge University Press. *deVries, Margaret Garritsen. ''The IMF in a Changing World, 1945–85'', International Monetary Fund, 1986. * James, H. ''International Monetary Cooperation since Bretton Woods'', Oxford, 1996. * Joicey, N. and Pickford, S. "The International Monetary Fund and Global Economic Cooperation" in Nicholas Bayne and Stephen Woolcock,
The New Economic Diplomacy: Decision-Making and Negotiation in International Relations
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External links

* {{DEFAULTSORT:International Monetary Fund 1945 in economics Global policy organizations International development organizations International finance institutions Organizations based in Washington, D.C. Organizations established in 1945 United Nations Development Group United Nations Economic and Social Council United Nations specialized agencies