Why the International Monetary Fund was created and
how it works

The IMF, also known as the “Fund,” was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, United States, in July 1944. The 45 governments represented at that conference sought to build a framework for economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations that had contributed to the Great Depression of the 1930s.

The IMF’s responsibilities: The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to buy goods and services from each other. This is essential for sustainable economic growth, increasing living standards, and alleviating poverty.

Surveillance of economies: To maintain stability and prevent crises in the international monetary system, the IMF reviews national, regional, and global economic and financial developments through a formal system known as surveillance. The IMF provides advice to its 186 member countries, encouraging them to adopt policies that foster economic stability, reduce their vulnerability to economic and financial crises, and raise living standards. It provides regular assessment of global prospects in its World Economic Outlook and of capital markets in its Global Financial Stability Report, as well as publishing a series of regional economic outlooks.

Financial assistance: IMF financing is available to give member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditional on effective implementation of this program. To help support countries during the global economic crisis, the IMF has strengthened its lending capacity and has approved a major overhaul of how it lends money. In low-income countries, the IMF provides financial support through its concessional lending facilities. The IMF has doubled loan access limits and is boosting its lending to the world’s poorer countries, with interest rates set at zero until 2011.

SDRs: The IMF issues an international reserve asset known as Special Drawing Rights that can supplement the official reserves of member countries. Two allocations in August and September 2009 increased the outstanding stock of SDRs ten-fold to total about $316 billion. Members can also voluntarily exchange SDRs for currencies among themselves.

Technical assistance: The IMF offers technical assistance and training help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including tax policy and administration, expenditure management, monetary and exchange rate policies, banking and financial system supervision and regulation, legislative frameworks, and statistics.

Resources: At the April 2, 2009 G-20 summit, world leaders pledged to support growth in emerging market and developing countries by boosting the IMF's lending resources to $750 billion. The IMF’s resources are provided by its member countries, primarily through payment of quotas, which broadly reflect each country’s economic size. The annual expenses of running the Fund have been met mainly by the difference between interest receipts (on outstanding loans) and interest payments (on quotas used to finance the loans’ “reserve positions”), but the membership recently agreed to adopt a new income model based on a range of revenue sources more suited to the diverse activities of the Fund.

Governance and organization: The IMF is accountable to the governments of its member countries. At the top of its organizational structure is the Board of Governors, which consists of one Governor from each member countries. All Governors meet once each year at the IMF-World Bank Annual Meetings.

Twenty-four of the Governors sit on the International Monetary and Finance Committee (IMFC) and meet twice each year. The day-to-day work of the IMF is conducted by its 24-member Executive Board; this work is guided by the IMFC and supported by the IMF’s professional staff. The Managing Director is Head of IMF staff and Chairman of the Executive Board, and is assisted by three Deputy Managing Directors.