About the IMF Overview

The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. With its near-global membership of 187 countries, the IMF is uniquely placed to help member governments take advantage of the opportunitiesand manage the challenges posed by globalization and economic development more generally. The IMF tracks global economic trends and performance, alerts its member countries when it sees problems on the horizon, provides a forum for policy dialogue, and passes on know-how to governments on how to tackle economic difficulties. The IMF provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. Marked by massive movements of capital and abrupt shifts in comparative advantage,globalization affects countries' policy choices in many areas, including labor, trade, and tax policies. Helping a country benefit from globalization while avoiding potential downsides is an important task for the IMF. The global economic crisis has highlighted just how interconnected countries have become in todays world economy. Key IMF activities The IMF supports its membership by providing policy advice to governments and central banks based on analysis of economic trends and cross-country experiences; research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets; loans to help countries overcome economic difficulties; concessional loans to help fight poverty in developing countries; and technical assistance and training to help countries improve the management of their economies. IMF and the global financial crisis

Click here to read about our work in crisis countries Original aims The IMF was founded more than 60 years ago toward the end of World War II (see History). The founders aimed to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed. Since then the world has changed dramatically, bringing extensive prosperity and lifting millions out of poverty, especially in Asia. In many ways the IMF's main purposeto provide the global public good of financial stabilityis the same today as it was when the organization was established. More specifically, the IMF continues to provide a forum for cooperation on international monetary problems facilitate the growth of international trade, thus promoting job creation, economic growth, and poverty reduction; promote exchange rate stability and an open system of international payments; and lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.

The IMF's way of operating has changed over the years and has undergone rapid change since the beginning of the 1990s as it has sought to adapt to the changing needs of its expanding membership in an globalized world economy. Most recently, the IMF's Managing Director, Dominique Strauss-Kahn, has launched an ambitious reform agenda, aimed at making sure the IMF continues to deliver the economic analysis and multilateral consultation that is at the core of its missionensuring the stability of the global monetary system.

Video (11:17) Dan Rather interviews IMF Managing Director, Dominique Strauss-Kahn

An adapting IMF With cross-border financial flows increasing sharply in recent decades, the interdependence of countries has deepened (see slideshow on capital inflows). The turbulence in advanced economy credit markets in 2007-08 has demonstrated that domestic and international financial stability cannot be taken for granted, even in the world's wealthiest countries. The spike in food and fuel prices, which has hit importdependent poor and middle-income countries particularly hard, is another aspect of the globalized economy we all are part of. In response, the IMF has rethought its operations in several ways: Enhancing IMF lending facilities. The IMF has upgraded its lending facilities to enable it to better serve its members. It has created a new Short-Term Liquidity Facility designed to help emerging market countries with a track record of sound policies address fallout from the current financial crisis. To make its financial support more flexible and tailored to the diversity of low-income countries, it has established a new Poverty Reduction and Growth Trust, which has three new lending windows. As part of a wide-ranging reform of its lending practices, the IMF has also redefined the way it engages with countries on issues related to structural reform of the economy. (See Lending). Strengthening the monitoring of global, regional, and country economies. The IMF has taken several steps to improve economic and financial surveillance, which is its framework for providing advice to member countries on macroeconomic policies (seeOur Work). It is emphasizing research into the links between the financial sector and the real economy and the sharing of cross-country experiences. It has published new guidance on how to analyze and advise on exchange rates, and is paying more attention to the impact of the world's most important economies on other countries' economies. And it is improving its ability to warn member countries of risks and vulnerabilities in their economies. Helping resolve global economic imbalances. The IMF's analysis of global economic developments, contained in its World Economic Outlook, provide finance ministers and central bank governors with a common framework for discussing the global economy. The IMF now also has the ability to call for multilateral consultations to discuss specific problems facing the global economy with a select group of countriesan innovative way of facilitating collective action among key players in the global economy. The first such consultation took place in 2006. It sought to reduce global payments imbalances and involved China, the euro area, Japan, Saudi Arabia, and the United States (see Tackling Current Challenges).

Analyzing capital market developments.The IMF is devoting more resources to the analysis of global financial markets and their linkages with macroeconomic policy. Twice a year, it publishes the Global Financial Stability Report, which provides up-to-date analysis of developments in global financial markets. IMF staff also work with member countries to help them identify potential risks to financial stability, including through the Financial Sector Assessment Program (described in more detail below). The IMF also offers training to country officials on how to manage their financial systems, monetary and exchange regimes, and capital markets. The IMF is currently facilitating the drafting of voluntary guidelines for Sovereign Wealth Funds and works closely with the Financial Stability Board to promote international financial stability. Assessing financial sector vulnerabilities.Resilient, well-regulated financial systems are essential for macroeconomic stability in a world of ever-growing capital flows. The IMF and the World Bank jointly run the Financial Sector Assessment Program, aimed at alerting countries to vulnerabilities and risks in their financial sectors. IMF and World Bank staff also advise on how to strengthen oversight and supervision of banks and other financial institutions. Working to cut poverty. At present, more than a billion people are living on less than $1 a day, and more than three-quarters of a billion people are malnourished. The IMF's role in low-income countries is changing as these countries grow and mature. But its central goal remains the same: to help promote economic stability and growth, laying the ground work for deep and lasting poverty reduction. Its current main priority is to help low- and middle-income countries cope with the adverse effects of the global economic crisis. To that effect, it is stepping up lending to low-income countries to combat the impact of the global recession. Improving IMF governance. In May 2008, the IMF's membership approved a twoyear package of reforms to improve representation of members at the Fund. For the IMF to be fully effective in its role, it must be perceived as representing all countries in a fair manner. With that in mind, governance reform is being accelerated to ensure a decisionmaking structure that reflects current global realities. The IMF is also becoming leaner and more efficient. It is trimming expenditures and reorganizing the way it earns revenue to pay for its operations (See Governance). Greater accountability and transparency. The IMF publishes almost all of its annual economic health checks of member countries, updates about its lending programs, and a wealth of other information on its website. The IMF's performance is assessed on a regular basis by an Independent Evaluation Office.

How we do it
The IMF's main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises, and works with its member countries to promote growth and alleviate poverty. It has three main tools at its disposal to carry out its mandate: surveillance, technical assistance and training, and lending. These functions are underpinned by the IMF's research and statistics. Surveillance The IMF promotes economic stability and global growth by encouraging countries to adopt sound economic and financial policies. To do this, it regularly monitors global, regional, and national economic developments. It also seeks to assess the impact of the policies of individual countries on other economies. This process of monitoring and discussing countries economic and financial policies is known as bilateral surveillance. On a regular basisusually once each yearthe IMF conducts in depth appraisals of each member country's economic situation. It discusses

with the country's authorities the policies that are most conducive to a stable and prosperous economy. Consistent with the decision on bilateral surveillance adopted in June 2007, the main focus of the discussions is whether there are risks to the economys domestic and external stability that would argue for adjustments in economic or financial policies. Member countries may agree to publish the IMF's assessment of their economies, with the vast majority of countries opting to do so. The IMF also has the option to bring together, on an as-needed basis, groups of systemically relevant economies to address issues of broad importance to the global economy. These meetings are called multilateral consultations. A consultation on how to reduce global imbalances took place in 2006-07. The IMF's work on individual countries informs its work on regional economies and the global economy. These views, along with timely analysis of important economic and financial issues, are published twice a year in the World Economic Outlook, various Regional Economic Outlook reports, and the Global Financial Stability Report. The IMF works with the World Bank to promote resilient financial systems around the world through the joint Financial Sector Assessment Program (FSAP). Supported by experts from a range of national agencies and standard-setting bodies, IMF and World Bank staff assess the stability of a countrys financial system by identifying its strengths and vulnerabilities, determine how key sources of risks are being managed, ascertain the sector's developmental needs, and help prioritize policy responses. For more information on how the IMF monitors economies, go to Surveillance in the Our Worksection. Technical assistance and training IMF offers technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including fiscal policy, monetary and exchange rate policies, banking and financial system supervision and regulation, and statistics. The IMF provides technical assistance and training mainly in four areas: Monetary and financial policies (monetary policy instruments, banking system supervision and restructuring, foreign management and operations, clearing settlement systems for payments, and structural development of central banks) Fiscal policy and management (tax and customs policies and administration, budget formulation, expenditure management, design of social safety nets, and management of domestic and foreign debt) Compilation, management, dissemination, and improvement of statistical data Economic and financial legislation. For more on technical assistance, go to Technical Assistance in the Our Work section or read an Issues Brief on the subject. Lending In the event that member countries experience difficulties financing their balance of payments, the IMF is also a fund that can be tapped to facilitate recovery. A policy program supported by financing is designed by the national authorities in close cooperation with the IMF. Continued financial support is conditional on the effective implementation of this program. The IMF also provides low-income countries with loans at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Facility (ESF). For more on different types of IMF lending, go to Lending in the Our Work section. Research and data Supporting all three of these activities is the IMF's economic and financial research andstatistics. In recent years, the IMF has applied both its surveillance and technical assistance work to the development of standards and codes of good

practice in its areas of responsibility, and to the strengthening of financial sectors. These are part of the IMF's continuing efforts to strengthen the international financial system and improve its ability to prevent and resolve crises.

Membership
The IMF currently has a near-global membership of 187 countries. To become a member, a country must apply and then be accepted by a majority of the existing members. In June 2009, the former Yugoslav republic of Kosovo joined the IMF, becoming the institution's 186th member. Upon joining, each member of the IMF is assigned a quota, based broadly on its relative size in the world economy. The IMF's membership agreed in May 2008 on a rebalancing of its quota system to reflect the changing global economic realities, especially the increased weight of major emerging markets in the global economy. For more on the quota and voice reform, please go to the section on Country Representation in the Governance section). A member's quota delineates basic aspects of its financial and organizational relationship with the IMF, including: Subscriptions. A member's quota subscription determines the maximum amount offinancial resources the member is obliged to provide to the IMF. A member must pay its subscription in full upon joining the IMF: up to 25 percent must be paid in the IMF's own currency, called Special Drawing Rights (SDRs) or widely accepted currencies (such as the dollar, the euro, the yen, or pound sterling), while the rest is paid in the member's own currency. Voting power. The quota largely determines a member's voting power in IMF decisions. Each IMF member has 250 basic votes plus one additional vote for each SDR 100,000 of quota. Accordingly, the United States has 371,743 votes (16.77 percent of the total), and Palau has 281 votes (0.01 percent of the total). The newly agreed quota and voice reform will result in a significant shift in the representation of dynamic economies, many of which are emerging market countries, through a quota increase for 54 member countries. A tripling of the number of basic votes is also envisaged as a means to give poorer countries a greater say in running the institution. Access to financing. The amount of financing a member can obtain from the IMF (its access limit) is based on its quota. Under Stand-By and Extended Arrangements, which are types of loans, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances. SDR allocations. Allocations of SDRs, the IMF's unit of account, is used as an international reserve asset. A member's share of general SDR allocations is established in proportion to its quota. The most recent general allocation of SDRs took place in 2009.

Collaborating with others

The IMF collaborates with the World Bank, the regional development banks, the World Trade Organization (WTO), UN agencies, and other international bodies. While all of these organizations are involved in global economic issues, each has its own unique areas of responsibility and specialization. The IMF also interacts with think tanks, civil society, and the media on a daily basis. Working with the World Bank The IMF and the World Bank are different, but complement each other's work. Whereas the IMF's focus is chiefly on macroeconomic and financial sector issues, the World Bank is

concerned mainly with longer-term development and poverty reduction. Its loans finance infrastructure projects, the reform of particular sectors of the economy, and broader structural reforms. Countries must join the IMF to be eligible for World Bank membership. Given the World Bank's focus on antipoverty issues, the IMF collaborates closely with the Bank in the area of poverty reduction and helping countries draw up poverty reduction strategies. Other areas of collaboration include assessments of member countries' financial sectors, development of standards and codes, and improvement of the quality, availability, and coverage of data on external debt. An external review committee on World Bank and IMF collaboration was formed in March 2006 to assess the working relationship between the two sister agencies, known collectively as the Bretton Woods institutions. In its February 2007 report, the sixmember Malan committee offered recommendations for closer collaboration between the two institutions. This led to the institutions adoption of a Joint Management Action Plan, under which, IMF and World Bank country teams discuss their country-level work programs, the division of labor, and the work needed from each insititution in the coming year. Also the Bank and Fund have improved their information sharing at the country level, including technical assistance reports. Cooperating with other international organizations The IMF is a member of the Switzerland-based Financial Stability Board, which brings together government officials responsible for financial stability in the major international financial centers, international regulatory and supervisory bodies, committees of central bank experts, and international financial institutions. It also works with standard-setting bodies such as the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors. The IMF collaborates with the World Trade Organization (WTO) both formally and informally. The IMF has observer status at WTO meetings and IMF staff contribute to the work of the WTO Working Group on Trade, Debt, and Finance. And the IMF is involved in the WTO-led Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries, whose other members are the International Trade Commission, UNCTAD, UNDP, and the World Bank. The IMF has a Special Representative to the United Nations, located at the UN Headquarters in New York. The Special Representative facilitates the liaison between the IMF and the UN system. The general arrangements for collaboration and consultations between the IMF and the UN include areas of mutual interest, such as cooperation between the statistical services of the two organizations, and reciprocal attendance and participation at events. Engaging with think tanks, civil society, and the media The IMF also engages on a regular basis with the academic community, civil society organizations (CSOs), and the media. IMF staff at all levels frequently meet with members of the academic community to exchange ideas and receive new input. The IMF also has an active outreach programinvolving CSOs. IMF management and senior staff communicate with the media on a daily basis. Additionally, a biweekly press briefing is held at the IMF headquarters, during which a spokesperson takes live questions from journalists

Cooperation and reconstruction (1944 71)

During the Great Depression of the 1930s, countries attempted to shore up their failing economies by sharply raising barriers to foreign trade, devaluing their currencies to

compete against each other for export markets, and curtailing their citizens' freedom to hold foreign exchange. These attempts proved to be self-defeating. World trade declined sharply (see chart below), and employment and living standards plummeted in many countries. This breakdown in international monetary cooperation led the IMF's founders to plan an institution charged with overseeing the international monetary systemthe system of exchange rates and international payments that enables countries and their citizens to buy goods and services from each other. The new global entity would ensure exchange rate stability and encourage its member countries to eliminate exchange restrictions that hindered trade.

The Bretton Woods agreement The IMF was conceived in July 1944, when representatives of 45 countries meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for international economic cooperation, to be established after the Second World War. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression. The IMF came into formal existence in December 1945, when its first 29 member countries signed its Articles of Agreement. It began operations on March 1, 1947. Later that year, France became the first country to borrow from the IMF. The IMF's membership began to expand in the late 1950s and during the 1960s as many African countries became independent and applied for membership. But the Cold War limited the Fund's membership, with most countries in the Soviet sphere of influence not joining. Par value system The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar and, in the case of the United States, the value of the dollar in terms of gold) pegged at rates that could be adjusted only to correct a "fundamental disequilibrium" in the balance of payments, and only with the IMF's agreement. This par value systemalso known as the Bretton Woods systemprevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.

The end of the Bretton Woods System (197281)

By the early 1960s, the U.S. dollar's fixed value against gold, under the Bretton Woods system of fixed exchange rates, was seen as overvalued. A sizable increase in domestic spending on President Lyndon Johnson's Great Society programs and a rise in military spending caused by the Vietnam War gradually worsened the overvaluation of the dollar. End of Bretton Woods system The system dissolved between 1968 and 1973. In August 1971, U.S. President Richard Nixon announced the "temporary" suspension of the dollar's convertibility into gold. While the dollar had struggled throughout most of the 1960s within the parity established at Bretton Woods, this crisis marked the breakdown of the system. An attempt to revive the fixed exchange rates failed, and by March 1973 the major currencies began to float against each other. Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish (except pegging their currency to gold): allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. Oil shocks Many feared that the collapse of the Bretton Woods system would bring the period of rapid growth to an end. In fact, the transition to floating exchange rates was relatively smooth, and it was certainly timely: flexible exchange rates made it easier for economies to adjust to more expensive oil, when the price suddenly started going up in October 1973. Floating rates have facilitated adjustments to external shocks ever since. The IMF responded to the challenges created by the oil price shocks of the 1970s by adapting its lending instruments. To help oil importers deal with anticipated current account deficits and inflation in the face of higher oil prices, it set up the first of two oil facilities. Helping poor countries From the mid-1970s, the IMF sought to respond to the balance of payments difficulties confronting many of the world's poorest countries by providing concessional financing through what was known as the Trust Fund. In March 1986, the IMF created a new concessional loan program called the Structural Adjustment Facility. The SAF was succeeded by the Enhanced Structural Adjustment Facility in December 1987

Debt and painful reforms (198289)

The oil shocks of the 1970s, which forced many oil-importing countries to borrow from commercial banks, and the interest rate increases in industrial countries trying to control inflation led to an international debt crisis. During the 1970s, Western commercial banks lent billions of "recycled" petrodollars, getting deposits from oil exporters and lending those resources to oil-importing and developing countries, usually at variable, or floating, interest rates. So when interest rates began to soar in 1979, the floating rates on developing countries' loans also shot up. Higher interest payments are estimated to have cost the non-oil-producing developing countries at least $22 billion during 197881. At the same time, the price of commodities from developing countries slumped because of the recession brought about by monetary policies. Many times, the response by developing countries to those shocks included expansionary fiscal policies and overvalued exchange rates, sustained by further massive borrowings. When a crisis broke out in Mexico in 1982, the IMF coordinated the global response, even engaging the commercial banks. It realized that nobody would benefit if country after country failed to repay its debts.

The IMF's initiatives calmed the initial panic and defused its explosive potential. But a long road of painful reform in the debtor countries, and additional cooperative global measures, would be necessary to eliminate the problem.

Societal Change for Eastern Europe and Asian Upheaval (1990-2004)

The fall of the Berlin wall in 1989 and the dissolution of the Soviet Union in 1991 enabled the IMF to become a (nearly) universal institution. In three years, membership increased from 152 countries to 172, the most rapid increase since the influx of African members in the 1960s. In order to fulfill its new responsibilities, the IMF's staff expanded by nearly 30 percent in six years. The Executive Board increased from 22 seats to 24 to accommodate Directors from Russia and Switzerland, and some existing Directors saw their constituencies expand by several countries. The IMF played a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven economies. This kind of economic transformation had never before been attempted, and sometimes the process was less than smooth. For most of the 1990s, these countries worked closely with the IMF, benefiting from its policy advice, technical assistance, and financial support. By the end of the decade, most economies in transition had successfully graduated to market economy status after several years of intense reforms, with many joining the European Union in 2004. Asian Financial Crisis In 1997, a wave of financial crises swept over East Asia, from Thailand to Indonesia to Korea and beyond. Almost every affected country asked the IMF for both financial assistance and for help in reforming economic policies. Conflicts arose on how best to cope with the crisis, and the IMF came under criticism that was more intense and widespread than at any other time in its history. From this experience, the IMF drew several lessons that would alter its responses to future events. First, it realized that it would have to pay much more attention to weaknesses in countries banking sectors and to the effects of those weaknesses on macroeconomic stability. In 1999, the IMFtogether with the World Banklaunched the Financial Sector Assessment Program and began conducting national assessments on a voluntary basis. Second, the Fund realized that the institutional prerequisites for successful liberalization of international capital flows were more daunting than it had previously thought. Along with the economics profession generally, the IMF dampened its enthusiasm for capital account liberalization. Third, the severity of the contraction in economic activity that accompanied the Asian crisis necessitated a re-evaluation of how fiscal policy should be adjusted when a crisis was precipitated by a sudden stop in financial inflows. Debt relief for poor countries During the 1990s, the IMF worked closely with the World Bank to alleviate the debt burdens of poor countries. The Initiative for Heavily Indebted Poor Countries was launched in 1996, with the aim of ensuring that no poor country faces a debt burden it cannot manage. In 2005, to help accelerate progress toward the United NationsMillennium Development Goals (MDGs), the HIPC Initiative was supplemented by theMultilateral Debt Relief Initiative (MDRI)

Globalization and the Crisis (2005 present)

The IMF has been on the front lines of lending to countries to help boost the global economy as it suffers from a deep crisis not seen since the Great Depression. For most of the first decade of the 21st century, international capital flows fueled a global expansion that enabled many countries to repay money they had borrowed from the IMF and other official creditors and to accumulate foreign exchange reserves. The global economic crisis that began with the collapse of mortgage lending in the United States in 2007, and spread around the world in 2008 was preceded by large imbalances in global capital flows. Global capital flows fluctuated between 2 and 6 percent of world GDP during 1980-95, but since then they have risen to 15 percent of GDP. In 2006, they totaled $7.2 trillionmore than a tripling since 1995. The most rapid increase has been experienced by advanced economies, but emerging markets and developing countries have also become more financially integrated. The founders of the Bretton Woods system had taken it for granted that private capital flows would never again resume the prominent role they had in the nineteenth and early twentieth centuries, and the IMF had traditionally lent to members facing current account difficulties. The latest global crisis uncovered a fragility in the advanced financial markets that soon led to the worst global downturn since the Great Depression. Suddenly, the IMF was inundated with requests for stand-by arrangements and other forms of financial and policy support. The international community recognized that the IMFs financial resources were as important as ever and were likely to be stretched thin before the crisis was over. With broad support from creditor countries, the Funds lending capacity was tripled to around $750 billion. To use those funds effectively, the IMF overhauled its lending policies, including by creating a flexible credit line for countries with strong economic fundamentals and a track record of successful policy implementation. Other reforms, including ones tailored to help low-income countries, enabled the IMF to disburse very large sums quickly, based on the needs of borrowing countries and not tightly constrained by quotas, as in the past. For more on the ideas that have shaped the IMF from its inception until the late 1990s, take a look at James Boughton's "The IMF and the Force of History: Ten Events and Ten Ideas that Have Shaped the Institution.

Surveillance
When a country joins the IMF, it agrees to subject its economic and financial policies to the scrutiny of the international community. It also makes a commitment to pursue policies that are conducive to orderly economic growth and reasonable price stability, to avoid manipulating exchange rates for unfair competitive advantage, and to provide the IMF with data about its economy. The IMF's regular monitoring of economies and associated provision of policy advice is intended to identify weaknesses that are causing or could lead to financial or economic instability. This process is known assurveillance. Country surveillance Country surveillance is an ongoing process that culminates in regular (usually annual) comprehensive consultations with individual member countries, with discussions in between as needed. The consultations are known as "Article IV consultations" because they are required by Article IV of the IMF's Articles of Agreement. During an Article IV

consultation, an IMF team of economists visits a country to assess economic and financial developments and discuss the country's economic and financial policies with government and central bank officials. IMF staff missions also often meet with parliamentarians and representatives of business, labor unions, and civil society. The team reports its findings to IMF management and then presents them for discussion to the Executive Board, which represents all of the IMF's member countries. A summary of the Board's views is subsequently transmitted to the country's government. In this way, the views of the global community and the lessons of international experience are brought to bear on national policies. Summaries of most discussions are released in Public Information Notices and are posted on the IMF's web site, as are most of the country reports prepared by the staff. In June 2007 the IMF's Executive Board adopted a comprehensive policy statement on surveillance. The 2007 Decision on Bilateral Surveillance over Member's Policies, complements Article IV of the IMFs Articles of Agreement and introduces the concept of external stability as an organizing principle for bilateral surveillance. This means that the main focus of the discussions between the IMF and country officials is whether there are risks to the economys domestic and external stability that would call for adjustments to that countrys economic or financial policies. Regional surveillance Regional surveillance involves examination by the IMF of policies pursued under currency unionsi ncluding the euro area, the West African Economic and Monetary Union, the Central African Economic and Monetary Community, and the Eastern Caribbean Currency Union. Regional economic outlook reports are also prepared to discuss economic developments and key policy issues in Asia Pacific, Europe, Middle East and Central Asia, Sub-Saharan Africa, and the Western Hemisphere. Global surveillance Global surveillance entails reviews by the IMF's Executive Board of global economic trends and developments. The main reviews are based on theWorld Economic Outlook reports and the Global Financial Stability Report, which covers developments, prospects, and policy issues in international financial markets. Both reports are published twice a year, with updates being provided on a quarterly basis. In addition, the Executive Board holds more frequent informal discussions on world economic and market developments. The IMF also has the option of holding multilateral consultations, involving smaller groups of countries , to foster debate and develop policy actions designed to address problems of global or regional importance. In 2006, multilateral consultations brought together China, euro area countries, Japan, Saudi Arabia, and the United States to discuss global economic imbalances.

Technical Assistance
The IMF shares its expertise with member countries by providing technical assistance and training in a wide range of areas, such as central banking, monetary and exchange rate policy, tax policy and administration, and official statistics. The objective is to help improve the design and implementation of members' economic policies, including by strengthening skills in institutions such as finance ministries, central banks, and statistical agencies. The IMF has also given advice to countries that have had to reestablish government institutions following severe civil unrest or war. In 2008, the IMF embarked on an ambitious reformeffort to enhance the impact of its technical assistance. The reforms emphasize better prioritization, enhanced performance measurement, more transparent costing and stronger partnerships with donors. Beneficiaries of technical assistance Technical assistance is one of the IMF's core activities. It is concentrated in critical areas of macroeconomic policy where the Fund has the greatest comparative advantage. Thanks to its near-universal membership, the IMF's technical assistance program is

informed by experience and knowledge gained across diverse regions and countries at different levels of development. About 80 percent of the IMF's technical assistance goes to low- and lower-middle-income countries, in particular in sub-Saharan Africa and Asia. Post-conflict countries are major beneficiaries. The IMF is also providing technical assistance aimed at strengthening the architecture of the international financial system, building capacity to design and implement poverty-reducing and growth programs, and helping heavily indebted poor countries (HIPC) in debt reduction and management. Types of technical assistance The IMF's technical assistance takes different forms, according to needs, ranging from long-term hands-on capacity building to short-notice policy support in a financial crisis. Technical assistance is delivered in a variety of ways. IMF staff may visit member countries to advise government and central bank officials on specific issues, or the IMF may provide resident specialists on a short- or a long-term basis. Technical assistance is integrated with country reform agendas as well as the IMF's surveillance and lending operations. The IMF is providing an increasing part of its technical assistance through regional centerslocated in Gabon, Mali, and Tanzania for Africa; in Barbados for the Caribbean; in Lebanon for the Middle East; and in Fiji for the Pacific Islands. As part of its reform program, the IMF is planning to open four more regional technical assistance centers in Africa, Latin America, and central Asia. The IMF also offers training courses for government and central bank officials of member countries at its headquarters in Washington, D.C., and at regional training centers in Austria, Brazil, China, India, Singapore, Tunisia, and the United Arab Emirates. Partnership with donors Contributions from bilateral and multilateral donors are playing an increasingly important role in enabling the IMF to meet country needs in this area, now financing about two thirds of the IMF's field delivery of technical assistance. Strong partnerships between recipient countries and donors enable IMF technical assistance to be developed on the basis of a more inclusive dialogue and within the context of a coherent development framework. The benefits of donor contributions thus go beyond the financial aspect. The IMF is currently seeking to leverage the comparative advantages of its technical assistance to expand donor financing to meet the needs of recipient countries. As part of this effort, the Fund is strengthening its partnerships with donors by engaging them on a broader, longer-term and more strategic basis. The idea is to pool donor resources in multi-donor trust funds that would supplement the IMF's own resources for technical assistance while leveraging the Fund's expertise and experience. Expansion of the multi-donor trust fund model is envisaged on a regional and topical basis, offering donors different entry points according to their priorities. The IMF is planning to establish a menu of seven topical trust funds over the next two years, covering anti-money laundering/combating the financing of terrorism; fragile states; public financial management; management of natural resource wealth, public debt sustainability and management, statistics and data provision; and financial sector stability and development

Lending by the IMF

A country in severe financial trouble, unable to pay its international bills, poses potential problems for the stability of the international financial system, which the IMF was created to protect. Any member country, whether rich, middle-income, or poor, can turn to the IMF for financing if it has a balance of payments needthat is, if it cannot find sufficient financing on affordable terms in the capital markets to make its international payments and maintain a safe level of reserves. IMF loans are meant to help member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. The IMF is not a

development bank and, unlike the World Bank and other development agencies, it does not finance projects. The changing nature of lending About four out of five member countries have used IMF credit at least once. But the amount of loans outstanding and the number of borrowers have fluctuated significantly over time. In the first two decades of the IMF's existence, more than half of its lending went to industrial countries. But since the late 1970s, these countries have been able to meet their financing needs in the capital markets. The oil shock of the 1970s and the debt crisis of the 1980s led many lower- and lowermiddle-income countries to borrow from the IMF. In the 1990s, the transition process in central and eastern Europe and the crises in emerging market economies led to a further increase in the demand for IMF resources. In 2004, benign economic conditions worldwide meant that many countries began to repay their loans to the IMF. As a consequence, the demand for the Funds resources dropped off sharply (see chart below). But in 2008, the IMF began making loans again to countries hit by the financial crisis and high food and fuel prices. In late 2008 and early 2009 the IMF lent $60 billion to emerging markets affected by the crisis. While the financial crisis has sparked renewed demand for IMF financing, the decline in lending that preceded the financial crisis also reflected a need to adapt the IMF's lending instruments to the changing needs of member countries. In response, the IMF conducted a wide-ranging review of its lending facilities and terms on which it provides loans. In March 2009, the Fund announced a major overhaul of its lending framework, including modernizing conditionality, introducing a new flexible credit line, enhancing the flexibility of the Funds regular stand-by lending arrangement, doubling access limits on loans, adapting its cost structures for high-access and precautionary lending, and streamlining instruments that were seldom used. It has also speeded up lending procedures and redesigned its Exogenous Shocks Facility to make it easier to access for low-income countries. Lending to preserve financial stability Article I of the IMF's Articles of Agreement states that the purpose of lending by the IMF is "...to give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity." In practice, the purpose of the IMF's lending has changed dramatically since the organization was created. Over time, the IMF's financial assistance has evolved from helping countries deal with short-term trade fluctuations to supporting adjustment and addressing a wide range of balance of payments problems resulting from terms of trade shocks, natural disasters, post-conflict situations, broad economic transition, poverty reduction and economic development, sovereign debt restructuring, and confidencedriven banking and currency crises. Today, IMF lending serves three main purposes. First, it can smooth adjustment to various shocks, helping a member country avoid disruptive economic adjustment or sovereign default, something that would be extremely costly, both for the country itself and possibly for other countries through economic and financial ripple effects (known as contagion). Second, IMF programs can help unlock other financing, acting as a catalyst for other lenders. This is because the program can serve as a signal that the country has adopted sound policies, reinforcing policy credibility and increasing investors' confidence. Third, IMF lending can help prevent crisis. The experience is clear: capital account crises typically inflict substantial costs on countries themselves and on other countries through

contagion. The best way to deal with capital account problems is to nip them in the bud before they develop into a full-blown crisis. Conditions for lending When a member country approaches the IMF for financing, it may be in or near a state of economic crisis, with its currency under attack in foreign exchange markets and its international reserves depleted, economic activity stagnant or falling, and a large number of firms and households going bankrupt. In difficult economic times, the IMF helps countries to protect the most vulnerable in a crisis. The IMF aims to ensure that conditions linked to IMF loan disbursements are focused and adequately tailored to the varying strengths of members' policies and fundamentals. To this end, the IMF discusses with the country the economic policies that may be expected to address the problems most effectively. The IMF and the government agree on a program of policies aimed at achieving specific, quantified goals in support of the overall objectives of the authorities' economic program. For example, the country may commit to fiscal or foreign exchange reserve targets. The IMF discusses with the country the economic policies that may be expected to address the problems most effectively. The IMF and the government agree on a program of policies aimed at achieving specific, quantified goals in support of the overall objectives of the authorities' economic program. For example, the country may commit to fiscal or foreign exchange reserve targets. Loans are typically disbursed in a number of installments over the life of the program, with each installment conditional on targets being met. Programs typically last up to 3 years, depending on the nature of the country's problems, but can be followed by another program if needed. The government outlines the details of its economic program in a "letter of intent" to the Managing Director of the IMF. Such letters may be revised if circumstances change. For countries in crisis, IMF loans usually provide only a small portion of the resources needed to finance their balance of payments. But IMF loans also signal that a country's economic policies are on the right track, which reassures investors and the official community, helping countries find additional financing from other sources. Main lending facilities In an economic crisis, countries often need financing to help them overcome their balance of payments problems. Since its creation in June 1952, the IMFs Stand-By Arrangement (SBA) has been used time and again by member countries, it is the IMFs workhorse lending instrument for emerging market countries. Rates are non-concessional, although they are almost always lower than what countries would pay to raise financing from private markets. The SBA was upgraded in 2009 to be more flexible and responsive to member countries needs. Borrowing limits were doubled with more funds available up front, and conditions were streamlined and simplified. The new framework also enables broader high-access borrowing on a precautionary basis. The Flexible Credit Line (FCL) is for countries with very strong fundamentals, policies, and track records of policy implementation. It represents a significant shift in how the Fund delivers Fund financial assistance, particularly with recent enhancements, as it has no ongoing (ex post) conditions and no caps on the size of the credit line. The FCL is a renewable credit line, which at the countrys discretion could be for either one- or twoyears, with a review of eligibility after the first year. There is the flexibility to either treat the credit line as precautionary or draw on it at any time after the FCL is approved. Once a country qualifies (according to pre-set criteria), it can tap all resources available under the credit line at any time, as disbursements would not be phased and conditioned on particular policies as with traditional Fund-supported programs. This is justified by the very strong track records of countries that qualify to the FCL, which give confidence that their economic policies will remain strong or that corrective measures will be taken in the face of shocks.

The new Precautionary Credit Line (PCL) is also for countries with sound fundamentals and policies, and a track record of implementing such policies. While they may face moderate vulnerabilities that may not meet the FCL qualification standards, they do not require the same large-scale policy adjustments normally associated with traditional Fund-supported program. The PCL combines pre-qualification (similar to the FCL), with more focused ex-post conditions that aim at addressing the identified vulnerabilities. Progress is assessed in the context of semi-annual monitoring over a one to two year period. The size of the credit line allows access to a larger amount of resources than under a typical SBA. While there may be no actual balance of payments need should at the time of approval, the PCL can be drawn upon should such a need arise unexpectedly. The Extended Fund Facility is used to help countries address balance of payments difficulties related partly to structural problems that may take longer to correct than macroeconomic imbalances. A program supported by an extended arrangement usually includes measures to improve the way markets and institutions function, such as tax and financial sector reforms, privatization of public enterprises. The Trade Integration Mechanism allows the IMF to provide loans under one of its facilities to a developing country whose balance of payments is suffering because of multilateral trade liberalization, either because its export earnings decline when it loses preferential access to certain markets or because prices for food imports go up when agricultural subsidies are eliminated. Lending to low-income countries To help low-income countries weather the severe impact of the global financial crisis, the IMF has revamped its concessional lending facilities to make them more flexible and meet increasing demand for financial assistance from countries in need. These changes became effective in January 2010. Once additional loan and subsidy resources are mobilized, these changes will boost available resources for low-income countries to US$17 billion through 2014. Three types of loans were created under the new Poverty Reduction and Growth Trust (PRGT) as part of this broader reform: the Extended Credit Facility, the Rapid Credit Facility and the Standby Credit Facility. The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF succeeds the Poverty Reduction and Growth Facility (PRGF) as the Funds main tool for providing medium-term support LICs, with higher levels of access, more concessional financing terms, more flexible program design features, as well as streamlined and more focused conditionality. The Rapid Credit Facility (RCF) provides rapid financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need. The RCF streamlines the Funds emergency assistance, provides significantly higher levels of concessionality, can be used flexibly in a wide range of circumstances, and places greater emphasis on the countrys poverty reduction and growth objectives. The Standby Credit Facility (SCF) provides financial assistance to low-income countries (LICs) with short-term balance of payments needs. The SCF replaces the High-Access Component of the Exogenous Shocks Facility. It provides support under a wider range of circumstances, allows for higher access, carries a lower interest rate, can be used on a precautionary basis, and places greater emphasis on the countrys poverty reduction and growth objectives. Several low-income countries have made significant progress in recent years toward economic stability and no longer require IMF financial assistance. But many of these countries still seek the IMF's advice, and the monitoring and endorsement of their economic policies that comes with it. To help these countries, the IMF has created a program for policy support and signaling, called the Policy Support Instrument. Debt relief In addition to concessional loans, some low-income countries are also eligible for debts to be written off under two key initiatives.

The Heavily Indebted Poor Countries (HIPC) Initiative, introduced in 1996 and enhanced in 1999, whereby creditors provide debt relief, in a coordinated manner, with a view to restoring debt sustainability; and The Multilateral Debt Relief Initiative (MDRI), under which the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF) canceled 100 percent of their debt claims on certain countries to help them advance toward the Millennium Development Goals

Management
The IMF is led by a Managing Director, who is head of the staff and Chairman of the Executive Board. He is assisted by a First Deputy Managing Director and two other Deputy Managing Directors. The Management team oversees the work of the staff, and maintain high-level contacts with member governments, the media, non-governmental organizations, think tanks, and other institutions. Managing Director: Duties and selection According to the IMF's Articles of Agreement, the Managing Director "shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund." The IMF's Executive Board is responsible forselecting the Managing Director. Any Executive Director may submit a nomination for the position, consistent with past practice. When more than one candidate is nominated, as has been the case in recent years, the Executive Board aims to reach a decision by consensus. The current management team

Dominique Strauss-Kahn, a French national, became the IMF's tenth Managing Director in November 2007. Previously, he was the Finance Minister of France during 1997-99.

John Lipsky, an American, has been First Deputy Managing Director since September 2006. Before coming to the IMF, he worked for JPMorgan Investment Bank.

Murilo Portugal, from Brazil, became Deputy Managing Director of the IMF in December 2006. From 2005 to 2006, he was Brazil's Deputy Minister of Finance.

Naoyuki Shinohara, a Japanese national, joined the IMF as Deputy Managing Director in March 2010. Previously, he was Japan's Vice-Minister of Finance for International Affairs.

Country Representation
How countries are represented is key to the IMF's legitimacy as an international organization representing the interests of its 187 member countries. Upon joining the IMF, each country is allocated a quota based approximately on the relative size of its economy. The quota determines the country's financial contribution to the IMF, its voting power, and ability to access IMF financing. Because of rapid changes in the global economy in recent years, the IMF's members agreed that the existing quota allocations had become somewhat misaligned and needed to be adjusted. However, any changes in quotas require approval by an 85 percent majority. A broad-based consensus was therefore needed before any changes could be implemented. Two-year program In 2006, the IMF launched a two-year program to reform the system of quota shares. First-round changes included ad hoc quota increases for the four most underrepresented countries: China, Korea, Mexico, and Turkey (see chart). Agreementto further increase the voting share of emerging market and developing economies was reached in March 2008. This shift will be based on a new quota formula, replacing the old, complex system of five formulas. Under the reform, 135 countries will see increases in their voting power, with an aggregate shift of 5.4 percentage points. A total of 54 countries will see increases in their nominal quotas ranging from 12 to 106 percent, with aggregate quota shares for these countries increasing by 4.9 percentage points (see chart). Consistent with the objectives of the reform, some of the largest increases will go to dynamic emerging market countries. The Board of Governors also encouraged the Executive Board to recommend further realignments as a means to raise the shares of underrepresented members in future

general quota reviews (conducted every five years). Such realignments would recognize that member country representation should continue to adjust to changes in the global economy.

Protecting voice of low-income countries Enhancing the voice of low-income countries was another central element of the reform package. A key mechanism for achieving this goal is through an increase in basic votes. Basic votes reflect the principle of equality of states and give the smallest members of the IMF (many of which are low-income countries), a greater voice in the organization's deliberations. The agreement reached endorsed a tripling of basic votes, the first such increase since the IMF was established in 1945. This boost is crucial as it will more than compensate many low-income countries that would have otherwise seem their voting shares diminished (see chart). Additionally, the Articles of Agreement will be amended so that the share of basic votes in total voting power does not decline in the event of future quota increases.

To further enhance the participation of low-income countries, the amendment will also enable the two Executive Directors representing African constituencies to appoint a second Alternate Executive Director. Watch a video on governance reform. Read more about quota and voice reform. Listen to a podcast with Leo van Houtven, former Secretary of the IMF

Tackling current challenges

The IMF is helping many emerging market countries tackle the problems brought on by the devastating global economic crisis. Its lending to low-income countries has also been stepped up, as these countries start to feel the effects of the crisis. And it is providing policy advice to advanced countries, for instance on how to address problems in their financing and banking sectors, and how to design effective stimulus packages. As part of its response, the IMF has already more than doubled its financial assistance to lowincome countries, with new IMF concessional lending commitments to low-income

countries through mid-July 2009 reaching $2.9 billion compared with $1.5 billion for the whole of 2008. As the global economy continues to struggle in 2009, and with both trade and capital flows plummeting, the IMF is foreseeing mounting problems for many countries. The Fund is therefore seeking to add to its resources, and has already negotiated borrowing agreements with a number of countries. The Fund has already made good progress toward its target of $250 billion in bilateral government loans as part of moves to triple the IMFs lendable resources to $750 billion. Agreements are already in place with Japan ($100 billion), Canada ($10 billion), and Norway ($4.5 billion), and a number of other countries have committed funds either through loans or the purchase of IMF notes. In addition, the Fund is closely tracking economic and financial developments worldwide so that it can provide policymakers with the latest forecasts and analysis of developments in financial markets. And it is engaging with the Group of 20 (G-20) leading economies and other stakeholders on issues related to the evolution of the international financial system.

Emergency lending to emerging markets

Emerging market countries are facing increasing difficulties around the world because of the spreading global economic crisis, with demand falling for their exports, investment slumping, and cross-border lending drying up. A growing number of emerging economies have found room for policy maneuver becoming increasingly limited, and large-scale official support has been needed from bilateral and multilateral sources. Since 2008, the IMF has committed more than $160 billion in lending to a number of countries affected by the crisis, including Belarus, Hungary, Iceland, Latvia, Pakistan, Poland, Romania, Serbia, Sri Lanka, and Ukraine. It announced a precautionary loan for El Salvador and an IMF team has also been in negotiations with Turkey.

Helping low-income countries fight the crisis

The global economic crisis is threatening to undermine recent economic gains and to create a humanitarian crisis in the worlds poorest countries. In response, the IMF has stepped up lending to lowincome countries to combat the impact of the global recession with a new framework for loans to the worlds poorest nations, including increased resources, a doubling of borrowing limits, zero interest rates until the end of 2011, and new lending instruments that offer more flexible terms. Most low-income countries escaped the early phases of the global crisis, which began in the financial sectors of advanced economies. But it is now hitting them hard, mainly through trade, as financial problems in advanced countries trigger recessions that dampen demand for imports from low-income countries.

In addition, more than $18 billion of a planned $250 billion allocation of IMF Special Drawing Rights (SDRs) will go to low-income countries. These countries can benefit by either counting the SDRs as extra assets in their reserves, or selling their SDRs for hard currency to meet balance of payments needs.

Advocating global fiscal stimulus

The IMF is also providing policy advice to advanced countries, for instance on how to address problems in their financing and banking sectors, and how to design effective stimulus packages. Because of the constraints on the effectiveness of monetary policy, fiscal policy must play a central role in supporting demand. The IMF has advised countries that a key feature of a fiscal stimulus program is that it should support demand for a prolonged period of time and be applied broadly across countries with policy space to minimize cross-border leakages. But countries also need to be mindful of medium-term fiscal sustainability. The cost of fiscal stimulus packages to revive economies battered by the financial crisis, combined with tax revenue losses from output decline and the huge price tag for financial sector restructuring, will be very large.

Reforming the international financial system

The global economic crisis has sparked a rethinking of how the international financial system is structured. The IMF is assisting the G-20 industrialized and emerging economies with recommendations to reshape the system of international regulation and governance. To a large extent, global efforts thus far have been focused on the crisis at hand, but reforms are in progress with a view toward the post-crisis world. As input into the reform process, the IMF published a comprehensive study of the causes of the global financial crisis. The study takes stock of the initial lessons learnt from the crisis and presses for a worldwide rethink of how to handle systemic risk management. Although economic and financial sector policies will remain primarily the business of national governments, ongoing changes to the global financial architectureincluding to the IMFcan reduce the frequency and depth of future crises. Additional changes could also include addressing some of the shortcomings of the decision-making structure of the G-20 by allowing greater scope for joint decision making on a wider set of international economic and financial issues, with the IMF in its newly expanded role as a central player.

IMF and India Relations

India is among one of the developing economies that effectively employed the various Fund programmes to fortify its fiscal structure. Through productive engagement with the IMF, India formulated a consistent approach to expand domestic and global assistance for economic reforms. Whenever India underwent

balance of payments crises, it sought the help of IMF and in turn the internationally recognized reserve willingly helped India to overcome the difficulties. Recently, India purchased IMF gold to lend money to developing countries. This proves that the fiscal reforms set in motion by the previous finance ministers have finally started gaining momentum, transforming India from fiscal borrower to major lender. The speed at which the gold was purchased by India on September 18, 2009 astonished the market observers, who later considered it as a smart move towards shoring its bullion funds and steadily trying to stake on the US dollar. Some analysts predict that India is purchasing gold to move forward for higher voting share in the IMF. India is also seeking for a considerable say in global fiscal affairs and greater account in the IMF. The Reserve Bank of India forfeited USD 1,045/ ounce of yellow metal paying the amount in hard exchange and not in the IMF's internal division of account. The history of India's engagement with IMF illustrates that with premeditated planning it is possible to alleviate a macroeconomic calamity and sustain the rights of reform package without negotiating on democratic organizations or international policy autonomy.

IMF 2010-11 prediction of Indian Economy The International Monetary Fund (IMF) predicted 8% expansion during 2010-11. However, the growth will be affected by high inflation and increasing monetary deficit in the concerned fiscal year. India's long term economic prospects will continue to remain sturdy in 2010-11 followed by lower growth rate at 7.7% for the FY 2011-12. Other than high inflation and rising financial deficit, the major areas of concern are rise in asset cost and the prospects of an unanticipated slowdown in the influx of foreign investment in India caused due by the chaos in worldwide financial markets.

India Joined on December 27, 1945; Article VIII