The International Monetary Fund
The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. Since the IMF was established its purposes have remained unchanged but its operations - which involve surveillance, financial assistance, and technical assistance - have developed to meet the changing needs of its member countries in an evolving world economy.
Growth in IMF Membership, 1945 - 2003
(number of countries)
The purposes of the International Monetary Fund are:
- To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
- To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.
- To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
- To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.
- 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 accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.
The role of the IMF
The IMF is helping low-income countries make progress toward the MDGs and contributing to the approach embodied in the Monterrey Consensus through each of the Fund's three key functions—lending, technical assistance, and surveillance.
Lending. The IMF provides financial assistance to low-income countries experiencing balance of payments problems through its Poverty Reduction and Growth Facility (PRGF) and, for temporary needs arising from exogenous shocks, through the Exogenous Shocks Facility (ESF). The interest rate on PRGF and ESF loans is concessional (only 0.5 percent), and loans are repaid over a period of 10 years (with 5 years' grace).
PRGF and ESF lending programs are based on Poverty Reduction Strategy Papers (PRSP). A PRSP is prepared by the government of a low-income country, in concert with civil society and development partners such as the IMF and World Bank, to describe the policies that will be employed to promote growth and reduce poverty in the country. In addition to economic policies, PRSPs typically cover structural and social policies that are needed to improve health and education, safeguard the environment, and combat HIV/AIDS, malaria, and other diseases. The IMF sees the PRSP approach as a key framework for implementing the Monterrey Consensus, and is working to ensure better alignment of PRGF lending programs with PRSPs.
Some low-income countries are eligible for the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). The joint IMF-World Bank HIPC Initiative entails coordinated action by the international financial community, including multilateral organizations and governments, to reduce to sustainable levels the external debt burdens of heavily indebted poor countries. The MDRI adds full debt relief by three multilateral institutions—the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF). The HIPCs that have already obtained debt service relief are spending much more on social services than on debt service—on average four times as much—and have shown a marked increase in the share of health and education in the budgets under their PRGF programs.
The Policy Support Instrument offers support for low-income countries that do not want or do not need financial assistance from the IMF but want its advice, monitoring, and endorsement of their economic policies. It is a vehicle intended to help them design effective economic programs and provide signaling to donors, the multilateral development banks, and markets.
Technical assistance. Adequate policy-making capacity is critical for sustainable development and growth. The IMF provides assistance and training—generally free of charge—to help member countries strengthen the capacity of their institutions and officials to manage economic and financial policies. In recent years, the Fund has reinforced its efforts in low-income countries by establishing regional technical assistance centers in the Pacific, the Caribbean, East, West, and Central Africa, and in the Middle East.
Surveillance. Low-income countries benefit from the full range of policy advice that is provided regularly to all 184 members through IMF surveillance. The objectives of this advice are to help countries: i) establish economic frameworks that can support sustained high growth and poverty reduction; ii) identify and manage sources of macroeconomic risks and vulnerabilities; and iii) strengthen institutions and policies that underpin sound macroeconomic management. Low-income countries also benefit from the Fund's surveillance over the policies of other countries and the international monetary system, which promotes global growth and economic stability. The IMF also uses the surveillance process to encourage developed countries to live up to their pledges toward the MDGs—especially, the long-standing target of 0.7 percent of GNP of official development assistance, and the need to reduce subsidies and other barriers to trade in order to improve access to their markets for low-income country exports.
Progress in implementing the policies and actions needed to achieve the MDGs and related outcomes is assessed annually in the Global Monitoring Report, a publication produced jointly by the IMF and the World Bank, in collaboration with other international partners.
Where the IMF Gets its Money
Most resources for IMF loans are provided by member countries, primarily through their payment of quotas. Concessional lending and debt relief for low-income countries are financed through separate contribution-based trust funds. The IMF's annual operating expenses are largely paid for by the difference between its interest receipts and its interest payments.
The quota system. Each member of the IMF is assigned a quota, based broadly on its relative size in the world economy, which determines its contribution to the IMF's financial resources. Upon joining the IMF, a country normally pays up to one-quarter of its quota in the form of widely accepted foreign currencies (such as the U.S. dollar, the euro, the yen, or the pound sterling) or Special Drawing Rights (SDRs). The remaining three-quarters is paid in the country's own currency. Quotas are reviewed at least every five years. The quota review that was concluded in 1998 led to a 45 percent increase in IMF quotas to SDR 213 billion (about $308 billion as of end-March 2006). The review concluded in January 2003 resulted in no change in quotas.
Gold holdings. Valued at current market prices, the IMF's gold holdings are worth about $60 billion as of end-March 2006, making the Fund one of the largest official holders of gold in the world. However, the IMF's Articles of Agreement strictly limit its use. Under some circumstances, the IMF may sell gold or may accept gold as payment by member countries; but the IMF is prohibited from buying gold or engaging in other gold transactions.
The IMF's lending capacity. The IMF can only use the currencies of financially strong economies to finance lending. The IMF's Executive Board selects these currencies every three months. Most are issued by industrial countries, but the list also has included currencies of developing countries such as Botswana, China, and India. The IMF's holdings of these currencies, together with its own SDR holdings, make up its usable resources.
The amount the IMF has readily available for new (non-concessional) lending is indicated by its one-year forward commitment capacity. This is determined by its usable resources, plus projected loan repayments over the subsequent twelve months, less the resources that have already been committed under existing arrangements, less a precautionary balance. As of end-March 2006, the Fund's one-year forward commitment capacity was $173 billion.
Borrowing arrangements. If the IMF believes that its forward commitment capacity might fall short of its members' needs—for example, in the event of a major financial crisis—it can activate supplementary borrowing arrangements. The first and principal resort is the New Arrangements to Borrow (NAB), which was established in 1998. Under the NAB, 26 countries have agreed to lend SDR 34 billion (about $49 billion).
IMF concessional lending and debt relief. The IMF provides two primary types of financial assistance to low-income countries: low-interest loans under the Poverty Reduction and Growth Facility (PRGF), and the Exogenous Shocks Facility (ESF), and debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). These resources come from member contributions and the IMF itself, rather than from the quota subscriptions. They are administered under the PRGF-ESF, PRGF-HIPC, MDRI-I and MDRI-II Trusts, for which the IMF acts as Trustee. The renamed PRGF ESF Trust (originally PRGF Trust) was established to provide lending in support of PRGF and ESF arrangements and to subsidize the market rate of interest down to the concessional interest rate of 0.5 percent per annum. Loan resources close to $23 billion have been committed by 17 contributors to the Trust, while a larger number of IMF member countries have made subsidy contributions.
The PRGF-HIPC Trust was established to provide debt relief under the HIPC Initiative and to subsidize PRGF lending. The resources available to the Trust consists of grants and deposits from 93 member countries and contributions from the IMF itself. The bulk of the IMF's contribution comes from the investment income on the net proceeds from off-market gold transactions made during 1999-2000.
The MDRI-I and MDRI-II Trusts were established to provide debt relief under the MDRI. Financed from the IMF's own resources of SDR 1.5 billion in the Special Disbursement Account (SDA), the MDRI-I Trust is to provide debt relief to countries (both HIPCs and non-HIPCs) with per capita incomes at or below $380 a year (on the basis of 2004 gross national income). The MDRI-II Trust is to provide debt relief to HIPCs with per capita incomes above $380 a year, with financing from bilateral resources of SDR 1.12 billion transferred from the PRGF-ESF Trust.
In addition to the above, there is a separate administered account financed by a group of member countries for interest subsidies on IMF emergency assistance to PRGF-eligible countries in post-conflict or natural disaster situations.
IMF income and expensesThe IMF’s annual expenses are financed largely by the difference between annual interest receipts and annual interest payments. In fiscal year 2005, interest and charges received from borrowing countries and other income totaled $3.6 billion, while interest payments on the portion of members' quota subscriptions used in IMF operations and other operating expenses amounted to $2.6 billion. The remainder was added to the IMF's General Resources Account—the funds available for lending to member countries.
Data and Statistics
The IMF publishes a range of time series data on IMF lending, exchange rates and other economic and financial indicators. Manuals, guides, and other material on statistical practices at the IMF, in member countries, and of the statistical community at large are also available.
- World Economic Outlook Databases. Download time series data for GDP growth, inflation, unemployment, payments balances, exports, imports, external debt, capital flows, commodity prices, more.
- International Financial Statistics. Approximately 32,000 time series covering more than 200 countries starting in 1948. Includes exchange rates, Fund accounts and the main global and country economic indicators.
- Joint BIS-IMF-OECD-World Bank Statistics on External Debt. External debt data and selected foreign assets from international creditor/market and national debtor sources.
- Balance of Payments Statistics Yearbook Includes annual aggregate and detailed time series balance of payments and international investment position data for countries; provides world and regional tables of balance of payments components and aggregates; and descriptions of methodologies, compilation practices and data sources used by individual countries. (not available in full text online)
- Currency Composition of Official Foreign Exchange Reserves (COFER). End-of-period quarterly data on the currency composition of official foreign exchange reserves. Data presented in CSV and PDF are aggregated data.
Source - International Monetary Fund