International Monetary Fund (IMF)

The International Monetary Fund (IMF) has a part in shaping the global economy since the end of World War II. It is an organization of 18( 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 It provides policy advice and financing to members in economy difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.

During the cooperation and reconstruction phase after the end c Second World War, the IMF was assigned the task of overseeing the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder trade. When the system of fixed exchange rates collapsed in 1971 as well as during the oil shocks of 1973-74 and 1979, the IMF stepped in to help countries deal with the consequences.

It assisted in coordinating the global response to the international debt crisis caused due to oil shocks. It played a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven economies.

During the recent economic crisis too, the IMF has been on the front lines of lending to countries to help boost the global economy. 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 century’s, and the IMF had traditionally lent to members facing current account difficulties.

However, the fragility in the advanced financial markets was uncovered by the latest global crisis and the IMF was inundated with requests for stand-by arrangements and other forms of financial and policy support.

The international community recognized that the IMF's 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 Fund's lending capacity was tripled to around $ 750 billion. To use those funds effectively, the IMF overhauled its lending policies.

It created 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.

The IMF supports its member countries 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.

The world has changed dramatically since the IMF was founded, bringing extensive prosperity and lifting millions out of poverty, especially in Asia. In many ways the IMF's main purpose to provide the global public good of financial stability is 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 also changed over the years. It has undergone rapid change since the beginning of the 1990s to meet the changing needs of its expanding membership in a globalized world economy. Most recently, it 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 mission ensuring the stability of the global monetary system.

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 import-dependent poor and middle- income countries particularly hard, is another aspect of the globalized economy. The IMF has responded by enhancing its lending facilities by creating a new Short-Term Liquidity Facility and a new Poverty Reduction and Growth Trust. It has taken several steps to improve economic and financial surveillance and strengthen the monitoring of global, regional, and country economies.

In order to help resolve global economic imbalances, in its World Economic Outlook, the IMF has provided 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 countries an innovative way of facilitating collective action among key players in the global economy.

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. 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. 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.

The IMF's 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 this mandate surveillance, technical assistance and training, and lending. These functions are underpinned by the IMF's research and statistics. On a regular basis usually once each year the IMF conducts an in depth bilateral surveillance and 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. The main focus of the discussions is whether there are risks to the economy's domestic and external stability that would argue for adjustments in economic or financial policies.

IMF offers technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. The main areas in which it provides technical assistance and training are: monetary and financial policies; fiscal policy and management; compilation, management, dissemination, and improvement of statistical data; and economic and financial legislation.

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. The IMF cooperates with the national authorities in designing a policy program supported by financing. 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).

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. Besides collaborating with the World Bank, the regional development banks, the World Trade Organization (WTO), UN agencies, and other international bodies, the IMF also interacts with think tanks, civil society, and the media on a daily basis.

With its near-global membership, the IMF is uniquely placed to help member governments take advantage of the opportunities and 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. It also 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.