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International Monetary Fund

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Brief Overview

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.

Formal Definition

Headquarters located in Washington D.C., USA, the International Monetary Fund (IMF) currently has a near-global membership of 185 countries in the year of 2007 and is an international organization that supervise the financial system worldwide by following the macroeconomic policies of member nations, especial those with an impact on exchange rates and the balance of payments. Through its economic surveillance, the IMF keeps track of the economic health of its member countries, altering them to risks on the horizon and providing policy advice. It also provides financial resources and technical assistance to help members in balance of payments difficulties and to assist with poverty reduction.

Detailed Description

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 fight poverty in developing countries; and

• technical assistance and training to help countries improve the management of their economies.

The IMF promotes global growth and economic stability by encouraging countries to adopt sound economic policies. To do this, it regularly monitors global, regional, and national economic developments. It also seeks to assess the impact of the economic policies of individual countries on other economies. This process of monitoring and discussing is known as economic surveillance. On a regular basis—usually once each year, the 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 growing and prosperous economy. 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. This process of monitoring and discussing is known as economic surveillance. On a regular basis—usually once each year, the 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 growing and prosperous economy.

The IMF also works with the World Bank to encourage the growth of resilient, well-regulated 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, FSAP work identifies the strengths and vulnerabilities of a country's financial system, determines how key sources of risks are being managed, ascertains the sector's developmental needs, and helps prioritize policy responses.

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.

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).(Summarized from IMF officical website). (http://www.imf.org/external/index.htm)

Recommended Reading

International Monetary Fund. (http://www.imf.org/external/index.htm)

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