imf what we do

7/30/2019 IMF What we do

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What we doHighlights of this section:

Key IMF Activities Original Aims Adapting to Change

With its near-global membership of 187 countries, the IMF is uniquely placed to help membergovernments take advantage of the opportunitiesand manage the challengesposed byglobalization and economic development more generally. The IMF tracks global economictrends 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 tackleeconomic difficulties.

The IMF provides policy advice and financing to members in economic difficulties and alsoworks with developing nations to help them achieve macroeconomic stability and reducepoverty.

Marked by massive movements of capital and abrupt shifts in comparative advantage,globalizationaffects countries' policy choices in many areas, including labor, trade, and taxpolicies. Helping a country benefit from globalization while avoiding potential downsides is animportant task for the IMF. The global economic crisis has highlighted just how interconnectedcountries 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 andcross-country experiences;

research, statistics, forecasts, and analysis based on tracking of global, regional, andindividual 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

Original aims

The IMF was founded more than 60 years ago toward the end of World War II (seeHistory). Thefounders aimed to build a framework for economic cooperation that would avoid a repetition of
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the disastrous economic policies that had contributed to the Great Depression of the 1930s andthe global conflict that followed.

Since then the world has changed dramatically, bringing extensive prosperity and lifting millionsout of poverty, especially in Asia. In many ways the IMF's mainpurposeto provide the global

public good of financial stabilityis the same today as it was when the organization wasestablished. 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 expandingmembership in an globalized world economy. Most recently, the IMF's Managing Director,Dominique Strauss-Kahn, has launched an ambitiousreform agenda, aimed at making sure theIMF continues to deliver the economic analysis and multilateral consultation that is at the core ofits missionensuring the stability of the global monetary system.

An adapting IMF

With cross-border financial flows increasing sharply in recent decades, the interdependence ofcountries has deepened (seeslideshow on capital inflows). The turbulence in advanced economycredit markets in 2007-08 has demonstrated that domestic and international financial stabilitycannot be taken for granted, even in the world's wealthiest countries. The spike in food and fuelprices, which has hit import-dependent poor and middle-income countries particularly hard, isanother 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 enableit to better serve its members. It has created a new Short-Term Liquidity Facilitydesigned to help emerging market countries with a track record of sound policies addressfallout from the current financial crisis. To make its financial support more flexible andtailored to the diversity of low-income countries, it has established a new PovertyReduction 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 engageswith countries on issues related to structural reform of the economy.
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Strengthening the monitoring of global, regional, and country economies. The IMFhas taken several steps to improve economic and financial surveillance, which is itsframework for providing advice to member countries on macroeconomic policies (seeOur Work). It is emphasizing research into the links between the financial sector and thereal economy and the sharing of cross-country experiences. It has published new

guidanceon how to analyze and advise on exchange rates, and is paying more attention tothe impact of the world's most important economies on other countries' economies. And itis improving its ability to warn member countries of risks and vulnerabilities in theireconomies.

Helping resolve global economic imbalances. The IMF's analysis of global economicdevelopments, contained in itsWorld Economic Outlook, provide finance ministers andcentral 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 specificproblems facing the global economy with a select group of countriesan innovative wayof facilitating collective action among key players in the global economy. The first suchconsultation took place in 2006. It sought to reduce global payments imbalances and

involved China, the euro area, Japan, Saudi Arabia, and the United States (seeTacklingCurrent Challenges). Analyzing capital market developments.The IMF is devoting more resources to the

analysis of global financial markets and their linkages with macroeconomic policy. Twicea year, it publishes theGlobal Financial Stability Report, which provides up-to-dateanalysis of developments in global financial markets. IMF staff also work with membercountries to help them identify potential risks to financial stability, including through theFinancial Sector Assessment Program (described in more detail below). The IMF alsooffers training to country officials on how to manage their financial systems, monetaryand exchange regimes, and capital markets. The IMF is currently facilitating the draftingof voluntary guidelines for Sovereign Wealth Funds and works closely with theFinancialStability Boardto promote international financial stability.

Assessing financial sector vulnerabilities.Resilient, well-regulated financial systems areessential for macroeconomic stability in a world of ever-growing capital flows. The IMFand the World Bank jointly run theFinancial Sector Assessment Program, aimed atalerting countries to vulnerabilities and risks in their financial sectors. IMF and WorldBank staff also advise on how to strengthen oversight and supervision of banks and otherfinancial institutions.

Working to cut poverty. At present, more than a billion people are living on less than $1a day, and more than three-quarters of a billion people are malnourished. The IMF's rolein low-income countries is changing as these countries grow and mature. But its centralgoal remains the same: to help promote economic stability and growth, laying the groundwork for deep and lasting poverty reduction. Its current main priority is to help low- andmiddle-income countries cope with the adverse effects of the global economic crisis. Tothat effect, it is stepping up lending to low-income countries to combat the impact of theglobal recession.

Improving IMF governance. In May 2008, the IMF's membership approved atwo-yearpackage of reformsto improve representation of members at the Fund. For the IMF to befully effective in its role, it must be perceived as representing all countries in a fairmanner. With that in mind, governance reform is being accelerated to ensure a decision-
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making structure that reflects current global realities. The IMF is also becoming leanerand more efficient. It is trimming expenditures and reorganizing the way it earns revenueto pay for its operations (SeeGovernance).

Greater accountability and transparency. The IMF publishes almost all of its annualeconomic 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 aregular basis by anIndependent Evaluation Office.
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