History

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 lowincome 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."

What we do
with its near-global membership of 188
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.
Video (11:38). In this short film, we hear about the IMF
and its role during the global economic crisis that brought
the world economy to its knees.

An adapting IMF

The IMF has evolved along with the global

economy throughout its 65-year history,
allowing the organization to retain its central
role within the international financial
architecture
As the world economy struggles to restore
growth and jobs after the worst crisis since the
Great Depression, the IMF has emerged as a
very different institution. During the crisis, it
mobilized on many fronts to support its
member countries. It increased its lending,
used its cross-country experience to advise on
policy solutions, supported global policy
coordination, and reformed the way it makes
decisions. The result is an institution that is
more in tune with the needs of its 188 member
countries.
Stepping up crisis lending. The IMF
responded quickly to the global economic
crisis, with lending commitments reaching a
record level of more than US$250 billion in
2010. This figure includes a sharp increase in
concessional lending (thats to say, subsidized
lending at rates below those being charged by
the market) to the worlds poorest nations.
Greater lending flexibility. The IMF has
overhauled its lending framework to make it
better suited to countries individual needs. It

is also working with other regional institutions

to create a broader financial safety net, which
could help prevent new crises.
Providing analysis and advice. The IMFs
monitoring, forecasts, and policy advice,
informed by a global perspective and by
experience from previous crises, have been in
high demand and have been used by the G20.
Drawing lessons from the crisis. The IMF is
contributing to the ongoing effort to draw
lessons from the crisis for policy, regulation,
and reform of the global financial architecture.
Historic reform of governance.The IMFs
member countries also agreed to a significant
increase in the voice of dynamic emerging and
developing economies in the decision making
of the institution, while preserving the voice of
the low-income members.

How we do it
The IMFs 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 IMFs
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 bilateralsurveillance. On a regular
basisusually once each yearthe IMF
conducts in depth appraisals of each member
countrys economic situation. It discusses with
the countrys authorities the policies that are
most conducive to a stable and prosperous
economy, drawing on experience across its
membership. Member countries may agree to
publish the IMFs assessment of their
economies, with the vast majority of
countries opting to do so.
The IMF also carries out extensive analysis of
global and regional economic trends, known as
multilateral surveillance. Its key outputs are

three semiannual publications, the World

Economic Outlook, the Global Financial Stability
Report, and the Fiscal Monitor. The IMF also
publishes a series of regional economic
outlooks.
The IMF recently agreed on a series of actions
to enhance multilateral, financial, and bilateral
surveillance, including to better integrate the
three; improve our understanding
of spillovers and the assessment of emerging
and potential risks; and strengthen IMF policy
advice.
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; and
economic and financial legislation.
For more on technical assistance, go to
Technical Assistance in the Our Work section.
Lending
IMF financing provides member countries the
breathing room they need to correct balance of
payments problems. 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.
In the most recent reforms, IMF lending
instruments were improved further to
provide flexible crisis prevention tools to a
broad range of members with sound

fundamentals, policies, and institutional policy

frameworks.
In low-income countries, the IMF has doubled
loan access limits and is boosting its lending to
the worlds poorer countries, with loans at a
concessional interest rate.
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
IMFs 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 IMFs
continuing efforts to strengthen national and
global financial systems and improve its ability
to prevent and resolve crises.

Membership
The IMF currently has a near-global
membership of 188 countries. To become a
member, a country must apply and then be
accepted by a majority of the existing
members. In April 2012, Republic of South

Sudan joined the IMF, becoming the

institution's 188th member.
Upon joining, each member country of the IMF
is assigned a quota, based broadly on its
relative size in the world economy. The IMF's
membership agreed in November 2010 on
a major overhaul of its quota system to reflect
the changing global economic realities,
especially the increased weight of major
emerging markets in the global economy.
A member country's quota defines its financial
and organizational relationship with the IMF,
including:
Subscriptions
A member country's quota subscription
determines the maximum amount of financial
resources the country is obliged to provide to
the IMF. A country must pay its subscription in
full upon joining the IMF: up to 25 percent
must be paid in the IMF's own currency,
calledSpecial 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's votes are comprised of basic votes
plus one additional vote for each SDR 100,000
of quota. The number of basic votes attributed
to each member is calculated as 5.502 percent
of total votes. Accordingly, the United States
has 421,965 votes (16.76 percent of the total),
and Tuvalu has 759 votes (0.03 percent of the
total).
Access to financing
The amount of financing a member country can
obtain from the IMF is based on its quota. For
instance, under Stand-By and Extended
Arrangements, which are types of loans, a
member country can borrow up to 200 percent
of its quota annually and 600 percent
cumulatively.
SDR allocations
SDRs are 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,

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
works closely with the Group of Twenty (G-20)
industrialized and emerging market economies
and 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. While 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. IMF loans assist countries in
continuing to pay for imports, stabilizing their
currencies, and restoring conditions for strong
economic growth. 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. 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.
Cooperating on financial stability, banking
supervision, and trade
The IMF is a member of the Switzerlandbased 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 theBasel Committee on Banking
Supervision and the International Association of
Insurance Supervisors.
The IMF has observer status at formal meetings
of the World Trade Organization (WTO). The
IMF's determination of a country's balance of
payments situation plays a considerable part in
the WTO's assessment of trade restrictions

applied in the event of balances of payments

difficulties. The IMF is also involved in the
WTO-led Integrated Framework for TradeRelated Technical Assistance to Least
Developed Countries, and IMF staff contribute
to the work of the WTO Working Group on
Trade, Debt, and Finance.
Collaborating with the UN
The IMF has a Special Representative to
the United Nations, located at the UN
Headquarters in New York. Collaboration
between the IMF and the UN covers several
areas of mutual interest, including cooperation
on tax issues and statistical services of the two
organizations, as well as reciprocal attendance
and participation at regular meetings and
specific conferences and events. In recent
years, the IMF has worked with the
International Labor Office on issues related to
employment, as well as social protection floors;
the UN Children's Fund on fiscal issues and
social policy; the UN Environment Program on
the green economy; and the World Food
Program on social safety nets and early
assessments of vulnerability.
Working closely with the G-20

Increasingly, the IMF has been working with

the Group of Twenty (G-20) industrialized and
emerging market economies. During the global
financial crisis, collective action by the G-20
was critical for avoiding even greater economic
difficulties, and in subsequent meetings the G20 leaders have continued to reaffirm their
commitment to reinvigorate economic growth.
The IMF provides analysis on global economic
conditions and on how G-20 members' policies
fit togetherand whether, collectively, they can
achieve the Group's goals.
Working on employment issues
The IMF's mandate includes contributing to the
promotion and maintenance of high levels of
employment and real incomes through the
expansion and balanced growth of international
trade. Given the importance of employment for
sustainable and inclusive growth, IMFsupported programs often contain
recommendations pertaining to the labor
market. That said, labor market policies are not
a core area of IMF expertise. For this reason,
the Fund works with other international,
regional, and local organizations in this
important area. We have an active partnership
with the International Labor Organization (ILO),

with whom we have been pooling expertise to

better understand the impact of
macroeconomic policies on job creation.
The IMF also liaises regularly with the
International Trade Union Confederation, and
its affiliates. Finally, IMF missions to member
countries meet regularly with trade union
representatives to gain a better understanding
of and exchange views on national labor
market dynamics.
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 program involving
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.