International Monetary Fund

International Monetary Fund Definition and Meaning

IMF: International Monetary Fund

Short for IMF according to AbbreviationFinder, International Monetary Fund is autonomous specialized agency of the UN based in Washington (D.C.), founded in 1945 on the basis of the Bretton Woods (USA) agreement. The IMF promotes international cooperation in the field of monetary policy among its members (currently 189 countries), to whom it can grant loans if they have encountered financial difficulties.

In retrospect, the role and importance of the IMF has changed several times. After the original role of overseeing the Bretton Woods system of fixed exchange rates became obsolete with the collapse of that system in the early 1970s, other activities took center stage. Since the mid-1960s, the IMF has endeavored to make member countries more independent of the development of the balance of payments in the USA and the global supply of gold when it comes to the supply of international liquidity. In 1969 the artificial reserve medium special drawing rights was created. In the 1970s, in connection with the two oil price surges in 1973/74 and 1979/80, the financing of balance of payments imbalances came to the fore. The IMF was involved in recycling the petrodollars with. Since the 1980s, the focus has been on the debt crisis in the developing countries. The IMF has assumed a central role as crisis manager and made economic policy adjustment measures a condition for loans. With its (so far) policy, which has been geared more towards short-term repayable balance of payments aid, the IMF comes into play and v. a. With the unilateral economic and monetary policy conditions, it is increasingly in conflict with developing countries, which tend to need long-term development finance to overcome their economic difficulties. The drastic conditions imposed by the IMF are often criticized by the government and the population of the countries concerned, as this considerably restricts the government’s scope for political decision-making.

Although the IMF has meanwhile expanded its functions in the direction of development policy (e.g. through financial aid in the event of export failures and through expert assistance), more far-reaching demands from the developing countries, e.g. B. after a higher quota and vote share, after coupling the issue of special drawing rights with development aid, so far not taken into account.

On the one hand, developing and industrialized countries are calling for a strengthening of the IMF and better cooperation between the IMF and the World Bank, with the developing countries viewing the IMF more as a development-oriented lender, while the industrialized countries continue to focus on the original monetary policy mandate. On the other hand, there are also voices calling for the IMF to be curtailed or even abolished. The main accusation is that, as a result of the aid and safety nets provided by the IMF, private investors underestimate the risks of lending funds to public and non-public borrowers (moral hazard ). To the extent that private investors anticipate the grant, they view the IMF as an insurance policy for their financial commitment. This makes him an important cause of the misallocation of resources and shares responsibility for the development of financial crises. However, the possibility of moral hazard is not a sufficient reason to abolish an institution. It would not occur to anyone to abolish central banks just because they can achieve a similar effect with their credit facilities with commercial banks as a “lender of last ressort” (refinancing institution). Overall, the IMF can therefore still be seen as one of the most important international (executive) organs for safeguarding the international currency order.

At the latest with the G-20 summit (G 20) in Washington in mid-November 2008, which was held in order to be able to take concerted measures against the global financial market crisis, it became clear that the IMF has a central role to play in the effort to ensure the stability and security of the global economy. He was entrusted with examining the stability of the national financial systems of all participants in the summit, and it was also decided to increase his financial reserves so that he can help states hit particularly hard by the crisis (such as Iceland, Hungary and Pakistan) quickly and unbureaucratically. In 2011, however, the IMF complained that the states had implemented the restructuring of the financial system too slowly. The Monetary Fund in particular criticized the failure to react consistently enough to the problems in the banking sector.

Since 2010, the IMF, together with the EU Commission, the ECB and, most recently, the ESM crisis fund has been the lender for Greece, which suffers from high national debt.

International Monetary Fund