The International Monetary Fund (IMF) is entering its 65th year since it began operations, but there’s no sign it will be retiring from the world stage. In fact, as the “lender of last resort” to countries in financial crisis, the IMF is arguably more important than ever to the global economy. When the global financial crisis hit, the IMF stepped up its lending, brokering rescue deals for countries including Hungary, Iceland, Pakistan, and Ukraine. In 2010 its loans totaled more than $250 billion. Now it is deeply involved in attempts to resolve the European debt crisis, especially efforts to protect “crisis bystanders” from financial fallout. Nearly all the world’s countries are members of the Washington-based fund, with the United States being the largest shareholder.
The IMF was created in the aftermath of World War II as part of a new global financial system formed to aid nations in recovering from the destruction of the war. The IMF’s main purpose has been to provide the global public good of financial stability. It facilitates the growth of international trade, promotes exchange rate stability, and lends to countries in crisis. In short, it helps make possible the monetary transactions that enable countries and their citizens to buy goods and services from each other. It also offers policy advice to governments and central banks and performs economic research and analysis based on its extensive tracking of global, regional, and individual national economies. It aims to help nations benefit from globalized markets while avoiding the pitfalls.
In 2009, the international community recognized that the IMF’s financial resources were likely to be tapped out by the crisis. The fund’s lending capacity was therefore tripled to about $750 billion. The IMF revised its lending policies to include flexible “credit lines” for countries with strong economic fundamentals and began moving toward greater representation in its decision making for “emerging market countries” such as Brazil, China, India, Russia, and South Korea.
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- International Monetary Fund: History
Explore this website that contains a five-part official history of the IMF; each part includes a video, with the latest installment being “Lessons from a Time of Crisis.”
(Source: imf.org; accessed February 29, 2012)
- International Monetary Fund
This overview of the IMF’s history and role focuses on the changes and challenges that have made it a major player in the European sovereign debt crisis.
(Source: New York Times, January 24, 2012)
- IMF Seeks Funds for European Debt Crisis as U.S. Stands Back
This article explains the workings of the IMF in relation to the European debt crisis and the present U.S. administration’s stance toward the IMF’s activity.
(Source: Bloomberg Business Week, December 14, 2011)