Highlights of this section:

• Key IMF Activities
• Original Aims
• Adapting to Change

With its near-global membership of 186 countries, the IMF is uniquely placed to help member governments take advantage of the opportunities—and 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 today’s 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.

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 purpose—to provide the global public good of financial stability—is 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.

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 expanding membership in an globalized world economy. Most recently, the IMF's Managing Director, Dominique Strauss-Kahn, has launched an ambitious reform agenda, aimed at making sure the IMF continues to deliver the economic analysis and multilateral consultation that is at the core of its mission—ensuring the stability of the global monetary system.

An adapting IMF

With cross-border financial flows increasing sharply in recent decades, the interdependence of countries has deepened (see slideshow on capital inflows). The turbulence in advanced economy credit markets in 2007-08 has demonstrated that domestic and international financial stability cannot be taken for granted, even in the world's wealthiest countries. The spike in food and fuel prices, which has hit import-dependent poor and middle-income countries particularly hard, is another 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 enable it to better serve its members. It has created a new Short-Term Liquidity Facility designed to help emerging market countries with a track record of sound policies address fallout from the current financial crisis. To make its financial support more flexible and tailored to the diversity of low-income countries, it has established a new Poverty Reduction 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 engages with countries on issues related to structural reform of the economy. (See Lending).
• Strengthening the monitoring of global, regional, and country economies. The IMF has taken several steps to improve economic and financial surveillance, which is its framework for providing advice to member countries on macroeconomic policies (see Our Work). It is emphasizing research into the links between the financial sector and the real economy and the sharing of cross-country experiences. It has published new guidance on how to analyze and advise on exchange rates, and is paying more attention to the impact of the world's most important economies on other countries' economies. And it is improving its ability to warn member countries of risks and vulnerabilities in their economies.
• Helping resolve global economic imbalances. The IMF's analysis of global economic developments, contained in its World Economic Outlook, provide finance ministers and central 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 specific problems facing the global economy with a select group of countries—an innovative way of facilitating collective action among key players in the global economy. The first such consultation took place in 2006. It sought to reduce global payments imbalances and involved China, the euro area, Japan, Saudi Arabia, and the United States (see Tackling Current Challenges).
• Analyzing capital market developments.The IMF is devoting more resources to the analysis of global financial markets and their linkages with macroeconomic policy. Twice a year, it publishes the Global Financial Stability Report, which provides up-to-date analysis of developments in global financial markets. IMF staff also work with member countries to help them identify potential risks to financial stability, including through the Financial Sector Assessment Program (described in more detail below). The IMF also offers training to country officials on how to manage their financial systems, monetary and exchange regimes, and capital markets. The IMF is currently facilitating the drafting of voluntary guidelines for Sovereign Wealth Funds and works closely with the Financial Stability Board to promote international financial stability.
• Assessing financial sector vulnerabilities.Resilient, well-regulated financial systems are essential for macroeconomic stability in a world of ever-growing capital flows. The IMF and the World Bank jointly run the Financial Sector Assessment Program, aimed at alerting countries to vulnerabilities and risks in their financial sectors. IMF and World Bank staff also advise on how to strengthen oversight and supervision of banks and other financial institutions.
• Working to cut poverty. At present, more than a billion people are living on less than $1 a day, and more than three-quarters of a billion people are malnourished. The IMF's role in low-income countries is changing as these countries grow and mature. But its central goal remains the same: to help promote economic stability and growth, laying the ground work for deep and lasting poverty reduction. Its current main priority is to help low- and middle-income countries cope with the adverse effects of the global economic crisis. To that effect, it is stepping up lending to low-income countries to combat the impact of the global recession.
• Improving IMF governance. In May 2008, the IMF's membership approved a two-year package of reforms to improve representation of members at the Fund. For the IMF to be fully effective in its role, it must be perceived as representing all countries in a fair manner. With that in mind, governance reform is being accelerated to ensure a decision-making structure that reflects current global realities. The IMF is also becoming leaner and more efficient. It is trimming expenditures and reorganizing the way it earns revenue to pay for its operations (See Governance).
• Greater accountability and transparency. The IMF publishes almost all of its annual economic 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 a regular basis by an Independent Evaluation Office.