Background

How does the IMF operate?

23 August 2005 | FAQ

The IMF was conceived primarily as a supervisory institution to promote international monetary cooperation and facilitate the growth of international trade. This is to be achieved through maintaining monetary exchange stability and assisting member countries who are experiencing balance of payments problems.

Upon membership of the IMF, member countries deposit a sum of money known as a ‘quota subscription’. This sum will determine how much money the country can draw from the Fund in times of crisis. Quotas also determine the voting rights of each member country, which means, like the World Bank, decision-making power in the IMF rests with the countries with the highest contribution.

The IMF lends money to member countries faced with balance of payments problems, ie when a country fails to earn sufficient foreign currency—through exports or provision of services—to pay for its imports. In return for financial assistance from the IMF, borrower countries must implement a set of economic reforms aimed at overcoming their balance of payments problems. Loans are disbursed in installments and payment is tied to the countries’ compliance with the structural adjustment policies.