What The Heck Is The IMF?


by Stephanie Berenbaum – May 18, 2011

The Importance of the International Monetary Fund

When news broke the other day that Dominique Strauss-Kahn, the head of the IMF, was arrested in New York for alleged sexual assault, the International Monetary Fund made headlines around the world. But how many of us really know what the IMF is?

I mean, I had certainly heard of the IMF before.  But if really pressed, I couldn’t tell you much about it. So, here is our Fab & Fru rundown of what this organization is and why it is important…

So What Is It?

The IMF is an international organization made up of a group of 187 member countries. Each of these countries contributes money to the “fund”.  The biggest contributors are the USA and Europe, hence they are the most powerful members.

Like most clubs, there are rules members are supposed to abide by.  In the case of the IMF, members agree when they join to “subject its economic and financial policies to the scrutiny of the international community.”  To be eligible for membership and help, you must open yourself up to be under the watch of the international roving eye  – and should you seek a loan from the IMF, you will likely have to agree to reforms in exchange for their help.

What’s Their Goal?

Basically, the purpose of the IMF is to foster financial stability through the world via their relationships with their 187 members. Their goal is for member countries to have “high rates of employment, low inflation and stable economic growth” Sounds good, right?

This means helping countries going through rough patches as well as providing support and assistance to developing countries.

How Do They Do It?

How does the IMF go about tackling such large and lofty goals? Basically through surveilance, technical assistance, and loans.  The first two basically mean they keep tabs on what is going on in the global economy and provide training to help countries improve their economic management.  The third – loans – is what you hear about most in the news, and not surprisingly comes with MANY strings attached, such as financial belt tightening and reform milestones that countries must reach.

Is The IMF The Same Thing As The World Bank?

Nope!  The World Bank and the IMF are two different entities.  In simplest terms, the World Bank is a development bank, and the IMF is not.  So, the World Bank finances development projects throughout the world, whereas the IMF steps in with loans when  countries need help. Think of the IMF more as a “protector” and the World Bank as more of a “developer”.

Fun-Da-Mentals

We hope this brief overview has at least given you a rough idea of the crucial role that the IMF’s plays in the global economy.  Prior to this past week, many of us had no idea who Dominique Strauss-Kahn even was, but thanks to his alleged horrifying behavior, we are all a little wiser…

So, now that you know a bit more about the IMF, stay tuned as to what happens regarding Mr. Strauss-Kahn’s likely exit as head of the organization and the naming of his replacement.  With any new leader will come new and changing implications for the global economy — which, don’t forget, YOU are a part of!

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