What is the ‘International Monetary Fund – IMF’
The International Monetary Fund (IMF) is an international organization created for the purpose of standardizing global financial relations and exchange rates. The IMF generally monitors the global economy, and its core goal is to economically strengthen its member countries.
What the IMF Does
The work of the IMF is of three main types:
Surveillance involves the monitoring of economic and financial developments, and the provision of policy advice, aimed especially at crisis-prevention.
The IMF also lends to countries with balance of payments difficulties, to provide temporary financing and to support policies aimed at correcting the underlying problems; loans to low-income countries are also aimed especially at poverty reduction.
Third, the IMF provides countries with technical assistance and training in its areas of expertise. Supporting all three of these activities is IMF work in economic research and statistics.
The IMF and the Europe financial crisis
The financial crisis has transformed the relationship between the International Monetary Fund (IMF) and Europe. In 2006, the IMF was a struggling institution, facing a budget shortfall and shedding staff. Since 1976, the IMF had no active program in the old member states of the European Union (EU). Its influence even in new EU member states had subsided after their transition to a market economy. Hence, prior to the crisis, the IMF’s role in Europe had been confined to technical consultancy and being an interlocutor during regular but unimportant Article-IV surveillance missions.
The crisis has returned the IMF to the center of international crisis management and economic policy- making. The G20 tripled the Fund’s resources, and the IMF was able to expand its lending framework and enhance its surveillance mandate. With more than 40% of the current IMF crisis financing flowing to EU member states, the Fund’s role in Europe has changed dramatically. Initially, the IMF was called upon to intervene in individual European economies, such as Iceland, Latvia, Romania, or Hungary. As the crisis spread across Europe, the IMF has become central for the stabilization of the entire Eurozone: EU member states decided to channel hundreds of billions of Euro to Greece, Ireland, and Portugal through new joint IMF-EU programs. Moreover, the IMF became financially and politically involved in European reform initiatives, such as the European Financial Stability Fund, the European Stability Mechanism or the re-regulation of European cross-border banking.