Although the IMF is a specialized agency of the United Nations and participates in the Economic and Social Council of the UN, it operates independently and has its own charter, governing structure, rules, and finances.
The IMF currently has 184 member countries, 7 fewer than the United Nations. The difference is accounted for by Cuba, North Korea, and 5 very small countries: Andorra, Liechtenstein, and Monaco in Europe, and the island countries of Nauru and Tuvalu in the Pacific Ocean. Cuba was an original member of the IMF but withdrew in 1964; none of the other six countries has applied for membership. To become a member, a country must apply and then be accepted by a majority of the existing members.
Political oversight of the IMF is primarily the responsibility of the International Monetary and Financial Committee (IMFC), whose 24 members are finance ministers or central bank governors from the same countries and constituencies that are represented on the Executive Board (see organization chart, page 33). The IMFC meets twice a year and advises the Fund on the broad direction of policies. Most IMFC members are also members of the Board of Governors, on which every member country has a Governor. The Board of Governors meets once a year and votes on major institutional decisions such as whether to increase the Fund’s financial resources or admit new members. A Development Committee, which, like the IMFC, also has 24 members of ministerial rank, advises the Board of Governors of the IMF and the World Bank about issues facing developing countries. It meets twice a year.
The head of the institution is the Managing Director, who is selected by the Executive Board (which he chairs) to serve a fiveyear term. The Managing Director has always been European. The Executive Board, which sets policies and is responsible for most decisions, consists of 24 Executive Directors. The five countries with the largest quotas (see below) in the Fund—the United States, Japan, Germany, France, and the United Kingdom—appoint Directors. Three other countries—China, Russia, and Saudi Arabia—have large enough quotas to elect their own Executive Directors. The other 176 countries are organized into 16 constituencies, each of which elects an Executive Director. Constituencies are formed by countries with similar interests and usually from the same region, such as French-speaking countries in Africa (see table on next page).
The IMF has around 2,700 staff from more than 140 countries, most of whom work at the IMF’s headquarters in Washington, DC. A small number of staff work at regional or local offices around the globe. The IMF staff is organized mainly into departments with regional (or area), functional, information and liaison, and support responsibilities (see organization chart, page 33). These departments are headed by directors who report to the Managing Director. The staff track economic developments around the world and in individual countries and conduct the analysis of economic developments and policies that forms a basis for the IMF’s operational work of policy advice and lending.
Where does the IMF get its money?
The IMF is a financial cooperative, in some ways like a credit union. On joining, each member country pays in a subscription, called its “quota.” A country’s quota is broadly determined by its economic position relative to other members and takes into account the size of members’ GDP, current account transactions, and official reserves. Quotas determine members’ capital subscriptions to the IMF and the limits on how much they can borrow. Quotas also help determine members’ voting power.
The combined capital subscriptions of the IMF’s members form a pool of resources, which the IMF uses to provide temporary help to countries experiencing financial difficulties. These resources allow the IMF to provide balance of payments financing to support members implementing economic adjustment and reform programs.
At regular intervals of not more than five years, the IMF’s Executive Board reviews members’ quotas and decides—in light of developments in the global economy and changes in members’ economic positions relative to other members—whether to propose an adjustment of their quotas to the Board of Governors.
Countries pay 25 percent of their quota subscriptions in reserve assets, defined as Special Drawing Rights (SDRs, the IMF’s unit of account, see page 33), or the major currencies (U.S. dollars, euros, Japanese yen, or pounds sterling); the IMF can call on the remainder, payable in the member’s own currency, to be made available for lending as needed. Quotas determine not only a country’s subscription payments, but also the amount of financing that it can receive from the IMF and its share in SDR allocations. The IMF’s total quotas are equivalent to SDR 213 billion (about $310 billion). Each country’s voting power is the sum of its “basic votes” and its quota-based votes. Each IMF member has 250 basic votes (which were set in the Articles of Agreement as equal for all countries) plus one additional vote for each SDR 100,000 of quota.
If necessary, the IMF may borrow to supplement the resources available from its quotas. The IMF has two sets of standing arrangements to borrow from member countries, if necessary, to cope with any threat to the international monetary system. Under the two arrangements combined, the IMF has up to SDR 34 billion (about $50 billion) available to borrow.
Concessional loans and debt relief for low-income countries come from trust funds administered by the IMF.
Paying for the IMF
The IMF’s annual expenses are financed largely by the difference between annual interest receipts and annual interest payments. In fiscal year 2004, interest and charges received from borrowing countries and other incomes totaled $3.4 billion, while interest payments on the portion of members’ quota subscriptions used in IMF operations and other operating expenses amounted to $1.4 billion. Administrative expenditures (including staff salaries and pensions, travel, and supplies) totaled $0.8 billion. The remainder was added to the IMF’s general funds available for lending to member countries.
The IMF and the World Bank—what’s the difference?
The IMF and the World Bank were conceived at the Bretton Woods conference in July 1944 as institutions to strengthen international economic cooperation and to help create a more stable and prosperous global economy. While these goals have remained central to both institutions, their mandates and functions differ, and in both cases their work has evolved in response to new economic developments and challenges.
The IMF promotes international monetary cooperation and provides member countries with policy advice, temporary loans, and technical assistance so they can establish and maintain financial stability and external viability, and build and maintain strong economies. The Fund’s loans are provided in support of policy programs designed to solve balance of payments problems—that is, situations where a country cannot obtain sufficient financing on affordable terms to meet net international payments. Some IMF loans are relatively short term (for periods of about a year, repayable in 3–5 years) and funded by the pool of quota contributions provided by its members. Other IMF loans are for longer periods (up to 3 years, repayable in 7–10 years), including concessional loans provided to low-income members on the basis of subsidies financed by past IMF gold sales and members’ contributions. In its work in low-income countries, the IMF’s main focus is on how macroeconomic and financial policies can contribute to the central goal of poverty reduction. Most IMF professional staff are economists.
The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support, including to help countries reform particular sectors or implement specific projects—for example, building schools and health centers, providing water and electricity, fighting disease, and protecting the environment. World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance. World Bank staff have qualifications that embrace a broader range of disciplines than those of IMF staff.
The IMF and the World Bank collaborate in a variety of areas, particularly in reducing poverty in low-income countries, providing debt relief for the poorest countries, coordinating programs to help meet the Millennium Development Goals (see pages 28–31), and assessing the financial sectors of countries. The two institutions hold joint meetings twice a year.