International Monetary Fund

IMF HQ

📍Washington, DC

Foundation year

1947

Number of member states

191

3 IMF roles

1. Stability in 🌍 exchange rates → provide economic stability

2. Surveillance

3. Advice

Stability in 🌍 exchange rates — action

• 1930s Great Depression

  • Devaluation of currencies

  • Uncertainty

  • Economic recession

• IMF: fixed exchange rates to price of gold rather than USD to increase stability

Stability in 🌍 exchange rates — events

• 1971 — fixed exchange rate collapsed

  • High inflation and unemployment

    • Nixon wanted to increase flexibility in monetary policy and increase value of 🇺🇸 currency

• Now: role has changed to provision of economic stability

Provision of economic stability

• Loans $ to states w/debt crises

Debt crisis

• When a state can’t repay loans to a financial institution (e.g. IMF) or private banks

1976 IMF loan

• To 🇬🇧

• $3.9bn

3 states who’ve recently recieved $ from the IMF to prevent bankruptcies

1. 🇵🇹

2. 🇬🇷

3. 🇪🇸

3 current main roles of IMF

1. Monitoring/surveillance

2. Technical assistance

3. Lending

Surveillance

• Produces annual report:

  • Monitoring outlook of 🌍 economy and member countries

  • Comments on and forecasts threats and weaknesses

Advice

• To member countries on their economic policy

Structure — most recent membership

2024 — 🇱🇮

Structure — 2 states missing

1. 🇰🇵

2. 🇲🇨 (Monaco)

• And other small states

Structure — 👑 of IMF

• Managing director, usually always European

• 2019-present — 🇭🇺 Kirstalina Georgieva

  • Former VP of EC

2016 Brexit controversy

• Under Christine Lagarde

• Published report week before that predicted Brexit would increase inflation and decrease 🇬🇧 GDP by 5.5%

  • This was true! We went from 5th to 6th richest economy by GDP

• Criticsed for interfering in decision

Resources — $

• Majority of $ comes from member states

  • Pay by quotas relative to their position in global economy

• 2008 — increased loan amount due to Financial Crash so payments went up again

Voting power

• Relative to financial contribution (which is relative to your wealth… so voting power is relative to a country’s wealth)

• Need supermajority for anything to pass

% needed for anything to pass in the IMF and 🇺🇸’s voting power

• 85% needed for anything to pass

• 🇺🇸 makes up 17%… so anything 🇺🇸 doesn’t support literally cannot pass

2020 Annual Report — total leant to total countries, total of this to LICs

• $165bn to 83 countries

  • Maj. to W. Hemisphere countries (🇲🇽, 🇨🇱, 🇨🇴)

  • Next largest to sub-Saharan Africa (🇪🇹, 🇳🇬)

  • $16bn to LICs

2 largest contributors to IMF by %

1. 🇺🇸 17%

2. 🇨🇳 and 🇯🇵 @ 6% each

Response to crises and 3 crises IMF has assisted with

• Tries to prevent spreading to other countries

1. 1997 Asian financial crisis

2. Emergency lending to 🇧🇷 (1998) and 🇦🇷 (2000)

3. 2008!

Structural Adjustment Programmes (not called this anymore but still exist)

• Conditions placed on IMF loans

• Macro-economic reforms

3 examples of SAPs

1. Cutting public spending and increasing taxes to reduce budget deficit

2. Privatsation

3. Cutting public sector wages/pensions

SAPs example — 🇦🇷

• $56bn loan — highest ever

• SAPs needed to be fulfilled for any future IMF loans

• SAPs:

  • Wealth tax

  • Creation of independent body to review gov’t budget and make forecasts

• Consequences:

  • SAPs failed and 🇦🇷 owes lots to IMF/lenders — COVID didn’t help

  • 🇦🇷 currency did stabilise

  • Now has lots of corruption

SAPs example — 🇵🇰

• Owed $100bn to international lenders

• Agreed to 3 years of $6bn worth of IMF loans

• SAPs:

  • Tax reforms that have led to tax revenue steadily rising over last decade

4 CRITICISMS of SAPs

1. Excessive demand to put on states

2. Infringes state sovreignty, often imposing neoliberal economic policy on states that may not agree (🇬🇷)

3. Benefit the richest

• Increased poverty after SAPs

• Economic reforms like privatisation actually just increase corporate profits

• Reforming formal sector instead of informal sector benefits richest

4. Opening markets to foreign investors exposes fragile economies to foreign economic crises

2 categories of IMF money

1. 25% of IMF subscription paid in $/£/€/yen and makes up Special Drawing Right, i.e. money that can be given to members when needed

2. 75% of money is the loan fund

Highly Indebted Poor Country Initiatives

• Focus on highly indebted poor countries to free them from debt

  • Form of Structural Adjustment Facility

Liberal view of IMF

• Yay!

• Hope that gain for all would integrate global economy

  • Rising living standards for everyone would reduce likelihood of war

Realist view of IMF

• Only happy with relative gains

  • Would not be happy with absolute gains for some states due to loans

Structural/neo-marxist/neocolonial view of IMF

• Not applied equally

• Structure of world economy and IMF designed to benefit global north core states that then benefit global north TNCs

• See it as leading to exploitation of workers in global south by reducing standards of living and health and safety standards

2 groups that run IMF

1. Board of Governors (every member-state has representative) that meets annually and ‘approve’ Executive Board decisions

2. Executive Board with 24 directors (8 permanent, 16 temporary) which meets several times a week

Change to voting power in 2017

• Structural reforms that extended Chinese voting power

• Cut quota of ‘advanced European seats’ on Executive Board by 2

IMF in 2022

• Warned Truss about damaging impacts of mini-budget