The IMF: A delve into the management of the world’s financial system

Julie Brownlee, Fsp Invest, 15 Jun. 2015

Tags: imf, international monetary fund, what is the imf, what does the imf do, south africa,

When reading financial and business news stories, you’ve most likely come across mentions of the International Monetary Fund (IMF).

So what exactly is the IMF? And what does it do?

Read on to find out…

What is the IMF?

The IMF is an international organisation. It plays a central role in managing the global financial system, says Money Week.

Founded in 1945, the IMF came into being to help rebuild international payments and global trade following the Second World War and the Great Depression.

Since then, its role in the world’s financial system has grown. This was especially so after the end of the Bretton Woods system of fixed exchange rates. The Bretton Woods system meant that global currencies were pegged to the US dollar.

Today, the IMF describes its purpose as “working to foster global monetary cooperation secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world”.

One of its key roles is lending money to troubled economies.

How the IMF works

The IMF has 188 member countries, which includes South Africa.

Each country has an IMF quota. This determines its maximum financial commitment to the organisation, how much it can borrow and its voting power.

The quotas each country has go back to when each country joined the IMF. This means Western economies have a heavy influence over votes.

This is certainly the case for the US. Its quota means it has a controlling share of votes.

This Western stronghold means that decisions can sometimes be at the expense of emerging countries.

The IMF also provides reports on economic growth.

For instance, in January the IMF downgraded South Africa’s growth forecast for the year. These reports weigh up positive and negative influences on the economy.

So there you have it. A delve into the management of the world’s financial system by the IMF.

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