Highlights of this section:

• Key IMF Activities
• Original Aims
• Adapting to Change

With its near-global membership of 186 countries, the IMF is uniquely placed to help member governments take advantage of the opportunities—and manage the challenges—posed by globalization. The IMF tracks global economic trends and performance, alerts its member countries when it sees problems on the horizon, provides a forum for policy dialogue, and passes on know-how to governments on how to tackle economic difficulties.

Marked by massive movements of capital and abrupt shifts in comparative advantage, globalization affects countries' policy choices in many areas, including labor, trade, and tax policies. Helping a country benefit from globalization while avoiding its downsides is an important task for the IMF.

Read here how the IMF is helping countries to tackle the global financial crisis.

Key IMF activities

The IMF supports its membership by providing:

• policy advice to governments and central banks based on analysis of economic trends and cross-country experiences;
• research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets;
• loans to help countries overcome economic difficulties;
• concessional loans to fight poverty in developing countries; and
• technical assistance and training to help countries improve the management of their economies.

Original aims

The IMF was founded more than 60 years ago toward the end of World War II (see History). The founders aimed to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed.

Since then the world has changed dramatically, bringing extensive prosperity and lifting millions out of poverty, especially in Asia. In many ways the IMF's main purpose—to provide the global public good of financial stability—is the same today as it was when the organization was established. More specifically, the Fund continues to

• provide a forum for cooperation on international monetary problems
• facilitate the growth of international trade, thus promoting job creation, economic growth, and poverty reduction;
• promote exchange rate stability and an open system of international payments; and
• lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.

This is not to say that the IMF has remained static. In fact, the IMF's way of operating has been undergoing rapid change at least since the beginning of the 1990s as it has sought to adapt to the changing needs of its expanding membership in an globalized world economy. Most recently, the IMF's new Managing Director, Dominique Strauss-Kahn, has launched an ambitious reform agenda, aimed at making sure the IMF continues to deliver the economic analysis and multilateral consultation that is at the core of its mission—ensuring the stability of the global monetary system.

An adapting IMF

With cross-border financial flows increasing sharply in recent decades, the interdependence of countries has deepened (see slideshow on capital inflows). The turbulence in advanced economy credit markets in 2007-08 has demonstrated that domestic and international financial stability cannot be taken for granted, even in the world's most wealthy countries. The spike in food and fuel prices, which has hit import-dependent poor and middle-income countries particularly hard, is another aspect of the globalized economy we all are part of.

In response, the IMF has rethought its operations in several ways:

• Enhancing IMF lending facilities. The IMF is upgrading its lending facilities to enable it to better its serve members. It has created a new Flexible Credit Line designed to help emerging market countries with a track record of sound policies address fallout from the current financial crisis. It has also revamped its Exogenous Shocks Facility to facilitate the disbursement of aid to countries hit by the fuel and food crisis. The institution announced in March 2009 an overhaul of its lending facilities and the terms on which loans are provided to ensure that the IMF can respond quickly to the ongoing global economic crisis and adequately tailor disbursements to the varying strengths of members' policies and fundamentals.
  (See Lending).
• Strengthening the monitoring of global, regional, and country economies. The IMF has taken several steps to improve economic surveillance, its framework for providing advice to member countries on macroeconomic policies (see Our Work). It is emphasizing research into the links between the financial sector and the real economy and the sharing of cross-country experiences. It has published new guidance on how to analyze and advise on exchange rates, and is paying more attention to the impact of the world's most important economies on other countries' economies. And it is improving its ability to warn member countries of risks and vulnerabilities in their economies.
• Helping resolve global economic imbalances. The IMF's analysis of global economic developments, contained in its World Economic Outlook, provide finance ministers and central banks governors with a common framework for discussing the global economy. The IMF now also has the ability to call for multilateral consultations to discuss specific problems facing the global economy with a select group of countries—an innovative way of facilitating collective action among key players in the global economy. The first such consultation took place in 2006. It sought to reduce global payments imbalances and involved China, the euro area, Japan, Saudi Arabia, and the United States.
• Analyzing capital market developments. The IMF is devoting more resources to the analysis of global financial markets and their linkages with macroeconomic policy. Twice a year, it publishes the Global Financial Stability Report, which provides up-to-date analysis of developments in global financial markets. IMF staff also work with member countries to help them identify potential risks to financial stability, including through the Financial Sector Assessment Program (described in more detail below). The IMF also offers training to country officials on how to manage their financial systems, monetary and exchange regimes, and capital markets. The IMF is currently facilitating the drafting of voluntary guidelines for Sovereign Wealth Funds and works closely with the Financial Stability Forum to promote international financial stability.
• Assessing financial sector vulnerabilities. Resilient, well-regulated financial systems are essential for macroeconomic stability in a world of ever-growing capital flows. The IMF and the World Bank jointly run the Financial Sector Assessment Program (FSAP), aimed at alerting countries to vulnerabilities and risks in their financial sectors. IMF and World Bank staff also advise on how to strengthen oversight and supervision of banks and other financial institutions.
• Working to cut poverty. At present, more than a billion people are living on less than $1 a day, and more than three-quarters of a billion people are malnourished. The IMF's role in low-income countries is changing as these countries grow and mature. But its central goal remains the same: to help promote economic stability and growth, laying the ground for deep and lasting poverty reduction.
• Improving IMF governance. In May 2008, the IMF's membership approved a two-year package of reforms to improve representation of members at the Fund. The IMF is also becoming leaner and more efficient. It is trimming expenditure and reorganizing the way it earns revenue to pay for its operations (See Governance).
• Greater accountability and transparency. The IMF publishes almost all of its annual economic health checks of member countries, updates about its lending programs, and a wealth of other information on its website. The IMF's performance is assessed on a regular basis by an Independent Evaluation Office.