How the IMF Promotes Global Economic Stability

March 8, 2021

The IMF advises member countries on economic and financial policies that promote stability, reduce vulnerability to crises, and encourage sustained growth and high living standards. It also monitors global economic trends and developments that affect the health of the international monetary and financial system and promotes dialogue among member countries on the regional and global consequences of their policies. In addition to these surveillance activities, the IMF provides technical assistance to help strengthen members’ institutional capacity and makes resources available to them to facilitate adjustment in the event of a balance of payments crisis.

Why is global economic stability important?

Promoting economic stability is a matter of avoiding economic and financial crises, large swings in economic activity, high inflation, and excessive volatility in foreign exchange and financial markets. Instability can increase uncertainty, discourage investment, impede economic growth, and hurt living standards. A dynamic market economy necessarily involves some degree of volatility, as well as gradual structural change. The challenge for policymakers is to minimize instability in their own country and abroad without reducing the economy’s ability to improve living standards through rising productivity, employment, and sustainable growth.

Economic and financial stability is both a national and a multilateral concern. As recent crises have shown, economies have become more interconnected. Vulnerabilities can spread more easily across sectors and national borders.

How does the IMF help?

The IMF helps countries implement sound and appropriate policies through its key functions of surveillance, capacity development, and lending.

Surveillance: A core responsibility of the IMF is to oversee the international monetary and financial system and monitor the economic and financial policies of its 190 member countries, an activity known as surveillance. As part of this process, which takes place at the global, regional, and country levels, the IMF identifies potential risks to stability and recommends appropriate policy adjustments needed to sustain economic growth and promote financial and economic stability.

Data: The IMF is working with members, the Financial Stability Board, and other organizations to fill data gaps important for global stability.

Capacity development: The IMF helps countries strengthen their capacity to design and implement sound economic policies. It provides technical assistance and training in areas of core expertise—including fiscal, monetary, and exchange rate policies; the regulation and supervision of financial systems; statistics; and legal frameworks.

Lending: Even the best economic policies cannot completely eradicate instability or avert crises. If a member country faces a balance of payment crisis, the IMF can provide financial assistance to support policy programs that will correct underlying macroeconomic problems, limit disruption to both the domestic and the global economy, and help restore confidence, stability, and growth. In certain cases, the IMF can also provide emergency assistance without the need to have a full-fledged program in place. The IMF also offers precautionary credit lines for countries with sound economic fundamentals for crisis prevention.