## How the IMF Continues to Change To Confront Global Challenges

_IMF Blog, January 18, 2022_

## Source details

**Canonical URL:** [How the IMF Continues to Change To Confront Global Challenges](https://www.imf.org/en/blogs/articles/2022/01/18/blog-how-imf-continues-to-change-to-confront-global-challenges)

## Other formats

- [Markdown version](/en/blogs/articles/2022/01/18/blog-how-imf-continues-to-change-to-confront-global-challenges/index.md)
- [Structured JSON version](/en/blogs/articles/2022/01/18/blog-how-imf-continues-to-change-to-confront-global-challenges/index.json)
- [Bundle manifest](/en/blogs/articles/2022/01/18/blog-how-imf-continues-to-change-to-confront-global-challenges/bundle-manifest.json)

## Bibliographic details
- Authors: Ceyla Pazarbasioglu
- Published: January 18, 2022

---

### Evolving mandate and directional change
- The IMF’s mandate—assisting members to overcome balance of payments problems without resorting to measures that threaten national or international prosperity—remains central and guides adaptations.
- The Fund has periodically modernized its financing and surveillance approaches as member countries’ balance of payments problems evolved.
- Historical milestones cited:
  - IMF opened its doors in 1947 with a focus on very short duration balance of payments lending to maintain exchange rate parity.
  - Stand-by Arrangement (SBA) introduced in 1952 providing assurances of future access to IMF resources subject to conditions.
  - In the early 1970s the Fund introduced longer and more concessional financing instruments and overhauled surveillance in response to oil price shocks and widespread adoption of flexible exchange rates.
- The Fund retained its character as a monetary institution focused on viable and sustainable balance of payments as a prerequisite for macroeconomic and financial stability.

### Recent adaptations and crisis response
- The IMF enhanced fast-disbursing emergency assistance (financing and debt relief) in response to natural disasters and health crises (examples: Ebola in western Africa; earthquake in Haiti).
- When the COVID 19 pandemic struck, the Fund was positioned to act quickly with temporary support and is following up with traditional lending programs as the crisis continues.
- Ongoing effort: establishment of a Resilience and Sustainability Trust intended to build on the historic 2021 SDR allocation of $650 billion to meet longer-term financing requirements of members in greatest need.

### Current and near-term challenges for members
- Traditional short-to-medium-term financing shocks will recur as the world emerges from the pandemic.
- Specific near-term risks and dynamics:
  - Sharper than expected monetary tightening in advanced economies will have spillover effects on the balance of payments of emerging market countries.
  - Countries with high debt burdens will need to work to avert fiscal and financing crises.
  - Large commodity exporters and importers must build resilience to large price swings.
- The IMF will continue to deploy its traditional toolkit of surveillance, lending and capacity building, with occasional minor modifications.

### Longer-term structural challenges and cross-institutional cooperation
- Deep-seated structural issues are becoming more prevalent and should be addressed now to prevent larger balance of payments problems later.
- Key structural trends and their balance of payments implications:
  - Climate change: disparate impacts across countries; can lead to higher food imports and outward migration in many affected countries.
  - Digitalization: affects trade in goods and services and capital flows by accelerating financial innovation (e.g., central bank digital currencies); not all countries equally able to seize opportunities.
  - Demographics: divergent pressures—young, fast-growing populations risk higher unemployment; ageing societies may face shortages of labor, goods and services.
  - Income and gender inequalities are widening.
- Successful responses require cooperation between the Fund and other institutions with relevant expertise (for example, the World Bank).

### Policy implications and IMF strategy
- The IMF will:
  - Revisit policy advice, lending activities, and capacity building to determine selective adaptations to meet evolving member needs.
  - Add selectively to its toolkits, as it has historically, to confront emerging challenges in collaboration with other institutions.
  - Remain within its mandate while addressing overlapping global public policy goals that require action from all international financial institutions.

*Source: IMF blog post "How the IMF Continues to Change To Confront Global Challenges" by Ceyla Pazarbasioglu, January 18, 2022.*

---


## References

- [revisit its policy advice](https://www.imf.org/en/Topics/Comprehensive-Surveillance-Review)
- [Resilience and Sustainability Trust](https://blogs.imf.org/2021/10/08/sharing-the-recovery-sdr-channeling-and-a-new-trust/)
- [2021 SDR allocation of $650 billion](https://www.imf.org/en/News/Articles/2021/07/30/pr21235-imf-governors-approve-a-historic-us-650-billion-sdr-allocation-of-special-drawing-rights)
- [spillover effects](https://blogs.imf.org/2022/01/10/emerging-economies-must-prepare-for-fed-policy-tightening/)

_Source: https://www.imf.org/en/blogs/articles/2022/01/18/blog-how-imf-continues-to-change-to-confront-global-challenges_