# What Is the International Monetary Fund (IMF)?

> **Definition**
>
> The International Monetary Fund is an intergovernmental financial institution that promotes global economic growth, high employment, and international monetary cooperation, secures global financial stability, facilitates international trade, and reduces global poverty.

## What Is the International Monetary Fund (IMF)?

The International Monetary Fund (IMF) is an organization that monitors the global economy and helps keep it stable and healthy. Made up of 191 nations, the IMF was founded in 1944 following the Great Depression during the Bretton Woods Conference. The IMF loans money, gives advice, and supports nations to help them avoid and recover from financial trouble. Each member contributes money to the IMF; larger nations contribute more, which gives them more decision-making power. Countries that borrow from the IMF are subject to conditionality, which means they have to put policy changes in place as part of the loan agreement.

### Key Takeaways

*   The IMF is a group of nations whose main objectives are to monitor the world's economy, global trade, employment, and reduce poverty.
*   The group has 191 members, which is almost every country in the world.
*   The IMF's mission is to lend money to countries in financial trouble, give advice, and provide support to nations that are in need.
*   Countries contribute money to the fund based on their size, with larger nations contributing more.
*   Countries that borrow agree to put policy changes in place as part of their loan agreements.

![International Monetary Fund (IMF)](https://www.investopedia.com/thmb/zgY1ayIflGMv4y-gQ4tgs3wH0hI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/International-Monetary-Fund-341cc9af70f348608e6f58b636ab995b.jpg)

*The International Monetary Fund is headquartered in Washington, D.C., and is composed of 24 executive directors who are elected by member countries and the managing director. — Investopedia / Xiaojie Liu*

## Mission of the International Monetary Fund (IMF)

The International Monetary Fund (IMF) is based in Washington, D.C. The organization is currently composed of 191 member countries, each of which has representation on the IMF's executive board in proportion to its financial importance. Quotas are a key determinant of the voting power in IMF decisions. Votes comprise one vote per SDR100,000 of quota plus basic votes (same for all members).

The IMF's website describes its mission as "to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world."

## History of the IMF

The IMF was originally created in 1945 as part of the [Bretton Woods Agreement](https://www.investopedia.com/terms/b/brettonwoodsagreement.asp), which attempted to encourage international financial cooperation by introducing a system of convertible currencies at [fixed exchange rates](https://www.investopedia.com/terms/f/fixedexchangerate.asp). The dollar was redeemable for gold at $35 per ounce at the time.

The IMF also acted as a gatekeeper: Countries were not eligible for membership in the International Bank for Reconstruction and Development (IBRD)—a [World Bank](https://www.investopedia.com/terms/w/worldbank.asp) forerunner that the Bretton Woods agreement created in order to fund the reconstruction of Europe after World War II—unless they were members of the IMF.

Since the Bretton Woods system collapsed in the 1970s, the IMF has promoted the system of [floating exchange rates](https://www.investopedia.com/terms/f/floatingexchangerate.asp), meaning that market forces determine the value of currencies relative to one another. This system remains in place today.

## IMF Activities

The IMF's primary methods for achieving these goals are monitoring capacity building and lending.

> **Important**
>
> The reports the IMF publishes on its monetary surveillance include the "World Economic Outlook," the "Global Financial Stability Report," and the "Fiscal Monitor."

### Surveillance

The IMF collects massive amounts of data on national economies, [international trade](https://www.investopedia.com/insights/what-is-international-trade/), and the global economy in aggregate. The organization also provides regularly updated economic forecasts at the national and international levels. These forecasts, published in the World Economic Outlook, are accompanied by lengthy discussions on the effect of fiscal, monetary, and trade policies on growth prospects and financial stability.

### Capacity Building

The IMF provides technical assistance, training, and policy advice to member countries through its capacity-building programs. These programs include training in data collection and analysis, which feed into the IMF's project of monitoring national and global economies.

### Lending

The IMF makes [loans](https://www.investopedia.com/terms/l/loan.asp) to countries that are experiencing economic distress to prevent or mitigate financial crises. Members contribute the funds for this lending to a pool based on a quota system. For example, in 2019, loan resources in the amount of SDR 11.4 billion (SDR 0.4 billion above target) were secured to support the IMF’s concessional lending activities into the next decade.

IMF funds are often conditional on recipients making reforms to increase their growth potential and financial stability. [Structural adjustment](https://www.investopedia.com/terms/s/structural-adjustment.asp) programs, as these conditional loans are known, have attracted criticism for exacerbating poverty and reproducing colonialist structures.

## Where Does the IMF Get Its Money?

The IMF gets its money through quotas and subscriptions from its member countries. These contributions are based on the size of the country's economy, making the U.S., with the world's largest economy, the largest contributor.

## How Much Are the IMF Grants?

IMF grants are given to charities in Washington, D.C., and member countries. The grants are meant to foster economic independence through education and economic development. The average grant size is $15,000.

## What Is the Difference Between the International Monetary Fund and the World Bank?

The International Monetary Fund is primarily focused on the stability of the global monetary system and monitoring the currencies of the world. The aim of the World Bank is to reduce poverty across the world and strengthen the low- to middle-class populations.

## The Bottom Line

The IMF [works to help reduce poverty](https://www.investopedia.com/articles/investing/070715/confused-how-imf-world-bank-wto-differ.asp), encourage trade, and promote financial stability and economic growth around the world. It accomplishes this by monitoring capacity building and providing loans. While the IMF is currently working on these goals with its 191 member nations, the organization has still faced criticism for the possible negative impacts of its structural adjustment programs. 

> **Article Sources**
>
> 1.  International Monetary Fund. "[IMF Country Information](https://www.imf.org/en/Countries)."
>     
> 2.  International Monetary Fund. "[About the IMF](https://www.imf.org/en/About)."
>     
> 3.  International Monetary Fund. "[IMF Quotas](https://www.imf.org/en/About/Factsheets/Sheets/2016/07/14/12/21/IMF-Quotas)."
>     
> 4.  Federal Reserve Bank of St. Louis. "[Creation of the Bretton Woods System](https://www.federalreservehistory.org/essays/bretton_woods_created)."
>     
> 5.  The World Bank. "[The World Bank History](https://www.worldbank.org/en/about/history)."
>     
> 6.  The World Bank. "[Member Countries](https://www.worldbank.org/en/about/leadership/members)."
>     
> 7.  International Monetary Fund. "[The End of the Bretton Woods System](https://www.imf.org/external/about/histend.htm)."
>     
> 8.  International Monetary Fund. "[Capacity Development](https://www.imf.org/external/np/ins/english/capacity_about.htm)."
>     
> 9.  International Monetary Fund. "[The IMF at a Glance](https://www.imf.org/en/About/Factsheets/IMF-at-a-Glance)."
>     
> 10.  Council on Foreign Relations. "[The IMF: The World’s Controversial Financial Firefighter](https://www.cfr.org/backgrounder/imf-worlds-controversial-financial-firefighter)."
>      
> 11.  International Monetary Fund. "[Guidelines on Grant Request](https://www.imf.org/en/About/imf-giving-together/guidelines-on-grant-request)."