FAQ: International Monetary Fund

What is it?

The IMF is an intergovernmental organization made up of 187 member countries that ultimately strives to stabilize the world's financial system.

It does so by monitoring the world economy and the fiscal health of its member states, giving help to members and issuing loans to nations that are having trouble meeting debt obligations. Its stated goal is to reduce poverty.

The IMF has a staff of about 2,500 people, half of whom are economists. The majority of them work at IMF headquarters in Washington, D.C.

What does it do?

Conceived at a United Nations conference in Bretton Woods, N.H., in 1944 and established a year later, the IMF set out to strengthen currencies and assist in the reconstruction of the international payment system in the wake of the Second World War.

The IMF began with 45 member countries, who contributed to a pot of money that could be accessed, on a temporary basis, by countries with payment imbalances. The IMFs roster of members, and its subsequent budget, has grown significantly since then.

A member nations size and the amount of money or "quota" it contributes to the IMF kitty determines the amount of its voting weight in IMF decisions, its access to IMF financing and its portion of Special Drawing Rights (SDRs), which are foreign exchange currency reserves. Due to the size of their respective contributions, the U.S., Japan, Germany, Great Britain and France currently hold the most voting weight and SDRs.

When a country comes to the IMF for financial help, the organization creates a program to address the problem, which typically involves significant economic reforms. These reforms may include increasing taxes, devaluing the currency, reducing trade tariffs and opening markets to foreign trade.

What is its management structure?

Comprised of a managing director and three deputies, the IMFs management team oversees operations and maintains crucial contact with member governments, non-governmental organizations (NGOs), think tanks and the media.

The managing director is selected by the 24-person IMF Executive Board, which also has the power to dismiss him or her. On May 15, the board named John Lipsky interim managing director amid allegations that sitting managing director Dominique Strauss-Kahnsexually assaulted a hotel housekeeper in New York.

What are its current projects

While the IMF has projects scattered across the globe, the fallout from the financial crisis that began in late 2008 has been the organizations main preoccupation in recent years. The IMF has been intimately involved in bailout packages negotiated for battered economies like Ireland, Portugal and, most recently, Greece.

What do critics say?

Along with the World Bank, the IMF is often disparaged for what critics call "predatory" lending practices. Like any loan, the IMFs financial aid comes with conditions, most notably Structural Adjustment Programs (SAPs). For deeply indebted countries, the IMF will often advocate austerity programs that can include, for example, increasing income taxes or decreasing federal agricultural subsidies. These steps may balance ledgers, but can have an adverse on ordinary citizens, in some cases worsening poverty.

The most oft-cited case is Ethiopia, which sank into a crushing famine in the mid-80s as a result of a number of factors, including a stringent program of debt repayment.

Another tool that the IMF frequently employs with poor nations is currency devaluation, which free-market advocates claim increases the likelihood of inflation.

The IMF is often criticized as being Western-centric, from its choice of managing director (which has thus far always been a European), to its policies, which tend to favour Western philosophies such as supply-side economics.