What is the International Monetary Fund?
May 16, 2011— -- The organization headed by Dominique Strauss-Kahn is one of the most important but least understood players in the world of international finance.
The International Monetary Fund is an inter-governmental organization charged with keeping the global financial system intact and functioning.
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Founded after World War II to build a working international system for currency exchange and to avert economic crises, the Washington, D.C.-based IMF currently counts some 187 countries amongst its membership.
The Fund has deposits from member countries – commonly called "quotas" – totaling some $340 billion, with additional commitments for about $600 billion from member governments should the funds be needed.
Quota requirements are determined by the size of the member country's economy. So the United States, with a $14 trillion GDP, is the biggest contributor with about 18 percent of the quotas.
What do they do with all that money?
They provide loans to member countries which are facing currency shortfalls or economic trouble. The most recent administrative report, out at the end of January, shows that the IMF has about $254 billion in loans committed today (only $64 billion of which has actually been deployed). The biggest borrowers are Romania, Ukraine and Greece.
These loans come with strings attached. Typically, a country could get assistance from the IMF, but it would be required to embark on a series of monitored economic reforms over a period of years.
The organization says it funds its administration and overhead through the interest borrowing states pay on the loans they take.
In addition to actual loans, the IMF provides standardized economic data and statistics, surveillance of current economic conditions and consultation for member countries facing economic hardship.
The organization, which has seen Europeans in the top leadership spot of its Executive Board since its founding in the 1940s, has representatives from every member country on its Board of Governors, which meets once a year. The IMF is currently undergoing a series of reforms which would make appointments to its top executive positions more democratic.
