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Globalization and the Crisis (2005 - present

The IMF has been on the front lines of lending
to countries to help boost the global economy
as it suffers from a deep crisis not seen since
the Great Depression.
For most of the first decade of the 21st century,
international capital flows fueled a global
expansion that enabled many countries to
repay money they had borrowed from the IMF
and other official creditors and to accumulate
foreign exchange reserves.
The global economic crisis that began with the
collapse of mortgage lending in the United
States in 2007, and spread around the world in
2008 was preceded by large imbalances in
global capital flows.
Global capital flows fluctuated between 2 and 6
percent of world GDP during 1980-95, but since
then they have risen to 15 percent of GDP. In
2006, they totaled $7.2 trillion—more than a
tripling since 1995. The most rapid increase
has been experienced by advanced economies,
but emerging markets and developing countries
have also become more financially integrated.
The founders of the Bretton Woods system had
taken it for granted that private capital flows

Suddenly. take . To use those funds effectively. and the IMF had traditionally lent to members facing current account difficulties. For more on the ideas that have shaped the IMF from its inception until the late 1990s. the IMF was inundated with requests for stand-by arrangements and other forms of financial and policy support. With broad support from creditor countries. enabled the IMF to disburse very large sums quickly. the Fund’s lending capacity was tripled to around $750 billion. including by creating a flexible credit line for countries with strong economic fundamentals and a track record of successful policy implementation. based on the needs of borrowing countries and not tightly constrained by quotas. including ones tailored to help lowincome countries. Other reforms. as in the past. The latest global crisis uncovered a fragility in the advanced financial markets that soon led to the worst global downturn since the Great Depression.would never again resume the prominent role they had in the nineteenth and early twentieth centuries. The international community recognized that the IMF’s financial resources were as important as ever and were likely to be stretched thin before the crisis was over. the IMF overhauled its lending policies.

The IMF tracks global economic trends and performance. and passes on know-how to governments on how to tackle economic difficulties. globalization affects countries' policy choices in many areas. the IMF is uniquely placed to help member governments take advantage of the opportunities—and manage the challenges— posed by globalization and economic development more generally. trade. Helping a country . and tax policies. provides a forum for policy dialogue. alerts its member countries when it sees problems on the horizon. including labor." What we do with its near-global membership of 188 countries. The IMF provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.a look at James Boughton's "The IMF and the Force of History: Ten Events and Ten Ideas that Have Shaped the Institution. Marked by massive movements of capital and abrupt shifts in comparative advantage.

and individual economies and markets. The global economic crisis has highlighted just how interconnected countries have become in today’s world economy. IMF and the global financial crisis  Click here to read about our work in crisis countries Original aims The IMF was founded more than 60 years ago toward the end of World War II (see History).  concessional loans to help fight poverty in developing countries.  research. regional. statistics. Key IMF activities The IMF supports its membership by providing  policy advice to governments and central banks based on analysis of economic trends and cross-country experiences.  loans to help countries overcome economic difficulties. forecasts. and  technical assistance and training to help countries improve the management of their economies.benefit from globalization while avoiding potential downsides is an important task for the IMF. and analysis based on tracking of global. The founders aimed to build a framework for economic cooperation that would avoid a .

Since then the world has changed dramatically. In many ways the IMF's main purpose—to provide the global public good of financial stability—is the same today as it was when the organization was established.repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed. bringing extensive prosperity and lifting millions out of poverty. and  lend countries foreign exchange when needed. An adapting IMF . economic growth. especially in Asia. thus promoting job creation. More specifically.  promote exchange rate stability and an open system of international payments. on a temporary basis and under adequate safeguards. we hear about the IMF and its role during the global economic crisis that brought the world economy to its knees. the IMF continues to  provide a forum for cooperation on international monetary problems  facilitate the growth of international trade. Video (11:38). In this short film. to help them address balance of payments problems. and poverty reduction.

used its cross-country experience to advise on policy solutions. allowing the organization to retain its central role within the international financial architecture As the world economy struggles to restore growth and jobs after the worst crisis since the Great Depression.  Greater lending flexibility. and reformed the way it makes decisions. supported global policy coordination.The IMF has evolved along with the global economy throughout its 65-year history. with lending commitments reaching a record level of more than US$250 billion in 2010. The IMF responded quickly to the global economic crisis. This figure includes a sharp increase in concessional lending (that’s to say. The result is an institution that is more in tune with the needs of its 188 member countries. It . it mobilized on many fronts to support its member countries. It increased its lending.  Stepping up crisis lending. During the crisis. subsidized lending at rates below those being charged by the market) to the world’s poorest nations. the IMF has emerged as a very different institution. The IMF has overhauled its lending framework to make it better suited to countries’ individual needs.

The IMF is contributing to the ongoing effort to draw lessons from the crisis for policy. It helps resolve crises.The IMF’s member countries also agreed to a significant increase in the voice of dynamic emerging and developing economies in the decision making of the institution. have been in high demand and have been used by the G20. and works with its member countries to promote growth and alleviate poverty. informed by a global perspective and by experience from previous crises. The IMF’s monitoring. while preserving the voice of the low-income members.  Drawing lessons from the crisis. and reform of the global financial also working with other regional institutions to create a broader financial safety net. regulation.  Providing analysis and advice. forecasts. and policy advice. It has three main tools at its .  How we do it The IMF’s main goal is to ensure the stability of the international monetary and financial system.  Historic reform of governance. which could help prevent new crises.

On a regular basis—usually once each year—the IMF conducts in depth appraisals of each member country’s economic situation. Its key outputs are . It discusses with the country’s authorities the policies that are most conducive to a stable and prosperous economy. Surveillance The IMF promotes economic stability and global growth by encouraging countries to adopt sound economic and financial policies.disposal to carry out its mandate: surveillance. It also seeks to assess the impact of the policies of individual countries on other economies. Member countries may agree to publish the IMF’s assessment of their economies. To do this. and lending. drawing on experience across its membership. regional. technical assistance and training. it regularly monitors global. and national economic developments. This process of monitoring and discussing countries’ economic and financial policies is known as bilateralsurveillance. known as multilateral surveillance. with the vast majority of countries opting to do so. The IMF also carries out extensive analysis of global and regional economic trends. These functions are underpinned by the IMF’s research and statistics.

For more information on how the IMF monitors economies. banking and financial system supervision and regulation. monetary and exchange rate policies. banking system . including fiscal policy. and the Fiscal Monitor. and bilateral surveillance. financial. including to better integrate the three. and statistics. the World Economic Outlook.three semiannual publications. improve our understanding of spillovers and the assessment of emerging and potential risks. The IMF also publishes a series of regional economic outlooks. the Global Financial Stability Report. The IMF provides technical assistance and training mainly in four areas:  monetary and financial policies (monetary policy instruments. Technical assistance and training IMF offers technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. go to Surveillance in the Our Worksection. Technical assistance is offered in several areas. The IMF recently agreed on a series of actions to enhance multilateral. and strengthen IMF policy advice.

and  economic and financial legislation.  fiscal policy and management (tax and customs policies and administration. clearing settlement systems for payments. management. Lending IMF financing provides member countries the breathing room they need to correct balance of payments problems. and management of domestic and foreign debt).  compilation. and structural development of central banks). design of social safety nets. In the most recent reforms. and improvement of statistical data. IMF lending instruments were improved further to provide flexible crisis prevention tools to a broad range of members with sound . foreign management and operations. expenditure management. go to Technical Assistance in the Our Work section. A policy program supported by financing is designed by the national authorities in close cooperation with the IMF. For more on technical assistance. budget formulation. dissemination. Continued financial support is conditional on the effective implementation of this program.supervision and restructuring.

policies.fundamentals. the IMF has doubled loan access limits and is boosting its lending to the world’s poorer countries. and to the strengthening of financial sectors. In recent years. These are part of the IMF’s continuing efforts to strengthen national and global financial systems and improve its ability to prevent and resolve crises. In low-income countries. and institutional policy frameworks. For more on different types of IMF lending. the IMF has applied both its surveillance and technical assistance work to the development of standards and codes of good practice in its areas of responsibility. go to Lending in the Our Work section. Research and data Supporting all three of these activities is the IMF’s economic and financial research andstatistics. Republic of South . Membership The IMF currently has a near-global membership of 188 countries. To become a member. a country must apply and then be accepted by a majority of the existing members. with loans at a concessional interest rate. In April 2012.

the euro. A member country's quota defines its financial and organizational relationship with the IMF. based broadly on its relative size in the world economy. A country must pay its subscription in full upon joining the IMF: up to 25 percent must be paid in the IMF's own currency. Upon joining. while the rest is paid in the member's own currency. the yen. becoming the institution's 188th member.Sudan joined the IMF. each member country of the IMF is assigned a quota. especially the increased weight of major emerging markets in the global economy. calledSpecial Drawing Rights (SDRs) or widely accepted currencies (such as the dollar. The IMF's membership agreed in November 2010 on a major overhaul of its quota system to reflect the changing global economic realities. Voting power . or pound sterling). including: Subscriptions A member country's quota subscription determines the maximum amount of financial resources the country is obliged to provide to the IMF.

the United States has 421.03 percent of the total).76 percent of the total). under Stand-By and Extended Arrangements. Each IMF member's votes are comprised of basic votes plus one additional vote for each SDR 100. a member country can borrow up to 200 percent of its quota annually and 600 percent cumulatively. Access to financing The amount of financing a member country can obtain from the IMF is based on its quota. The number of basic votes attributed to each member is calculated as 5. For instance. Collaborating with others .000 of quota. which are types of loans. The most recent general allocation of SDRs took place in 2009. Accordingly. and Tuvalu has 759 votes (0. SDR allocations SDRs are used as an international reserve asset.965 votes (16. A member's share of general SDR allocations is established in proportion to its quota.502 percent of total votes.The quota largely determines a member's voting power in IMF decisions.

Countries must join the IMF to be eligible for World Bank membership. and restoring conditions for strong economic growth. stabilizing their currencies. civil society. and the media on a daily basis. Working with the World Bank The IMF and the World Bank are different. The IMF also works closely with the Group of Twenty (G-20) industrialized and emerging market economies and interacts with think tanks. the reform of particular sectors of the economy. IMF loans assist countries in continuing to pay for imports. each has its own unique areas of responsibility and specialization. regional development banks. and other international bodies. but complement each other's work.The IMF collaborates with the World Bank. While the IMF's focus is chiefly on macroeconomic and financial sector issues. While all of these organizations are involved in global economic issues. the World Bank is concerned mainly with longer-term development and poverty reduction. and broader structural reforms. Its loans finance infrastructure projects. . the World Trade Organization(WTO). UN agencies.

The IMF has observer status at formal meetings of the World Trade Organization (WTO). Cooperating on financial stability. It also works with standard-setting bodies such as theBasel Committee on Banking Supervision and the International Association of Insurance Supervisors. banking supervision. and international financial institutions. committees of central bank experts. Other areas of collaboration include assessments of member countries' financial sectors. international regulatory and supervisory bodies. availability. and trade The IMF is a member of the Switzerlandbased Financial Stability Board. and improvement of the quality. the IMF collaborates closely with the Bank in the area of poverty reduction. and coverage of data on external debt.Given the World Bank's focus on antipoverty issues. development of standards and codes. which brings together government officials responsible for financial stability in the major international financial centers. The IMF's determination of a country's balance of payments situation plays a considerable part in the WTO's assessment of trade restrictions .

Collaborating with the UN The IMF has a Special Representative to the United Nations. and Finance. including cooperation on tax issues and statistical services of the two organizations.applied in the event of balances of payments difficulties. Debt. the UN Environment Program on the green economy. and IMF staff contribute to the work of the WTO Working Group on Trade. as well as reciprocal attendance and participation at regular meetings and specific conferences and events. and the World Food Program on social safety nets and early assessments of vulnerability. the IMF has worked with the International Labor Office on issues related to employment. the UN Children's Fund on fiscal issues and social policy. The IMF is also involved in the WTO-led Integrated Framework for TradeRelated Technical Assistance to Least Developed Countries. located at the UN Headquarters in New York. as well as social protection floors. Working closely with the G-20 . In recent years. Collaboration between the IMF and the UN covers several areas of mutual interest.

regional. Given the importance of employment for sustainable and inclusive growth. they can achieve the Group's goals. We have an active partnership with the International Labor Organization (ILO). collective action by the G-20 was critical for avoiding even greater economic difficulties. and in subsequent meetings the G20 leaders have continued to reaffirm their commitment to reinvigorate economic growth. During the global financial crisis. . The IMF provides analysis on global economic conditions and on how G-20 members' policies fit together—and whether. IMFsupported programs often contain recommendations pertaining to the labor market. Working on employment issues The IMF's mandate includes contributing to the promotion and maintenance of high levels of employment and real incomes through the expansion and balanced growth of international trade. the Fund works with other international. labor market policies are not a core area of IMF expertise. the IMF has been working with the Group of Twenty (G-20) industrialized and emerging market economies.Increasingly. That said. and local organizations in this important area. collectively. For this reason.

a biweekly press briefing is held at the IMF headquarters. civil society. IMF staff at all levels frequently meet with members of the academic community to exchange ideas and receive new input. during which a spokesperson takes live questions from journalists. and its affiliates. The IMF also liaises regularly with the International Trade Union Confederation. IMF management and senior staff communicate with the media on a daily basis. . IMF missions to member countries meet regularly with trade union representatives to gain a better understanding of and exchange views on national labor market dynamics. civil society organizations (CSOs). Finally. The IMF also has an active outreach program involving CSOs. and the media. Engaging with think tanks. Additionally.with whom we have been pooling expertise to better understand the impact of macroeconomic policies on job creation. and the media The IMF also engages on a regular basis with the academic community.