Julie Kozac and Bernard Lauwers
The IMF may be best known for lending to crisis-hit countries. But what about its own finances? How does it finance its critical functions and cover its operational expenses?
Let’s remember that the IMF is not only a global financial firefighter. It also provides policy advice and technical support to help members create the right economic conditions and institutions for maintaining economic and financial stability, boosting growth, jobs, and living standards.
Fulfilling this mandate is made possible by a unique mechanism for generating and deploying resources. Think of it as a credit union for countries—with a lending capacity of nearly $1 trillion.
Credit union for countries
Consider how a credit union works. Not only do members put in money to earn interest on their deposits, but they can also tap this pool of resources by taking out a loan.
The IMF works in a similar way. Its 191 member countries are assigned individual “quotas” based broadly on their relative positions in the world economy. These quotas are the primary building blocks of the Fund’s financial structure. They determine the maximum financial contribution of each member, and they also help define how much a country can borrow from the Fund.
It’s a model that benefits borrowers and creditors alike. In exchange for providing resources for IMF lending, member countries receive an interest-bearing, liquid, and secure claim on the IMF. Importantly, that claim counts as part of members’ foreign exchange reserves.
This also means that, unlike many other international organizations, the IMF does not rely on annual fees or grants from budget appropriations by its members.
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