AuCanary GoldWisdom: What is the International Monetary Fund?

MARTIN CRUTSINGER
Published: Today

WASHINGTON (AP) - Here are questions and answers about the history and operations of the International Monetary Fund:

Q: What is the International Monetary Fund?

A: It is an international lending agency with 187 member countries. It's based in Washington.

Q: When was the IMF created?

A: The IMF and its sister lending agency, the World Bank, were established at a conference in Bretton Woods, N.H., in 1944. Forty-five countries met to develop a framework for economic cooperation after World War II. The idea was to avoid the mistakes in running the global economy that had contributed to the outbreak of the war.

Q: What does the IMF do?

A: The IMF provides emergency loans to countries facing economic difficulties under conditions that require the country to pursue economic reforms.

Q: How does it get the money to provide loans?

A: The IMF essentially works like a credit union. When a country joins the IMF, it must pay for the privilege of becoming a member. That money then becomes available for the IMF to lend to any country in trouble. As the country in trouble repays its loans, that money goes into the common pot to be used for future loans.

Q: How much must each member country pay?

A: Each country is assigned a quota that broadly reflects the size of its economy. The larger a country's economic output, the larger its quota. Countries must pay 25 percent of their quota in major currencies such as the U.S. dollar, euro, British pound or Japanese yen or in a type of money used by the IMF called a Special Drawing Right. The country can pay the remaining 75 percent of its quota in its own currency.

Q: How is the organization governed?

A: It's run on a day-by-day basis by a 24-member executive board in Washington. All 187 nations in the IMF have representation on the board. The world's biggest economies, like the United States and China, have their own seats. Most countries are grouped in constituencies: One board member represents four or more countries. The largest constituency includes 24 countries represented by the same board member.

Q: How does the board operate?

A: It directs IMF operations by taking votes on major policies, such as loan requests from individual countries. Its decisions are carried out by the IMF staff, led by the managing director.

Q: Who is running things now?

A: Dominique Strauss-Kahn, a former French finance minister, has been head of the IMF since 2007. But he was ordered jailed without bail after his arraignment Monday of charges of trying to rape a hotel maid in New York City. John Lipsky, the top deputy managing director, will run the IMF in Strauss-Kahn's absence.