Our Work

The IMF's fundamental mission is to help ensure stability in the international system. It does so in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members. Surveillance hat does the IMF look at! Surveillance covers a range of economic policies, with the emphasis varying in accordance with a country's individual circumstances.

Exchange rate, monetary, and fiscal policies. The IMF provides advice on issues such as the choice of e"change rate policies and ensuring consistency between the regime and fiscal and monetary policies. Financial sector issues are receiving elevated coverage in surveillance reports# building on the achievements under the Financial $ector %ssessment &rogram 'F$%&(# which enables the IMF and the orld )ank to gauge the strengths and weaknesses of countries' financial sectors. Assessment of risks and vulnerabilities stemming from large and sometimes volatile capital flows has become more central to IMF surveillance in recent years. Institutional and structural issues have also gained importance in the wake of financial crises and in the conte"t of some countries' transition from planned to market economies. The IMF and the orld )ank play a central role in developing# implementing# and assessing internationally recogni*ed standards and codes in areas crucial to the efficient functioning of a modern economy such as central bank independence# financial sector regulation# and policy transparency and accountability. ,ountry $urveillance -egional $urveillance .lobal $urveillance

+ighlights of this section:

hen a country /oins the IMF# it agrees to sub/ect its economic and financial policies to the scrutiny of the international community. It also makes a commitment to pursue policies that are conducive to orderly economic growth and reasonable price stability# to avoid manipulating e"change rates for unfair competitive advantage# and to provide the IMF with data about its economy. The IMF's regular monitoring of economies and associated provision of policy advice is intended to identify weaknesses that are causing or could lead to financial or economic instability. This process is known as surveillance. ountry surveillance

,ountry surveillance is an ongoing process that culminates in regular 'usually annual( comprehensive consultations with individual member countries# with discussions in between as needed. The consultations are known as 0%rticle I1 consultations0 because they are re2uired by %rticle I1 of the IMF's %rticles of %greement. 3uring an %rticle I1 consultation# an IMF team of economists visits a country to assess economic and financial developments and discuss the country's economic and financial policies with government and central bank officials. IMF staff missions also often meet with parliamentarians and representatives of business# labor unions# and civil society. The team reports its findings to IMF management and then presents them for discussion to the 4"ecutive )oard# which represents all of the IMF's member countries. % summary of the )oard's views is subse2uently transmitted to the country's government. In this way# the views of the global community and the lessons of international e"perience are brought to bear on national policies. $ummaries of most discussions are released in &ublic Information 5otices and are posted on the IMF's web site# as are most of the country reports prepared by the staff. In 6une 7889 the IMF's 4"ecutive )oard adopted a comprehensive policy statement on surveillance. The 7889 3ecision on )ilateral $urveillance over Member's &olicies# complements %rticle I1 of the IMF:s %rticles of %greement and introduces the concept of e"ternal stability as an organi*ing principle for bilateral surveillance. This means that the main focus of the discussions between the IMF and country officials is whether there are risks to the economy:s domestic and e"ternal stability that would call for ad/ustments to that country:s economic or financial policies. !egional surveillance -egional surveillance involves e"amination by the IMF of policies pursued under currency unions;including the euro area# the est %frican 4conomic and Monetary <nion# the ,entral %frican 4conomic and Monetary ,ommunity# and the 4astern ,aribbean ,urrency <nion. -egional economic outlook reports are also prepared to discuss economic developments and key policy issues in %sia &acific# 4urope# Middle 4ast and ,entral %sia# $ub=$aharan %frica# and the estern +emisphere. "lo#al surveillance .lobal surveillance entails reviews by the IMF's 4"ecutive )oard of global economic trends and developments. The main reviews are based on the World Economic Outlook reports and the Global inancial Stability !eport# which covers developments# prospects# and policy issues in international financial markets. )oth reports are published twice a year# with updates being provided on a 2uarterly basis. In addition# the 4"ecutive )oard holds more fre2uent informal discussions on world economic and market developments. The IMF also has the option of holding multilateral consultations# involving smaller groups of countries # to foster debate and develop policy actions designed to address problems of global or regional importance. In 788># multilateral consultations brought together ,hina# euro area countries# 6apan# $audi %rabia# and the <nited $tates to discuss global economic imbalances.

$echnical Assistance

%frica -ebuilds: IMF Technical %ssistance in ?iberia .lobal &artnerships: ,risis %ssistance# Transferring @nowledge# and )uilding $kills The IMF provides technical assistance and training mainly in four areas: "he #$ provides technical assistance and training mainly in four areas%

monetary and financial policies 'monetary policy instruments# banking system supervision and restructuring# foreign management and operations# clearing settlement systems for payments# and structure development of central banks(; fiscal policy and management 'ta" and customs policies and administration# budget formulation# e"penditure management# design of social safety nets# and management of domestic and foreign debt(; compilation# management# dissemination# and improvement of statistical data; and advising on economic and financial legislation. )eneficiaries of Technical %ssistance Types of Technical %ssistance orking ,losely with 3onors

+ighlights of this section:

The IMF shares its e"pertise with member countries by providing technical assistance and training in a wide range of areas# such as central banking# monetary and e"change rate policy# ta" policy and administration# and official statistics. The ob/ective is to help improve the design and implementation of members' economic policies# including by strengthening skills in institutions such as finance ministries# central banks# and statistical agencies. The IMF has also given advice to countries that have had to reestablish government institutions following severe civil unrest or war. In 788A# the IMF embarked on an ambitious reform effort to enhance the impact of its technical assistance. The reforms emphasi*e better prioriti*ation# enhanced performance measurement# more transparent costing and stronger partnerships with donors. %eneficiaries of technical assistance Technical assistance is one of the IMF's core activities. It is concentrated in critical areas of macroeconomic policy where the Fund has the greatest comparative advantage. Thanks to its near=universal membership# the IMF's technical assistance program is informed by e"perience and knowledge gained across diverse regions and countries at different levels of development. %bout A8 percent of the IMF's technical assistance goes to low= and lower=middle= income countries# in particular in sub=$aharan %frica and %sia. &ost=conflict countries are ma/or beneficiaries. The IMF is also providing technical assistance aimed at strengthening the architecture of the international financial system# building capacity to design and implement poverty=reducing and growth programs# and helping heavily indebted poor countries '+I&,( in debt reduction and management. $ypes of technical assistance

The IMF's technical assistance takes different forms# according to needs# ranging from long=term hands=on capacity building to short=notice policy support in a financial crisis. Technical assistance is delivered in a variety of ways. IMF staff may visit member countries to advise government and central bank officials on specific issues# or the IMF may provide resident specialists on a short= or a long=term basis. Technical assistance is integrated with country reform agendas as well as the IMF's surveillance and lending operations. The IMF is providing an increasing part of its technical assistance through regional centers located in .abon# Mali# Mauritius# and Tan*ania for %frica; in )arbados and .uatemala for ,entral %merica and the ,aribbean; in ?ebanon for the Middle 4ast; and in Fi/i for the &acific Islands. The IMF also offers training courses for government and central bank officials of member countries at its head2uarters in ashington# 3.,.# and at regional training centers in %ustria# )ra*il# ,hina# India# $ingapore# Tunisia# and the <nited %rab 4mirates. &artnership 'ith donors )ilateral and multilateral donors are playing an increasingly important role in enabling the IMF to meet country needs in this area# with their contributions now financing about two thirds of the IMF's field delivery of technical assistance. $trong partnerships between recipient countries and donors enable IMF technical assistance to be developed on the basis of a more inclusive dialogue and within the conte"t of a coherent development framework. The benefits of donor contributions thus go beyond the financial aspect. The IMF is currently seeking to leverage the comparative advantages of its technical assistance to e"pand donor financing to meet the needs of recipient countries. %s part of this effort# the Fund is strengthening its partnerships with donors by engaging them on a broader# longer=term and more strategic basis. The idea is to pool donor resources in multi=donor trust funds that would supplement the IMF's own resources for technical assistance while leveraging the Fund's e"pertise and e"perience. 4"pansion of the multi=donor trust fund model is envisaged on a regional and topical basis# offering donors different entry points according to their priorities. To this end# the IMF is establishing a series of topical trust funds# covering such topics as anti= money launderingBcombating the financing of terrorism; fragile states; public financial management; management of natural resource wealth# public debt sustainability and management# statistics and data provision; and financial sector stability and development.

(ending #y the I)F

% country in severe financial trouble# unable to pay its international bills# poses potential problems for the stability of the international financial system# which the IMF was created to protect. %ny member country# whether rich# middle=income# or poor# can turn to the IMF for financing if it has a balance of payments need;that is# if it cannot find sufficient financing on affordable terms in the capital markets to make its international payments and maintain a safe level of reserves.

IMF loans are meant to help member countries tackle balance of payments problems# stabili*e their economies# and restore sustainable economic growth. This crisis resolution role is at the core of IMF lending. %t the same time# the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks. % key ob/ective of recent lending reforms has therefore been to complement the traditional crisis resolution role of the IMF with more effective tools for crisis prevention. The IMF is not a development bank and# unlike the agencies# it does not finance pro/ects. $he changing nature of lending %bout four out of five member countries have used IMF credit at least once. )ut the amount of loans outstanding and the number of borrowers have fluctuated significantly over time. In the first two decades of the IMF's e"istence# more than half of its lending went to industrial countries. )ut since the late CD98s# these countries have been able to meet their financing needs in the capital markets. The oil shock of the CD98s and the debt crisis of the CDA8s led many lower= and lower= middle=income countries to borrow from the IMF. In the CDD8s# the transition process in central and eastern 4urope and the crises in emerging market economies led to a further increase in the demand for IMF resources. In 788E# benign economic conditions worldwide meant that many countries began to repay their loans to the IMF. %s a conse2uence# the demand for the Fund:s resources dropped off sharply . )ut in 788A# the IMF began making loans to countries hit by the global financial crisis The IMF currently has programs with more than F8 countries around the world and has committed more than GH7F billion in resources to its member countries since the start of the global financial crisis. hile the financial crisis has sparked renewed demand for IMF financing# the decline in lending that preceded the financial crisis also reflected a need to adapt the IMF's lending instruments to the changing needs of member countries. In response# the IMF conducted a wide=ranging review of its lending facilities and terms on which it provides loans. In March 788D# the Fund announced a ma/or overhaul of its lending framework# including moderni*ing conditionality# introducing a new fle"ible credit line# enhancing the fle"ibility of the Fund:s regular stand=by lending arrangement# doubling access limits on loans# adapting its cost structures for high=access and precautionary lending# and streamlining instruments that were seldom used. It has also speeded up lending procedures and redesigned its 4"ogenous $hocks Facility to make it easier to access for low=income countries. More reforms have since been undertaken# most recently in 5ovember 78CC. (ending to preserve financial sta#ility %rticle I of the IMF's %rticles of %greement states that the purpose of lending by the IMF is 0...to give confidence to members by making the general resources of the Fund orld )ank and other development

temporarily available to them under ade2uate safeguards# thus providing them with opportunity to correct malad/ustments in their balance of payments without resorting to measures destructive of national or international prosperity.0 In practice# the purpose of the IMF's lending has changed dramatically since the organi*ation was created. Iver time# the IMF's financial assistance has evolved from helping countries deal with short=term trade fluctuations to supporting ad/ustment and addressing a wide range of balance of payments problems resulting from terms of trade shocks# natural disasters# post=conflict situations# broad economic transition# poverty reduction and economic development# sovereign debt restructuring# and confidence= driven banking and currency crises. Today# IMF lending serves three main purposes. First# it can smooth ad/ustment to various shocks# helping a member country avoid disruptive economic ad/ustment or sovereign default# something that would be e"tremely costly# both for the country itself and possibly for other countries through economic and financial ripple effects 'known as contagion(. $econd# IMF programs can help unlock other financing# acting as a catalyst for other lenders. This is because the program can serve as a signal that the country has adopted sound policies# reinforcing policy credibility and increasing investors' confidence. Third# IMF lending can help prevent crisis. The e"perience is clear: capital account crises typically inflict substantial costs on countries themselves and on other countries through contagion. The best way to deal with capital account problems is to nip them in the bud before they develop into a full=blown crisis. onditions for lending hen a member country approaches the IMF for financing# it may be in or near a state of economic crisis# with its currency under attack in foreign e"change markets and its international reserves depleted# economic activity stagnant or falling# and a large number of firms and households going bankrupt. In difficult economic times# the IMF helps countries to protect the most vulnerable in a crisis. The IMF aims to ensure that conditions linked to IMF loan disbursements are focused and ade2uately tailored to the varying strengths of members' policies and fundamentals. To this end# the IMF discusses with the country the economic policies that may be e"pected to address the problems most effectively. The IMF and the government agree on a program of policies aimed at achieving specific# 2uantified goals in support of the overall ob/ectives of the authorities' economic program. For e"ample# the country may commit to fiscal or foreign e"change reserve targets. The IMF discusses with the country the economic policies that may be e"pected to address the problems most effectively. The IMF and the government agree on a program of policies aimed at achieving specific# 2uantified goals in support of the overall ob/ectives of the authorities' economic program. For e"ample# the country may commit to fiscal or foreign e"change reserve targets. ?oans are typically disbursed in a number of installments over the life of the program# with each installment conditional on targets being met. &rograms typically last up to H years# depending on the nature of the country's problems# but can be followed by another program if needed. The government outlines the details of its economic program in a

0letter of intent0 to the Managing 3irector of the IMF. $uch letters may be revised if circumstances change. For countries in crisis# IMF loans usually provide only a small portion of the resources needed to finance their balance of payments. )ut IMF loans also signal that a country's economic policies are on the right track# which reassures investors and the official community# helping countries find additional financing from other sources. )ain lending facilities In an economic crisis# countries often need financing to help them overcome their balance of payments problems. $ince its creation in 6une CDF7# the IMF:s $tand=)y %rrangement '$)%( has been used time and again by member countries# it is the IMF:s workhorse lending instrument for emerging market countries. -ates are non=concessional# although they are almost always lower than what countries would pay to raise financing from private markets. The $)% was upgraded in 788D to be more fle"ible and responsive to member countries: needs. )orrowing limits were doubled with more funds available up front# and conditions were streamlined and simplified. The new framework also enables broader high=access borrowing on a precautionary basis. The Fle"ible ,redit ?ine 'F,?( is for countries with very strong fundamentals# policies# and track records of policy implementation. It represents a significant shift in how the IMF delivers Fund financial assistance# particularly with recent enhancements# as it has no ongoing 'e" post( conditions and no caps on the si*e of the credit line. The F,? is a renewable credit line# which at the country:s discretion could be for either C=7 years# with a review of eligibility after the first year. There is the fle"ibility to either treat the credit line as precautionary or draw on it at any time after the F,? is approved. Ince a country 2ualifies 'according to pre=set criteria(# it can tap all resources available under the credit line at any time# as disbursements would not be phased and conditioned on particular policies as with traditional IMF=supported programs. This is /ustified by the very strong track records of countries that 2ualify to the F,?# which give confidence that their economic policies will remain strong or that corrective measures will be taken in the face of shocks. The &recautionary and ?i2uidity ?ine '&??( builds on the strengths and broadens the scope of the &recautionary ,redit ?ine '&,?(. The &?? provides financing to meet actual or potential balance of payments needs of countries with sound policies# and is intended to serve as insurance and help resolve crises. It combines a 2ualification process 'similar to that for the F,?( with focused e"=post conditionality aimed at addressing vulnerabilities identified during 2ualification. Its 2ualification re2uirements signal the strength of 2ualifying countries: fundamentals and policies# thus contributing to consolidation of market confidence in the country:s policy plans. The &?? is designed to provide li2uidity to countries with sound policies under broad circumstances# including countries affected by regional or global economic and financial stress. The -apid Financing Instrument '-FI( provides rapid and low=access financial assistance to member countries facing an urgent balance of payments need# without the need for a full=fledged program. It can provide support to meet a broad range of urgent needs# including those arising from commodity price shocks# natural disasters# post=conflict situations and emergencies resulting from fragility. The 4"tended Fund Facility is used to help countries address balance of payments difficulties related partly to structural problems that may take longer to correct than

macroeconomic imbalances. % program supported by an e"tended arrangement usually includes measures to improve the way markets and institutions function# such as ta" and financial sector reforms# privati*ation of public enterprises. The Trade Integration Mechanism allows the IMF to provide loans under one of its facilities to a developing country whose balance of payments is suffering because of multilateral trade liberali*ation# either because its e"port earnings decline when it loses preferential access to certain markets or because prices for food imports go up when agricultural subsidies are eliminated. (ending to lo'*income countries To help low=income countries weather the severe impact of the global financial crisis# the IMF has revamped its concessional lending facilities to make them more fle"ible and meet increasing demand for financial assistance from countries in need. These changes became effective in 6anuary 78C8. Ince additional loan and subsidy resources are mobili*ed# these changes will boost available resources for low=income countries to <$GC9 billion through 78CE. Three types of loans were created under the new &overty -eduction and .rowth Trust '&-.T( as part of this broader reform: the 4"tended ,redit Facility# the -apid ,redit Facility and the $tandby ,redit Facility. The 4"tended ,redit Facility '4,F( provides financial assistance to countries with protracted balance of payments problems. The 4,F succeeds the &overty -eduction and .rowth Facility '&-.F( as the Fund:s main tool for providing medium=term support ?I,s# with higher levels of access# more concessional financing terms# more fle"ible program design features# as well as streamlined and more focused conditionality. The -apid ,redit Facility '-,F( provides rapid financial assistance with limited conditionality to low=income countries '?I,s( facing an urgent balance of payments need. The -,F streamlines the Fund:s emergency assistance# provides significantly higher levels of concessionality# can be used fle"ibly in a wide range of circumstances# and places greater emphasis on the country:s poverty reduction and growth ob/ectives. The $tandby ,redit Facility '$,F( provides financial assistance to low=income countries '?I,s( with short=term balance of payments needs. It provides support under a wide range of circumstances# allows for high access# carries a low interest rate# can be used on a precautionary basis# and places emphasis on countries: poverty reduction and growth ob/ectives. $everal low=income countries have made significant progress in recent years toward economic stability and no longer re2uire IMF financial assistance. )ut many of these countries still seek the IMF's advice# and the monitoring and endorsement of their economic policies that comes with it. To help these countries# the IMF has created a program for policy support and signaling# called the &olicy $upport Instrument. +e#t relief In addition to concessional loans# some low=income countries are also eligible for debts to be written off under two key initiatives. The +eavily Indebted &oor ,ountries '+I&,( Initiative# introduced in CDD> and enhanced in CDDD# whereby creditors provide debt relief# in a coordinated manner# with a view to restoring debt sustainability; and The Multilateral 3ebt -elief Initiative 'M3-I(# under which the IMF# the International

3evelopment %ssociation 'I3%( of the orld )ank# and the %frican 3evelopment Fund '%f3F( canceled C88 percent of their debt claims on certain countries to help them advance toward the Millennium 3evelopment .oals.