the IMF - International Monetary Fund
- a specialized financial  agency of the United Nations

last updated 2022 Oct 13th
Wednesday (2022 Oct 12th), "IMF staff said growth in Canada is expected to slow to 1.5 per cent in 2023 from 3.3 per cent in 2022. The unemployment rate could rise to above 6%"

".. economists at Canadaís biggest bank warned that the country is likely fall into recession sooner than they had expected." as  quoted in the Edmonton Journal.

It is not what the IMF and World Bank "say" that is important - what is important is who listens to them (senior bank execs and government leaders) and the consequent things world leaders and bankers do to
- avoid forecasted problems
- at the same time as looking for positive opportunities
if many companies stock share price drops very low, some "players" will take the opportunity to buy those stocks, which may effect the future of certain large companies and industries when the ownership changes
INTRODUCTION This unit discusses
  • What is the IMF
  • IMF SDR Special Drawing Rights
  • examples of IMF involvement in the countries of
  • how / why the IMF may be a resource for college / university students studying international business
  • Pakistan
  • South Korea
  • Russia
  • Mexico
  • Indonesia
  • Argentina
  • Japan
  • Iraq
  • Bosnia
The best explanation of the IMF is the first paragraph on their "about.htm" page, seen in the screen capture below
"The IMF is 
o an international organization of 188 member countries, 
o established to promote international monetary cooperation, 
o exchange stability, and orderly exchange arrangements; 
o to foster economic growth 
o and high levels of employment; 
o and to provide temporary financial assistance to countries 
o to help ease balance of payments adjustment."
The FAQs are very straightforward and you are encouraged to check this page and read the first ten ?s
. Sources of Information
IMF country reports 

For students of international business, the IMF has a detailed page listing the countries of the world, and links to  reports and analysis the IMF has done over the years - such reports are valuable to persons developing international marketing plans and Threat, Risk and Analysis Reports

The FAQs are very straightforward and you are encouraged to check this page and read the first ten
What does the IMF do to help countries in trouble, particularly trouble with exchange rate fluctuations?
  • Surveillance
    • "oversees the international monetary system and monitors the financial and economic policies of its members"
    • "keeps track of economic developments on a national, regional, and global basis"
  • Technical Assistance
    • focuses on helping struggling economies manage their financial policies
  • Lending
    • designed to "restore macroeconomic stability"
World Bank
for the 
  2014 July
BRICS nations
  • Brazil
  • Russia
  • India
  • China
  • South Africa
announced a 
  • $50 billion development bank, and a
  • $100 billion currency exchange reserve 
which experts say can rival the World Bank and the IMF
a widely distributed photo of the leaders of Brazil, Russia, India, China and South Africa at the 6th BRICS summit in Brazil 2014 July 14th
This new development bank and the currency exchange reserve require some future legislative approval.

One of the things the BRICS made a point of announcing is that the management of the bank will be "democratic", while pointing out that the IMF and the World Bank are run mostly by Europeans and North Americans.


Canada and the IMF

"As a result of the relatively large size of the Canadian economy, and its openness to international trade, Canada has a significant voting share at the IMF." Dept. of Finance, Ottawa

The government of Canada is also aware that being an export led economy, it is helpful to our country if the rest of the world is doing well economically in order to buy our exports - which means the IMF's work in lending money and helping with exchange rate fluctuations contributes to an economic climate favourable to trade.

Canada is involved in running the IMF. A Canadian has historically held a seat on the Executive Board. This Board is composed of 5 appointed member countries and 19 elected member countries and constituencies.

Voting Share Percentages of the Largest Members of the IMF
United States

Canadian Government website discussing the IMF

IMF website discussing Canada

What does the IMF do to help countries in trouble
"When Russia was facing severe economic challenges in the wake of the Asian Financial Crisis, the IMF stepped in to provide some financial assistance. It provided a loan of $4.5 billion to support the government's 1999-2000 economic program."
Here is the "kicker" - the IMF, by virtue of providing the loan, required quarterly reviews and the Russian government had to meet certain performance criteria. The IMF challenged the Russian government to be more effective at collecting taxes since it was the absence of revenue from taxes that caused the Russian government to be short of money.

"The IMF negotiates with a country to provide financial assistance if the country will agree to adopt certain policies to stabilize its economy"

The problem arises when the recipient country does not like the IMF telling it what to do with respect to particular domestic policies.


"The Russian financial crisis demonstrates the failings of the IMF on several fronts:"

"Thus, the IMF failed to implement due diligence procedures and violated its fiduciary duty to its shareholders--the member governments that fund and support its lending policies--and the taxpayers who finance them."
IMF has a surveillance program

"The IMF has a surveillance program where it monitors the economic policies of countries that would affect those countries exchange rates".

From the IMF website

"The IMF seeks to improve a country's macroeconomic environment and policies through a regular dialogue with its national authorities. As regards financial system surveillance in particular, the IMF,  in cooperation with other institutions and as part of its adaptation to the  demands of the global economy, is deepening its surveillance and emphasizing its quest for transparency by a further increase in the coverage of financial system issues. Such efforts are designed to lessen the frequency and diminish the intensity of financial system problems in the future, through better identifying financial system strengths as well as potential weaknesses  that could have major macroeconomic implications."
"Bosnian Vets Riot for pay"
To keep in line with IMF requirements for receiving financial aid, the Bosnian government announced they would cut back on benefits to Bosnia war veterns
(April 2010)
Veterans of Bosnia's 1992-1995 war rioted with police in the 3rd week of April 2010 when the government threatened to cut back on their pensions and benefits.

These government cutbacks were one of the things the IMF required of the Bosnian government in order for them to comply with austerity measures and conditions that came with receiving money from the IMF.

According to the IMF deal, Bosnia's two regions (the Muslim-Croat federation and the Serb Republic) have to cut public spending [which is often a condition the IMF imposes on many recipient countries]. In the case of Bosnia, a large part of their government spending goes to generous pensions paid to ex-soldiers.

"Pakistan gets IMF bailout, but problems persist "
is the title of an East-Asian newspaper story in Oct 2000
In Pakistan in 1999, Nawaz Sharif was overthrown by General Pervez Musharraf. Despite the fact that it was a military takeover the General was quite aware of the power of the IMF in the context of his country's sovereignty and said he would do his best to appease the IMF. 

Pakistan has been trying hard to stay solvent, as a country and receiving money from the IMF has been key.

Pakistan turned to the IMF for an emergency package of $7.6 billion in November 2008 to avert a balance of payments crisis and shore up reserves.
The loan was increased to $11.3 billion in July 2009 and the central bank of Pakistan received a fourth amount of $1.2 billion on December 28. 

What are the problems?

The IMF has required that the government of Pakistan create a VAT (Value Added Tax law) and impliment this by July 2010. Given Pakistan's volitile political situation few politicians want to push this idea since it will make them very unpopular to get elected. As for other methods of collecting money, the government raised electricity charges by more than 16 per cent since October 2009, but the IMF is seeking a further hike.

up-to-date information on the IMF and Pakistan can be read online at
South Korea
the Positive  & Negative Impact of the 1997 IMF bailout plan on South Korea

Positive Impact
"Since the implementation of the plan, Koreans have by and large engaged in less over-consumption and have been shifting towards the purchase of cheaper and domestically produced goods. Imports of foreign goods like automobiles and liquor have also fallen, which has helped alleviate their huge trade deficits."
The problem of over-consumption is said to be a consequence of the world-wide marketing drives of North American and European consumer products companies. These marketing activities has caused a demand among people (in many countries of the world)  that do not have the money to afford the products - so they borrow in order to acquire, what many consider, non-essential items.


Negative Impact
"In complying totally with the IMF plan, Korea was virtually plunged into a deep recession. Wages became depressed and unemployment skyrocketed. The devaluation of the won has also generated a deadly chain of bankruptcies because firms could not repay their debts as they had suddenly doubled or tripled overnight."

CNN reported the situation in South Korea in November 1997 saying

"South Korea announced it was asking the IMF  to organize a bailout package. In exchange, the IMF is likely to  order deep spending cuts, lower import tariffs, higher domestic  taxes, the elimination of shaky banks, and the forfeiture of some  national decision-making power to lenders"
How did the situation develop in South Korea that required the IMF?

CNN says "the answer seemed to be unanimous: corrupt politicians and businessmen who wheeled and dealed during South Korea's boom years."

"South Korea's stunning economic growth rates -- averaging 8 percent annually over the past two decades -- were largely fueled by the fast expansion of a dozen family-controlled conglomerates.  Past military governments provided cheap loans, tax breaks and other benefits to help the corporate giants expand and mass-produce cars, television sets, microchips, petroleum products and other goods. The business groups account for half of South Korea's industrial output and lead its export-driven economy. They supply one-quarter of the world's computer memory chips and account for about 30 percent of the commercial shipbuilding orders.  The economic boom also had negative impacts, triggering unbridled land speculation and environmental exploitation. Bribes  to police and public officials became common.  The problems came to a head this year when the economy slowed down, sales dropped, and some of the weaker conglomerates went belly up, saddling banks with $26 billion in bad loans."
Mexico  1995
"The financial crisis faced by Mexico in late 1994 and early 1995 produced a collapse in investors' confidence, making it impossible for the Mexican authorities to roll-over short-term, foreign-currency debt held by non-residents. To complicate matters, international reserves at the Bank of Mexico were insufficient to meet the demand of investors seeking to convert pesos into US dollars.In response to this crisis, a 48.8 billion dollar multilateral financial assistance package was negotiated by the Mexican authorities with those of the United States, the Bank of Canada, the International Monetary Fund and the Bank for International
Settlements (BIS). The purpose of the multilateral assistance package was to enable Mexico to overcome its short-term liquidity crisis and thus avoid defaulting on its debt obligations, and at the same time prevent the crisis from spreading to other emerging markets. The international response to Mexico's financial crisis was the largest multilateral economic assistance package ever extended to any single country."

How did Mexico get help?

"IMF pledged up to 17.8 billion dollars in financial assistance in the form of a stand-by arrangement to be disbursed over an 18 month period. Additionally, the Bank of Canada pledged 1.5 billion Canadian dollars (approximately 1.1 billion US dollars)"
"Under heavy pressure from wealthy nations that control its policies, the fund demanded a king's ransom from Indonesia as the price for its $40 billion assistance package."
By Joseph Kahn, New York Times, October 21, 2000

"Study Says IMF's Hand Often Heavy"

Kahn writes an article based on a [2000] study of how the IMF made decisions on several countries. The study was done by Morris Goldstein, who is now an economist at the Institute for International Economics

Kahn writes "Terms for rescuing nations from economic oblivion around the world during the emerging-market financial crisis of the late 1990's, was often criticized as the International Monetary Fund's equivalent of imperial overstretch. Now a new study using the fund's own unpublished data suggests that the critique may have actually underestimated the fund's commandeering approach.

Kahn says "Indonesia was told to raise taxes on state-owned companies; cancel 12 road, bridge and port projects; remove protections on dairy farmers; and eliminate price controls on cement ó part of a long list that at one point included 140 items, the  study shows.  The idea was to convert Mr. Suharto's Indonesia, which had a partly capitalist economy plagued by corruption,  into an open, competitive and stable free market economy. Even though few mainstream economists argue with  the goal, the methods are coming under new scrutiny. "I think it's clear that both the scope and the depth of the fund's conditions were excessive," said Morris Goldstein. Goldstein said that the recent push for radical overhauls of nations that borrow money has undermined the fund's reputation and strained its competence. "They clearly strayed outside their area of expertise," Mr. Goldstein said. "If a nation is so plagued with problems that it needs to make 140 changes before it can borrow, then maybe the fund should not lend."
"Argentina secured a US$4- billion lending package in December, 2000, that was led by the IMF"
"In December 2001 the IMF withheld $1.3-billion in crucially needed aid to Argentina after a previous government could not rein in budget overspending. Argentina is mired in a four-year  recession that has forced it to devalue its peso currency and default on part of its $141-billion debt."

Jacqueline Thorpe wrote a story in the Financial Post, in July 2001 that said "...   International Monetary Fund said it was not studying plans to grant Argentina more funds to help it through its financial crunch."
The Argentinian government has publically stated a variety of plans to solve it's crumbling economy - but one of the stumbling blocks (which was also a problem in Russia) is collecting tax: - tax evasion remains a big problem. The IMF expresses concern about Argentina's problems collecting taxes from businesses because if the government cannot collect money to pay the debt, then the economy will collapse completely.


In International Business, it is important for us to recognize that situations in countries are not fixed and that in the past, and future, things can change very differently from the present. In the case of Argentina, Fred McMahon wrote in the National Post , August 8, 2001, that "Argentina was one of seven richest nations on earth, right up there  with wealthy European nations and the emerging new world powerhouses."

McMahon's article explains how Argentina developed problems and how those problems are compounded today by situations that will be difficult to change.

"... Argentina has huge policy problems, especially at the micro level. That's led to trouble with costs and productivity...The economy is highly politicized and corruption is rampant. Key government duties, like education and infrastructure, get neglected..."

McMahon's complete text is at
Fred McMahon manages the Economic Freedom of the World report at the Vancouver-based Fraser Institute. E-mail:
examples of IMF commentary on large economies
The reason for mentioning Japan is that Japan is the second largest trading partner with Canada - therefore things which negatively effect the ability of the Japanese economy will impact on Canada.


article from the Toronto Star about the IMF's concern about the global implications of a recession in Japan [2001]
click An earlier article in May 2001 about the IMF concern for Japan.

IMF states that "Japan needs to ease monetary policy"



What are the sources of IMF finance

Answer - Special Drawing Rights  SDR
(link checked 2014 June 23rd)

The SDR is an international reserve asset created to supplement member's existing reserve assets. SDR's serve as the IMF's unit of account and are used by the IMF for transactions and operations"

" The bulk of the IMFís resources derives from membersí subscriptions (called quotas) that are based on each memberís relative size in the world economy. Quotas determine the maximum amount of financial resources that a member is obligated to provide to the IMF, voting power in IMF decision-making, and a memberís share of Special Drawing Rights  (SDR) allocations (the international reserve asset created by the IMF). The  financial assistance a member may obtain from the IMF is also based on its  quota."

In order to lend money to someone - you have to possess money yourself. If you want to lend a large amount of money - you need to possess an equally large amount of money.

It sounds simple but it is a fundamental way of looking at how the IMF works. The IMF itself does not have under its own control enough money to lend to those who need it - so - what it does is hold money given to it my wealthier nations and with this money it in turn lends it out to those that need it.


In what form does the SDR exist?

"Initially, the value of the SDR was defined in terms of one US-$, which in turn was defined in terms of an ounce of gold: $35/oz until 18-Dec-1971; Since July 1974 the SDR has been defined in terms of a basket of currencies. This basket consisted initially of 16 currencies and was reduced to 5 in 1981." [WTGR - it was further reduced to 4 currencies in 2000]
The SDR is not physical money like gold or some other currency - it is a value unit composed of the
"weighted average of five [now 4] currencies"
Because the SDR is composed of 4 currencies, its value changes all the time because the value of those 4 currencies is always changing on the world market in relationship to each other - so the IMF posts a page on its site identifying this value.


These currencies that make up the SDR are
(5 currencies in the 1990's)
    o U.S. dollar
    o Euro (Germany)
    o Japanese Yen 
    o Euro (France)
  •     o British Pound
  • (changed to 4 currencies in Y2K)
        o U.S. dollar $
        o Euro
        o Japanese Yen ¥
        o British Pound £

    Since 1981, the weight of each of these currencies has been changing every 5 years. The table below shows the weights for the present, and immediate past periods.
    Old weighted values 1991 - 1998
    Currency Jan/91-Dec/95 Jan/96-Dec/98
    Wgt. Value Wgt. Value
    USD US Dollar 40% $ 0.572 39% $ 0.582
    DEM German Mark 21% DM 0.453 21% DM 0.446
    JPY Japanese Yen 17% ¥ 31.8 18% ¥ 27.2
    FRF French Franc 11% F 0.800 11% F 0.813
    GBP British Pound 11% £ 0.0812 11% £ 0.1050
    New weighted values 1999 - 2005
    Currency Jan/99-Dec/00 Jan/01-Dec/05
    Wgt. Value Wgt. Value
    USD US Dollar 39% $ 0.582 44% $ 0.5770
    EUR Euroland Euro 32% E 0.3519 31% E 0.4260
    JPY Japanese Yen 18% ¥ 27.2 14% ¥ 21.0
    GBP British Pound 11% £ 0.1050 11% £ 0.0984
    (the tables listed above come from the webpage of Prof. Werner Antweiler, UBC, Vancouver)
    Prof. Antweiler is with the Sauder School of Business at UBC
    Copies of emails kept in the permissions binder
    Criticism of the IMF The IMF is criticized on many front, one of the popular challenges deals with the way the IMF encourages (some people say "forces" companies to "open up" their economy.

    Capital market liberalization

    "The IMF pressures countries that petition for IMF loans to open their markets to outside investment capital. Rather than help matters, this approach often makes matters worse as it destabilizes the economy of the country as well as the global economy. Investors may invest huge sums in a country only to pull those investments at a momentís notice, causing acute economic crises."

    from Stiglitz, Joseph E. 2002. Globalization and Its Discontents. New York: Norton. Ch.8, pp.195-213.
    Economist and Nobel Laureate Joseph E. Stiglitz
    Stiglitz was  Senior Vice President and Chief Economist at the World Bank in the late 1990s


    Leaders of  NGOs like the IMG, World Bank, OECD often seek to gain publicity for their organizations by issuing statements about world events and commentary on the development of situations.

    The head of the IMF and the World Bank are often quoted in major newspapers and online media sources for their statements on current issues

    In November of 2005, Rodrigo Rato, current Managing Director, was quoted by Associated Press as saying
    "High oil costs imperil economy"
    this is like a "duh, like we don't know that already" kind of statement.
    Rato made this comments in the context of worry about inflation pressures in many countries.

    NGOs like the IMG, World Bank, OECD often seek to publicity for their publications, reports and forecasts. Many times these reports are used by other governments and organizations around the world to support various conclusions.
    To the left is a screen capture from the website of the York Region Economic Development newsletter in which they talk about the IMF 2007 forecast.


    NGOs like the IMG, World Bank, OECD often seek to publicity for their publications, reports and forecasts. Many times these reports are used by other governments and organizations around the world to support various conclusions.
    To the left is a screen capture from the website of the Canadian federal government - boasting about the IMF's opinion of Canada

    IMF vs. World Bank
    MGTC44 student David D. sent Prof. Richardson an email in October 2005 saying

    "The differences between the IMF and World Bank are difficult to grasp when initially introduced, and  consequently easily confused.  I found this link on the IMF site and thought it may be of help to those students having difficulty differentiate the two"
    Hope it can help those looking for supplementary information."

    WTGR replies
    "Thanks David, that is indeed a helpful page, and if the URL doesn't change, I'll encourage students to use that as part of their reading material for this part of the course."

    emailed to ask permission to use image 2005 Nov 1st. Copies of emails in the permissions binder.

    "The fundamental difference is this: the [World] Bank is primarily a development institution; the IMF is a cooperative institution that seeks to maintain an orderly system of payments and receipts between nations"

    "To help nations ... the IMF administers a pool of money from which members can borrow when they are in trouble. The IMF is not, however, primarily a lending institution as is the Bank. It is first and foremost an overseer of its members' monetary and exchange rate policies... It receives frequent reports on members' economic policies and prospects, which it debates, [and] comments on..."

    "IMF is not a bank and does not intermediate between investors and recipients. Nevertheless, it has at its disposal significant resources, presently [2005] valued at over $215 billion. These resources come from quota subscriptions, or membership fees, paid in by the IMF's 182 member countries. Each member contributes to this pool of resources a certain amount of money proportionate to its economic size and strength (richer countries pay more, poorer less). While the Bank borrows and lends, the IMF is more like a credit union whose members have access to a common pool of resources (the sum total of their individual contributions) to assist them in times of need.."

    On the IMF website, it states "Creating links to our website is freely permitted..."
    The IMF also states  "Fair use of IMF published content for such purposes as criticism, comment ... teaching, scholarship, freely authorized for up to 1,000 words..."
    July 7th, 2005 Shirley Davies, Authorized Agent, Copyright, IMF emailed Prof. Richardson to give permission for linking and quoting from the IMF site.
    Copies of emails on file in the permissions binder.


    Prof. W. Tim G. Richardson ©