The International Monetary Fund (IMF) is an international financial institution and a specialized agency of the United Nations, headquartered in Washington, D.C.. It was conceived in July 1944 at the Bretton Woods Conference in New Hampshire, U.S., and formally came into existence on December 27, 1945, when the first 29 countries ratified its Articles of Agreement. The IMF was created to solve the problem of competitive currency devaluations and foreign exchange restrictions that contributed to the Great Depression of the 1930s. Its original purpose was to supervise the Bretton Woods system of fixed exchange rates and provide short-term capital to prevent the spread of international financial crises.
The IMF works through three main mechanisms: Surveillance, Lending, and Capacity Development. Surveillance involves monitoring the global economic system and the economic policies of its 191 member countries. Lending provides financial assistance to members facing actual or potential balance-of-payments problems, often through programs like the Stand-By Arrangement (SBA) or the Extended Fund Facility (EFF). The funds for lending come primarily from member country Quotas, which are based on a country's relative size in the global economy and also determine its voting power. Loans are typically subject to conditionality, requiring the borrowing country to implement specific policy reforms.
The IMF is one of the two Bretton Woods Institutions, the other being the World Bank (specifically the International Bank for Reconstruction and Development or IBRD), and they are often referred to as the Bretton Woods Twins. The IMF also manages the Special Drawing Right (SDR), an international reserve asset created in 1969 to supplement member countries' official reserves. Recently, the IMF has been undergoing a series of interlinked reviews, including its framework for conditionality and its comprehensive surveillance. The core structure of the IMF, including the Quota system and the Articles of Agreement, has remained the same, but its role shifted significantly after the collapse of the fixed exchange rate system in 1971 to focus more on managing financial crises and promoting global financial stability.