Posted at 6:00 a.m.
I recently read an article in The Press whose title was “The IMF releases 1 billion dollars to support Ecuador”. Who provides the money to the IMF? Does this money earn interest? How are cash advance decisions made?
Normand Boisjoly
The International Monetary Fund (IMF) is one of those organizations that we regularly hear about and that we have the impression of knowing without really asking questions about its origins or its mode of operation, including its sources of financing.
First, the IMF was created in 1944 and its primary purpose is to promote international financial cooperation. It therefore wants to contribute to the economic stability of its members.
“It’s a bank whose shareholders are also customers,” summarizes Arthur Silve, associate professor in the economics department at Laval University, who specifies that the mandate of the IMF is not to make investments that would bring in interests, although it is not impossible.
It is therefore its members, 188 countries, which finance it, but not all of them participate at the same level, of course. Upon joining, the country agrees to contribute to the fund with a share calculated according to the vitality of its economy established according to various criteria, including GDP.
These “quotas” in fact represent the maximum limit of the sums that the member country undertakes to make available to the IMF. In reality, the contributions are not as impressive.
The country’s commitment is reviewed every five years, but is not changed without its agreement. The United States has the largest commitment to the IMF.
It should also be understood that the IMF will not seek the quota of a country in a situation of economic vulnerability. We will therefore not find ourselves in this absurd situation where a State benefits from IMF aid which it has financed itself, even in a very small part, or which would be financed by a country in a similar economic situation.
The operating logic of the IMF can therefore be summed up as follows: when a country’s economy is strong, it contributes, when a country is in need, it reaps. Similarly, not all IMF loans are created equal, the terms depend on the circumstances of the recipient.
You should also know that the IMF can borrow from its member countries and that it has an imposing stock of gold which comes from its foundation at the time when the countries which joined the group had to pay a quarter of their endowment. gold initial.
Finally, the IMF has a Board of Directors and a Board of Governors made up of representatives from each of the member countries.
In fact, explains Professor Silve, these governors cede their decision-making power to the CA which makes IMF decisions, such as the decision to allocate 1 billion dollars to Ecuador to which you refer.