The IMF may be best known for lending to crisis-hit countries. But what about its own finances? How does it finance its critical functions and cover its operational expenses?
Let’s remember that the IMF is not only a global financial firefighter. It also provides policy advice and technical support to help members create the right economic conditions and institutions for maintaining economic and financial stability, boosting growth, jobs, and living standards.
Fulfilling this mandate is made possible by a unique mechanism for generating and deploying resources. Think of it as a credit union for countries—with a lending capacity of nearly $1 trillion.
Credit union for countries
Consider how a credit union works. Not only do members put in money to earn interest on their deposits, but they can also tap this pool of resources by taking out a loan.
The IMF works in a similar way. Its 191 member countries are assigned individual “quotas” based broadly on their relative positions in the world economy. These quotas are the primary building blocks of the Fund’s financial structure. They determine the maximum financial contribution of each member, and they also help define how much a country can borrow from the Fund.
It’s a model that benefits borrowers and creditors alike. In exchange for providing resources for IMF lending, member countries receive an interest-bearing, liquid, and secure claim on the IMF. Importantly, that claim counts as part of members’ foreign exchange reserves.
This also means that, unlike many other international organizations, the IMF does not rely on annual fees or grants from budget appropriations by its members.
All this matters for the world economy. By pooling member resources, the IMF plays a central role in the global financial safety net. It supports countries that are struggling to meet their international financial obligations, such as paying for imports or servicing their external debt. Faced with such a balance of payments crisis, countries can seek swift help from the IMF.
To be clear, the Fund does not provide development aid or project financing, such as loans to build infrastructure and so on; other institutions do that. As a lender of last resort, the Fund provides temporary liquidity support to countries under stress. But the benefits of this assistance are no less tangible. IMF loans help soften the impact of a crisis on ordinary people. They restore confidence and provide vital “breathing space” to pursue economic reforms that can help countries get back on their feet.
This benefits everyone, even the strongest economies. Think about it: if instability is left unaddressed in one country, or one region, it could easily spill over to others, including through volatile capital flows and increased migration pressures. In other words, supporting a country in need is in the enlightened self-interest of all countries.
Terms and conditions
When members borrow from the IMF, creditor countries receive fair compensation on resources made available for Fund lending—that is, the market-based interest you would expect to receive on a loan that for all practical purposes is risk-free.
The list of creditors includes those IMF members whose economic positions, especially in their external accounts, are strong enough to support others. In 2024, some 50 creditor countries received a total of about $5 billion in interest on the resources they had provided for non-concessional IMF lending.
Members also benefit from the power of pooled resources. Take, for example, the largest IMF shareholder, the United States: for every dollar the US makes available for lending, the IMF leverages four dollars from other countries. All in all, the Fund’s total lending capacity is close to $1 trillion. Its loans can also serve as a catalyst for vital financing from other international financial institutions and, crucially, from the private sector.
For borrowing countries, the “credit-union membership” provides a macroeconomic lifeline. Loan amounts represent a multiple of their individual quotas. And to address the underlying economic challenges, loans come with IMF program design and conditionality. The benefits of such terms and conditions are reflected in reasonable interest rates on the borrowings from the IMF. These rates are far lower than what crisis-hit countries would face in private capital markets.
Borrowing countries that access the IMF’s general, or non-concessional, lending pay an interest rate that equals the rate paid to creditor members—plus a small margin. In addition, the Fund administers trusts which provide even cheaper, concessional, financing to its poorest members.
IMF member contributions are secure due to the Fund’s strong lending safeguards, rock-solid balance sheet, and substantial reserves. IMF loans have always been repaid. This means the Fund has never incurred a credit loss, and no country has ever experienced a loss on its claim on the Fund.
Administrative expenses
The IMF’s unique financial structure lies at the heart of its lending function. But this is not its only unique feature. With its near universal membership, the IMF is the only global institution empowered by its members to carry out regular “health checks” of their economies, the so-called IMF Article IV consultations.
In addition, the Fund provides cutting-edge research and policy advice, from dealing with debt to fighting money laundering and designing productivity-boosting reforms. It also works with members to build economic institutions, such as tax administration systems and monetary frameworks that support sound policy making and provide accountability of public functions.
To deliver on this work program, the IMF incurs administrative expenses. But the Fund does not rely on annual budget appropriations or any other support from taxpayers to meet these expenses.
Instead, they are fully covered by income from lending and investments. These income streams, and prudent expense management within a flat budget framework, allow the Fund to further build reserves. The IMF’s administrative budget today, adjusted for inflation, is about the same size as it was 20 years ago.
All these elements of the IMF’s financial structure are critical. They are in many ways unique, but the basic principles are simple—and were enshrined at the institution’s birth.
Speaking at the 1944 Bretton Woods Conference, US Treasury Secretary Henry Morgenthau noted: “The actual details of the international monetary and financial agreement may seem mysterious. Yet, at the heart of it lie the most elementary bread and butter realities of daily life.”
These words could not be more relevant today. IMF members pool resources for their individual and overall economic wellbeing. This benefits creditor members and borrowing countries alike—and allows the Fund to promote global economic stability and prosperity.
