The International Monetary Fund (IMF)Print
The International Monetary Fund was founded by the United Nations in 1945, is located in Washington, D.C., and currently has 187 member countries (2010). This central institution of the international monetary system was established to promote international monetary co-operation and exchange stability, to foster economic growth and to achieve high levels of employment, as well as with the purpose of providing temporary financial support for members experiencing balance of payments difficulties.
At the top of the IMF's organisational structure is the Board of Governors, which consists of one Governor from each member country (Hungary is represented by the Governor of the Magyar Nemzeti Bank). They meet once a year at the IMF-World Bank Annual Meetings, while the International Monetary and Financial Committee (IMFC) and the joint IMF-World Bank Development Committee meet twice each year. The daily work of the Fund is conducted by its 25-member Executive Board, and is supported by its professional staff, headed by the Managing Director and his three Deputies.
Since its foundation, the purposes of the Fund have remained unchanged, but its operation, adapting to the changing global environment, has undergone major changes. The three main pillars of its activity are the surveillance - which involves the monitoring of economic and financial developments, and the provision of policy advice, technical assistance and financial assistance. In the context of its surveillance work, the IMF conducts regular dialogue with its member countries' authorities, generally once a year during the so-called Article IV Consultation, and it provides recommendations for them.
The Special Data Dissemination Standard was established in 1996 in order to provide comprehensive, reliable financial information and therefore contribute to the pursuit of sound macroeconomic policies and to the improved functioning of financial markets. Within its framework, members agree to provide monetary, fiscal, external and real sector data in 22 categories according to the requirements on coverage, periodicity and timeliness as defined in the standards. During the recent crisis-prevention activities and within the work on strengthening the international monetary system, the IMF put greater emphasis on making its activities more transparent (and thereby the institution more accountable) and on the use of these standards and codes in a more extensive context. The Fund applies these standards and codes in 12 different areas, such as data provision, fiscal, monetary and financial transparency. Based on these requirements, the IMF, in co-operation with the World Bank, prepares Reports on Observance of Standards and Codes (ROSCs) to evaluate members' compliance with the standards.
Hungary's compliance with the above-mentioned standards and codes has been examined and reports have been prepared:
- on data provision (Data ROSC),
- on monetary and financial policy transparency (Code of Good practices on Transparency in Monetary and Financial Policies),
- on banking supervision (Basel Core Principles for Effective Banking Supervision),
- on securities regulation (IOSCO Objectives and Principles of Securities Regulations),
- on insurance supervision (IAIS Insurance Supervisory Principles),
- on payments systems (CPSS Core Principles for Systemically Important Payment Systems),
- on corporate governance (OECD Principles of Corporate Governance), and
- on fiscal transparency (Fiscal Transparency),
- anti-money laundering and combating the financing of terrorism (AML/CFT).
Reports on the Observance of Standards and Codes (ROSCs) can be found on the websites of the IMF, the World Bank, and those relating to the financial sector can also be read here, on the MNB's website. Moreover, recent consultation reports, reports concerning the financial arrangement, Public Information Notices and other related materials on Hungary are available here too.
Hungary joined the Special Data Dissemination Standards (SDDS) initiative among the very first members (64 participating countries as of 2010), and the country fully complies with its requirements.
Within the framework of technical assistance, the Fund offers professional advice to members in order to improve the effectiveness of their economic policies. This activity of the Fund ranges from training and seminars to proposing alternative solutions to specific problems. Technical assistance is offered in several areas, including fiscal, monetary and exchange rate policies, banking and financial system supervision and regulation, statistics, etc.
Financial support is given to countries with balance of payments difficulties to provide temporary financing and to support policies aimed at correcting the underlying problems. An IMF loan is usually provided under a standardized financial “arrangement”, part of which stipulates the tailor made specific policies and measures a country has agreed to implement to resolve its balance of payments problem. The economic program underlying an arrangement is formulated by the country in consultation with the IMF.
Hungary became a member of the IMF in 1982, its quota share which determines its voting power is SDR 1038.4 million. Since it joined the Fund till the 1996 precautionary arrangement to support the country's 1995 stability program Hungary has used IMF resources on nine occasions within the framework of the so-called stand-by, extended and compensation arrangements. Following the successful exit from the latter stand-by program, Hungary made early repayment of all its outstanding balance to the IMF in 1998. At the burst of the 2008 financial crisis Hungary concluded a 10 537 million SDR – 1015 % of its quota - Stand-By Arrangement for 23 month on November 6, 2008 and drew in 2008 and 2009 4,2 billion and 3,4 billion SDRs, respectively. (Hungary’s Stand-By Arrangement)
In addition, the IMF (in close co-operation with the World Bank) is actively working on raising the living standard of the low-income countries and on reducing poverty. Within the scope of this activity, different initiatives have been taken. For example, the Fund provides financial support to the poorest countries through its concessional lending facility, the Poverty Reduction and Growth Trust (PRGT), the Heavily Indebted Poor Countries (HIPC) Initiative, participates in the Multilateral Debt Relief Initiative (MDRI) and supports through its Policy Support Instrument (PSI) designing macropolicy.