The International Monetary Fund was founded by the UN in 1945, its headquarters is located in Washington, D.C., and it currently has 190 member countries (as of 30 August 2023). 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 Development Committee (DC) meet twice each year. The daily work of the Fund is conducted by its Executive Board, which has grown to 26 members as of 1 November 2024 (25 Executive Directors and the Managing Director), and is supported by its professional staff, headed by the Managing Director and the four Deputies.
Since its foundation, the IMF’s fundamental mission – to ensure the stability of the international monetary system – has remained unchanged, but its operation, adapting to the changing global environment, has undergone major changes. The three main pillars of its activity are (i) economic policy surveillance, which involves the monitoring of economic and financial developments, as well as the provision of policy advice, (ii) technical assistance and training, and (iii) lending. In the context of its economic policy surveillance work, the IMF conducts regular dialogue with its member countries’ authorities, generally once a year during the Article IV Economic Policy Consultation, providing policy recommendations for them.
In 1996, the IMF established the Special Data Dissemination Standard (SDDS) in order to provide comprehensive, reliable financial information and therefore contribute to the pursuit of sound financial policies and to the improved functioning of financial markets. Within its framework, the member states agree to provide monetary, fiscal, external and real sector data in 21 categories according to the requirements on coverage, periodicity and timeliness as defined in the standards. Hungary joined the SDDS initiative – established in 1996 – among the very first members, and the country fully complies with its requirements.
As part of its crisis-prevention activities and its efforts to strengthen the international monetary system, the IMF put greater emphasis on making its activities more transparent, and on the assessing the use of principles and standards of good practice in member countries. The Fund approved these standards 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 compliance with the standards of good practice and principles in each area.
Hungary’s practices have been reviewed based on good practices and standards for the following areas:
- Data ROSC
- Code of Good Practices on Transparency in Monetary and Financial Policies
- Basel Core Principles for Effective Banking Supervision
- IOSCO Objectives and Principles of Securities Regulations
- IAIS Insurance Supervisory Principles
- CPSS Core Principles for Systemically Important Payment Systems
- OECD Principles of Corporate Governance, and
- Fiscal Transparency.
- Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT)
Reports on the assessment can be found on the websites of the IMF and the World Bank.
Within the framework of technical assistance, the Fund offers professional support and 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, statistical data provision, etc.
The Fund offers financial support to countries with balance of payments difficulties. This entails both temporary financing, and supporting economic policies aimed at correcting the underlying problems. The loan is disbursed under a standard loan agreement. This stipulates the specific economic policies and measures a country has agreed to implement to resolve its balance of payments problem. The economic program underlying a loan arrangement is formulated by the country in consultation with the IMF.
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 concessional loans to the poorest countries through the Poverty Reduction and Growth Trust (PRGT), grants debt relief to countries participating in the Heavily Indebted Poor Countries (HIPC) Initiative, and participates in the Multilateral Debt Relief Initiative. The Policy Support Instrument (PSI) aims to support sound economic policies. While it does not provide financing, but it does grant fast-track access to credit if needed, subject to the successful implementation of the programme. Collaborating in the international effort to support low-income countries, Hungary made a historic announcement at the joint FSB/World Bank Annual Meetings in Marrakech in October 2023, committing to provide 11 million SDRs (Special Drawing Rights) – approximately equivalent to EUR 14 million – to the IMF Poverty Reduction and Growth Trust (PRGT) through the net proceeds of a specific investment with the IMF. The agreement regarding Hungary’s commitment was signed in Spring 2024 by the Governor of the MNB and IMF Managing Director Kristalina Georgieva. Hungary has been a member of the International Monetary Fund since 1982, with a participation quota of 1940 million SDRs (as of October 2024). Since joining the IMF, Hungary has made use of the IMF’s resources on several occasions in the form of stand-by, extended and compensatory loan agreements. Hungary has signed a total of eight loan agreements with the IMF since becoming a member, most recently in 2008 to tackle the financial crisis.