What is the IMF and what does it do for the global economy?

A pedestrian walks past a sign for the International Monetary Fund (IMF) annual Fall Meetings in Washington, DC, on October 8, 2022. - The IMF will be hosting its annual Fall Meetings in Washington DC from October 10 through October 16. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)
The IMF now has 190 member countries after starting with 44. (Getty Images)

The financial turmoil that has engulfed the UK has seen Liz Truss criticised by a series of economic experts.

Among the most prominent voices as been the International Monetary Fund (IMF), which has raised serious concerns about the UK government's economic support package and tax plans.

What does the IMF stand for – and what does it do?

Set up in 1944 in the aftermath of the Great Depression of the 1930s, the IMF's 44 founding members sought to build a framework for international economic cooperation.

It now has 190 member countries and aims to support economic policies, promote monetary cooperation and support financial stability across the world.

The IMF works with governments to strengthen institutions such as central banks and finance ministries with the goal of promoting growth and reducing economic inequality.

WASHINGTON, DC - OCTOBER 10: Ugandan climate activist Vanessa Nakate participates in a discussion on climate change with IMF Deputy Secretary of the Executive Board Sabina Bhatia at IMF headquarters on October 10, 2022 in Washington, DC. The International Monetary Fund and World Bank Group are holding their annual meetings in Washington, DC all this week. Last week, the IMF executive board approved $1.3 billion in emergency funding for Ukraine. (Photo by Drew Angerer/Getty Images)
Ugandan climate activist Vanessa Nakate in a discussion with the IMF's Sabina Bhatia at the organisation's Washington DC headquarters. (Getty Images)

Ways that it does this include training policymakers on progressive taxation, financial inclusion and reducing economic inequality – for example by closing the gender pay gap.

It also helps countries align their legal framework to international standards with the aim of combating corruption, money laundering and the funding of terrorism.

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The IMF helps improve nations' economic and financial data to make it more accurate and attract more investment, and generally assists them with their development needs.

Members contribute funds to a pool based on a quota system, and countries experiencing issues with their debt can borrow money from the fund.

The IMF's lending to countries with struggling economies has hit a record high, with analysis by the Financial Times in August showing $140bn had been provided in 44 separate programmes already in 2022.

With many countries including Zambia, Sri Lanka and Lebanon defaulting on their debts during the COVID pandemic, others are expected to ask for help amid soaring inflation and an energy crisis.

What is the IMF growth forecast?

The IMF's growth forecast for the UK is not positive.
The IMF's growth forecast for the UK is not positive.

The IMF has said 2023 will be a difficult year for the world, with the institution's World Economic Outlook report saying: "The worst is yet to come. For many people 2023 will feel like a recession."

Global growth is expected to hit 2.7% next year, the institution says, down from 6% last year and the 3.2 forecast for 2022.

It is the weakest growth profile since 2001, with the exception of the start of the Covid pandemic and the aftermath of the 2008 financial crash.

"The world is in a volatile period: economic, geopolitical, and ecological changes all impact the global outlook," the report says.

The IMF's economic counsellor Pierre-Olivier Gourinchas said: “As storm clouds gather, policymakers need to keep a steady hand.

“Increasing price pressures remain the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability.”

What has the IMF said about the UK economy?

BIRMINGHAM, UNITED KINGDOM - OCTOBER 04:  British Chancellor of the Exchequer Kwasi Kwarteng speaks at a fringe event during the Conservative Party's annual conference at the International Convention Centre in Birmingham, on October 4, 2022. (Photo by Isabel Infantes/Anadolu Agency via Getty Images)
Chancellor Kwasi Kwarteng's plans have been criticised multiple times by the IMF already (Getty Images)

The IMF has warned that while the chancellor's plans to slash taxes will boost growth in the short-term, it expects the benefits to sharply reduce in 2023 as rampant inflation and higher interest rates take their toll.

According to its latest assessment of the global economy, inflation in the UK is expected to peak at around 11.3% before the end of the year.

It expects prices to rise by an average of 9% over the next two years – well above the Bank of England's (BoE) target of 2%.

The fund says Kwarteng's tax measures – an attempt to stimulate the economy – are at odds with the BoE's recent raising the base rate of interest, in an attempt to cool down the economy by making borrowing more expensive.

While the UK is set to grow the fastest of the major economies in the G7, this is expected to sharply decline next year, with the economy forecast to expand by just 0.3%.

Business Secretary Jacob Rees-Mogg during a fringe event hosted by Institute of Economic Affairs during day three of the Conservative Party annual conference at the International Convention Centre in Birmingham. Picture date: Tuesday October 4, 2022.
Business secretary Jacob Rees-Mogg has questioned the impartiality of the IMF. (PA)

Business secretary Jacob Rees-Mogg has questioned the IMF's analysis, saying: “I think the IMF is wrong on both counts. I think it’s particularly wrong on energy, and frankly doesn’t know what it’s talking about…

“The IMF is not holy writ and the IMF likes having a pop at the UK for its own particular reasons. I’m afraid I would never lose too much sleep about the IMF.”

In response, the Fund's deputy managing director Gita Gopinath flatly rejected the criticism.

"I have no idea why he said that, that's certainly not what we love doing," he said. "What we do want to communicate to the world is what we think are sound policies at this current juncture.

"These are difficult times, there are no easy choices, but there are best practices on fiscal and monetary policy that we take as our job to let our greater membership know."