Among the many surprising features of the global financial crisis of 2008–9 was the emergence of the International Monetary Fund (IMF) as a leading player in the response to what has become known as the “Great Recession.” The news that the IMF was “back in business” was remarkable in view of the deterioration of the IMF’s reputation after the crises of the late 1990s and the decline in its lending activities in the succeeding decade. The IMF had been widely blamed for indirectly contributing to the earlier crises by advocating the premature removal of controls on capital flows, and then imposing harsh and inappropriate measures on the countries that were forced to borrow from it. The number of new lending arrangements approved by the IMF had fallen from twenty-six in 2001 to twelve in 2007 (Figure A.2), and all but two of the latter went to the IMF’s poorest members, which had little access to private sources of finance.

Moreover, the IMF, the intergovernmental organization assigned the task of promoting international economic and financial stability, initially had no direct role in dealing with the crisis. Finance ministers and central bank heads in the United States and Western Europe, where the financial institutions most affected by the crisis were located, sought to contain its impact by easing credit conditions and rescuing distressed financial institutions. The IMF was relegated to the sidelines as government officials in the advanced economies coordinated their responses to the crisis.