What Is the Arab Monetary Fund and How Does It Work?

The Arab Monetary Fund (AMF) is a regional financial institution that supports economic stability and development in the Arab world. It provides funding, policy advice, and technical assistance to member countries, aiming to enhance monetary cooperation and promote trade. By offering loans and facilitating payment systems, the AMF strengthens financial integration within the region.

Beyond lending, the AMF works to improve economic data collection and collaborates with international organizations to align its initiatives with global financial standards.

Membership and Governance

The AMF consists of 22 member countries, all part of the League of Arab States. Each member contributes capital based on its economic size, which determines voting power. Larger economies like Saudi Arabia and the United Arab Emirates hold greater influence, though all members participate in governance.

A Board of Governors, composed of finance ministers or central bank governors from each member state, meets annually to review financial statements, approve policies, and set long-term objectives. An Executive Board manages daily operations, implementing decisions and overseeing financial activities. The Director General, who also serves as Chairman of the Executive Board, is appointed for a renewable five-year term and is responsible for executing policies.

Funding Framework

The AMF secures financial resources through paid-in capital from member states, retained earnings, and investment income. Each country contributes an initial subscription upon joining, with additional capital injections as needed.

To sustain operations, the AMF invests in a diversified portfolio, including sovereign bonds and other low-risk assets, generating income while preserving capital. It can also issue debt instruments in regional and international markets, though this is rare. External funding allows the AMF to respond to economic shocks or finance large-scale initiatives without overburdening member states.

Lending Facilities and Programs

The AMF provides financial assistance through various lending programs tailored to short-term imbalances, structural economic challenges, and broader development goals. These loans help stabilize economies, support policy reforms, and strengthen financial sectors. AMF financing typically carries lower interest rates and longer repayment periods than commercial loans.

To address different economic needs, the AMF offers multiple lending facilities. The Automatic Loan facility provides short-term financing for balance of payments deficits. The Structural Adjustment Facility supports fiscal policy improvements and financial sector modernization. The Trade Reform and Export Credit Guarantee Program assists countries in trade liberalization and export growth.

Loan agreements often require recipient countries to commit to policy measures such as tax reforms, public spending adjustments, or exchange rate policies. The AMF monitors implementation through periodic reviews, ensuring compliance. If issues arise, loan disbursements may be delayed or adjusted.

Regional Payment Arrangements

To facilitate cross-border transactions, the AMF developed the Buna payment platform, a multi-currency system that enables real-time settlements between Arab banks. By reducing reliance on correspondent banking relationships with non-regional institutions, Buna lowers transaction costs and improves liquidity management.

The platform supports both commercial and central banks, allowing secure processing of payments in local and major international currencies. This enhances trade and investment by enabling businesses to conduct transactions without delays and high fees. Unlike conventional systems that require intermediary banks in Europe or the United States, Buna allows for direct settlements, reducing counterparty risk and increasing financial autonomy.

Coordination with Other Global Bodies

The AMF collaborates with international financial institutions and regional organizations to enhance economic stability and policy coordination. It works with the International Monetary Fund (IMF), World Bank, and Bank for International Settlements (BIS) to align its initiatives with global financial standards. These partnerships facilitate knowledge sharing, technical assistance, and co-financing arrangements.

A key area of cooperation is financial stability and regulatory frameworks. The AMF works with the Financial Stability Board (FSB) and Basel Committee on Banking Supervision to help member states implement international banking standards, such as Basel III capital requirements. This strengthens the resilience of Arab financial institutions by promoting risk management practices. The AMF also collaborates with the IMF on macroeconomic surveillance to ensure policy recommendations support broader financial stability objectives.

Trade and investment facilitation is another focus. The AMF partners with the World Trade Organization (WTO) and regional development banks to support trade finance initiatives and economic diversification. It also works with organizations like the World Bank’s Consultative Group to Assist the Poor (CGAP) to expand access to banking services in underserved regions.

Economic Data and Research Support

Beyond financial assistance, the AMF helps improve economic data collection and provides research-based policy guidance. Reliable economic indicators are essential for informed decision-making, and the AMF works with national statistical agencies to enhance data accuracy and reporting standards. Through technical assistance and training programs, it helps member states compile and analyze key economic metrics such as inflation rates, fiscal balances, and trade statistics.

The AMF publishes reports and research studies on economic trends and policy challenges in the Arab region, covering topics such as exchange rate policies, public debt sustainability, and financial sector development. By providing in-depth analysis, the AMF equips policymakers with the information needed to implement effective economic strategies. Its research also serves as a reference for investors and financial institutions seeking insights into Arab economies.