Imf and world bank relationship

The IMF and the World Bank: How Do They Differ?

imf and world bank relationship

full-fledged review of Bank-Fund relations, to determine where the respon- The World Bank and the International Monetary Fund have been bedeviled. Central America is considered by the US government as part of its own exclusive sphere of influence. The policies adopted by the World Bank. The Bank and the IMF are twin intergovernmental pillars supporting the structure At Bretton Woods the international community assigned to the World Bank the aims .. promotes exchange stability and orderly exchange relations among its.

The IMF and the World Bank

IMF staff are primarily economists with wide experience in macroeconomic and financial policies. The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries reform certain sectors or implement specific projects—such as building schools and health centers, providing water and electricity, fighting disease, and protecting the environment.

World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance. World Bank staff are often specialists on particular issues, sectors, or techniques. Framework for cooperation The IMF and World Bank collaborate regularly and at many levels to assist member countries and work together on several initiatives.

Inthe terms for their cooperation were set out in a concordat to ensure effective collaboration in areas of shared responsibility. The Boards of Governors decide how to address international economic and financial issues and set priorities for the organizations. This committee was established in to advise the two institutions on critical development issues and on the financial resources required to promote economic development in low-income countries.

They also issue joint statements and occasionally write joint articles, and have visited several regions and countries together. Faced with such hostility, the Sandinista majority government opted for more radical policies.

During the elections, the first democratic ones in half a century, the Sandinista Daniel Ortega was elected President with 67 per cent of the ballot. The following year, the United States called a trade embargo against Nicaragua, cutting the country off from foreign investments. The World Bank had put a stop to its loans from the time of the Sandinista presidential election victory. The Sandinistas actively urged the WB to resume its loans.

They were even ready to accept a drastic structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans. The WB decided not to follow up on this and did not resume the loans until the Sandinista electoral defeat in Februarywhen Violeta Barrios de Chamorro, the US-backed conservative candidate, won the vote.

United Nations, IMF, NATO and World Bank - The Evil 4 of our World - YouTube

The findings included a rejection of the justification of collective self-defence advanced by the United States concerning the military or paramilitary activities in or against Nicaragua, and a statement that the United States had violated the obligations imposed by customary international law not to intervene in the affairs of another State, not to use force against another State, not to infringe the sovereignty of another State, and not to interrupt peaceful maritime commerce.

The Court also found that the United States had violated certain obligations arising from a bilateral Treaty of Friendship, Commerce and Navigation ofand that it had committed acts such to deprive that treaty of its object and purpose.

The World Bank Group and the International Monetary Fund (IMF)

Confusion has reigned ever since. That there are two pillars rather than one is no accident. The international community was consciously trying to establish a division of labor in setting up the two agencies. Those who deal professionally with the IMF and Bank find them categorically distinct. To the rest of the world, the niceties of the division of labor are even more mysterious than are the activities of the two institutions. Similarities between them do little to resolve the confusion.

Superficially the Bank and IMF exhibit many common characteristics.

imf and world bank relationship

Both are in a sense owned and directed by the governments of member nations. The People's Republic of China, by far the most populous state on earth, is a member, as is the world's largest industrial power the United States. In fact, virtually every country on earth is a member of both institutions. Both institutions concern themselves with economic issues and concentrate their efforts on broadening and strengthening the economies of their member nations. Staff members of both the Bank and IMF often appear at international conferences, speaking the same recondite language of the economics and development professions, or are reported in the media to be negotiating involved and somewhat mystifying programs of economic adjustment with ministers of finance or other government officials.

The two institutions hold joint annual meetings, which the news media cover extensively. Both have headquarters in Washington, D.

imf and world bank relationship

For many years both occupied the same building and even now, though located on opposite sides of a street very near the White House, they share a common library and other facilities, regularly exchange economic data, sometimes present joint seminars, daily hold informal meetings, and occasionally send out joint missions to member countries.

Despite these and other similarities, however, the Bank and the IMF remain distinct. The fundamental difference is this: Each has a different purpose, a distinct structure, receives its funding from different sources, assists different categories of members, and strives to achieve distinct goals through methods peculiar to itself.

Purposes At Bretton Woods the international community assigned to the World Bank the aims implied in its formal name, the International Bank for Reconstruction and Development IBRDgiving it primary responsibility for financing economic development.

The Bank's first loans were extended during the late s to finance the reconstruction of the war-ravaged economies of Western Europe. The World Bank has one central purpose: The international community assigned to the IMF a different purpose. In establishing the IMF, the world community was reacting to the unresolved financial problems instrumental in initiating and protracting the Great Depression of the s: Set up as a voluntary and cooperative institution, the IMF attracts to its membership nations that are prepared, in a spirit of enlightened self-interest, to relinquish some measure of national sovereignty by abjuring practices injurious to the economic well-being of their fellow member nations.

The rules of the institution, contained in the IMF's Articles of Agreement signed by all members, constitute a code of conduct. The code is simple: To help nations abide by the code of conduct, the IMF administers a pool of money from which members can borrow when they are in trouble.

The IMF is not, however, primarily a lending institution as is the Bank. It is first and foremost an overseer of its members' monetary and exchange rate policies and a guardian of the code of conduct. Philosophically committed to the orderly and stable growth of the world economy, the IMF is an enemy of surprise.

It receives frequent reports on members' economic policies and prospects, which it debates, comments on, and communicates to the entire membership so that other members may respond in full knowledge of the facts and a clear understanding of how their own domestic policies may affect other countries. The IMF is convinced that a fundamental condition for international prosperity is an orderly monetary system that will encourage trade, create jobs, expand economic activity, and raise living standards throughout the world.

By its constitution the IMF is required to oversee and maintain this system, no more and no less. Most of its staff members work at headquarters in Washington, D.

imf and world bank relationship

Its professional staff members are for the most part economists and financial experts. The structure of the Bank is somewhat more complex.

imf and world bank relationship

The World Bank itself comprises two major organizations: Moreover, associated with, but legally and financially separate from the World Bank are the International Finance Corporation, which mobilizes funding for private enterprises in developing countries, the International Center for Settlement of Investment Disputes, and the Multilateral Guarantee Agency.

With over 7, staff members, the World Bank Group is about three times as large as the IMF, and maintains about 40 offices throughout the world, although 95 percent of its staff work at its Washington, D.

The Bank employs a staff with an astonishing range of expertise: Source of Funding The World Bank is an investment bank, intermediating between investors and recipients, borrowing from the one and lending to the other.

Committee for the Abolition of Illegitimate Debt

The IBRD obtains most of the funds it lends to finance development by market borrowing through the issue of bonds which carry an AAA rating because repayment is guaranteed by member governments to individuals and private institutions in more than countries. Its concessional loan associate, IDA, is largely financed by grants from donor nations.

The Bank is a major borrower in the world's capital markets and the largest nonresident borrower in virtually all countries where its issues are sold. It also borrows money by selling bonds and notes directly to governments, their agencies, and central banks. The proceeds of these bond sales are lent in turn to developing countries at affordable rates of interest to help finance projects and policy reform programs that give promise of success. Despite Lord Keynes's profession of confusion, the IMF is not a bank and does not intermediate between investors and recipients.

These resources come from quota subscriptions, or membership fees, paid in by the IMF's member countries. Each member contributes to this pool of resources a certain amount of money proportionate to its economic size and strength richer countries pay more, poorer less. While the Bank borrows and lends, the IMF is more like a credit union whose members have access to a common pool of resources the sum total of their individual contributions to assist them in times of need.

Although under special and highly restrictive circumstances the IMF borrows from official entities but not from private marketsit relies principally on its quota subscriptions to finance its operations. The adequacy of these resources is reviewed every five years.

Recipients of Funding Neither wealthy countries nor private individuals borrow from the World Bank, which lends only to creditworthy governments of developing nations.

imf and world bank relationship

The poorer the country, the more favorable the conditions under which it can borrow from the Bank. Per capita GNP, a less formidable term than it sounds, is a measure of wealth, obtained by dividing the value of goods and services produced in a country during one year by the number of people in that country. These loans carry an interest rate slightly above the market rate at which the Bank itself borrows and must generally be repaid within years.

IDA loans are interest free and have a maturity of 35 or 40 years. In contrast, all member nations, both wealthy and poor, have the right to financial assistance from the IMF.