Role of IMF and World Bank

International Monetary Fund [IMF]

The IMF was founded more than 60 years ago toward the end of World War II. The founders aimed to build a framework for economic cooperation that would avoid a IMFrepetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed.

Since then the world has changed dramatically, bringing extensive prosperity and lifting millions out of poverty, especially in Asia. In many ways the IMF's main purpose—to provide the global public good of financial stability—is the same today as it was when the organization was established. More specifically, the IMF continues to

  • provide a forum for cooperation on international monetary problems
  • facilitate the growth of international trade, thus promoting job creation, economic growth, and poverty reduction;
  • promote exchange rate stability and an open system of international payments; and
  • lend countries foreign exchange when needed, on a temporary basis and under adequate safeguards, to help them address balance of payments problems.

 

Key IMF activities

The IMF supports its membership by providing

  • policy advice to governments and central banks based on analysis of economic trends and cross-country experiences;
  • research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets;
  • loans to help countries overcome economic difficulties;
  • concessional loans to help fight poverty in developing countries; and
  • technical assistance and training to help countries improve the management of their economies.

The IMF collaborates with the World Bank, regional development banks, the World Trade Organization (WTO), UN agencies, and other international bodies. While all of these organizations are involved in global economic issues, each has its own unique areas of responsibility and specialization. The IMF also works closely with the Group of Twenty (G-20) industrialized and emerging market economies and interacts with think tanks, civil society, and the media on a daily basis.

Watch a Video - About the IMF

With the world's economies so closely connected, having an organization to help countries prevent crises and resolve when they occur is more important than ever.

Watch a Video-Making sense of SDRs

The Special Drawing Right, or SDR, is an international reserve asset created by the IMF to supplement official reserves of member countries. Once added to countries' official reserves, SDRs can be exchanged for usable currencies like the US dollar. You can read more about SDRs on the IMF's website: www.imf.org/external/np/exr/facts/sdr.htm

Download PDF version "making sense of SDRs"

World Bank

The World Bank, formed in 1944, is like a cooperative, made up of 188 member countries. These member countries, or shareholders, are represented by a Board of world bankGovernors, who are the ultimate policymakers at the World Bank. Generally, the governors are member countries' ministers of finance or ministers of development. They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund.

The World Bank seeks to

  • promote the economic development of the world's poorer countries
  • assists developing countries through long-term financing of development projects and programs
  • provides to the poorest developing countries whose per capita GNP is less than $865 a year special financial assistance through the International Development Association (IDA)
  • encourages private enterprises in developing countries through its affiliate, the International Finance Corporation (IFC)

Since inception, the World Bank has expanded from a single institution to a closely associated group of five development institutions. These are

  1. The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries.
  2. The International Development Association (IDA) provides interest-free loans—called credits— and grants to governments of the poorest countries.
  3. The International Finance Corporation (IFC) provides loans, equity and technical assistance to stimulate private sector investment in developing countries.
  4. The Multilateral Investment Guarantee Agency (MIGA) provides guarantees against losses caused by non-commercial risks to investors in developing countries.
  5. The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.

Further reading

The IMF and the World Bank How Do They Differ? http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm

IMF official websitehttp://www.imf.org

World Bank official website http://www.worldbank.org

Role of IMF and worldbank http://da-academy.org/imf_worldbank.pdf (external link)

The Functions of the IMF & the World Bank http://blogs.law.uiowa.edu/ebook/sites/default/files/Part_1_2_0.pdf

Excellent articles on Aid and development http://www.guardian.co.uk/global-development/poverty-matters+aid