IMF AND WORLD BANK - THE TWO GLOBAL FINANCIAL GIANTS

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If you are confused between the difference between IMF and the World Bank well you are not the only one. Framed economist John Maynard Keynes who was the founding father of both these two institutions said that he was confused by their names. The IMF and the World Bank are closely linked. So closed are they that their headquarters are across the street from each other in Washington DC, USA.


FORMATION: -

So what is the difference between these two institutions and how did they come to existence. It all started at a hotel in New Hampshire in July 1944. When 44 countries gathered at the Bretton wood conference at the hotel. The goal of the conference was to agree on a new framework and guidelines for the international monetary system so that the global institutions that keep the global economy running, can run smoothly without any hiccups and hindrances. After the second world war most people agreed that the existing age old system has failed. It has seen the great depression in the late 1920’s and the early 1930’s, unfair trade policies between countries and unstable currency in the world. After 3 weeks of heated negotiations at the Bretton woods specially between Keynes a representative of the United Kingdom and Harry Druckster White, the treasury representatives of the United States of America, the deal was reached. This deal created the IMF and the International Bank for Reconstruction and Development. Soon to be known as the world bank.

ROLE IN THE WORLD ECONOMY: -

 Each institution was given a distinct role for their functioning. The IMF job was to oversee system of fixed exchange rate system which tied the countries currency’s value to the US dollar, which was pegged against the Gold. The main purpose of this was to make sure that the exchange rates remain stable and smooth and also to encourage global trade. The IMF was also tasked with providing soft term loans to countries struggling to pay off their debts. Meanwhile the main role of the world bank was to give financial assistance to countries mainly the European countries that needed the financial assistance to rebuilt their country after the war. The roles of both the IMF and the world bank till date have changed a lot after the great debate in the Bretton woods in the 1944. President Nixon unpegged the US Dollar from the gold in 1971. Since then the IMF has taken on a bigger role fighting the financial crisis around the world. It keeps tabs on the current global economy and puts economic policies in place for its member countries. The world bank focuses its effort on the development activities and reducing poverty around the globe. It provides funds for funding in resources development and projects in some of the poorest countries in the world.


MEMBER STATES: -

 Both the IMF and the World bank has 189 member countries. The IMF has around 2700 employees compared to that of the world bank which has 10000 employees. The IMF is funded by the quotas which is the subscription fees that the member countries has to pay. It receives around $675 Billion in quotas, with the US, Japan, China and Germany contributing the most funds. The world bank is financed mostly through the issuance of bonds to the global investors. The group’s lending commitments reached nearly $59 Billion in fiscal year 2017. The IMF has committed $160 Billion under its current lending arrangements for attaining its objectives. Today the IMF’s biggest borrower includes Greece, Pakistan, Portugal and Ukraine. The places where the World bank is running most of the projects are in Africa and East Asia.

CONCLUSION: -

One thing that the IMF and the World Bank have in common is that they both have some opponents. Could it explain to the terms that are attached to these loans. The IMF has come under fire for continuing to bailout Greece, even if the country has failed to clean up its finances. Human rights group have criticized the world bank for ignoring the environmental and social impact of some of its projects in countries like Ethiopia or Myanmar. But the IMF and the World bank is promoting global and economic stability around the world. They make countries less vulnerable to crisis, improving the standard of living of the people and is providing vital help to countries that needs it.

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