International Monetary Fund and World Bank Essay

International Monetary Fund and World Bank - Essay Example "Due to their considerable financial resources, technical assets, and global presence, the IFIs1 (i.e. the World Bank and the IMF, S.K.) have the capacity to assist in maintaining or recreating an environment of peace and stability."2 The World Bank's focus is on the provision of long-term loans to support development projects and programs. The IMF, on the other hand, concentrates on providing loans to stabilize countries facing short-term financial crises. The World Bank and IMF are directed by the governments of the world's richest countries. Combined, the "Group of 7"3 holds more than 40% of the votes on the Boards of Directors of these institutions and the U.S. alone accounts for almost 20% of the votes. It was the U.S. policy during the Reagan Administration in the early 1980s, to expand the role of the World Bank and IMF to manage developing economies4. The statutory purposes of the IMF are, first, utilizing a permanent institution for the purpose of ensuring international monetary cooperation which also makes available expertise to deal with relevant problems. Second, bringing about an increase in the balanced growth of international trade, which will result in significantly reduced levels of unemployment. Third, ensuring that the stability, orderly arrangements and avoidance of competitive depreciation in respect of exchanges is maintained. Fourth, elimination of restrictions which hinder world trade by helping in the establishment, in respect of current transactions, between members. Fifth, reducing the duration and lessening the amount of disparity in the international balances of payments of members5. Their fundamental difference is that the World Bank is primarily a developmental institution whereas the IMF is a cooperative institution that seeks to maintain an orderly system of payments and receipts between nations. Each has a different purpose, a distinct structure, receives its funding from different sources, assists different categories of members and strives to achieve its distinct goals through methods specific to itself. The primary aim of the World Bank was the financing of economic development and accordingly, the Bank's first loans, during the late 1940s, were disbursed in order to finance the reconstruction of the war-ravaged economies of Western Europe. When these nations recovered some measure of economic self-sufficiency, the Bank turned its attention to assisting the developing countries, to which it has given more than $330 billion as loans. The World Bank's main aim is to promote economic and social progress in developing countries, by bringing about an increase in their productivity in order to enable their citizens to have a better quality of life6. The IMF is involved in key policy negotiations with regard to the exchange rate and the budget deficit. The monitoring of country's economic performance by the IMF provides the basis of so-called IMF surveillance activities over members' economic policies. The World Bank, on the other hand, is far more involved in the actual reform process through its country-level representative office and its numerous technical missions. Moreover, the World Bank is also present in most of the line ministries; the reforms in health, education, industry, agriculture, transportation, the environment, and so on are under