The International

Monetary
Fund(IMF) and the
World Bank
 Learner’s Objective
• To be able to identify the different purpose and
function of International Monetary Fund and
World Bank
 INTERNATIONAL
MONETARY FUND (IMF)
AND THE WORLD BANK
The International Monetary Fund (IMF) and the World Bank
are institutions in the United Nations system. They share the
same goal of raising living standards in their member
countries. Their approaches to this goal are complementary,
with the IMF focusing on macroeconomic issues and the
World Bank concentrating on long-term economic
development and poverty reduction.
 THE BRETTON WOOD
INSTITUTION
• The International Monetary Fund and the World Bank
were both created at an international conference
convened in Bretton Woods, New Hampshire, United
States in July 1944.
• Goal of the conference was to establish a framework for
economic cooperation and development that would lead
to a more stable and prosperous global economy.
 What is International Monetary
Fund
• The International Monetary Fund promotes monetary
cooperation internationally and offers advice and
assistance to facilitate building and maintaining a
country’s economy.
• The IMF also provides loans and helps countries develop
policy programs that solve balance of payment problems
• Often, a loan provided by the IMF as a form of "rescue"
for countries in serious debt
 IMF’s Mandate
• The IMF promotes international monetary cooperation
and provides policy advice and capacity development
support to help countries build and maintain strong
economies.
• IMF loans are short and medium term and funded mainly
by the pool of quota contributions that its members
provide.
 IMF’s Four key credit lines
• FCL (Flexible Credit Line): This is usually given to countries well
before they get into a problem. They are the ones with better
policies.
• PLL (Precautionary Lending): This is for countries that are beginning
to get weak.
• SBA (Stand By Arrangement): This is for countries that are quite
weak, but can be rescued quick.
• EFF (Extended Fund Facility): This is for countries too screwed up
and requiring a long term help.
 THE WORLD BANK
• The World Bank's purpose is to aid long-term economic development
and reduce poverty in developing countries.
• The bank initially focused on rebuilding infrastructure in Western
Europe following World War II and then turned its operational focus
to developing countries
• The bank’s loans are not used as a type of bailout, like with the IMF,
but as a fund for projects that help develop an underdeveloped or
emerging market nation and make it more productive economically.
WORLD BANK TWO ARMS
• IBRD (International Bank for Reconstruction and Development): This
is the bank portion of it. It charges a slightly higher interest rate than
it borrows and it is mainly for profitable commercial projects [such
as roads and dams]. This interest is still a lot lower than what the
governments can get anywhere.
• IDA (International Development Association): This is a grant body.
Here interest is not charged and usually countries are given long
periods for repaying. The focus is on social projects such as
immunization and education. This is however open only for the
poorest nations.
FY2016 World Bank Lending By
Theme
 SOURCE OF FUNDING
• The World Bank is an investment bank, intermediating
between investors and recipients, borrowing from the
one and lending to the other.
• The IBRD obtains most of the funds it lends to finance
development by market borrowing through the issue of
bonds to individuals and private institutions in more than
100 countries
 SOURCE OF FUNDING
• 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 182 member countries.
• 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.
The International Monetary Fund and the World Bank at a Glance
•International Monetary Fund •World Bank
oversees the international monetary system seeks to promote the economic development of
•promotes exchange stability and orderly the world's poorer countries
exchange relations among its member countries •assists developing countries through long-term
•assists all members--both industrial and financing of development projects and
developing countries--that find themselves in programs
temporary balance of payments difficulties by •provides to the poorest developing countries
providing short- to medium-term credits whose per capita GNP is less than $865 a year
•supplements the currency reserves of its special financial assistance through the
members through the allocation of SDRs International Development Association (IDA)
(special drawing rights); to date SDR 21.4 billion •encourages private enterprises in developing
has been issued to member countries in countries through its affiliate, the International
proportion to their quotas Finance Corporation (IFC)
•draws its financial resources principally from •acquires most of its financial resources by
the quota subscriptions of its member countries borrowing on the international bond market
•has at its disposal fully paid-in quotas now •has an authorized capital of $184 billion, of
totaling SDR 145 billion (about $215 billion) which members pay in about 10 percent
•has a staff of 2,300 drawn from 182 member •has a staff of 7,000 drawn from 180 member
countries countries
 FRAMEWORK FOR
COOPERATION
• High-level coordination
• Management consultation
• Staff collaboration
• Reducing debt burdens
• Reducing poverty
• Setting the stage for the 2030 development agenda
• Assessing financial stability