WHAT ARE THE DIFFERENCES AND SIMILARITIES
OF THE IMF AND THE WORLD BANK AND HOW
ARE THEY HELPFUL TO THE AFRICAN COUNTRIES
AND ECONOMIES.
International organizations
RICHARD KIMOKOTI KARANI
1027857
COMMENTS: THE WORK IS GOOD. MARKS ARE 25 OVER 30 PLUS 3
Contents
INTRODUCTION ............................................................................................................................................. 2
ANALYSIS ....................................................................................................................................................... 2
International monetary Fund .................................................................................................................... 2
The World Bank......................................................................................................................................... 2
DIFFERENCES AND SIMILARITIES BETWEEN THE WORLD BANK AND IMF ............................................... 3
ROLE OF IMF AND WORLD BANK IN DEVELOPING COUNTRIES ................................................................ 4
CONCLUSION................................................................................................................................................. 5
INTRODUCTION
The aim of this paper is to explain the difference and similarities between the World Bank and IMF. It
also goes ahead to highlight how they are helpful to other economies in the world especially Africa. The
method of research done to support my findings is mainly primary research online.
ANALYSIS
International monetary Fund
The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global
monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world.
Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its nearglobal membership. (IMF, 2017)
The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire,
United States, in July 1944. The 44 countries at that conference sought to build a framework for
economic cooperation to avoid a repetition of the competitive devaluations that had contributed to the
Great Depression of the 1930s.
The IMF's responsibilities: The IMF's primary purpose is to ensure the stability of the international
monetary system—the system of exchange rates and international payments that enables countries and
their citizens to transact with each other. The Fund's mandate was updated in 2012 to include all
macroeconomic and financial sector issues that bear on global stability. (IMF, 2017)
The World Bank
The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the
International Bank for Reconstruction and Development (IBRD). Today, the World Bank functions as an
international organization that fights poverty by offering developmental assistance to middle-income
and low-income countries. By giving loans and offering advice and training in both the private and public
sectors, the World Bank aims to eliminate poverty by helping people help themselves. Under the World
Bank Group, there are complimentary institutions that aid in its goals to provide assistance. (Heakal,
2017)
The World Bank is a vital source of financial and technical assistance to developing countries around the
world. It comprises of five institutions managed by their member countries, they offer support to
developing countries through policy advice, research and analysis, and technical assistance. The
analytical work often underpins World Bank financing and helps inform developing countries’ own
investments. In addition, the organization supports capacity development in the countries they serve.
They also sponsor, host, or participate in many conferences and forums on issues of development, often
in collaboration with partners. To ensure that countries can access the best global expertise and help
generate cutting-edge knowledge, the Bank is constantly seeking to improve the way it shares its
knowledge and engages with clients and the public at large. (THE WORLD BANK, 2017)
DIFFERENCES AND SIMILARITIES BETWEEN THE WORLD BANK AND IMF
KEY DIFFERENCES
International Monetary Fund
•
oversees the international monetary
system
•
promotes exchange stability and orderly
exchange relations among its member
countries
•
•
•
assists all members--both industrial and
developing countries--that find themselves
in temporary balance of payments
difficulties by providing short- to mediumterm credits
supplements the currency reserves of its
members through the allocation of SDRs
(special drawing rights); to date SDR 21.4
billion has been issued to member
countries in proportion to their quotas
draws its financial resources principally
from the quota subscriptions of its
member countries
World Bank
•
seeks to promote the economic
development of the world's poorer
countries
•
assists developing countries through longterm 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)
•
acquires most of its financial resources by
borrowing on the international bond
market
•
has an authorized capital of $184 billion, of
•
has at its disposal fully paid-in quotas now
totaling SDR 145 billion (about $215 billion)
•
has a staff of 2,300 drawn from 182
member countries
which members pay in about 10 percent
•
has a staff of 7,000 drawn from 180
member countries
(IMF, 2017)
ROLE OF IMF AND WORLD BANK IN DEVELOPING COUNTRIES
The IMF supports many developing nations by helping them overcome monetary challenges and to
maintain a stable international financial system. Despite this clearly defined purpose, the execution of
its work can be very complicated and can have wide repercussions for the recipient nations. As a result,
the IMF has both its critics and its supporters. The challenges for organizations like the the IMF and the
World Bank center not only on some of their operating deficiencies but also on the global political
environment in which they operate. The IMF has been subject to a range of criticisms that are generally
focused on the conditions of its loans, its lack of accountability, and its willingness to lend to countries
with bad human rights records. (IMF, 2017)
The World Bank provides low-interest loans, interest-free credits, and grants to developing countries.
There’s always a government (or “sovereign”) guarantee of repayment subject to general conditions.
The World Bank is directed to make loans for projects but never to fund a trade deficit. These loans
must have a reasonable likelihood of being repaid. The IDA was created to offer an alternative loan
option. IDA loans are free of interest and offered for several decades, with a ten-year grace period
before the country receiving the loan needs to begin repayment. These loans are often called soft loans.
(THE WORLD BANK, 2017)
CONCLUSION
In conclusion we could say most people have only the vaguest idea of what these institutions do, and
very few people indeed could, if pressed on the point, say why and how they differ. Known collectively
as the Bretton Woods Institutions after the remote village in New Hampshire, U.S.A., where they were
founded by the delegates of 44 nations in July 1944, the Bank and the IMF are twin intergovernmental
pillars supporting the structure of the world's economic and financial order. (THE WORLD BANK, 2017)
Similarities between them do little to resolve the confusion. Superficially the Bank and IMF exhibit many
common characteristics. Both are in a sense owned and directed by the governments of member
nations. 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.
Despite these and other similarities, however, the Bank and the IMF remain distinct. The fundamental
difference is this: the Bank is primarily a development institution; 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 distinct goals through methods peculiar to itself. (IMF,
2017)
Bibliography
Heakal, R. (2017, july 1). investopedia. Retrieved from investopedia website:
http://www.investopedia.com/articles/03/042303.asp Date retrieved?
IMF. (2017, july 1). INTERNATIONAL MONETARY FUND. Retrieved from NTERNATIONAL MONETARY
FUND website: http://www.imf.org/en/About-Date retrieved
THE WORLD BANK. (2017, JULY 1). THE WORLD BANK. Retrieved from THE WORLD BANK website:
http://www.worldbank.org/en/about/what-we-do-Date retrieved