The IMF and World Bank
Creative ways to not help developing countries
The World Bank
Promotes long-term development and
poverty reduction
Works on specific projects, like building
schools, providing water/electricity etc.
Get funding through selling bonds,
interest on loans and member nations
contributions
Discussion
What benefits would the World Bank have
over individual countries giving aid?
What are some disadvantages to a World
Bank giving aid?
Problems
When individual countries give aid it is
rarely altruistic, US food aid is used to
subsidize US farmers
Water Wars in Bolivia caused by the World
Bank
Bolivia
World Bank wouldn't renew a $25 million
loan to Bolivia unless they privatized
water service in certain regions
Reason was the local government was
not capable of creating an efficient
water service
Rates increased 35% and communal wells
were given metres
Discussion
How else could the project be salvaged?
What would be reasonable conditions to
attach to aid?
In the Bolivian case since there was little
return on the loan, privatization was
seen as an alternative
International Monetary Fund (IMF)
Help countries to build and maintain
strong economies
Provides short term loans so that
countries can pay their debts (see
Greece)
Gets funds from member nations and
interest on loans
SAPs
With these loans there is usually economic
conditions that the recipient country
must follow
Usually include trade liberalization,
deregulated financial sector and
privatization
In 1982 Mexico defaulted on its loans, the
IMF loan included a SAP, as a result the
economy was stagnant for 10 years
Discussion
What are the consequences when a
country defaults on their loans?
Who is the IMF really serving?