Question

What is the International Monetary Fund? What is the World Bank? What is their relationship, if any, with each other?

Answer 1

The IMF was set up at the Bretton WoodS Agreement in 1944. This body was set up as a multilateral financial institution after world war II . It was to look after the short run Balance of Payments adjustment of member countries.

World Bank was also established at Bretton Woods Agreement in 1944 as International Bank for Reconstruction and Development. It was set up to give aid and support to reconstruct the war -torn Europe initially and then shifted its focus to development of developiny and less - developed countries. It seeked to achieve so by focusing on infrastructural projects but when it realised that trickle-down effect was not so prominent in these economies , it shifted to improving helath , education and nutrition level to combat poverty in these countries.

IMF and WB were envisioned with different functions. Their relationship is being sister institutions. Membership of IMF is required to be a member of WB. And organisational structure of the two institutions is similar. The top powers are vested with A Board of Governors which consists of one member from each member nation in both the institutions. The board meets once a year and take important decisions in both IMF and WB.