Question

Money and Culture, Discuss the role of the International Monetary Fund in global trade and how this differs from the role of the World Bank.

Answer 1

IMF and World bank are referred as the Bretton woods twin institutions as they were formed after the second world war on Bretton woods agreement. Both the organisations were set to have a stable world economy but they have difference roles and responsibilities. After the fall of the golden standard, countries adopted measures to reduce imports and boost exports and as all the nations followed suit, it led to a slump in the world economy. International Monetary Fund was founded to stabilise the world economy and check for any slumps and lend a helping hand to keep the world economy healthy. World Bank on the other hand was founded majorly to help the western European countries post the second world war. Development of these countries was initially the crux and later it shifted to all the developing nations.

IMF is concerned with the health of world economy. Hence it lends to countries which have balance of payments issues and are unable to fund them by themselves. Ofcourse, IMF provides loans as a bail out only after the countries sign an agreement to change their internal policies as per IMF advise and most countries end up paying hefty interests. IMF is concerned in the smooth flow of the world trade. It keeps a health check on the member nations and rates them on a periodic basis and provides guidance on fiscal measures to be taken as well.

World bank on the other hand, has poverty alleviation as a goal, It provides funding only to development projects and advances loans for longer periods. It does not provide loan for bail out like IMF and concentrates on development issues in the world. It provides grants as well in addition to the loans and provides a grace period after which only the borrowing nation has to pay the interests

Thus IMF and world banks vary in terms of their background and roles and purpose of foundation.