IMF and World Bank

The International Monetary Fund (IMF) was established in 1945 and is administered and responsible for the 188 countries that make up its near-global membership. Assume that one of the organization’s members is undergoing or about to face a financial, banking, or similar crisis. In that situation, the IMF will provide money to that nation’s government to help it resolve the crisis and get back on its feet. It also offers technical assistance, publishes research and knowledge, and monitors and surveys the global financial system’s health and stability and its members’ economic health. 

The IMF Full form and How It Works ?

The IMF’s full form is the International Monetary Fund. The International Monetary Fund- IMF was established in 1945 and is administered and responsible for the 188 countries that make up its near-global membership.

The International Monetary Fund (IMF established) in July during a United Nations summit at Bretton Woods, New Hampshire, USA. At that summit, the 44 countries in attendance attempted to build an economic cooperation framework to avoid a repetition of the competitive devaluations that contributed to the Great Depression of the 1930s.

The IMF’s fundamental purpose is to keep the international monetary system stable, which is the system of exchange rates and international payments that allows countries (and their citizens) to interact. In 2012, the fund’s scope expanded to encompass all macroeconomic and financial-sector challenges that affect global stability.

Difference between IMF and World Bank

The differences between the IMF and the world bank are given below:

The World Bank is a growth organization. The IMF is all about maintaining stability. The World Bank finances development programs in developing countries. The IMF’s mission is to help affluent and developing countries balance their international financial systems [Greece is a recent beneficiary].

The World Bank is your trainer, providing you with all the necessary tools to get stronger. In the emergency room, IMF is your doctor. They’ll try to revive you and advise you on how to avoid consuming fatty foods in the future. The World Bank has no negative connotations. Aid from the IMF might have a stigma since it implies that you have an illness that needs to be treated.

Both organizations are designed to help governments borrow money. When you need to build a dam, a power plant, or a road, you go to the World Bank. You go to the IMF when your economy is so messed up that your currency is plummeting. The IMF generally comes in and repairs things while also giving a lot of guidance.

The World Bank is a financial institution. It does this by borrowing money from investors worldwide and then lending it to impoverished governments constructing initiatives to assist them in escaping poverty.

The International Monetary Fund (IMF) is a financial institution. It has a pool of money that has been provided to it in the past by 182 member nations, and it only lends from that fund. It doesn’t normally take on new debt.

IMF Establishment

The IMF is made up of four major lending lines:

• FCL (Flexible Credit Line): This is normally offered to countries well before financial difficulties. They are the ones who have more effective policies.
• Prudent Lending (PLL): This is for nations on the verge of becoming weak.
• SBA (Stand By Agreement): This is for relatively weak countries but can be quickly saved.
• EFF (Extended Fund Facility): This is for messed-up countries and needs long-term assistance.

The World Bank provides loans to developing countries to help fund development projects and encourage policy reforms that its staff believes are necessary to promote faster and more inclusive economic growth as well as improvements in social sectors such as education, health, and water and sanitation systems. In many cases, the World Bank provides loans on the condition that the borrowing country’s government executes policy changes, saying that such reforms are necessary to meet the loan’s objectives while also supporting the borrowing country in producing additional resources to repay the loan.

The World Bank is a much larger organization with two branches:

This is the bank element: IBRD (International Bank for Reconstruction and Development). It borrows at a somewhat higher interest rate than it charges, and it is mostly used for commercially successful projects [such as highways and dams]. This interest rate is still a bargain compared to what governments can receive elsewhere.

The International Development Association (IDA) is a grant-making organization. Interest is not imposed here, and nations are often granted extensive repayment terms. Social programs such as vaccination and education are prioritized. So, This is for countries that are severely messed up and require long-term assistance.

Conclusion

The World Bank (WB) provides funding for development projects, such as infrastructure development and facility construction. We can avoid External economic crises, and other nations’ obligations (External debts) can be paid off, thanks to the International Monetary Fund (IMF full form). Essentially, the WB focuses on resolving resource needs to advance the internal economy (growth – poverty reduction). In contrast, the IMF is focused on preserving its members’ external balance (stability). The World Bank and the IMF offer loans and aid with conditions and strings attached. Loans from the World Bank are often not fungible and are linked.