IMF vs World Bank

Source: http://www.differencebtw.com/difference-between-imf-and-world-bank/

If you ever had difficulties differentiating IMF and World Bank, you are not alone. Most people have very least or a shady idea of what these institutions are, what they do as well as why and how they differ. IMF stands for International Monetary Fund while World Bank can simply be understood as the bank of the world or bank for governments across the globe. The purpose of this article is to give a clear picture on how do these two institutions distinguish as well as similar to each other. Both institutions were established during the midst of World War 2 in 1944 as part of Bretton Woods Agreement in Bretton Woods Institution, New Hampshire, USA.

Resemblances in Functions and Traits

IMF and World Bank share number of similarities. Firstly, the general purpose of these two institutions is to preserve world economy after being badly damaged due to the war. Both institutions concern themselves with economic issues and concentrate their efforts on broadening and strengthening the economies of their member nations. Besides, both of them share the same parent organization, which is the United Nations (UN) and both are founded by the famous modern world economists, John Maynard Keynes and Harry Dexter White.

The pair is owned and directed by the governments of its’ 189 member nations including Russia and China. Not to forget the few countries which are not members such as North Korea, Cuba, Hong Kong and Macau while Vatican City and Palestine are being considered as non-member observer countries.

World Bank headquarters (left) and IMF headquarters (middle).

Both headquarters share the same street, opposite to one another, closely situated to the White House in Washington D.C. Prior to having their very own buildings, for many years both occupied the same building. Even now, they share a common library and other facilities, regularly exchange economic data, sometimes present joint seminars, daily hold informal meetings, and occasionally send out joint missions to member countries.

Contrasting Purposes

Despite these and other similarities, IMF and World Bank remain distinct. The core differences lie on their functions. World Bank is primarily a development institution which gives loans to countries for development purposes and eradication of poverty. For instance, Malaya after independence in 1957, relied on loans from World Bank to fund development projects like Cameron Highland Hydroelectric Power Project, Education Project, Kuala Lumpur Water Supply Project, and various highway and railway projects.

In total, we used loans from World Bank to fund 92 of our country development projects. We benefitted a lot from those projects as they served as a foundation that transformed Malaya from being a third world country to a more developed nation today. Just as it assisted Malaysia to expand, World Bank has also helped various other nations to develop for the past decades. As a matter in fact, the poverty rate of the world drastically dropped roughly from 55% in 1945 to 9.6% in 2015 due to the constant commitment of World Bank in assisting countries to grow.

On the other hand, IMF is a cooperative body that aims to maintain a proper orderly system of payments and receipts among its member nations. IMF promotes monetary cooperation internationally and offers advice and assistance to facilitate building and maintenance of a country’s economy. Despite that, their main function and service are to provide loans and help countries develop economic policy programs that maintain the balance of payment and solve problems if a country cannot obtain sufficient financing to meet its international obligations such as loans and bonds payment.

However, the loans offered by IMF are loaded with tight and strict conditions. It is understood as a form of rescue for countries in serious debt. For example, in 2015 Greece debt crisis, IMF came to rescue Greece from going deeper to the abyss of a financial crisis that would likely affect Eurozone if not deal it quickly. Almost 20 years before today, Malaysia was hit hard by the 1997 Asian Financial Crisis and IMF had actually offered monetary assistance to Malaysia. Recognising the unfavourable and inhumane rules set out by IMF, our prime minister of that time, Tun Dr. Mahathir, rejected the loan provided and embarked on a tough mission to rebuild the country’s economy from shambles.

This man took an unorthodox route compared to the neighbouring countries to save Malaysia during the 1997 Asian Financial Crisis.

Source: Youtube, Google Images

Conclusion

Since their founding from almost 60 years ago, both institutions have been challenged by growing economic circumstances to develop new ways and practices on assisting their member countries. World Bank has expanded its assistance from an orientation toward projects to the wider forms of economic reform. At the same time, IMF has broadened their perspective of just concerning the simple balance of payment adjustment to interest itself in the structural economic and financial reform of its members’ economies. Despite the bad critics they received, there is no denying that these two have assisted the world to maintain economically stable. The World Bank has helped a number of poor countries to escape poverty whereas the IMF has bailed out countries from bankruptcy. These 2 institutions complement each other in the quest of improving the economy status of countries and the world in general, at the same time withholding the pillar of global economy from tumbling and preventing catastrophic downfalls to the economic system.

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References

IMF (2017). The IMF at a Glance. [online] Imf.org. Available at: http://www.imf.org/en/About/Factsheets/IMF-at-a-Glance [Accessed 3 July 2017].

World Bank (2017). What We Do. [online] Worldbank.org. Available at: http://www.worldbank.org/en/about/what-we-do [Accessed 13 July 2017].

World Bank (2017). History. [online] Worldbank.org. Available at: http://www.worldbank.org/en/about/history [Accessed 12 July 2017].

Driscoll, D. (2017). The IMF and the World Bank: How Do They Differ?. [online] Imf.org. Available at: https://www.imf.org/external/pubs/ft/exrp/differ/differ.htm [Accessed 10 July 2017].

The World Bank (2017). Projects & Operations – All Projects | The World Bank. [online] Projects.worldbank.org. Available at: http://projects.worldbank.org/search?lang=en&searchTerm=&countrycode_exact=MY [Accessed 9 July 2017].

Roser, M. and Ortiz-Ospina, E. (2017). Global Extreme Poverty. [online] Our World In Data. Available at: https://ourworldindata.org/extreme-poverty/ [Accessed 8 July 2017].