Difference between IMF and World Bank

Introduction

The key difference between IMF and World Bank lies in their respective purposes and functions. The IMF and the World Bank seemed to hand in hand, they share the same member’s countries but they are two different bodies.

The International Monetary Fund (IMF) and the World Bank are institutions in the United Nations system. They share the same goal of raising living standards in their member countries. Their approaches to this goal are complementary, with the IMF focusing on macroeconomic and financial stability issues and the World Bank concentrating on long-term economic development and poverty reduction.

The International Monetary Fund and the World Bank were both created at an international conference convened in Bretton Woods, New Hampshire, the United States in July 1944. 

Difference between IMF and World Bank

Basis of ComparisonIMF World Bank
FunctionOversees the international monetary systemSeeks to promote the economic development of developing nations
TypeCooperative institutionDevelopment institution
FocusEconomic StabilityEconomic Growth
Fundingdraws its financial resources principally from the quota subscriptions of its member countriesacquires most of its financial resources by borrowing on the international bond market
Size2300 staff members7000 staff members
Organization StructureSingle organization with unitary of four credit linesFive institutions with 2 major institutions like IDA and IBRD.
Constituents188 member countries189 countries (IBRD)
173 countries (IDA)
OperationsProvides advice and assistance.Facilitates lending
Main ObjectiveDeals with macroeconomics and financial sectorTo lessen poverty and promote the long term development

What is IMF?

The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., consisting of 189 countries. It formed in 1944 at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes

The work of the IMF is of three main type:

  1. Economic Surveillance involves the monitoring of economic and financial developments
  2. Lending to countries with balance of payments difficulties
  3. Capacity Development provides technical assistance and training to improve growth and create jobs.

IMF Objectives

  • Promotes international monetary cooperation

  • secure financial stability and facilitate international trade

  • promote high employment and sustainable economic growth

  • IMF loans are short and medium-term

  • IMF staff are primarily economists with wide experience in macroeconomic and financial policies.

How the IMF react in the recession

When an unforeseeable crisis like recession or natural disaster, destabilizes one nation’s economy, it can severely affect dependent countries. The balancing force of the IMF prevents any potential “domino effect” in collapsing economies.

IMF is one of the several globals that provides loans to troubled economies to promote a stable world economy. IMF and its sister organization, the World Bank, tend to serve more western interests like the US & EU. While other global banks like the new development bank and the Asian infrastructure investment banks serve Chinese and Russian interest more.


What is World Bank?

The World Bank is an international financial institution affiliated with the United Nations (UN), headquartered in Washington, D.C., consisting of 189 countries. It formed in 1944 at the Bretton Woods Conference.

Motto

Working for a World Free of Poverty

World Bank Group consists of five organizations:

  1. International Bank for Reconstruction and Development (IBRD)
  2. International Development Association (IDA)
  3. International Finance Corporation (IFC)
  4. Multilateral Investment Guarantee Agency (MIGA)
  5. International Centre for Settlement of Investment Disputes (ICSID)

World bank Objectives

  • World Bank promotes long-term economic development

  • Poverty reduction by providing technical and financial support

  • Provide assistance is generally long term.

  • World Bank staff are often specialists on particular issues, sectors, or techniques.

World Bank gets its funds by selling bonds to investors, collecting subscription fees from member’s governments, and net earnings from assets.

  • It issues low-interest loans
  • Low to zero-interest credits
  • Grants to developing countries

For instance, in India world bank has funded the construction of nearly ten thousand miles of roads that connect poor rural communities, schools, markets, and clean water sources.


Similarities Between IMF & World Bank

  • Both IMF and World Bank promote global economic stability, they make countries less vulnerable to crises, promote higher living standards, and provide help to needed countries.

  • Both are in a sense owned and directed by the governments of member nations.

  • The two institutions hold joint annual meetings, which the news media cover extensively.

  • John Maynard Keynes says, both IMF and World Bank are closely linked as 44 countries gathered for the Bretton woods conference framed a goal to agree on a new framework for the international monetary fund.

Key Differences Between IMF & World Bank

  1. IMF is a cooperative institution, whereas the World Bank is primarily a development institution.

  2. IMF oversees the international monetary system, whereas seeks to promote the economic development of developing nations.

  3. IMF focus on economic stability whereas, World Bank focus on economic growth.

  4. IMF helps in framing the monetary policies of the nation whereas, World Bank helps through giving small loans.

  5. IMF performs mission creeps and mission pushes whereas, World Bank invests in specific projects like schools, dams, hospitals, etc.

  6. IMF draws its financial resources from the quota subscriptions of its member countries whereas, World bank acquires most of its financial resources by borrowing on the international bond market.

Conclusion

Both the IMF and the World Bank are the organizations that are meant to help these developing nations.

Both organizations shared their duties in helping poor or developing nations monetarily by investing or providing loans or by stabilizing the exchange rates to those needy nations.

The goals of these organizations are to bring economic stability and protecting nations from the crisis.

Reference

References

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