World Bank & IMF - International Organisations and Arrangements, International Business | International Business - B Com PDF Download

Definition: The World Bank is an international organization that helps emerging market countries reduce poverty. It is not a bank in the conventional sense of the word. Instead, it consists of two development institutions. One is the International Bank for Reconstruction and Development. The second is the International Development Association. The Bank's 189 member countries share ownership. 

The Bank works closely with three other organizations:

1. The International Finance Corporation
2. The Multilateral Guarantee Agency
3. The International Centre for the Settlement of Investment Disputes.

All five organizations make up the World Bank Group.

Purpose and Function

The World Bank provides low-interest loans, interest-free credit and grants.  It focuses on improving education, health and infrastructure. It also uses funds to modernize a country's financial sector, agriculture and natural resources management.

The Bank's stated purpose is to "bridge the economic divide between poor and rich countries." It does this by turning "rich country resources into poor country growth." It has a long-term vision to "achieve sustainable poverty reduction."

To achieve this goal, the Bank focuses on six areas:

1. Overcome poverty by spurring growth, especially in Africa.
2. Help reconstruct countries emerging from war, the biggest cause of extreme poverty.
3. Provide a customized solution to help middle-income countries remain out of poverty.
4. Spur governments to prevent climate change. It helps them control communicable diseases, especially HIV/AIDS and malaria. It also manages international financial crises and promotes free trade.
5. Work with the Arab League on three goals. They are to improve education, build infrastructure and provide micro-loans to small businesses.
6. Share its expertise with developing countries. Publicize its knowledge via reports and its interactive online database.

Who Heads the World Bank?

Jim Yong Kim, M.D., Ph.D., is the president of the World Bank. Before his appointment in 2012, Dr. Kim was the president of Dartmouth College. He's advocated for improved health services his entire career. He's chaired departments at Harvard Medical School and Brigham and Women's Hospital in Boston. He co-founded the nonprofit Partners in Health. It provides health services to the poor on four continents. 

Dr. Kim reports to a 25-member Board of Executive Directors. The most significant contributing countries are France, Germany, Japan, the United Kingdom and the United States. 

The President of the United States has selected the World Bank President since its founding. That's because it owns 16 percent of the bank's shares, making it the largest shareholder. This unofficial agreement with the other European board members is creating dissent. Many members complain that the Bank represents the interests of the developed world, and not the poor countries it assists. 

The Bank has more than 10,000 employees from over 160 countries. Two-thirds work in Washington, DC. The rest are in 100 country offices in the developing world.

Robert Zoellick was president from 2007 to 2012.  Zoellick got his start working for President Ronald Reagan's Treasury Secretary, James Baker. Zoellick held executive positions in Fannie Mae (1993-1997) and the Office of Trade Representative (2001-2005). From there he went to the State Department (2005-2006) and Goldman Sachs (2006-2007). 

Statistics and Reports

The World Bank provides a wealth of downloadable data for more than 200 countries. In 2010, the Bank launched a new Open Data website. It provides free access to 298 major indicators, including:

• Climate change, the environment and energy,
• Health, such as life expectancy,
• Urban development and infrastructure,
• Labor, income and education,
• Government, economic policy and sovereign debt,
• Demographics such as poverty, gender and aid effectiveness,
• And business, agriculture and financial areas.

The Bank analyzes development issues in depth, including the annual World Development Report. Its research reports examine global trends in trade, financial flows and commodity prices. It explains their impacts on developing countries. The Bank also publishes the World Development Indicators and Global Development Finance. It provides the Little Data Book, Little Green Data Book and The World Bank Atlas.

IMF

Definition: The International Monetary Fund is an organization of 189 member countries. It stabilizes the global economy in three ways. First, it monitors global conditions and identifies risks. Second, it advises its members on how to improve their economies. Third, it provides technical assistance and short-term loans to prevent financial crises.The IMF's goal is to prevent these disasters by guiding its members.
 

These countries are willing to give up some of their sovereign authority to achieve that aim. 

IMF Chief

The IMF chief has been Managing Director Christine Lagarde since July 5, 2011.  She is Chairman of the 24-member Executive Board. It appointed her to a second renewable five-year term in February 2016. That's effective July 5, 2016. The Managing Director is the chief of the IMF’s 2,700 employees from 147 countries. She supervises four Deputy Managing Directors. 

The IMF Governing Board sets direction and policies. Its members are the finance ministers or central bank leaders of the member countries. They meet each year in conjunction with the World Bank. The International Monetary and Financial Committee meets twice a year. It reviews the international monetary system and makes recommendations.

Functions

Survey Global Conditions. The IMF has the rare ability to look into and review the economies of all its member countries. As a result, it has its finger on the pulse of the global economy better than any other organization.

The IMF produces a wealth of analytical reports thanks to that role.
 

It provides the World Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor each year. It also delves into regional and country-specific assessments. It uses this information to determine which countries need to improve their policies. The IMF can identify which ones threaten global stability. The member countries have agreed to listen to the IMF's recommendations. They want to improve their economies and remove these threats.  

Advise Member Countries. Since the Mexican peso crisis of 1994–95 and the Asian crisis of 1997–98, the IMF has taken a more active role to help countries prevent financial crises. It develops standards that its members should follow.

For example, members agree to provide adequate foreign exchange reserves in good times. That helps them increase spending to boost their economies during recessions. It reports on members countries' observance of these standards. It also issues member country reports that investors use to make well-informed decisions. That improves the functioning of financial markets. The IMF encourage sustained growth and high living standards. That's the best way to reduce members' vulnerability to crises.

Provide Technical Assistance and Short-term Loans. The IMF provides loans to help its members tackle balance of payments problems, stabilize their economies, and restore sustainable growth.

Since the Fund does lend money, it's often confused with the World Bank. The Bank lends money to developing countries for specific projects that will fight poverty. Unlike the World Bank and other development agencies, the IMF does not finance projects.

Traditionally, most IMF borrowers were developing countries. They had limited access to international capital markets due to their economic difficulties. An IMF loan signals that a country's economic policies are on the right track. That reassures investors and acts as a catalyst for attracting funds from other sources.

That shifted in 2010. The eurozone crisis prompted the IMF to provide short-term loans to bail out Greece. That was within the IMF's charter since it prevented a global economic crisis.

Members

Rather than listing all 189 members, it's easier to list the countries that are not members.

The seven countries (out of a total of 196 countries) that are not IMF members are: Cuba, East Timor, North Korea, Liechtenstein, Monaco, Taiwan and Vatican City. The IMF has 11 members that are not sovereign countries: Anguilla, Aruba, Barbados, Cabo Verde, Curacao, Hong Kong, Macao, Montserrat, Netherlands Antilles, Sint Maarten and Timor-Leste. 

Members do not receive equal votes. Instead, they have voting shares based on a quota. The quota is based on their economic size. If they pay their quota, they receive the equivalent in voting shares. The number of voting shares was updated in 2010.  That gave emerging market members more voting authority. Here are the Member Quotas and Voting Shares.

Role 

The role of the IMF has increased since the onset of the 2008 global financial crisis. In fact, an IMF surveillance report warned about the economic crisis but was ignored. As a result, the IMF has been called upon more and more to provide global economic surveillance. It's in the best position to do so because its requires members to subject their economic policies to IMF scrutiny. Member countries also committed to pursuing policies that are conducive to reasonable price stability. They agree to avoid manipulating exchange rates for unfair competitive advantage.