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Difference Between World Bank and IMF

February 15, 2011 Posted by Olivia

World Bank vs IMF

World Bank and IMF are two very important specialized agencies of United Nations.  To understand the roles, functioning and responsibilities of these autonomous bodies, World Bank and IMF, a brief look into history is necessary. In 1944, with World War II raging, delegates from 44 allied nations gathered in Bretton Woods, Washington, US and finalized Bretton Woods agreement which gave birth to World Bank and IMF. This agreement laid rules for commercial and financial relations between member states of the world. IMF and World Bank were set up and later joined and ratified by most of the countries of the world. All countries agreed to tie their currency with US dollar and also upon the role of IMF to look into imbalance of payments problems of the countries. In 1971, US unilaterally terminated convertibility of dollar to gold, thus bringing to an end Bretton Woods agreement. USD became the sole backing of world currencies and a source of reserve currency for all countries of the world.

The difference between the World Bank and the IMF is not easy to understand. Even the founding father of the two institutions, John Maynard Keynes, the most brilliant economist of the 20th century said that the names were confusing and that bank should be called a fund, and the fund, bank.

World Bank

World Bank was set up under Bretton Woods system on 27 December, 1945 in Washington D.C. An international financial institution, World Bank has an aim to reduce poverty in member states. It provides loans for economic programs to countries. It is guided by a commitment to promote foreign investment, particularly capital investment, and international trade. It provides technical and financial assistance to poor countries for development of infrastructure such as building roads, hospitals, schools etc. Nearly all countries of the world are members of World Bank.

Traditionally, World Bank President comes from US.

IMF

IMF was also founded on 27 December, 1945 in Washington D.C with the objective of promoting global monetary cooperation and international trade. It seeks to promote employment and secure financial stability in member countries. IMF looks into macroeconomic policies of countries to see its impact on exchange rates of currencies and also the balance of payments problems of member states. It engages in providing loans at lower rates of interest thus acting as the biggest international lender. Traditionally, IMF President comes from Europe.

Differences between World Bank and IMF

In recent times, the functions and roles of the two international institutions have often overlapped, so much so, that it has become difficult to demarcate the differences between the two.

But broadly speaking, while IMF concerns itself with macroeconomic policies of member states, balance of payment problems, international trade policies and exchange rates of different currencies, World Bank takes up cases of different countries on individual level. It concerns itself with economic policies within a country, look for ways to improve economic conditions, and also how to correct government spending to improve the situation. World Bank takes up development projects in different countries by providing financial assistance on easy terms.

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Filed Under: Public Tagged With: Aim of IMF, balance of payments, Bretton Woods agreement, economic policies, exchange rates, global monetary cooperation, IMF, IMF loan, international trade, John Maynard Keynes, macroeconomic policies, members of World Bank, reserve currency, UN specialized agencies, United Nations, World Bank, world currencies, World War II

About the Author: Olivia

Olivia is a Graduate in Electronic Engineering with HR, Training & Development background and has over 15 years of field experience.

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