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International Monetary Fund and World BankTable of Contents
International Financial Institutions: The IMF and the World Bank ........................................................................................Introduction ........................................................................................................................................................................
The Origins of the IFIs ...........................................................................................................................................................The International Monetary Fund..........................................................................................................................................
Governance Organi!ation and "ur#oses ........................................................................................................................$o% &oes the IMF 'chieve Its Goals(.............................................................................................................................
Why Is the IMF *ontroversial( ..............................................................................................................................................The World Bank ....................................................................................................................................................................
-tructure ........................................................................................................................................................................... Governance ...................................................................................................................................................................... The IB& .......................................................................................................................................................................... International &evelo#/ent 'ssociation 0I&'1...................................................................................................................International Finance *or#oration 0IF*1 ..........................................................................................................................Multilateral Invest/ent Guarantee 'gency 0MIG'1..........................................................................................................International *enter for -ettle/ent of Invest/ent &is#utes 0I*-I&1................................................................................
Why Is the World Bank *ontroversial( ...............................................................................................................................,)
&e4t elief ..........................................................................................................................................................................,
*onclusion ..........................................................................................................................................................................
,Glossary ..............................................................................................................................................................................
,6Bi4liogra#hy ........................................................................................................................................................................
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Internati o nal Financial Instit ut ions: The IMF and the World B ank
Introdu c tion
To%ard the end of the -econd World War in 7uly ,633 re#resentatives of the 8nited -tates Great Britain Franceussia and 39 other countries /et at Bretton Woods a resort in e% $a/#shire to lay the foundation for the #ost;%arinternational financial order. -uch a ne% syste/ they ho#ed %ould #revent another %orld%ide econo/ic cataclys/ likethe Great &e#ression that had desta4ili!ed <uro#e and the 8nited -tates in the ,69s and had contri4uted to the rise ofFascis/ and the %ar.
Therefore the 8nited ations Monetary and Financial *onference as the Bretton Woods conference %as officially calle
created the International Monetary Fund 0the IMF1 and the World Bank to #revent econo/ic crises and to re4uildecono/ies shattered 4y the %ar.
The Bretton Woods strategy addressed %hat %ere considered to 4e the t%o /ain causes of the #re;%ar econo/icdo%nturn and o4stacles to future glo4al #ros#erity=the lack of sta4le financial /arkets around the %orld that had led tothe %ar and the destruction caused 4y the %ar itself. The IMF %ould 4e ai/ed at sta4ili!ing glo4al financial /arkets andnational currencies 4y #roviding the resources to esta4lish secure /onetary #olicy and e>change rate regi/es %hile theWorld Bank %ould re4uild <uro#e 4y facilitating invest/ent in reconstruction and develo#/ent.
'lthough intended to 4enefit the glo4al econo/y and contri4ute to %orld #eace the World Bank and the IMF collectivelyreferred to as international financial institutions 0IFIs1 have 4eco/e #ri/ary targets of the anti;glo4ali!ation /ove/ent. /any countries they are resented and are vie%ed as i/#osing Western;style ca#italis/ on develo#ing countries %ithouregard to the social effects.
The follo%ing Issue Brief is designed to hel# you understand the history #ur#ose structure and activities of the IFIs andto descri4e 4oth 4enefits and concerns that surround the World Bank and the IMF.
The Origi n s of the IFIs
't the ti/e of Bretton Woods there %as serious concern a4out the sta4ility of glo4al econo/ic /arkets. The %orld;%idede#ression of the ,69s had 4een dee#ened 4y the insta4ility of international currency /arkets and the contraction ofinternational trade so that sta4ili!ation of those /arkets and #ro/otion of trade %ere considered crucial to avoid anothecrisis. ?ike%ise the %ides#read destruction of <uro#e and uncertainty a4out its future also threatened to cause econo/and #olitical disru#tion. The countries allied to fight a!i Ger/any and 7a#an 4elieved that a si/ilar colla4orative effort%as the only %ay to sta4ili!e their econo/ies and those of their soon;to;4e;defeated ene/ies and to #rovide funds tore@uvenate the countries destroyed 4y the %ar.
The Bretton Woods conference therefore gathered together so/e of the %orldAs /ost #ro/inent /inds in econo/ic #olicand so/e of its /ost #o%erful #olicy;/akers to chart a ne% course. e#resenting the 8nited -tates and serving aschair/an of the conference %as $enry Morgenthau the 8.-. -ecretary of the Treasury. Morgenthau %as acco/#anied4y $arry &e>ter White the 'ssistant -ecretary of the Treasury %ho had laid the ground%ork for the conference andoriginated the key ideas and #olicies to 4e discussed.
'long %ith the/ %as &ean 'cheson then the 8nder -ecretary of -tate %ho later 4eca/e $arry Tru/anAs influential-ecretary of -tate during the first years of the *old War and a nu/4er of senators and congress/en. ?eading the Britis
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delegation %as the fa/ed econo/ist 7ohn Maynard eynes. Other delegations of nota4les ca/e fro/ *hina Indiaussia and France.
-o/e leading econo/ists fro/ s/aller nations %ere also Cuite influential at the conference such as ?ouis a/insky of*anada yriakos Darvaressos of Greece and 7ohan Beyen of the etherlands. Morgenthau o#ened the conference 4ytelling his fello% #artici#ants EWhat %e do here today %ill sha#e to a significant degree the nature of the %orld in %hich %
are to live.E,
The ai/ of the conference %as to dra% u# #lans for the IMF and World Bank 0as %ell as a #ro#osed International TradeOrgani!ation %hich never got off the ground as a result of concerns a/ong /any countries over their econo/icsovereignty1.
The conference %as controversial ho%ever %ith the #u4lic #oliticians and /edia in /any of the countries=es#ecially
the 8nited -tates=that %ere %ary of international control of their sovereign econo/ic #olicy. <ven the 8.-. and Britishdelegations the leading countries at the conference co//ented to each other that their #lans had to 4e #oliticallya/ena4le to their ho/e govern/ents to 4e ulti/ately a##roved.
't the sa/e ti/e the conference %as largely o#aCue to the #u4lic. The #ro/inent '/erican co//entator Walter?i##/an said EIt has 4een i/#ossi4le for the general #u4lic to o4tain any idea of %hat the Bretton Wood conference isa4out. Though it is concerned %ith Cuestions %hich %ill affect /enAs lives dee#ly the language of /onetary #olicy is
understood 4y very fe% /en in any country.E2
egotiations at the conference %ere therefore contentious. 'lthough White had dra%n u# #lans for the #ro#osedorgani!ations /any details es#ecially regarding financial contri4utions to the ne% institutions %ere still to 4e %orked ou*ountries %ere concerned a4out the 4alance of #o%er %ithin the organi!ations as reflected in their #ro#ortions ofcontri4utions of gold to the IMF and their conco/itant a4ility to dra% fro/ the IMF 0their ECuotasE1.
There %ere e>tensive IMF negotiations regarding ho% to divide the total a/ount of /oney the IMF %ould have a/ong th33 #artici#ants. India insisted on having as high a Cuota as *hina for e>a/#le %hile France insisted on having /ore thIndia and /ore than the three Benelu> countries 0Belgiu/ the etherlands and ?u>e/4ourg1 %ho %ere coordinatingtheir /onetary #olicy. The ussians insisted on a Cuota of not /uch less than the British and argued that they shouldhave to contri4ute less gold to the fund than other countries 4ecause of their suffering in the %ar 4ut 4e a4le to dra% ahigher #ro#ortional Cuota than other countries. 't the sa/e ti/e they refused to #u4lish accurate econo/ic statistics.
Other dis#utes concerned the governance of the organi!ations such as ho% /any #er/anent seats the /a@or contri4utors %ould hold and %here the organi!ations %ould 4e located the British unsuccessfully lo44ied for the IMF to in ?ondon. 'nother significant dis#ute revolved around %hether the dollar %ould serve along %ith gold as the standard e>change rates %hich in the end the '/erican delegation successfully insisted on.
Mean%hile eynes leading the co//ittee that dre% u# #lans for the World Bank do/inated the drafting #rocess andforged the institution largely along his #referred lines and i/#le/enting his key econo/ic idea=that govern/ents shouls#end their resources to sti/ulate their econo/ies during slo%do%ns.
With the di#lo/atic %rangling co/#leted the conferenceAs Final 'ct %as signed on 7uly 22 ,633 although the institutiodid not actually start o#erations until the follo%ing year. In a letter read to the delegates 8.-. "resident Franklin oosev
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said that they had E#re#ared t%o further foundation stones for the structure of lasting #eace and security.E
$o% did sucho#e at the ti/e result in such o##osition today( The rest of this Issue Brief e>#lains the current o#erations of the WorlBank and the IMF and %hy they are so controversial.
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The International Moneta r y Fund
Governance, Organiation and !ur"oses
Governance
The IMF is controlled 4y its ,+ /e/4er;countries each of %ho/ a##oints a re#resentative to the IMFAs Board ofGovernors. The Board of Governors /ost of %ho/ are the finance /inisters or heads of the central 4ank of the/e/4ers /eet once #er year to discuss and #ossi4ly achieve consensus on /a@or issues. In the /eanti/e day;to;dayo#erations are /anaged 4y a 23;#erson <>ecutive Board. The %orldAs /a@or econo/ic and #olitical #o%ers=the 8nited
-tates 0the IMFAs largest shareholder1 Great Britain 7a#an Ger/any France *hina ussia and -audi 'ra4ia=eachhave #er/anent seats on the e>ecutive 4oard %hile the ,) other directors are elected for t%o;year ter/s 4y grou#s ofcountries divided roughly 4y geogra#hy e.g. *ari44ean 'frica -outheast 'sia etc. The e>ecutive 4oard in turn is run4y the /anaging director %ho is elected for rene%a4le five;year ter/s.
The IMF also has an International Monetary and Financial *o//ittee of 23 re#resentatives of the /e/4er;countries tha/eets t%ice yearly to #rovide advice on the international /onetary and financial syste/ to the IMFAs staff.
In all of its o#erations voting #o%er is %eighted 4ased on the si!e of the econo/y and therefore the Cuota allocation ofeach country. &ecisions are usually taken 4y consensus 4ut the 8nited -tates as the IMFAs /a@or shareholder has the/ost influence in the institutionAs #olicy;/aking.
Organization
The IMFAs current /anaging director is Ms. *hristine ?agarde of France %ho took office on 7une 2+ 29,,. <ach/e/4ers of the e>ecutive 4oard runs a #articular de#art/ent of the IMF. There are offices devoted toa1 #articular regions of the %orld such as <uro#e 'frica Middle <ast Western $e/is#here and 'sia"acific41 functions such as finance technical assistance fiscal "lanning ca"ital #arkets research and statistics andc1 ad/inistrative functions of the IMF itself.The IMF has a total of 2)99 e/#loyees /ostly 4ased in its Washington &.*. headCuarters.
Purposes
The Bretton Woods *onference set out si> goals for the IMF in its 'rticles of 'gree/ent. Those goals as sho%n in theacco/#anying 4o> re/ain the guiding #rinci#les of the IMF today.
0i1 To #ro/ote international /onetary coo#eration through a #er/anent institution that #rovides the /achinery forconsultation and colla4oration on international /onetary #ro4le/s.0ii1 To facilitate the e>#ansion and 4alanced gro%th of international trade and to contri4ute there4y to the #ro/otion an/aintenance of high levels of e/#loy/ent and real inco/e and to the develo#/ent of the #roductive resources of all/e/4ers as #ri/ary o4@ectives of econo/ic #olicy.0iii1 To #ro/ote e>change sta4ility to /aintain orderly e>change arrange/ents a/ong /e/4ers and to avoidco/#etitive e>change de#reciation.0iv1 To assist in the esta4lish/ent of a /ultilateral syste/ of #ay/ents in res#ect of current transactions 4et%een/e/4ers and in the eli/ination of foreign e>change restrictions that ha/#er the gro%th of %orld trade.
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0v1 To give confidence to /e/4ers 4y /aking the general resources of the IMF te/#orarily availa4le to the/ underadeCuate safeguards thus #roviding the/ %ith o##ortunity to correct /alad@ust/ents in their 4alance of #ay/ents%ithout resorting to /easures destructive of national or international #ros#erity.0vi1 In accordance %ith the a4ove to shorten the duration and lessen the degree of diseCuili4ria in the international4alances of #ay/ents of /e/4ers.
In si/#ler ter/s the goals are to:,1 Facilitate the coo#eration of countries on #onetary #olicy including #roviding the necessary resources for 4oth
consultation and the esta4lish/ent of /onetary #olicy in order to /ini/i!e the effects of international financialcrises.
21 'ssist the liberaliation of international trade 4y hel#ing countries increase their real inco/es %hile lo%eringune/#loy/ent.
1 $el# sta4ili!e e$change rates 4et%een countries. <s#ecially after the glo4al de#ression of the ,69s it %asconsidered vital to esta4lish currencies that could hold their value serve as /ediu/s of international e>changeand resist any s#eculative attacks.
31 Maintain a #ultilateral syste/ of #ay/ents that eli/inates foreign e>change restrictions. *ountries are thus freto trade %ith each other %ithout %orrying a4out the effects of interest rates and currency de#reciation on their #ay/ents.
51 "rovide a safeguard to /e/4ers of the IMF against 4alance of #ay/ents crises i.e. %hen govern/ents cannot4alance the /oney they have %ith the /oney they o%e to other countries. IMF /e/4ers can have the confidencto ad@ust the i/4alances in their national accounts %ithout resorting to #ainful /easures that %ould ha/#er thei#ros#erity such as devaluing their currency in relation to other countriesA.
)1 Try to reduce the effects of volatility in countriesA balance of "ay#ents accounts the IMF hel#s assure thatglo4al trade and financial relationshi#s can continue at a steady rate %ithout the risks of glo4al de#ressions likethat of the ,69s.
When founded the IMF also o#erated the syste/ of international e>change on the 4asis of gold reserves that its /e/4ecountries #ledged to it. In ,6, ho%ever the 8.-. govern/ent under "resident i>on eli/inated the connection 4et%eethe 8.-. dollar and gold as a /eans to resolve a do/estic /onetary crisis. By allo%ing the dollarAs value to EfloatE aso##osed to having it "egged to gold the 8.-. govern/ent %as a4le to ad@ust its /onetary #olicy to deal %ith changes inthe '/erican econo/y. -u4seCuently the IMF eli/inated its use of gold and all other /e/4ers %ere allo%ed to EfloatEtheir currencies as %ell.
% o & 'oes th e IMF (chie v e Its Goals)
The IMF has three /ain activities: surveillance financial assistance and technical assistance.
Surveillance
<ach year the IMF sends econo/ists to each of its /e/4er countries to analy!e the countryAs econo/ic situation. Thetea/ e>a/ines fiscal and #onetary #olicy e$change rate general #acroecono#ic sta4ility and any related #oliciessuch as la4or #olicy trade #olicy and social #olicy 0such as the #ension syste/1. This #rocess is kno%n as an 'rticle IDconsultation after the section authori!ing it in the 'rticles of 'gree/ent. The #ur#ose of such consultation is to #rovide aoutside check on national decisions that /ight have an affect on the international econo/ic syste/.
'fter the tea/ finishes its analysis the IMF e>ecutive 4oard discusses the re#ort and gives it to the leaders of the countin Cuestion as the official o#inion of the IMF. ' version of the re#ort is also #u4lished and availa4le as an IMF "u4lic
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Infor/ation otice 0"I1. The IMF also #erfor/s si/ilar revie%s of regional #olicy 4y such organi!ations as the <uro#ea8nion 0<81 the West 'frican <cono/ic and Monetary 8nion and the <astern *ari44ean *urrency 8nion.
On a glo4al level the IMF also #u4lishes its analysis of the %orld econo/ic syste/ in its World <cono/ic Outlook t%ice#er year and the Glo4al Financial -ta4ility e#ort %hich focuses s#ecifically on the international ca"ital #arkets alsot%ice #er year.
The IMFHs 7une 29,, edition of the World <cono/ic OutlookH can 4e seen here
Financial Assistance
The central activity undertaken 4y the IMF is financial assistance to national treasury de#art/ents. Me/4er countries %
balance of "ay#ents #ro4le/s can receive credits and loans to #ay off their o4ligations and read@ust their econo/ic#olicies so that they %ill not face another crisis or near;crisis. To receive assistance ho%ever the /e/4er;country /ustagree through a Eletter of intentE to i/#le/ent changes in its fiscal and /onetary #olicies that IMF e>#erts havedeter/ined are necessary. These conditions as e>#lained 4elo% are the cause of so/e of the /ost vociferousresent/ent to%ard the IMF 4ecause they often involve very detailed changes in national #olicies. evertheless IMFassistance is considered so essential to national econo/ic health that countries generally agree even %hen they havestrong reservations.
The loans are dis4ursed in #hases to ensure that the receiving country /oves for%ard %ith the refor/s reCuired of it.?oans are generally granted for relatively short #eriods of ti/e for @ust a fe% /onths or for as long as ten yearsde#ending on the ty#e of loan. The receiving country /ust #ay 4ack loans on ti/e on a rigorous schedule 4ecause theloans are intended to 4e te/#orary assistance.
*ountries are discouraged fro/ 4eco/ing de#endent on IMF loans and in fact /ay face e>tra charges if too /uch oftheir govern/ent funding co/es fro/ the IMF. ather the IMF ho#es to #lay a role as a catalyst for #rivate 4anks to lento govern/ents 4ecause the e>tension of an IMF loan is intended to e>#ress confidence that the receiving country isgetting its financial house in order.
The IMF #rovides the assistance through several lending #rogra/s 0EfacilitiesJ1:
• -tand;4y arrange/ents are loans granted for s#ecific a/ounts over ,2 to ,+ /onths to deal %ith short;ter/#ro4le/s.
• The <>tended IMFs Facility is used to hel# a /e/4er;country deal %ith %hat are called EstructuralE econo/ic#ro4le/s resulting fro/ a history of #oor econo/ic #lanning. The IMF attaches strong conditions to loans througthis facility %hich are granted for three to four year ter/s.
• The !overty *eduction and Gro&th Facility is granted at lo% interest rates to #oor countries.•
The +u""le#ental *eserve Facility grants short;ter/ loans during crises 4ut adds a surcharge to discouragetoo /uch 4orro%ing.• Contingent Credit ines are granted during %aves of crises that can s#read fro/ one country to another calle
Econtagions.E• </ergency 'ssistance is granted to countries facing /ilitary conflicts or other sudden disasters.
Technical Assistance
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The IMF #rovides technical assistance on fiscal and /onetary #olicy regulatory #rocedures ta> #olicy and collection ofstatistics a/ong other issues. These #rogra/s are ai/ed at strengthening develo#ing countriesA a4ilities to refor/ and#ro#erly /anage their /acroecono/ic #olicies. The IMF dis#atches its o%n e>#erts and #rivate consultants on training/issions to educate govern/ent officials and also runs the IMF Institute in Washington &.*. to #rovide courses forofficials.
In addition to these three /ain activities the IMF also has instituted various #rogra/s to ensure the sta4ility of financialsyste/ /anage/ent on a glo4al scale. For e>a/#le the IMF along %ith the World Bank and other institutions hasdrafted voluntary standards and codes for countries and financial institutions to ada#t in order to increase accounta4ilityand trans#arency and to li/it corru#tion. The IMF also has develo#ed t%o syste/s of collection and disse/ination ofstatistical infor/ation to hel# assess the econo/ic via4ility of the do/estic and international financial syste/s.
W h y Is the IMF Controversial)
'fter the colla#se of the -oviet 8nion the %estern a##roach to /arket liberaliation "rivatiation fiscal austerity anfree trade that had #roduced econo/ic gro%th in the develo#ed countries=es#ecially in the 8nited -tates=%ase>#orted to develo"ing countries through the IFIs. -ince they %ere headCuartered in Washington &.*. the IFIsA strate%as called the EWashington *onsensus.E 's su//ari!ed 4y the World Bank it had ten 4asic #oints:
,. Fiscal disci#line 0that is not too /uch govern/ent s#ending1.2. edirection of #u4lic s#ending to%ard education health and infrastructure.. Ta> refor/ 0that is 4roadening the ta> 4ase and cutting ta> rates1.3. Market-deter#ined interest rates.5. *o/#etitive e>change rates.
). Trade li4erali!ation 0that is eli/inating Cuotas and tariffs1.. O#enness to foreign direct invest#ent.+. "rivati!ation of state enter#rises.6. 'eregulation.,9. ?egal security for #ro#erty rights.
The success of industrialied nations %hen follo%ing these #ractices in co/#arison to *o//unist countriesA lack ofecono/ic develo#/ent caused %estern econo/ists and #oliticians to assu/e their infalli4ility and enticed /anydevelo#ing countries into follo%ing the/. $o%ever the %ay in %hich the Washington *onsensus %as unifor/ly #resenteto a %ide range of national econo/ies is said 4y critics to have contri4uted to serious #ro4le/s.
*ritics attack four interrelated as#ects of the i/#le/entation of the Washington *onsensus.
First critics say that the conditions #laced on loans are too intrusive and co/#ro/ise the econo/ic and #oliticalsovereignty of the receiving countries. For e>a/#le 7ose#h -tiglit! a %inner of the o4el "ri!e in econo/ics and for/chief econo/ist of the World Bank %rites that those conditions often referred to as a %hole as EconditionalityE are not
@ust the ty#ical reCuire/ents that anyone lending /oney /ight e>#ect the 4orro%er to fulfill in order to ensure the /oney%ill 4e #aid 4ack. ather says -tiglit! EA*onditionalityA refers to /ore forceful conditions ones that often turn the loan ina #olicy tool.E
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The IMF has used conditionality to e>act /a@or changes called Estructural ad.ust#entsE in 4orro%ing countriesA fiscaand #onetary #olicies including such issues as 4anking regulations govern/ent deficits and #ension #olicy. $e citesthe e>a/#le of the IMFAs insistence that the orean *entral Bank focus on fighting inflation during the ,66 'sianFinancial *risis not 4ecause /onetary #olicy %as a cause of the crisis 4ut rather 4ecause the IMF 4elieved that fightinginflation should 4e the #ri/ary #ur#ose of a central 4ank.
'ccording to -tiglit! /any of these changes are si/#ly #olitically i/#ossi4le to achieve 4ecause they %ould cause too/uch do/estic o##osition. <ven in the 8nited -tates he #oints out the Federal eserve Bank is not charged %ith @ustfighting inflation 4ut also %ith #ro/oting e/#loy/ent and econo/ic gro%th and an atte/#t 4y a #o%erful senator in the/id;,669s to refocus its charter @ust on inflation %as 4eaten 4ack 4y the White $ouse.
+econd critics say that the IMF i/#osed the #olicies of the Washington *onsensus on countries %ithout understandingthe distinct characteristics of the countries that /ade those #olicies difficult to carry out unnecessary or even counter;
#roductive. 'ccording to -tiglit! for e>a/#le the econo/ists of the IMF had a Eone;si!e;fits;allE #olicy 4ased on theiracade/ic training %hich focused on econo/ic /odels %ith unrealistic assu/#tions a4out ho% real;life econo/ies %orkThey do not generally s#eciali!e in the econo/ies of the countries %hose #olicies they oversee often do not live in thoscountries and /ostly %ork fro/ Washington &.*. and have little a##reciation for the #olitical circu/stances under %hichthe govern/ents o#erated. When crises arise therefore says -tiglit! the IMF instinctively 4la/es the govern/ents of tcountries suffering the crises.
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Third critics say that the #olicies %ere i/#osed all at once rather than in an a##ro#riate seCuence. For e>a/#le the IMde/ands that countries it lends to #rivati!e govern/ent services ra#idly=that is sell the/ to #rivate investors rather thao#erate the services itself=such as %ater su##ly and utilities. 'ccording to -tiglit! this is a result of the IMFAs E/arketfunda/entalis/E a 4lind faith in the free /arket that ignores the fact that the ground /ust 4e #re#ared for #rivati!ation."rivate o%ners are /ost interested in o#erating a co/#any efficiently %hich often /eans letting go of staff.
But says -tiglit! if a countryAs une/#loy/ent #rogra/ and other social safety nets are not sufficiently develo#ed thosefired staff %ill have no %ay to su##ort their fa/ilies. E"rivati!ation needs to 4e #art of a /ore co/#rehensive #rogra/%hich entails creating @o4s in tande/ %ith the inevita4le @o4 destruction that #rivati!ation often entails. Macroecono/ic#olicies including lo% interest rates that have hel#ed create @o4s have to 4e #ut in #lace. Ti/ing 0and seCuencing1 iseverything.E
)
Fourth critics say that the IMF %as not o#en to criticis/ or #u4lic oversight %hen %orking on these #olicies leading toarrogance and a lack of connection to the reality on the ground in the affected countries. For e>a/#le -tiglit! #oints outthat the agree/ents 4et%een the IMF and 4orro%er countries %ere al%ays ke#t secret fro/ the general #u4lic in thosecountries. -o/eti/es he says the agree/ents %ere ke#t even fro/ hi/ and his colleagues at the World Bank %hen%orking on @oint #ro@ects %ith the IMF.
't the sa/e ti/e the govern/ent officials of 4orro%ing countries often felt #o%erless to Cuestion the IMFAs #olicies
4elieving that @ust to ask a Cuestion %ould 4e vie%ed 4y the IMF as a challenge to its authority and @eo#ardi!e the loans %as offering. ' great lack of trust therefore characteri!ed relations 4et%een the IMF and its 4orro%ers as the #u4lic angovern/ents of its 4orro%er countries felt out of the loo# on the decisions that %ould sha#e their econo/ic future.
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-o/e o##onents of the IMF and glo4ali!ation in general go even further. They clai/ that the entire international financisyste/ is corru#t and unfair. They critici!e not @ust the i/#le/entation of the Washington *onsensus 4ut its verye>istence. One grou# for e>a/#le called 59 Kears Is <nough argues that the IMF World Bank and the World TradeOrganiation /WTO0 are anti;de/ocratic institutions res#onsi4le for the i/#overish/ent of the develo#ing %orld and4enefiting only rich countries and /ultinational cor#orations.
'ccording to 59 Kears Is <nough EOnly %hen the %ell;4eing of all including the /ost vulnera4le #eo#les andecosyste/s is given #riority over cor#orate #rofits can %e achieve genuine sustaina4le develo#/ent and create a %orldof @ustice eCuality #eace and ecological values %here funda/ental hu/an rights including internationally;recogni!ed
social cultural environ/ental and econo/ic rights are res#ected.E
This grou# %ants an i//ediate end to the IMFAs#olicies a cancellation of all outstanding govern/ent de4ts in the develo#ing %orld 0discussed in /ore detail 4elo%1 anre#arations for the da/age in their vie% that the IMF and World BankAs #olicies have caused.
's you can see three vie%s of the IMFAs role are #ossi4le. First the IMF vie%s itself as co//itted to sound financial/anage/ent lending /oney and #roviding surveillance and advice to hel# countries avoid econo/ic colla#se. -econdho%ever IMF critics clai/ that the IMFAs #olicies are often #oorly #lanned and even counter;#roductive. Third the /ostradical critics of the IMF contend that the %hole international finance syste/ of %hich the IMF is one of the leadinginstitutions should 4e dis/antled for the 4enefit of the %orldHs #oor.
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The World Bank
+tructure
The World Bank is the na/e that has co/e to 4e used for the International Bank for econstruction and &evelo#/ent0IB&1 founded at Bretton Woods. 's the World Bank e>#anded 4eyond its initial sco#e and #ur#ose of re4uilding <uro#after the -econd World War the World Bank gre% through the creation of four additional organi!ations. Together thesefive financial organi!ations co/#rise the World Bank Grou# na/ely the IB& the International &evelo#/ent 'ssociatio0I&'1 the International Finance *or#oration 0IF*1 the Multilateral Invest/ent Guarantee 'gency 0MIG'1 and theInternational *enter for -ettle/ent of Invest/ent &is#utes 0I*-I&1.
The IB& and the I&' focus /ainly on #u4lic sector /onetary #olicy and #rovide lo%;interest loans interest;free creditand grants to develo#ing countries. 'dditionally they %ork to affect the #olicies of govern/ents 4y #roviding/acroecono/ic #olicy advice research and technical advice. The re/aining three institutions that 4elong to the WorldBank Grou# focus /ore on #rivate /arket interactions #roviding funding insurance and dis#ute resolution for #rivatesector #ro@ects. The sections 4elo% discuss %ith each #art of the World Bank Grou# in turn.
Go v ernance
The governance of the World Bank is al/ost identical to that of the IMF. It is directed 4y a 4oard of governors co/#osedof one re#resentative fro/ each /e/4er country and the governors direct the IB& 4ased on %eighted voting rights thaare deter/ined 4y each countryAs agreed annual contri4utions to the World Bank. 's in the IMF the 8nited -tates is thelargest contri4utor and has the /ost %eighted voting #o%er though as a #ractical /atter decisions are /ade 4yconsensus.
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T%enty;four e>ecutive directors oversee the daily o#erations of the World Bank including five #er/anent s#ots given tothe 8nited -tates 7a#an Great Britain Ger/any and France. The re/aining ,6 directors are elected 4y all /e/4er;nations. The World Bank is led 4y its #resident currently o4ert Loellick for/er under -ecretary of -tate and for/er 8.Trade e#resentative. Dice #residents /anage World Bank affairs in si> regions='frica <ast 'sia "acific <uro#e an*entral 'sia ?atin '/erica the *ari44ean Middle <ast and orth 'frica and -outh 'sia=and in other functional unitsuch as Finance "overty eduction Infrastructure and "rivate -ector &evelo#/ent.
The World Bank also o#erates a World Bank Institute for training of officials in develo#/ent related to#ics. In total theWorld Bank has /ore than ,9999 e/#loyees s#read out over ,99 offices around the %orld and headCuartered inWashington &.*.
The IB*'
The /ission state/ent of the IB& states that it Eai/s to reduce #overty in /iddle;inco/e and credit%orthy #oorercountries 4y #ro/oting sustainable develo"#ent through loans guarantees and non;lending;including analytical andadvisory;services.E The World Bank ai/s at issues such at 4uilding infrastructure 0roads da/s #o%er #lants1 naturaldisaster relief hu/anitarian e/ergencies "overty reduction infant /ortality gender eCuality education and long;ter/develo#/ent issues. Further/ore the World Bank tries to foster social refor/s to #ro/ote econo/ic develo#/ent suchthe e/#o%er/ent of %o/en 4uilding schools and health centers #rovision of clean %ater and electricity fightingdisease and #rotecting the environ/ent.
-ince 2999 the World Bank has 4een devoted to hel#ing i/#le/ent the Millenniu/ &evelo#/ent Goals 0M&Gs1 drafte4y the 8nited ations at the Millenniu/ World -u//it. The goals are as follo%s:
,. <radicate e>tre/e #overty and hunger.2. 'chieve universal #ri/ary education.
. "ro/ote gender eCuality and e/#o%er %o/en.3. educe child /ortality.5. I/#rove /aternal health.). *o/4at $ID'I&- /alaria and other diseases.. <nsure environ/ental sustaina4ility.+. &evelo# a glo4al #artnershi# for develo#/ent.
The goals also have ,+ s#ecific targets and 3+ #erfor/ance indicators and are considered a ste# for%ard over #reviousdevelo#/ent efforts 4ecause they set s#ecific targets and ti/eta4les for achieve/ent %ith 29,5 as the /a@or deadline.*o//e/orating the ten year /ark of %hen the M&GHs %ere set there %as a /a@or conference held at 8 headCuartersin e% Kork in -e#te/4er 29,9 to revie% %hat #rogress has 4een /ade as %ell as the shortco/ings of these #[email protected] is still great concern in the international co//unity that nearly all of these goals are Cuite off;target %ith the#ros#ects of Neradicating e>tre/e #overty and hungerJ looking Cuite dis/al.
' *o#y of the 29,, 8 Millenniu/ &evelo#/ent Goals e#ort can 4e seen here
The World Bank o#erates 4y #roviding loans in t%o different %ays.
First invest/ent loans are granted for #ro@ects that %ill #roduce goods or services or #u4lic %orks to hel# econo/ic andsocial develo#/ent.
-econd ad.ust#ent loans are granted for #rogra/s to su##ort refor/s to govern/ent #olicies.
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?ike IMF loans World Bank loans are conditioned on the World BankAs a##roval of the invest/ent #lans and schedule fothe #ro@ect and re#ay/ent of the loans. The World Bank funds its loans 4y raising /oney on the international bond#arket issuing 4onds in its na/e to large institutional international investors such as 4anks and #ension funds.
's a non;#rofit institution ho%ever the World Bank does not take any #rofit on the results of its fundraising. Instead ituses its #rofits to su4sidi!e its lending 4ack to the countries %hose #ro@ects its finances. Only a4out half of the WorldBankAs funding co/es fro/ grants 4y /e/4ers and the rest co/es fro/ the World BankAs o%n o#erations.
<>a/#les of the #rogra/s the World Bank funds include:
• In Bangladesh the World Bank #rovided a 56.+ /illion credit to #rovide /edical services and nutritionalsu##le/ents to children and their /others.
• In Bosnia the World Bank hel#s offer E#icrocreditE loans ty#ically less than ,999 to individuals %ho %ish tostart s/all 4usinesses and other%ise %ould not have access to 4ank credit.
• In "eru the World Bank hel#ed finance the "eru ural oads "rogra/ %hich increased the connection of ruralareas to each other and to ur4an centers as a %ay to increase econo/ic activity.
• In Bra!il the World Bank has #rovided funds to the govern/ent to run the ain Forest "ilot "rogra/ to reducedeforestation in the state of Mato Grasso.
• In *hina the World Bank su##orted the *hinese govern/entAs ational Iodine &eficiency <li/ination "rogra/ #roviding aid for u#grading #hysical #lants for iodi!ed salt #roduction #ackaging and distri4ution 4y esta4lishieffective Cuality control in the salt industry and funding the training of la4oratory staff and the i/#rove/ent of la4oratory facilities.
• In *ote dAIvoire the World Bank has financed an e/ergency ur4an infrastructural #ro@ectH intending to i/#roveaccess to and Cuality of facilities and services in '4id@an and other select cities. This #ro@ect %ill su##ort so/e othe countryHs #oorest co//unities.
-hift fro/ ?oans to Grants video: htt#: %%%.youtu 4e .co/%atch(vP5;T6y3e4$Q
Intern a tional 'e v elo"# e nt ( s soci a tion /I'(0
The I&' %as organi!ed 4y the World Bank in ,6)9 to #rovide additional financial assistance to the #oorest develo#ingcountries. In order to #rovide resources on 4etter ter/s than those that are availa4le fro/ the World Bank the I&'#rovides s#ecial Ecredits.E These credits are !ero;interest loans that have longer #ay/ent #eriods of 5 to 39 years and grace #eriod of ten years. These ty#es of loans are offered to the #oorest countries to hel# the/ #ursue their develo#/ent goals so/eti/es des#ite disease and conflict. *urrently ,)6 of the 8 /e/4ers and osovo are /e/4eof the I&'.
To hel# develo#ing countries %ith these issues the I&' has esta4lished a fra/e%ork that e/#hasi!es si> core #rinci#les,1 The I&' seeks to #ro/ote gro%th through #acroecono#ic #olicy es#ecially in rural and #rivate sector
develo#/ent.21 The I&' concentrates on social issues such as gender eCuality and #u4lic health.1 The I&' %orks to i/#rove governance 4y assisting in #u4lic /anage/ent and in co/4ating corru#tion.31 The I&' strives for sustainable develo"#ent #ro@ects that hel# #rotect the environ/ent.51 The I&' fosters recovery efforts in #ost;conflict countries.
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)1 The I&' #ro/otes econo/ic integration through regional trade.
<>a/#les of I&' #ro@ects include the follo%ing:
• In Tan!ania since ,665 the I&' has allocated 8- .2 Billion %hich has caused an annual increase of anaverage of five and si> #ercent in the G&" and the G&" #er ca#ita has dou4led. 'll of this has greatly i/#rovethe standard of living
+
• In Bhutan the I&' gave a ,9;year , /illion credit for construction of rural schools and curricula develo#/ent
Intern a tional Finance C or "oration /I F C0
The IF* %as esta4lished in ,65) and is no% the largest #u4lic source of financial invest/ent for #rivate sector #ro@ects develo"ing countries. 8nlike the grass;roots develo#/ent efforts #ursued 4y the IB& and I&' IF* invest/ent is ofteused for #ro@ects such as 4uilding hotels or #o%er #lants %here finance and trade are /ore heavily involved. IF*#rovides #rivate sector invest/ent hel#s co/#anies acCuire additional financing in international /arkets and #rovidestechnical advice and assistance.
<>a/#les of IF* %ork include:
• In *olo/4ia the IF* is financing the first stage of develo#/ent of oil fields in Middle Magdalena Dalley #rovidinloans totaling 9 /illion fro/ its o%n account and organi!ing a co/4ined loan of 25 /illion for a nu/4er ofother #rivate #artici#ants.
,9
• In '!er4ai@an Georgia and Turkey the IF* is hel#ing finance the construction of an oil #i#eline to /ove u# to a/illion 4arrels of oil #er day fro/ Baku in *entral 'sia to *eyhan on TurkeyAs Mediterranean coast.
,,
Multilateral In v est#ent Guarantee (gen c y /MIG(0
MIG' %as created in ,6++ to #rovide risk;4alancing insurance services to foreign direct invest#ent #ro@ects indevelo"ing countries. The ty#ical service offered 4y MIG' is #olitical risk insurance %hich insulates investors againstgovern/ent e>#ro#riations conseCuences of conflict terroris/ and si/ilar threats. This allo%s 4oth investors andlenders to undertake co//it/ents to such #ro@ects %ithout the over%hel/ing do%nside risk that %ould other%ise e>ist. also ena4les develo#ing countries to attract and /aintain #rivate invest/ent in their countries %hich is essential tosustained develo#/ent.
Me/4ershi# in MIG' is offered to all /e/4er countries of the World Bank Grou# and currently nu/4ers ,5 countries.MIG' is o#erated 4y a *ouncil of Governors %ho recently voted to dou4le the agencyAs ca#ital stock fro/ the current ,4illion to 2 4illion. ' s/all a/ount of that 0,59 /illion1 ca/e in the for/ of li/ited financial assistance fro/ the WorldBank and the re/aining +59 /illion increase %as due to a ca#ital increase.
-ince it %as esta4lished in ,6++ MIG' has insured /ore than 29.6 4illion of foreign direct invest/ent in over ,99develo#ing countries=invest/ent that /ay not have other%ise ha##ened. The result of all of MIG'As activities is that %
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the #otential reduction of risks through insurance develo#ing countries are encouraged to ado#t #olicies that #ro/oteinvest/ent. This co/4ination of refor/ at the do/estic level and insurance coverage for investors is another i/#ortanttool in the drive to reduce #overty 4y the World Bank Grou#.
<>a/#les of MIG' #ro@ects include the follo%ing:
• In '!er4ai@an MIG's #rovided insurance to #rotect Turkish investors in a #ro@ect to e>#and and /oderni!e aflour/ill to #roduce and distri4ute flour sold in '!er4ai@an and Georgia.
,2
• In <cuador MIG' is su##orting investors in the construction of a ne% air#ort to serve the ca#ital of Quito toi/#rove and e>#and econo/ic develo#/ent and trade.
,
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"rivate -ector1
Intern a tional Center for + ettle# e nt o f I n v est#ent 'is" u tes / IC+I'0
The World Bank esta4lished I*-I& in ,6)) to encourage 4oth investors and govern/ents to undertake and receiveforeign direct invest#ent 4y #roviding a neutral dis#ute resolution syste/. The I*-I& #rovides arbitration services%hich are entered into on a voluntary 4asis 4ut once t%o #arties agree to su4/it issue resolution to I*-I& they arereCuired to follo% I*-I& #rocedures until the verdict is rendered. Further/ore all /e/4er countries of I*-I& are 4oundrecogni!e and enforce the rulings that are /ade.
'lthough it is technically a se#arate entity I*-I& is chaired 4y the #resident of the World Bank and the t%o organi!ationare %ell integrated %ith their annual /eetings 4eing held in concert and %ith I*-I&As o#erating e>#enses co/ing fro/the World Bank Grou#As 4udget. *urrently ,3 8 /e/4er nations and osovo are /e/4ers of the I*-I&.
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W h y Is the World Bank Controversial)
?ike the IMF the World Bank has 4een critici!ed for its #art in #ro/oting the Washington Consensus through its close#artici#ation %ith the IMF in lending only to #rogra/s that %ere heavily conditioned. For e>a/#le according to 59 KearsIs <nough the World BankAs #olicies are Eindistinguisha4leE fro/ the IMFAs in that they often go to Eausterity #lans thatArefor/A econo/ic #olicies 4y suffocating the #oor and inviting cor#orate e>#loitation.E
,3
In addition several uniCue factors contri4ute to dislike and distrust of the World Bank. The World Bank is often accused ignoring the environ/ental and social i/#act of #ro@ects it su##orts. For e>a/#le the World Bank hel#ed fund Bra!ilAs"olonoroeste develo#/ent #rogra/ inaugurated in the '/a!onian state of ondonia in ,6+,. By i/#roving the /ainhigh%ay into the forest su4dividing the land and granting o%nershi# of the land to settlers the #rogra/ caused anintense /igration and land rush that resulted in the %ide;s#read destruction of the rainforest
,5.
The World Bank also funded a da/;4uilding #ro@ect in India that resulted in the forced resettle/ent of #eo#le thear/ada iver Dalley 4et%een ,6+ and ,66. 's da/s %ere 4uilt on the river territories that have 4een #o#ulated sin#re;historic ti/es %ere lost to /an;/ade reservoirs causing resent/ent and social tur/oil for %hich the World Bank %4la/ed.
,)
-i/ilarly the World Bank has 4een attacked for funding the Western "overty eduction "ro@ect in *hina that o##onentsof *hinese control of Ti4et say %ill resettle 999 ethnic *hinese in the territory of Ti4et.
Most recently the Baku;*eyhan #i#eline /entioned a4ove has garnered o##osition 4ecause its critics say it %ill increa#ollution in the region and %orld;%ide through further use of fossil fuels contri4ute to oil de#endency in the econo/ies othe countries involved da/age the forests and %ater su##lies in the region and contri4ute to hu/an rights a4uses.
'nother /a@or co/#laint a4out the World Bank 0as %ell as the IMF1 is its role in causing high de4t a/ong develo"ing
countries. 'lthough the World BankAs loans are intended to hel# countries they also cause those countries to take onde4t that they /ust #ay interest on and re/ain under the conditions of the institution. Over the last 29 years these de4tshave #iled u# so /uch that critics say they a/ount to E#er#etual de4tE that the #oor #eo#le of %orld are saddled %ith.
'ccording to 59 Kears Is <nough E<>ternal de4t #er ca#ita for su4;-aharan 'frica 0not including -outh 'frica1 is )5%hile G" #er ca#ita is @ust 9+.E
,Many countries say these critics s#end /ore on servicing their de4t o4ligations th
on 4asic social services.
NWhy is the %orld 4ank controversial(J Dideo cli#
To re/edy this #ro4le/ a ca/#aign has 4egun to get international 4anks=4oth the #u4lic develo#/ent 4anks such asthe World Bank and #rivate 4anks=to eli/inate the de4t. 'ccording to the 7u4ilee /ove/ent 0na/ed after the Bi4lical#ractice of forgiving de4ts every fifty years1 the ca/#aigners E%ant to #ut an end to this syste/ of deli4erate e>#loitatio%hich generates e>ternal de4ts for our countries i/#overishes 4illions of #eo#le and degrades our environ/ent. It is a
syste/ %hich does not allo% our co//unities societies and nations to develo# on their o%n ter/s de/ocratically%ithout do/ination and e>#loitation 4y foreign interests and dictates fro/ the O1C' 2Organiation for 1cono#ic
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Coo"eration and 'evelo"#ent countries %ho are the %orldAs /a@or econo/ic #o%ersR govern/ents the IMF the WoBank and the WTO.E
,+aturally the IMF the World Bank and their #rivate;sector allies o##ose this ca/#aign.
'ebt *elief
Many of the %orldHs #oorest countries accu/ulated de4t in the ,69Hs and ,6+9Hs after suffering fro/ %orld%ide oilshocks high interest rates %eak co##odity #rices and recessions that /arked this #eriod of history. 't the ti/edevelo#/ent e>#erts reco//ended that govern/ents of #oor countries should 4orro% /oney fro/ the World Bank andthe IMF a/ong others to industriali!e their econo/ies 4y investing in industry and infrastructure and 4y re#lacing goodand services fro/ a4road %ith goods and services #roduced %ithin the country.
8nfortunately %eak co//odity #rices decreased the value of #oor country e>#orts and high oil #rices increased the #ricof i/#orts 4oth further increasing de4t. In addition /any lo% and /iddle inco/e countries %ere living 4eyond their/eans %ith high trade and 4udget deficits as %ell as lo% saving rates. Weak #u4lic sector /anage/ent and corru#tioncontri4uted to i/#ro#er or inefficient use of loans further decreasing the ca#a4ility of these countries to #ay 4ack the4orro%ed /oney. "ro4le/s such as droughts civil %ar %eak econo/ic #olicies all e>acer4ated the situation. <ventual#oor countries %ere taking out ne% loans to #ay 4ack old ones.
The World Bank and IMF %ere the /ain lenders to these #oor countries 4ecause #rivate lenders 4elieved that thesecountries %ere too risky. eali!ing the /agnitude of the #ro4le/ in ,6++ the World Bank 4egan to forgive so/e de4t. Ithe ,669Hs so/e /a@or industrial countries started to cancel 4ilateral de4t #ay/ents as %ell. By ,663 /ore than ,54illion of 'frica de4t %as forgiven. onetheless the region still o%ed 25 4illion to foreigners including donor countriesregional 4anks and /ultilateral institutions.
In ,66) the World Bank and IMF created the &e4t elief for %eavily Indebted !oor Countries /%I!C0 Initiativerecogni!ing the need for de4t relief fro/ #ultilateral institutions. Through this initiative eligi4le countries are reCuired tointroduce s#ecific econo/ic refor/s such as restructuring and #rivati!ation of state;run enter#rises and creating a sounlegal syste/ in return for de4t relief. The Initiative reCuire/ents %ere Cuite stringent and 4y ,66+ only t%o of the 39eligi4le countries received actual de4t cancellation. In ,666 the World Bank enlarged the #rogra/ to enco/#ass /orecountries and take into account other ongoing efforts for #overty reduction in eligi4le countries. *ritics %ere still notsatisfied.
allies concerts and ca/#aigns s#onsored 4y 82Hs Bono and 4y GOs such as O>fa/ raised #u4lic a%areness and#ressured countries to res#ond. The G;+ /eeting in 2995 4rought ,99 #ercent cancellations of de4t o%ed to the 'frican
&evelo#/ent Fund the World Bank and the IMF 4y ,+ countries %ho %ere eligi4le for the $I"* initiative.
NWorld Bank #olicy on &e4t elief J video seg/ent: htt#:%%%.youtu4e.co/%atc h(vP5,$v$$&F5O'
Conclusion
The IFIs are #illars of glo4ali!ation. &esigned to hel# /anage the international financial syste/ they have taken on /a@roles as drivers of closer econo/ic integration of all of the %orldHs countries fro/ the advanced to the least develo#ed.They have #rovided funds and advice to assist countries %ith their econo/ic develo#/ent and #olicy;/aking. 't the sa/
1& http://%".12#."%.1!2/sear h'(ahe:F0%GlMC7af*@ :www.globalternat i5 es.nl/file/&% wantto pt anendto th is sCst e m ofd
iberatee;ploitationwhihgeneratese;ternaldebtsfororontries-d(1-hl(en-t(lnk-gl(s-lient(firefo;Ha
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ti/e they are critici!ed on /any levels=for intrusiveness into the econo/ic and #olitical sovereignty of nationsde#endent on their aid lack of trans#arency and i/#act of their #olicies on societies and the environ/ent.
The IFIs have res#onded %ith ne% #rogra/s to address these critiCues. For e>a/#le the IMF has 4egun #u4lishing"u4lic Infor/ation otices 0"Is1 regarding their 'rticle ID consultations %ith govern/ents. 'lso the IMF has e/#hasi!eEo%nershi#E 4y client countries of the #olicies it reco//ends. Finally the World Bank and the IMF are coo#erating in the%eavily Indebted !oor Countries /%!IC0 initiative to #rovide de4t relief.
Whether or not these ne% #olicies %ill serve to /ollify the IFIs critics re/ains to 4e seen. "rotests continue against theIFIs and it is likely that controversy a4out 4oth the/ and glo4ali!ation in general %ill continue for so/e ti/e.
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Glossar y
(d.ust#ent loans: loans given 4y the World Bank or IMF to countries to restructure their de4t. These loans have strictfinancial and 4udgetary o4ligations and reCuire the receiving country to o#en u# their econo/y to #rivate invest/ent.
(rbitration: a #rocess 4y %hich #arties resolve their conflicts outside of a for/al courtroo/ and agree for a rd
#arty tohel# resolve the dis#ute a/ongst the #arties
Balance of "ay#ents: The Balance of "ay/ents 0BO"1 is a statistical state/ent that su//ari!es for a s#ecific #eriod0ty#ically a year or Cuarter1 the econo/ic transactions of an econo/y %ith the rest of the %orld.
Bond #arket: a financial /arket %here #artici#ants 4uy and sell de4t securities. &e4t is o%ed /oney. -ecurities areinstru/ents that have a financial value and are issued 4y co/#anies govern/ents and other entities.
Bretton Woods: To%ard the end of the -econd World War in 7uly ,633 re#resentatives of the 8nited -tates GreatBritain France ussia and 39 other countries /et at Bretton Woods a resort in e% $a/#shire to lay the foundation the #ost;%ar international financial order. -uch a ne% syste/ they ho#ed %ould #revent another %orld%ide econo/iccataclys/ like the Great &e#ression %hich had desta4ili!ed <uro#e and the 8nited -tates in the ,69s and contri4utedto the rise of Fascis/ and the %ar. Therefore the 8nited ations Monetary and Financial *onference as the BrettonWoods conference %as officially called created the International Monetary Fund 0the IMF1 and the World Bank to #revenecono/ic crises and to re4uild econo/ies shattered 4y the %ar.
Ca"ital #arkets: ' /arket %here co/#anies govern/ents or other institutions can go and raise /oney 0ca#ital1 for theneeds. T%o ty#es of ca#ital are stocks and 4onds 0de4t1 hence t%o %ell;kno%n ca#ital /arkets are the stock /arket and
the 4ond /arket.
Co##odity: an ite/ than has a value and can 4e traded it is the sa/e no /atter %here you 4uy and sell it. <>a/#les o4asic co//odities include: crude oil corn ethanol sugar soy 4eans coffee rice %heat gold and silver.
Conditionality: N<cono/ic #olicies or structural refor/s that S4orro%ingR /e/4ers agree to follo% as a condition for theuse of IMF and World Bank resources SloansR often called #erfor/ance criteria or 4ench/arks.J htt#:%%%. 4r etton% o o d s # [email protected] rggl os s ar y in d e > .s h t/l
Contingent Credit ines: NIMF credit line esta4lished after the financial crisis in ,66;,666. *ountries are reCuired tosatisfy certain conditions in order to @oin the **? to #rovide e/ergency assistance.J htt#:%%%. 4r etton% o o d s # [email protected] rggl os s ar y in d e > .s h t/l
'eregulation: a #rocess in %hich govern/ents re/ove reduce or si/#lify restrictions #laced on 4usinesses and
individuals to /ake it easier and /ore efficient to do 4usiness in that country
'evelo"ing countries: The World Bank classifies countries according to their Gross ational Inco/e 0GI1 #er ca#ita aeither lo% inco/e /iddle inco/e or high inco/e. ?o% inco/e and /iddle inco/e econo/ies are referred to asdevelo#ing econo/ies.
1$change rates: is eCual to ho% /uch do/estic currency is eCual to one unit of foreign currency
Fiscal austerity: govern/ent #olicies that cut 4udgets and reduce govern/ent s#ending
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Fiscal disci"line: careful /anage/ent of a govern/entHs 4udget
Fiscal "lanning: #lanning financial /atters andor a govern/ent 4udget
Foreign direct invest#ent: This category refers to international invest/ent in %hich the investor o4tains a lasting interein an enter#rise in another country. Most concretely it /ay take the for/ of 4uying or constructing a factory in a foreigncountry or adding i/#rove/ents to such a facility in the for/ of #ro#erty #lants or eCui#/ent.
Float: in the econo/ic sense to float a currency /eans that a countryHs central 4ank does not interfere %ith the value ofthe currency
Free trade: goods and services are 4ought and sold according to su##ly and de/and 0instead of govern/ents
deter/ining the #rice of goods and services1
%eavily Indebted !oor Countries /%I!C0 Initiative: 'rrange/ent for reducing de4t to institutions such as the WorldBank de4t to other countries and de4t in the #rivate sector for the #oorest /ost inde4ted countries.
Industrialied nations: a synony/ for develo#ed countries /eaning the country has a high #er ca#ita inco/e highG&" and develo#ed industries
International Bank for *econstruction and 'evelo"#ent /IB*'0: the World Bank. It ai/s to reduce #overty in /iddleinco/e and credit%orthy #oorer countries 4y #ro/oting sustaina4le develo#/ent through loans guarantees and non;lending;including analytical and advisory;services.
International Center for +ettle#ent of Invest#ent 'is"utes /IC+I'0: The I*-I& #rovides arbitration services %hic
are entered into on a voluntary 4asis 4ut once t%o #arties agree to su4/it issue resolution to I*-I& they are reCuired follo% I*-I& #rocedures until the verdict is rendered. Further/ore all /e/4er countries of I*-I& are 4ound to recogni!and enforce the rulings that are /ade.
International 'evelo"#ent (ssociation /I'(0: The I&' %as organi!ed 4y the World Bank in ,6)9 to #rovide additionafinancial assistance to the #oorest develo#ing countries. In order to #rovide resources on 4etter ter/s than those that aravaila4le fro/ the World Bank the I&' #rovides s#ecial Ecredits.E These credits are !ero;interest loans that have longer#ay/ent #eriods of 5 to 39 years and a grace #eriod of ten years. These ty#es of loans are offered to the #oorestcountries to hel# the/ #ursue their develo#/ent goals so/eti/es des#ite disease and conflict.
International Finance Cor"oration /IFC0: The IF* %as esta4lished in ,65) and is no% the largest #u4lic source of financial invest/ent for #rivate sector #ro@ects in develo#ing countries.
Inflation: a sustained increase of general #rices for goods and services in a s#ecific econo/y over a s#ecific #eriod of ti/e.
iberaliation: rela>ing of govern/ent restrictions usually in social and econo/ic #olicy. It is not the sa/e as#rivati!ation as a /arket can 4e o#ened to co/#etition 4ut still includes govern/ent;o%ned co/#anies.
Macroecono#ic: the #art of econo/ics dealing %ith the #erfor/ance structure and 4ehavior of national econo/ies as%hole. For e>a/#le /acroecono/ics includes studying national inco/e une/#loy/ent inflation and international trad
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Market-deter#ined: the /arket decides vs. a govern/ent dictating the #rice or another feature
Market funda#entalis#: 4elief that free /arkets 0free of govern/ent interference1 #rovide the 4est outco/e and thatgovern/ent interference decreases social %ell;4eing
Monetary: refers to govern/ent or central 4ank /anage/ent of the su##ly of /oney or trading in foreign currencies
Microcredit: the giving of very s/all loans to co/#anies or individuals %ho cannot go to traditional 4anks to receive aloan
Multilateral: /ulti#le countries %orking together to on a s#ecific issue
Multilateral Invest#ent Guarantee (gency /MIG(0: MIG' created in ,6++ to #rovide risk;4alancing insurance service
to foreign direct invest/ent #ro@ects in develo#ing countries. The ty#ical service offered 4y MIG' is #olitical riskinsurance %hich insulates investors against govern/ent e>#ro#riations conseCuences of conflict terroris/ and si/ilarthreats. This allo%s 4oth investors and lenders to undertake co//it/ents to such #ro@ects %ithout the over%hel/ingdo%nside risk that %ould other%ise e>ist. It also ena4les develo#ing countries to attract and /aintain #rivate invest/enttheir countries %hich is essential to sustained develo#/ent.
Organiation for 1cono#ic Coo"eration and 'evelo"#ent /O1C'0: ' grou# of the %orldHs /ost advanced and%ealthiest econo/ies that is 4oth a foru/ for and an active #artici#ant in de4ates a4out international econo/ic #olicies.%as esta4lished in ,6), and no% has /e/4ers including the 8nited -tates *anada Me>ico 7a#an -outh oreaand /ost /e/4ers of the <uro#ean 8nion.
!egged: in financial ter/s it occurs %hen a currencyHs value is tied to another countryHs currency value or to so/ethingvalue 0such as gold1
!overty reduction: This strategy e/#hasi!es getting countries out of %hat the World Bank calls E#overty tra#sE such alo% #roductivity #oor infrastructure and %eak #u4lic health and education syste/s.
!overty *eduction and Gro&th Facility: develo#ed 4y the IMF to /ake #overty reduction and gro%th /ore central to lending o#erations to the #oorest countries
!olitical risk insurance: a ty#e of insurance that can 4e taken out 4y co/#anies against #olitical risk such asrevolutions #olitical violence cou#s civil unrest terroris/ or other #olitical conditions that result in loss
!rivatiation: #rocess %here govern/ent;o%ned institutions andor assets are sold to co/#anies or individuals
+overeignty: co/#lete and e>clusive control of all the #eo#le and #ro#erty %ithin a territory
+tructural ad.ust#ents: refor/s that are reCuired 4y develo#ing country %hen seeking a loan 4y the IMF or World Ban%hich ensure a free /arket %here goods and services are 4ought and sold according to su##ly and de/and 0instead ofgovern/ents deter/ining the #rice of goods and services1
+u""le#ental *eserve Facility: ' facility to #rovide financial assistance for countries e>#eriencing e>ce#tional ca#italaccount #ro4le/s resulting fro/ a sudden and disru#tive loss of /arket confidence. -ource: htt#:%%%. 4r etton% o o d s # [email protected] rggl os s ar y ite/. s ht/l(>P35,,
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+ustainable develo"#ent: develo#/ent that /eets the needs of the #resent %ithout co/#ro/ising the a4ility of futuregenerations to /eet their o%n needs.
Washington Consensus: #hrase coined in ,6+6 4y 7ohn Willia/son to descri4e a set of ,9 econo/ic #olicies that areconsidered the standard refor/ #ackage #ro/oted 4y the IMF and World Bank including: ,1 fiscal disci#line 21 redirecti#u4lic funds to%ards key gro%th sectors such as education health care and infrastructure 1 ta> refor/ 31 Market;deter/ined interest rates that are /oderate 51 co/#etitive e>change rates )1 trade li4erali!ation 1 li4erali!ation ofin%ard foreign direct invest/ent +1 #rivati!ation of state enter#rises 61 deregulation e>ce#t for those institutions needefor #u4lic safety and ,91 legal security of #ro#erty rights.
World Trade Organiation /WTO0: an international 4ody dealing %ith the rules of trade 4et%een #artici#ating nations
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Bibliogra"hy
Origins of the IFIs: 'r/and Dan &or/ael NBretton Woods: Birth of a Monetary Syste!" "art I ,6+. 'r/and Dan &or/ael NBretton Woods: Birth of a Monetary Syste!" "art II ,6+. 'r/and Dan &or/ael NBretton Woods: Birth of a Monetary Syste!" "art ID ,6+.
The International Monetary Fund:International Monetary Fund Organi!ation *hartl '#ril 9 299IMF <>ecutive &irectors and Doting "o%er 7une 5 2996
'4out the IMF: #oini$ue Strauss%&anh! Managing #irector! 'ove(er )! *++, '4out the IMF: Staff of -nternational .ivil Servants 'rticles of 'gree/ent of the International Monetary Fund
'4out the IMF: The /nd of the Breton Woods Systen 0)1,*%)12)34Article -56O(ligations 7egarding /8change Arrangeents" IMF 'rticles of 'gree/ent&ata and -tatistics: IMF ?ending
Why is the IMF Controversial)7ohn Willia/son N A Short 9istory of the Washington .onsensus! and Suggestions for What to #o 'e8t!efor/ 'genda -e#te/4er 2997ose#h -tiglit!NWhat - earned at the World /conoic .risis" 7ose#h -tiglit! NGlo4ali!ation and its &iscontentsJ #. 33 29927ose#h -tiglit! NGlo4ali!ation and its &iscontentsJ #. 5 299259 Kears is <nough
The World BankWorld Bank Organi!ational *hart-taff of the World Bank
IB& Mission -tate/ent '4out the World Bank: The *hallengeWhat is the I&': ?endingI&' at Work: Trans#ortationIF* -u//ary of "ro@ect Infor/ation: *olo/4iaIF* BT* "ro@ectMIG': Me/4er *ountriesMIG': Our &evelo#/ent I/#act and "rioritiesMIG' "ro@ects: '!er4ai@anMIG' "ro@ects: <cuador 47esist the World Ban; and -MF< Stop .orporate Glo(alization<" 59 Kears is <nough4and%=se >oning on Tropical Frontiers: /erging essons fro the Brazilian Aazon" &enis 7. Maharand *ecile <. &ucrot
4#as and the World Ban;" 4Africa 'eeds #e(t .ancelation! 'ot More -MF Progras" 59 Kears is <nough-tate/ent of the 7u4ilee Move/ent International for <cono/ic and -ocial 7ustice$I"* $istory
G+ Finance Ministers Final *o//uniCu
