## The IMF and the World Bank — How Do They Differ?

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---

### Overview / Introduction
- Known collectively as the Bretton Woods Institutions, founded by the delegates of 44 nations in July 1944.
- Both institutions are owned and directed by the governments of 180 member nations and share many surface similarities (joint annual meetings, Washington, D.C. headquarters proximity, shared library, joint seminars, occasional joint missions).
- Fundamental distinction: the Bank is primarily a development institution; the IMF is a cooperative institution that seeks to maintain an orderly system of payments and receipts between nations.

### Purposes
- World Bank (International Bank for Reconstruction and Development, IBRD)
  - Primary responsibility: financing economic development.
  - First loans: extended during the late 1940s to finance reconstruction of war-ravaged Western Europe.
  - Central purpose: to promote economic and social progress in developing countries by helping to raise productivity.
  - Since the 1940s the Bank has loaned more than $330 billion.
- IMF
  - Created to address financial problems that contributed to and prolonged the Great Depression of the 1930s (sudden, unpredictable variations in exchange values and restrictions on currency exchange).
  - Set up as a voluntary and cooperative institution to have members relinquish some sovereignty to follow a code of conduct contained in the IMF’s Articles of Agreement.
  - Code requires members to allow their currency to be exchanged freely, keep the IMF informed of policy changes that affect other members, and modify policies on IMF advice where feasible.
  - IMF administers a pool of money from which members can borrow when in trouble; its principal role is overseer of members’ monetary and exchange rate policies and guardian of the international monetary system.

### Size and Structure
- IMF
  - Staff: about 2,300 staff members.
  - No affiliates or subsidiaries.
  - Headquarters in Washington, D.C.; three small offices in Paris, Geneva, and at the United Nations in New York.
  - Professional staff largely economists and financial experts.
- World Bank (World Bank Group)
  - Comprises two major organizations: IBRD and the International Development Association (IDA).
  - Associated but legally and financially separate entities: International Finance Corporation, International Center for Settlement of Investment Disputes, Multilateral Guarantee Agency.
  - Staff: over 7,000 staff members (about three times as large as the IMF).
  - Offices: about 40 offices around the world; 95 percent of staff work at Washington, D.C. headquarters.
  - Staff expertise spans economists, engineers, urban planners, agronomists, statisticians, lawyers, portfolio managers, loan officers, project appraisers, and specialists in telecommunications, water supply and sewerage, transportation, education, energy, rural development, population and health care, and other disciplines.

### Source of Funding
- World Bank (IBRD and IDA)
  - Owners: governments of its 179 member nations with equity shares valued at about $176 billion in June 1995.
  - IBRD obtains most lending funds by market borrowing through bond issues (AAA rating) to individuals and private institutions in more than 100 countries.
  - IDA is largely financed by grants from donor nations.
  - The Bank borrows by selling bonds and notes directly to governments, their agencies, and central banks; proceeds are lent to developing countries at affordable interest rates.
- IMF
  - Not a bank intermediating between investors and recipients; resembles a credit union of members.
  - Resources presently valued at over $215 billion.
  - Resources come from quota subscriptions (membership fees) paid by the IMF’s 180 member countries; each member contributes an amount proportionate to its economic size and strength.
  - The IMF relies principally on quota subscriptions to finance operations; adequacy of resources is reviewed every five years.
  - Under special and highly restrictive circumstances the IMF may borrow from official entities (but not from private markets).

### Recipients of Funding
- World Bank
  - Lends only to creditworthy governments of developing nations; does not lend to wealthy countries or private individuals.
  - Eligibility:
    - IBRD: developing countries whose per capita GNP exceeds $1,305 may borrow from the IBRD.
      - IBRD loans carry an interest rate slightly above the market rate at which the Bank borrows and generally must be repaid within 12–15 years.
    - IDA: lends only to governments of very poor developing nations whose per capita GNP is below $1,305; in practice IDA loans go to countries with annual per capita incomes below $805.
      - IDA loans are interest free and have a maturity of 35 or 40 years.
  - The Bank assists projects for which capital is not available from other sources on reasonable terms and seeks to strengthen economies so they can graduate from reliance on Bank resources.
- IMF
  - All member nations, both wealthy and poor, have the right to financial assistance from the IMF.
  - IMF assistance supports members facing shortages of foreign exchange (balance of payments problems).
  - Money received from the IMF must normally be repaid within three to five years, and in no case later than ten years.
  - Interest rates are slightly below market rates but not as concessional as the World Bank’s IDA loans.

### World Bank Operations
- Focus: encourage poor countries to develop via technical assistance and funding for projects and policies; development viewed as a long-term, integrated endeavor.
- Historical composition of assistance:
  - First two decades: two thirds of assistance went to electric power and transportation projects.
  - More recent diversification: greater emphasis on agriculture, rural development, small-scale enterprises, urban development, safe water, waste-disposal facilities, health care, family-planning assistance, nutrition, education, and housing.
- Infrastructure shifts:
  - Transportation projects: greater attention to farm-to-market roads.
  - Power projects: increased provision of lighting and power for villages and small farms.
  - Industrial projects: greater emphasis on creating jobs in small enterprises; labor-intensive construction where practical.
  - Energy: support for oil, gas, coal, fuelwood, and biomass as alternative sources.
- Technical assistance:
  - Largest element of Bank-financed technical assistance is component of Bank loans or credits (running over $1 billion a year recently).
  - Increased financing for free-standing technical assistance and project preparation.
  - Bank serves as executing agency for UNDP-financed technical assistance in agriculture and rural development, energy, and economic planning.
  - Emphasis on institutional development and macroeconomic policy formulation in response to members’ economic climates.
- Project design and cofinancing:
  - Every project is designed in close collaboration with national governments and local agencies and often with other multilateral assistance organizations.
  - About half of all Bank-assisted projects also receive cofinancing from official sources (governments, multilateral financial institutions, export-credit agencies) and private sources (commercial banks).
- Graduation:
  - Graduation from IBRD and IDA has occurred for many years.
  - Of the 34 very poor countries that borrowed from IDA during the earliest years, more than two dozen have graduated.
  - About 20 countries that formerly borrowed from IBRD no longer do so (example: Japan borrowed from the IBRD for a period of 14 years; now the IBRD borrows large sums in Japan).

### IMF historical phases and core functions
- First phase ended in 1973: IMF oversaw adoption of general convertibility among major currencies, supervised a system of fixed exchange rates tied to the value of gold, and provided short-term financing to countries needing foreign exchange to keep currencies at par value or to adjust to changing economic circumstances.
- After five years of analysis and negotiation (1973–78), a second phase began with the amendment of the IMF constitution in 1978, broadening its functions to address challenges after the collapse of the par value system.
- The IMF’s three principal functions (post-1978):
  - Urge members to allow national currencies to be exchanged without restriction for currencies of other member countries. Exact status: As of May 1995, 101 members had agreed to full convertibility of their national currencies.
  - Supervise economic policies that influence members’ balance of payments in a legalized flexible exchange rate environment; supervision is principally advisory, involving regular consultations (usually once a year) to analyze economic positions and warn of actual or potential problems.
  - Provide short- and medium-term financial assistance to members with temporary balance of payments difficulties, supplying convertible currencies to augment dwindling foreign exchange reserves only in return for commitments to reform the economic policies that caused the problem.

### How the IMF assists members — mechanisms and example
- Assistance is opened by a member’s balance of payments situation; members may apply to the IMF by virtue of the Articles of Agreement when payments and receipts with other nations fall out of rough balance.
- Typical IMF-supported program elements (illustrated with an agricultural economy example):
  - Raise producer prices paid to farmers to encourage agricultural production and reverse migration to cities.
  - Lower interest rates to expand the supply of credit.
  - Adjust the currency to reflect world prices, discouraging imports and raising export competitiveness.
- IMF financial assistance:
  - Lends money during disruptive, costly reforms to subsidize the transition period.
  - Monitors economic progress closely, provides technical assistance and consultative services to ensure funds are used productively.
- IMF nonfinancial assistance:
  - Technical assistance in organizing central banks, establishing and reforming tax systems, and setting up agencies to gather and publish economic statistics.

### IMF instruments and resources (exact figures)
- SDRs (special drawing rights):
  - The IMF is authorized to issue SDRs as a fiduciary asset to provide members additional liquidity.
  - To date the IMF has issued slightly over 21.4 billion SDRs, presently valued at about U.S. $30 billion.
- Financial resource structure:
  - SDR 21.4 billion has been issued to member countries in proportion to their quotas.
  - Fully paid-in quotas now totaling SDR 145 billion (about $215 billion).
- Institutional capacity:
  - IMF has a staff of 2,300 from 180 member countries.

### IMF role assessment and evolution
- Measuring IMF success is difficult because much of its work consists of averting or containing financial crises.
- Noted accomplishments include containing the debt crisis of the 1980s and assisting transitions to market-based economies in countries of the former Soviet Union and responding to the Mexican peso crisis in 1994.
- The IMF has been strengthening supervision of members’ economic policies and holds provisions in its Articles of Agreement that would allow a more active role should the world community choose stricter management of flexible exchange rates or a return to stable exchange rates.

### World Bank focus and comparative statistics
- World Bank objectives and resources:
  - Seeks to promote economic development of the world’s poorer countries through long-term financing of development projects and programs.
  - Provides special assistance to the poorest developing countries through the International Development Association (IDA) where per capita GNP is less than $865 a year.
  - Encourages private enterprise through the International Finance Corporation (IFC).
  - Acquires most financial resources by borrowing on the international bond market.
  - Has an authorized capital of $184 billion, of which members pay in about 10 percent.
  - Has a staff of 7,000 from 179 member countries.
- Lending composition:
  - Around 75 percent of the Bank’s lending is applied to specific projects dealing with roads, dams, power stations, agriculture, and industry.
  - Since the early 1980s the Bank expanded into structural- and sector-adjustment loans to help countries adjust economic policies and structures in the face of balance of payments problems.

### Convergence and cooperation between IMF and World Bank
- Drivers of closer cooperation:
  - Recognition that long-term development accelerates only when sound underlying financial and economic policies are in place.
  - Recognition that unsound policies are often rooted in long-term structural inefficiencies requiring protracted reforms.
  - The oil crisis of the mid-1970s and the debt crisis of the early 1980s prompted the IMF to lengthen and enlarge financial assistance beyond short-term lending, increasing the rationale for cooperation with the World Bank.
- Areas of coordinated action:
  - Structural- and sector-adjustment loans from the Bank often accompany IMF financial assistance programs.
  - Both institutions encourage other lenders, private and official, to cofinance projects and mobilize credits for countries in need.
  - Regular and frequent interaction between Bank economists/loan officers and IMF staff working on the same country underpins cooperation; Bank offers a longer-term structural view, IMF offers day-to-day balance of payments and integration perspective.
- Formalized concessional financing arrangements:
  - IMF procedures enable it to make available up to $12 billion to about 70 poor member countries that adjust the structure of their economies to improve balance of payments and foster growth.
  - The Bank joins the IMF by providing additional money from IDA.
  - An extra $7 billion was pledged by various governments and international agencies for cofinancing programs arranged by the Bank for low-income, debt-distressed countries of the region.
- Resulting institutional balance:
  - The Bank and IMF have distinct mandates but increasing overlap in focus—Bank on long-term structural reform, IMF on balance of payments and structural reform—making coordinated programs essential to integrate economies into the international monetary and financial system while encouraging economic expansion.

*Source: imf-wb-how-do-they-differ — Sections 1–2*

### Section 1

### The IMF and the World Bank — How Do They Differ?

### Overview / Introduction
- Known collectively as the Bretton Woods Institutions, founded by the delegates of 44 nations in July 1944.
- Both institutions are owned and directed by the governments of 180 member nations and share many surface similarities (joint annual meetings, Washington, D.C. headquarters proximity, shared library, joint seminars, occasional joint missions).
- Fundamental distinction: the Bank is primarily a development institution; the IMF is a cooperative institution that seeks to maintain an orderly system of payments and receipts between nations.

### Purposes
- World Bank (International Bank for Reconstruction and Development, IBRD)
  - Primary responsibility: financing economic development.
  - First loans: extended during the late 1940s to finance reconstruction of war-ravaged Western Europe.
  - Central purpose: to promote economic and social progress in developing countries by helping to raise productivity.
  - Since the 1940s the Bank has loaned more than $330 billion.

- IMF
  - Created to address financial problems that contributed to and prolonged the Great Depression of the 1930s (sudden, unpredictable variations in exchange values and restrictions on currency exchange).
  - Set up as a voluntary and cooperative institution to have members relinquish some sovereignty to follow a code of conduct contained in the IMF’s Articles of Agreement.
  - Code requires members to allow their currency to be exchanged freely, keep the IMF informed of policy changes that affect other members, and modify policies on IMF advice where feasible.
  - IMF administers a pool of money from which members can borrow when in trouble; its principal role is overseer of members’ monetary and exchange rate policies and guardian of the international monetary system.

### Size and Structure
- IMF
  - Staff: about 2,300 staff members.
  - No affiliates or subsidiaries.
  - Headquarters in Washington, D.C.; three small offices in Paris, Geneva, and at the United Nations in New York.
  - Professional staff largely economists and financial experts.

- World Bank (World Bank Group)
  - Comprises two major organizations: IBRD and the International Development Association (IDA).
  - Associated but legally and financially separate entities: International Finance Corporation, International Center for Settlement of Investment Disputes, Multilateral Guarantee Agency.
  - Staff: over 7,000 staff members (about three times as large as the IMF).
  - Offices: about 40 offices around the world; 95 percent of staff work at Washington, D.C. headquarters.
  - Staff expertise spans economists, engineers, urban planners, agronomists, statisticians, lawyers, portfolio managers, loan officers, project appraisers, and specialists in telecommunications, water supply and sewerage, transportation, education, energy, rural development, population and health care, and other disciplines.

### Source of Funding
- World Bank (IBRD and IDA)
  - Owners: governments of its 179 member nations with equity shares valued at about $176 billion in June 1995.
  - IBRD obtains most lending funds by market borrowing through bond issues (AAA rating) to individuals and private institutions in more than 100 countries.
  - IDA is largely financed by grants from donor nations.
  - The Bank borrows by selling bonds and notes directly to governments, their agencies, and central banks; proceeds are lent to developing countries at affordable interest rates.

- IMF
  - Not a bank intermediating between investors and recipients; resembles a credit union of members.
  - Resources presently valued at over $215 billion.
  - Resources come from quota subscriptions (membership fees) paid by the IMF’s 180 member countries; each member contributes an amount proportionate to its economic size and strength.
  - The IMF relies principally on quota subscriptions to finance operations; adequacy of resources is reviewed every five years.
  - Under special and highly restrictive circumstances the IMF may borrow from official entities (but not from private markets).

### Recipients of Funding
- World Bank
  - Lends only to creditworthy governments of developing nations; does not lend to wealthy countries or private individuals.
  - Eligibility:
    - IBRD: developing countries whose per capita GNP exceeds $1,305 may borrow from the IBRD.
      - IBRD loans carry an interest rate slightly above the market rate at which the Bank borrows and generally must be repaid within 12–15 years.
    - IDA: lends only to governments of very poor developing nations whose per capita GNP is below $1,305; in practice IDA loans go to countries with annual per capita incomes below $805.
      - IDA loans are interest free and have a maturity of 35 or 40 years.
  - The Bank assists projects for which capital is not available from other sources on reasonable terms and seeks to strengthen economies so they can graduate from reliance on Bank resources.

- IMF
  - All member nations, both wealthy and poor, have the right to financial assistance from the IMF.
  - IMF assistance supports members facing shortages of foreign exchange (balance of payments problems).
  - Money received from the IMF must normally be repaid within three to five years, and in no case later than ten years.
  - Interest rates are slightly below market rates but not as concessional as the World Bank’s IDA loans.

### World Bank Operations
- Focus: encourage poor countries to develop via technical assistance and funding for projects and policies; development viewed as a long-term, integrated endeavor.
- Historical composition of assistance:
  - First two decades: two thirds of assistance went to electric power and transportation projects.
  - More recent diversification: greater emphasis on agriculture, rural development, small-scale enterprises, urban development, safe water, waste-disposal facilities, health care, family-planning assistance, nutrition, education, and housing.
- Infrastructure shifts:
  - Transportation projects: greater attention to farm-to-market roads.
  - Power projects: increased provision of lighting and power for villages and small farms.
  - Industrial projects: greater emphasis on creating jobs in small enterprises; labor-intensive construction where practical.
  - Energy: support for oil, gas, coal, fuelwood, and biomass as alternative sources.
- Technical assistance:
  - Largest element of Bank-financed technical assistance is component of Bank loans or credits (running over $1 billion a year recently).
  - Increased financing for free-standing technical assistance and project preparation.
  - Bank serves as executing agency for UNDP-financed technical assistance in agriculture and rural development, energy, and economic planning.
  - Emphasis on institutional development and macroeconomic policy formulation in response to members’ economic climates.
- Project design and cofinancing:
  - Every project is designed in close collaboration with national governments and local agencies and often with other multilateral assistance organizations.
  - About half of all Bank-assisted projects also receive cofinancing from official sources (governments, multilateral financial institutions, export-credit agencies) and private sources (commercial banks).
- Graduation:
  - Graduation from IBRD and IDA has occurred for many years.
  - Of the 34 very poor countries that borrowed from IDA during the earliest years, more than two dozen have graduated.
  - About 20 countries that formerly borrowed from IBRD no longer do so (example: Japan borrowed from the IBRD for a period of 14 years; now the IBRD borrows large sums in Japan).

### IMF Operations
- The IMF has gone through two distinct phases in its 50-year history.
- (Text for subsequent details of IMF operations continues beyond this section.)

*Source: imf-wb-how-do-they-differ - Section 1 — https://www.imf.org/-/media/files/publications/miscellaneous/english/2016/imf-wb-how-do-they-differ.pdf*

### Section 2

### imf-wb-how-do-they-differ - Section 2

### IMF historical phases and core functions
- First phase ended in 1973: IMF oversaw adoption of general convertibility among major currencies, supervised a system of fixed exchange rates tied to the value of gold, and provided short-term financing to countries needing foreign exchange to keep currencies at par value or to adjust to changing economic circumstances.
- After five years of analysis and negotiation (1973–78), a second phase began with the amendment of the IMF constitution in 1978, broadening its functions to address challenges after the collapse of the par value system.
- The IMF’s three principal functions (post-1978):
  - Urge members to allow national currencies to be exchanged without restriction for currencies of other member countries. Exact status: As of May 1995, 101 members had agreed to full convertibility of their national currencies.
  - Supervise economic policies that influence members’ balance of payments in a legalized flexible exchange rate environment; supervision is principally advisory, involving regular consultations (usually once a year) to analyze economic positions and warn of actual or potential problems.
  - Provide short- and medium-term financial assistance to members with temporary balance of payments difficulties, supplying convertible currencies to augment dwindling foreign exchange reserves only in return for commitments to reform the economic policies that caused the problem.

### How the IMF assists members — mechanisms and example
- Assistance is opened by a member’s balance of payments situation; members may apply to the IMF by virtue of the Articles of Agreement when payments and receipts with other nations fall out of rough balance.
- Typical IMF-supported program elements (illustrated with an agricultural economy example):
  - Raise producer prices paid to farmers to encourage agricultural production and reverse migration to cities.
  - Lower interest rates to expand the supply of credit.
  - Adjust the currency to reflect world prices, discouraging imports and raising export competitiveness.
- IMF financial assistance:
  - Lends money during disruptive, costly reforms to subsidize the transition period.
  - Monitors economic progress closely, provides technical assistance and consultative services to ensure funds are used productively.
- IMF nonfinancial assistance:
  - Technical assistance in organizing central banks, establishing and reforming tax systems, and setting up agencies to gather and publish economic statistics.

### IMF instruments and resources (exact figures preserved)
- SDRs (special drawing rights):
  - The IMF is authorized to issue SDRs as a fiduciary asset to provide members additional liquidity.
  - To date the IMF has issued slightly over 21.4 billion SDRs, presently valued at about U.S. $30 billion.
- Financial resource structure:
  - SDR 21.4 billion has been issued to member countries in proportion to their quotas.
  - Fully paid-in quotas now totaling SDR 145 billion (about $215 billion).
- Institutional capacity:
  - IMF has a staff of 2,300 from 180 member countries.

### IMF role assessment and evolution
- Measuring IMF success is difficult because much of its work consists of averting or containing financial crises.
- Noted accomplishments include containing the debt crisis of the 1980s and assisting transitions to market-based economies in countries of the former Soviet Union and responding to the Mexican peso crisis in 1994.
- The IMF has been strengthening supervision of members’ economic policies and holds provisions in its Articles of Agreement that would allow a more active role should the world community choose stricter management of flexible exchange rates or a return to stable exchange rates.

### World Bank focus and comparative statistics
- World Bank objectives and resources:
  - Seeks to promote economic development of the world’s poorer countries through long-term financing of development projects and programs.
  - Provides special assistance to the poorest developing countries through the International Development Association (IDA) where per capita GNP is less than $865 a year.
  - Encourages private enterprise through the International Finance Corporation (IFC).
  - Acquires most financial resources by borrowing on the international bond market.
  - Has an authorized capital of $184 billion, of which members pay in about 10 percent.
  - Has a staff of 7,000 from 179 member countries.
- Lending composition:
  - Around 75 percent of the Bank’s lending is applied to specific projects dealing with roads, dams, power stations, agriculture, and industry.
  - Since the early 1980s the Bank expanded into structural- and sector-adjustment loans to help countries adjust economic policies and structures in the face of balance of payments problems.

### Convergence and cooperation between IMF and World Bank
- Drivers of closer cooperation:
  - Recognition that long-term development accelerates only when sound underlying financial and economic policies are in place.
  - Recognition that unsound policies are often rooted in long-term structural inefficiencies requiring protracted reforms.
  - The oil crisis of the mid-1970s and the debt crisis of the early 1980s prompted the IMF to lengthen and enlarge financial assistance beyond short-term lending, increasing the rationale for cooperation with the World Bank.
- Areas of coordinated action:
  - Structural- and sector-adjustment loans from the Bank often accompany IMF financial assistance programs.
  - Both institutions encourage other lenders, private and official, to cofinance projects and mobilize credits for countries in need.
  - Regular and frequent interaction between Bank economists/loan officers and IMF staff working on the same country underpins cooperation; Bank offers a longer-term structural view, IMF offers day-to-day balance of payments and integration perspective.
- Formalized concessional financing arrangements:
  - IMF procedures enable it to make available up to $12 billion to about 70 poor member countries that adjust the structure of their economies to improve balance of payments and foster growth.
  - The Bank joins the IMF by providing additional money from IDA.
  - An extra $7 billion was pledged by various governments and international agencies for cofinancing programs arranged by the Bank for low-income, debt-distressed countries of the region.
- Resulting institutional balance:
  - The Bank and IMF have distinct mandates but increasing overlap in focus—Bank on long-term structural reform, IMF on balance of payments and structural reform—making coordinated programs essential to integrate economies into the international monetary and financial system while encouraging economic expansion.

*International Monetary Fund — imf-wb-how-do-they-differ - Section 2*

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_Source: https://www.imf.org/-/media/files/publications/miscellaneous/english/2016/imf-wb-how-do-they-differ.pdf_