World Bank vs. IMF

Difference Between World Bank and IMF

World Bank and IMF were found by John Maynard Keynes and even he believed that these two institutions have very confusing names and the institution which works as bank is called fund and the one which acts as fund is called bank. Most of us may not know the difference between the two.

There is lot of difference between these two UN agencies in terms of their roles, responsibilities and the reasons behind their establishment. Delegates from 44 allied nations thought about an agency to set commercial and financial relations between them under some agreement. These delegates gathered in Bretton Woods, Washington, US and gave final touch to the Bretton Woods agreement which led to the birth of IMF and World Bank.

These organizations were joined by many other countries. The role of IMF was to monitor the imbalances in payments in all the dealings after all the countries agreed to tie their currencies to the US dollar.

Later in 1971 US terminated the Bretton Woods agreement by terminating the convertibility of US dollar to gold and this lead to strengthening of the position of dollar in the international market as it became the sole backing of world currencies. US dollar is also a source of reserve currency for all the countries.

World Bank and IMF are different from each other and to understand the differences between then, following points can be very helpful.

  1. World Bank has the aim of eradicating poverty from the member countries by providing loans for economic development and development of infrastructure.

Role of IMF in broader terms overlapping with World Bank because even IMF aims to promote financial stability and employment in the member countries but its core responsibilities are looking into macro-economic policies of member countries and to see their affect on the exchange rates of their currencies. It also keeps an eye on the balance of payment problems of the member countries.

IMF is the biggest loan providing agency at international level which provides loans to the member countries at low rate of interest.

  1. Traditionally the president of World Bank comes from US while that of IMF from Europe.
  2. World bank takes up the cases of different countries at individual level and focuses mainly on taking up developmental activities and projects while IMF deals with broader aspects like exchange rates of currencies, international trade policies etc.
  3. World Bank is also concerned with the economic policies of a country and the way they spend the money given to them by World Bank for developmental activities while IMF is not involved with any of the member countries at individual level.

These differences are just for the sake of understanding these two agencies and their functions. In practical terms their roles and responsibilities overlap with each other.

 

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