World Bank

[WORLD BANK ORGANIZATION]

2015Hailey College of Commerce

MC13-091MC13-062

World Bank OrganizationMC13 – 091MC13 – 062

WORLD BANKThe World Bank is a United Nations international financial institution that provides loans to

developing countries for capital programs. The World Bank is a component of the World Bank Group,

and a member of the United Nations Development Group. The World Bank's official goal is the

reduction of poverty. According to its Articles of Agreement, all its decisions must be guided by a

commitment to the promotion of foreign investment and international trade and to the facilitation of

capital investment.

Motto of the World Bank

Working for a World Free of Poverty

Profile of the World Bank

Formation July 1944 (70 years ago)Type International Financial OrganizationLegal Status TreatyPurpose CreditingHeadquarters Washington D.C., United StatesCo-ordinates of Geo Tagging 38.53° North ; 77.02° WestRegion of Operation WorldwideMembership 188 Countries (IBRD) 172 countries (IDA)Languages Arabic, Chinese, English, French, Russian, SpanishPresident Jim Yong KimMain Organ Boards of DirectorsParent Organization World Bank Group

World Bank GroupThe World Bank is not to be confused with the United Nations World Bank Group, a member of

the United Nations Economic and Social Council, and a family of five international organizations that make leveraged loans to poor countries.

(i) International Bank for Reconstruction and Development (IBRD)(ii) International Development Association (IDA)(iii) International Finance Corporation (IFC)(iv) Multilateral Investment Guarantee Agency (MIGA)(v) International Centre for Settlement of Investment Disputes (ICSID)


HistoryLord Keynes (right) and Harry Dexter White are the "founding fathers" of both the World Bank

and the International Monetary Fund (IMF). The World Bank was created at the 1944 Bretton Woods Conference, along with three other institutions, including the International Monetary Fund (IMF). The World Bank and the IMF are both based in Washington, D.C., and work closely with each other.

The Gold Room at the Mount Washington Hotel where the IMF and World Bank were established although many countries were represented at the Bretton Woods Conference, the United States and United Kingdom were the most powerful in attendance and dominated the negotiations.

1944–1968Before 1968, the reconstruction and development loans provided by the World Bank were

relatively small. The Bank's staff was aware of the need to instill confidence in the bank. Fiscal

conservatism ruled, and loan applications had to meet strict criteria.

The first country to receive a World Bank loan was France. The Bank's president at the time,

John McCloy, chose France over two other applicants, Poland and Chile. The loan was for US$250

million, half the amount requested, and it came with strict conditions. France had to agree to produce a

balanced budget and give priority of debt repayment to the World Bank over other governments. World

Bank staff closely monitored the use of the funds to ensure that the French government met the

conditions. In addition, before the loan was approved, the United States State Department told the

French government that its members associated with the Communist Party would first have to be

removed. The French government complied with this diktat and removed the Communist coalition

government. Within hours, the loan to France was approved. When the Marshall Plan went into effect

in 1947, many European countries began receiving aid from other sources. Faced with this competition,

the World Bank shifted its focus to non-European countries. Until 1968, its loans were earmarked for

the construction of income-producing infrastructure, such as seaports, highway systems, and power

plants that would generate enough income to enable a borrower country to repay the loan.

1968–1980From 1968 to 1980, the bank concentrated on meeting the basic needs of people in the

developing world. The size and number of loans to borrowers was greatly increased as loan targets

expanded from infrastructure into social services and other sectors. These changes can be

attributed to Robert McNamara, who was appointed to the presidency in 1968 by Lyndon B.

Johnson. McNamara imported a technocratic managerial style to the Bank that he had used as

United States Secretary of Defense and President of the Ford Motor Company. McNamara shifted

bank policy toward measures such as building schools and hospitals, improving literacy and

agricultural reform. McNamara created a new system of gathering information from potential


borrower nations that enabled the bank to process loan applications much faster. To finance more

loans, McNamara told bank treasurer Eugene Rotberg to seek out new sources of capital outside of

the northern banks that had been the primary sources of bank funding. Rotberg used the global

bond market to increase the capital available to the bank. One consequence of the period of

poverty alleviation lending was the rapid rise of third world debt. From 1976 to 1980 developing

world debt rose at an average annual rate of 20%.In 1980, the World Bank Administrative Tribunal

was established to decide on disputes between the World Bank Group and its staff where allegation

of non-observance of contracts of employment or terms of appointment had not been honored.

1980–1989In 1980, McNamara was succeeded by US President Jimmy Carter's nominee, A.W. Clausen.

Clausen replaced many members of McNamara's staff and instituted a new ideological focus. His 1982

decision to replace the bank's Chief Economist, Hollis B. Chenery, with Anne Krueger was an indication

of this new focus. Krueger was known for her criticism of development funding and for describing

Third World governments as "rent-seeking states." During the 1980s, the bank emphasized lending to

service Third-World debt, and structural adjustment policies designed to streamline the economies of

developing nations. UNICEF reported in the late 1980s that the structural adjustment programs of the

World Bank had been responsible for "reduced health, nutritional and educational levels for tens of

millions of children in Asia, Latin America, and Africa".

1989–presentBeginning in 1989, in response to harsh criticism from many groups, the bank began including

environmental groups and NGOs in its loans to mitigate the past effects of its development policies that

had prompted the criticism. It also formed an implementing agency, in accordance with the Montreal

Protocols, to stop ozone-depletion damage to the Earth's atmosphere by phasing out the use of 95% of

ozone-depleting chemicals, with a target date of 2015. Since then, in accordance with its so-called "Six

Strategic Themes," the bank has put various additional policies into effect to preserve the environment

while promoting development. For example, in 1991, the bank announced that to protect against

deforestation, especially in the Amazon, it would not finance any commercial logging or infrastructure

projects that harm the environment.

In order to promote global public goods, the World Bank tries to control communicable

disease such as malaria, delivering vaccines to several parts of the world and joining combat forces. In

2000, the bank announced a "war on AIDS", and in 2011, the Bank joined the Stop Tuberculosis

Partnership. Less recently, a project in Seychelles to promote local tourism by the name of project

MAGIC was launched in 2010. Its successor project TIME was scheduled to be launched in 2012.


Traditionally, based on a tacit understanding between the United States and Europe, the

president of the World Bank has always been selected from candidates nominated by the United

States. In 2012, for the first time, two non-US citizens were nominated. On 23 March 2012, U.S.

President Barack Obama announced that the United States would nominate Jim Yong Kim as the next

president of the Bank. Jim Yong Kim was elected on 27 April 2012.

Organization and Structure:The organization of the bank consists of the Board of Governors, the Board of Executive

Directors and the Advisory Committee, the Loan Committee and the president and other staff

members. All the powers of the bank are vested with the Board of Governors who are supreme

policy is making body of the bank. The board consists of one Governor and one Alternative Governor

appointed for five years by each member country. Each Governor has the voting power which is related

to the financial contribution of the Government which he represents.

The Board of Executive Directors consists of 21 members, 6 of them are appointed by the six

largest shareholders, namely the USA, the UK, West Germany, France, Japan and India. The rest of

the 15 members are elected by the remaining countries. Each Executive Director holds voting power

in proportion to the shares held by his Government. The board of Executive Directors meets

regularly once a month to carry on the routine working of the bank. The president of the bank is

pointed by the Board of Executive Directors. He is the Chief Executive of the Bank and he is

responsible for the conduct of the day-to-day business of the bank. The Advisory committees

appointed by the Board of Directors. It consists of 7 members who are expects in different branches

of banking. There is also another body known as the Loan Committee. This committee is consulted

by the bank before any loan is extended to a member country

MembershipThere are 184 member countries that are shareholders in the IBRD, which is the primary arm of

the WBG. To become a member, however, a country must first join the International Monetary Fund

(IMF). The size of the World Bank's shareholders, like that of the IMF's shareholders, depends on the

size of a country's economy. Thus, the cost of a subscription to the World Bank is a factor of the quota

paid to the IMF.

There is an obligatory subscription fee, which is equivalent to 88.29% of the quota that a

country has to pay to the IMF. In addition, a country is obligated to buy 195 World Bank shares

(US$120,635 per share, reflecting a capital increase made in 1988). Of these 195 shares, 0.60% must be

paid in cash in U.S. dollars while 5.40% can be paid in a country's local currency, in U.S. dollars, or in

non-negotiable non-interest bearing notes. The balance of the 195 shares is left as "callable capital,"


meaning the World Bank reserves the right to ask for the monetary value of these shares when and if

necessary. A country can subscribe a further 250 shares, which do not require payment at the time of

membership but are left as "callable capital." (Learn more about the IMF in An Introduction to the

International Monetary Fund.)

The president of the World Bank comes from the largest shareholder, which is the United States, and

members are represented by a Board of Governors. Throughout the year, however, powers are delegated to

a board of 24 executive directors (EDs). The five largest shareholders - the U.S., U.K., France, Germany and

Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as

groups of constituencies. Of these 19, however, China, Russia and Saudi Arabia have opted to be single

country constituencies, which mean that they each have one representative within the 19 EDs. This

decision is based on the fact that these countries have large, influential economies, which requires that

their interests be voiced individually rather than diluted within a group. The World Bank gets its

funding from rich countries as well as from the issuance of bonds on the world's capital markets.

Capital Resources of World Bank:The initial authorized capital of the World Bank was $ 10,000 million, which was divided in 1

lakh shares of $ 1 lakh each. The authorized capital of the Bank has been increased from time to time

with the approval of member countries. On June 30, 1996, the authorized capital of the Bank was $

188 billion out of which $ 180.6 billion (96% of total authorized capital) was issued to member

countries in the form of shares. Member countries repay the share amount to the World Bank in the

following ways:

1. 2% of allotted share are repaid in gold, US dollar or Special Drawing Rights (SDR).

2. Every member country is free to repay 18% of its capital share in its own currency.

3. The remaining 80% share deposited by the member country only on demand by the World

Bank.

Objectives:The following objectives are assigned by the World Bank:

To provide long-run capital to member countries for economic reconstruction and

development.

To induce long-run capital investment for assuring Balance of Payments (BoP)

equilibrium and balanced development of international trade.

To provide guarantee for loans granted to small and large units and other projects


of member countries.

To ensure the implementation of development projects so as to bring about a smooth

transference from a war-time to peace economy.

To promote capital investment in member countries by the following ways;


a) To provide guarantee on private loans or capital investment.

b) If private capital is not available even after providing guarantee, then IBRD

provides loans for productive activities on considerate conditions

FUNCTIONS AND ROLE OF WORLD BANK

Sustainable GrowthThe World Bank's studies indicate that approximately 1.4 billion people live on $1.25 or less a

day. With the rising food prices exacerbated by civil conflict, hunger and disease plagues many of these

nations, making it hard for them to develop sustainable growth programs. Through its International

Development Association, the World Bank is funding agricultural production programs and developing

power, transportation, water, and information and communication technologies.

Post-Conflict and Fragile StatesConflict generated through war has afflicted many of the world's poorest countries. An

estimated 80 percent of the world's 20 poorest countries have experienced a major war in the past 15

years. Even when those wars end, the fragile state of peace can end at any time, plunging the countries

back into chaos. The World Bank recognizes that conflict-prevention and reconstruction support are

among the most effective ways of fighting poverty. In Rwanda, for example, the World Bank helped fund

the Rwanda Demobilization and Reintegration Program to provide assistance to ex-soldiers on both

sides of the Rwandan conflict to reintegrate into society through job programs and education.

Middle Income CountriesThough middle-income countries don't have all the challenges associated with the poorest

nations, they do have concentrations of poverty especially among indigenous ethnic populations.

The World Bank invests in infrastructure and essential services to help these countries reform

policies and provide development education for their poorest citizens. In Brazil, the World Bank's

Bolsa Familia Program reaches 46 million low-income people by providing funds to buy food,

school supplies and clothes for children.

Knowledge and LearningPoor countries rely on the World Bank to help them evaluate their development knowledge

through reports, analytical tools, data, conferences and the Internet. The World Bank is developing

an online data platform that will allow countries to access information. One example is the World

Bank's 2008 report on how technological progress since the 1990s has helped pull millions of people

out of poverty. The report cited the use of mobile phones, computers and the Internet as easy-to-use


technologies that can be set up in poor countries with private investment, whereas older

technologies required government funding.

The Arab WorldThe World Bank believes that to properly take advantage of potential for growth and

development, the Arab world must learn to better integrate itself into the global economy. The region

suffers from lack of economic diversity, conflict and water scarcity, and in an effort to combat some of

these issues, the World Bank and the League of Arab States has founded the Arab World Initiative.

This initiative has three key components: infrastructure projects, enterprise development, and human

development through improving the quality of education. The World Bank has committed $100

million as initial funding for micro, small and medium enterprises, lending money directly to people in

Arab countries to start and sustain their own businesses.

Adapting to the TimesAs mentioned earlier, the main function of the WBG is to eliminate poverty and to provide

assistance to the poor by offering loans, policy advice and technical assistance. As such, the countries

receiving aid are learning new ways to function. Over time, however, it has been realized that

sometimes as a nation develops, it requires more aid to work its way through the development

process. This has resulted in some countries accumulating so much debt and debt service that

payments become impossible to meet. Many of the poorest countries can receive accelerated debt

relief through the Heavily Indebted Poor Countries scheme, which reduces debt and debt service

payments while encouraging social expenditure

Global Partnerships and InitiativesThe World Bank has been assigned temporary management responsibility of the Clean

Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as

quickly as possible, but this may not continue after UN's Copenhagen climate change conference in

December 2009, because of the Bank's continued investment in coal-fired power plants. Together with

the WHO, the World Bank administers the International Health Partnership (IHP+). IHP+ is a group of

partners committed to improving the health of citizens in developing countries. Partners work together

to put international principles for aid effectiveness and development cooperation into practice in the

health sector. IHP+ mobilizes national governments, development agencies, civil society and others to

support a single, country-led national health strategy in a well-coordinated way.

Climate ChangeWorld Bank President Jim Yong Kim said in 2012 that:


“A 4 degree warmer world can, and must be, avoided – we need to hold warming below 2 degrees ....

Lack of action on climate change threatens to make the world our children inherit a completely different

world than we are living in today. Climate change is one of the single biggest challenges facing

development, and we need to assume the moral responsibility to take action on behalf of future

generations, especially the poorest.”

A World Bank report into Climate change in 2012 noted that: "Even with the current

mitigation commitments and pledges fully implemented, there is roughly a 20 percent likelihood of

exceeding 4°C by 2100." This is despite the fact that the "global community has committed itself to

holding warming below 2°C to prevent 'dangerous' climate change"". Furthermore: "A series of recent

extreme events worldwide highlight the vulnerability of all countries. ... No nation will be immune to

the impacts of climate change."

The World Bank doubled its aid for climate change adaptation from $2.3bn (£1.47bn) in 2011 to

$4.6bn in 2012. The planet is now 0.8 °C warmer than in pre-industrial times. It says that 2 °C warming

will be reached in 20 to 30 years.

Food securityGlobal Food Security Program: Launched in April 2010, six countries alongside the Bill and

Melinda Gates Foundation have pledged $925 million for food security. Till date the program has helped

8 countries, promoting agriculture, research, trade in agriculture, etc. Launched Global Food Crisis

Response Program: Given grants to approximately 40 nations for seeds, etc. for improving productivity.

In process of increasing its yearly spending for agriculture from $4 billion to $6 billion – $8 billion. Runs

several nutrition programs across the world, e.g., vitamin A doses for children, school meals, etc.

Clean Air InitiativeClean Air Initiative (CAI) is a World Bank initiative to advance innovative ways to improve air

quality in cities through partnerships in selected regions of the world by sharing knowledge and

experiences. It includes electric vehicles.

Open Data initiativeThe World Bank collects and processes large amounts of data and generates them on the basis

of economic models. These data and models have gradually been made available to the public in a way

that encourages reuse, whereas the recent publications describing them are available as open access

under a Creative Commons Attribution License, for which the bank received the SPARC Innovator 2012

award.


Open Knowledge RepositoryThe World Bank hosts the Open Knowledge Repository (OKR) as an official open access

repository for its research outputs and knowledge products.

Other areas of focusAnother issue on which the Bank has recently been focusing has presented itself as an

endangerment to a country's livelihood: support programs for HIV/AIDS. The WBG has also been

focusing on reducing the risk of projects by means of better appraisal and supervision mechanisms as

well as a multidimensional approach to overall development. (This includes not only lending but also

support for legal reform, educational programs, environmental safety, anti-corruption measures and

other types of social development.)

TRAINING WIN

World Bank InstituteThe World Bank Institute (WBI) creates learning opportunities for countries, World Bank staff

and clients, and people committed to poverty reduction and sustainable development. WBI's work

program includes training, policy consultations, and the creation and support of knowledge networks

related to international economic and social development. The World Bank Institute (WBI) can be

defined as a "global connector of knowledge, learning and innovation for poverty reduction". It aims

to inspire change agents and prepare them with essential tools that can help achieve development

results. WBI has four major strategies to approach development problems: innovation for

development, knowledge exchange, leadership and coalition building, and structured learning.

World Bank Institute (WBI) was formerly known as Economic Development Institute (EDI),

established on 11 March 1955 with the support of the Rockefeller and Ford Foundations. The

purpose of the institute was to serve as provide an open place where senior officials from developing

countries could discuss development policies and programs. Over the years, EDI grew significantly

and in 2000, the Institute was renamed as the World Bank Institute. Currently Sanjay Pradhan is the

Vice President of the World Bank Institute.

Global Development Learning NetworkThe Global Development Learning Network (GDLN) is a partnership of over 120 learning centers

(GDLN Affiliates) in nearly 80 countries around the world. GDLN Affiliates collaborate in holding events

that connect people across countries and regions for learning and dialogue on development issues.

GDLN clients are typically NGOs, government, private sector and development agencies who find that


they work better together on sub regional, regional or global development issues using the facilities and

tools offered by GDLN Affiliates. Clients also benefit from the ability of Affiliates to help them choose

and apply these tools effectively, and to tap development practitioners and experts worldwide. GDLN

Affiliates facilitate around 1000 videoconference-based activities a year on behalf of their clients,

reaching some 90,000 people worldwide. Most of these activities bring together participants in two or

more countries over a series of sessions. A majority of GDLN activities are organized by small

government agencies and NGOs

GDLN Asia PacificThe GDLN in the East Asia and Pacific region has experienced rapid growth and Distance Learning

Centers now operate, or are planned in 20 countries: Australia, Mongolia, Cambodia, China, Indonesia,

Singapore, Philippines, Sri Lanka, Japan, Papua New Guinea, South Korea,

Thailand, Laos, Timor Leste, Fiji, Afghanistan, Bangladesh, India, Nepal and New Zealand. With over 180

Distance Learning Centers, it is the largest development learning network in the Asia and Pacific region.

The Secretariat Office of GDLN Asia Pacific is located in the Center of Academic Resources of

Chulalongkorn University, Bangkok, Thailand. GDLN Asia Pacific was launched at the GDLN's East Asia

and Pacific regional meeting held in Bangkok from 22 to 24 May 2006. Its vision is to become "the

premier network exchanging ideas, experience and know-how across the Asia Pacific Region". GDLN

Asia Pacific is a separate entity to The World Bank. It has endorsed its own Charter and Business Plan

and, in accordance with the Charter, a GDLN Asia Pacific Governing Committee has been appointed.

The committee comprises China (2), Australia (1), Thailand (1), The World Bank (1) and finally, a

nominee of the Government of Japan (1). The organization is currently hosted by Chulalongkorn

University in Bangkok, Thailand, founding member of the GDLN Asia Pacific.

The Governing Committee has determined that the most appropriate legal status for the GDLN

AP in Thailand is a "Foundation". The World Bank is currently engaging a solicitor in Thailand to process

all documentation in order to obtain this legal status.

GDLN Asia Pacific is built on the principle of shared resources among partners engaged in a

common task, and this is visible in the organizational structures that exist, as the network evolves.

Physical space for its headquarters is provided by the host of the GDLN Centre in Thailand –

Chulalongkorn University; Technical expertise and some infrastructure is provided by the Tokyo

Development Learning Centre (TDLC); Fiduciary services are provided by Australian National University

(ANU) Until the GDLN Asia Pacific is established as a legal entity tin Thailand, ANU, has offered to assist

the governing committee, by providing a means of managing the inflow and outflow of funds and of

reporting on them. This admittedly results in some complexity in contracting arrangements, which need


to be worked out on a case by case basis and depends to some extent on the legal requirements of the

countries involved.

The JUSTPAL NetworkA Justice Sector Peer-Assisted Learning (JUSTPAL) Network was launched in April 2011 by the

Poverty Reduction and Economic Management (PREM) Department of the World Bank’s Europe and

Central Asia (ECA) Region. The JUSTPAL objective is to provide an online and offline platform for justice

professionals to exchange knowledge, good practices and peer-driven improvements to justice systems

and thereby support countries to improve their justice sector performance, quality of justice and service

delivery to citizens and businesses.

The JUSTPAL Network includes representatives of judiciaries, ministries of justice,

prosecutors, anti-corruption agencies and other justice-related entities from across the globe. The

Network currently has active members from more than 50 countries. To facilitate fruitful exchange of

reform experiences and sharing of applicable good practices, the JUSTPAL Network has organized its

activities under (currently) five Communities of Practice (COPs):

i. Budgeting for the Justice Sector;

ii. Information Systems for Justice Services;

iii. Justice Sector Physical Infrastructure;

iv. Court Management and Administration;

v. Prosecution and Anti-Corruption Agencies.

PAKISTAN and WORLD BANK

DEVELOPMENT CHALLENGESPoverty remains a serious concern in Pakistan. According to the rebased GDP numbers, the per

capita income comes to US$720; poverty rates, which had fallen substantially in the 1980s and early

1990s, started to rise again towards the end of the decade. Though complete data from the recent

Integrated Household Survey is not yet available, it is evident that a large segment of the population

lives in poverty. More importantly, differences in income per capita across regions have persisted or

widened. Poverty varies significantly among rural and urban areas and from province to province, from

a low of 24 percent in urban Sindh to 51 percent in rural Sindh. Pakistan has grown much more than

other low-income countries, but has failed to achieve social progress commensurate with its economic

growth. The educated and well-off urban population lives not so differently from their counterparts in

other countries of similar income range. However, the poor and rural inhabitants of Pakistan are being

left behind. For example, access to sanitation in Pakistan is 23 percent lower than in other countries


with similar income. Maternal mortality remains high at 450 per 100,000 live births. Gender gaps

remain in schooling, largely due to the rural areas where only 22 percent of girls above age 10 have

completed primary level or higher schooling as compared to 47 percent boys. While the PSLSMS

indicates an improvement in Net Enrolment Rate (NER), from 42% in 2001/02 to 52 per cent, it still

indicates that almost half of the primary school age cohort is currently out of school. While the NER

shows an insignificant gender gap in urban areas, NER for rural girls at 42 percent trails behind rural

boys’ NER of 53 percent. Meeting the vision embraced in the Millennium Development Goals by 2015

(including the reduction of infant and child mortality by two thirds and maternal mortality by three

quarters and halving the percentage of the population living in poverty) will require renewed efforts in

Pakistan. The World Bank’s assistance strategy is based on measurable outcomes using the MDGs as the

background for its engagement in Pakistan.

WORLD BANK ASSISTANCE TO PAKISTANThe World Bank's strategy is to support implementation of the Government of Pakistan’s own

Poverty Reduction Strategy Paper (PRSP) and to provide financing and technical assistance for both

economic and human development. The strategy is built around three main themes which correspond

to the pillars of the PRSP.

Sustaining High and Broad Based Growth, And Improving Competitiveness

Pakistan’s PRSP emphasizes the importance of sustaining rapid and broad-based economic

growth as the principle means of reducing poverty. While significant progress has been made in

reducing state intervention in the economy and improving the regulatory framework for private

business, firms continue to face significant policy, regulatory, and infrastructure constraints. To help

address these constraints and create an environment conducive to healthy private sector growth, the

Bank program will support legal and regulatory reforms to improve the business environment along with

investments in water, power, transport, and other infrastructure sectors.

Improving GovernanceImproving government performance is a central element of Pakistan’s poverty reduction

strategy. The Bank is assisting the government’s efforts in this area by supporting reforms in public

financial management and procurement; restructuring of the tax administration bureaucracy; support

for civil service reforms; and assistance to local and municipal governments to improve their capacity

for delivering public services.


Improving Lives and Protecting the VulnerableThe World Bank also supports Pakistan’s efforts to improve the lives of its citizens through

efforts to improve access to, and quality of, public services in education, health, electricity, water

supply, and sanitation, with an emphasis on addressing gender disparities. At the same time the Bank is

assisting in efforts to reduce vulnerability and poverty through effective safety nets

DIFFERENCES OF IMF AND WORLD BANKAlthough both IMF and World Bank have shared some common characteristics, however, they

remain distinct. The most obvious distinction is that World Bank is a development institution while IMF

is a cooperative institution (Driscoll, D.D., n.d.). The task that IMF needs to do is to monitor the process

of payments and receipts among its members’ nations. Not only that, each of them has their own

purpose, distinct structure, membership, decision making, tasks, sources of funding, recipients of

funding, IMF and World Bank’s operation.

PurposeThe establishment of IMF contributes to different purposes. In dealing with the unresolved

financial problems, unpredictable changes in the trading of national currencies’ value in which it can be

exchanged for foreign currencies. Besides, IMF also acts as a voluntary and cooperative institution. It

attracts its membership nations by giving up some of the controls towards them. It does not do harm

activities towards the membership nations and maintain the economic welfare of its member nations.

The IMF institution has set up the rule which is in the Articles of Agreement signed by all members;

make up a code of conduct. The guardian of the code of conduct is the IMF. The member nations are

allowed to exchange their currency to foreign currencies without restriction. IMF should be informed of

changes in monetary and financial policies which will bring implications to the economies of its

members’ nations. Stated in the code of conduct, they can modify the policies based on the advice of

the IMF. If its members’ nations are deficit in the funds, they can borrow money from IMF. Besides, it

receives reports on member’s economic policies and prospects. IMF discusses on it so that other

members will respond it in a right way and understand of the way to own their domestic policies.

Furthermore, IMF is required to maintain the orderly monetary system that will sustain economic

growth throughout the world.

World Bank also has different purposes and responsibilities. The international community

assigned World Bank as IBRD [2] (Driscoll, D.D., n.d.). Its primary role and responsibility is for financing

economic development. Besides, the World Bank’s first loan is for the Western Europe to restructure

the economies after the war. After these nations recover to their normal operations, the World Bank

changed its attention to the poorer nation which is developing countries. Moreover, the World Bank


wants to help the developing countries to enhance the progress of the social and economic

circumstances. It can help to move up the productivity of the developing countries. This can ensure that

their people may live a better life.

Size and StructureThe IMF is small and has no affiliates or subsidiaries. It has only about 2,300 staff members

(Driscoll, D.D., n.d.). Most of them work at headquarters in Washington, D.C. There are three small

offices in Paris, Geneva, and United Nations in New York. The staff members who work for

economists and financial aspects are professional staff members.

However, the World Bank is larger than the IMF and its structure is more complex. It has over

7,000 staff members which are three times larger than IMF. Not only that, it also maintains about 40

offices throughout the world. Most of its staffs work at headquarters which is located at Washington,

D.C. There are different expertise of staffs in the World Bank such as economists, engineers, urban

planners, lawyers, as well as experts in telecommunications, transportation, and education. The World

Bank has two organizations which are IBRD and International Development Association (IDA). World

Bank transfers fund from surplus unit in developing countries to the private enterprises.

MembershipCurrently, IMF has around 182 members throughout the world. The Board of Governors is

the highest authority (IMF and the World Bank, n.d.).Each country has two representatives which are

a Governor and an Alternate Governor. They meet once a year and votes are carried out through

mail. There is 24 member Board of Executive Directors monitors the day-to-day operations of the

IMF. Japan, USA, France, United Kingdom, and Germany are the first five nations that contribute to

the IMF. Each of them appoint one Executive Director, however, the remaining 19 are elected for

several nations. Nevertheless, in the World Bank, there are 187 member countries. If the country is

the member’s nation of the IMF, then it just can be considered the membership of the World Bank.

However, if it is not a member’s nation of the IMF, then it cannot be the member of the World Bank.

Same as the IMF, the World Bank also has Board of Governors. Each country will elect a

representative. They meet once a year. The day-to-day operations are managed by a board of 24

Executive Directors. The overall membership structure of World Bank is much like that of the IMF.

Decision Making PowerIn the IMF, if the member nation wants to make decision, it needs to base on its quota. If it has

higher quota, then it can have higher decision making power. The amount of quota mentioned here is

determined by the reserves, balance of payments and national income of the members’ nation. In


addition, it also decides the contribution of the nation to the IMF. The decision-making power of the

first five nations that contribute to the IMF and Saudi Arabia is about 40%. Nonetheless, there is less

than 5% of the decision making power of the entire continent of Africa (IMF and the World Bank, n.d.).

In the operations of World Bank, the Governors are delegating the decision making power to

the Executive Directors. The decisions are normally made by consensus rather than formal vote by the

Directors. Therefore, the World Bank policy is considered and decided by the Directors. Besides, the

Directors also approve the credit and loan proposals. They need to show all the reports to the

Governors during the annual meetings.

TasksThe IMF performs the task by prerequisite of short term loans which are reliant on the

structural adjustment programs (SAPs). This task is used for correcting a deficit, eliminating or easing

net export controls and foreign exchange investment, diminishing development in domestic money

supply, demolishing price controls, depreciating the currency, privatizing the firms which are publicly

owned, increasing taxes, reducing government spending, and abolishing subsidies. While performing

the tasks, the World Bank works closely with the IMF. It makes long term loans and repayable within 15

years. They are investing the projects which has viable rate of return. World Bank has used structural

adjustment lending to monitor the economic structure and if there are changes, they can follow up

easily. The World Bank’s plan is to reduce deficiencies that have the accumulating of the specific

country assessments and the strategies which make sure that the support and complement of the

World Bank’s projects and programs of the country.

Source of FundingThe IMF is not a bank and it does not act as intermediate between investors and recipients.

However, it has at its disposal resources which come from quota subscriptions, paid by IMF’s member

countries. They contribute certain amount of money based on their economic sizes and strengths. The

members of the IMF can share the same resources when they are in need, this can show that IMF acts

as a credit union. Even though under high restraining conditions the IMF borrows from official entities,

it relies on its quota subscriptions to carry out its operations. Every five years, the IMF will review the

amount of the resources.

World Bank has different sources from the IMF. The World Bank is an investment bank, acts as

intermediate between investors and recipients. The IBRD issues the bonds which have the greatest

rate to individuals and private institutions through market borrowing to acquire the extra funds. The

funds are used to lend to the financial development. The IDA is supported by agreement from

contributor nations. The major borrower in the capital market is the World Bank. It is also the biggest


nonresident borrower to all countries that sold issues. It sells bonds and notes to governments and

publics to raise funds. So, it can borrow money to other countries. The money that gets after the

borrowing is lent to developing countries at affordable interest rates to help them to finance their

projects and programs.

Recipients of FundingAll wealthy and poor member nations can have the opportunity to ask financial aid from the

IMF. The stable and arranged international monetary system is maintained and sustained by the IMF to

allow all participants in that system to accomplish their financial obligations to other participants. When

the IMF’s member nations experience a shortage of foreign exchange, they can access temporarily to

the pool of currencies of IMF to account for the balance of payments problem, however, it is not related

to the size of the economy or per capita GNP level. Throughout many years, nearly all IMF’s members’

nations that are from the smallest to the largest industrial countries have shares the same resources to

the IMF. They accepted the financial supports to surge them over the hard and difficult periods. The

money that lent by the IMF must be repaid between three to five years. Interest rates are below than

market rates. The members’ countries have been able to fix the economic policies by using the

resources from the IMF. They also want to re-establish growth without doing the activities that

damaging to other members’ economies.

In contrast, World Bank would not lend the money to neither wealthy countries nor private

individuals. It only lends to the developing nations and helps the governments to maintain their

economies. The worse the economy of the country is, the easier for the World Bank to lend the money

to those countries. The per capita GNP of developing countries exceeds $1,305 may borrow from the

IBRD (Driscoll, D. D., n.d.). The interest rates of these loans are higher than the market rate and the

country must do the repayment between 12 to 15 years. Not only that, only poor developing nations’

governments can borrow the loans that provided by the IDA. Those developing countries must have per

capita GNP less than $1,305 and annual per capita incomes below $865 (Driscoll, D. D., n.d.). IDA loans

are interest free and its maturity dates is 35 or 40 years.

CriticismsThe World Bank has long been criticized by non-governmental organizations, such as the

indigenous rights group Survival International, and academics, including its former Chief Economist

Joseph Stiglitz, Henry Hazlitt and Ludwig Von Mises.[45][46][47] Henry Hazlitt argued that the World

Bank along with the monetary system it was designed within would promote world inflation and "a

world in which international trade is State-dominated" when they were being advocated.[48] Stiglitz

argued that the so-called free market reform policies which the Bank advocates are often harmful to


economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or

in weak, uncompetitive economies.

One of the strongest criticisms of the World Bank has been the way in which it is governed.

While the World Bank represents 188 countries, it is run by a small number of economically powerful

countries. These countries (which also provide most of the institution's funding) choose the leadership

and senior management of the World Bank, and so their interests dominate the bank. Titus Alexander

argues that the unequal voting power of western countries and the World Bank's role in developing

countries makes it similar to the South African Development Bank under apartheid, and therefore a

pillar of global apartheid.

In the 1990s, the World Bank and the IMF forged the Washington Consensus, policies which

included deregulation and liberalization of markets, privatization and the downscaling of government.

Though the Washington Consensus was conceived as a policy that would best promote development, it

was criticized for ignoring equity, employment and how reforms like privatization were carried out.

Joseph Stiglitz argued that the Washington Consensus placed too much emphasis on the growth of

GDP, and not enough on the permanence of growth or on whether growth contributed to better living

standards.

The United States Senate Committee on Foreign Relations report criticized the World Bank and

other international financial institutions for focusing too much "on issuing loans rather than on

achieving concrete development results within a finite period of time" and called on the institution to

"strengthen anti-corruption efforts”. Criticism of the World Bank often takes the form of protesting as

seen in recent events such as the World Bank Oslo 2002 Protests, [53] the October Rebellion, and the

Battle of Seattle. Such demonstrations have occurred all over the world, even amongst the Brazilian

Kakapo people. Another source of criticism has been the tradition of having an American head the bank,

implemented because the United States provides the majority of World Bank funding. "When

economists from the World Bank visit poor countries to dispense cash and advice," observed The

Economist in 2012, "they routinely tell governments to reject cronyism and fill each important job with

the best candidate available. It is good advice. The World Bank should take it." Jim Yong Kim is the most

recently appointed president of the World Bank.

Structural adjustmentThe effect of structural adjustment policies on poor countries has been one of the most

significant criticisms of the World Bank. The 1979 energy crisis plunged many countries into economic

crisis. The World Bank responded with structural adjustment loans which distributed aid to struggling

countries while enforcing policy changes in order to reduce inflation and fiscal imbalance. Some of these

policies included encouraging production, investment and labor-intensive manufacturing, changing real


exchange rates and altering the distribution of government resources. Structural adjustment policies

were most effective in countries with an institutional framework that allowed these policies to be

implemented easily. For some countries, particularly in Sub-Saharan Africa, economic growth regressed

and inflation worsened. The alleviation of poverty was not a goal of structural adjustment loans, and the

circumstances of the poor often worsened, due to a reduction in social spending and an increase in the

price of food, as subsidies were lifted.

By the late 1980s, international organizations began to admit that structural adjustment policies

were worsening life for the world's poor. The World Bank changed structural adjustment loans, allowing

for social spending to be maintained, and encouraging a slower change to policies such as transfer of

subsidies and price rises.[60]:70 In 1999, the World Bank and the IMF introduced the Poverty Reduction

Strategy Paper approach to replace structural adjustment loans. The Poverty Reduction Strategy Paper

approach has been interpreted as an extension of structural adjustment policies as it continues to

reinforce and legitimize global inequities. Neither approach has addressed the inherent flaws within the

global economy that contribute to economic and social inequities within developing countries. By

reinforcing the relationship between lending and client states, many believe that the World Bank has

usurped indebted countries' power to determine their own economic policy.

Fairness of assistance conditionsSome critics, most prominently the author Naomi Klein, are of the opinion that the World Bank

Group's loans and aid have unfair conditions attached to them that reflect the interests, financial power

and political doctrines (notably the Washington Consensus) of the Bank and, by extension, the countries

that are most influential within it. Amongst other allegations, Klein says the Group's credibility was

damaged "when it forced school fees on students in Ghana in exchange for a loan; when it demanded

that Tanzania privatise its water system; when it made telecom privatization a condition of aid for

Hurricane Mitch; when it demanded labor "flexibility" in Sri Lanka in the aftermath of the Asian tsunami;

when it pushed for eliminating food subsidies in post-invasion Iraq.

Sovereign immunityThe World Bank requires sovereign immunity from countries it deals with. Sovereign immunity

waives a holder from all legal liability for their actions. It is proposed that this immunity from

responsibility is a "shield which [The World Bank] wants to resort to, for escaping accountability and

security by the people." As the United States has veto power, it can prevent the World Bank from taking

action against its interests.

World Bank

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