The International Monetary Fund and the World Bank

1. The InternationalMonetary Fundand the World Bank Jaclyn Williamson ∙ Jessica Phelan

2. What is the IMF? • The International Monetary Fund (IMF) • International organization that oversees the global financial system by following the economic policies of its 185 member nations • Particularly focuses on exchange rates, facilitating development, reducing poverty, and global cooperation. • Also offers financial and technical assistance to its members using funds deposited with the IMF from member nations • Last resort international lender • Not without stipulations

3. Brief History of the IMF • Formally created in July 1944 during the United Nations Monetary and Financial Conference in Bretton Woods, NH • Finalized on December 27, 1945 when 29 countries signed its Articles of Agreement • Headquarters is in Washington, DC

4. Membership • Currently 185 members • Any country can apply for membership • Quotas • A country can also withdraw from the IMF though this is rare • Ex: Venezuela (still a member)

5. Special Drawing Rates • Monetary unit for IMF and World Bank • After collapse of Bretton Woods System (1973), SDR redefined as a basket of four currencies: • Euro, Japanese yen, pound sterling, and U.S. dollar. • Calculated daily on the basis of exchange rates quoted at noon each day in the London Market • Allocations: • General • Special One-Time SDRs

6. Financial Crises and the IMF • 1976 Great Britain Financial Crisis • Asian Financial Crisis of 1997 • Current Economic Crisis

7. 1976 Financial Crisis in Great Britain • Investors became concerned that the pound was overvalued and that the government might devalue • A large scale sale of sterling ensued, which rapidly lost value against the dollar • Pound suffered from heavy inflation • IMF issues$3.9 Billion • Stipulations of Loan: • Heavy cuts in public expenditure (around a 20% cut in the budget deficit) • Improvement seen starting in 1977

8. Asian Financial Crisis of 1997 • Thailand, Indonesia and Korea hit the hardest • Key Issues: • Foreign investing, US, China, defaulting on debt, depreciation, and bankruptcies • IMF • Rescue Packages • US$35 Billion from IMF • US$77 Billion raised from other countries • Temporary credit • Structural Adjustment Packages (SAPs) • Criticism

9. Current Financial Crisis • Bankruptcy of Iceland in 2008 • Pakistan approved by IMF for $874 million loan • Other countries with SBA’s from the IMF: • Georgia, Ukraine, Hungary, Iceland, Latvia, Pakistan, Serbia, Belarus, and El Salvador • The SBA is designed to help countries address short-term balance of payments problems. • The length of a SBA is typically 12–24 months, • Repayment is due within 3¼-5 years

10. Controversy • The United States is the biggest shareholder in the IMF, holding nearly 18% in shares, and the IMF is generally considered a tool of the US Treasury. • Criticism of bailouts • Conditions added onto loans (SAPs) • Ex: Argentina

12. What is the World Bank? • The World Bank is a bank that provides assistance to developing countries with the goal being to reducing poverty and aid in their development. • Provides low-interest loans and interest-free credits and grants to developing countries • Made up of two Development Institutions: • International Bank for Reconstruction and Development (IBRD) • International Development Association (IDA).

13. The World Bank • Formation: December 1945 • Institutions: International Bank for Reconstruction and Development; International Development Association • Membership: 185 Countries • President: Robert Zoellick • Headquarters: Washington, D.C.

14. World Bank Group • The World Bank Group is not the same as the World Bank • Same President, Board of Directors, goals • The WBG includes the two institutions of the World Bank, and in addition consists of: • International Finance Corporation (IFC) • Multilateral Investment Guarantee Agency (MIGA) • International Centre for Settlement of Investment Disputes (ICSID)

15. History of the World Bank • Developed at the 1944 Bretton Woods conference in Bretton Woods, NH • Originally, just the International Bank for Reconstruction and Development was formed • First loans were for reconstruction of Europe after World War II • After, the Bank focused attention on developing countries • Has loaned over $330 billion to developing countries since its start

16. International Bank for Reconstruction and Development (IBRD) • Formed at the Bretton Woods Conference • Focuses its attention on middle-income and creditworthy poorer countries as opposed to developing countries • Loans with low interest rates

17. International Development Association (IDA) • Established in 1960 • Assists the world’s poorest countries • Interest-free credits and grants • Serves to complement the IBRD • Single largest source of donor funds for basic social service funds in developing countries

18. Membership and Leadership in the World Bank • There are 185 countries who are members in the World Bank • You must be a member of the IMF to be a member of the World Bank • The World Bank is run by the governments of the member countries • There is one president, and Executive Directors and a Board of Directors for each institution

19. Major Activities • Loans, Grants • Korea • Millenium Development Goals • Poverty Reduction Strategies • Reconstruction after political conflicts • Most recent operations

20. Criticisms of the World Bank • Structure • Corporate powers • Are they really reducing poverty? • Conditionalities • Criticisms of former President Paul Wolfowitz

21. Sources • McCallum, Bennett T. International Monetary Economics. New York: Oxford University Press, 1996. • The World Bank homepage: www.worldbank.org • “Head of World Bank Fraud Unit Resigns.”Steven R. Weisman. New York Times. (Late Edition (East Coast)). New York, N.Y.: Jan 17, 2008. pg. A.14 • “A World Bank without U.S. dominance; [Chicagoland Final Edition]” Kenneth Rogoff. Chicago Tribune. Chicago, Ill.: Apr 23, 2007. pg. 17 • http://www.brettonwoodsproject.org/item.shtml?x=320869 • http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm • http://www.twnside.org.sg/title/louder.htm • www.imf.org • http://news.yahoo.com/s/afp/20090330/wl_sthasia_afp/financeeconomyimfpakistanlead • http://www.nytimes.com/2008/10/10/business/worldbusiness/10icebank.html • http://www.normangirvan.info/wp-content/uploads/2009/03/imf-crisis-loans-chart-twn-march-2009.doc • Buira, Ariel. The IMF and the World Bank at sixty. London: Anthem, 2005