The document provides an overview of the International Monetary Fund (IMF) and World Bank. It discusses their origins, governance structures, purposes, operations, and criticisms. The IMF was established in 1944 at the Bretton Woods conference to promote international monetary cooperation and financial stability. The World Bank was also founded at Bretton Woods and includes the International Bank for Reconstruction and Development and other organizations that provide development financing. Both institutions have faced criticism for promoting neoliberal economic policies and ignoring social and environmental impacts of their projects.

1. International Monetary Fund and
World Bank
(History, Role and Future)
By
Sylvia Hany Habib

2. Contents
1.IMF, World Bank and the Force of History
a. Ten Events and That Have Shaped the Institution
b. Ten Ideas That Have Shaped the Institution
2.The International Monetary Fund
a. Governance, Organization and Purposes
b. How Does the IMF Achieve Its Goals?
c. Why Is the IMF Controversial?
3.The World Bank
a. Structure
b. Governance
c. The IBRD
d. International Development Association (IDA)
e. International Finance Corporation
f. Multilateral Investment Guarantee Agency (MIGA)
g. International Center for Settlement of Investment Disputes (ICSID)
h. Why Is the World Bank Controversial?
4. Debt Relief for Heavily Indebted Poor Countries (HIPC)
5.IMF and World Bank Annual Meeting in Tokyo 2012 Highlights
6. Egypt and IMF Reach Tentative Loan Deal

3. Briefed View 1/2
• During the Great Depression of the 1930s,
countries attempted to shore up their failing
economies by sharply raising barriers to foreign
trade.
• The IMF was conceived in 1944, when 45 countries
meeting in the town of Bretton Woods, in the United
States, agreed on a framework for international
economic cooperation, after 2nd world wear
• The IMF came into formal existence in 1945, when
its first 29 countries signed its Articles of
Agreement.
http://www.imf.org/external/about/histcoop.htm Accessed 3 November 2012

4. Briefed View 2/2
• The countries that joined the IMF agreed to keep their
exchange rates which called par value system—also known
as the Bretton Woods system—prevailed until 197
• By the early 1960s, the U.S. dollar's fixed value against gold,
under the Bretton Woods system of fixed exchange rates,
was seen as overvalued, Vietnam War gradually worsened
the overvaluation of the dollar
• The system dissolved between 1968 and 1973. 1971, U.S.
President Richard Nixon announced the "temporary"
suspension of the dollar's convertibility into gold
http://www.imf.org/external/about/histcoop.htm Accessed 3 November 2012

5. Ten Events and That Have Shaped IMF
and World Bank
1-The Paris
Peace
Conference
2-The Great
Depression
3- World War II
4-The Rise of
Multiple
Economic
Centers
5- The Cold
War
6- African
Independence
7-The Vietnam
War

6. 1-The Paris Peace Conference
• They created the League of Nations, but its
economic functions were poorly defined and
never did get into an effective role. They
created the International Labour Organization,
but its role was specialized and limited.
• The conference’s neglect of economics did
not result from a failure to understand the
importance of international trade for prosperity
and thus for maintaining the peace.
• It was very much on the minds of those who
were drawing up the designs for the new
institution

7. 2-The Great Depression
• The Depression amplified the negative
consequences of Versailles, as an implosion of
international trade interacted with domestic
policy errors to deflate both output and prices
around the world
• The article which sets the objective of using IMF
lending to provide member countries “with
opportunity to correct maladjustments in their
balance of payments without resorting to
measures destructive of national or international
prosperity”

8. 3- World War II
• The other major influence of the war on the IMF
was that it left the United States in virtual control
of the world economy. As a consequence, the
financial structure of the IMF would be based on
the U.S. dollar, rather than on an international
currency of its own making.
• Its lending power would be limited in size and
scope, and the Fund would lack most of the
powers of a central bank. Its headquarters would
be neither in London nor even in New York.

9. 4-The Rise of Multiple Economic Centers
• As the balance of economic and financial power
became more widely dispersed, more and more
currencies became fully convertible for current
account and even capita transactions.
• The IMF responded in 1969 by amending its
Articles and creating Special Drawing Rights
(SDRs) as a supplement to existing reserve
assets, second amendment, adopted in 1978,
that exchange rates among key currencies were
likely to float.

10. 5- The Cold War
• The obvious effect of the Cold War on the IMF
was this limitation on membership. In the
terminology of the period, it included the first
world and much of the third, but the second was
missing from the table.
• The IMF became largely a capitalist club that
helped stabilize market-oriented economies

11. 6- African Independence
• The emergence of Africa as a continent of
independent nations had a major effect on the
size and diversity of the IMF.
• The IMF now lends to low-income countries
primarily through ,the Poverty Reduction and
Growth Facility, and it coordinates that
assistance with the World Bank.
• To qualify for those loans, countries must
develop their own strategies for generating
economic growth and reducing poverty

12. 7-The Vietnam War
• The larger effect, however, was on the U.S.
economy and its external payments position.
• In combination with a sizeable increase in
domestic spending, With the dollar no longer
convertible into gold.

13. 8-Globalization of Financial Markets
• The importance of capital flows began to
increase in the 1950s as Europe countries
gradually reestablished convertibility, IMF
financing became quantitatively marginalized
for many potential borrowers, and weaken
the “credit union” character of the IMF as a
membership institution

14. 9-The International Debt Crisis
• The debt crisis had a transforming impact on
the IMF, catapulting it into the role of
international crisis manager.
• Previous international crises—Suez in 1956,
the breakdown of the official gold market in
1968, the oil shocks of the 1970s had
intensified the demand for IMF lending
without fundamentally changing the way the
IMF worked

15. 10-Collapse of Communism
• The fall of the Berlin wall in 1989 and the
dissolution of the Soviet Union in 1991
enabled the IMF at last to become a (nearly)
universal institution.
• In three years, membership increased from
152 countries to 172, the most rapid
increase since the influx of African members
in the 1960s, This development had little
impact on the philosophical underpinnings of
the Fund’s work.

16. Ten Ideas That Have Shaped IMF and
World Bank
The Case for
Floating
Exchange Rates
Monetarism
The Open-
Economy Macro
Model
The Monetary
Approach to the
Balance of
Payments
Keynesian
Macroeconomics
Inflation
Targeting
The Washington
Consensus

17. The International Monetary Fund

18. Governance
The IMF is controlled by its 187 member-
countries, and managed by a 24-person
Executive Board.
voting power is weighted based on the size of
the economy and therefore the quota allocation
of each country.
 Decisions are usually taken by consensus, but
the United States, as the IMF's major
shareholder, has the most influence in the
institution's policy-making.

19. Organization
The IMF's current managing director is Ms.
Christine Lagarde of France, who took office on
June 28, 2011. Each members of the executive
board runs a particular department of the IMF.
The IMF has a total of 2,300-2,600 employees,
mostly based in its Washington, D.C.
headquarters

20. Purposes
The Bretton Woods Conference set out six goals for the IMF which is valid till
today
1) Facilitate the cooperation of countries on monetary policy
2) Assist the liberalization of international trade by helping countries
increase their real incomes while lowering unemployment.
3) Help stabilize exchange rates between countries.
4) Maintain a multilateral system of payments that eliminates foreign
exchange restrictions.
5) Provide a safeguard to members of the IMF against balance of
payments crises
6) Try to reduce the effects of volatility in countries' balance of
payments accounts, the IMF helps assure that global trade and
financial relationships can continue at a steady rate without the risks of
global depressions like that of the 1930s.

21. How Does the IMF Achieve Its Goals?
• Surveillance
 Each year, the IMF sends economists to each of its member
countries to analyze the country's economic situation. The purpose
of such consultation is to provide an outside check on national
decisions that might have an affect on the international economic
system
• Financial Assistance
 Member countries with balance of payments problems can receive
credits and loans to pay off their obligations and readjust their
economic policies so that they will not face another crisis or near-
crisis,
• Technical Assistance
 The IMF dispatches its own experts and private consultants on
training missions to educate government officials and also runs the
IMF Institute in Washington, D.C. to provide courses for officials

22. Why Is the IMF Controversial?
• Since they were headquartered in Washington, D.C. the IFIs' strategy was
called the "Washington Consensus." As summarized by the World Bank,
with ten basic points, Critics attack four interrelated aspects of the
implementation of the Washington Consensus.
• First, critics say that the conditions placed on loans are too intrusive and
compromise the economic and political sovereignty of the receiving
countries.
• Second, critics say that the IMF imposed the policies of the Washington
Consensus on countries without understanding the distinct characteristics of
the countries that made those policies difficult to carry out, unnecessary, or
even counterproductive
• Third, critics say that the policies were imposed all at once, rather than in
an appropriate sequence
• Fourth, critics say that the IMF was not open to criticism or public oversight
when working on these policies, leading to arrogance and a lack of
connection to the reality on the ground in the affected countries

23. The World Bank

24. Organization
• The World Bank is the name that
has come to be used for the
International Bank for
Reconstruction and Development
(IBRD) founded at Bretton
Woods.
• The IBRD and the IDA focus
mainly on public sector monetary
policy and provide low-interest
loans, interest-free credit, and
grants to developing countries

25. Governance
• The governance of the World Bank is almost
identical to that of the IMF. The governors direct
the IBRD based on weighted voting rights that
are determined by each country's agreed annual
contributions to the World Bank. As in the IMF,
the United States is the largest contributor and
has the most weighted voting power, though as
a practical matter, decisions are made by
consensus.

26. The International Bank for Reconstruction
and Development (IBRD) 1/4
• The mission statement of the IBRD states that it
"aims to reduce poverty in middle-income and
creditworthy poorer countries by promoting
sustainable development, through loans,
guarantees, and non-lending-including analytical
and advisory-services."

27. The International Bank for Reconstruction
and Development (IBRD) 2/4
• The goals are as follows: Eradicate extreme
poverty and hunger, Achieve universal primary
education, Promote gender equality and
empower women, Reduce child mortality.
Improve maternal health, Combat HIV/AIDS,
malaria, and other diseases, Ensure
environmental sustainability, and Develop a
global partnership for development.

28. The International Bank for Reconstruction
and Development (IBRD) 3/4
• World Bank loans are conditioned on the World
Bank's approval of the investment plans and
schedule for the project and repayment of the
loans. The World Bank funds its loans by raising
money on the international bond market,
issuing bonds in its name to large institutional
international investors, such as banks and
pension funds.

29. The International Bank for Reconstruction
and Development (IBRD) 4/4
• As a non-profit institution, however, the World
Bank does not take any profit on the results of its
fundraising. Instead, it uses its profits to
subsidize its lending back to the countries whose
projects its finances. Only about half of the
World Bank's funding comes from grants by
members, and the rest comes from the World
Bank's own operations.

30. A need for new specialized
organizations
• As the World Bank expanded beyond its initial scope and
purpose of rebuilding Europe after the Second World
War, the World Bank grew through the creation of four
additional organizations
World Bank
ICSID
1966
MIGA
1988
IDA
1960
IFC
1956
IBRD
Investment through
syndications,
underwritings and
co-financing.
Long-term credits at
concessional rates to
the poorest country
Provides
guarantees
against risks
Provides
arbitration
services

31. International Development Association
(IDA)
• The IDA was organized by the World Bank in
1960 to provide additional financial assistance
to the poorest developing countries,
• These credits are zero-interest loans that have
longer payment periods of 35 to 40 years and
a grace period of ten years.
• These types of loans are offered to the poorest
countries to help them pursue their
development goals, sometimes despite
disease and conflict
• Examples of IDA projects: In Tanzania, since
1995, the IDA has allocated US $3.2 Billion,
which has caused an annual increase of an
average of five and six percent in the GDP,
and the GDP per capita has doubled. All of
this has greatly improved the standard of living

32. International Finance Corporation (IFC)
• The IFC was established in 1956 and is now the largest public
source of financial investment for private sector projects in
developing countries
• IFC provides private sector investment, helps companies acquire
additional financing in international markets, and provides technical
advice and assistance
• In Azerbaijan, Georgia, and Turkey,
the IFC is helping finance the
construction of an oil pipeline to
move up to million barrels of oil per
day from Baku, in Central Asia, to
Ceyhan, on Turkey's Mediterranean
coast

33. Multilateral Investment Guarantee
Agency (MIGA)
• MIGA was created in 1988 to provide risk-balancing insurance
services to foreign direct investment projects in developing countries.
• MIGA's activities, potentiate reduction of risks through insurance,
developing countries are encouraged to adopt policies that promote
investment.
• This combination of reform at the domestic level and insurance
coverage for investors is another important tool in the drive to reduce
poverty by the World Bank Group
• In Ecuador, MIGA is supporting
investors in the construction of a
new airport to serve the capital of
Quito to improve and expand
economic development and trade

34. International Center for Settlement of
Investment Disputes (ICSID)
• The World Bank established ICSID in
1966 to encourage both investors and
governments to undertake and receive
foreign direct investment by providing a
neutral dispute resolution system.
• The ICSID provides arbitration services
• ICSID is chaired by the president of the
World Bank, and the two organizations
are well integrated, with their annual
meetings being held in concert, and
with ICSID's operating expenses
coming from the World Bank Group's
budget.

35. Why Is the World Bank Controversial?
• Promoting the Washington Consensus through its close participation
with the IMF in lending only to programs that were heavily
conditioned.
• World Bank causes high debt among developing countries
• The World Bank is often accused of ignoring the environmental and
social impact of projects it supports.
• The World Bank also funded a dam-
building project in India that resulted
in the forced resettlement of people
the Narmada River Valley between
1978 and 1993.

36. The International Monetary Fund and the
World Bank at a Glance
International Monetary Fund World Bank
• oversees the international
monetary system
• seeks to promote the economic
development of the world's poorer
countries
• promotes exchange stability and
orderly exchange relations among
its member countries
• assists developing countries
through long-term financing of
development projects and
programs
• assists all members--both industrial
and developing countries--that find
themselves in temporary balance of
payments difficulties by providing
short- to medium-term credits
• provides to the poorest developing
countries whose per capita GNP is
less than $865 a year special
financial assistance through the
International Development
Association (IDA)
http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm accessed 10-2012

37. The International Monetary Fund and the
World Bank at a Glance con’t
International Monetary Fund World Bank
• supplements the currency reserves
of its members through the
allocation of SDRs (special drawing
rights); to date SDR 21.4 billion has
been issued to member countries in
proportion to their quotas
• encourages private enterprises in
developing countries through its
affiliate, the International Finance
Corporation (IFC)
• draws its financial resources
principally from the quota
subscriptions of its member
countries
• acquires most of its financial
resources by borrowing on the
international bond market
• has at its disposal fully paid-in
quotas now totaling SDR 145 billion
(about $215 billion)
• has an authorized capital of $184
billion, of which members pay in
about 10 percent
• has a staff of 2,300 drawn from 182
member countries
• has a staff of 7,000 drawn from 180
member countries
http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm accessed 10-2012

38. Debt Relief for Heavily Indebted Poor
Countries (HIPC)
• In 1996, the World Bank and IMF created the Debt Relief
for Heavily Indebted Poor Countries (HIPC) Initiative,
recognizing the need for debt relief from multilateral
institutions.
• The G-8 meeting in 2005 brought 100 percent
cancellations of debt owed to the African Development
Fund, the World Bank, and the IMF by 18 countries who
were eligible for the HIPC initiative.
• Most recently The (IMF) and the (IDA) have decided to
support US$ 2.1 billion in debt relief for Guinea,
representing a 66 % reduction of its future external debt
service over a period of 40 years,

39. IMF and World Bank Annual Meeting in
Tokyo 2012 Highlights
• The I.M.F. warned that economic stagnation in richer countries hurt
poorer ones,
• Bilateral borrowing agreements
• To implement the increase in IMF resources 10 bilateral borrowing
agreements
• Governance of the IMF
• No decision was reached on the review of the quota formula. However, the
member states reiterated their determination to complete the review by
January 2013.
• Strengthening financing opportunities for developing countries
• The member states unanimously welcomed the decision of the IMF’s
Executive Board to use the SDR 1.75bn
• Deauville Partnership
• Took place on the sidelines of the IMF’s annual meeting. The participants
decided to establish a “Transition Fund” worth US$250m to support the
Middle East and North African countries.

40. Egypt and IMF Reach Tentative Loan
Deal
• Egypt's request for the 22-month loan is
expected to be submitted to the IMF Executive
Board for approval in a few weeks.
• Egypt's economy has been battered by a sharp
drop in tourism and foreign investment.
• The country was long viewed as an emerging
market star with rapid economic expansion,
fuelled by decades of stability and the Middle
East's largest population.
http://online.wsj.com/article/SB10001424127887324352004578130723791212616.html accessed 24-11-2012

41. Egypt and IMF Reach Tentative Loan
Deal
• The program will give Egypt access to a total of
$14.5 billion in loans and deposits on favorable
terms from a range of bilateral and multilateral
donors, including the IMF.
• The erosion of foreign-exchange reserves has
prompted speculation that the central bank would
be forced to devalue the Egyptian pound, which
has been remarkably stable at close to 6 per dollar
since the revolution.
http://online.wsj.com/article/SB10001424127887324352004578130723791212616.html accessed 24-11-2012

42. THANK YOU
FOR TRYING
TO STAY
AWAKE