The World Bank and IMF
The institutions
The World Bank and International Monetary Fund (IMF) were set up
in 1944, to achieve different but complementary goals. The IMF
aims to keep international trade going and ensure exchange rates
remain stable.
It does this by providing short-term loans to countries
with balance of payments problems (where their imports exceed
their exports). The World Bank has the official name of 'International
Bank for Reconstruction and Development' and it makes loans for
long-term development. For the poorest countries, these are usually
at concessionary rates, repayable over 15 to 20 years.
Their organisation
Both institutions share the same approach for achieving their objectives
- which is to promote 'free' trade, unrestricted investment, and
private enterprise over the public sector.
Both institutions are
also run in the same way, in that the right of countries to vote
on policy is given according to the contributions they pay. For
example, the USA has a 15% of the voting share, but represents
only 5% of the population of World Bank member nations.
In the
IMF, the ten most industrialised countries have 53% of the
vote. Hence Southern voices are rarely heard.
Making loans
Loans are only made by the World Bank and IMF on condition that they
submit to strict 'structural adjustment progammes' (SAPs).
These
include conditions such as currency devaluation, privatising
state industries and agencies, and cutting public expenditure including
areas such as education, health and social welfare.
This approach
has been heavily criticised, in that the IMF does not
take account of each country's individual situation, and that the World Bank
fails to take account of the human and environmental needs in
its projects.
Furthermore, they should be made more democratic and
accountable to those countries affected by their policies.
Debt relief
Countries end up paying huge sums of money, yet never manage to pay
off their debts. In 1996 the Heavily Indebted Poor Country (HIPC)
initiative was started, which is a way of cancelling a country's
debt.
However, like the SAPs, there are many conditions attached – which
at times can increase poverty levels and slow down development
- and it only cancels debt that wasn't being paid. It still leaves
countries with a huge burden of debt service (annual interest and
principal repayments). The process is very slow and complex, and
the country receiving the relief has no say in the process.
NB Use World Bank and IMF logos (on their websites) between textboxes
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