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 |