Saturday, 10 August 2013

The IMF and the World Bank

The International Monetary Fund (IMF) and the World Bank play major roles in running the world economy. Some people criticise the way in which these two organisations operate however.
 
The IMF was established to oversee the global financial system. It offers financial and technical assistance to its members, making it the international lender of last resort. One of its briefs is to renegotiate the terms of debt on behalf of nations in financial difficulties. To prevent the problem occurring again the IMF usually imposes conditions on its financial assistance. These conditions often include severe cuts in welfare and education spending by governments in developing countries and this has caused controversy.
 
The World Bank (International Bank for Reconstruction and Development) deals mainly with internal investment projects, usually in developing countries, with the stated aim of reducing poverty. Loans are set at the current market rate. However, one branch of the bank, known as the International Development Association (IDA), provides interest-free loans (with long repayment periods) to countries with very low per capita incomes. Since the 1990s the bank has claimed that it promotes sustainable development, with most funding going to small-scale projects. However, its critics argue that conditions attached to loans have not always had the effect of reducing poverty and dependency.

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