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Difference between IMF and World Bank

We all have heard about the Indian Monetary Fund (IMF) and the World Bank in our economic classes. We have all learnt about how these two institutions help the country in raising the required funds. But are IMF and World Bank the same? No, definitely not. Both are different financial institutions providing funds to various countries. Now, as these two terms are different, let us look at the key differences between them.

1. IMF does not follow the international monetary system. The World Bank helps in the economic development in the poor and developing countries that do not have enough funds.
2. IMF helps to maintain orderly relations among its member countries. The World Bank helps poor countries by financing their projects and programs.
3. The Indian Monetary Fund helps several countries by providing short and medium-term credits. IMF also assists these countries that have difficulties in paying the funds borrowed. This financial institution provides funds to the poorest countries whose gross national income is very low (Rs. 60,000/- approx.).
4. The financial resources of IMF come from the quota subscription of the member countries. The World Bank raises the money and other required funds from the international bond market.
5. The IMF has a staff of around 2300 members from 182 countries. World Bank has a staff of around 7000 members across 189 countries.
6. IMF focuses on the economic stability of the member countries. The World Bank focuses on the economic development of the member countries.
7. IMF deals with various issues of macroeconomics and the financial sector. World Bank aims at reducing poverty and making the countries developed.

So these are the key differences between IMF and the World Bank. Now, let us discuss these two terms separately in detail.

The World Bank is made of five international institutions. These institutions are:

  • International Bank of Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC)
  • Multilateral Investment Guarantee Agency (MIGA)
  • International Centre for Settlement of Investment Disputes (ICSID)

The IBRD is one of the oldest members of the World Bank. IBRD focuses on various aspects like agriculture, healthcare, family welfare, and urban development. The IDA aims at providing loans to poor countries to make them economically developed. This institution assists the poor and developing countries to be sustainable. The IFC provides investment and asset management services to member countries. The MIGA focuses on promoting foreign investment to enhance the economic growth of various countries. It aims at reducing poverty and risks associated with investments.

The ICSID aims at providing advice and suggestions in legal disputes between investors, be it national or international. These five organizations make the World Bank stronger, thereby helping the poor countries in becoming financially stable. The projects of other countries are funded by the World Bank, thereby assisting these poor countries to excel in every field like agriculture, education, healthcare, etc.

On the other hand, the Indian Monetary Fund oversees the operations of the World Bank and has the following characteristics:

  1. Providing assistance in MIGA systems of payments.
  2. Assisting the member countries by providing them with temporary financial resources.
  3. Maintaining exchange rate stability among the member nations.
  4. Providing short and medium-term credit to the member nations who face difficulty in making payments for the credit taken.

These are the functions of IMF. The board of Governors of IMF includes a Governor of each member country. In India, the Finance Minister is the Governor of IMF. Well, it is interesting to note that along with a particular Governor, an alternative Governor is also present. In the case of India, the RBI Governor is the alternative Governor of IMF. In the year 2020, the Governor of IMF (India) was Ms. Nirmala Sitharaman, while the alternative Governor was Mr. Shaktikanta Das.

Now, you must be wondering that which is a bigger financial institution, IMF or the World Bank? Well, as already mentioned above that the World Bank has a staff of around 7000 members, which makes it three times as that of the staff of the IMF. Well, apart from helping the poor nations, the IMF and World Bank have also suffered from various negative and critical comments. There are some disadvantages of IMF and World Bank.

  • The IMF applies several terms and conditions before providing the loan. The taxes are high due to which countries find it difficult to take a loan from IMF.
  • Both IMF and World Bank focus on the mega projects of countries. In fulfilling the mega projects, small projects and programs are often ignored by them. The member countries also focus on mega projects and ignore several small projects.
  • The World Bank and IMF have weak forest policies due to which the forests are ruined every now and then. Several activists have criticized about this.

Well, the World Bank and IMF lack in the above-mentioned aspects. Both IMF and the World Bank help the countries in becoming financially stable. It is important to note that the funds provided by these two financial institutions support the poor countries in small and big projects. The main areas of concern for these poor countries are infrastructure, education, and agriculture. These countries aim at becoming financially stable. And IMF and World Bank help these countries in achieving economic stability. Thus, both IMF and World Bank are the fundamental institutions that provide funds to several countries for various projects.

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