Difference between World Bank and IMF

Difference between World Bank and IMF

“World Bank and international monetary fund aren’t they the same? They both ensure the economic stability of the world economy, then what’s the difference?”- This is a common reply when people are asked about the difference between the World Bank and IMF. Most people tend to get confused between the two because they both concentrate on economic issues and help their member countries whenever required. The difference lies in their purposes and functions. IMF and the World Bank are collectively known as the Bretton Woods Institutions and were established in the year 1945.

World Bank: The primary purpose of the World Bank is to help its member nations in their economic development. The World Bank finances the major development projects of any country in order to help in its growth prospects. It is a development institution which offers loans to the poorer nations and the developing nations with the aim of increasing the standard of living of the people living in those countries. The initial work of the World Bank after its launch was focused on rebuilding the infrastructure of the countries affected by the World War II. The major organizations that come under World Bank are: international bank for reconstruction and development (IBRD) and International development association (IDA).

  • IBRD: It gives loans for the commercial projects or profitable projects if a country like building of world class infrastructure like dams, highways etc. It charges a higher rate of interest and has a fixed no. of years for repayment of the loan.
  • IDA: It generally gives loans for the social infrastructure programs like health, education etc. Here interest is not charged and longer periods of repayment are provided.

International Monetary Fund: The primary purpose of IMF is maintaining international monetary cooperation among its member countries. It oversees the monetary policies and exchange rate policies of its members. It aims at supervising economic policies that affect the balance of payments of countries, thereby providing suggestions in case of any potential problem. It also provides monetary assistance to the countries whenever they face a crisis. IMF gives loans to the countries in serious crises which are unable to meet its foreign payment obligations and suffer from balance of payment deficit. The loans are given under certain terms and conditions which the recipient country must follow. The member nations contribute some amount at the time of joining which along with the contribution of other members is used for giving financial assistance whenever needed in future. IMF is the lender of the last resort.

“World Bank is a development institution while International Monetary Fund (IMF) is cooperative institution”

World Bank is a bank and obtains its funding from investors around the world and from that, gives loans to the governments of poor nations for development projects. Whereas IMF is a fund, which uses the pooled money, obtained by the member countries (182) at the time of joining, and uses that for assisting nations with economic crisis.

These institutions may differ in their functions and purposes but, they share the same objective of economic growth and welfare of the member countries.

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