The IMF and the World Bank
The IMF and the World Bank are sister institutions in the United Nations system. They share the same goal of raising living standards in their member countries. Their approaches to this goal are complementary, with the IMF focusing on ensuring the stability of the international financial system and the World Bank concentrating on long-term economic development and poverty reduction. |
What are the purposes of the "Bretton Woods Institutions"?
The International Monetary Fund and the World Bank were both created at an international conference convened in Bretton Woods, New Hampshire, U.S.A. in July 1944. The goal of the conference participants was to establish a framework for economic cooperation and development that would lead to a more stable and prosperous global economy. While this goal has remained central to both institutions, their work has evolved in response to new economic developments and challenges.
The IMF promotes international monetary cooperation and provides policy advice and technical assistance to help countries build and maintain strong economies. The Fund also makes loans and helps countries devise policy programs to solve balance of payments problems-that is, situations where sufficient financing on affordable terms cannot be obtained to meet net international payments. IMF loans are relatively short term and funded mainly by the pool of quota contributions that its members provide. IMF staff are primarily economists with wide experience in macroeconomic and financial policies.
The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries reform particular sectors or implement specific projects-for example, building schools and health centers, providing water and electricity, fighting disease, and protecting the environment. World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance. World Bank staff are often specialists in particular issues, sectors, or techniques.
How the Fund and Bank work together
The IMF and World Bank collaborate regularly and at many levels on assistance to member countries and are involved in several joint initiatives. The terms for their cooperation were set out in a concordat in 1989 to ensure effective collaboration in areas where responsibilities overlap. The staffs of the IMF and the Bank routinely exchange information on country assistance. The two institutions also often conduct country missions in parallel and have staff participate in each other's missions. IMF assessments of a country's general economic situation and policies provide input to the Bank's assessments of potential development projects or reforms. Similarly, Bank advice on structural and sectoral reforms is taken into account by the IMF in its policy advice. The staffs of the two institutions also cooperate on the conditionality involved in their respective lending programs.
The Managing Director of the IMF and the President of the World Bank meet regularly to consult on major issues. They issue joint statements and occasionally write joint articles in the world press, and they have made joint visits to several regions and countries.
The 2007 external review of Bank-Fund collaboration led to a Joint Management Action Plan (JMAP) to further enhance the way the two institutions work together. Fund and Bank country teams have initiated country-level work program discussions on macro-critical sectoral issues, the division of labor, and the inputs needed from each institution in the coming year. Actions have also been taken to improve the sharing of information at the country level and technical assistance reports.
In parallel with implementing the JMAP at the institutional level, the Fund's Africa Department and the Bank's Africa Region have worked with a group of members to identify ways to improve the coordination of support for growth-critical reforms in public financial management, the financial sector, and natural resources management.
Joint initiatives: The IMF and World Bank are also working together to reduce the external debt burdens of the most heavily indebted poor countries under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI), and help low-income countries in their efforts to achieve their development goals without creating future debt problems. IMF and Bank staff jointly prepare country debt sustainability analyses under the Debt Sustainability Framework (DSF) developed by the two institutions.
In 1999, the IMF and the World Bank initiated the Poverty Reduction Strategy Paper (PRSP) approach-a country-led strategy for linking national policies, donor support, and the development outcomes needed to reduce poverty in low-income countries. PRSPs underpin the HIPC Initiative and concessional lending by the IMF and World Bank.
Since 2004, the Fund and Bank have worked together on the Global Monitoring Report (GMR). This annual report assesses progress on policies and actions needed to achieve the UN Millennium Development Goals (MDGs). The GMR also considers how well developing countries, developed countries, and the international financial institutions are contributing to the development partnership and strategy to meet the MDGs.
The IMF and World Bank are also working together to make financial sectors in member countries resilient and well regulated. The Financial Sector Assessment Program (FSAP) was introduced in 1999 to identify the strengths and vulnerabilities of a country's financial system and recommend appropriate policy responses.
High-level coordination: The Annual Meetings of the Boards of Governors of the IMF and the World Bank provide another forum for Fund-Bank collaboration. Governors consult and present their countries' views on current issues in international economics and finance. The Boards of Governors decide how to address international economic issues and approve corresponding resolutions.
A group of IMF and World Bank Governors also convene during the semi-annual meetings of the Development Committee, whose meetings coincide with the Spring and Annual Meetings of the IMF and the World Bank. This committee was established in 1974 to advise the two institutions on critical development issues and on the financial resources required to promote economic development in low-income countries.
More detailed information can be found on the institutions' websites: www.imf.org and www.worldbank.org.
1 See: International Monetary Fund and the World Bank - Enhancing Collaboration: Joint Management Action Plan