introduction and differences between world bank and IMF

2.  Founding Father of both
the World Bank and the
International Monetary
Fund (IMF).
 John Maynard Keynes.
 Harry Dexter White.

3. International
Monetary Fund World Bank
 IMF came into Existence
on 1945 with 29 member
countries with a goal of
reconstructing
international payment
system.
 It now plays central role
in the management of
Balance of Payments
deficit and international
financial crisis.
 World Bank created on 1944.
 Working for a world free of
poverty.

4. Basic Differences between
IMF World Bank
 Oversees the International
Monetary System.
 Provides Short to Medium
term credits.
 Assists all member
countries that are facing
difficulties in Balance of
Payments.
 Generate its financial
resources mainly through
the quota system of its
member countries
 Promote Economic
Development of the
developing countries.
 Provides long-term
financing of developments
projects.
 Assists developing countries
whose per capita GNP is less
$865 a year.
 Raises most of its funds on
the world’s financial market
by selling world bank bonds
to investors.

5. International Monetary Fund (IMF)
• Voting power
• Effects of the quota system
• Inflexibility of voting power
• Overcoming borrower/creditor division
World bank
• Voting power

6. Programs of IMF in Pakistan
 Pakistan’s relationship with the IMF dates back to 1958.
 However, the association deepened with the structural
Adjustment Program of 1988.
 Pakistan is one of those countries that have frequently
approached the IMF for standby loans, adjustment lending
and Economic stabilization packages
 In 1988, when loan of US$516 Million was extended to
Pakistan. It was the largest loan advanced by the Fund to
any country under this Facility. It was a “soft loan but
with hard adjustment” as interest rate was low but
conditions attached were severe.
 Pakistan entered into nine different agreements with the
IMF during the period 1988- 2000.

7.  The 1990s, was a ‘lost decade’ for Pakistan’s economy. During the
1990s, growth in per capita income dropped to slightly over 1%.
Poverty resurfaced and about one third of the population now
lives below the poverty line of $ 1 per day.
The structural Adjustment Facility program (SAF) was introduced
by the IMF in 1988 however, the Program failed to achieve the
targets. The objectives of the program were consistent with the
earlier program:
 reducing budget deficit,
 bringing down public expenditures through elimination of
subsidies,
 increasing Foreign exchange reserves,
 reducing external debt

8.  In May 1998, Pakistan declared itself a nuclear state and foreign
currency accounts were frozen to avert the likely outflow of capital
from the country. There was military takeover in Oct 1999. The balance
of Payment position had deteriorated badly. Pakistan, therefore, again
approached the IMF once again for standby loans in 2000.
 The structural Adjustment Facility program (SAF) was introduced by
the IMF in 1988 however, the Program failed to achieve the targets.
 The conditions attached with the Adjustment Package were
incorporated in the budget of 1989-1990. General sales Tax was
imposed through the Sales tax Act 1990. The government reduced the
support price for essential crops like wheat, cotton, sugarcane and
oilseeds.

9.  The economy took a kick-start and till 2007, Pakistan was
enjoying high growth rates. Pakistan did not even withdraw
the last two installments from IMF, claiming that the
country has regained its economic sovereignty and loans
from the Fund were no longer required.
 The macroeconomic situation, however, deteriorated
sharply since 2007/2008. Thereby, Pakistan had to embark
on a stabilization program for 2008-2009 and 2009-10. The
program aimed at restoring fiscal stability. The
stabilization program called for tightening of monetary
and fiscal policy in order to bring down inflation and
strengthen external position

10. 2013-2016
 International Monetary Fund (IMF) had reviewed
Pakistan's economic performance according to which
it will make available a further $510 million to the
country as part of a three-year, $6.4 billion financial
assistance program.
 Pakistan received its final payment of $102 million
tranche in October 2016. According to Christian
Lagarde, Completion of the IMF programme reflects
very positively on Pakistan.

11.  IMF stated that all end-March 2016 quantitative
performance criteria, including the budget deficit
target and the floor on the SBP’s net international
reserves, have been met.
 The agreement was reached after the IMF mission held
discussions with Finance Minister Ishaq Dar, SBP
Governor Ashraf Wathra and other senior officials in
Dubai from May 2 to May 11.

12. Programs and Impacts of World
Bank
Structural adjustment polices(SAP)
1)saps have been imposed to ensure debt repayment and
economic restructuring.
2)it also introduced structural adjustment programs
(saps) in developing countries so that not only
macroeconomic stability can be attained but also
structural reforms aimed at accelerating growth can be
undertaken.
3) it has shifted its emphasis from the financing on
specific projects towards non-project linked programs. It
works in developing economies with the focus of helping
the poorest people and the poorest countries.

13. Reducing of Black Money
Operation
1)world bank programs are also found to have a
significantly positive influence on the difference
between the official and the black market exchange rate.
2)although the bank does not directly force countries to
devalue their currencies, some adjustment programs aim
at liberalizing the exchange rate .
as a consequence, overvalued currencies may devalue
which decreases the black market premium.

14. Knowledge Bank
 The Bank provides advice and expertise.
It now puts more emphasis on institutional technical
assistance and infrastructure assistance.
Over the years, it has been able to generate and disseminate
policy relevant knowledge.
Today, it has been concentrating more on this asset rather
than financial resources. This organization is now called
the ‘knowledge bank’.
 The number of programs in operation increases economic
freedom due to either the direct effect of conditionality on
policies or to the transfer of knowledge and advice, which
increases with the number of contacts between a recipient
country and the IMF or World Bank.

15. Negative Impacts of World Bank
 Social and environmental concern
 1)about the types of development projects funded. Many infrastructure
projects financed by the world bank group have social and
environmental implications for the populations in the affected areas
and criticism has centered on the ethical issues of funding such
projects.
For example, world bank-funded construction of hydroelectric dams in
various countries has resulted in the displacement of indigenous
peoples of the area.
2)the bank’s role as a central player in climate change mitigation and
adaptation efforts is in direct conflict with its carbon-intensive lending
portfolio and continuing financial support for heavily polluting
industries, which includes coal power.
3)world bank working in partnership with the private sector may
undermine the role of the state as the primary provider of essential
goods and services, such as healthcare and education, resulting in the
shortfall of such services in countries badly in need of them.

16. Abetting environmental
destruction:
 1)No assessment for the environmental worthiness and
impact of financial investments.
2) Civil society groups see the Bank as unfit for a role
in climate finance because of the conditional ties and
advisory services usually attached to its loans

17. Controlling foreign direct
investment:
 approval in the case of developing countries.
World Bank and the IMF are concerned about the
‘conditionalities’ imposed on borrower countries. The
World Bank and the IMF often attach loan
conditionality based on what is termed the
‘Washington Consensus’, focusing on liberalization—
of trade, investment and the financial sector—,
deregulation and privatization of nationalized
industries.

18. Political and bureaucratic control of developed
countries over developing countries:
 1) The design of loan conditionality is intrinsically
highly political because it involves policies and
processes which affect the welfare of most people and
thus changes the power balances between the political
actors involved in the domestic democratization
process.

19. Ten Reasons to Abolish the IMF
1. Immoral system of modern day colonization.
2. Serves wealthy country members.
3. Imposing a fundamentally flawed development
model.
4. A secretive institution.
5. Policies promote corporate welfare.
6. Unsatisfied workers due to IMF’s policies.
7. IMF’s policies affect women the most.
8. IMF’s policies affecting the environment.
9. The IMF bails out rich bankers.
10. The IMF’s bail outs deepen, rather than, solving
economic crisis.