Wiki IMF World Bank and The WTO

IMF Borrowers

IMF

IMF International Monetary Fund (http://www.imf.org) The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.

The work of the IMF is of 3 main types:

  • Surveillance involves the monitoring of economic and financial developments, and the provision of policy advice, aimed especially at crisis-prevention.
  • The IMF also lends to countries with balance of payments difficulties, to provide temporary financing and to support policies aimed at correcting the underlying problems; loans to low-income countries are also aimed especially at poverty reduction.
  • Third, the IMF provides countries with technical assistance and training in its areas of expertise. Supporting all three of these activities is IMF work in economic research and statistics.

In recent years, as part of its efforts to strengthen the international financial system, and to enhance its effectiveness at preventing and resolving crises, the IMF has applied both its surveillance and technical assistance work to the development of standards and codes of good practice in its areas of responsibility, and to the strengthening of financial sectors.

World Bank

World Bank (http://www.worldbank.org) The World Bank Group is a group of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, where the United Nations Monetary and Financial Conference that led to their establishment took place (1 July-22 July 1944).

The World Bank's activities are focused on developing countries, in fields such as:

  • -human development (e.g. education, health),
  • -agriculture and rural development (e.g. irrigation, rural services),
  • -environmental protection (e.g. pollution reduction, establishing and enforcing regulations),
  • -infrastructure (e.g. roads, urban regeneration, electricity), and
  • -governance (e.g. anti-corruption, legal institutions development).

It provides loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and to implementation of new regulations to limit pollution. Technically the World Bank is part of the United Nations system, but its governance structure is different. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization. As a result, the World Bank is controlled primarily by developed countries, while clients have almost exclusively been developing countries. Some critics argue that a different governance structure would take greater account of developing countries' needs. As of November 1, 2004 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5%, and the United Kingdom and France each held 4.3%. As major decisions require an 85% super-majority, the US can block any change.

World Bank

World Bank / IMF Structural Adjustment

Structural adjustment is a term used to describe the policy changes implemented by the International Monetary Fund (IMF) and the World Bank (the Bretton Woods Institutions) in developing countries. These policy changes are conditions (Conditionalities) for getting new loans from the IMF or World Bank, or for obtaining lower interest rates on existing loans. Conditionalities are implemented to ensure that the money lent will be spent in accordance with the overall goals of the loan.

Conditions of Structural Adjustment:

  • Cutting expenditures, also known as Austerity.
  • Focusing economic output on direct export and resource extraction.
  • Devaluation of currencies
  • Trade liberalization, or lifting import and export restrictions.
  • Increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets)
  • Balancing budgets and not overspending
  • Removing price controls and state subsidies
  • Privatization, or divestiture of all or part of state-owned enterprises
  • Enhancing the rights of foreign investors vis-a-vis national laws
  • Improving governance and fighting corruption

Strucutral Adjustment - Debt and Spending

World Trade Organization

The World Trade Organization is an international, multilateral organization, which sets the rules for the global trading system and resolves disputes between its member states. Its aims are to increase international trade by promoting lower trade barriers and providing a platform for the negotiation of trade. The WTO discussions should follow these fundamental principles of trading.

  • A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services.
  • A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers).
  • A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open.
  • A trading system should tend toward greater competition.
  • A trading system should be more accommodating for LDCs, giving them more time to adjust, greater flexibility, and more privileges.

WTO Criticism

Many people argue that free trade does not make ordinary people's lives more prosperous but only results in the rich (both people and countries) becoming richer. WTO treaties have also been accused of a partial and unfair bias toward multinational corporations and wealthy nations. Critics contend that small countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the influential nations in the WTO focus on their own commercial interests. They also claim that the issues of health, safety and environment are steadfastly ignored. WTO does not manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations, harming smaller states which have less negotiation power.