5 Differences Between World Bank and IMF

TEMPO.CO, Jakarta - Many people still equate the International Monetary Fund (IMF) with the World Bank because both are known as international institutions that provide loans to developing countries. In fact, these two institutions have different goals and approaches.

Both global financial institutions were born from an international monetary conference held by the United Nations (UN) in Bretton Woods, United States, in 1944. Both the IMF and the World Bank have complementary roles, especially in efforts to reduce poverty in low-income countries.

The IMF focuses more on macroeconomic stability within a country. Meanwhile, the World Bank is more focused on long-term development, especially through investment and financing of development projects.

Up to now, the roles of the IMF and the World Bank continue to evolve in line with the dynamics and challenges of the global economy. To become a member of the World Bank, a country must first be registered as a member of the IMF.

Both institutions work together to provide various forms of loans to meet the needs of developing and poor countries.

Differences between IMF and World Bank

Quoted from the official website of the World Bank, here are the fundamental differences between the IMF and the World Bank:

1. Establishment Date

The IMF officially began operations on December 27, 1945, with 29 initial member countries. The number of members has now reached 190 countries, with around 2,700 staff from more than 150 countries. Meanwhile, the World Bank was established earlier, on April 1, 1944, and now covers 189 member countries.

2. Objectives and Functions

The IMF's mission is to promote international monetary cooperation, provide recommendations for economic policies, and support the capacity building of member countries to strengthen their economies. On the other hand, the World Bank focuses on long-term economic development and poverty reduction through financing support and technical assistance.

3. Main Tasks

The IMF carries out its role through three main pillars, namely:

• Monitoring and evaluating the global economic conditions and those of member countries.
• Providing loans to countries experiencing balance of payments crises, provided that the country is willing to implement the reforms recommended by the IMF.
• Providing technical assistance in the form of fiscal policy development, tax system design, and economic analysis.

On the other hand, the World Bank carries out its functions through five main institutions:

• International Bank for Reconstruction and Development (IBRD)
  Provides loans to middle-income developing countries with creditworthiness.
• International Development Association (IDA)
  Provides interest-free loans to the poorest countries.
• International Finance Corporation (IFC)
  Provides financial support and consultation to the private sector.
• Multilateral Investment Guarantee Agency (MIGA)
  Promotes private sector investment in developing countries through non-commercial risk guarantees.
• International Centre for Settlement of Investment Disputes (ICSID)
  Provides investment dispute resolution services through arbitration and mediation.

4. Staff Expertise

The IMF generally employs economists with experience in macroeconomic and financial policy. Meanwhile, the World Bank has staff with broader expertise, covering social issues, public sector development, and civil engineering techniques.

5. Types of Loans

The IMF provides short to medium-term loans, which come from member country contributions, with the main goal of helping to resolve balance of payments crises and restructure economic policies.

Conversely, loans from the World Bank are aimed at financing development projects, such as infrastructure development, improving access to basic services (health, education, clean water, electricity), and environmental preservation.

Andika Dwi and Melynda Dwi Puspita contributed to the writing of this article.

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