IMF and the World Bank Group
Born at Bretton Woods in 1944, the IMF guards monetary and BoP stability while the World Bank funds development. The SDR is the IMF's reserve asset.
IMF vs World Bank
Both were born at Bretton Woods in 1944, and India is a founding member of both.
IMF functions
| Function | What it means |
|---|---|
| Surveillance | Monitors the world and member economies through Article IV consultations, usually yearly, and reports such as the World Economic Outlook |
| Lending | Stand-By Arrangement (short-term BoP needs), Extended Fund Facility (structural problems), concessional loans to low-income countries (PRGT), Rapid Financing Instrument (emergencies) |
| Capacity development | Technical assistance and training |
| SDR allocation | Creates SDRs and allocates them in proportion to quotas |
World Bank Group
| Institution | Year | Role |
|---|---|---|
| IBRD | 1944 | Loans to middle-income and creditworthy lower-income governments |
| IFC | 1956 | Invests in and lends to the private sector |
| IDA | 1960 | Interest-free or very low-interest credits and grants to the poorest countries (the soft-loan window) |
| ICSID | 1966 | Settles investment disputes between foreign investors and states |
| MIGA | 1988 | Political-risk insurance and credit enhancement for foreign investors |
SDR and related points
- The Special Drawing Right was created by the IMF in 1969 to supplement members' official reserves.
- It is not a currency. It is a potential claim on the freely usable currencies of IMF members, and it is the IMF's unit of account.
- Its value is set daily from a basket of five currencies: US dollar, euro, Chinese renminbi, Japanese yen and pound sterling.
- The renminbi joined the basket on 1 October 2016. The basket is normally reviewed every five years, and weights change.
- Votes in the IMF are weighted: mostly by quota, plus a small number of basic votes shared equally.
- India is a member of IBRD, IDA, IFC and MIGA, but has not joined the ICSID Convention.
- India sought IMF support during its 1991 balance of payments crisis.
NET asks you to match World Bank Group bodies with their roles and years (IDA = soft loans, MIGA = guarantees, ICSID = disputes), to name the SDR basket, and to separate IMF from World Bank functions.
Typical MCQ: “Which World Bank Group body lends to and invests in the private sector?” IFC (1956). Trap: IDA lends to the poorest governments, not firms.
Typical MCQ: “Is the SDR a currency?” No. It is an international reserve asset and the IMF's unit of account; its value comes from a five-currency basket.
World Bank Group in age order, I-I-I-I-M: IBRD 1944, IFC 1956, IDA 1960, ICSID 1966, MIGA 1988.