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Relationship between the IMF and the World Bank

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Published: Mon, 5 Dec 2016

Where does the IMF get its money from?

Most of the money for IMF loans is provided already by countries that are members, primarily through payment of quotas. The IMG has signed a number of new bilateral loan and note purchase agreements to increases its ability to help member countries during global economic crisis.

Does the IMF help poor countries? If so, how?

The IMF has upgraded its support for low-income countries for helping out the economic conditions these countries are in and preventing more damage to occur during a major economic disaster. IMF has increased the amount of resources available to low-income countries to $17 billion through 2014 and to top it off a zero percent interest will occur for lending through 2011. Lastly, to help poor countries even further, $18 Billion of the $250 billion allocation of IMF special Drawing Rights (SDRs) went towards low-income countries.

Why was the IMF formed in the first place?

The IMF was created to watch currency values and act like a kind of credit union from which countries would be able to take short-term or long-term loans in economic crisis and balance off their payment difficulties. It has upgraded to an international judge of countries that administrates macroeconomic policies and offers loan to poor or needy countries.

What is the relationship between the IMF and the World Bank? Do we need them both? Explain.

The International Monetary Fund and the World Bank are both organizations that were created in 1944 and have international members. Both organizations seem very similar but there are slight differences in the mandates which separate them. The IMF organization is set to provide policy advice and technical assistance to help countries build and maintain strong economies. The funds they provide help countries design their own policies or help in finically tough situations in the short term. The World Bank promotes long term economic help and reduces poverty by providing finical support to help countries build schools and health centers directly. Both organizations are needed because one is more of a short term aid and the second is generally a long term help through funds from countries and bond issuance.

WTO

What are the principles of the WTO?

The World Trade Organization has 5 many principles; trade without discrimination, freer, predictable, more competitive and more beneficial for less developed countries. A country should not base their trades upon views or be discriminative against their trading partners by not allowing them to trade foreign products, services or nationals. Barriers coming down through negotiation, there should be no arbitral rising of trade barriers like tariffs to prevent trade between countries and discouraging unfair practices like dumping products at below cost to gain market shares, also giving under developed countries more time to adjust and special privileges to help them develop a stronger economy.

When was it formed?

The World Trade Organization was created on January 1 1995, but its system was half a century older and the general agreements on Tariffs and trade that provided rules for the system was created in 1948.

Why was it formed?

The World Trade Organization was created for 6 main reasons; to administrate world trade agreements, to create a forum for trade negotiations between different countries, to handle trading disputes between countries, to monitor national trade policies, to provide technical assistance and training for developing countries and to cooperate with other international organizations like IMF.

What criticism has it come under lately?

One common criticism the world trade organizations get from developing countries is that politicians that represent developed countries like American only proceeded to be in the WTO for commercial interest of profit making companies rather than the interest of helping other countries. This argument of the WTO being undemocratic is one of the most commonly debated argument/ criticism for the WTO because critics believe that the WTO rules are written by corporations and intended for corporations with access to the negotiations. Other criticism includes the following; the WTO will not make us safer, the WTO tramples labour and human rights, the WTO would privatize essential services and the WTO is destroying the environment.

EU

How did the European Union originate?

The European Union originates from the European Coal and Steel community and the European Economic Community which was formed by six countries in the 1950’s. The European Union was created during post-Cold War era with a series of treaties which laid structure for the euro, foreign policy and future enlargement. The following shows the important dates and events that lead to the creation of the European Union.

1951: The European Coal and Steel Community is established by the six founding members

1957: The Treaty of Rome establishes a common market

1973: The Community expands to nine member states and develops its common policies

1979: The first direct elections to the European Parliament

1981: The first Mediterranean enlargement

1993: Completion of the single market

1993: The Treaty of Maastricht establishes the European Union

1995: The EU expands to 15 members

2002: Euro notes and coins are introduced

2004: Ten more countries join the Union

What is the Common Agricultural Policy? How is it governed?

The Common Agricultural Policy is a European Union system for agricultural subsidies and programmes. It puts together a direct subsidy payment for land which can be cultivated with price support mechanisms including import tariffs , quotas on certain goods from outside the EU and minimum prices .In other words, it allows farmer’s income to be maintained through a system of target prices for agricultural commodities.

Did all the members join at once? If not, what has been 

its development?

The European Union was formed initially by six countries which are Belgium, France, West Germany, Italy, Luxembourg and Netherlands. Nicknamed the Inner Six, these member states were the first of the European Union and the first to create the European free trade Association. Events like the Suez Crisis lead to further expansion of the Union by inviting seven other countries which include; Austria, Denmark, Norway, Portugal, Sweden, Switzerland and United Kingdom. The Union then began to expand when they met in Copenhagen in December 2002 and decided to invite 10 more countries to join the EU. To this date there are 27 different countries in the European Union which include all the countries stated above and Bulgaria, Cyprus, Czech Republic, Estonia, Finland, Greece, Ireland, Latvia, Lithuania, Malta, Poland , Portugal , Romania, Slovakia , Slovenia and Spain.

Have any other geographical economic unions sprung up since in other parts of the world? If so, explain?

One geographical economic union that has sprung up since the creation of the European Union is Union State. The Union state also known as Union State of Russia and Belarus is a super national entity including the Russian Federation and the Republic of Belarus. Geographically The Union state had expanded to incorporate 7 other countries from the time it was formed till now, those countries are; Abkhazia, Kazakhstan, Kyrgyzstan, Moldova, Ukraine, South Ossetia and Transnistria. The purpose was to develop both common policies on product regulation, freedom of movement of goods, services and factors or production and common external trade policies.


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