IMF and World Bank: Differences

If you have difficulty distinguishing between the World Bank and the International Monetary Fund; fear not, for you aren't alone. Many people have only a slight idea of what these institutions do and would not be able to differentiate between the two. Even J.M. Keynes, a founding father of the two institutions and considered the most brilliant economist of the twentieth century, admitted that he was confused with the words 'Fund' and 'Bank' as both are a form of one another. The confusion between the two terms still prevail. Let us first try to understand a little about these two financial institutions.

World Bank

The World Bank is one of the two major financial institutions created as a result of the Bretton Woods Conference in 1944. It was formed on 27 December, 1945, in Washington D.C. The World Bank provides technical and financial assistance to underdeveloped nations for development schemes like building roads, schools, hospitals, etc. The main aim is to eliminate poverty from the world. A total of 185 countries are members of the World Bank, which is currently headed by Robert B. Zoellick. The World Bank Group is the parent organization of the World Bank.

International Monetary Fund (IMF)

The IMF was formally organized on 27 December, 1945, and as in the case of the World Bank, is headquartered in Washington D.C. The main goal of the IMF is to foster global monetary cooperation, improve international trade, promote employment, secure financial stability and reduce poverty. It looks after the macroeconomic policies, particularly the impact on exchange rates and balance of payments. The IMF, like the World Bank, offers financial assistance to poor countries, making it an international lender of last resort. Presently, the International Monetary Fund is headed by Dominique Strauss-Kahn.

Some Important Differences are as follows:

International Monetary Fund	World Bank
Oversees the monetary system of the world.	Promotes economic development in underdeveloped countries.
Promotes exchange relations and stability among its member countries.	Helps underdeveloped countries by providing long-term financing for development projects.
Adds to the currency reserves of its member countries through allocation of special drawing rights (SDRs).	Encourages private enterprises in developing countries through International Finance Corporation (IFC), which is a sub-part of the IMF.
Assists all its member countries that are in temporary balance of payments difficulties by providing them short- to medium-term credits.	Provides special finances to poor countries that have a per capita Gross National Product (GNP) less than $865 a year.
Financial resources come from the fixed quota subscriptions of its member countries.	Financial resources are acquired by borrowing on the international bond market.
Has about fully paid-in quotas totaling $215 billion.	Has authorized capital of $184 billion, of which members pay in 10 percent.
Has a total staff of 2,300 from 185 countries.	Has a staff of 7,000 from 185 countries.

Both these institutions were formed with two aims in mind: one, to help underdeveloped countries and two, to eradicate poverty from the world. They have been working closely together to achieve these aims since their inception.