IMF / World Bank: the facts
New Internationalist magazine,
The World Bank and the IMF were formed
at the Bretton Woods Conference in 1944, called to establish a
new global economic order at the end of World War Two. The influential
economist John Maynard Keynes proposed a stable, fair world economy
in which trade surpluses were automatically recycled to finance
trade deficits. Instead the US pushed for a system based on the
dollar and on the free movement of capital. The IMF and the Bank
were designed to smooth out the wrinkles of currency and capital
* The IMF was intended to oversee currency
values and act as a kind of credit union from which national governments
could draw short-term loans when they were in balance-of-payment
difficulties. It has evolved into an international judge of countries'
macroeconomic policies, offering loans conditional upon the adoption
of a raft of free-market measures.
* The IBRD (International Bank for Reconstruction
and Development) is commonly known as the World Bank. It was designed
to loan money to rebuild wartorn and 'underdeveloped' nations.
Most of its money comes from bonds sold on the international markets;
most of its money has tended to go into big infrastructure projects
such as dams, power plants and roads.
There are four other members of the World
* The IFC (International Finance Corporation)
was founded in 1956 to invest in or make loans to private companies
operating in borrowing countries. It must make a profit and therefore
can never benefit the poorest directly. 85% of its money goes
into 15 countries that could attract investment on the international
* The IDA (International Development Association)
was set up in 1960 to make long-term low-interest loans to the
poorest countries. This headed off attempts by newly independent
Third World countries to establish an independent funding agency
within the UN.
* The ICSID (International Center for
the Settlement of Investment Disputes) has since 1966 served as
a tribunal settling disputes between governments and corporations.
* The MIGA (Multilateral Guarantee Investment
Agency) appeared in _ 1988. It provides political risk insurance
to corporations undertaking projects in the developing world.
Power and Control
Voting power in both the IMF and the World
Bank is broadly based on economic power. The 30 countries of the
OECD (Organization for Economic Co-operation and Development -
broadly the rich world plus a select few) control almost two-thirds
of the votes in both the IMF (63.55%) and the World Bank (61.58%).
The G8 countries alone control almost half the votes (48.18% of
the IMF, 45.71% of the Bank).
Practical power in both the Fund and the
Bank rests with their Boards of Directors. There are 24 Directors
on each Board. The 8 countries in the chart have their own Director
on both Boards. Other member countries are divided into blocs,
with one nation 'representing' them on the Board. Just 2 Directors
represent sub-Saharan Africa on the IMF Board, for example, wielding
4.43% of votes between them.
The US has by far the most powerful Director,
with a 17.14% vote in the Fund and 16.39% in the Bank. The US
has stated that it will not allow its voting power in the IMF
to drop below 15%, which gives it a veto over all key decisions.
Adjustment: Enemy of Growth
The IMF and the World Bank claim that
the structural adjustment programmes they have imposed on developing
countries are in the service of long-term economic growth. In
practice four decades of global experience tells a different story.
As adjustment lending has ballooned, so economic growth has gone
45% of the $25 billion that the World Bank lends each year is
dispensed directly to Western transnational corporations.
In 2000, the Joint Economic Committee of the US Congress found
a failure rate of 55-60% for all World Bank-sponsored projects.
In Africa, the failure rate reached 73%.
The Debt Disgrace
The poorest nations of the world are drowning
in debt. Current commitments to debt relief such as the much hyped
Highly Indebted Poor Countries (HIPC) initiative, have achieved
Net Negative Transfer
In 1999, the HIPC countries repaid $1,680
million more than they received in the form of new loans. For
every dollar in grant aid to developing countries, more than 13
comes back in debt repayments.
Hiccoughs in the HIPC
Between 1996 and 1999 the overall amount
of debt-servicing payments from the HIPC increased by 25% (from
$8,860 million in 1996 to $11,440 million in 1999).
Between 1990 and 1996 HIPC debt increased
by 30%. In 1996, the G7, the IMF and the World Bank announced
a cancellation of up to 80% but in practice, far from diminishing,
the debt continued its upward curve and climbed a further 4.7%
in 5 years.
Cancel the Debt !
The IMF, World Bank and the regional development
banks (African Development Bank, Asian Development Bank, InterAmerican
Development Bank) hold a wealth of resources, approximately $633
billion in effective capital and $60 billion in reserves and provisions
for loan losses.
According to the US Government's International
Financial Institution Advisory Commission, these banks can easily
marshal internal resources for total debt cancellation for HIPC
countries as it represents just 5% of their effective capital.
International Monetary Fund (IMF) & World Bank