12 Difference between IMF and World Bank

Key difference between IMF and World Bank to understand their roles in the global economy. Find out how these institutions promote stability and development.

 IMF Bank was established in 1947 as a result of Breton Wood Conference held in July, 1944. IMF began its function in March 1947, The fund is an inter ­government organization comprising over 170 states. In beginning it had only 44 members.The IMF is managed by an Executive Committee. There are twelve members in the Executive Committee, five of which are the representatives of U.S.A. UK., China , France and India. The principal office of the IMF is in U.S.A. Purposes and Functions

To promote international monetary co- operation.

To promote exchange stability and the main orderly exchange arrangements between member countries.

• To promote short term credits to the debtor countries.
• To facilitate the expansion and balanced growth of foreign trade.
• To assist in the establishment of international system of payments in respect of currency transaction between member counties and in the estimation of foreign restriction.
• To shorten the duration and lessen the degree of disequilibrium in the international balances of payments of member countries.

Main Features of Agreement

The main features at which an agreement was arrived at were as follows.

 The Pool

The initial capital of IMF amounting to 8.5 billion dollars was contributed by 49 members countries. The quota of each member country was fixed. They were required to pay their subscriptions in the pool partly in the form of gold and partly in domestic currency. Each member country was to pay 75% of its agreed quota in the form of its own currency which is kept with the Central Bank of the member country. The remaining 25% of their quota or 10% of their actual holding of gold, which ever is less, is to be subscribed in gold.

The Pool and the Debtor Country

The IMF allows the member countries to obtain short term credit. The debtor country can purchase the foreign currency in exchange for its own currency up to 75% of its quota plus an addition of 25% each year. If any country receives loan above 200% of its quota, then the foreign currency is given only in exchange of gold. This step is taken to discourage excessive purchases form the IMF.

• Scarce Currencies

If at any time there is a great demand for the currency of particular country and its stock with the IMF falls below 75% of its subscribed quota, the IMF can declare that currency to be scarce. The IMF will try to increase the supply of scarce currency in two ways.

• By purchasing some of it for gold or by borrowing it from the member surplus country.
• By rationing among debtor countries.
• Change of Parity

If at any time, a member country wishes to change the parity of its currency of correcting disequilibrium in the balance of payments, then it can do without getting the approval of IMF, provided the exchange does not exceed 10%. However, any further exchange can be made with the approval of the IMF.

• Rate of Exchange

The member countries are required to declare the par value of their currencies and this is to be expressed in terms of gold or the American dollar,at that time amounted that the par value of the British fund would be equal to 4.04 to USA dollars.

The International Monetary Fund (IMF) plays a major role in the global economy. It helps countries stabilize their finances, promotes international trade, and provides financial assistance during economic crises. In this blog, we’ll explore the purpose of the IMF, where it’s located, which country has borrowed the most from it, and its main functions and goals.

Difference between IMF and World Bank You Must Understand If you have Interest In Banking.

IMF (International Monetary Fund) – Key diffrences.

• Primary Role: Oversees the global monetary system and ensures international financial stability.

• Core Focus: Exchange rate stability, balance of payments, and global macroeconomic surveillance.

• Type of Assistance: Provides short-term to medium-term loans to countries facing balance of payments crises (currency devaluation, debt default, etc.).

• Loan Purpose: Helps countries stabilize their currencies, rebuild foreign reserves, and restore investor confidence.

• Loan Duration: Typically 1 to 5 years (emergency loans can be shorter; extended facilities up to 10 years).

• Conditionality: Strict policy conditions attached to loans—borrowers must implement fiscal reforms, austerity measures, or structural adjustments (e.g., cutting subsidies, raising taxes).

• Borrowers: All 190 member countries (rich and poor) can request IMF support if they experience payment difficulties.

• Funding Source: Funded primarily through quota subscriptions (membership fees) paid by member countries based on their economic size.

• Staff Expertise: Predominantly macroeconomists, financial experts, and monetary policy specialists.

• Accountability: Reports to its member governments through its Board of Governors; quota-based voting gives more power to larger economies (e.g., USA, China).

• Flagship Publications: World Economic Outlook (global growth forecasts) and Global Financial Stability Report.

World Bank  – Key diffrences

• Primary Role: Promotes long-term economic development and poverty reduction in developing nations.

• Core Focus: Financing infrastructure projects, human capital development, and institutional capacity-building.

• Type of Assistance: Provides long-term loans, grants, technical assistance, and policy advice for specific development projects.

• Loan Purpose: Funds tangible projects like building highways, power plants, schools, hospitals, water systems, and also supports climate resilience and health programs.

• Loan Duration: Typically 15 to 30 years (including grace periods of 5–10 years before repayment begins).

• Conditionality: Less rigid than the IMF; may require policy reforms but loans are more often tied to project milestones (e.g., completing a dam or reaching vaccination targets).

• Borrowers: Primarily developing and low-income countries; middle-income countries get market-rate loans (from IBRD), while the poorest get concessional loans/grants (from IDA).

• Funding Source: Funded by member country contributions and by issuing bonds on international capital markets (AAA-rated).

• Staff Expertise: Sector specialists—engineers, environmental scientists, education experts, public health professionals, and urban planners.

• Accountability: Also governed by member countries via Board of Governors; voting power is based on capital subscriptions, but development impact is the key metric.

• Flagship Publications: World Development Report and Doing Business reports (discontinued but replaced with other development indicators).