BPSC GS Economy Mains- Function of IMF and World Bank HOT TOPIC-1   Leave a comment

BPSC GS Mains- Function of IMF and World Bank in the context of the world economy.

International monetary Fund
IMF gives short-term loans to its members, and helps in recovering from BoP crisis (balance of payment crisis)
In simplest terms, BoP crisis means you don’t have enough money/ foreign currency to pay for your imports. So in that case you run to IMF.
When IMF gives loans, they’ll ask you to change your policies accordingly. eg. they’ll ask you to

  1. let the MNCs enter your market,
  2. reduce the jobs or shutting down the loss making Public sector units etc.
  3. stop giving subsidies to particular section (petrol/fertilizer etc.)

and so on…
IMF gives loans, it expects you to pay full amount back + interest rate.
In IMF there is a thing called Quota i.e.
Every member has to give some money to IMF, (IMF will give it to loan as other members). The rich nations with bigger Quota has more voting rights (USA).
So rich nations can effectively decide how IMF should function.

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World Bank

In short, They give soft loans to poor nations for Development purpose and various health-education,poverty removal programs.
Soft loan= minimal interest rates, the EMIs have longer time brackets in between, and they don’t expect your to pay back the principle.
They facilitate private players to setup business in poor nations. (via insurance and loans)

Their loan-terms are not as stringent as IMF.

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