THE BRETTON WOODS INSTITUTIONS

World Bank on the web: http://www.worldbank.org
International Monetary Fund on the web: http://www.imf.org

The World Bank and the IMF were both established at a conference of world leaders in Bretton Woods, New Hampshire after the second World War, with the aim to place the international economy on a sound footing after World War II.

THE WORLD BANK

The work of the World Bank and the IMF is complementary, but their individual roles are quite different. The World Bank is a lending institution whose aim is to help integrate countries into the wider world economy and promote long-term economic growth that reduces poverty in developing countries.

The World Bank Group is one of the world's largest sources of development assistance. In 2001, the institution provided more than US$17 billion in loans to its client countries. It works in more than 100 developing economies with the focus of helping the poor. Founded in 1944, the World Bank today consists of four financing arms, the largest of which is the International Bank for Reconstruction and Development (IBRD). At its founding, the IBRD was conceived as an institution that would finance reconstruction projects in war-ravaged countries following World War II. Since the early 1980s the IBRD and the International Development Association (the Bank's concessional [no-interest] lending arm) have accelerated so-called "structural adjustment" lending, for which they have been sharply criticised by developing countries and human rights groups. The Bank has also been criticised for its role in financing projects that have been detrimental to human rights and the natural environment. The World Bank is one of the most powerful financial institutions in the world. Together with the International Monetary Fund (IMF) it formulates and enforces major economic policy decisions for over 75 mostly poor countries.

THE INTERNATIONAL MONETARY FUND

The International Monetary Fund is an international organisation set up by treaty in 1945 to help promote the health of the world economy. Headquartered in Washington, D.C., it is governed by its almost global membership of 183 countries. The IMF is the central institution of the international monetary system and acts as a monitor of the world's currencies by helping to maintain an orderly system of payments between all countries, and lends money to members who face serious balance of payments deficits. While the World Bank makes loans for both policy reforms and projects, the International Monetary Fund concerns itself with policies alone.

The IMF's role includes guarding the the system of international payments and exchange rates among national currencies that enables business to take place between countries, fostering economic growth and high levels of employment; and providing temporary financial assistance to countries to help ease balance of payments adjustment. Since the IMF was established in 1946, its purposes have remained unchanged but its operations -- which involve surveillance, financial assistance, and technical assistance -- have been adjusted from time to time to meet the changing needs of its member countries in the world economy.

The power of the Bank and the IMF relies on the fact that other lending institutions and governments generally deny credit to countries that have not complied with the Bank and IMF's demands, and many of the countries subject to World Bank and IMF supervision are desperate for the funds that these institutions provide.

WHAT ARE THE STRUCTURAL ADJUSTMENTS PROGRAMMES?

Structural adjustment programs (SAPs) are a set of economic policies required by the World Bank and the IMF as a condition of loans these institutions make to developing countries. These programs often include "austerity measures" such as high interest rates and reduced access to credit, which result in slower economic growth as well as increased poverty and unemployment. Other adjustment policies include cuts in government spending on health care and education, increases in the cost of food, health care and other basic necessities, mandates to open markets to foreign trade and investment, and privatization of state-run enterprises.

Although the IMF is the lead institution in imposing structural adjustment, the World Bank provides much of the money for structural adjustment programs. The World Bank has often been the lead institution in requiring governments to privatise public services and increase fees for poor people's access to health care. Sixty-five percent of the Bank's lending is now directed to the implementation of adjustment policies.