Institutions of Aid - IFI's - the WB and the IMF

International Financial Institutions

Started in 1944

44 countries

International Monetary Fund

To develop rules to regulate the monetary system and institutions

To lend to get the global economy going after WW2

The WB and the IMF

• "Act as intermediaries between private international capital markets and the governments of developing countries"
• Boas and McNeil

Boas and McNeil

• Set the gold standard
• Chose the American dollar as the backbone of international exchange

5

• International Bank of Reconstruction and Development (IBRD)
• International Development Agency (IDA)
• International Finance Corporation (IFC)
• Multilateral Investment Guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)

International Development Agency

1960

UK, US, Japan and Germany

$52.1 billion`

To lend to poorest countries on favourable terms

77 countries

As of 2015, under $1,215

India, Pakistan, Bangladesh and Nigeria

Over 36 countries including China and India (are now donors)

Gender, fragile and conflict affected countries

90% portfolio loans interest free and long term 10% on grant terms

29 members

188

Wolfensohn oversaw a shift to a more "humane" bank

1999

• More recently gender, resilience, changing social norms and technology
• Growing interest in participation, social capital, strengthening civil society

2000

Emphasis on poverty alleviation, empowerment

• "More instruments and broader goals: moving towards the post-Washington consensus"
• 1998, Stiglitz

Rebranded as a knowledge bank

Was to lend money for short term liquidity crises

US, Japan, Germany, UK and France

• Help prevent crisis
• Smooth adjustment to shocks
• Unlock other financing

Poverty Reduction Strategy Papers

• Country ownership
• Increased accountability of governments to citizens
• Participation of citizens

Every 3 years (or longer)

Prepared by the member countries through a participatory process involving domestic stakeholders as well as eng development partners, including the World Bank and International Monetary Fund

Describe the country's macroeconomic, structural and social policies and programs over a three year or longer horizon to promote broad-based growth and reduce poverty, as well as associated eng financing needs and major sources of financing.

Social capital refers to the collective value of all "social networks" [who people know] and the inclinations that arise from these networks to do things for each other

• Priorities remained the same
• Co-opted participation
• Technocratic - not enough about politics and power which effectively increased

• Ignores power and conflict
• Colonising by economics (Fine)
• Over emphasis on civil society

"Conditionalities have started to reach beyond the economic sphere” Arne Ruckert

"Conditionalities have started to reach beyond the economic sphere”

Greece, Portugal and Ireland

• Long term (WB) vs short term (IMF) at the beginning
• A gradual merging or remits

• Technical assistance 1945-late 1970s
• Development assistance focused on projects, particularly large infrastructure projects anticipated to lead to increases in national income
• Started to shift under McNamarra (WB leader between 1968-1981) recognizing redistributional assistance to the rural and urban poor was needed, in terms of both finance and know how

Started to shift under McNamarra (1968-1981) recognizing redistributional assistance to the rural and urban poor was needed, in terms of both finance and know how

• Greek crisis - IMF economic shock within the Eurozone
• Troika "Brussels consensus" - 2002
• Increased tax
• Reduction in public sector services and salaries

A group of auditors representing the Commission, the European Central Bank and the IMF

• Increasing poverty, unemployment
• Widening gaps between class and gender, citizens and non citizens
• Protest, new forms of economic activity and citizenship
• (Woestman, 2012, Development)

Woestman, 2012, Development

1980s - Financial crisis prompted move to macroeconomic structural adjustment and the Washington Consensus:

• Market forces
• Reducing the role of the state
• Privatisation and deregulation
• Opening up to Foreign Direct Investment

BRICS agree to capitalize development bank at $100billion

• Aim: to help finance infrastructure and development projects in the BRICS countries and avoid finance crisis
• Explicitly described as competition to IFIs
• May help BRICS drive reform in the IMF

• Despite significant changes in the global economy and several apparent shifts in policy, there has been little change in main thrust and operations
• Continuity encouraged by need to swurvive as well as culture and norms shaped by economists
• Recent challenges by BRICs have influenced IMF governance, but will that make IFIs better able to respond to poverty and inequality?

• Were both set up at the end of WW2 to rebuild the economies of broken Europe
• Later, they began offering loans to poorer countries
• Only if privatised their economies
• And access to Western corporation to raw materials and resources
• To get their policies implemeted in developing countries
• Viscous cycle of poverty - debt cancellation still will not allow them to get them from poverty trap
• Debts were occurred under pressure or something that was not for the best of the people
• WB aim to help poor people - world development - socialism for the rich, little tax
• Poor get poorer - interest debt owned to the WB
• Indonesia handouts to the rich have been extraordinary
• Up to 1/3 of the general aid of Indonesia, went to the corruption of individuals

"Act as intermediaries between private international capital markets and the governments of developing countries"

• 310 immunised
• 3 million more teachers
• 118,000km of roads
• 2 million aids patients treated
• 13 million lives saved
• "We invest in people"

The IMF provided 32 billion euros in loans to keep the Greek economy from collapsing

• The WB focuses on financing and investing in developing countries, as well as eliminating poverty
• The IMF primarily monitored exchange rates, establishes international monetary systems and fosters global financial cooperation

The world economies have become interdependent on each other through trade and investment. While this helps strengthen the global financial system, it also creates weaknesses in the economic chain. The balancing force of the IMF prevents any potential "domino effect" in collapsing economies

• Based on how much you donate
• 16.74% of votes to the US and a contribution of $58 billion

• Country ownership
• Increased accountability of governments to citizens
• Participation of citizens

• Money flows changing: access and distribution
• Living in the past: need to be smarter with innovation and adaption
• Too internally focused: need to focus less on surival and more on poor and vulnerable communities

• Power inequality in relationships related to money, knowledge and reporting
• But is this critique too simplistic? Will empowering Southern CSOs necessarily improve the lives of poor people?

Civil Society organisation