WORLD BANK AND IMF’S POLICIES TOWARDS THE GLOBAL SOUTH

FINAL EXAM – WORLD BANK AND IMF’S POLICIES TOWARDS THE GLOBAL SOUTH

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Final Exam – World Bank and IMF’s Policies towards the Global South

The World Bank and IMF are two organizations that have some connections but also have their specific obligations. The study pays attention to the policies by both organizations aimed at helping nations in the Global South. Both organizations have achieved tremendous achievement in the implementation of their policies but they need to increase their focus on particular areas that require more attention to achieve more impressive outcomes. Policies by the World Bank and the IMF aimed at countries in the Global South play fundamental roles in bolstering economic performance and alleviating poverty.

The World Bank

1The World Bank Group serves in every major aspect of development. The organization offers a broad range of technical aid and financial products, and assist nations to apply and share innovative remedies and knowledge to the challenges they encounter (Akyuz 2015). It was formed in 1944 when delegates from 44 nations congregated for the UN Monetary and Financial Conference conducted at the Mount Washington Hotel in Bretton Woods, New Hampshire (Akyuz 2015). The meeting resulted in the establishment of two institutions, the International Bank for Reconstruction and Development, commonly called the World Bank and the International Monetary Fund (IMF), but the formation of the former was not the central focus (Akyuz 2015). Most attention was dedicated to the IMF under the leadership of Harry Dexter. Attention towards the World Bank only came later when the conference was coming to an end when John Maynard drafted its articles.

The operations of the World Bank fall into four categories; development projects, priorities, knowledge, and products and services. The group has since 1947 funded more than 12,000 development initiatives, through grants, credits, and loans (Akyuz 2015). Three priorities guide the work of the World Bank in its attempts to end poverty and foster prosperity for the poorest nations. The three priorities are prosperity, peace, and people (Akyuz 2015). The group believes that it can bring extreme poverty to an end and build more inclusive groups by enhancing human capital. The organization believes that it can achieve the goal by investing in people by equipping them with skills, offering them jobs, improving nutrition, and enhancing health care (Akyuz 2015). The World Bank also focuses on improving knowledge by focusing on research and development, enhancing data management, and promoting learning practices.

IMF

The study already shows that IMF was formed nearly at same time as the World Bank (1944). Whereas the primary objective of the World Bank is to work with developing nations to minimize poverty and enhance share growth and development, the chief purpose of the IMF is to stabilize and strengthen the international monetary system while acting as a monitor of the globe’s currencies (Boughton 3). However, both the World Bank and the IMF are part of the UN system. Both institutions pays attention to improving the living standards in the member states. In addition to enhancing economic stability, the IMF seeks to minimize global poverty and to encourage global trade (Boughton 3). The group that has a membership of 190 nations receives its resources from the funds it get from the money that nations pay as their quotas when they become affiliates. Each affiliate is assigned a quota, depending largely on their relative position and influence in the world economy. Member states can then borrow from the pool when they encounter financial constraints (Boughton 4). At the helm of the organizational structure is the Board of Governors. Twenty-four members who constitute the Board of Governors oversee the day-to-day work of the group, which stands for the whole membership and helped by members of staff. The Managing Director leads the IMF staff and also acts as Chair of the Executive Board (International Monetary Fund 2021). Four Deputy Managing Directors help the Managing Director in conducting day-to-day operations. In addition to lending, the IMF also focuses on surveillance and capacity development in various parts of the world while prioritizing its members.  

Role of the World Bank with Regard to its Policy towards South Nations

The World Bank is committed to improving the welfare of people in the Global South that many NGOs and scholars refer to nations termed by the World Bank as middle or low income that are situated in the Caribbean, Latin America, Asia, Africa, and Oceania (The World Bank 2021). The World Bank policy is designed in such a way that five different organizations are charged with the duty of enhancing development in various aspects in developing nations in the Global South (Dethier 2009). One group that serves under the World Bank Group, and which was formed as part of enhancing the well-being and welfare of people in developing nations is the International Bank for Reconstruction and Development (IRBD) that offers financial assistance to governments of developing countries low-income nations that are credit worthy (The World Bank 2021). The policy aimed at offering financial aid to developing nations also facilitated the development of the International Development Association (IDA) that offers loans (interest free) known as grants and credits to governments of very poor countries (The World Bank 2021). Moreover, the policy aimed at providing financial assistance to developing nations in the Global South facilitated the formation of the International Finance Corporation (IFC) that helps developing nations realize sustainable growth by offering advisory services to governments and firms and harnessing capital in global financial markets. Moreover, the Multilateral Investment Guarantee Agency formed under the policy targeting to offer financial aid to nations in the Global South plays a fundamental role in promoting FDIs (foreign direct investments) in developing nations to promote economic growth, minimize poverty, and enhance people’s lives (The World Bank 2021). The agency fulfils its objective by providing political risk guarantees to lenders and investors. Also part of the agencies that offer financial support to developing nation and which is part of the policy aimed towards developing the region is the International Centre for Settlement of Investment Disputes that offers financial aid aimed at settling disputes (The World Bank 2021). The institutions play fundamental roles in offering financial aid to countries in the Global South, and are instrumental in fostering growth and stability in these regions.

The World Bank considers poverty as a major concern for countries in the Global South and has consequently formulated a policy aimed at addressing the concern in the various target countries. The policy is clear that the Group is dedicated to bring to an end severe poverty and encourage shared growth and prosperity (The World Bank 2021). The policy is structured with goal number one of the sustainable development goals (SDGs), which calls for the enactment of suitable measures aimed towards eradicating poverty (The World Bank 2021). The World Bank is confident that so far, its intervention in various parts of the world, especially in its 145 member countries, cases of extreme poverty have recorded a steady decline (The World Bank 2021). Despite disruptions from COVID-19 that hampered the efforts to mitigate poverty in targeted state, the World Bank’s policy aimed at ending poverty is resilient and focused on achieving the desired goals. The policy has facilitated the establishment of three agencies committed to reducing poverty in the south countries. One of these is the International Development Association that primarily functions to overcome gender imbalance by enrolling as many girls as possible to school (The World Bank 2021). IDA also helps women get access to necessary assets and ensure they can get financial aid to commence businesses. The World Bank through IDA also helps encourage adolescent girls and women empowerment and reach to proper education and mental health, child, and reproductive services (The World Bank 2021). The group hopes that empowering and educating girls and women presents a suitable chance to deal with the issue of poverty. Other ways through which the policy aimed at reducing poverty works, include advocating for increased connection to water and electricity as well as access to better health services (The World Bank 2021). Thus, World Bank’s intervention through its policy aimed at reducing poverty plays fundamental roles in boosting the welfare of people in countries in the Global South.

MIGA, on its part, helps to alleviate poverty through the various projects it conducts in many parts where its members experience deplorable living conditions. For example, the group has indulged in numerous projects aimed at improving use of environment-safe sustainable energy (The World Bank 2021). The agency acknowledges that reach to electricity remains subdued across Sub-Saharan Africa with at least 600 million people lacking access to electricity in the region. MIGA targets nations such as DRC, Rwanda, and Kenya where some places lack grid connection or the available ones are costly or unreliable (The World Bank 2021). MIGA emphasizes on use of renewable forms of energy such as solar energy and LPG gas that are economically and environmentally sustainable (The World Bank 2021). The agency through this project believes that increased reach to electricity among underserved groups present an opportunity to venture into small businesses that could help to overcome poverty.

The policy towards eradicating poverty in the Global South incorporates the functions of the International Finance Corporation (a branch of the World Bank) as being critical in mitigating poverty in the target areas. IFC that partners with the World Bank has more than sixty years of experience in dealing with social problems, including poverty (IFC 2021). Hence, the World Bank identifies it as a key intervener in its policy aimed at addressing poverty in the Global South. The group has invested in excess of $320 billion in developing economies and emerging markets (IFC 2021). IFC partnership with the World Bank presents a better chance to reach out to the larger population of those who can hardly afford the fundamental human wants.

Role of the IMF with Regard to its Policy towards South Nations

IMF’s policy aimed at improving the welfare of south countries is one that is based on understanding members’ financial and economic needs and enacting suitable mitigating measures. The group engages in continuous assessment of the condition of member states and engage in discussions with relevant authorities on how to intervene effectively (International Monetary Fund 2021). The policy directs that other than offering financial aid through the Poverty Reduction and Growth Trust initiative, members can benefit from the General Resources Account. Both forms are better placed to meet the requirements and diversity of low-income countries (International Monetary Fund 2021). The IMF relies on three organs to facilitate its lending initiatives in the Global South. One of these is the Extended Credit Facility that provides medium to long-term aid in situations of prolonged balance of challenges in payment. The IMF also relies on the Standby Credit Facility that offers financial support to nations in the Global South that encounter financial constraints due to external or domestic economic turmoil or policy blunders (International Monetary Fund 2021). The organization also provides financial aid through the Rapid Credit Facility that supports up-front payouts for low-income nations experiencing dire balance of payment requirements over a restrained period debts (International Monetary Fund 2021). The IMF through the financial aid also contributes significantly towards mitigating poverty in south countries.

Success of the Policies

The policies by the World Bank committed towards providing financial support and ending poverty in countries in the Global South have achieved significant performance, based on the growth and development recorded in various areas. The group uses at least 30 billion each year to its member countries. The Group also uses about $200 million to facilitate provision of advisory and analytical every year, which contributes significantly in development initiatives (Knack et al. 2020). Effective implementation of the policies by WHO can be termed a success because they have facilitated mobilization of immediate reaction to the serious food insecurity in nations such as Yemen, Kenya, and Somalia. Moreover, the group is committed to bringing in excess of $1.7 billion to establish social protection structures, encourage community resilience, and uphold effective service delivery to the most affected groups (Knack et al. 2020). It is also possible to identify other successes the World Bank has achieved due to effective implementation of the policies aimed towards eradicating poverty and offering financial aid to countries in the Global South. For example, the group boasts of the establishment of the Afghanistan Reconstruction Trust Fund that offers coordinated financing framework for the Afghanistan’s government’s budget and critical national investment initiatives (ARFT 2021). Similarly, the World Bank considers the Zimbabwe Reconstruction Fund to be a major milestone in its operations.

Implementation of the IMF policy aimed towards the Global South can be termed a success based on the impact the group has on various member states. An outstanding achievement by the IMF is that it has promoted international trade, which boosts economic development and financial stability. The organization through its funding structure enable developing countries to reinforce their trading structures in a way that attracts foreign investors and trading partners.

Need for Possible Improvement

The World Bank can become more effective in the way it deploys its policies towards the Global South by considering certain critical factors. Information reveals that there is inadequate information on the distribution and timing of advisory and analytical products and the policy needs of member states, which has made it hard for scholars and policy developers to know which World Bank tools are the most suitable for fostering change in the nature of government policies (Knack et al. 2020). With data from new research on the delivery of advisory and analytical products and additional findings from a survey involving more than 1200 public officers in about 120 developing nations, the research indicates that the World Bank’s non-lending tools are more suitable than its lending mechanisms at impacting the policy needs of member states (Knack et al. 2020). Consequently, the World Bank can decide on the areas to pay more attention based on the findings of the research. The Group can choose to initiative various projects that help local members of the communities it serves rather than paying much attention to lending practices. The Group can also rely on the data to furnish the teams focusing on non-learning instruments with necessary resources needed to excel in this area. For example, the group can encourage MIGA to install more electric infrastructure that enable people to use electricity for different purposes (Akyuz 2015). Likewise, the Group can direct IDA to facilitate establishment of more learning facilities to allow women and girls to access education. However, that does not mean that the organization should disregard its lending instruments because they are equally essential in in fostering the needed change and stability in developing nations, especially those that battle financial constraints and poverty.

Likewise, IMF can become more influential in the way it implements its policy by considering certain important factors. The IMF can introduce more programs aimed at offering financial support. Furthermore, the IMF should draw a clear distinction between groups that focus on lending initiatives as well as those that deal with ending poverty. Making a distinction in this area makes it easier to focus on each area, and presents a suitable opportunity to have more influential impact on the target groups. Moreover, embracing more robust performance evaluation techniques and overcoming present challenges would provide the opportunity to get a more comprehensive perception of the situation in the targeted country or region. Nonetheless, the IMF is in the right path judging from the immense aid it offers to member nations.

Conclusion

The study describes that policies by the World Bank and IMF aimed at improving the state of things in countries in the Global South. Both organizations were formed in 1944 with almost similar roles although there are slight variations in the way the two agencies work. The World Bank in its relations with countries in the Global South relies on two critical policies; one aimed at offering financial aid to member nations and the other aimed at ending poverty in developing nations. The policy aimed at providing financial support to countries in developing nations has facilitated the developed of various agencies tasked with the duty of providing financial support at different capacities. They include, IBRD, IDA, IFC, MIGA, and ICSID. On the other hand, the World Bank also adheres to a policy aimed at ending poverty in the Global South. The policy advocates for empowering and educating women and girls, and promotes development initiatives through various institutions, including the IDA, IFC, and MIGA, which also provides financial aid. The policy of the IMF, on the other hand, relies on agencies such as the ECF, SCF, and RCF that focus on lending practices. Even though the policies by both organizations may require some adjustment to be more effective, the World Bank and the IMF have made tremendous steps towards offering financial security and alleviating poverty in countries in the Global South.

References

“Afghanistan Reconstruction Trust Fund.” ARFT, 2021. Accessed December 13, 2021, https://www.artf.af/

Akyuz, Emrah. “The World Bank and the Evolution of Development Thinking.” The Journal of Academic Social Sciences, vol. 3, no. 21, 2015, pp. 475-484.

Boughton, James. “The IMF and the Force of History: Ten Events and Ten Ideas That Have Shaped the Institution.” IMF Working Paper, 2004, pp. 1-21.

Dethier, Jean-Jacques. “World Bank Policy Research: A Historical Overview.” RePEc, 2009. Accessed December 13, 2021, https://www.researchgate.net/publication/46443856_World_Bank_Policy_Research_A_Historical_Overview

“International Finance Corporation.” IFC, 2021. Accessed December 13, 2021, https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/home

“International Monetary Fund.” International Monetary Fund, 2021. Accessed December 13, 2021, https://www.imf.org/en/About/Factsheets/Sheets/2016/07/27/15/31/IMF-World-Bank

Knack, Stephen, Parks, Bradley, Harutyunyan, Ani and DiLorenzo, Matthew. 2020. How Does the World Bank Influence the Development Policy Priorities of Low-Income and Lower-Middle-Income Countries? Policy Research Working Paper; No. 9225. World Bank, Washington, D.C. https://openknowledge.worldbank.org/handle/10986/33707 

“The World Bank.” The World Bank, 2021. Accessed December 13, 2021, https://www.worldbank.org/en/home