AOFBusiness in a Global Economy

Unit 4, Lesson 8

The IMF and the World Bank

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The IMF helps economies three ways

Surveillance: monitors and studies countries’ economies

Financial assistance: provides help (usually short-term loans) when the exchange rate of a country’s currency is threatened

Technical assistance: helps governments and central banks collect data and make policies on:

• Exchange rates• Balance of payment issues

Why is it important for countries to stop their debts to other countries from getting too big?

A Ghanaian building financed by the IMF

Not all IMF members have equal say

• The Board of Governors deals with big issues.

• The Executive Board makes the day-to-day decisions.

• The International Finance and Monetary Committee gives recommendations to the IMF staff.

Why do you think the executive board has some permanent members?

United States17.1%African Nations5.9%EU Members 32.4%

Japan 6.1%

China 3.7%

All other nations34.8%

Percent of Votes on the IMF Board of Governors

The World Bank has two purposes

Aid Developing Countries

–Strengthen governments

–Create legal and political systems that encourage business

–Research, consult, and train

Reduce Poverty

–Develop financial systems

–Combat corruption

–Provide money• Low-interest loans• Grants• Interest-free credit

The World Bank is organized like the IMF

• It has a Board of Governors with one governor from each member country.

• It has an Executive Board with five permanent members and 17 elected members.

• It also has a president and several vice presidents, each in charge of a particular region or function.

Managing Directors

Regional VPs

Sr. Economist

President

Executive Board22 members

Board of GovernorsAll member nations

How do the IMF and World Bank compare?

Both organizations were created by international agreement at the same time.

•The IMF deals with currency exchanges between nations.

•The World Bank is involved with funding projects within developing countries.

What other similarities or differences can you think of?