-WORLD BANK &-INTERNATIONAL

MONETARY FUNDBY : SYEDA AREEBA TARIQ

PRESENTATION OUTLINE WORLD BANK- Purpose- HistoryDifference between World Bank and IMFIMF - Purpose- HistoryThe impact of IMF & World Bank on Pakistan

WORLD BANKThe World Bank provides financial and technical assistance to emerging

market countries. It consists of two development institutions -- the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)-- owned by 186 member countries.

Affiliated with the International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID) -- that support its goal of reducing worldwide poverty.

PURPOSE:The World Bank provides low-interest loans, interest-free credits and grants

to developing countries. The World Bank loans are usually to invest in education, health, and

infrastructure. The loans are even use in financial sector, agriculture, and natural resources

management.

CONT…The Bank's goal is to "bridge the economic divide between poor and rich

countries.

To achieve this goal, the Bank focuses on six areas:

1. Overcome poverty through growth in the poorest countries, focusing on Africa.

2. Offer reconstruction to poor countries emerging from war.

3. Provide a customized development solution to help those middle-income countries overcome problems that could throw them back into poverty.

4. Motivate governments to act on preventing climate change, controlling diseases, (HIV/AIDS and malaria), managing international financial crises, and promoting free trade.

5. Work with the League of Arab States to improve education, build infrastructure and provide micro-loans to small businesses in the Arab world.

6. Share its expertise with developing countries, and its knowledge with anyone via reports and its interactive online database.

HISTORYThe World Bank was created at Bretton Woods in 1944 to lend

to European countries to help them rebuild after World War II. It was the world's first multilateral development bank, and was funded through the sale of World Bonds. Its first loans were to France and other European countries, but soon lent money to Chile, Mexico and India to build power plants and railways. By 1975, the Bank also lent money to countries to help with family planning, pollution control and environmentalism.

DIFFERENCE BETWEEN WORLD BANK & IMF

Since the IMF does lend money, it is often confused with the World Bank

The Bank's purpose is to lend money to developing countries for specific projects that will fight poverty.

The IMF only provides loans if it will help prevent a global economic crisis. Its overall goal is to prevent these crises through guidance to, and cooperation among, its members.

The Fund provides loans to help its members tackle balance of payments problems, stabilize their economies, and restore sustainable growth. Unlike the World Bank and other development agencies, the IMF does not finance projects.

INTERNATIONAL MONETARY FUND-IMFThe International Monetary Fund (IMF) is an organization of 186 countries,

working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth.

PURPOSETheir goal is to work with the Fund to stabilize the global economy by

cooperating in practices which achieve that aim.

The IMF helps its members by:Surveying global economic conditions.Advising member countries on methods to improve their economy.Providing short-term loans to avoid currency instability.

HISTORYThe International Monetary Fund (IMF), like the World Bank, was

conceived at the Bretton Woods conference that sought to rebuild Europe after World War II. Unlike the Bank, its goal was to help countries maintain the value of their currencies without resorting to trade barriers and high interest rates.

THE IMPACT OF IMF & WORLD BANK Impact of external debt :

Common measure to finance deficits and to keep economy on pedals of growth cycle. But these debts hampers our growth, investment and production. About 40% of our national income goes to debts service payments. Every year we payoff the previous debts with the new loans that are taken after following the conditionality that leave our economy to vulnerable state.

- Ayub’s era--------125 million loans- Z.A. Bhutto------330 million loans- Zia ul Haq--------1.27 billion loans- Moeen Qureshi ------265.4 million loans (1993)Purpose to take loans: To overcome fiscal and external accounts

deficit.

OUTCOME: Reduce investment :As most of our NI goes in paying off debts we are

unable to do investments whereas, our private sector doesn’t have incentives and they seize their investments. While, public sector has little fund left.

Reduce savings: Foreign capital inflows have been used entirely to finance consumption. Moreover, the increase in foreign capital lower our saving by same magnitude. Thus, contribute almost nothing to growth.

Negative impact on private sector-crowding out effect: In order to finance deficits government push up interest rates to such extent that the private sector would find it unaffordable to invest, and crowd out. (Neo-classicists phenomenon)

Productivity worsened: Due to increase in imports as we follow liberalize trade affects domestic Industrial producers adversely as they are ill-prepared to compete with imported finish goods. And increase in direct tax and sales tax negatively affects them too.

Our economic frontiers were thrown open: Following such conditionality and allowing others to intervene in our state to be our ultimate deciders leave our borders open for others to play in our country for their own sake.

• Inflow of debt used to pay off old debts: we payoff previous debts with the debts taken newly. And ultimately we see pile of interest rate that hamper our economic growth.

• Dependability ( Foreign Aid Dependent Regime): Due to excessive import our industries were one way or the other dependent on foreign aid inflows.

• More political, not economic: Devaluation of currency, lifting trade restrictions, curtailing government expenditures, dissolving subsides etc left us in miserable state and acting upon such conditions in 1988 we were granted loan by IMF. More of others interest than ours.

THANKYOU….!!