The World Bank and the International Monetary Fund (IMF) are intergovernmental institutions that came out of the Bretton-Woods Agreement. Since both the World Bank and the International Monetary Fund are both organizations of the United Nations (headquartered in New York), criticism of both is that they further the agenda of the United States and the western effort to spread capitalism, not the best interests of the country that the World Bank or IMF might influence (Bretton Woods Project, n.d., p.2).
The World Bank’s purpose is to work in development and their mission is to end extreme poverty and promote shared prosperity (World Bank, n.d.). The United Nations sets objectives such as the Sustainable Development Goals (SDGs) as guidance for this. The low-interest and no-interest loans that they provide to developing countries are designed to bridge the economic divide to turn resources from rich countries into growth for poor countries (Amadeo, 2021). Although the World Bank may seem altruistic, money is power, and the World Bank has controlling influence in many countries as a result of their development projects. It is interesting to note that the president of the World Bank gets appointed not by the United Nations, but by the President of the United States (Amadeo, 2021), which further indicates that non-neutrality of the World Bank, and its bias toward American interests.
The International Monetary Fund (IMF) has the primary purpose of ensuring the stability of the international monetary system of exchange rates and international transactions. The IMF also lends money to member countries needing to rebuild their reserves or stabilize their currencies (International Monetary Fund, n.d.).
The low- to no-interest loans may be difficult or impossible for a struggling nation to pay back, putting more financial pressure on the system, putting them in a debt position that can create problems. In addition, the IMF and the World Bank both require austerity measures to be made by the borrowing country, by policy. In other words, the World Bank and the IMF are dictating fiscal policy and budget changes which the borrowing country must make. Often, this is in the form of cuts to social services. For example, they mandated that Brazil save approximately 3% of their GDP by cuts in the health and education sectors (Bretton Woods Project, 2019). For an organization that is supposed to help people and developing countries, forcing austerity and cuts on social services seems hardly the route to take.
The assumption of the United Nations, World Bank, and the International Monetary Fund is that they know better. They have all the power in the situation. Yes, they are highly-competent in international finance and development projects, but they also may be ignorant to the country’s actual position. Struggling countries, desperate for the welfare of the citizens, comply with the demands of the all-powerful World Bank and IMF in order to meerly survive. The policies and austerity that they push as accountability and governance does unfairly threaten the sovereignty of nations.
Imagine making $1000 a month. Imagine that your mortgage is $500. That leaves you with $500. Then imagine that your food is $100, daycare is $300, gas is $50, and electric is $50. That leaves you with nothing. You need a new roof. It is starting to leak. Your car breaks down every other day. You can’t afford health insurance. The World Bank comes in and offers to do a project to fix your roof at zero interest, but you still need to pay them back (with zero reserve cash), so they tell you that you need to cut daycare. Who takes care of your kids while you work? The World Bank comes in and buys you a new car at zero interest, but you still need to pay them back (with zero reserve cash), so they tell you to renegotiate your mortgage.
This story is illustrative of the pressure that the World Bank and the IMF exerts on countries. They appear to be doing amazing work and furthering humanitarian objectives, and they are. Their gift is not without a cost which may not improve the borrowing country.
With the United Nations SDGs in mind, the World Bank and the International Monetary Fund have the ability to improve so many nations. At the helm of these organizations, the first thing to do is to eliminate the austerity practices. Yes, they should take a look at the budgets of these developing countries and help them balance their budgets, but not to the extent that they are cutting services that their impoverished citizens depend upon. Austerity practices do nothing to further the SDGs. Better policies would be to give free consulting and analyst services to any member country, as much as needed. Build a forbearance into each loan and build in conditions of loan forgiveness which align with accomplishing United Nations SDG goals. Yes, this furthers the United Nations influence, but gives the borrowing country options.
In conclusion, the World Bank and the IMF are on noble missions, but these noble missions put undue pressure on borrowing countries. Countries are heavily influenced to change their policies by the World Bank and IMF as they take on their debt. The projects are beautiful, humanitarian pieces, but they do not happen for free. The loans come at a cost.
Amadeo, K. (2021). The World Bank, Its Purpose, History, Duties, and Mission. Retrieved from https://www.thebalance.com/the-purpose-of-the-world-bank-3306119
Bretton Woods Project. (n.d.). What are the main criticisms of the World Bank and IMF? Inside the Institutions. Retrieved from https://www.brettonwoodsproject.org/wp-content/uploads/2019/06/Common-Criticisms-FINAL.pdf
Bretton Woods Project. (2019). IMF and World Bank complicit in ‘austerity as new normal’, despite availability of alternatives. Retrieved from https://www.brettonwoodsproject.org/2019/12/imf-and-world-bank-complicit-in-austerity-as-new-normal-despite-availability-of-alternatives/
International Monetary Fund. (n.d.). About the IMF. Retrieved from https://www.imf.org/en/About
World Bank. (n.d.). Our Mission. Retrieved from https://www.worldbank.org/en/who-we-are