These two sisters born in USA have already reached the age of retirement but they are still young, gorgeous and attractive. They have saved as many lives as they have destroyed. Those who are poor and under-privileged hate them and love them at the same time but the fact of the matter is that they can not breathe, let alone live, without them. One of the sisters is married to American and the other to European but they have influence of neither of the two. These sisters have their own personalities. Although their permanent residence is in Washington DC, they have homes everywhere. In addition to these homes, these two ladies meet here and there off and on. Every time they try to meet at one of the international destinations, there are widespread protests against them.

At the end of World War II, Europe which was heretofore a major market for American goods, found economies of its countries in shambles with infrastructure completely destroyed by the war. This was an alarming situation for the Americans who could foresee closure of its industries as a result of economic meltdown of the buyers. The Americans came up with a unique idea; creation of financial institutions to help rebuild Europe and its economies so that they are economically strong enough to buy American goods and keep the industries running. They met their European counterparts at Bretton Woods in the state of New Hampshire in July, 1944. Notable powers at the meeting were USA and UK who dominated the proceedings and influenced the decision-making. As a result of this meeting, two institutions among three other were born. These are commonly known as Bretton Woods sisters. One was named as International Bank for Reconstruction and Development (IBRD) while the younger sister was named as International Monetary Fund (IMF). IBRD is also known as World Bank. Traditionally, World Bank is headed by an American and IMF is headed by a European.

World Bank

World Bank provides leveraged loans to developing countries for capital programs. The World Bank has a stated goal of reducing poverty. It Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

From its conception until 1967 the bank undertook a relatively low level of lending. France was the first recipient of World Bank aid; two other applications from Poland and Chile were rejected. The loan was for $987 million, half the amount requested and came with strict conditions. Staff from the World Bank monitored the use of the funds, ensuring that the French government would present a balanced budget and give priority of debt repayment to the World Bank over other governments. The United States State Department told the French government that communist elements within the Cabinet needed to be removed. The French Government complied with this diktat and removed the Communist coalition government. Within hours the loan to France was approved.

Emphasis was shifted to non-European countries and until 1968, loans were earmarked for projects that would enable a borrower country to repay loans (such projects as ports, highway systems, and power plants). From 1968 to 1980 the bank concentrated on meeting the basic needs of people in the developing world. The size and number of loans to borrowers was greatly increased as loan targets expanded from infrastructure into social services and other sectors

From 1989 World Bank policy changed in response to criticism from many groups. Environmental groups and NGOs were incorporated in the lending of the bank in order to mitigate the effects of the past that prompted such harsh criticism. Bank projects “include” green concerns.

For more details, please visit Wikipedia.

International Monetary Fund

IMF is the international organization that oversees the global financial system by following the macroeconomic policies of its member countries; in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalizing economic policies on other countries as a condition for loans, restructuring or aid. It also offers highly leveraged loans, mainly to poorer countries.

Whenever Pakistan was faced with Balance of Payments problems, it had to seek assistance from IMF and accept its diktats which were largely to the disadvantage of the poorer segments of the society like frequent tariff increases in the case of most essential items and utilities, withdrawal of subsidies etc. Unless Pakistan checks its foreign exchange outflows and enhances its remittances and exports, it will remain in the clutches of IMF.

For details on IMF functions and its history, please visit Wikipedia.

Article by: Arooj Anjum