This article provides a comprehensive overview of the Bretton Woods Institutions—the International Monetary Fund (IMF) and the World Bank—explaining their origins, functions, and their specific impact on Bangladesh.
The Birth of a New Economic Order: Bretton Woods
Following the devastation of World War II, global leaders realized that economic instability in one nation could trigger a "butterfly effect," destabilizing the entire world. In 1944, representatives from 45 countries gathered in Bretton Woods, New Hampshire, to create a universal economic system. This gave birth to the IMF and the World Bank.
The Evolution of the IMF
Initially, the IMF was not focused on general development but on preventing the types of economic conflicts that lead to wars.
The Gold Exchange Standard: In the early years, currencies were valued against the US Dollar, which was directly convertible to gold ($35 per ounce).
Transition to Fiat Money: Today, most countries use "Fiat Money," which is backed by government trust rather than physical gold.
The International Monetary Fund (IMF)
Core Objectives
The IMF serves as a global financial accountant and cooperative. Its goals include:
Financial Cooperation: Providing a platform for countries to solve economic disputes.
Currency Stability: Ensuring orderly exchange arrangements among member nations.
Emergency Assistance: Providing loans to countries facing temporary balance-of-payment crises.
Balanced Trade: Promoting the growth of international trade to boost employment and income.
Structure of the IMF
The IMF is governed by a Board of Governors (usually Finance Ministers or Central Bank heads). Daily operations are managed by an Executive Board of 24 directors representing the global regions.
The World Bank and World Bank Group
While the IMF focuses on short-term stability, the World Bank focuses on long-term development and poverty reduction.
The Five Organizations of the World Bank Group:
IBRD: Lends to middle-income and creditworthy low-income governments.
IDA: Provides interest-free loans (credits) and grants to the poorest countries.
IFC: Focuses on the private sector in developing countries.
MIGA: Promotes foreign direct investment by offering political risk insurance.
ICSID: Provides facilities for the conciliation and arbitration of investment disputes.
IMF and the World Bank in Bangladesh
Bangladesh’s relationship with these institutions involves financial support tied to specific economic reforms:
Privatization: Under IMF conditions, several state-owned enterprises (like the Adamjee Jute Mill in 2003) were closed or privatized to promote a free-market economy.
Banking Reforms: The transition from state-controlled banks to Private Commercial Banks was part of these structural reforms.
Taxation: The implementation of the VAT and Supplementary Duty Act (2016) was a key condition for receiving IMF loans.
Subsidies: The IMF often advises reducing government subsidies on fuel and energy to stabilize the national budget.
Key Differences: IMF vs. World Bank
| Feature | International Monetary Fund (IMF) | World Bank |
| Primary Role | Oversees the global monetary system & exchange rates. | Focused on long-term economic development & poverty. |
| Size | Small (approx. 2,500 staff). | Large (approx. 7,000+ staff). |
| Focus | Short-term economic crises. | Technical and financial support for projects (education, health, infrastructure). |
| Membership | Countries must join IMF first to join the World Bank. | Requires IMF membership. |
In summary, the IMF and the World Bank serve as the twin pillars of the global financial architecture. Born from the necessity of post-war recovery, they have evolved into the world's most influential economic regulators. While the IMF acts as a "financial watchdog" ensuring currency stability and helping nations during short-term crises, the World Bank functions as a "development partner," investing in long-term projects to eradicate poverty.
For countries like Bangladesh, these institutions are both a source of essential capital and a driver of significant structural change. While their conditions—such as privatization and subsidy cuts—can be challenging, their support remains vital for navigating the complexities of the modern global market. Understanding the balance between these two giants is key to understanding how the world’s money moves and how developing nations grow.
