The World Bank and the IMF
11. The World Bank was set up in 1944 and, like the
IMF, is a Bretton Woods institution. Its role is to promote "global
poverty reduction and the improvement of living standards".
The division of responsibilities between the World Bank and the
Fund is a key issue, because it determines both the future role
of the IMF and its relationship with low-income countries.
12. The Treasury Committee has previously looked
at this issue. In 2000, the Committee recommended that the IMF
should pull back from debt relief programmes in developing countries
as this would "help clarify the roles of the IMF and the
World Bank. If it is not done, the level of overlap increases
the argument for a merger."
13. We received evidence, both written and oral,
suggesting that the IMF has not dealt particularly well with low-income
countries and emerging market economies, exemplified in the build-up
of reserves by the Asian economies, as insurance against future
Some of our witnesses criticised the IMF's role in these countries,
with Dr Tembo, of World Vision, calling for "the IMF to stand
back from putting too much weight on lower income countries".
While the staff of the IMF were considered excellent, Ms Greenhill,
of Action Aid, told us "I think that is the real problem
with IMF economists, that they see things very much in purely
economic terms and they do not have any basis to think more broadly".
However, she did not necessarily agree with merging the IMF and
the World Bank. Dr
Tembo also told us that World Vision had found that social impact
analysis, with its wider scope than purely economics, achieved
more changes in favour of poor people.
14. In his evidence to us, the Chancellor of the
Exchequer stated that "there is a new sense
[the IMF] has got to work far more closely with the World Bank,
the United Nations agencies that are operating in some
of these countries as well".
He said that "there have been quite difficult examples of
the World Bank giving with the one hand, the IMF taking with the
the Chancellor was also adamant that the IMF should not move away
from working with low-income countries. He told us that, as the
"IMF becomes a very specialist organisation that is dealing
it is not necessary then to say that
the IMF should be out of developing countries; it should be involved
in surveillance of developing countries".
15. The Managing Director's Report on Implementing
the Fund's Medium-Term Strategy announced a review into the concordat
that defines the working relationship between the World Bank and
the Fund. The Governor
of the Bank of England referred to this review as a "welcome
development" to make sure there were no "unnecessary
overlaps" between the IMF and the World Bank.
Tom Scholar, UK Executive Director to the IMF and World Bank,
thought it would be a "a very important and welcome review"
that would be "looking precisely at [the] collaboration between
the two institutions, ensuring that there is complete coverage
of all issues but without duplication".
On our visit to Washington D.C., President Wolfowitz told us that
in the past there had been supposed tension between the IMF and
the World Bank. But, he said, to counter this there was currently
a high level of engagement with the present review of the relationship
between the two institutions. We
welcome the IMF Managing Director's announcement of a review to
examine the relationship between the World Bank and the Fund.
Given the concerns expressed to us by NGOs, we recommend that
the UK Government ensure that the Fund utilises the expertise
of the World Bank in social and poverty issues, to augment the
Fund's more macro-economics based analysis. The IMF should remain
within its remit of crisis prevention, not extend its activities
into areas of social policy and development it does not appear
to be equipped to deal with.