Question

5. Write a one-page paper on the role of the World Bank and the Interna- tional Monetary Fund in providing loans to countries. Is it important for U.S. citizens to lend money to people in other countries through such organizations? Why or why not? Be prepared to debate the value of these organizations in class.

Answer 1

The IMF’s mandate. The IMF promotes international monetary cooperation and provides policy advice and capacity development support to help countries build and maintain strong economies. The IMF also makes loans and helps countries design policy programs to solve balance of payments problems when sufficient financing on affordable terms cannot be obtained to meet net international payments. IMF loans are short and medium term and funded mainly by the pool of quota contributions that its members provide. IMF staff are primarily economists with wide experience in macroeconomic and financial policies.

The World Bank’s mandate. The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries reform certain sectors or implement specific projects—such as building schools and health centers, providing water and electricity, fighting disease, and protecting the environment. World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance. World Bank staff are often specialists on particular issues, sectors, or techniques.

educing debt burdens. The IMF and World Bank have also worked together to reduce the external debt burdens of the most heavily indebted poor countries under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).

They continue to help low-income countries achieve their development goals without creating future debt problems. IMF and Bank staff jointly prepare country debt sustainability analyses under the Debt Sustainability Framework (DSF)developed by the two institutions.

The US citizens specially the wealth ones should definitely lend to the poorer countries through such organisations. This would help to reduce the debt burden that these countries are facing. The World Bank and IMF's financial reserves come from several sources - from funds raised in the financial markets, from earnings on its investments, from fees paid in by member countries, from contributions made by members (particularly the wealthier ones) and from borrowing countries themselves when they pay back their loans.