Simplified— The IMF & World Bank Explained

IMF Headquarters in Washington, D.C.

This is Simplified, our flagship series which seeks to give readers a nuanced understanding of businesses, systems, and institutions.

What is the IMF & World Bank?

The International Monetary Fund (IMF) is an organization focused on stabilizing the global economy. It provides financial assistance to its 191 member states during economic crises (IMF, n.d.). Its primary role is to offer short-term financial support, helping countries manage balance-of-payments issues and maintain exchange rate stability.

The World Bank, in contrast, is centered on long-term economic development, and macroeconomic issues. The bank provides loans to countries for infrastructure projects, education programs, and healthcare improvements.

Why Do They Exist?

The IMF and World Bank are two of the three institutions established under the Bretton Woods system, a financial framework created by the United States after World War II. At the time, the global economy required stability to prevent another Great Depression. Both institutions uphold the U.S. dollar as the world's reserve currency (Hudson, 2003).

How do they work?

IMF

• Acts as a financial safety net by providing temporary assistance to countries in crisis.

• Member states contribute to a funding pool, which struggling nations can borrow from.

• Countries receiving financial support must often implement economic reforms aimed at restoring stability and growth.

World Bank

• Funds specific development projects, such as infrastructure, education, and healthcare.

• Works on long-term strategies to reduce poverty and support economic development.

• Receives funding from wealthier nations and by issuing bonds to global investors.

What, if any, controversies or criticisms surround them?

IMF

a. Accused of enforcing strict austerity measures on borrowing nations, which can lead to higher poverty levels and social unrest.

b. Criticized for using a one-size-fits-all approach that may not consider the unique economic conditions of each country.

World Bank

a. Some development projects have been linked to environmental damage and the displacement of local communities.

b. Concerns exist over rising debt burdens on developing countries, increasing the risk of "debt-trap diplomacy”. 

c. World Bank loans are given in US dollars which is stronger than most currencies — potentially leading to inflationary pressures in recipient countries.

Both institutions have also been scrutinized for their internal practices.

• World Bank officials have faced criticism for high carbon emissions due to frequent private jet travel, raising concerns about the gap between their environmental advocacy and actual operations (Franey, 2025).

• IMF officials have been criticized for excessive spending, such as memberships to exclusive country clubs, which conflict with the austerity measures they often impose on borrowing nations (Franey, 2025).

The United States holds about 17% of the voting power in the IMF, and the ability to block major decisions that require an 85% majority. In the World Bank, the U.S. also holds significant influence due to its financial contributions and voting shares, giving it the ability to shape policies and decisions (Hudson, 2003).

Reference

Franey, J. (2025, March 12). World Bank bureaucrats accused of ‘hypocrisy’ over jet flights to UN climate confab. New York Post. (https://nypost.com/2025/03/12/business/world-bank-bureaucrats-accused-of-hypocrisy-over-jet-flights-to-un-climate-confab/)

Hudson, M. (2003). Super Imperialism: The Origin and Fundementals of US World Dominance. London: Pluto Press.

International Monetary Fund. (n.d.). IMF member benefits. https://www.imf.org/external/np/exr/center/mm/eng/mm_bnfts.htm

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