The effectuality of two of the world’s biggest financial institutions, World Bank and International Monetary Fund, is getting questioned amid the widening gap between their achievements and commitments. To draw an analogy of increasing distrust among public towards these financial aiders, one can refer to the movie, “Our Brand is Crisis,”, which loosely represents a version of the 2002 Bolivian elections, where people protested against IMF and its policies.
Today, both IMF and WB are facing similar criticism for failing in preventing economic crisis ranging from the Latin American debt crisis in the 1980s, the Asian and Russian crises in the 1990s, to the global financial crisis in 2007, leading to the Global Recession, the horrors of which still loom over the global economy.
Two, considered as the financial pillars of the global economy, were created on July 22, 1944 towards the end of World War II to help recover the wounded economies of European nations and later Japan.
The critics reviewing the effectiveness of the two, as IMF and WB completed 75 years of service, raised the need for structural reforms as they work according to the aspirations of US and UK, rather than realities of developing economies. Even till today, the two follow the conventional rule that the head of the IMF would be appointed from Europe and the head of the WB from US.
In an interview with the Executive Director of Reserve Bank of India Rabi Mishra, told The Economic Times that the IMF and WB should adapt to the changing times and consult developing nations in charting out a plan for them rather than imposing the directions of member nations. Mishra added the two need to shift from the top-down approach to bottom-up approach and address the root cause of the issue.
There is a huge gap in the say of western and other economies, especially in case of IMF which is based on the shareholding system. In it, the US has more than a 16% share of voting power compared to China’s 6.09%, which is the world’s second-largest economy. Which is why China does not even attend the IMF meetings.
Acting managing director David Lipton rightly says the IMF cannot expect to retain global reach and resources “unless countries gaining in importance … gain appropriately in their say in the fund”.
It is said that the two institutions, which were created to eradicate poverty and to help float the drowning economies, have made things worse for the sufferers.
In a recent interview with AFP, World Bank President David Malpass said that the institution has to surmount huge challenges. Malpass said, “I have put emphasis on having the bottom 40 percent of the population see more jobs, more cash income but also more of the inputs to a better living standard.
“That might mean access to healthcare, to education. And that would be better environmental practices — all of that contributing to a more prosperous … society.” WB data showed that world over poverty has gone down by 10 percent in 2015. But there are still 700 million people that need to be taken out of extreme poverty.