In recent times, there has been a growing call for the “cleaning up” of the institutions of the World Bank and International Monetary Fund, the two premier financial institutions of the world. What is the importance of these institutions, and why does it need cleansing? Let us find out!
What are the World Bank and the International Monetary Fund?
Founded in July 1944 at the Bretton Woods conference, the World Bank is an international financial organization. Its main aim is to reduce poverty worldwide, specifically in the third world or developing countries. They do this by providing grants and loans to the governments of these countries.
It is part of the World Bank Group, which is based in Washington. Other than working to reduce poverty across low-income countries, its other aim is to work for universal primary education, gender equality, and environmental sustainability. The president of the World Bank is also the president of the World Bank Group.
Like the World Bank, the International Monetary Fund was also founded in July 1944 at Bretton Woods Conference. Its headquarters is also based in Washington DC (USA). Like the World Bank, it is another premier financial institution and has 190 countries as its members.
The primary purpose of the International Monetary Fund is to help in international trade, provide an atmosphere for sustainable economic growth, and assist in helping the member countries recover from a financial crisis. Also, its secondary objective is the reduction of poverty like the World Bank.
Issues of the World Bank and IMF
A major problem with both the financial institutions is their structure designed to favor Europe and the USA; this can be gauged from the fact that only a European can be the Managing Director of IMF while the President of the World Bank has always been a US citizen, that too nominated by the USA. Moreover, it’s not necessary that a person chosen to head the World Bank must have banking experience.
This monopoly of Americans and Europeans over the two financial institutions leads to various problems. The most recent issue was the revelation that data related to the Kingdom of Saudi Arabia and China were fudged. This means that their actual conditions are hidden, and a made-up image is presented before the world; this poses a serious question about the honesty and integrity of the premiers of both these institutions.
Not only this, it is being assumed that since the Presidents of the World Bank and IMF are from first world countries, their immediate focus is always on the interests of these countries. Hence, many nations now want to remove the monopoly of Europe and the USA over the presidential position of the two institutions.
The Chinese Factor
Another major issue with the organization is its submissive attitude towards China. Out of the 15 UN specialized agencies, four are headed by Chinese citizens; this was the primary factor in suppressing the COVID-19 related inquiry at the international level. Additionally, the quick rise of China as a force at the international level is bound to create frictions between China and US-Europe.
The Credibility Problem
All the Heads of the World Bank and International Monetary Fund travel around the middle and lower-income countries with the message of good governance and philosophy of sustainable economic growth. They ask the governments of these countries to try and reduce the corruption in their respective countries so that their data integrity can be improved.
However, with the recent reports of Chinese and Saudi Arabia data being compromised, it poses a serious question to the credibility of other reports being published by these international institutions. It was evident when more than 300 former staff of World Bank had their fair share of anger at the report of data fudging on Doing Business Index.
Hence, now it is clear that choosing the premiers of the World Bank and IMF is nothing but a failure. So, the US and Europe need to stick to the high standards of accountability and integrity that they expect from the rest of the world. If this does not happen, they will lose their credibility as responsible nations. It is vital that when the global leaders meet this week for the annual meetings, they must act with utmost urgency to stop this so that nations do not lose their faith in the international organizations. For that to happen, the monopoly of the US and Europe over the presidential candidature must end.