IMF & World Bank (Bretton Woods system)
The Bretton Woods twins—IMF and World Bank—their architecture, mandates, quota-based governance, lending instruments, and the reform debate over voice and quota share.
The 1944 Settlement
The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD)—the original World Bank—were created at the United Nations Monetary and Financial Conference held at Bretton Woods, New Hampshire, in July 1944, with 44 Allied nations attending. The negotiation pitted the British plan of John Maynard Keynes (an International Clearing Union with an 'bancor' overdraft facility) against the American plan of Harry Dexter White; the U.S. plan prevailed, reflecting Washington's creditor dominance. Both institutions began operations in 1946. The IMF's Articles of Agreement entered into force on 27 December 1945.
Two Distinct Mandates
The IMF is the guardian of international monetary stability. Article I of its Articles of Agreement charges it with promoting exchange-rate stability, facilitating balanced growth of trade, and providing temporary resources to members with balance-of-payments difficulties. Under the original system, members pegged currencies to the U.S. dollar, itself convertible to gold at $35/ounce. That par-value regime collapsed when President Nixon suspended dollar–gold convertibility on 15 August 1971 (the 'Nixon Shock'); the Second Amendment to the Articles (effective 1 April 1978) legalised floating exchange rates and demonetised gold. The IMF today conducts Article IV surveillance of every member's economy.
The World Bank Group is a development institution. It comprises five arms: the IBRD (1944, middle-income and creditworthy poor countries), the International Development Association (IDA, 1960, concessional credits and grants to the poorest), the International Finance Corporation (IFC, 1956, private-sector lending), the Multilateral Investment Guarantee Agency (MIGA, 1988, political-risk insurance), and the International Centre for Settlement of Investment Disputes (ICSID, 1966). The Bank lends for projects—infrastructure, health, education—while the IMF lends to plug balance-of-payments gaps.
Lending Instruments
IMF facilities include the Stand-By Arrangement (SBA), the Extended Fund Facility (EFF), the Rapid Financing Instrument, and the concessional Poverty Reduction and Growth Trust for low-income members. Loans carry conditionality—macroeconomic and structural policy commitments. The Fund's own reserve asset is the Special Drawing Right (SDR), created by the First Amendment in 1969; its valuation basket since 2016 comprises the US dollar, euro, Chinese renminbi, Japanese yen and pound sterling. In August 2021 the IMF approved a record SDR 456 billion (~$650 billion) general allocation in response to the COVID-19 pandemic.
India's engagement is instructive: India drew on the IMF during the 1991 balance-of-payments crisis, pledging gold reserves to the Bank of England and undertaking the conditionality that catalysed liberalisation under Finance Minister Manmohan Singh. India has since become a net creditor and contributed to the SDR pool. Candidates should retain that the IMF's managing director has by convention been European and the World Bank president American—an arrangement the reform debate now contests.
