Answer by Balaji Viswanathan:
World Bank is about growth. IMF is about stability. World Bank is for development projects in the developing world. IMF is about balancing the international financial system in both rich and poor countries [Greece is a recent recipient]. World Bank is your gym trainer – provides you stuff to grow strong. IMF is your doctor in emergency ward. They will try to bring you back to life & provide you advice on not eating that fatty food again. Countries that get IMF assistance are usually "pitied" in global markets.
Both the organizations are for governments to borrow. You go to the World Bank when you want to build a dam or power plant or a road. You go to the IMF when you are so fucked up that your currency is dropping like crazy. IMF comes and usually fixes stuff along with providing a mouthful of advice.
World Bank is a bank. Meaning it borrows money from investors around the world and then lends to the poor governments that are building projects that help them out of poverty. You can see some of their projects in India, for instance:
IMF is a fund. Meaning it has a pool of money given to it by 182 member countries in the past and just lends out of that fund. It doesn't usually borrow new money. See where IMF lends:
IMF is comprised of four key credit lines:
- FCL (Flexible Credit Line): This is usually given to countries well before they get into a problem. They are the ones with better policies.
- PLL (Precautionary Lending): This is for countries that are beginning to get weak.
- SBA (Stand By Arrangement): This is for countries that are quite weak, but can be rescued quick.
- EFF (Extended Fund Facility): This is for countries too screwed up and requiring a long term help.
World Bank is a much bigger institution and has two arms:
- IBRD (International Bank for Reconstruction and Development): This is the bank portion of it. It charges a slightly higher interest rate than it borrows and it is mainly for profitable commercial projects [such as roads and dams]. This interest is still a lot low than what the governments can get anywhere.
- IDA (International Development Assistance): This is a grant body. Here interest is not charged and usually countries are given long periods for repaying. The focus is on social projects such as immunization and education. This is however open only for the poorest nations.
Countries usually graduate out of IDA to IBRD and eventually completely out of World Bank. Dozens of countries have got World Bank aid and then grown enough to not be eligible for it anymore.