ABSTRACT
After World War I, the international economy went through stages of extreme difficulties, eventually resulting in the stock market crash of 1929 and the subsequent depression of the 1930s. The depression was seen by many as one of the factors contributing to the rise of the Nazi regime in Germany. During World War II, the allied States worried about similar developments of a postwar economy, and initiatives were taken on both sides of the Atlantic to prepare the international economic regime for a peace-time situation. As a result, the US and Britain took the initiatives to establish the IMF and the World Bank. The two international financial institutions were established with quite distinct mandates. The World Bank was given the tasks of assisting in the reconstruction of a war-torn Europe, and, subsequently, getting involved in ‘the encouragement of the development of productive facilities and resources in less developed countries’. The IMF was established to ‘promote international monetary co-operation through a permanent institution that provides the machinery for consultation and collaboration on international monetary problems’.2 For the first few decades of their operation, this division of labour was fairly straightforward. The World Bank supported projects in various countries that promoted infrastructural development and improvement of production facilities. The IMF assisted in solving balance of payment problems, based on a par value system of international currency exchange rates.3 The Bank finances its loans, credits and guarantees largely by raising money on the private financial market, while the IMF draws upon its own resources deposited by the members.4
