Global Policy Forum

In a show of unity before meetings in Prague this month, the World Bank and International Monetary Fund promised on Wednesday to cooperate to help the poor, but said each had a subtly different role to play.

An unusual joint statement from World Bank President James Wolfensohn and IMF Managing Director Horst Koehler to staff and board members of the two global lenders said the institutions needed to work together, but avoid duplicating efforts.

The IMF should concentrate on core issues of monetary, fiscal and exchange rate policy, while the World Bank's "core mandate" was to reduce poverty and help countries build a framework to guarantee growth and development, the statement said.

"We share a vision of our two institutions working closely together to make a strong contribution to a better world," the two men said. "To be most effective each institution needs to focus on its respective core tasks, while working together in complementary fashion in areas -- such as the financial sector -- where our responsibilities overlap."

The World Bank and IMF were created in 1944 to rebuild the world economy after World War II, concentrating on efforts to reconstruct war-torn Europe and to manage the old exchange rate system, where currency values were tied to the price of gold.

But their tasks have changed considerably since those early days, and each institution now lends tens of billions of dollars each year to member states. The IMF has 182 member states, while 181 countries are members of the World Bank.

While each pays lip service to the need for cooperation and coordination, they have frequently appeared at odds on policies and procedures. They clashed openly at the early stages of the world economic crisis of 1997-99 about the best ways to rescue troubled countries and stop the problems getting worse.

In general, World Bank loans pay for development and social sector projects, although it also provided massive "adjustment loans" to richer countries at the peak of the crisis. The IMF provides broad balance of payments support to countries which meet tough economic conditions, and members can use this money as they see fit.

The two lenders hold their annual meetings in Prague from Sept 26-28. Anti-globalisation protesters have vowed to disrupt the gatherings because they say the institutions are recommending the wrong policies.

HELP THE POOR

In addition to their normal loans to emerging market economies, the IMF and World Bank provide subsidised credits for the world's poorest countries and the statement said the World Bank would set up a new lending facility for countries preparing detail plans on how they will reduce poverty.

The lenders have also created a new international initiative to ease the debt burden for poor countries which can demonstrate a strong track record on market-friendly reform.

"We are determined to bring the benefits of debt relief to as many countries as possible, as rapidly as possible," the statement said. "Our staffs are working closely together to make sure this happens." The two lenders aim to grant large-scale debt relief to 20 countries by the end of this year. Nine have so far qualified for aid under the Highly Indebted Poor Countries Initiative and the boards of both institutions are discussing debt relief for Mali later this week.

Wolfensohn and Koehler also urged rich countries to do more to ease poverty and ensure sustainable economic growth, step up aid levels and opening up markets. "The richer countries should open their markets, especially for agricultural products and textiles to developing countries," they said. "This would bring major benefits -- greater than the benefits they receive from current levels of aid -- to developing countries."

In a clear message to the United States, where lawmakers have yet to approve Washington's share of funding for the HIPC debt program, the two called on member governments to act to ensure funding. "The funding for debt relief is not yet fully assured," they said.

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