Who runs the IFIs?

cyclical, being more determined by country events and exceptional circumstances, such
as balance of payments or financial crises. The World Bank, moreover, should lend “with
market”, while the IMF substitutes market by lending in times of turbulence and low
confidence in borrowers. In deciding how much and to whom to lend, both institutions
are driven by an assessment of local and global needs -the particular situation and
prospects a country faces and the possible external (at times systemic) consequences that
may follow from its failures. When risks are pervasive and countries are large, the IMF
lending also shape the ways in which World Bank and other Regional Development
Banks lend.

Yet, every lending decision that is made in the IFIs also reflects a judgment of the
benefits that accrue to members, as borrowers or lenders. There can be benefits of
stability (positive externalities) that accrue to all. There can be benefits that accrue
directly to the borrowers (help with the financing of a project or a balance of payments
deficit). There can be benefits that go specifically to certain lenders (as the safeguard of
national interests, the enhancing of trade linkages, or the protection of domestic banks
exposed in a borrowing country) . By analyzing the stream of decisions made by the
Boards of the two major IFIs concerning loans and credits to members (by IBRD and
IDA) and “quota purchases” or access to special facilities (in the IMF), and looking for
patterns and factors of relative influence, one can infer some of the specific functional
interests to which they may conform and the country or regional advantages that they
can serve most (US or European, for example)¹⁴.

World Bank and IMF lending since 1984

Conventional wisdom is about an ever expanding, and intrusive, role of the World Bank
and the IMF in the economic lives of member countries. However, at least on one
important count, namely the amount of disbursements to developing countries, the
conventional wisdom seems to be misleading. Figure 1 shows that over the last twenty
years the value of disbursements by the two Bretton Woods institutions, normalized by
GDP, has if anything trended downward. A glance at regional patterns (Figure. 2) shows
that most of the downward trend in the amount of the IFI disbursements comes from a
progressive disengagement from Sub Saharan Africa, possibly a reflection of the efforts
made to substitute lending to the poorest countries with debt cancellation. Still, the
pattern is at odds with the ongoing rhetoric concerning the two institutions and with
outside perceptions.

Both Figure 1 and 2 also show a marked variability in the pattern of disbursements to
member countries. The impact of systemic currency crises is visible in the two lending
peaks: in 1995 - following the Tequila crisis - and in 1997-98 -- in response to the
outburst of the East Asian crisis. In both these episodes, the IFI’s were quick to react to

¹⁴ We do not investigate in this paper whether bilateral lending is even more subject to political influence.
The issue has been extensively studied in the literature. See for instance Rodrik (1995).

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