IMF: Toward growth and development

People who deal with domestic and global economy and development may have noticed that once a regulatory body, the International Monetary Fund, (IMF) has brought major changes in its policies and areas of focus. Apart from working on its core mandate -- ensuring the stability of the international monetary system -- the IMF is now offering more focuses on development and financial inclusion.
The change was evident when IMF managing director Christin Lagarde addressed the World Bank and the IMF's annual meeting in Washington DC last October. In her speech, she on several occasions uttered the words 'growth' and 'inclusive growth'.
She said: "We need growth-but we need inclusive growth." She offered three paths for attaining growth. She emphasised good public policies, which can boost growth in the decades to come.
Lagarde suggested reenergising of trade to reinvigorate growth. She also put greater emphasis on policies that can help mitigate the negative effects of trade, and make everybody benefit. Lagarde said achieving greater inclusion was actually a tall order. It requires more than macroeconomics. It also involves politics and social contracts, which must reflect national, regional, and cultural diversity.
While briefing the IMF governors -- mainly the finance ministers of member countries-about the work of her team members during the last one year she said: "We have stepped up efforts in our core areas of expertise-including fiscal, monetary, and exchange rates, as well as expanding our macro-financial analysis. We have stepped up work on other macro-critical issues-such as financial inclusion, gender equality, corruption, migration, and climate change."
It the global financial institution was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944. The 44 countries at that conference sought to build a framework for economic cooperation to avoid a repetition of the competitive devaluations that had contributed to the Great Depression of the 1930s.
The primary purpose of establishing the IMF was to ensure the stability of the international monetary system-the system of exchange rates and international payments that enable countries (and their citizens) to transact with each other. In 2012, however, the mandate of the IMF was updated to include all macroeconomic and financial sector issues that have a bearing on global stability.
The IMF's fundamental mission is to ensure the stability of the international monetary system. It does it in three ways: Keeping a track on the global economy and the economies of member countries, lending to countries with balance of payments difficulties, and giving practical advice to members.
Bangladesh's finance minister AMA Muhith was talking with reporters at the World Bank head quarters in Washington DC after Ms Lagarde's speech where growth and inclusive growth got more prominence. He described it as a major policy shift and said the IMF has brought changes in its policy and transformed it into an organisation working for development and growth from its previous role as a regulatory body.
He went on saying that now there is no difference in role of IMF and the World Bank. The duo now works together on growth and development. "It (IMF) was a regulatory body in the past. But Lagarde was talking about growth, distribution and development on several occasions."
Muhith at one point narrated his experiences gathered earlier. He said in the past bodies of poor nations -- G-24 and G-77 -- had to push for incorporating 'development' in the agendas of the IMF meetings. But now the developed countries themselves include the issue as important part of meeting agenda.
He explained the reason for such a major policy shift saying the change is because the number of poor people is much higher than that of the rich. Out of seven billion, world population, only one billion are rich and the rest are poor. Besides, the growth prospects in developed countries are now bleak and have become saturated. If growth takes place in poor countries, the developed nations somehow get benefits from it. So now they are looking towards development and growth in poor countries.
The Bangladeshi minister thinks that the poor nations' voice in the IMF and World Bank activities now get more importance than in the past. He even believes that nowadays, policies are being framed looking into the interests of underdeveloped nations.
It may be well evident that the IMF's changes in policies and continuous efforts of the World Bank on pro-development activities have really benefited the poor nations. In the recent years, many countries have graduated to the upper level and some are in the process of graduation.
Bangladesh can be a shining example in this case. Here Muhith's words can be cited again. He said Bangladesh has reached a stage at 45 years, which in cases of Britain, France and some other developed countries needed 200 years.
It is no denying that Bangladesh's growth performance in recent years has been impressive.
Now the country is waiting for a formal graduation from Lower-Middle Income Country (LMIC) to a Middle Middle Income Country (MMIC) status. The World Bank in July 2015 announced that the Gross National Income per capita (GNI) continue to show improved economic performance in many low-income countries, with Bangladesh, Kenya, Myanmar, and Tajikistan now becoming lower-middle income countries, joining those with annual incomes of $1,046 to $4,125 and Mongolia and Paraguay move from lower middle-income status to upper middle-income, a group with yearly income levels of $4,126 to $12,735. The United Nations (UN) system now has to recognise the graduation of these countries through a formal process for which they are waiting.
Established in 1944, the World Bank is now working with two goals-ending extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3.0 per cent, and promoting shared prosperity by fostering the income growth of the bottom 40 per cent for every country.
The World Bank's initiatives also helped many poor nations come out from extreme poverty. The International Development Association (IDA), soft lending arm of the World Bank lends at a rate as low as 0.75 per cent. Such loans have helped many countries make their economy stronger. The IDA is one of the largest sources of assistance for the world's 77 poorest countries, 39 of which are in Africa, and is the single largest source of donor funds for basic social services in these countries. The IDA lends money in concessional terms. The credits have a zero or very low interest charge and repayments are stretched over 25 to 40 years, including a 5- to 10-year grace period. The IDA also provides grants to countries at risk of debt distress.
Bangladesh has alone so far received US$24 billion in IDA credit and remained at top of the list of the IDA credit recipient countries, with which it has mainly developed core infrastructural needs. The country still expects to remain as the top IDA recipient nine more years. Muhith said the impact of IDA assistance has been very positive in the case of Bangladesh. Here, the IDA has played a big role in poverty reduction.
The World Bank Group president Jim Yong Kim, in his speech at World Bank-IMF's annual meeting in Washington, made a commitment to end poverty and boost shared prosperity. And he said these goals will be achieved in three ways. By accelerating inclusive and sustainable economic growth, by investing more and more effectively in people, and by fostering resilience to multiple global shocks and threats.
The heads of two global financial bodies expressed their firm commitment towards growth and development. They are also committed to ending poverty and reducing the gap between the rich and poor. The World Bank has been working on this for a long period. The IMF's drive towards growth and development will speed up the efforts to achieve the goals. This is expected by all.  
The author is a Senior Reporter of The Financial Express.
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