World Bank and the IMF

The World Bank was established in 1946 to loan funds to less developed countries (LDCs) and the poorer countries of the world. In 1980, it loaned approximately $5.8 billion. Under its former president, Robert McNamera, the World Bank loaned funds for “hard” development projects such as roads and factories, and for “soft”

projects such as health care and educational facilities. The International Monetary Fund {IMF) also loans funds to countries that need assistance in international trade, but has been accused by LDCs of imposing stricter, unrealistic conditions for bor¬rowing (funding going primarily to private enterprise projects).7
Today the World Bank and the IMF are faced with the difficult problem of increasing LDC loans without risking a wave of defaults that could cause an inter¬national depression. In 1983 the developing and Eastern block countries of the world had a staggering debt of $706 billion. A major portion of this debt has been caused by OPEC price increases.
In addition, the World Bank and the IMF must closely monitor the borrowing of communist nations such as the Soviet Union, which owes a total of approximately $23 billion. There is sharp criticism in some American quarters to the effect that Soviet borrowing for trade with the United States allows large sums of communist money to be freed up for financing such military events as the Soviet occupation of Afghanistan and the Cuban occupations of Angola and Ethiopia. It is further ar¬gued that because Eastern block countries owe Western banks over $75 billion, po¬litical and financial blackmail is possible. A default of these loans could bring financial disaster to Western Europe and the United States.

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