Rethinking Poverty through the Eyes of the International Monetary Fund and the World Bank

Abstract

This essay investigates factors that caused shifts in the policies of the International Monetary Fund (IMF) and the World Bank which culminated in new frameworks for poverty alleviating initiatives. The introduction of the Heavily Indebted Poor Countries Initiative (HIPC) in 1996 as well as the subsequent broadening and expanding of this program into the Enhanced HIPC Initiative coupled with the implementation of the Poverty Reduction Strategy Papers in 1999, were some of the strongest initiatives to date by the institutions to address poverty in the poorest countries. Institutional characteristics of the IMF and the World Bank are found to be an important explanatory factor for their differing approaches to alleviating and understanding poverty. The World Bank has evolved to be able to address poverty as a societal and developmental issue, as a result of the formation of programs to include input from the poor themselves. The IMF has been slower in this evolutionary process and is still more likely to focus on macroeconomic issues that affect the poor such as high inflation and slower economic growth.