The Role of International Financial Institutions in Globalisation | Chapter 06

This discussion examines the role of the IMF and World Bank in globalisation, specifically focusing on their impact on Sri Lanka’s economy. The conversation distinguishes between the functions of the two “Bretton Woods Twins” regarding global economic management. IMF: Focuses on short-term resource management and addressing balance of payments problems to keep an economy running. It provides different programmes such as the standby programme and the extended fund facility for countries in desperate situations. World Bank: Focuses on long-term development, often managing projects over 30 to 40 years. Relationship: The institutions work together; since the 1980s, the World Bank has generally required a country to have an active IMF programme before lending. Sarath critiques recent economic mismanagement in Sri Lanka and challenges specific theoretical approaches. Modern Monetary Theory: Sarath argues this theory is fundamentally wrong because it suggests money can be printed without impacting price levels, which leads to resource misallocation and inflation.