The Bretton Woods twins: How do the World Bank and IMF work together?
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Article summary
This Inside the Institutions looks at the evolving relationship between the IMF and World Bank: how they work together, leading to increasingly converging policy approaches, and how their coordination and lending practices continue to shape debates over conditionality, constrained policy space. It also highlights civil society critiques of their harmful impact on development and human rights outcomes.
The IMF and World Bank Group, the Bretton Woods Institutions (BWIs), were established at the 1944 Bretton Woods Conference in New Hampshire as twin pillars of the post-war international economic order, aimed at promoting global monetary stability, expanding international trade, and supporting post-war reconstruction. Yet interpretations of their founding differ, with some arguing they were created to maintain Western dominance and, at the time, to counter Soviet power. Created with distinct mandates – the World Bank to finance reconstruction and development, and the IMF to promote international monetary stability through short-term balance-of-payments (BoP) support (see Inside the Institutions, What are the BWIs?) – they were designed to be complementary. One of the system’s architects, John Maynard Keynes, leading the UK delegation to the conference, referred to them as the Bretton Woods “twins”.
The BWIs are separate legal entities with distinct Articles of Agreement and Boards of Governors (see Inside the Institutions, IMF and World Bank decision-making and governance). However, their proximity in Washington DC – across the street and linked by an underground tunnel – reflects their close institutional relationship, evidenced in their joint hosting of the Annual and Spring Meetings. With governance structures that grant the US veto power over key changes – and the “gentlemen’s agreement” which has ensured that the IMF Managing Director has historically always been European and the World Bank President a US national (see Inside the Institutions, What is the ‘gentleman’s agreement’?) – they have jointly exercised considerable influence over the global development and financial agenda.
Joint enforcers of the Washington Consensus
Cooperation between the BWIs deepened in the 1980s as the Global South debt crisis, to which many consider their policies contributed, reshaped their division of labour. The Bank expanded into the IMF’s traditional policy space through Structural Adjustment Loans (SALs), while the Fund increasingly provided longer-term support, increasingly blurring their roles. In practice this led to a proliferation of policy conditionality attached to lending, with the BWIs becoming joint enforcers of the “Washington Consensus” – a paradigm centred on fiscal austerity, privatisation, and trade and financial liberalisation, and the preeminent role of the market through “getting prices right”. These reforms also reshaped domestic social relations in borrowing countries, including state-citizen relations and trust in the social contract, public service provision, and the balance of power between labour, capital and the private sector.
In 1989, the World Bank President and IMF Managing Director issued a joint memorandum (the “Concordat”), which remains the main framework for their cooperation. It established a division of labour based on “primary responsibilities”: the Bank leading on structural and sectoral reforms, and the Fund on macroeconomic policy. Although tensions persisted, the Concordat clarified roles, with the IMF stating that its “immediate aim is to help members strengthen their BoP positions”, while the Bank focuses on “efficiency in the use of resources”, both assessing national policy from different perspectives. As Tamar Gutner, an associate professor at American University specialising in international institutions, notes, the aim was not only to avoid conflicting advice but to ensure it was “mutually supportive”.
Later refinements, notably the 2007 Joint Management Action Plan (JMAP), strengthened coordination through information sharing, work sequencing, and country-level collaboration. Today, joint work also includes financial sector stability assessments in emerging markets and debt sustainability analyses in low-income countries (see Inside, What is the World Bank & IMF debt sustainability framework for low-income countries).
Difficult collaboration in practice
Yet collaboration has remained limited. A 2020 assessment by the Independent Evaluation Office (IEO) – an independent IMF body responsible for evaluating the Fund’s work – found it was “broad, but uneven”, with widespread informal consultation but few examples of in-depth collaboration. Expectations that the IMF would systematically draw on World Bank expertise proved “over-optimistic”, due to decentralised pilots, institutional self-reliance, and practical barriers to access to information, expertise and aligned timelines. Collaboration was also largely left to team discretion, with limited central guidance.
With the World Bank’s current restructuring and renewed emphasis on decentralisation (see Observer Summer 2026), these coordination challenges – and “mixed messages” – may persist.
Malicious fairies with shared arrière-pensées
The IEO evaluation also found that collaboration is strongest at country-level, particularly in “IMF-supported programmes and World Bank policy-based lending.” It noted that even where formal joint design is limited, both institutions operate within broadly similar analytical frameworks and a shared “overall approach to problem-solving based on market-based, mainstream economics,” producing largely aligned policy advice.
Indeed, the Bank’s successor to SALs is Development Policy Financing (DPFs; see Inside the Institutions, What is Development Policy Financing?), which continues policy-based lending that retains the logic of structural adjustment, as argued by civil society (see Report, Gambling with the planet’s future), a pattern also reflected in IMF surveillance and lending (see Report, Brace for impact: Social and gender inequality in IMF surveillance).
The diversification of the Bank’s lending and programming away from project finance in the 1980s created new and broader avenues of influence. Despite its recent weakening of its antagonism to industrial policy, the Bank is still doubling down on private capital mobilisation (see Observer Summer 2023). This has been contributing to a narrowing of the distinction between “development” and financial adjustment, embedding a short-term balance-of-payments stability logic within development policy rather than a longer-term economic transformation agenda. This has reinforced civil society critiques of the BWIs – particularly in the context of the climate crisis, rising inequality, debt crises and austerity – which argue that their policy advice constrains fiscal and policy space in borrowing countries, effectively “kicking away the ladder” to development.
In his inaugural speech in Savannah in 1946, Keynes christened the BWIs using a Sleeping Beauty analogy, warning there should be “no malicious fairy… whom he [the US organiser] has overlooked and forgotten to ask to the party”, otherwise the “two brats” would “grow up politicians”, acting with “arrière-pensée” rather than for their own sake, and that if so, the best “would be for the children to fall into an eternal slumber, never to waken or be heard of again in the courts and markets of Mankind.” Eight decades later, this warning resonates in a global financial architecture shaped by recurring debt crises and austerity cycles across the Global South, alongside an ongoing crisis in development itself, and a growing erosion of trust in international institutions and multilateralism, while the gains of private capital continue to grow.
These dynamics sit within a broader history of contestation by developing countries over global economic governance, from the New International Economic Order (NIEO) in the 1970s to efforts to diversify development finance through institutions like the New Development Bank, a multilateral development bank established by the BRICS (see Observer Autumn 2024). This reflects persistent struggles over the concentration of power in favour of rich countries within the Bretton Woods system and the limited role of the United Nations, where all member states participate on an equal footing (see Observer Spring 2025). In this context, improved cooperation between the BWIs could be detrimental without a systematic review of their policy effectiveness to date, and stronger engagement with the UN system, civil society and academia.
