World Bank
(International Bank for Reconstruction & Development- IBRD)
Dr. Dhaval J. Pandya
Head & Asst. Prof., Department of Economics,
UCCC, SPBCBA & SDHGCBCA & IT,
Udhna, Surat
Email: djp_econ@yahoo.co.in
Introduction
The International Monetary & Financial Conference was held at Bretton Woods during
July1-22,1944.
The main objective of this conference is to finalise the Article of Association of IMF &
establishment of an institution for the reconstruction of war shattered countries after
Second WorldWar.
The Conference has given birth to two international financial institutions namely,
International Monetary Fund (IMF) & International Bank For Reconstruction &
Development (IBRD) in the year 1945.
IBRD is an inter-governmental institution ,corporate in form. Its capital is entirely
owned by its members or Governments. And therefore it has “One Country –One Vote”
System unlike IMF.
Headquarter:Washington D.C., United States of America.
President: Davis R. Malpass (13th President of IBRD)
Ramifications of IBRD
IBRD
(World Bank)
International Multilateral Investment
International Financial
Development Guarantee Agency
Corporation (IFC)
Association(IDA) (MIGA)
Establishment Yr.-1956
Establishment Yr.-1960 Establishment Yr. -1988
Functions Or Purpose of IBRD
According to Article –I of the Agreement, the functions of Bank
are as follows:
1. To assist in the reconstruction & development of the member
nations by facilitating the investment of capital.
2. To promote private foreign investment.
3. To promote long term balanced growth of international trade
& maintaining equilibrium in balance of payments by
encouraging international investments & thereby raising
productivity & standard of living.
4. To arrange the loans or guarantees by it in relation to
international loans through other channels.
Funding Objectives of the Bank
To make sure availability of funds in the markets.
To provide funds to the borrowers in the form of soft loans.
To control volatility in net income & overall charges of the
loan.
To provide an appropriate degree of maturity between
borrowing & lending.
Guiding Principles of the Bank
In its lending operations, the Bank is guided by certain polices which
have been formulated on the basis of Articles of Agreements :
First: The Bank should properly assess the repayment prospects of the
loans.
Second: The Bank should lend only for specific projects which are
economically & technically sound & of a high priority nature.
Third: The Bank lends only to enable a country to meet the foreign
exchange contents of any project cost.
Fourth: The Bank does not expect the borrowing country to spend the
loan in a particular country.
Fifth: The Bank’s policy is to maintain continuing relations with
borrowers & keep in touch with financial & economic developments.
Sixth: The Bank indirectly attaches special importance to the promotion
of local private enterprises.
Organisational Structure of the Bank
Board of
Governors
Executive
Directors
Director
General
President
(As Chairman)
Departmental
Heads
Special Facilities By the Bank
Facilities Explanation
(i)Structural Adjustment Facility For correcting disequilibrium in B/Ps
(ii)Enhanced Structural Adjustment Facility For making available resources at concessional
rate.
(iii)Special Action Programme For structural adjustments, finance to high
priority sectors & advisory service .
(iv) Technical Assistance For preparing reports, training to Sr. officials of
LDCs etc.
Areas of Sanction for Loans by IBRD
1. Supply side reforms: e.g., improving the efficiency.
2. Price reforms.
3. Changing the price of tradable goods relative to non
tradable goods.
4. Getting the correct terms of trade between agriculture &
industrial goods.
5. Reducing the size of the public sector.
6. Financial reforms.
7. Tax reforms.
International Development Association(IDA)
The IDA is an affiliated of the IBRD established in 1960.
Primarily, its main objective is to provide assistance to poorer
developing countries on soft loan basis. Hence IDA is a soft
loan window of IBRD.
At present there are more than 181 member countries of IDA.
Objectives of IDA :
1. To provide development finance on easy terms.
2. To provide assistance for poverty alleviation.
3. To provide loans for macroeconomic management services like
HRD, Population Control, development of health ,education
nutrition etc.
Membership of IDA
IDA
Part-I Part-II
Members Members
For
For Developed
Developing
Countries
Countries
Conditions of Loans by IDA
Conditions of IDA includes:
1. Repayment Period- 35-40 years.
2. Grace Period- 10 years.
3. Interest Rate varies in-between Zero to 0.5%.
4. Administrative Fees is 0.75% on the loan amount
disbursed.
International Finance Corporation (IFC)
IFC was established in July 1956 in order to provide
finance to private sector in developing countries.
IFC is also an affiliate of the IBRD but it has separate legal
entity, funds & functions.
All member are eligible to become a member of IFC.
Objectives of IFC
IFC helps for the growth of private enterprise particularly of
LDCs. The objectives of IFC as stated in Article-I of its
Article of Agreements are as follows-
“The purpose of the Corporation is to further economic
development by encouraging the growth of productive
private enterprises in member countries, particularly in
less developed areas, thus supplementing the
activities of IBRD.”
Multilateral Investment Guarantee Agency
Objectives:
1. To promote FDI in developing countries,
2. To support economic growth,
3. To reduce poverty,
4. To improves people’s lives.
MIGA fulfills this mandate by offering political risk insurance
(guarantees) to investors and lenders.
The International Centre for Settlement of
Investment Disputes(ICSID)
The International Centre for Settlement of Investment Disputes
(ICSID) was established in the year 1966 under Convention on the
Settlements of Investments Disputes between States & Nationals of
Other States.
The International Centre for Settlement of Investment Disputes
(ICSID) provides international facilities for conciliation and
arbitration of investment disputes.
Assistance to the Member Countries
1. Direct Investment.
2. Foreign & Local Capital.
3. Technical Assistance.
4. Development of Capital Markets.
5. Assistance to SSIs.
Distinct Role of IMF & World Bank
International Monetary Fund (IMF) World Bank (IBRD)
•Oversees the international monetary system & Seeks to promote economic development &
promotes international monetary cooperation. structural reform in developing countries.
•Promotes exchange stability & orderly exchange Assists developing countries through long term
relations among its members. financing of development projects & programs.
•Assists members in temporary B/Ps difficulties by Provides special financial assistance to poorest
providing medium term financing. developing countries through IDA.
•Supplements the reserves of its members by Stimulates private enterprises in developing
allocating SDRs. countries through its affiliate IFC.
•Draws its financial resources principally from Acquires most of its financial resources by
quota subscriptions of its members. borrowing in the international bond markets.
