WORLD BANK

IMJ- 1ST SEMESTER

INTRODUCTION

• The World Bank came into existence as International Bank

for Reconstruction and Development (IBRD) in 1944 at the
Bretton Woods Conference.
• The conference resulted in the establishment of Bretton
Woods Twins: the International Monetary Fund (IMF) along
with IBRD (later called the World Bank).
• The World Bank was founded in 1945
WORLD BANK GROUPS
• Expansion of IBRD
1. International Bank for Reconstruction and Development (IBRD) in
1944
2. International Finance Corporation (IFC) in 1956
3. International Development Association (IDA) in 1960
4. International Centre for Settlement of Investment Disputes (ICSID)
in 1966
5. Multilateral Investment Guarantee Agency (MIGA) in 1988
World Bank Group Membership
• To become a member, a country must first join the
International Monetary Fund (IMF)
• Membership in IDA, IFC and MIGA are conditional on
membership in IBRD
• Membership in ICSID is available to IBRD members, and
those which are a party to the Statute of the International
Court of Justice (ICJ)
International Bank for Reconstruction and
Development (IBRD)
• Established in 1944 and is commonly known as World Bank.
• It is led by the President, followed by the Boards of Governors.
• The Board of Governors consist of one Governor and one Alternate
Governor appointed by each member country.
• Voting Powers: Each member receives votes consisting of share votes
(one vote for each share of the Bank’s capital stock held by the
member) plus basic votes (calculated so that the sum of all basic
votes is equal to 5.55 percent of the sum of basic votes and share
votes for all members).
• IBRD Focus Area:
• Roads and highways
• Rural Credit energy
• Urban Infrastructure (including water and sanitation)
• Disaster management and the financial service sector
International Development Association
• Established in 1960
• Aim: to reduce poverty by providing loans (called “credits”) to the
world’s poorest countries
• Supports a range of development activities such as primary education,
basic health services etc.
• It has 173 members as its shareholders
• IDA lends money on concessional terms, often referred to as “soft loan
window” as it provides practically interest-free money for a long
periods.
• It provides significant amount of debt relief to poor countries.
International Finance Corporation
• Established in 1956
• Largest global development institution which focused exclusively on
the private sector in developing countries.
• Member- 184 as its shareholders
• It raises funds through the issuance of debt obligations in
international capital markets
• Focus Area: The IFC’s investment services consist of loans, equity,
trade finance, syndicate loans, structured and securitized finance,
client risk management service, treasury service and liquidity
management.
Multilateral Investment Guarantee Agency
• Established in 1988
• Provides guarantee to investors in developing countries against
political and non-commercial risks like currency inconvertibility, war,
terrorism and civil disturbance, etc
• Member-181 shareholder
• Aim: To promote foreign direct investment into developing countries
to support economic growth, reduce poverty.
• India became a member in 1994
International Centre for the Settlement of
Investment Disputes

• Established in 1966, by the Convention on the Settlement of

Investment Disputes between States and Nationals of Other States
(the ICSID Convention).
• Member-161
• It settles investment disputes between investors and countries by
conciliation, arbitration or fact-finding.
• India is not a member.
World Bank Group and India
• India was one of the signatories at the Bretton Woods Conference that
established the IBRD.
• IBRD lending to India commenced in 1949 with a loan to the Indian railways
• During the 1950’s, the IBRD was India’s soul source of World Bank
borrowings.
• During the 1960’s and 7o’s India was the largest recipient of IDA funds
accounting for more than two fifth of its lending.
• India is currently defined as a “blend-country” defined as one in transition
from lower-middle income to middle income.
• The World Bank Group has approved a $25-30 dollar commitment plan for
India for the period 2019-22.
Criticisms
• The World Bank Group System allows the largest shareholder to
dominate the vote
• Results in WBG policies being decided by the rich but implemented by
the Poor.
• The WBG is often accused of ignoring the environmental and social
impact of projects its supports.
• Although, the World Bank loans are intended to help countries, they
also cause those countries to take on debt that they must pay interest
on and remain under the conditions of the institution.
• There have been instances of violation of their Articles of Ageement
wherein political issues influenced lending policies.
• Example- World Bank denied India Fresh loans after India tested
nuclear weapons in 1998.
INTERNATIONAL MONETARY FUND

This Photo by Unknown Author is licensed under CC BY-NC-ND

This Photo by Unknown Author is licensed under CC BY-SA-NC
• The International Monetary Fund (IMF) works to achieve
sustainable growth and prosperity for all of its 190 member
countries. It does so by supporting economic policies that
promote financial stability and monetary cooperation, which
are essential to increase productivity, job creation, and
economic well-being. The IMF is governed by and accountable
to its member countries.

• The IMF has three critical missions: furthering international

monetary cooperation, encouraging the expansion of trade
and economic growth, and discouraging policies that would
harm prosperity. To fulfill these missions, IMF member
countries work collaboratively with each other and with other
international bodies.
• The IMF was conceived in July 1944 at the United
Nations Bretton Woods Conference. The 44 countries
in attendance sought to build a framework for
international economic cooperation and avoid
repeating the competitive currency devaluations that
contributed to the Great Depression of the 1930s
Who runs the IMF?
• The IMF is accountable to its member country governments. At the
top of the organizational structure is the Board of Governors,
consisting of one governor and one alternate governor from each
member country, usually the top officials from the central bank or
finance ministry. The Board of Governors meets once a year at
the IMF–World Bank Annual Meetings. Twenty-four of the governors
serve on the International Monetary and Financial Committee, or
IMFC, which advises the IMF's Executive Board.

• The day-to-day work of the IMF is overseen by its 24-

member Executive Board, which represents the entire membership
and is supported by IMF staff. The Managing Director is the head of
the IMF staff and Chair of the Executive Board and is assisted by four
Deputy Managing Directors.
• IMF funds come from three sources: member quotas, credit arrangements,
and bilateral borrowing agreements.
• MEMBER QUOTAS
• Member quotas are the primary source of IMF funding. A member country’s
quota reflects its size and position in the world economy.
• NEW ARRANGEMENTS TO BORROW
• New Arrangements to Borrow (NAB) between the IMF and a group of
members and institutions are the main backstop for quotas. In January 2020,
the IMF Executive Board agreed to double the size of the NAB to SDR 365
billion, or $504 billion.
• BILATERAL BORROWING AGREEMENTS
• Member countries also have committed resources through
bilateral borrowing agreements (BBAs). In 2020, the IMF Executive Board
approved a new round of BBAs, totaling SDR 138 billion, or $190 billion.
• How does the IMF give policy advice?
• A core responsibility of the IMF is monitoring the economic and financial
policies of member countries and providing them with policy advice, an
activity known as surveillance. As part of this process, which also takes place
at the global and regional levels, the IMF identifies potential risks and
recommends appropriate policy adjustments to sustain economic growth and
promote financial stability.
•
Why is IMF monitoring important?
• Vigilant monitoring by the IMF is essential to identifying risks that may
require remedial policy adjustments. International cooperation on these
efforts is critical in today’s globally integrated economy, in which the
problems or policies of one country can affect many others. IMF membership,
which includes nearly all the world’s nations, can facilitate this cooperation.
• IMF monitoring focuses on individual countries or bilateral surveillance, and
the global economy or multilateral surveillance.
• What kind of financial assistance does the IMF offer?
• Unlike development banks, the IMF does not lend for
specific projects. Instead, the IMF provides financial support
to countries hit by crises to create breathing room as they
implement policies that restore economic stability and
growth. It also provides precautionary financing to help
prevent crises. IMF lending is continuously refined to meet
countries’ changing needs.
• Other assistance offer by the IMF offer?
• The IMF provides capacity development, which is
technical assistance and training of government
officials to help member countries strengthen
economic institutions and statistics, as well as
capacities in areas such as taxation and administration,
expenditure management, monetary and exchange rate
policies, financial system supervision and regulation,
and legislative frameworks.
• The IMF fosters international financial stability by
offering:
• POLICY ADVICE
• FINANCIAL ASSISTANCE
• CAPACITY BUILDING