World Bank or International Bank for Reconstruction and Development (IBRD)


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

The International Bank for Reconstruction and Development (IBRD) better known as World Bank was set up in 1944. Since IMF was designed to provide temporary assistance in correcting balance of payments difficulties, an institution was needed to assist long-term investment purposes. Thus IBRD was established for promoting long term investment loans on concessional
terms.
 
Functions:
 
1) To assist in the reconstruction and development in the member countries by providing capital support.
2) To promote private foreign investment.
3) To promote growth of international trade in the long run and improve Balance of Payments of member countries.
4) To arrange for loans through for small and large projects.
 
Membership and Organization
 
All the members of the IMF are members of IBRD. It had 182 members in 2000. Like IMF, IBRD has a three-tier structure with a president, Executive Directors and Board of Governors. The Board of Governors is the supreme body. Every member country appoints one Governor and an alternate Governor for a period of 5 years. The voting power of each Governor is related to the financial contribution of its Government.
 
Funding strategy
 
The IBRD seeks to maintain unutilized access to funds in the markets in which it borrows. Its objective is to minimize the effective cost of those funds to its borrowers. It is to provide an appropriate degree of maturity transformation between its borrowing and lending. Maturity transformation refers to the Bank’s capacity to lend at longer maturities than it borrows.
 
Special Action Programme (SAP)
 
Special Action Programme (SAP) was started in 1983 to strengthen IBRD’s ability to assist member countries in adjusting to the current economic environment.
 
Structural Adjustment Facility (SAF)
 
The Structural Adjustment Facility was introduced in 1985 in order to reduce the balance of payments deficits of its members while maintaining or regaining their economic growth.
 
Conditions for lending
 
1. An efficient regulating mechanism for ensuring transparent policies and depoliticised environment.
2. Adequate risk management.
3. Provision for long-term finance.
4. Increase in the share of the private sector in the country’s GDP.
 
Bank borrowing
 
The IBRD is a corporate institution whose capital is subscribed by its members. It finances its lending operations primarily from its own medium and long term borrowing in the international capital markets and currency swap agreement (CSA). The Bank also borrows under the discount note programme. It has enabled two new borrowing instruments. Central Bank Facility (CBF) borrowing inflating rate notes is meant to help IBRD to meet some of the objectives of its funding strategy.
 
Lending activities
The Bank lends member countries in the following ways.
 
1) By marketing or participating in loans out of its own funds.
2) By making or participating in direct loans out of funds raised in the market of a member.
3) By guaranteeing loans made by private investors.
4) The Bank also provides facilities to member countries through SAF and SAP.
 
The Bank is laying greater emphasis on developing human resources such as education, population, health, nutrition and environment.
 


Friday, 18th Mar 2016, 10:25:03 AM

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