Presentation on International Bank for Reconstruction and Development or World Bank

Logo of World Bank

Introduction During World War II, in the year 1944, a decision for the establishment of two institutions was taken in a Conference held at Bretton Woods in America. The institutions to be established were (i) International Monetary Fund, and (ii) International Bank for Reconstruction and Development or World Bank.

Objective of the World Bank 1.Reconstruction and Development 2.Encouragement to Capital Investment 3.Encouragement to International Trade 4.Establishment of Peace-time Economy 5.Environmental Protection

Funding Strategy of the Bank There are four basic objectives of the World Bank’s funding strategy: (i)To make sure availability of funds in the market. (ii)To provide the funds at the lowest possible cost to the borrowers through appropriate currency mix when interest rates are expected to rise. (iii)To control volatility in net income and overall loan changes. (iv)To provide an appropriate degree of maturity transformations between its lending and the borrowing. Maturity Transformation depicts the Bank’s capacity to lend for longer period than to borrow.

Bank’s Borrowings Bank’s main function is to lend the money to the needy members. For lending activities, it needs money and therefore, it has to borrow. Sources : The Bank borrows from the following sources: (i)The Bank borrows from international market both for long and short periods. (ii)The Bank also borrows under Currency Swap Agreements (CSA). (iii)The Bank also borrows under the Discount-Note Programme by two methods. First, it places bonds and notes directly with its member countries. Second, it offers issues to investors and in public markets.

Functions of World Bank (1)To Advance Loans (i)Direct Loans (ii)Guarantee Loans (iii)Joint Loans (2)Technical Assistance (3)Training (4)Coordinated Development Assistance (5)Settlement of International Disputes

Evaluation Successes or Achievements of the World Bank 1.Increase in capital 2.Due Attention to Developed and Underdeveloped Countries 3.Loans for Productive Purposes 4.Technical Assistance 5.Third Window of World 6.Coordination of the Lending Activities of the Lender 7.Settlement of Disputes among Nations 8.Fight against poverty 9.Agriculture and Rural Development 10.Training

11.Research 12.Financial Assistance to Welfare Institutions 13.Establishment of Subsidiary Institutions (i) International Finance Commission (ii) International Development Association (iii) Multinational Investment Guarantee Agency (MIGA) 14.Environment Protection

Cont. Evaluation

Failures of the World Bank Main failure of the World Bank are as under: 1.Inadequate Financial Help 2.Discriminating Behaviour 3.High Rate of Interest and Commission 4.Defective Loan Policy 5.Loans for Limited Objectives 6.Repayment of Loans in Foreign Currency 7.Discriminatory 8.Hard Conditionalities

India and World Bank India has been a founder member of World Bank along with that of International Monetary Fund. India is one of those 17 countries that prepared the agenda of 1944 Bretton Woods Conference. India was one of those 44 countries who first of all signed the final draft for the establishment of the Bank. In fact, it is said that the present name of the Bank, viz., “International Bank for Reconstruction and Development” was suggested by India. The benefits that India has derived out of the membership of the World Bank are as follows: 1.Executive Director 2.Loans

Table : IBRD’s Sector-wise Lending in India (as on June, 2008) SectorAmount of Loan (in Billion Dollars) Percentage of Total Loan (i) Energy and Infrastructure7.152 (ii) Human Development2.921 (iii) Agricultural and Rural Development2.619 (iv) Poverty Reduction0.75 (v) Environmental Protection0.21 (vi) Others0.32 Total

3.Aid India Club or Consortium 4.Mediation between Indo-Pak River Water Dispute 5.Facilities for General Loans 6.Advantages from Membership of Sister Institutions of the World Bank (i)International Finance Corporation (ii) International Development Association (iii) Multinational Investment Guarantee Agency 7.Technical Assistance 8.Population Control Assistance 9.Help to Non-Government Organisations 10.Human Development Projects

Criticism Many decisions of the World Bank relating to India are criticised on various counts, like (i)Bank has made efforts to lower the significance of Indian planning after the Third Plan. It created certain situations that resulted in diminishing the role of planning commission. (ii)From its very inception, World Bank has influenced the economic policies of India. Its objective has been to promote foreign capital investment in India. (iii)World Bank has given more importance to the development of private than public sector.

(iv)It was at bank’s instance that India devalued its Rupee in 1966 and (v)India’s dependence on World Bank has been increasing. India’s economic policies must be in line with World Bank. It has adversely affected India’s economic freedom. (vi)World Bank is largely responsible for the Economic Reforms introduced in 1991 in India. According to critics these reforms will benefit multinational companies only. Poor masses will not gain from it.

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