Presentationon

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 BankThere 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 BorrowingsBank’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

EvaluationSuccesses or Achievements of the World Bank1. Increase in capital2. Due Attention to Developed and Underdeveloped

Countries3. Loans for Productive Purposes4. Technical Assistance5. Third Window of World6. Coordination of the Lending Activities of the Lender 7. Settlement of Disputes among Nations8. Fight against poverty9. Agriculture and Rural Development 10. Training

11. Research12. Financial Assistance to Welfare Institutions13. 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 BankMain failure of the World Bank are as under:1. Inadequate Financial Help2. Discriminating Behaviour3. High Rate of Interest and Commission4. Defective Loan Policy5. Loans for Limited Objectives6. Repayment of Loans in Foreign Currency7. Discriminatory8. Hard Conditionalities

India and World BankIndia 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 Director2. Loans

Table : IBRD’s Sector-wise Lending in India (as on June, 2008)

Sector Amount of Loan (in Billion Dollars)

Percentage of Total Loan

(i) Energy and Infrastructure 7.1 52

(ii) Human Development 2.9 21

(iii) Agricultural and Rural Development 2.6 19

(iv) Poverty Reduction 0.7 5

(v) Environmental Protection 0.2 1

(vi) Others 0.3 2

Total 13.8 100

3. Aid India Club or Consortium4. Mediation between Indo-Pak River Water Dispute5. Facilities for General Loans6. 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 Assistance8. Population Control Assistance9. Help to Non-Government Organisations10. Human Development Projects

CriticismMany 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 1991.

(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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