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Submitted by: Rajat suri 520771334 BBA L3S2
which were seen at the time as excessively volatile. The BSFF provides support in the context of those ICAs whose objective is the stabilization of international prices through market intervention by buffer stocks. The Fund will pay particular attention to the policy measures that the member intends to implement in order to mobilize resources and improve the utilization of them and to reduce reliance on external restrictions. Such assistance will be given in the form of extended arrangements in support of comprehensive programs that include policies of the scope and character required to correct structural imbalances in production. and that they do not maintain artificially high prices through long-term restrictions of supply. and prices when it is expected that the needed improvement in the member's balance of payments can be achieved without policies inconsistent with the purposes of the Fund only over an extended period. The BSFF was the Fund's contribution to the international community's efforts to stabilize commodity prices. in particular those with an impact on exchange rates and the balance of payments. the time required for these measures to have the intended effect on the balance of payments.Q1. Explain briefly the methods by which the IMF lends funds to member countries. EXTENDED FUND FACILITY-EFF The Fund will be prepared to give special assistance to members to meet balance of payments deficits for longer periods and in amounts larger in relation to quotas than has been the practice under existing tranche policies. and such other factors as the Fund considers relevant to the member's circumstances. and that satisfy certain participation requirements adopted by the United Nations Economic and Social Council. in particular that they are open to participation of both consuming and producing countries. . It is an organization formed to stabilize international exchange rates and facilitate development. trade. with damaging consequences for the stability of export earnings of developing countries heavily dependent on commodity exports. The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries. operating in the context of approved international commodity agreements (ICAs). The Buffer Stock Financing Facility (BSFF) The Buffer Stock Financing Facility (BSFF) was established in 1969 to provide assistance to members in connection with their contributions to international buffer stocks of primary products.
The compensatory element of the CCFF (the CFF) The compensatory element of the CCFF (the CFF) is designed to provide compensation to member countries experiencing shortfalls in export earnings and/or excesses in cereal import costs. Introduced in 1987. and protectionism.S. Were set up to assist low-income countries address deep-seated and persistent economic problems. Some 65 countries are eligible for assistance under the ESAF. despite decades of their own efforts and assistance from the international community. both the debts and policies they had financed became unsustainable Enhanced Structural Adjustment Facility (ESAF) Arrangement through which International Monetary Fund (IMF) provides medium-term (5 to 10 years) concessional loans for balance of payments adjustment to the poorer countries. public ownership. and exacerbated their economies' vulnerability to economic shocks. Structural Adjustment Facility (SAF) the Structural Adjustment Facility (SAF). These policies had stifled entrepreneurship. In many countries weaknesses had been masked during the 1970s by heavy foreign borrowing and improving terms of trade. and that the member have a balance of payments need. it follows the same policy framework paper as the structural adjustment facility (SAF) introduced in 1986.S. In addition. in SDRs to beneficiaries agreeing to receive them. promoted waste and corruption. along with the World Bank and member countries. dollars. or in a combination of these two assets.S.. the IMF. dollars shall be made on the basis of the SDR/U. For many developing countries. When they applied for SAF or ESAF assistance. At the new millennium. has been trying to help developing countries better position themselves to speed up growth and eradicate poverty. Subsidy payments in U. as part of a broader effort involving support from the World Bank and other agencies and donors in the international community. especially in poverty reduction. The eligibility criteria require that the shortfall/excess be temporary and stem from factors beyond the authorities' control. many of these countries were struggling with the legacy of development strategies based on state intervention. progress has been woefully inadequate. where the member is experiencing balance of payments . at the discretion of the Fund.Supplementary financing facility-SFF Subsidy payments made after the effective date of this Decision with respect to charges paid on holdings of currency referred to in Section 7 of the Instrument establishing the SFF Subsidy Account may be made. or in U. but has triple the resources and monitors the borrowers'performance even more closely. But when world commodity prices plummeted and interest rates rose in the early 1980s. dollar exchange rate in effect three business days before the payment date.
performance indicators and implementation plan. works and services in support of economic and social development projects in a broad range of economic and social sectors. and the Global Fund to Fight AIDS. The export shortfall (cereal import excess) is calculated as the amount by which a member's export earnings (cereal import costs) for a 12-month period are below (above) their medium-term trend. the borrower implements the project or program according to the agreed terms. and. the Heavily Indebted Poor Countries Initiative. During loan negotiations. ranging from multibillion dollar arrangements such as Carbon Finance. as well as a loan disbursement schedule.6. in particular that a request cannot be made later than six months after the end of the shortfall year. While we supervise the implementation of each loan and evaluate its results. Q2. socially and environmentally sound. How are they different than the IMF. Write a brief note on the lending operations of IBRD. Ans. These donor resources are leveraged for a broad range of development initiatives. the member is expected to cooperate with the Fund in an effort to address them. While IBRD earns a small margin on this lending. Countries use investment operations for goods. we offer two basic types of loans and credits: investment operations and development policy operations. in cases where the authorities foresee a shock. Loans Through the IBRD and IDA. the Global Environment Facility. Tuberculosis. IBRD s income also pays for World Bank operating expenses and has contributed to IDA and debt relief.7 Various other provisions of the facility ensure that requests for compensatory financing are met in a timely fashion. Development policy operations (formerly known as adjustment loans) provide quick-disbursing financing to support a country s policy and institutional reforms. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. the Bank and borrower agree on the development objectives. . and Malaria too much smaller and simpler freestanding ones. As more than 30% of our staff is based in over 100 country offices worldwide Trust Funds and Grants Donor governments and a broad array of private and public institutions make deposits inTrust funds that are housed at the World Bank. outputs.difficulties beyond the effects of the temporary shortfall/excess. that the calculation for the shortfall year may include up to 12 months of estimated data. financially. the greater proportion of its income comes from lending out its own capital.IBRD LENDING OPERATIONS Fund Generation IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. The initiatives vary significantly in size and complexity. Each borrower s project proposal is assessed to ensure that the project is economically.
where we evaluate a country's economic prospects by examining its banking systems and financial markets. poverty and social safety net issues. advice and knowledge are made available to our client countries. Linkages to knowledge-sharing networks such as these have been set up by the Bank to address the vast needs for information and dialogue about development: . 5. These are only some of the ways our analyses. and the public: 1. infrastructure. Analytic and Advisory Services While we are best known as a financier. We do this in various ways. 6. 2. improve government performance and delivery of services. promote economic growth and sustain poverty reduction programs. Relieve the debt burden of heavily indebted poor countries Improve sanitation and water supplies Support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria Combat the HIV/AIDS pandemic Support civil society organizations Create initiatives to cut the emission of greenhouse gases 4. and our own staff to help them acquire the knowledge and skills they need to provide technical assistance. 2.IDA grants Which are either funded directly or managed through partnerships have been used to: 1. Poverty Assessments Public Expenditure Reviews Country Economic Reports Capacity Building Another core Bank function is to increase the capabilities of our partners. poverty. as well as trade. trade and globalization Another is through country-specific. their government and development professionals. advice and information to our member countries so they can deliver the lasting economic and social improvements their people need. One is through economic on broad issues such as the environment. 3. 3. the people in developing countries. another of our roles is to provide analysis. non-lending activities such as economic and sector work.
it is governed by its almost global membership of 184 countries. and technical assistance have developed to meet the changing needs of its member countries in an evolving world economy. Countries pay 25 percent of their quota subscriptions in Special Drawing Rights (SDRs.C. and orderly exchange arrangements. see Box 3) or major currencies. financial assistance. The IMF has two sets of standing arrangements to borrow if needed to cope with any threat to the international monetary system: . or following periodic reviews in which quotas are increased.. examine the relevance of the above two institutions. the IMF may borrow to supplement the resources available from its quotas. The International Monetary Fund (IMF) The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation. and to provide temporary financial assistance to countries to help ease balance of payments adjustment. D. The IMF is the central institution of the international monetary system the system of international payments and exchange rates among national currencies that enables business to take place between countries.S. Quotas determine not only a country's subscription payments. it is also as its name suggests a fund that can be tapped by members needing temporary financing to address balance of payments problems. Quotas also are the main determinant of countries' voting power in the IMF. to foster economic growth and high levels of employment. such as U. Headquartered in Washington. and its share in SDR allocations.Q3. to be made available for lending as needed. exchange stability. the IMF can call on the remainder. In the current scenario. IMF: Role The International Monetary Fund was established by international treaty in 1945 to help promote the health of the world economy. but also the amount of financing that it can receive from the IMF. payable in the member's own currency. dollars or Japanese yen. If necessary. Since the IMF was established its purposes have remained unchanged but its operations which involve surveillance. It aims to prevent crises in the system by encouraging countries to adopt sound economic policies. IMF: Resources The IMF's resources come mainly from the quota (or capital) subscriptions that countries pay when they join the IMF.
advice. and research. (New Hampshire) negotiations. which has 11 participants (the governments or central banks of the Group of Ten industrialized countries and Switzerland). introduced in 1997. the IMF aims to stabilize the international monetary system and monitors the world s currencies. 2.1. . Guardian of good conduct in the area of Balance of payments Reducing tariffs and other trade restrictions Provides technical advice Provides short term financial assistance to its member countries Provides machinery for orderly adjustment of exchange rates Reservoir of currencies Lending institution of foreign currencies Relationship between World Bank and IMF The World Bank is a collection of international organizations to aid countries in their process of economic development with loans. The World bank promotes long-term economic development and poverty reduction to help countries reform particular sectors or implement specific projects 2. IMF and World Bank both were created at an International Conference convened in Bretton Woods. 1. 3. 2. It was founded in the 1940s to aid Western European countries after World War II with capital. with 25 participating countries and institutions. It makes loans to developing countries for social overhead capital projects that are guaranteed by the recipient country While the World Bank provides support to developing countries. A multilateral development finance agency created by the 1944 Bretton Woods. and the New Arrangements to Borrow (NAB). Functions of IMF 1. 2. set up in 1962. 4. IMF promotes international monetary cooperation and provides policy advice and technical assistance to maintain strong economies. the IMF has up to SDR 34 billion (about $50 billion) available to borrow. 5. the General Arrangements to Borrow (GAB). 1. Under the two arrangements combined. 3.
financially. which make sure that operations are economically. performance indicators (to measure the impact and success of the project) and a plan to put it all into practice. World Bank: Purpose 1. Loan procedure 1. All loans are governed by operational policies. The World Bank supervises how each loan is used and evaluate the results. fight disease. 4. the borrower puts the project or program into practice according to the terms agreed with the World Bank. outputs. work and services to support economic and social development projects in a broad range of sectors. Once a loan is approved and becomes effective. and protect the environment.4. adjustment loans to support policy and institutional reforms During loan negotiations. socially and environmentally sound. provide water and electricity. y y 2. The World Bank is one of the world s largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers. IMF and World bank collaborate regularly and at many levels on assistance to member countries and are involved in several joint initiatives. 3. The World Bank offers two basic types of loans: investment loans for goods. . the World Bank agrees with the borrowing country on the development objective of the project or program.
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