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Banking Awareness: Bretton Woods Twins

Bretton woods twins mean the organisations i.e.The International Monetary Fund (IMF) set up along with
the World Bank after the Second World War to assist in the reconstruction of war-ravaged countries.
Leaders felt that financial stability was best achieved when countries worked in an environment of
interdependence.

The two organisations were agreed to be set up at a conference in Bretton Woods in the US. Hence,they
are known as the Bretton Woods twins.The Bretton Woods Conference, formally known as the United
Nations Monetary and Financial Conference,was the gathering of 730 delegates from all 44 Allied nations
at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States, to regulate
the international monetary and financial order after the conclusion of World War II.The conference was
held from the 1st to 22nd of July, 1944. Agreements were executed that later established the International
Bank for Reconstruction and Development (IBRD, which is part of today's (World Bank Group) and the
International Monetary Fund (IMF)
INTERNATIONAL

MONETARY

FUND

IMF was supposed to oversee and monitor the economic performance


of 188 member countries and warn them of any developing economic crisis.If any crisis does develop
and a country approaches IMF for help, the organisation chalks out a recovery plan, which includes
imposition
of
conditions
for
keeping
the
economies
on
a
particular
path.
The organization's objectives stated in the Articles of Agreement are:

promote international economic cooperation,

international trade,

employment,

exchange-rate stability including by making financial resources available to member countries to


meet balance-of-payments needs.

When
did
India
take
the
IMF
bailout
package?
The Indian government, faced with a balance of payments crisis in 1991, took a loan and agreed to the
reforms process. The liberalisation in the economy was partly a concomitant of that need.
The IMF report is part of its mandate under Article IV of its constitution. The fund holds consultations with
finance ministries and central banks of each member countries annually for its spring meeting in
Washington.
The decision of the IMF to intervene in any country is based on the governing board's decision. The
voting rights are determined historically by the economic strength of the countries. India, because of its

rapidly growing economic clout, has demanded a re-drawing of the voting rights, but that did not happen
at the recent Singapore meeting.Instead, the fund gave ad hoc voting right increase to China, South
Korea, Turkey and Mexico. It has promised a long-term revision in another two years.
WORLD

BANK

GROUP

World Bank group provides loans to developing countries for capital programs. The World Bank is a
component of the World Bank Group, and a member of the United Nations Development Group.
The World Bank's official goal is the reduction of poverty. According to its Articles of Agreement, all its
decisions must be guided by a commitment to the promotion of foreign investment and international trade
and
to
the
facilitation
of
capital
investment.

The World Bank should not be confused with the United Nations World
Bank Group, a member of the United Nations Economic and Social Council and a family of five
international organizations that make leveraged loans to poor countries:

International Bank for Reconstruction and Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Centre for Settlement of Investment Disputes (ICSID)

International
Bank
for
Reconstruction
and
Development
IBRD is an international financial institution which offers loans to middle-income developing countries.
The IBRD is the first of five member institutions which compose the World Bank Group and is
headquartered in Washington, D.C., United States. It was established in 1944 with the mission of
financing the reconstruction of European nations devastated by World War II.Following the reconstruction
of Europe, the Bank's mandate expanded to advancing worldwide economic development and eradicating
poverty. The IBRD provides commercial-grade or concessional financingto sovereign states to fund
projects that seek to improve transportation and infrastructure, education, domestic policy, environmental
consciousness, energy investments, healthcare, access to food and potable water, and access to
improved
sanitation.
The
International
Development
Association
(IDA)
The IDA is an international financial institution which offers concessional loans and grants to the world's
poorest developing countries.The IDA is a member of the World Bank Group and is headquartered in
Washington, D.C., United States. It was established in 1960 to complement the existing International
Bank for Reconstruction and Development by lending to developing countries which suffer from the
lowest gross national income, from troubled creditworthiness, or from the lowest per capita income.
International

Finance

Corporation

(IFC)

The IFC was established in 1956 to support the growth of the private sector in the developing world. The
IFCs stated mission is to promote sustainable private sector investment in developing countries, helping
to reduce poverty and improve peoples lives.IFC provides loans and equity financing,advice, and
technical services to the private sector. The IFC also plays a catalytic role, by mobilizing additional capital
through loan syndication and by lessening the political risk for investors, enabling their participation in a
given
project.
The
International
Centre
for
Settlement
of
Investment
Disputes
(ICSID)
The ICSID is considered to be the leading international arbitration institution devoted to resolving disputes
between States and foreign investors, also known as BIT arbitrations.Based in Washington, D.C. (U.S.A.)
and operating under the World Bank, ICSID was established in 1965 by the Convention on the Settlement
of Investment Disputes between States and Nationals of Other States (known as the ICSID Convention or
Washington
Convention).
The
Multilateral
Investment
Guarantee
Agency
(MIGA)
The MIGA is an international financial institution which offers political risk insurance and
credit enhancement guarantees. Such guarantees help investors protect foreign direct investments
against political and non-commercial risks in developing countries.MIGA is a member of the World Bank
Group and is headquartered in Washington, D.C., United States. It was established in 1988 as
an investment insurance facility to encourage confident investment in developing countries.
World
Bank
Group
Strategy
to
Help
India
Achieve
Its
Vision
The World Bank Groups new Country Partnership Strategy will guide its support to India from 2013
through 2017. The strategy aims to help the country lay the foundations for achieving its longer-term
vision
of
faster,
more
inclusive
growth.
A key feature of the new strategy is the significant shift in support toward low-income and special category
states, where many of Indias poor and disadvantaged live.The new strategy proposes a lending program
of $3 billion to $5 billion each year over the next five years. Sixty percent of the financing will go to state
government-backed projects. Half of this, or 30% of total lending, will go to low-income or special
category states, up from 18% of lending under the previous strategy.

Read more: http://www.bankersadda.com/2015/01/bretton-woods-twins.html#ixzz3OjX59SVx