Module 5

Explain Bretton woods system ?

Bretton Woods System was an international monetary arrangement. , developed in 1944 during the
UN Monetary and Financial Conference, pins the value of currencies on the price of Gold with the US
dollar acting as a reserve currency which compares to the price of gold.

Creation of Two New Institutions

• The IMF was created in 1945 as an institution to monitor currency exchange rates and to lend
dollars to nations.

• The World Bank whose goal was to offer financial assistance for countries & to promote general
economic development

End of Bretton Woods Agreement

The Bretton Woods System collapsed due to an increase in value of the US dollar. The overvaluation
of the dollar raised concerns on the tie of the value of currencies to gold. President Richard Nixon
suspended the system in 1971 after which governments let their currencies float and the system was
ended in 1973.

Explain International Monetary fund ?

The International Monetary Fund (IMF) is an international organisation which was brought into
operation to boost the global economic growth and financial stability, international trade and to
decrease poverty. The formation of the International Monetary Fund or IMF was initiated in the year
1944 at the Bretton Woods conference and it came into operation on the 27th of December in the
year 1945. This international organisation is headquartered in Washington D.C., and consists of 189
member countries.

Organization Structure of IMF

The IMF is headed by a board of governors, each of whom represents one of the organization’s
approximately 180 member states. The governors, who are usually their countries’ finance ministers
or central bank directors, attend annual meetings on IMF issues. The fund’s day-to-day operations
are administered by an executive board, which consists of 24 executive directors who meet at least
three times a week. Eight directors represent individual countries (China, France, Germany, Japan,
Russia, Saudi Arabia, the United Kingdom, and the United States), and the other 16 represent the
fund’s remaining members, grouped by world regions. The board is chaired by a managing director,
The managing director is usually a European and by tradition not an American.

Each member contributes a sum of money called a quota subscription. Quotas are reviewed every
five years and are based on each country’s wealth and economic performance the richer the country,
the larger its quota.
Since its creation, the IMF’s principal activities have included stabilizing currency exchange rates,
financing the short-term balance-of-payments deficits of member countries, and providing advice
and technical assistance to borrowing countries.

Explain World Bank ?

The World Bank is an international financial institution owned by 187 countries that provides loans
and grants to the governments of low- and middle-income countries to improve their economies to
improve the standard of living of their people.

The Bank is also one of the world's largest research centers in development. It has specialized
departments that use this knowledge to advise countries in areas like health, education, nutrition,
finance, justice, law and the environment.

Explain World Bank Group ?

The World Bank Group (WBG) is a family of five international organizations that make leveraged
loans to developing countries. It is the largest and best-known development bank in the world and
an observer at the United Nations Development Group. The bank is headquartered in Washington,
D.C. in the United States. It provided around $98.83 billion in loans and assistance to "developing"
and transition countries in the 2021 fiscal year.

Its five organizations are:

• The International Bank for Reconstruction and Development (IBRD),

• The International Development Association (IDA),

• The International Finance Corporation (IFC),

• The Multilateral Investment Guarantee Agency (MIGA)

• The International Centre for Settlement of Investment Disputes (ICSID).