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INTERNATIONAL

MONETARY FUND
&
WORLD BANK

What is IMF?
An international organization of 185 member
countries
Established to promote international monetary
cooperation, exchange stability
And orderly exchange arrangements
To foster economic growth and high levels of
employment; and
To provide temporary financial
assistance to countries to help ease
balance of payments adjustment

Beginning of IMF
Great depression
Bretton
Wood
System

After effects of
World War II
Bretton Wood
System
IMF

World Bank

The Bretton Woods System


A Conference was held at Bretton Woods New Hampshire in
USA in July, 1944, in order to put in place a new international
monetary system.

44 representing countries met to set up a system of


fixed exchange rates.
All currencies had fixed exchange rates against the U.S. dollar and an
unvarying dollar price of gold ($35 an ounce).

It intended to provide lending to countries with


current account deficits.
It called for currency convertibility.

Failure of Bretton Woods System


The Bretton Woods System lasted from 1944 to 1971
In 1960s the US balance of payment deficits started
mounting
In 1968, convertibility of privately held Dollar into
Gold was abandoned

By 1947, the US conclude that the Bretton Woods


system was not working and that the Western system
was on the verge of collapse

The primary factor for the collapse of the system was


currency convertibility into Gold.
Several attempts to revise the system trough a series of
parity realignments,
Dollar revaluation (in terms of gold)

the Bretton Woods System totally invalid in 1978.

Who runs the IMF?


Member Countries
Board of Governors
Executive Board
IMF Managing Directors
First Deputy Managing Dir

Deputy Managing Deputy Managing


Dir
Dir

Who runs the IMF?


Governed by, and is accountable to, its member
countries through its Board of Governors.
There is one Governor from each member country,
The Governors usually meet once a year, in September
or October, at the Annual Meetings of the IMF and the
World Bank.
The day-to-day work of the IMF is carried out by the
Executive Board
Receives its powers from the Board of Governors
The Executive Board selects the IMF's Managing
Director, who is appointed for a renewable five-year
term.

Who runs the IMF?


The Managing Director reports to the Board and serves as its
chair and the chief of the IMF's staff
He is assisted by a First Deputy Managing Director and two
other Deputy Managing Directors.
The Executive Board usually meets three times a week, in fullday sessions, and more often if needed, at the IMF's
headquarters in Washington, D.C.
Of the 24 Executive Directors on the Board, 8 are appointed
by single countriesthe IMF's 5 largest quota-holders (the
United States, Japan, Germany, France, and the United
Kingdom) and China, Russia, and Saudi Arabia.
The other 16 Executive Directors are elected for two-year
terms by groups of countries known as "constituencies.

Who runs the IMF?


IMF employees are international civil servants.
Their responsibility is to the IMF, not to the national
authorities of the countries of which they are citizens.
About one-half of the IMF's approximately 2,700
staff members are economists.
Most staff work at the IMF's Washington, D.C.,
headquarters
In addition, it maintains offices in Brussels, Paris, and
Tokyo New York and Geneva,

Objectives of IMF

To promote international monetary corporation

To facilitate expansion and balanced growth of international trade;

To promote exchange stability;

To assist in the establishment of multilateral system of payments;

To make its general resources temporarily available to its members experiencing


balance of payment difficulties under adequate safeguard.

To shorten the duration and lessen the degree of disequilibrium in the


international balance of payments of members.

The architects of the IMF hoped to design a


fixed exchange rate system that
would encourage growth
in international trade

Activities of IMF
The IMF performs three main activities:
Monitoring and advising member countries
on their economic policies
Lending members
Offering technical assistance

Monitoring and Advising


Advice on policies and global oversight
Country surveillance
Crisis prevention
Crisis resolution
Global surveillance
Lending to countries in difficulty

IMF lending facilities


Stand-By Arrangements
Extended Fund Facility
Poverty Reduction and Growth Facility
Emergency Assistance
Trade Integration Mechanism

Technical Assistance
The IMF provides technical assistance and training
mainly in four areas:
Monetary and financial policies (monetary policy instruments;
banking system supervision, and restructuring; foreign management
and operations; clearing settlement systems for payments; and
structure development of central banks)

fiscal policy and management (tax and customs policies and


administration, budget formulation, expenditure management, design
of social safety nets, and management of domestic and foreign debt)

compilation, management, dissemination, and improvement of

statistical data
economic and financial legislation.

Place of IMF
under the Balance
of Payment

Where does the IMF get its money?


The IMF's resources come mainly from the quotas
that countries deposit when they join the IMF.
Quotas broadly reflect the size of each member's
economy: the larger a country's economy in terms
of output, and the larger and more variable its trade,
the larger its quota tends to be.
For example,
the United States, the world's largest economy, has the
largest quota in the IMF. Quotas are reviewed
periodically and can be increased when deemed
necessary by the Board of Governors

Where does the IMF get its money?


Countries deposit 25 percent of their quota
subscriptions in Special Drawing Rights or major
currencies, such as U.S. dollars or Japanese yen.
Most IMF loans are financed out of members'
quotas.
IMF may borrow from a number of its financially
strongest member countries to supplement the
resources available from its quotas.

How does the IMF help poor countries?


The IMF is not a development institution.
IMF's loans to low-income countries are made
on concessional terms.
Ease the pain of the adjustments these
countries need to make to bring their spending
into line with their income.
To promote reforms that foster stronger,
sustainable growth and .

How does the IMF help poor countries?


Poverty reduction.
IMF loan also encourages other lenders and
donors to provide additional financing, by
signaling that a country's policies are
appropriate.
Also participates in debt relief efforts
for poor countries

Criticism
Conditionalities
Structural Adjustment Programs
IMF frequently advocates currency devaluation
Austerity programmes
International Monetary Fund gold reserve
being undervalued.
E.g. : Argentina

THE
WORLD
BANK

World Bank Group


The World Bank Group (WBG) is a family of five
international organizations

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)

The World Bank has 185 member countries


Headquarters at Washington D.C

World Bank Group


Since inception in 1944, the World Bank has expanded from
a single institution to a closely associated group of five
development institutions.
The World Bank was formally established on December 27,
1945
The World Bank expanded from a single institution to an
associated group of coordinated development institutions
Two years later, the Bank issued its first, and largest, loan:
$250 million to France for post-war reconstruction

World Bank Group


It is an international organization owned by member
governments; it makes profits, these profits are used to support
continued efforts in poverty reduction
Responsible for providing finance and advice to countries for
the purposes of economic development and eliminating poverty.
Started as a facilitator of post-war reconstruction and
development
Present day mandate of worldwide poverty alleviation.
Whereas heavy infrastructure investment projects once
dominated the Bank's portfolio

Organization structure
Member Governments

President
Board of governors

Executive directors

Governance structure
The World Bank Group is owned by its member
governments, -subscribe to its basic share capital -votes
proportional to shareholding
The President of the World Bank is nominated by the
President of the United States and elected by the Bank's
Board of Governors
As of November 1, 2006

United States held 16.4% of total votes,


Japan 7.9%,
Germany 4.5%
France and the United Kingdom each held 4.3%.

Governance structure
The institutions of the World Bank Group are all run by a Board
of Governors meeting once a year.
Each member country appoints a governor
Daily work is governed by a Board of 24 Executive Directors to
whom the governors have delegated certain powers.
Executive Directors are appointed by their respective
governments or the constituencies
The agencies of the World Bank are each governed by their
Articles of Agreement that serve as the legal and institutional
foundation for all of their work

Objectives

Investing in people, particularly through basic health and education

Focusing on social development, inclusion governance, and


institution-building as key elements of poverty reduction.

Strengthening the ability of the governments to deliver quality


services, efficiently and transparently

Protecting the environment.

Supporting and encouraging private business development

Promoting reforms to create a stable macroeconomic environment,


conducive to

investment and long-term planning.

4 keys for economic growth


The World Bank sees the four key factors necessary for economic growth
and the creation of a business environment as:
Capacity Building Strengthening governments and educating government
officials
Infrastructure creation implementation of legal and judicial systems for the
encouragement of business, the protection of individual and property rights
and the honoring of contracts
Development of Financial Systems the establishment of strong systems
capable of supporting endeavors from micro credit to the financing of larger
corporate ventures
Combating corruption Eradicating corruption to ensure optimal effect of
actions

Issues handled by World Bank


Information, Computing
& Telecommunications
International Economics
& Trade
Labor & Social
Protections
Agriculture & Rural
Development
Conflict & Development
Development Operations
& Activities
Economic Policy

Education
Energy
Environment
Financial Sector
Gender
Governance
Health, Nutrition &
Population
Industry
Information &
Communication
Technologies

Issues handled by World Bank


Governance
Health, Nutrition &
Population
Industry
Information &
Communication
Technologies

Information,
Computing &
Telecommunications
International
Economics & Trade
Labor & Social
Protections

Financial Assistance

Lending Instruments

Depending upon eligibility, a member country will draw on


loans from either IBRD or IDA to support a lending project
The Bank offers borrowers a number of lending instruments
designed for different kinds of investment and adjustment
projects
E.g. Sector Investment and Maintenance Loans (SIMs),

Co financing

Refers to funding committed by an external official bilateral or


multilateral partner, an export credit agency, or a private source
in the context of a specific Bank-funded project.

Grants

Grants are seed money for pilot projects with innovative


approaches and technologies.
become catalysts for collaboration with partner organizations to
promote shared regional and global objectives.

Learning & Capacity Building


The Bank conducts learning and knowledge
sharing programs to enhance the skills and
development of its clients, staff, and partners.
Includes training courses, policy consultations,
partnership with training and research institutions
worldwide, and the creation and support of
knowledge networks related to international
development.
The program enhances the professional and
technical skills of participating staff and promotes
cultural exchange, fresh perspectives, and diversity
for the institutions involved.

Policies Of World Bank


Policy Definitions and Documentation
Policy Formulation and Review
Compliance Monitoring
Disclosure of Information
Fiduciary Policies
Safeguard Policies

Evaluation at the World Bank


Social and environmental concerns
The Independent Evaluation Group
Extractive Industries Review
Impact evaluations

Criticism
The World Bank has long been criticized by nongovernmental organizations and academics &
including its former Chief Economist.
Called free market policies Bank advocates in
many cases
In practice are often harmful to economic
development if implemented badly, too quickly in
the wrong sequence, or in very weak, uncompetitive
economies

Criticism
Makes a sharp criticism of the assumptions
and structure of the World Bank operation.
In the past six years, it has committed about
US$2 billion through grants, loans and
credits for programs to fight HIV/AIDS.
Critics, claim these financial expenditures
to be insufficient. "Race Against Time"

International Bank for Reconstruction &


Development
The IBRD is an international organization whose
original mission was to finance the reconstruction of
nations devastated by WW -II. Now, its mission has
expanded to fight poverty
The IBRD provides loans to governments, and public
enterprises, always with a government guarantee of
repayment
Issue world Bank bonds on the global capital markets
Originally the bank focused mainly on large-scale
infrastructure projects, building highways, airports, and
power plants

International Development Asso.


Helps the worlds poorest countries.
IDA is responsible for providing long-term
interest-free loans to the world's 81 poorest
countries, 40 of which are in Africa.
Education, basic health services, clean water and
sanitation, environmental safeguards, business
climate improvements, infrastructure and
institutional reforms.
Arrest the spread of HIV/AIDS.

Multilateral Investment Guarantee


Agency
It was established to promote foreign direct
investment into developing countries.
MIGA was founded in 1988 with a capital
base of $1 billion.
Insuring investors against political risk,
advising governments on attracting
investment, sharing information

MIGAS BUSINESS
Guarantees protect investors against the risks of Transfer
Restriction, Expropriation, War and Civil Disturbance

MIGA can cover only new investments. These include:


1. New, Greenfield investments;
2. New investment contributions associated with the
expansion, modernization, or financial restructuring of
existing projects; and
3. Acquisitions involving privatization of state enterprises

International Finance Corp.


Promotes private sector investment in developing countries
as a way to reduce poverty and improve people's lives.

Established in 1956

IFC is the largest multilateral source of loan and equity


financing for private sector projects in the developing world.
1. Financing private sector projects located in the
developing world.
2.Helping private companies in the developing world
mobilize financing in international financial markets.
3. Providing advice and technical assistance to businesses
and governments

IFC- MANAGEMENT
IFC has 179 member countries .
To join IFC, a country must first be a member of
the International Bank for Reconstruction and
Development (IBRD)
IFC's corporate powers are vested in its Board of
Governors, to which member countries appoint
representatives
The Board of Governors delegates many of its
powers to the Board of Directors, and which
represents IFC's member countries.
The Board of Directors reviews all projects.

International Centre for Settlement of


Investment Disputes
ICSID has an Administrative Council, chaired by
the World Bank's President, and a Secretariat.
investment disputes between member countries
and individual investors.
In field of the settlement of disputes has consisted
in the Secretary of ICSID accepting to act as the
appointing authority of arbitrators for noninstitutional arbitration proceedings.
ICSID also carries on advisory and research
activities.
Published a semi-annual law journal entitled
ICSID.

BIBLIOGRAPHY

www.worldbank.org
www.imf.org
http://finmin.nic.in
http://commerce.nic.in
www.rbi.org.in

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Making This World a
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