International Bank For Reconstruction And Development (IBRD) or World Bank

Economics Uncategorized

The World Bank

The International Bank for Reconstruction and Development (IBRD), otherwise called the World Bank(WB) was established in 1945 under the Bretton Woods Conference in 1944. The purpose is to bring about a smooth transition from a war-time to peace-time economy.

It isknown as a sister institution along withthe International Monetary Fund. Themembership in International MonetaryFund is a prerequisite to become amemberof IBRD. The IBRD was established provide long term financial assistance to member countries.

Objectives of IBRD:

1. Reconstruction and Developmen

2. Encouragement to Capital Investment

3. Encouragement to International Trade

4. Establishment of Peace-time Economy

5. Environmental Protection

Objectives of the World Bank
The following are the objectives of the
World Bank:

1. To help member countries for economic reconstruction and development.

2. To stimulate long-run capital investment for restoring Balance of Payments (BoP) equilibrium and thereby ensure balanced development of international trade among the member nations.

3. To provide guarantees for loans meant for infrastructural and industrial
projects of member nations.

4. To help war ravaged economies
transform into peace economies.

5. To supplement foreign private
investment by direct loans out of its
own funds for productive purposes.

World Bank’s Lending Procedure:
The Bank advances loans to members
in three ways

i) Loans out of its own fund,

ii) Loans out of borrowed capital and

iii) Loans through Bank’s guarantee.

The Bank(WB) has changed its
development loan strategy and lays more emphasis on financing schemes which directly influence the well being of poor masses of the member countries, especially the developing countries. The amount of agricultural loans has increased more rapidly than in any other sector.

The bank now also takes interest in the activities ofthe development of rural areas such as:

a) spread of education among the rural
people

b) development of roads in rural areas and

c) electrification of the villages.

Functions of IBRD:

The World Bank performs the major
role of providing loans for development
works to member countries, especially
to underdeveloped countries. The WorldBank provides long-term loans for variousdevelopment projects. Article 1 of theAgreement states the functions performed.

by the world bank as follows.

1. Investment for productive purposes
The World Bank performs the
function of assisting in the reconstruction and development of territories of member nations through facility of investment for productive purposes. It also encourages the development of productive facilities
and resources in less developed countries.

2. Balanced growth of international
trade Promoting the long range balanced growth of trade at international level and the maintaining equilibrium in BOPs of member nations by encouraging international investment.

3. Provision of loans and guarantees
Arranging the loans or providing
guarantees on loans by various other
channels so as to execute important
projects.

4. Promotion of foreign private
investmentThe promotion of private foreigninvestment by means of guarantees onloans and other investment made by private investors. The Bank supplements private investment by providing finance
for productive purpose out of its own
resources or from borrowed funds.

5. Technical services The World Bank facilitates different kinds of technical services to the member countries through Staff College and
experts.

Achievements of World Bank:

The World Bank is said to be successful
in achieving its primary objective of
reconstruction and development of war
ravaged nations. It helped greatly in
the reconstruction of Europe after the
World War II. It has been providing the
developed and developing countries the
same treatment in the process of growth.

i) It is noted that the Bank’s membershiphas increased from the initial number of30 countries to 68 countries in 1960 andto 151 countries in 1988. The IBRD has189 member countries.

ii) The Bank grants medium and long-
term loans (i.e., payable over a period
of 15-20 years) for reconstruction and
development purposes to the member
countries. The actual term of a loan
depends upon the estimated useful life
of the equipment or plant financed.

iii) Initially the World Bank’s loans were mainly directed at the European
countries for financing their
programmes of reconstruction. Later it
changed its development loan strategy
and lays more emphasis of financing
schemes for the poor masses of the
developing countries.

iv) The World Bank grants loans to
member countries only for productive
purposes particularly for agriculture,
irrigation, power and transport. In
other words, the Bank strengthens
infrastructure needed for further
development.

v) The International Development
Association (IDA), the Soft Loan
Window of the Bank provides loans
to UDCs at very low rate of interest.
However, the economic inequality
among the member-countries goes on
increasing. Many African countries are
yet to improve their economic status.

India and World Bank:

The name “International Bank
for Reconstruction and Development”
was first suggested by India to the
drafting committee. Since then the two
have developed close relationship with
each other from framing the policies
of economic development in India to
financing the implementation of these
policies. The World Bank has given large financial assistance to India for economic development. Special mention may bemade of the assistance World Bank hasgiven to India in the development of infrastructure such as electric power, transport, communication, irrigation projects and steel industry.

The World Bank has assisted a
number of projects in India. The IFC
has identified five priority areas, namely, capital market development, direct foreign investment, access to foreign markets,equity investments in new and expanding companies and infrastructure.

The World Bank has also assisted India in accelerating programmes of poverty alleviation and
economic development. Until China
became the member of World Bank in
1980, India was the largest beneficiary of the World Bank assistance.

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