This post continues from the series on International Relations for IAS Prep. Read the essential posts here –
If you haven’t read part one of Bretton Woods institution, click here to read that first
World Bank is a vital source of financial and technical assistance to developing countries around the world. This is not only a bank in the ordinary sense but a unique partnership to reduce poverty and support development.
Headquarter: Washington, D.C.
Publications- global economic prospects, Ease of doing business index
There are 2 goals for the world to achieve by 2030 –
World Bank Group is not just World bank but comprises of 5 institutions managed by their member countries
These 5 institutions are as follows –
Except for ICSID, India is member of other four groups<We don’t like external interference such as arbitration in our decision making process, hence not the member of ICSID>
<India is one of the founder members of IBRD, IDA and IFC>
So, we will discuss this 3 institutions in detail, as are important for India –
IBRD provides loans and other assistance primarily to middle income and poor but credit worthy countries at interest rates slightly lower than that offered by other financial institutions but with long term maturity<countries which have the capacity to repay the loan amount with interest>
Origins: IBRD as the name suggest was created in 1944 to help Europe reconstruct/ rebuild after World War II. To be a member of IBRD, a country has t join IMF first.
Other functions of IBRD Bank –
Before granting or guaranteeing a loan, the Bank considers the following matters –
How is IBRD financed?
IDA is the part of the World Bank that helps the world’s poorest countries
Aim: To reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.
Main Functions of IDA:
Structure of lending and credits by IDA
Borrowers of IDA
Roadmap ahead for IDA
India has exceeded IDA’s per capita income threshold of 1260$ and is thus technically not eligible to tap IDA window but India campaigned to extend the tenure of India’s concessional loans by several more years (till 2022), given the country’s high poverty levels and WB decided to continue it’s IDA concessional lending in view of 300m people living below poverty line.
Largest global development institution focused exclusively on the private sector in developing countries
Objectives of the IFC
Focus Areas –
Let’s take a look at India-IFC ties
IFC also issue India’s first masala bonds to tap in foreign funding in local currency. similar IFC also issued first green masala bonds to raise investments to deal with climate change. Want to know what is masala bond, click here to read more
|IBRD (WB)||Infrastructure loan to poor middle income but credit worthy countries at just below market rates||India founder member, largest recipient of loan|
|IDA||Soft loan at virtually zero rate for poverty eradication to poorest countries||India founder largest recipient, has crossed the per capita threshold for funding but will continue to receive IDA funds|
|IFC||Private sector arm of WB group, supports private enterprises in developing countries||India founder, IFC launched India’s offshore masala bond|
|MIGA||Provide guarantee to investors against non-commercial political risk||India not founding member|
|ICSID||Resolve disputes through arbitration and conciliation||India not a member|
#1. Which one of the following groups of items is included in India’s foreign-exchange reserves? (IAS pre 2013)
#2. ‘BioCarbon Fund Initiative for Sustain- able Forest Landscapes’ is managed by the (IAS pre 2015)
(a) Asian Development Bank
(b) International Monetary Fund
(c) United Nations Environment Programme
(d) World Bank
#3. The price of any currency in international market is decided by the (ias pre 2012)
Which of the statements given above are correct?
#1. The World Bank and the IMF, collectively known as the Bretton Woods Institutions, are the two inter-governmental pillars supporting the structure of the world’s economic and financial order. Superficially, the World Bank and the IMF exhibit many common characteristics, yet their role, functions and mandate are distinctly different. Elucidate. (IAS mains 2013)
#2. Does India Need the World Bank?