Balance of Payment A record of all transactions made between one particular country and all other countries during

a specified period of time. BOP compares the dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa. Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BoP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. When all components of the BOP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways such as by funds earned from its foreign investments, by running down central bank reserves or by receiving loans from other countries. While the overall BOP accounts will always balance when all types of payments are included, imbalances are possible on individual elements of the BOP, such as the current account, the capital account excluding the central bank's reserve account, or the sum of the two. Imbalances in the latter sum can result in surplus countries accumulating wealth, while deficit nations become increasingly indebted. The term "balance of payments" often refers to this sum: a country's balance of payments is said to be in surplus (equivalently, the balance of payments is positive) by a certain amount if sources of funds (such as export goods sold and bonds sold) exceed uses of funds (such as paying for imported goods and paying for foreign bonds purchased) by that amount. There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter. Under a fixed exchange rate system, the central bank accommodates those flows by buying up any net inflow of funds into the country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's
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currency and other currencies. Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit. Alternatives to a fixed exchange rate system include a managed float where some changes of exchange rates are allowed, or at the other extreme a purely floating exchange rate (also known as a purely flexible exchange rate). With a pure float the central bank does not intervene at all to protect or devalue its currency, allowing the rate to be set by the market, and the central bank's foreign exchange reserves do not change. The two principal parts of the BOP accounts are the current account and the capital account. The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers. It is called the current account as it covers transactions in the "here and now" - those that don't give rise to future claims.

Exchange rate In finance, an exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one countrys currency in terms of another currency.[1] For example, an interbank exchange rate of 91 Japanese yen (JPY, ) to the United States dollar (US$) means that 91 will be exchanged for each US$1 or that US$1 will be exchanged for each 91. Exchange rates are determined in the foreign exchange market,[2] which is open to a wide range of different types of buyers and sellers where currency trading is continuous: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. In the retail currency exchange market, a different buying rate and selling rate will be quoted by money dealers. Most trades are to or from the local currency. The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell the currency. The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading, or else the margin may be recovered in the form of a "commission" or in some other way. Different rates may also be quoted for cash (usually notes only), a documentary form (such as traveller's cheques) or electronically (such as a credit card purchase). The higher rate on documentary transactions is due to
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the additional time and cost of clearing the document, while the cash is available for resale immediately. Some dealers on the other hand prefer documentary transactions because of the security concerns with cash.

Capital account convertibility Capital account convertibility is a feature of a nation's financial regime that centers on the ability to conduct transactions of local financial assets into foreign financial assets freely and at country determined exchange rates. It is sometimes referred to as capital asset liberation or CAC. In layman's terms, full capital account convertibility allows local currency to be exchanged for foreign currency without any restriction on the amount. This is so local merchants can easily conduct transnational business without needing foreign currency exchanges to handle small transactions. CAC is mostly a guideline to changes of ownership in foreign or domestic financial assets and liabilities. Tangentially, it covers and extends the framework of the creation and liquidation of claims on, or by the rest of the world, on local asset and currency markets. CAC has 5 basic statements designed as points of action All types of liquid capital assets must be able to be exchanged freely, between any two nations in the world, with standardized exchange rates. The amounts must be a significant amount (in excess of $500,000). Capital inflows should be invested in semi-liquid assets, to prevent churning and excessive outflow. Institutional investors should not use CAC to manipulate fiscal policy or exchange rates. Excessive inflows and outflows should be buffered by national banks to provide collateral. CAC (Capital Account Convertibility) for Indian Economy refers to the abolition of all limitations with respect to the movement of capital from India to different countries across the globe. In fact, the authorities officially involved with CAC (Capital Account Convertibility) for Indian Economy encourage all companies, commercial entities and individual countrymen for investments, divestments, and real estate transactions in India as well as abroad. It also allows the people and companies not only to convert one currency to the other, but also free cross-border movement of those currencies, without the interventions of the law of the country concerned.
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Following are the pre-requisites for Capital Account Convertibility in India: The Tarapore Committee appointed by the Reserve Bank of India (RBI) was meant for recommending methods of converting the Indian Rupee completely. The report submitted by this Committee in the year 1997 proposed a three-year time period (19992000) for total conversion of Rupee. However, according to the Committee, this was possible only when the following few conditions are satisfied: The average rate of inflation should vary between 3% to 5% during the debt-servicing time Decreasing the gross fiscal deficit to the GDP ratio by 3.5% in 1999-2000 Evolution of CAC in India economic and financial scenarios: In 1994 August, the Indian economy adopted the present form of Current Account Convertibility, compelled by the International Monetary Fund (IMF) Article No. VII, the article of agreement. The primary objective behind the adoption of CAC in India was to make the movement of capital and the capital market independent and open. This would exert less pressure on the Indian financial market. The proposal for the introduction of CAC was present in the recommendations suggested by the Tarapore Committee appointed by the Reserve Bank of India. Reasons for the introduction of CAC in India: The logic for the introduction of complete capital account convertibility in India, according to the recommendations of the Tarapore Committee, is to ensure total financial mobility in the country. It also helps in the efficient appropriation or distribution of international capital in India. Such allocation of foreign funds in the country helps in equalizing the capital return rates not only across different borders, but also escalates the production levels. The forecasts made by the Tarapore Committee regarding Indian CAC are as follows: A prescribed average inflation rate of 3% to 5% will exist for a three-year time period, from1997-98 and 1999-2000. The non-performing assets will experience a decline to 12%, 9% and 5% by the years 1997-98, 1998-99 and 1999-2000 respectively, with respect to the total or aggregate advances. By the years 1997-98, there will be a complete deregulation of the structure of interest rate.
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 The gross fiscal deficit will fall from 4.5% in 1997-98 to 4.0% in 1998-99 and further to 3.5 % in 1999-2000, with respect to the GDP. What is capital account convertibility? There is no formal definition of capital account convertibility (CAC). The Tarapore committee set up by the Reserve Bank of India (RBI) in 1997 to go into the issue of CAC defined it as the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. In simple language what this means is that CAC allows anyone to freely move from local currency into foreign currency and back. Libor Scam LIBOR stands for the London Interbank Offered Rate. To some it may be just the latest entry on a list of bank frauds and blunders in recent years, from mortgage scams to MF Global and the London Whale. In fact, this may be the mother of all scandalsthe one that finally leads to criminal charges and the insolvency of major banks. The fraud is breathtakingly easy to understand once past a small amount of jargon. Indeed, the simplicity of the fraud is the greatest threat to the perpetrators because here at last is a fraud that is easy for juries to understand and for prosecutors to prove. LIBOR is the interest rate at which top-tier banks in London offer to lend to each other on an unsecured basis. The loans are usually short term, typically a day, a week, or several months. Historically the banks in the LIBOR market were among the strongest credits in the world and this type of lending was considered extremely low risk. As a result, LIBOR was among the lowest interest rates available in the market. Other interest rates including corporate loans were benchmarked to LIBOR and expressed as a spread, such as LIBOR plus 1 percent. LIBOR became the base rate used in calculating a vast number of other products and transactions. LIBOR is set by a committee of banks sending their estimates of the rate at which they could borrow to a trade association. The banks on the committee are among the largest in the world including J.P. Morgan, Citibank, and Bank of America. The trade association would discard the highest and lowest rates and average the rest to arrive at the official LIBOR. We now know that some of the banks on the committee lied about the rates for a period of six years from 2005 to 2010, perhaps longer. The lies had two purposes. The first was to
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make money for the bank by lowering what it had to pay on LIBOR-based contracts. This is a kind of direct theft from customers. The second reason involved hiding the fact that some banks were being asked to pay high rates during the Panic of 2008. This is considered a sign of distress. We also know that regulators acted as aiders and abettors of the fraud by ignoring clear signs, including admissions by the banks themselves, that the rates were rigged. Taken to the full extent of the law, these damages are enough to render a large segment of the global banking system insolvent. These damages will be pursued not by regulators, but in private lawsuits by class action lawyers. Bank defendants in cases like this typically ask a judge to dismiss the case because the claims are too vague. However, the facts in this case have already been made plain by Barclays, which is the one large bank to settle its case with the regulators. Once the plaintiffs get past the motion to dismiss, they begin discovery, which gives the class action lawyers access to internal E-mails, tape recordings, depositions, and other books and records of the perpetrator banks. In the meantime, some arrests and criminal charges by the government seem likely. In the end, legislatures may have to intervene to limit total damages to avoid the destruction of the too-big-too-fail banks. In this sense, the LIBOR litigation may come to resemble the tobacco litigation where the big tobacco companies embraced a government-backed deal with damages of over $200 billion to avoid eventual bankruptcy in the face of state and private lawsuits.. The Libor scandal is a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks in London. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. It is controlled by the British Bankers' Association (BBA). The banks are supposed to submit the actual interest rates they are paying, or would expect to pay, for borrowing from other banks. The Libor is supposed to be an overall assessment of the health of the financial system because if the banks being polled feel confident about the state of things, they report a low number and if the member banks feel a low degree of confidence in the financial system, they report a higher interest rate number. In June 2012, multiple criminal settlements by Barclays Bank revealed significant
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fraud and collusion by member banks connected to the rate submissions, leading to the scandal. The British Bankers Association said on September 25, 2012 that it would transfer oversight of LIBOR to UK regulators, as proposed by Financial Services Authority Managing Director Martin Wheatley's independent review recommendations. Wheatly's review recommended that banks submitting rates to LIBOR must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks' LIBOR submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates. Commentators noted that financial institution customers may experience higher and more volatile borrowing and hedging costs after implementation of the recommended reforms.[13] The UK government agreed to accept all of the Wheatly Review's recommendations and press for legislation implementing them. Regulatory investigations The Wall Street Journal reported in March 2011 that regulators were focusing on Bank of America Corp., Citigroup Inc. and UBS AG in their probe of Libor rate manipulation. A year later, it was reported in February 2012 that the U.S. Department of Justice was conducting a criminal investigation into Libor abuse. Among the abuses being investigated were the possibilities that traders were in direct communication with bankers before the rates were set, thus allowing them an unprecedented amount of insider knowledge into global instruments. In court documents, a trader from the Royal Bank of Scotland claimed that it was common practice among senior employees at his bank to make requests to the bank's rate setters as to the appropriate Libor rate, and that the bank also made on occasions rate requests for some hedge funds The Canadian Competition Bureau was reported on 15 July 2012 to also be carrying out an investigation into price fixing by five banks of the yen denominated Libor rates. Court documents filed indicated that the Competition Bureau had been pursuing the matter since at least January 2011. The documents offered a detailed view of how and when the international banks allegedly colluded to fix the Libor rates. The information was based on a whistleblower who traded immunity from prosecution in exchange for turning on his fellow conspirators. In the court documents, a federal prosecutor for the bureau stated that the IRD (interest-rate derivatives) traders at the participant banks communicated with each other their desire to see a higher or lower yen LIBOR to aid their trading positions". Barclays Bank fined for manipulation
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On 27 June 2012, Barclays Bank was fined $200 million by the Commodity Futures Trading Commission, $160 million by the United States Department of Justice and 59.5 million by the Financial Services Authority for attempted manipulation of the Libor and Euribor rates. The United States Department of Justice and Barclays officially agreed that "the manipulation of the submissions affected the fixed rates on some occasions". Barclays manipulated rates for at least two reasons. Routinely, from at least as early as 2005, traders sought particular rate submissions to benefit their financial positions. Later, during the 20072012 global financial crisis, they artificially lowered rate submissions to make their bank seem healthy. Breadth of scandal becomes apparent By 4 July 2012 the breadth of the scandal was evident and became the topic of analysis on news and financial programs that attempted to explain the importance of the scandal. Two days later, it was announced that the U.K. Serious Fraud Office had also opened a criminal investigation into manipulation of interest rates. The investigation was not limited to Barclays. It has been reported since then that regulators in at least seven countries are investigating the rigging of the Libor and other interest rates. Around 20 major banks have been named in investigations and court cases. Early estimates are that the rate manipulation scandal cost U.S. states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation.[50] An increasingly smaller set of banks are participating in setting the LIBOR, calling into question its future as a benchmark standard, but without any viable alternative to replace it. Mortgage rates manipulated on reset date Homeowners in the US filed a class action lawsuit in October 2012 against twelve of the largest banks which alleged that Libor manipulation made mortgage repayments more expensive than they should have been. Statistical analysis indicated that the Libor rose consistently on the first day of each month between 2000 and 2009 on the day that most adjustable-rate mortgages had as a change date on which new repayment rates would "reset". During the analysed period, the Libor rate rose on average more than two basis points above the average on the first day of the month, and between 2007 and 2009, the Libor rate rose on average more than seven and one-half basis points above the average on the first day of the month.

Municipalities lost billions due to rigging The city of Baltimore and others in the US filed a class action lawsuit in April 2012 against Libor setting banks which alleged that the manipulation of Libor caused payments on their interest rate swaps to be smaller than they should have been.[59] Before the financial crisis, states and localities bought $500 billion in interest rate swaps to hedge their municipal bond sales. It is estimated that the manipulation of Libor cost municipalities at least $6 billion. These losses were in addition to $4 billion that localities had already paid to unwind backfiring interest rate swaps. In order to hedge costs on the sale of variable interest rate bonds, which can rise and fall with the market, local governments, such as Baltimore, purchased interest rate swaps which exchange a variable interest rate for a fixed interest rate.[62] In a swap deal, when the interest rate rises, the swap seller pays the local government the increased cost on the bond, while when the interest rate falls, the swap seller saves and pays the local government the decreased cost on the bond. The interest rate swap mechanism generally works well, however, between 2007 and 2010 the payments to local governments on their swaps artificially decreased but the cost on their bonds remained at actual market rates. This was because most interest rate swaps are linked to the Libor interest rate, while municipal bond rates are linked to the SIFMA Municipal Bond Index interest rate. During the financial crisis the two benchmark rates decoupled. Municipalities continued to pay on their bonds at the actual market Sifma rate but were paid on their interest rate swaps at the artificially lower Libor rate. Recommendations The British Bankers Association said on September 25 that it would transfer oversight of LIBOR to UK regulators, as proposed by Financial Services Authority Managing Director Martin Wheatley and CEO-designate of the new Financial Conduct Authority.[12] On September 28, Wheatly's independent review was published, recommending that an independent organization with government and regulator representation, called the Tender Committee, manage the process of setting LIBOR under a new external oversight process for transparency and accountability. Banks that make submissions to LIBOR would be required to base them on actual inter-bank deposit market transactions and keep records of their transactions supporting those submissions. The review also recommended that individual banks' LIBOR submissions be published, but only after three months, to reduce the risk that they would be used as a measure of the submitting banks' creditworthiness. The review left open the possibility that regulators might compel additional banks to participate in submissions if an insufficient number do voluntarily. The review recommended criminal sanctions specifically for
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manipulation of benchmark interest rates such as the LIBOR, saying that existing criminal regulations for manipulation of financial instruments were inadequate. Some commentators noted that LIBOR rates may be higher and more volatile after implementation of these reforms, so financial institution customers may experience higher and more volatile borrowing and hedging costs.[13] The UK government agreed to accept all of the Wheatly Review's recommendations and press for legislation implementing them.[14] Bloomberg LP CEO Dan Doctor off told the European Parliament that Bloomberg LP could develop an alternative index called the Bloomberg Interbank Offered Rate that would use data from transactions such as market-based quotes for credit default swap transactions and corporate bonds.

IMFs Response to the Global Economic Crisis Since the onset of the global economic crisis in 2007, the IMF has mobilized on many fronts to support its 188 member countries. It increased and deployed its lending firepower, used its cross-country experience to offer policy solutions, and introduced reforms that made it better equipped to respond to countries needs. Creating a crisis firewall: To meet ever increasing financing needs of countries hit by the global financial crisis and help strengthen global economic and financial stability, the Fund has greatly bolstered its lending capacity since the onset of the global crisis. It has done so both by obtaining commitments to increase quota subscriptions of member countriesthe IMF's main source of financingand securing large temporary borrowing agreements from member countries, including recent pledges of $456 billion. Stepping up crisis lending. The IMF has overhauled its general lending framework to make it better suited to country needs giving greater emphasis on crisis prevention, and has streamlined conditions attached to loans. Since the start of the crisis, it has committed well over $300 billion in loans to its member countries. Helping the worlds poorest. The IMF undertook an unprecedented reform of its policies toward low-income countries and quadrupled its concessional lending. Sharpening IMF analysis and policy advice. The IMFs monitoring, forecasts, and policy advice, informed by a global perspective and by experience from previous crises, have been in high demand. The IMF is also contributing to the ongoing effort to draw lessons from the crisis for policy, regulation, and reform of the global financial
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architecture, including through its work with the Group of Twenty (G-20) industrialized and emerging market economies. Reforming the IMFs governance. To strengthen its legitimacy, in November 2010, the IMF agreed on wide-ranging governance reforms to reflect the increasing importance of emerging market countries. The reforms, expected to be effective by October 2012, also ensure that smaller developing countries will retain their influence in the IMF. Reforming the IMFs lending framework In an effort to better support countries during the global economic crisis, the IMF beefed up its lending capacity and approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries varying strengths and circumstances. Credit line for strong performers. The Flexible Credit Line (FCL), introduced in April 2009 and further enhanced in August 2010, is a lending tool for countries with very strong fundamentals that provides large and upfront access to IMF resources, as a form of insurance for crisis prevention. There are no policy conditions to be met once a country has been approved for the credit line. Colombia, Mexico, and Poland have been provided combined access of over $100 billion under the FCL (no drawings have been made under these arrangements). FCL use has been found to lead to lower borrowing costs and increased room for policy maneuver. Access to liquidity on flexible terms. Heightened regional or global stress can affect countries that would not likely be at risk of crisis. Providing rapid and adequate shortterm liquidity to such crisis bystanders during periods of stress could bolster market confidence, limit contagion, and reduce the overall cost of crises. The Precautionary and Liquidity Line (PLL) is designed to meet the liquidity needs of member countries with sound economic fundamentals but with some remaining vulnerabilitiesMacedonia and Morocco have used the PLL. Reformed terms for IMF lending. Structural performance criteria have been discontinued for all IMF loans, including for programs with low-income countries. Structural reforms will continue to be part of IMF-supported programs, but have become more focused on areas critical to a countrys recovery. Emphasis on social protection. The IMF is helping governments to protect and even increase social spending, including social assistance. In particular, the IMF is promoting measures to increase spending on, and improve the targeting of, social safety net programs that can mitigate the impact of the crisis on the most vulnerable in society.
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Helping the worlds poorest In response to the global financial crisis, the IMF undertook an unprecedented reform of its policies toward low-income countries. As a result, IMF programs are now more flexible and tailored to the individual needs of low-income countries, with streamlined conditionality, higher concessionality and more emphasis on safeguarding social spending. Increase in resources. Resources available to low-income countries through the Poverty Reduction and Growth Trust over the period 20092014 were boosted to $17 billion, consistent with the call by G-20 leaders in April 2009 of doubling the IMFs concessional lending capacity and providing $6 billion additional concessional financing over the next two to three years. The IMFs concessional lending to low-income countries amounted to $3.8 billion in 2009, an increase of about four times the historical levels. In 2010 and 2011, concessional lending reached $1.8 billion and $1.9 billion respectively. More flexibility. Partly because of the crisis, the IMF has generally factored in higher deficits and spending, and has made financial assistance programs more flexible. On average, for all of sub-Saharan Africa, fiscal deficits widened by about 2 percent of GDP in 2009. Establishment of a Post-Catastrophe Debt Relief (PCDR) Trust. This allows the IMF to join international debt relief efforts for very poor countries that are hit by the most catastrophic of natural disasters. PCDR-financed debt relief amounted to $268 million in 2010. Climate, Environment, and the IMF Stabilizing global atmospheric concentrations of greenhouse gases will require a radical transformation of the global energy system over coming decades. Fiscal instruments (carbon taxes or similar) are the most effective way to ensure that environmental costs are reflected in energy prices and promote the development of cleaner technologies. They also have an important role to play in addressing other major environmental challenges, like premature mortality caused by poor air quality. Responding to climate change has become one of the worlds foremost policy challenges. In line with its mandate and expertise, the IMF focuses on the fiscal, financial, and macroeconomic challenges of climate change. The IMF provides advice on emissions mitigation policies and aims to promote understanding of the difficult issues of international fiscal policy cooperation confronting efforts to design a successor to the Kyoto Protocol. The IMF has also been involved in work for the Group of Twenty
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advanced and emerging economies on potential sources of climate finance for developing countries. Fiscal implications Broad-based charges on greenhouse gas emissions are the most effective mitigation instrument because they exploit all possible behavioral responses for reducing emissions throughout the economy. Regulatory policies (at least in isolation) tend to be much less effective, because they focus on a narrower range of these responses. Carbon taxes can also raise substantial amounts of government revenue. Fiscal challenges created by current economic difficulties present an opportunity to consider innovative environmental charges. Cap-and-trade systems are another promising policy, but generally they should be designed to look like fiscal instruments through revenue-raising and price stability provisions. Designing a response There are a number of issues to consider in designing fiscal policies to mitigate climate change:

such as clean technology research, development, and deployment policies;

-energy emissions; and implications of the policies. More generally, policy makers need to understand the pros and cons of fiscal instruments relative to regulatory approaches and or project-by-project funding. Financing responses to climate change There is broad agreement that substantial financial assistance is needed for climate adaptation and mitigation projects in developing countries. In 2011, the IMF, in collaboration with the World Bank and others, undertook a study for the G-20 on the
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effectiveness, revenue potential, and administration, of a wide range of fiscal options for climate finance. This included analysis of potential charges for international aviation and maritime emissions and domestic (carbon-related and other) fiscal instruments. An IMF proposal for a Green Fund would facilitate financial flows to developing countries to assist in their efforts on climate change adaptation and mitigation. The Green Fund would be neither created nor managed by the IMF itself, but it would play an important role as a framework to mobilize resources, and could be the first step toward a binding global agreement on reducing greenhouse gas emissions. Macroeconomic challenges Climate change mitigation policies affect countries economic growth, saving and investment levels, capital flows, and exchange rates. But IMF analysis suggests these costs can be moderate if policies are well designed. In particular, policies should be credible and provide long-term price stability, flexible enough to be able to adjust to emerging information and changing economic conditions, and implemented as broadly and equitably as possible. Other environmental work in the IMF There is also ample scope for reforming tax systems to deal better with broader environmental and related problems that can be a significant drag on economic growth, such as the health and productivity impacts of poor air quality, and severe congestion of major urban centers. For some countries, the priority is to restructure existing energy tax systems (rather than raise the overall level of energy taxes) to more effectively alleviate these problems (for example, by shifting taxes from vehicle ownership and onto fuels or vehicle mileage, and shifting taxes from electricity use and onto emissions). Tax rates also need to be better aligned with the scale of environmental damages. Recent IMF papers lay out core principles of green tax design and focus on case studies for Chile and Mauritius. Ongoing work is assessing the magnitude of pollution and other major environmental side effects associated with fossil fuel use, to provide actionable guidance on energy tax reforms for a broad range of developed and developing countries. The IMF has also analyzed subsidies on fuel products, including their effects on climate change. In the case of petroleum products for example, reducing subsidies could considerably reduce greenhouse gas emissions in many countries, while at the same time reducing fiscal deficits (and with better targeted instruments commonly available to protect the poor). The IMF is also involved in regular monitoring of fuel pricing policies

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in response to volatile international fuel prices. Another recent study defines and measures the concept of green investment, and explains recent trends.

What is the Functions of World Bank? World Bank performs the following functions: (i) Granting reconstruction loans to war devastated countries. (ii) Granting developmental loans to underdeveloped countries. (iii) Providing loans to governments for agriculture, irrigation, power, transport, water supply, educations, health, etc (iv) Providing loans to private concerns for specified projects. (v) Promoting foreign investment by guaranteeing loans provided by other organizations. (vi)Providing technical, economic and monetary advice to member countries for specific projects (vii) Encouraging industrial development of underdeveloped countries by promoting economic reforms. Resources The World Bank had initially authorized capital of $10 billion subscribed by the member countries in accordance with their economic strength. The United States of America is the largest subscriber. The Bank collects funds from members as well as by issue of international bonds. Definition: The World Bank is an international financial institution that provides loans to developing countries for capital programs. The World Bank's official goal is the reduction of poverty. According to the World Bank's Articles of Agreement (as amended effective 16 February 1989), all of its decisions must be guided by a commitment to promote foreign investment, international trade, and facilitate capital investment. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates
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these two in addition to three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).

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