INTERNATIONAL FINANCIAL INSTITUTIONS  The Bretton Woods Agreement and System created a
collective international currency exchange regime
In many parts of the world, international financial institutions
(IFIs) play a major role in the social and economic development
programs of nations with developing or transitional economies.
This role includes advising on development projects, funding
them and assisting in their implementation.
Characterized by AAA-credit ratings and a broad membership
of borrowing and donor countries, each of these institutions
operates independently. All however, share the following goals
and objectives:
 to reduce global poverty and improve people's living
conditions and standards;
 to support sustainable economic, social and institutional
development; and
 to promote regional cooperation and integration.
IFIs achieve these objectives through loans, credits and grants
to national governments. Such funding is usually tied to
specific projects that focus on economic and socially
sustainable development. IFIs also provide technical and
advisory assistance to their borrowers and conduct extensive
research on development issues. In addition to these public
procurement opportunities, in which multilateral financing is
delivered to a national government for the implementation of a
project or program, IFIs are increasingly lending directly to non-
sovereign guaranteed (NSG) actors. These include sub-national
government entities, as well as the private sector.
 International Financial Institutions (IFIs) are major
sources of financial and technical support for developing
countries and play a critical role in promoting economic
development and global stability.
 International Finance Institutions (IFIs) play a significant
role in supporting the private sector in developing
countries by encouraging entrepreneurial initiatives that
help developing countries achieve sustainable growth.
EXAMPLES OF INTERNATIONAL FINANCIAL INSTITUTIONS
THE BRETTON WOODS SYSTEM
The Bretton Woods Agreement was negotiated in July 1944 by
delegates from 44 countries at the United Nations Monetary
and Financial Conference held in Bretton Woods, New
Hampshire. Thus, the name “Bretton Woods Agreement. Under
the Bretton Woods System, gold was the basis for the U.S.
dollar and other currencies were pegged to the U.S. dollar’s
value.
Approximately 730 delegates representing 44 countries met in
Bretton Woods in July 1944 with the principal goals of creating
an efficient foreign exchange system, preventing competitive
devaluations of currencies, and promoting international
economic growth. The Bretton Woods Agreement and System
were central to these goals. The Bretton Woods Agreement
also created two important organizations—the International
Monetary Fund (IMF) and the World Bank. While the Bretton
Woods System
was dissolved in the 1970s, both the IMF and World Bank have
remained strong pillars for the exchange of international
currencies.
All of the countries in the Bretton Woods System agreed to a
fixed peg against the U.S. dollar with diversions of only 1%
allowed. Countries were required to monitor and maintain
their currency pegs which they achieved primarily by using
their currency to buy or sell U.S. dollars as needed. The Bretton
Woods System, therefore, minimized international currency
exchange rate volatility which helped international trade
relations. More stability in foreign currency exchange was also
a factor for the successful support of loans and grants
internationally from the World Bank.
that lasted from the mid-1940s to the early 1970s.
 The Bretton Woods System required a currency peg
to the U.S. dollar which was in turn pegged to the
price of gold.
 The Bretton Woods System collapsed in the 1970s
but created a lasting influence on international
currency exchange and trade through its
development of the IMF and World Bank.
INTERNATIONAL MONETARY FUND
The International Monetary Fund (IMF) works to achieve
sustainable growth and prosperity for all of its 190 member
countries. It does so by supporting economic policies that
promote financial stability and monetary cooperation, which
are essential to increase productivity, job creation, and
economic well-being. The IMF is governed by and accountable
to its member countries.
The IMF has three critical missions: furthering international
monetary cooperation, encouraging the expansion of trade
and economic growth, and discouraging policies that would
harm prosperity. To fulfill these missions, IMF member
countries work collaboratively with each other and with other
international bodies.
The IMF fosters international financial stability by:
 Policy Advise - Monitoring economic and financial
developments and advising countries.
 Financial Assistance - Loans and other financial aid to
member countries.
 Capacity Development - Technical assistance and
training to help governments to implement sound
economic policies.
WORLD BANK
The World Bank Group is one of the world’s largest sources of
funding and knowledge for developing countries. Its five
institutions share a commitment to reducing poverty,
increasing shared prosperity, and promoting sustainable
development.
IBRD - The International Bank for Reconstruction and
Development
IDA - The International Development Association
IFC - The International Finance Corporation
MIGA -The Multilateral Investment Guarantee Agency
ICSID - The International Centre for Settlement of
Investment Disputes
MISSION
 To end extreme poverty by reducing the share of the
global population that lives in extreme poverty to 3
percent.
 To promote shared prosperity by increasing the
incomes of the poorest 40 percent of people in every
country.
PRIORITIES
Food Security
Food security is defined when all people, at all times, have
physical and economic access to sufficient safe and
nutritious food that meets their dietary needs and food
preferences for an active and healthy life.
Climate Change
Climate change, poverty, and inequality are the defining
issues of our age. The World Bank Group is the biggest
multilateral funder of climate investments in developing
countries.
 International Development Association (IDA)
IDA is the part of the World Bank that helps the world’s
poorest countries.

GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

The General Agreement on Tariffs and Trade (GATT), signed in

1947 by 23 countries, is a treaty minimizing barriers to
international trade by eliminating or reducing quotas, tariffs,
and subsidies. It was intended to boost economic recovery
after World War II.
The GATT was created to form rules to end or restrict the most
costly and undesirable features of the prewar protectionist
period, namely quantitative trade barriers such as trade
controls and quotas. The agreement also provided a system to
arbitrate commercial disputes among nations, and the
framework enabled a number of multilateral negotiations for
the reduction of tariff barriers. The GATT was regarded as a
significant success in the postwar years.
One of the key achievements of the GATT was that of trade
without discrimination. Every signatory member of the GATT
was to be treated as equal to any other. This is known as the
most-favored-nation principle, and it has been carried through
into the WTO. A practical outcome of this was that once a
country had negotiated a tariff cut with some other countries
(usually its most important trading partners), this same cut
would automatically apply to all GATT signatories. Escape
clauses did exist, whereby countries could negotiate exceptions
if their domestic producers would be particularly harmed by
tariff cuts.
Most nations adopted the most-favored-nation principle in
setting tariffs, which largely replaced quotas. Tariffs (preferable
to quotas but still a trade barrier) were, in turn, cut steadily in
rounds of successive negotiations.

THE WORLD TRADE ORGANIZATION

The World Trade Organization (WTO) is the only global

international organization dealing with the rules of trade
between nations. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world’s trading
nations and ratified in their parliaments. The goal is to ensure
that trade flows as smoothly, predictably and freely as possible.
 The primary purpose of the WTO is to open trade for
the benefit of all.
 The WTO has many roles: it operates a global system
of trade rules, it acts as a forum for negotiating trade
agreements, it settles trade disputes between its
members and it supports the needs of developing
countries.
 All major decisions are made by the WTO's member
governments: either by ministers (who usually meet
at least every two years) or by their ambassadors or
delegates (who meet regularly in Geneva).