UNIT-5

1. Why was the World Bank established? Who is the current president
of the World Bank Group? Where does the World Bank obtain the
money it lends? Why does the World Bank keep large amount of
money as liquid resources and where does it come from?

 Why was the World Bank established

The World Bank was established with the primary objective of promoting
global economic development and reducing poverty. It was founded in
1944 during the Bretton Woods Conference held in Bretton Woods, New
Hampshire, United States. The conference aimed to address the economic
challenges and financial disruptions caused by World War II.

The key reasons for establishing the World Bank were:

1. Reconstruction and Development: The immediate objective was to

support the reconstruction and development of war-torn countries
and promote stability in the post-war era. The World Bank was
envisioned as an institution that would provide financial assistance
and expertise to help countries rebuild their economies and
infrastructure.

2. International Economic Cooperation: The establishment of the

World Bank aimed to foster international economic cooperation and
prevent economic crises similar to the Great Depression of the 1930s.
It was intended to promote collaboration among nations, facilitate
the flow of capital and investments, and provide financial resources
to address development challenges collectively.

3. Poverty Reduction: Addressing poverty and promoting economic

growth were fundamental goals of the World Bank. The institution
was created with the belief that development projects, investments,
and policy advice could uplift the living standards of people in
 developing countries, reduce poverty, and promote social and
economic progress.

4. Long-Term Development Financing: The World Bank was

envisioned as a long-term development financing institution. It
would provide loans and financial assistance on favorable terms to
support development projects in areas such as infrastructure,
agriculture, education, healthcare, and governance.

5. International Monetary Stability: The World Bank aimed to

promote international monetary stability by supporting the stability
of exchange rates and fostering cooperation among member
countries. It worked in conjunction with the International Monetary
Fund (IMF) to provide financial assistance to countries facing balance
of payment difficulties.

6. Institutional Framework for Development Assistance: The

establishment of the World Bank created an institutional framework
to coordinate and channel development assistance from member
countries. It acted as a platform for donor coordination, policy
dialogue, and knowledge sharing, allowing member countries to
collaborate on development initiatives.

Since its establishment, the World Bank has expanded its role and activities.
It provides financial assistance, technical expertise, policy advice, and
research to support sustainable development efforts around the world. The
World Bank Group comprises five institutions, including the International
Bank for Reconstruction and Development (IBRD), the International
Development Association (IDA), the International Finance Corporation (IFC),
the Multilateral Investment Guarantee Agency (MIGA), and the International
Centre for Settlement of Investment Disputes (ICSID).
The World Bank continues to play a crucial role in promoting economic
development, poverty reduction, and sustainable growth, working in close
partnership with member countries, governments, civil society
organizations, and other stakeholders.

 Who is the current president of the World Bank Group

Ajay Banga was selected 14th President of the World Bank Group and
began his five-year term as World Bank Group President on June 2, 2023.

 Where does the World Bank obtain the money it lends

The World Bank obtains the money it lends through various sources. The
primary sources of funding for the World Bank Group are as follows:

1. Member Country Contributions: The World Bank raises funds

through contributions from its member countries. These
contributions, known as capital subscriptions, are made by
member countries based on their respective quotas. The quotas
are determined by the size of a country's economy and its
involvement in global trade and finance.

2. International Bond Market: The World Bank issues bonds in

international capital markets to raise funds. These bonds are
known as International Bank for Reconstruction and Development
(IBRD) bonds or World Bank bonds. The World Bank's strong
credit rating allows it to borrow at competitive rates, and these
funds are then used for lending purposes.

3. Income from Loan Repayments: The World Bank receives

repayments of the principal and interest on loans it has previously
extended to borrowing countries. These loan repayments are an
important source of funding for the World Bank's ongoing
operations and allow it to recycle the funds into new lending
activities.

4. Access to Capital Markets: The World Bank has the ability to

access capital markets to borrow funds for its lending operations.
 It does this by issuing bonds, including green bonds and social
bonds, which attract investors seeking socially responsible
investments.

5. Trust Funds: The World Bank manages various trust funds that
receive contributions from member countries, foundations, and
other development partners. These funds are designated for
specific purposes, such as supporting development projects in
particular sectors or addressing specific challenges, and they
supplement the World Bank's own financial resources.

6. Net Income and Surplus: The World Bank generates income

through various activities, including the interest earned on its
lending operations and other financial activities. This income
contributes to the World Bank's financial resources and can be
used to support its lending and operational activities.

 Why does the World Bank keep large amount of money as liquid
resources and where does it come from
The World Bank keeps a significant amount of money as liquid resources
for several reasons:

1. Lending Operations: The World Bank needs liquid resources to

finance its lending operations. These resources allow the World
Bank to provide loans and financial assistance to member
countries for development projects, poverty reduction initiatives,
and capacity building. By maintaining liquid resources, the World
Bank ensures it has the necessary funds readily available to meet
the borrowing needs of member countries.

2. Financial Stability and Contingency Planning: Holding a

substantial amount of liquid resources helps the World Bank
maintain financial stability and manage potential risks. It provides
a cushion to address unforeseen events, economic downturns, or
financial crises that may impact the global economy or individual
member countries. By having sufficient liquidity, the World Bank
 can respond quickly to emerging needs and provide timely
support to countries facing financial difficulties.

3. Currency Exchange Operations: The World Bank engages in

currency exchange operations to facilitate its lending activities. It
may need to convert currencies to fund loans denominated in
different currencies. Maintaining liquid resources allows the World
Bank to efficiently carry out these currency exchange operations,
ensuring smooth and timely disbursements to borrowing
countries.

4. Financial Market Operations: The World Bank participates in

financial markets for various purposes, such as managing its
portfolio, investing its resources, and hedging against risks. Liquid
resources provide flexibility and enable the World Bank to
navigate financial markets effectively, optimize returns on its
investments, and mitigate potential losses.

2. What do you understand by International Bank for Reconstruction

and Development? Discuss its governance and finance model.
Enumerate the services provided by International Bank for
Reconstruction and Development.

 What do you understand by International Bank for Reconstruction

and Development
The International Bank for Reconstruction and Development (IBRD) is
one of the five institutions that make up the World Bank Group. It was
established in 1944 during the Bretton Woods Conference held in
Bretton Woods, New Hampshire, United States. The IBRD's primary
objective is to provide financial and technical assistance to middle-
income and creditworthy low-income countries for their development
projects.

 Discuss its governance and finance model.

The governance and finance model of the International Bank for
Reconstruction and Development (IBRD) is designed to ensure effective
 decision-making, accountability, and financial sustainability. Here are the
key aspects of its governance and finance model:

Governance:

1. Board of Governors: The highest decision-making body of the IBRD is

the Board of Governors, composed of representatives from each of the
IBRD's 189 member countries. The Board of Governors meets once a
year to discuss policies, strategic direction, and major decisions affecting
the institution.

2. Board of Executive Directors: The Board of Executive Directors is

responsible for the day-to-day operations and decision-making of the
IBRD. It consists of 25 Executive Directors who represent member
countries or groups of countries. The Executive Directors are appointed
or elected by the member countries or groups they represent.

3. Voting Power: Each member country has a number of votes based on

its capital subscription to the IBRD. Voting power is allocated to member
countries based on a formula that considers the country's economic size
and other factors. Major decisions require the approval of a
supermajority, typically 85% of the total voting power.

4. Leadership: The President of the World Bank Group serves as the

President of the IBRD. The President is appointed by the Board of
Executive Directors for a renewable term. The President is responsible
for the overall management of the IBRD and represents the institution at
global forums.

Finance Model:

1. Capital Contributions: The IBRD raises funds through capital

contributions from its member countries. Member countries
provide capital subscriptions based on their economic size and
participation in global trade and finance. These contributions
form the capital base of the IBRD and determine the voting power
of member countries.
 2. Borrowing: The IBRD also borrows funds from international
financial markets through the issuance of bonds. The bonds are
backed by the IBRD's capital and its income from loan repayments
and interest charges. The IBRD's strong credit rating allows it to
borrow at competitive rates and attract investors.

3. Loan Repayments and Interest Charges: The IBRD generates

income from the repayment of loans and interest charges on its
lending operations. These repayments and interest charges are
essential sources of revenue for the IBRD and contribute to its
financial sustainability.

4. Financial Sustainability: The IBRD operates as a financially

sustainable institution. It aims to cover its operational costs,
maintain its capital adequacy, and generate sufficient income to
support its lending activities. The IBRD applies prudent financial
management practices to ensure the long-term sustainability of
its operations.

5. Cost Recovery: The IBRD charges interest on its loans, aiming to

recover its operational costs and generate income. The interest
rates are determined based on market conditions, borrowing
costs, and the financial needs of the institution. The IBRD also
charges fees for certain services, technical assistance, and
advisory activities.

The governance and finance model of the IBRD ensure that member
countries have a voice in decision-making while promoting financial
sustainability and responsible use of resources. This model allows the
IBRD to fulfill its mandate of providing financial and technical assistance
to support development projects and promote economic growth in its
member countries.

 Enumerate the services provided by International Bank for

Reconstruction and Development.
The International Bank for Reconstruction and Development (IBRD)
provides a range of services to its member countries to support their
development efforts. These services include:

1. Financing Development Projects: The IBRD offers loans and

financial assistance to member countries for various development
projects. These projects may include investments in infrastructure,
transportation, energy, education, healthcare, agriculture, and
other sectors that promote economic growth and poverty
reduction.

2. Policy Advice and Technical Assistance: The IBRD provides

policy advice and technical assistance to member countries. This
includes expertise in areas such as economic policy formulation,
institutional capacity building, governance reforms, and project
implementation. The IBRD helps countries develop strategies and
policies to address development challenges effectively.

3. Sector-Specific Support: The IBRD focuses on specific sectors to

address key development challenges. It provides targeted support
in areas such as water and sanitation, urban development, climate
change mitigation and adaptation, renewable energy, agriculture,
and education. The goal is to assist member countries in
achieving sustainable development outcomes in these sectors.

4. Knowledge Sharing and Capacity Building: The IBRD facilitates

knowledge sharing and capacity building among member
countries. It conducts research, produces reports, and
disseminates best practices and lessons learned from
development projects. The IBRD also organizes workshops,
conferences, and training programs to enhance the capacity of
policymakers, government officials, and development
practitioners.

5. Private Sector Engagement: The IBRD supports private sector

development in its member countries. It provides financing and
advisory services to private enterprises, including small and
 medium-sized enterprises (SMEs), to promote entrepreneurship,
job creation, and economic diversification. The IBRD also works to
improve the business environment and facilitate public-private
partnerships.

6. Infrastructure Financing: The IBRD plays a significant role in

financing infrastructure projects in member countries. This
includes investments in roads, railways, airports, ports, power
plants, telecommunications networks, and other critical
infrastructure. By providing financing and technical expertise, the
IBRD helps member countries address infrastructure gaps and
improve connectivity.

7. Risk Management and Financial Instruments: The IBRD offers

financial instruments to help member countries manage risks
associated with development projects and economic volatility.
These instruments include guarantees, insurance, and hedging
products. They help mitigate risks related to currency fluctuations,
interest rate changes, natural disasters, and other external factors.

8. Collaboration with Other Institutions: The IBRD collaborates

closely with other institutions within the World Bank Group, such
as the International Finance Corporation (IFC) and the Multilateral
Investment Guarantee Agency (MIGA). This collaboration allows
for a comprehensive approach to development, combining
financial support, private sector engagement, and risk mitigation.

The services provided by the IBRD are tailored to the specific needs and
priorities of member countries. Through its financial resources, technical
expertise, and knowledge sharing, the IBRD aims to contribute to
sustainable development, poverty reduction, and improved living
standards in its member countries.

5. Write the following:

(a) World Bank
(b) IBRD
(c) IMF
(d)WTO

(a) World Bank

The World Bank was established with the primary objective of

promoting global economic development and reducing poverty. It was
founded in 1944 during the Bretton Woods Conference held in Bretton
Woods, New Hampshire, United States. The conference aimed to
address the economic challenges and financial disruptions caused by
World War II.

The World Bank's primary objective is to promote sustainable economic

growth, reduce poverty, and enhance living standards in its member
countries. It achieves this through financial assistance, policy advice,
technical assistance, and knowledge sharing. The World Bank comprises
five institutions: the International Bank for Reconstruction and
Development (IBRD), the International Development Association (IDA),
the International Finance Corporation (IFC), the Multilateral Investment
Guarantee Agency (MIGA), and the International Centre for Settlement
of Investment Disputes (ICSID). Each institution has its specific focus and
plays a vital role in the overall mission of the World Bank.

The World Bank operates under the governance of its member

countries. The Board of Governors, composed of representatives from
each member country, provides strategic direction and oversight. The
Board of Executive Directors, appointed or elected by member countries,
manages the day-to-day operations of the World Bank Group. Each
member country has voting power based on its capital subscription,
ensuring a democratic decision-making process that reflects the
interests of all member countries.

The World Bank's impact can be seen in numerous areas. It has

supported the implementation of critical infrastructure projects, such as
roads, bridges, power plants, and schools, which have improved
connectivity, access to services, and quality of life in many developing
countries. The World Bank's financial assistance has facilitated economic
reforms, poverty reduction programs, and social safety nets, benefiting
millions of people around the world. Additionally, the World Bank's
policy advice, technical expertise, and knowledge sharing have helped
countries develop effective strategies, improve governance, and build
capacity for sustainable development.

(b) IBRD

The International Bank for Reconstruction and Development (IBRD) is a

vital institution within the World Bank Group that plays a significant role
in promoting economic development and reducing poverty. Established
in 1944 during the Bretton Woods Conference, the IBRD focuses on
providing financial resources, technical expertise, and policy advice to
middle-income and creditworthy low-income countries. This essay will
delve into the history, structure, functions, and impact of the IBRD.

The primary objective of the IBRD is to support its member countries in

their development efforts. It achieves this through the provision of
loans, financial assistance, and knowledge sharing. The IBRD lends to
member countries for a wide range of projects, including investments in
infrastructure, education, healthcare, agriculture, and governance. It
operates on market-based lending terms, with loans repaid over a
specific period, including interest charges.

The structure of the IBRD includes its member countries, governance

bodies, and operational units. The IBRD has 189 member countries as of
September 2021, each with voting power based on their capital
subscription. The Board of Governors, composed of representatives from
member countries, provides strategic guidance and overall policy
direction. The Board of Executive Directors, appointed or elected by
member countries, manages the day-to-day operations of the IBRD.

The IBRD's functions are diverse and essential for supporting

development. These include:

1. Financial Resources: The IBRD raises funds through capital

contributions from member countries, income generated from
loan repayments and interest charges, and borrowing from
 international financial markets through the issuance of bonds.
These resources form the capital base of the IBRD, enabling it to
provide financial support to member countries.

2. Loans and Financial Assistance: The IBRD provides loans and

financial assistance to member countries to finance development
projects. These loans are typically provided on market-based
terms and are tailored to the specific needs of each borrowing
country. The IBRD's loans help fund infrastructure development,
social programs, economic reforms, and capacity-building
initiatives.

3. Technical Expertise and Policy Advice: In addition to financial

resources, the IBRD offers technical expertise and policy advice to
member countries. It provides guidance on economic policies,
institutional reforms, governance practices, and project
implementation. The IBRD's expertise helps countries design and
implement effective strategies to achieve sustainable
development goals.

4. Knowledge Sharing and Capacity Building: The IBRD promotes

knowledge sharing and capacity building among member
countries. It conducts research, produces reports, and organizes
workshops and conferences to facilitate the exchange of best
practices and lessons learned. The IBRD's knowledge sharing
activities enhance the capacity of policymakers, government
officials, and development practitioners.

5. Public-Private Partnerships (PPPs): The IBRD supports the

development of public-private partnerships to leverage private
sector resources and expertise for development projects. It helps
member countries design and implement PPPs in sectors such as
infrastructure, healthcare, and education. The IBRD's involvement
in PPPs facilitates sustainable and inclusive development.
(c) IMF
The International Monetary Fund (IMF) is an international organization
that works to promote global monetary cooperation, secure financial
stability, facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the world. It
was established in 1944 during the Bretton Woods Conference and has
since evolved to address the changing needs of the global economy.

Key aspects of the IMF include:

1. Objectives: The primary objectives of the IMF are to foster global

economic stability and growth. It provides member countries with
financial assistance, policy advice, and technical expertise to
address economic challenges, promote sound macroeconomic
policies, and maintain financial stability.

2. Membership: The IMF has 190 member countries, representing

almost the entire global community. Each member country holds
a quota, which determines its financial contributions to the IMF
and its voting power in decision-making processes.

3. Surveillance and Policy Advice: The IMF conducts economic

surveillance and provides policy advice to its member countries.
Through regular consultations and assessments, the IMF monitors
global economic developments, identifies risks, and offers
recommendations to promote economic stability and growth. It
also publishes reports and research on various economic and
financial topics.

4. Financial Assistance: The IMF provides financial assistance to

member countries facing balance of payment difficulties. This
assistance aims to help countries overcome short-term economic
challenges, restore stability, and implement necessary reforms.
The IMF's financial assistance comes in the form of loans with
specific conditions and policy requirements known as
"conditionality."

5. Technical Assistance and Capacity Building: The IMF offers

technical assistance and capacity-building programs to help
member countries strengthen their institutional and policy
 frameworks. This assistance covers areas such as fiscal
management, monetary policy, financial sector regulation,
exchange rate policies, and data management. The IMF's goal is
to support countries in developing the capacity to manage their
economies effectively.

6. Debt Relief and Sustainability: The IMF plays a crucial role in

debt relief initiatives for heavily indebted poor countries (HIPC)
and provides guidance on debt sustainability. It works with
countries and other stakeholders to alleviate the burden of
unsustainable debt, promote responsible borrowing and lending
practices, and ensure debt sustainability.

7. Research and Analysis: The IMF conducts research and analysis

on various aspects of the global economy, financial markets, and
policy issues. Its research helps deepen understanding of
economic trends, challenges, and potential solutions. The IMF also
provides a platform for discussion and knowledge sharing among
policymakers, economists, and researchers through conferences
and publications.

8. Governance: The IMF's governance structure involves its member

countries. The Board of Governors, representing member
countries, provides overall strategic guidance. The Executive
Board, consisting of representatives from member countries,
carries out day-to-day operations and decision-making. Major
decisions require a supermajority vote, ensuring broad consensus
among member countries.

The IMF plays a crucial role in promoting global economic stability,

providing financial assistance, and offering policy advice to member
countries. Its activities help address economic imbalances, prevent
financial crises, and foster sustainable growth. The IMF collaborates with
other international organizations and stakeholders to coordinate efforts
and strengthen the international monetary system, contributing to
global economic prosperity and poverty reduction.
(d)WTO

The World Trade Organization (WTO) is an international organization

that deals with the global rules of trade between nations. It was
established on January 1, 1995, as a result of the Uruguay Round of
negotiations under the General Agreement on Tariffs and Trade (GATT).
The WTO acts as a forum for member countries to negotiate trade
agreements, resolve trade disputes, and set global trade rules.

Key aspects of the WTO include:

1. Objectives: The primary objective of the WTO is to promote

global trade by ensuring the smooth flow of goods, services, and
intellectual property across borders. It aims to facilitate economic
growth, create employment opportunities, raise living standards,
and improve welfare for people worldwide.

2. Membership: The WTO has 164 member countries as of

September 2021, representing the majority of the world's trading
nations. Each member country has rights and obligations under
the WTO's agreements and participates in negotiations and
decision-making processes.

3. Trade Liberalization: The WTO promotes trade liberalization

through negotiations on the reduction of trade barriers, such as
tariffs and quotas. Member countries engage in negotiations to
lower trade barriers, promote fair competition, and create a level
playing field for international trade.

4. Most-Favored-Nation (MFN) Treatment: The MFN principle is a

fundamental principle of the WTO. It requires member countries
to extend any favorable trade treatment granted to one member
to all other members, ensuring non-discrimination and equal
treatment in trade relations.

5. National Treatment: The WTO's national treatment principle

requires member countries to treat foreign goods and services no
 less favorably than their domestic counterparts. It ensures that
foreign products are not subject to unfair discrimination in the
domestic market.

6. Dispute Settlement: The WTO has a dispute settlement

mechanism to resolve trade disputes among member countries.
This mechanism provides a structured process for consultations,
adjudication, and enforcement of trade rules, ensuring that trade
disputes are settled in a fair and timely manner.

7. Trade Policy Review: The WTO conducts regular trade policy

reviews of member countries to assess their trade policies and
practices. These reviews provide transparency, enhance
understanding of member countries' trade regimes, and facilitate
discussions on trade-related issues.

8. Technical Assistance and Capacity Building: The WTO provides

technical assistance and capacity-building programs to help
developing and least-developed countries participate effectively
in global trade. These programs aim to enhance trade-related
skills, build institutional capacity, and assist in the implementation
of WTO agreements.

9. Trade and Development: The WTO recognizes the importance of

trade as a driver of development and has specific provisions to
support developing countries. It encourages developed countries
to provide preferential market access and technical assistance to
developing countries, aiming to promote their integration into the
global trading system.

The WTO plays a crucial role in facilitating international trade, ensuring that
trade rules are transparent, predictable, and fair. It provides a platform for
negotiations, promotes trade liberalization, resolves trade disputes, and
supports the development needs of member countries. Through its efforts,
the WTO contributes to global economic growth, prosperity, and cooperation
among nations.