INTERNATIONAL

MONETARY FUND
&
WORLD BANK
 What is IMF?
• An international organization of 185 member
countries
• Established to promote international
monetary cooperation, exchange stability
• And orderly exchange arrangements
• To foster economic growth and high levels of
employment; and
• To provide temporary financial
assistance to countries to help ease
balance of payments adjustment
 Beginning of IMF
• Great depression

• After effects of Bretton

World War II Wood
System

• Bretton Wood
System

IMF World Bank

 The Bretton Woods System
• A Conference was held at Bretton Woods New Hampshire in
USA in July, 1944, in order to put in place a new
international monetary system.

• 44 representing countries met to set up a system of

fixed exchange rates.
• All currencies had fixed exchange rates against the U.S. dollar and an
unvarying dollar price of gold ($35 an ounce).

• It intended to provide lending to countries with

current account deficits.

• It called for currency convertibility.

 Failure of Bretton Woods System
• The Bretton Woods System lasted from 1944 to 1971
• In 1960s the US balance of payment deficits started
mounting
• In 1968, convertibility of privately held Dollar into
Gold was abandoned
• By 1947, the US conclude that the Bretton Woods
system was not working and that the Western system
was on the verge of collapse
• The primary factor for the collapse of the system was
currency convertibility into Gold.
– Several attempts to revise the system trough a series of
– parity realignments,
– Dollar revaluation (in terms of gold)
• the Bretton Woods System totally invalid in 1978.
 Who runs the IMF?
Member Countries

Board of Governors

Executive Board

IMF Managing Directors

First Deputy Managing Dir

Deputy Managing Deputy Managing
Dir Dir
 Who runs the IMF?
• Governed by, and is accountable to, its member
countries through its Board of Governors.
• There is one Governor from each member country,
• The Governors usually meet once a year, in
September or October, at the Annual Meetings of
the IMF and the World Bank.
• The day-to-day work of the IMF is carried out by
the Executive Board
• Receives its powers from the Board of Governors
• The Executive Board selects the IMF's Managing
Director, who is appointed for a renewable five-
year term.
 Who runs the IMF?
• The Managing Director reports to the Board and serves as its
chair and the chief of the IMF's staff
• He is assisted by a First Deputy Managing Director and two
other Deputy Managing Directors.
• The Executive Board usually meets three times a week, in full-
day sessions, and more often if needed, at the IMF's
headquarters in Washington, D.C.
• Of the 24 Executive Directors on the Board, 8 are appointed
by single countries—the IMF's 5 largest quota-holders (the
United States, Japan, Germany, France, and the United
Kingdom) and China, Russia, and Saudi Arabia.
• The other 16 Executive Directors are elected for two-year
terms by groups of countries known as "constituencies.“
 Who runs the IMF?
• IMF employees are international civil servants.
• Their responsibility is to the IMF, not to the national
authorities of the countries of which they are citizens.
• About one-half of the IMF's approximately 2,700
staff members are economists.
• Most staff work at the IMF's Washington, D.C.,
headquarters
• In addition, it maintains offices in Brussels, Paris, and
Tokyo New York and Geneva,
 Objectives of IMF
• To promote international monetary corporation

• To facilitate expansion and balanced growth of international trade;

• To promote exchange stability;

• To assist in the establishment of multilateral system of payments;

• To make its general resources temporarily available to its members

experiencing balance of payment difficulties under adequate
safeguard.
• To shorten the duration and lessen the degree of disequilibrium in the
international balance of payments of members.

“The architects of the IMF hoped to design a

fixed exchange rate system that
would encourage growth
 Activities of IMF
• The IMF performs three main activities:

• Monitoring and advising member countries

on their economic policies

• Lending members

• Offering technical assistance

 Monitoring and Advising
• Advice on policies and global oversight

• Country surveillance

• Crisis prevention

• Crisis resolution

• Global surveillance

• Lending to countries in difficulty

 IMF lending facilities
• Stand-By Arrangements

• Extended Fund Facility

• Poverty Reduction and Growth Facility

• Emergency Assistance

• Trade Integration Mechanism

 Technical Assistance
• The IMF provides technical assistance and training
mainly in four areas:
• Monetary and financial policies (monetary policy instruments;
banking system supervision, and restructuring; foreign management
and operations; clearing settlement systems for payments; and
structure development of central banks)

• fiscal policy and management (tax and customs policies and

administration, budget formulation, expenditure management, design
of social safety nets, and management of domestic and foreign debt)

• compilation, management, dissemination, and improvement of

statistical data

• economic and financial legislation.

 Place of IMF
under the Balance
of Payment
Items Credits Debits Net
A. Current Account
1. Merchandise
a. Private
b. Government
2. Invisibles
a. Travel
b. Transportation
c. Insurance
d. Investment Income
e. Government (not included elsewhere)
f. Miscellaneous
3. Transfer Payments
a. Official
b. Private
Total Current Account (1+2+3)
B. Capital Account
2. Private
a. Long Term
b. Short Term
3. Banking
4. Official
a. Loans
b. Amortisation
c. Miscellaneous
Total Capital Account (1+2+3)
C. IMF
D. SDR Allocation
E. Capital Account, IMF & SDR Allocation
(B+C+D)
F. Total Current Account, Capital
Account, IMF & SDR Allocation (A+E)
G. Errors & Omissions
H. Reserves and Monetary Gold
 Where does the IMF get its money?
• The IMF's resources come mainly from the quotas
that countries deposit when they join the IMF.

• Quotas broadly reflect the size of each member's

economy: the larger a country's economy in terms
of output, and the larger and more variable its
trade, the larger its quota tends to be.
– For example,
the United States, the world's largest economy, has the
largest quota in the IMF. Quotas are reviewed
periodically and can be increased when deemed
necessary by the Board of Governors
 Where does the IMF get its money?
• Countries deposit 25 percent of their quota
subscriptions in Special Drawing Rights or major
currencies, such as U.S. dollars or Japanese yen.

• Most IMF loans are financed out of members'

quotas.

• IMF may borrow from a number of its financially

strongest member countries to supplement the
resources available from its quotas.
 How does the IMF help poor countries?
• The IMF is not a development institution.

• IMF's loans to low-income countries are made

on concessional terms.

• Ease the pain of the adjustments these

countries need to make to bring their spending
into line with their income.

• To promote reforms that foster stronger,

sustainable growth and .
 How does the IMF help poor countries?

• Poverty reduction.

• IMF loan also encourages other lenders and

donors to provide additional financing, by
signaling that a country's policies are
appropriate.

• Also participates in debt relief efforts

for poor countries
 Criticism
• Conditionalities
• Structural Adjustment Programs
• IMF frequently advocates currency
devaluation
• Austerity programmes
• International Monetary Fund gold reserve
being undervalued.
– E.g. : Argentina
 THE
WORLD
BANK
 World Bank Group
• The World Bank Group (WBG) is a family of five
international organizations
– International Bank for Reconstruction and Development (IBRD)
– International Development Association (IDA)
– International Finance Corporation (IFC)
– Multilateral Investment Guarantee Agency (MIGA)
– International Centre for Settlement of Investment Disputes
(ICSID)

• The World Bank has 185 member countries

• Headquarters at Washington D.C

 World Bank Group
• Since inception in 1944, the World Bank has expanded from
a single institution to a closely associated group of five
development institutions.

• The World Bank was formally established on December 27,

1945

• The World Bank expanded from a single institution to an

associated group of coordinated development institutions

• Two years later, the Bank issued its first, and largest, loan:
$250 million to France for post-war reconstruction
 World Bank Group
• It is an international organization owned by member
governments; it makes profits, these profits are used to
support continued efforts in poverty reduction

• Responsible for providing finance and advice to countries for

the purposes of economic development and eliminating
poverty.
• Started as a facilitator of post-war reconstruction and
development
• Present day mandate of worldwide poverty alleviation.

• Whereas heavy infrastructure investment projects once

dominated the Bank's portfolio
Organization structure

Member Governments

President

Board of governors

Executive directors
 Governance structure
• The World Bank Group is owned by its member
governments, -subscribe to its basic share capital -votes
proportional to shareholding
• The President of the World Bank is nominated by the
President of the United States and elected by the Bank's
Board of Governors
• As of November 1, 2006
– United States held 16.4% of total votes,
– Japan 7.9%,
– Germany 4.5%
– France and the United Kingdom each held 4.3%.
 Governance structure
• The institutions of the World Bank Group are all run by a Board
of Governors meeting once a year.

• Each member country appoints a governor

• Daily work is governed by a Board of 24 Executive Directors to

whom the governors have delegated certain powers.

• Executive Directors are appointed by their respective

governments or the constituencies

• The agencies of the World Bank are each governed by their

Articles of Agreement that serve as the legal and institutional
foundation for all of their work
 Objectives
• Investing in people, particularly through basic health and education
• Focusing on social development, inclusion governance, and
institution-building as key elements of poverty reduction.
• Strengthening the ability of the governments to deliver quality
services, efficiently and transparently
• Protecting the environment.
• Supporting and encouraging private business development
• Promoting reforms to create a stable macroeconomic environment,
conducive to
• investment and long-term planning.

“For each of its clients, the Bank works with government agencies,
nongovernmental organizations, the private sector to formulate
assistance strategies.”
4 keys for economic growth
The World Bank sees the four key factors necessary for economic
growth and the creation of a business environment as:

• Capacity Building – Strengthening governments and educating

government officials

• Infrastructure creation – implementation of legal and judicial systems

for the encouragement of business, the protection of individual and
property rights and the honoring of contracts

• Development of Financial Systems – the establishment of strong

systems capable of supporting endeavors from micro credit to the
financing of larger corporate ventures

• Combating corruption – Eradicating corruption to ensure optimal

effect of actions
 Issues handled by World Bank

• Information, Computing • Education

& Telecommunications • Energy
• International Economics • Environment
& Trade • Financial Sector
• Labor & Social • Gender
Protections • Governance
• Agriculture & Rural • Health, Nutrition &
Development Population
• Conflict & Development • Industry
• Development Operations • Information &
& Activities Communication
• Economic Policy Technologies
 Issues handled by World Bank

• Governance • Information,
• Health, Nutrition & Computing &
Population Telecommunications
• Industry • International
• Information & Economics & Trade
Communication • Labor & Social
Technologies Protections
 Bank’s mission
• The Bank’s mission is to aid developing
countries and their inhabitants achieve the
alleviation of poverty
– by developing an environment for investment,
– jobs and sustainable growth, thus
– promoting economical growth and
– through investment in and empowerment of the
poor to enable them to participate in
development
 Financial Assistance
• Lending Instruments
– Depending upon eligibility, a member country will draw on
loans from either IBRD or IDA to support a lending project
– The Bank offers borrowers a number of lending instruments
designed for different kinds of investment and adjustment
projects
– E.g. Sector Investment and Maintenance Loans (SIMs),

• Co financing
– Refers to funding committed by an external official bilateral or
multilateral partner, an export credit agency, or a private source
in the context of a specific Bank-funded project.

• Grants
– Grants are seed money for pilot projects with innovative
approaches and technologies.
– become catalysts for collaboration with partner organizations to
promote shared regional and global objectives.
 Analytic and Advisory Services
• The Bank undertakes a broad range of analytic and advisory activities to
support its development mission

• Country clients benefit from a tailored program of economic and sector

work (ESW) geared to their specific development challenges.

• ESW examines a country's economic prospects, including,

– for example, its banking or its financial sectors, and trade, poverty, and
social safety net issues.

• The Bank's diagnostic work is shared with clients and partners

• The Advisory Services draw on the work of Thematic Groups, which are
organized and coordinated by Bank staff, and focus on specific
development topics.
 Learning & Capacity Building
• The Bank conducts learning and knowledge
sharing programs to enhance the skills and
development of its clients, staff, and partners.
• Includes training courses, policy consultations,
partnership with training and research institutions
worldwide, and the creation and support of
knowledge networks related to international
development.
• The program enhances the professional and
technical skills of participating staff and promotes
cultural exchange, fresh perspectives, and
diversity for the institutions involved.
Data And Charts
 Policies Of World Bank
• Policy Definitions and Documentation

• Policy Formulation and Review

• Compliance Monitoring
• Disclosure of Information

• Fiduciary Policies

• Safeguard Policies
 Evaluation at the World Bank

• Social and environmental concerns

• The Independent Evaluation Group

• Extractive Industries Review

• Impact evaluations
 Allegations of corruption
• In 2005, Paul Wolfowitz, President of the World Bank,
allegedly used his position to influence a pay and
grade increase for his girlfriend Shaha Riza.

• Liz Cheney, while remaining on the bank's payroll.

Her salary was increased from nearly $133,000 to tax-
free compensation of $180,000, and eventually
reached $193,590 after subsequent raises.

• The panel concluded that the salary increase at Mr.

Wolfowitz's direction.
 Criticism
• The World Bank has long been criticized by non-
governmental organizations and academics &
including its former Chief Economist.

• Called free market policies – Bank advocates in

many cases

• In practice are often harmful to economic

development if implemented badly, too quickly in
the wrong sequence, or in very weak, uncompetitive
economies
 Criticism

• Makes a sharp criticism of the assumptions

and structure of the World Bank operation.
• In the past six years, it has committed about
US$2 billion through grants, loans and
credits for programs to fight HIV/AIDS.
• Critics, claim these financial expenditures
to be insufficient. "Race Against Time"
 International Bank for Reconstruction &
Development
• The IBRD is an international organization whose
original mission was to finance the reconstruction of
nations devastated by WW -II. Now, its mission has
expanded to fight poverty
• The IBRD provides loans to governments, and public
enterprises, always with a government guarantee of
repayment
• Issue world Bank bonds on the global capital markets
• Originally the bank focused mainly on large-scale
infrastructure projects, building highways, airports, and
power plants
 International Development Asso.
• Helps the world’s poorest countries.

• IDA is responsible for providing long-term

interest-free loans to the world's 81 poorest
countries, 40 of which are in Africa.

• Education, basic health services, clean water and

sanitation, environmental safeguards, business
climate improvements, infrastructure and
institutional reforms.

• Arrest the spread of HIV/AIDS.

 Multilateral Investment Guarantee
Agency

• It was established to promote foreign direct

investment into developing countries.

• MIGA was founded in 1988 with a capital

base of $1 billion.

• Insuring investors against political risk,

advising governments on attracting
investment, sharing information
 MIGA’S BUSINESS
• Guarantees protect investors against the risks of Transfer
Restriction, Expropriation, War and Civil Disturbance

• MIGA can cover only new investments. These include:

1. New, Greenfield investments;

2. New investment contributions associated with the
expansion, modernization, or financial restructuring of
existing projects; and
3. Acquisitions involving privatization of state enterprises
 International Finance Corp.
• Promotes private sector investment in developing countries
as a way to reduce poverty and improve people's lives.
• Established in 1956
• IFC is the largest multilateral source of loan and equity
financing for private sector projects in the developing
world.
1. Financing private sector projects located in the
developing world.

2.Helping private companies in the developing world

mobilize financing in international financial markets.

3. Providing advice and technical assistance to

businesses and governments
 IFC- MANAGEMENT
• IFC has 179 member countries .
• To join IFC, a country must first be a member of
the International Bank for Reconstruction and
Development (IBRD)
• IFC's corporate powers are vested in its Board of
Governors, to which member countries appoint
representatives
• The Board of Governors delegates many of its
powers to the Board of Directors, and which
represents IFC's member countries.
• The Board of Directors reviews all projects.
 International Centre for Settlement of
Investment Disputes
• ICSID has an Administrative Council, chaired by
the World Bank's President, and a Secretariat.
• investment disputes between member countries
and individual investors.
• In field of the settlement of disputes has consisted
in the Secretary of ICSID accepting to act as the
appointing authority of arbitrators for non-
institutional arbitration proceedings.
• ICSID also carries on advisory and research
activities.
• Published a semi-annual law journal entitled
ICSID.
 BIBLIOGRAPHY

• www.worldbank.org
• www.imf.org
• http://finmin.nic.in
• http://commerce.nic.in
• www.rbi.org.in
Thank
You
Making This World a
Better Place For And For
Me..