WORLD BANK

(Brief History)

1994 - World Bank, together with IMF was created at the 1994 Breton Woods
Conference

- "founding fathers" John Maynard Keynes & Harry Dexter White

- World Bank and IMF are based in Washington D.C.

Traditionally, the president of the World Bank is an American and nominated by the
United Sttes .

There are three (3) separated agencies within theWorld Bank:

1. International Bank for Reconstruction and Development (IBRD) - facilitator of

post-war reconstruction and development to the present day mandate of worldwide
poverty alleviation, together with its affiliates: International Finance Corporation
(IFC), Multilateral Guarantee Agency (MIGA) & International Centre for the
Settlement of Investments Disputes (ICSID).

2. International Development Disputes (IDA)- provides soft loans to developing

countries or loans without interest charges.

3. International Finance Corporation (IFC) - provides equity investments as well as

loans.

- encourages the development of

private sector and

manages private co-financing of

specific projects.

France was the first country to receive a World Bank loan.

John McCloy, the bank's president at that time, chose France over Poland & Chile.

But the loan came with strict conditions.

1947 - When the Marshall Plan went into effect, many European countries began
receiving aid

from other sources. Because of the competiton, the World Bank shifted its
focus to non

European countries.
*Advantage 1

1968 - The loans were for the construction of income-producing infrastructure such
as seaports, highway systems and powerplants that would generate enough income
to enable a borrower country to repay the loan.

Disadvantage 1
Robert McNamara, who was the bank's president at this time faced the
consequence of the period of poverty alleviation lending was the rapid rise of the
3rd world debt.
1976 to 1980 - Developing world debt rose at an average annual rate of 20%
1980 to 1989 - Anne Krueger, as the Chief Economist of World Bank, who is known
for her criticism of development funding and for describing third world countries as
"rent-seeking states"
World Bank made structural adjustment policies designed to modernize the
economies of developing nations.
UNICEF reported in the late 1980's that the structural adjustment policies had been
responsible for "reduced health, nutritional & educational levels for tens of billions
of children in Asia, Latin America & Africa"
1989 to present -In response to harsh criticism from many groups, the bank began
including environmental groups & NGOs in its loans to mitigate the past effects of
its development policies that had prompted the criticism.
Advantage 2
The bank has put various additional policies into effect to preserve the
environmental while promoting development.

Traditionally, the understanding between U.S. and U.K, the president of World Bank
has always been selected nominee by the U.S. In 2012, for the first time, two non-
U.S. citizens were nominated.
On 23rd of March 2012, President Obama announced that the U.S. would nominate
Jim Yong Kim as the next president of the World Bank.
27th April 2012 - Jim Yong Kim was elected as the president of World Bank.

International Monetary Fund (IMF)

- International Financial Institution
- not a development bank
- lends money to countries that are having short-term balance-of-payments
problems
- these are often a result of structural difficulties and slow growth of exports.
- the IMF makes conditional loans requiring debtor countries to implement
macroeconomics
policies or structural reforms that will alleviate balance-of-payments problems.
Role of IMF:
John Maynard Keynes view: he imagined that the IMF would be a cooperative fund
upon which msttrs states could draw to maintain economic activity and employment
through periodic crises.

American Delegate Harry Dexter White's view: he foresaw an IMF that functioned
more like a bank, making sure that borrowing states could repay their debts on
time.
1945 - Dec. 27, IMF formally came into existence with 29 countries ratified its
Articles of Agreement.
1946 - it had grown to 39 members.
1947 - May 8, France was the first country to borrow from it.
Advantage 1:
The IMF's influence in the global economy steadily increased as it accumulated
more members. The increase reflected in particular the attainment of political
independence by many African countries.
Purposes:
1. Promote International monetary cooperation.
2. Facilitate international trade.
3. Foster sustainable economic growth.
4. Make resources available to members experiencing balance-of-payments
difficulties.
Goal: Reconstructing the international payment system.
Advantage 2: IMF works to improve the economies of its member countries.
Advantage 3: IMF was also intended to help mend the pieces of the International
economy after the Great Depression and World War II.
Advantage 4: Provides capital investments for economic growth and projects such
as infrastructures.