Bhupendra Kr.

Gautam
16/IMB/009

What Is the World Bank ?

Today, the World Bank functions as an international organization that fights

poverty by offering developmental assistance to middle-income and low-income
countries. By giving loans and offering advice and training in both the private and
public sectors, the World Bank aims to eliminate poverty by helping people help
themselves. Under the World Bank Group (WBG), there are complementary
institutions that aid in its goals to provide assistance.

The World Bank Group (WBG) was established in 1944 to rebuild post-World
War II Europe under the International Bank for Reconstruction and Development
(IBRD). It is one of a variety of organizations seeking to shape the world economy.

Functions of the World Bank:

Presently the World Bank is playing the main role of providing loans for
development works to member countries, especially to under developed countries.
The bank provides loans for various development projects of 5 to 20 years
duration.

i. Bank can grant loans to members countries up to 20 % of its share in paid up

capital.

ii. Bank also provides loans to private investors belonging to the members on its
own guarantee, but private investors need to take permission of its native country.
Banks charges 1% to 2% as service charge.

iii. The quantum of loan service, interest rate, terms and conditions are decided by
the World Bank itself.

iv.  Generally bank grant loans for a particular project duly submitted to the bank
by the member country.

v. The debtor nation has to repay either in reserve currencies or in the currencies in
which the loan was sanctioned.
World Bank Lending to India:
India has been borrowing from the World Bank for various projects in the area of
poverty reduction, infrastructure and rural development etc. IDA funds are one of
the most concessional external loans for government of India and are largely used
in the social sector projects that contribute to the achievement of the millennium
development goals. The first World Bank loan to India was in 1948 of US$ 86 bn.
The debt disbursed and outstanding as on March 2011 for IBRD is US$ 11.28 and
for IDA it is US$ 27 bn.

What is International Monetary Fund (IMF) ?

The International Monetary Fund (IMF) is an organization of 189 countries,
working to foster global monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and sustainable economic growth,
and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to the 189 countries that
make up its near-global membership.

The IMF's primary purpose is to ensure the stability of the international monetary

system—the system of exchange rates and international payments that enables
countries (and their citizens) to transact with each other. The Fund's mandate was
updated in 2012 to include all macroeconomic and financial sector issues that bear
on global stability.

Role of IMF
The International Monetary Fund is a global organisation founded in 1944 in the
post-war economic settlement which included the Bretton-Woods system of
managed exchange rates. J.M.Keynes and Harry Dexter White both played an
important role in its development.

Its primary aim is to help stabilise exchange rates and provide loans to countries in
need. Nearly all members of the United Nations are members of the IMF with a
few exceptions such as Cuba, Lichtenstein and Andorra.
The IMF is independent of the World Bank although both are United Nations
agencies and both are aiming to increase living standards. The World Bank
concentrates on long-term loans to developing countries.

Functions of IMF-

1. International monetary cooperation.

2. Promote exchange rate stability.
3. To help deal with balance of payments adjustment
4. Help deal with economic crisis by providing international coordination –
loans, plus advice.

What the IMF does in practice?

1. Economic surveillance and monitoring. IMF produces reports on member

countries economies and suggests areas of weakness / possible danger (e.g.
unbalanced economies with large current account deficit/excess debt levels.. The
idea is to work on crisis prevention by highlighting areas of economic imbalance.
A list of IMF reports on member countries are available at IMF Countries

2. Loans to countries with a financial crisis. The IMF has $300 billion of loanable
funds. This comes from member countries who deposit a certain amount on
joining. In times of financial/economic crisis, the IMF may be willing to make
available loans as part of a financial readjustment

How is the IMF Financed?

The IMF is financed by member countries who contribute funds on joining. They
can also increase this throughout their membership. The IMF can also ask its
member countries for more money. IMF financial resources have risen from about
$50 billion in 1950 to nearly $300 billion last year, sourced from contributions
from its 183 members.This initial amount depends on the size of the countries
economy. E.g. the US deposited the largest amount with the IMF. The US
currently has 16% of voting rights at the IMF, a reflection of its quotas deposited
with IMF. The UK has 4% of IMF Voting rights. Loans at a discounted rate are
also available to developing countries to ‘deal with poverty reduction.’
What is World Trade Organisation (WTO) ?
World Trade Organisation (WTO) is a permanent international organisation
dealing with global rules of trade between nations. It came into existence in 1995.
It is the successor of General Agreement on Tariffs and Trade (GATT) established
aftermath of Second World War. The last round 1986-94 Uruguay round led to
creation of WTO. At the heart of WTO is multilateral trading system. It consists of
WTO agreements negotiated and signed by majority world’s trading nations and
their parliaments. One of important functions of WTO is smooth trade flow
between nations.

Functions
The WTO’s overriding objective is to help trade flow smoothly, freely and
predictably. It does this by:

 administering trade agreements

 acting as a forum for trade negotiations
 settling trade disputes
 reviewing national trade policies
 building the trade capacity of developing economies
 cooperating with other international organizations

Structure
The WTO has 164 members, accounting for 98% of world trade. A total of 22
countries are negotiating membership.
Decisions are made by the entire membership. This is typically by consensus. A
majority vote is also possible but it has never been used in the WTO, and was
extremely rare under the WTO’s predecessor, the GATT. The WTO’s agreements
have been ratified in all members’ parliaments.
The WTO’s top level decision- making body is the Ministerial Conference, which
meets usually every two years.
Below this is the General Council (normally ambassadors and heads of delegation
based in Geneva but sometimes officials sent from members’ capitals) which meets
several times a year in the Geneva headquarters. The General Council also meets
as the Trade Policy Review Body and the Dispute Settlement Body.
Trading principles of WTO-
Trade without discrimination:

 Most Favoured Nation

If a member country of WTO grants special favour in trade to some favoured

country, then all other WTO countries will be given the same favour. Thus all
countries become the most favoured nation in all other countries, thereby making
every country equal.

 National Treatment

It means treating foreign goods and services at par with local equally by all
members of WTO.

How WTO is different from GATT ?

 GATT was agreement between contracting parties and was not an

international organisation dealing in global trade
 GATT deals with trade in good only while WTO covers trading of services
as well as Intellectual Property (IP)