Bretton Woods Institutions

IMF and World Bank: Their Functioning and Reforms

1. Bretton Woods Institutions

2. Intl. Monetary Fund (IMF)
•Founded 27
th
Dec, 1945 (29 Founding Countries)
•Current Membership – 189
•H.Q: Washington D.C
•Aims: To Foster Global Monetary Co-Operation, Secure
Financial Stability, Facilitate Intl. Trade, Promote High
Employment & Sustainable Economic Growth & Reduce
Poverty
•Organs: 1. Board of Governors (2 Governors from each
country)
2. Executive Board (24 Executive Directors)
3. Managing Director (Chairman of Executive
Board, European, currently Christine Lagarde,
France)
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3. IMF: Functions
•Primary:
oFixed Exchange Rate (floating Exchange Rates since 1971)
oShort term capital to aid BoP
•Other
oPolicy, advice & financing to members
oMacro economic stability & poverty alleviation in developing countries
oLoans
–Zero Interest Rates: Extended, Standby, Rapid (Credit Facility)
–Non-zero Interest Rates: Standby Arrangement, Flexible Credit Line, Precautionary
& Liquidity Line, Extended Fund Facility
–Emergency: Rapid Financing Instrument
oSurveillance of Global Economy
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4. IMF: Features
1. Special Drawing Right (XDR):
•Supplementary Forex assets
•Created in 1969; shortage of Gold & US $
•Value depends on Basket of Key Intl. Currencies
–US $=41.73%
–Euro=30.93%
–Chinese Yuan=10.92% w.e.f Oct. 2016
–Yen=8.33%
–British Pound=8.09%
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5. IMF: Features
2. Quota System
Quota Decided by:
Average GDP (50%)
Openness (30%)
Economic Variability (15%)
Intl. Reserves (5%)
Roles of Quota
Determination of Subscription (25% in SDRs, $, Yen,
etc.; 75% in own currency)
Voting Power (Basic + 1 Vote for every 100,000 SDR)
Access to Financing
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6. IMF Reforms
•Started in 2010
•Partnership with other Specialist Agencies – UNICEF,
FAO, UNDP
•Voting Reforms (85% Voting Power is required);
India’s voting power increased from 2.3% to 2.6% in
Jan.2016 (Top 10); China’s to 6% from 3.8% (3
rd
, after
US & Japan)
•US share down to 16.5% from 16.7%
•Elected Executive Directors as against Appointed Exec.
Dirs.
•‘Global Safety Net’ – tackle liquidity crises
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7. World Bank
•Estd. : July 1944
•H.Q: Washington D.C
•Members: 189 (IBRD); 173 (IDA)
•President: Jim Yong Kim (US)
•Objectives: Reduction of Poverty, Foreign Investment & Intl.
Trade
•Component of ‘World Bank Group’:
1.Intl. Bank for Recons. & Dev. (IBRD)
2.Intl. Dev. Asso. (IDA)
3.Intl. Finance Corp. (IFC)
4.Multilateral Investment Guarantee Agency (MIGA)
5.Intl. Centre for Settlement of Investment Disputes (ICSID)
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8. IBRD
•Objectives: Development assistance & Poverty reduction
•H.Q: Washington D.C
•Loans to middle income developing countries; only to Sovereign Govts. Or
Projects backed by them (No Pvt. Funding)
•Long term loans; with maturities upto 30 Years
•Catastrophe Deferred Drawdown Option- financing after natural disaster or
during ‘Emergency’
•Sectors funded:
•Transportation, Infra., Education, Environmental Protection, Energy,
Potable Water, Sanitation
•Governed by World Bank:
 Board of Governors (1 from each country)
Board of Directors (25)
President
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9. •IDA
•Concessional Loans to Poorest Countries: Lowest GNI, Troubled Creditworthiness
& Lowest PCI
•Single largest provider of funds to economic& human dev. Projects in World’s
Poorest Nations
•IFC
•‘Pvt. Sector Development & Poverty Reduction’
•Investment adisory, Asset Mgmt. services to Pvt. Sector in developing countries
•MIGA
•‘Political Risk Insurance, FDI’
•Insurance for risks: Currency Inconvertibility, Expropriation (War, Terrorism),
Breaches of Contract
•ICSID
•Intl. Arbitration Inst.
•153 Members signed the Treaty to enforce & uphold ‘Arbitral Awards’
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10. Thank You !!!