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International Bank for Reconstruction and Development

1. Establishment

The IBRD was established in 1944. The first half of the 20th Century was of uncertainties at levels in social, economic and political fields. Developed countries in Europe were eager to increase the size of their kingdom. The world economy was badly affected because of this approach. It resulted in World Depression in 1929.

Immediately after Second World Was it was essential to help the countries to come out of social, political and economic difficulties. In order to remove these difficulties the IBRD was established.

The important tasks before the IBRD were:-

1. Reconstruction of economies of countries involved in Second World War.

2. Economic Development of countries. The government of India also faces the same problems of reconstruction and development of Indian economy immediately after independence.

2. Objectives

Objectives of IBRD are:-

1. To achieve economic development of countries.

2. To undertake reconstruction of countries.

3. To remove economic disparity among member countries.

4. To encourage international investments.

Countries involved in Second World War were affected very badly in political, economic and social fields. Explosion of Atom Bomb on Japan resulted in several disturbances in social, political and economic fields. It was essential to improve the situation urgently. Several plans were formulated; many of theses plans are implemented by the IBRB.

Removal of the economic disparity among member was also very important issue. The IBRD formulated and implemented several programs for removing economic disparity. It was one of the efforts of improving standard of living people in different countries.

The IBRD helps in movement of capital among various countries. This helps in increasing production and employment in various sectors. It results in improvement of standard of living of people all over the world.

3. Function

Important function of IBRD of are as follows:-

1. To assist in reconstruction and development of the territories of its member governments by facilitating investment of capital for productive purposes.

2. To promote foreign private investment by giving guarantees of or through participation in loans and other investments of capital for productive purposes.

3. Where private capital is not available on reasonable terms, to make loans for productive purposes out of its own resources or out of the funds borrowed by it.

4. To  promote long range growth of international trade and the maintenance of equilibrium in the balance of payments and development of the productive resources of member.

5. The IMF and IBRD are complementary to each other. Both are the International Financial Institutions. Both try to increase national income and to improve the standard of the living of the people all over the world. The IMF provides short term fund and the IBRD provides long term funds. The IBRD supports in achieving the objectives of increasing volume of international trade.

4. Management

The important components of the management of the IBRD:-

1. Board of Governors

2. Executive Directors

3. Chairman

The board of governors is the highest authority in the management. It consists of governors and alternate governors nominated by all member countries for the period of 5 years. Usually a governor is a  country’s  finance minister or the governor of a central bank or an official of comparable rank. The board meets once in a year.

The Annual General Meeting of the Board of Governors is an important occasion of formal exchange of views at high level on major international financial and monetary problems. The Board also takes decision about giving new membership, increasing capital,  identifying various means of distribution of funds etc. The board of governors depends on executive director for all technical aspects.

 5. Lending Operations

The IBRD provides loans after evaluating the difficulties and nee of member countries. It also evaluates the projects before granting loans. Though the IBRD undertakes risks it ensures that the project for which the finance is made available is sound and viable.

It has right to observe and supervise the project to make sure that the loan is not misused. It gives medium and loan term loan. The period of loans depends on the life of the projects. It charges same interest rate to all the borrowers.

The Bank makes loans to members in any one or more of the following ways:-

1. By granting or participating in direct loans out of its own funds.

2. By granting loans out of funds raised in the market of a member or otherwise borrowed by the Bank.

3. By guaranteeing in whole or part loans made by private investors through the investment channels.

The bank has made loans for specific development projects in the fields of agriculture, power, transport, industry, population planning, water supply, project preparation, urbanization and education.

6. Technical Assistance and Other Advisory Help

Besides providing finance to members, the IBRD provides technical and advice to member countries. The IBRD has undertaken various survey missions. These survey missions make detailed studies of national resource of member countries and make recommendations to serve as the basis of long term development programmes.

The Economic Development Institute (EDI) was established by the IBRD to provide training for senior official of the developing member countries.

7. Deficiencies

The activities of the IBRD are criticized on  grounds.

Followings are the important points of criticism:-

1. rate of interest of IBRD is very high.

2. The IBRD is failure in providing all required help for the economic development of various countries.

 

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