The International Monetary Fund

and the World Bank

presented by Vimarsh Padha ,Abhishek and Tahir FazalShri Mata Vaishno Devi University kakryal,Katra J&K Instructor: Dr. Ashutosh Vashishtha

NOV.28 , 2014

“an organizational perspective”

Bretton Woods

• In response to post-war reconstruction and to discuss the future of international economic cooperation

• In July of 1944, representatives from 44 countries met at Bretton Woods, New Hampshire.

• Creation of two institutions, 1.International Monetary Fund (IMF) 2.International Bank for Reconstruction and Development; a.k.a. the “World Bank.”

The IMF Organizational Background

History• IMF was founded by John

Maynard Keynes and 44 charter nations during the United Nations Monetary and Financial Conference in July 1944 as the Bretton Woods Institution.

• Headquartered: Bretton Woods, New Hampshire

• Recognized in December 27, 1947 as the International Monetary Fund with 29 of the 44 members remaining.

March 31,2014• Headquartered:

Washington, DC• Member nations: 188• Employees: 2,830• Funds Available: $209.5

billion• Loans Outstanding: $16.1

billion• 64 Countries owe the IMF

(total)• 56 Countries are low-

income owed $6.5 billion• 8 Countries (are not low-

income) owed $9.6 billion

Purpose of the IMFIMF Agenda• Facilitate global monetary

exchange• Promote exchange stability• Organize exchange

arrangements• Foster economic growth• Enhance higher

employment • Provide temporary financial

assistance• Provide training & advice

for balance of payment issues

3 Primary Tasks of IMF• Surveillance

• Monitoring financial & economic activities to develop policies, strategies & recommendations for proactive crisis prevention.

• Lending• Funding for short-term, low-interest loans for

macroeconomic issues related to political & economic stability.

• Technical Assistance• Training & consultation for loan applications, policy

reforms and the interpretation of data.

FacilitiesFacilities are loan programs set-up by the IMF to address specific needs of

member nations. It should also be noted that IMF funding is disbursed in phases so that adjustments may be made to mitigate risk.

Facility Purpose Type Duration Repay Surcharge

Stand By Arrangements(Most lucrative loan.)

BoP Short-term

1 – 2 yrs 2 - 4 yrs Avg 4%

Extended Fund Facility(Recommended Reforms)

BoP Long-Term

3 yrs 5 – 7 yrs

Supplemental Reserve Facility(Developing Nations)

Economic Recovery ( masssive capital outflows)

Short-term Large-scale financing

1 yr 1 – 1.5 yrs

Avg 4%

Compensatory Financing Facility(Global Commodity Price Issues)

Drop in Export Earnings(lik-e during disasters)

Short-term

1 – 2 yrs 2 - 4 yrs

Emergency Assistance Loans(Disasters & Post-War)(Subsidies may be available)

Disaster Recovery

Long-term(Base Rate)

3 - 5 yrs

SDRs (claim to currency held by IMF……)

• The IMF issues an international reserve asset known as

Special Drawing Rights.

• Can supplement the official reserves of member

countries.

• Total allocations amount to about SDR 204billion (some

$309billion). IMF members can voluntarily exchange

SDRs for currencies among themselves.

• 1SDR=1.5$

Organization

Funding Process Overview

1. Member nation identifies a need from surveillance & evaluation data.

2. Implementation of policy changes and recommendations for compliance.

3. File Letter of Intent (doc. outlining agreement between two or more parties before agreement is finalised).

4. Monitor the use of phased funding and economic conditions, watching expenditures, growth and lowering of BoP.

5. Evaluation of previous disbursements, economic trends, growth and impact to correct problem.

6. Reassess and resolve unforeseen results due to policy changes, economic conditions and external factors.

The Future of the IMF

• Surveillance has been broadened to include capital markets and investments.

• Transparency Standards & Codes have been enhanced in banking supervision, accounting and many aspects of the global financial infrastructure to thwart terrorist activities through money laundering and illicit use of the international financial system.

• Member nations will face challenges in trying to adhere to policies and apply and ratify them in their own countries.

• Membership will expand with nations rising in status and assuming more financial responsibility.

The world Bank

WORLD BANK MISSION

MEMBERSHIPGenerally every member country of the IMF automatically becomes the member of World Bank. Similarly, any country quitting IMF is automatically expelled from the World Bank’s membership.

But, under a certain provision a country leaving the membership of IMF can continue its membership with World Bank if 75% members of the Bank give their vote in its favour.

Any member country can quit the Bank simply by written notice to the Bank, but such country has to repay the granted loans on terms and conditions decided at the time of sanctioning the loan.

Any country working against the guidelines of Bank can be debarred from membership by the Board of Governors.

World Bank has two types of members: Founder members and General members.

World Bank has 30 founder members. India is also one of the founding members.

At present total membership is 188

VOTING RIGHT

Voting right of members is determined on the basis of their share in the total capital of the Bank.

Each member has 250 votes plus one additional vote for each 1,00,000 shares of the capital stock held.

KEY ISSUES

• INCREASED TRNSPARENCY

• EXPANDING SOCIAL ISSUES IN THE FIGHT OF

POVERTY

• IMPROVEMENT IN COUNTRIES BY INCREASING

EXPORTS

• IMPROVING EFFICIENCIES IN DIVERSE

INDUSTRIES

5 PRIORITIES OF WORLD BANK

• World bank provides the largest external funds for education.• It is a big support in reducing poverty.• It provides fund for biodiversity projects.• It helps to bring clean water, electricity, and transport to poor

people.• It helps in controlling emerging conflicts.

OPERATIONS

• Fund generation• Grants• Analytic & Advisory Services• Capacity building• Granting reconstruction & development loans• Providing loans to governments & private concerns • Promoting foreign investment • Providing technical, economic and monetary advice• Encouraging industrial development

AREA OF OPERATION• Agriculture and Rural Development• Economic policy• Education• Energy• Environment• Financial sector• Health, nutrition and population industry• Information, computing and telecommunication• Law and justice• Private sector• Social protection• Trade• Water resources• Water supply and sanitation

SUPPORT TO INDIA

• India is home to over one-quarter of the world’s poor, and the World Bank Group is focused on sharing best practices as well as financing for development as a part of its mission to help reduce global poverty.

Difference Between IMF & World Bank

• The International Monetary Fund• Oversees the international monetary system• Promotes exchange stability and orderly exchange relations among its

member countries• Assists all members--both industrial and developing countries--that

find themselves in temporary balance of payments difficulties by providing short- to medium-term credits

• Draws its financial resources principally from the quota subscriptions of its member countries

• Has at its disposal fully paid-in quotas now totaling SDR 145 billion (about $215 billion)

• Has a staff of 2,300 drawn from 188 member countries

Cont.….

• World Bank

• Seeks to promote the economic development of the world's poorer countries

• Assists developing countries through long-term financing of development projects

and programs

• Provides to the poorest developing countries whose per capita GNP is less than $865

a year special financial assistance through the international development association

(IDA)

• Acquires most of its financial resources by borrowing on the international bond

market

• Has an authorized capital of $184 billion, of which members pay in about 10 percent

• Has a staff of 7,000 drawn from 188 member countries

THE END

QUESTIONS?

Thanks!!!!