INTERNATIONAL MONETARY FUND
IMF was supposed to oversee and monitor the economic performance of 188 member countries and warn them of any developing economic crisis.If any crisis does develop and a country approaches IMF for help, the organisation chalks out a recovery plan, which includes imposition of conditions for keeping the economies on a particular path.
The organization’s objectives stated in the Articles of Agreement are:
- promote international economic cooperation,
- international trade,
- exchange-rate stability including by making financial resources available to member countries to meet balance-of-payments needs.
When did India take the IMF bailout package?
The Indian government, faced with a balance of payments crisis in 1991, took a loan and agreed to the reforms process. The liberalisation in the economy was partly a concomitant of that need.
The IMF report is part of its mandate under Article IV of its constitution. The fund holds consultations with finance ministries and central banks of each member countries annually for its spring meeting in Washington.
The decision of the IMF to intervene in any country is based on the governing board’s decision. The voting rights are determined historically by the economic strength of the countries. India, because of its rapidly growing economic clout, has demanded a re-drawing of the voting rights, but that did not happen at the recent Singapore meeting.Instead, the fund gave ad hoc voting right increase to China, South Korea, Turkey and Mexico. It has promised a long-term revision in another two years.
WORLD BANK GROUP
World Bank group provides loans to developing countries for capital programs. The World Bank is a component of the World Bank Group, and a member of the United Nations Development Group.
The World Bank’s official goal is the reduction of poverty. According to its Articles of Agreement, all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment.
The World Bank should not be confused with the United Nations World Bank Group, a member of the United Nations Economic and Social Council and a family of five international organizations that make leveraged loans to poor countries:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
International Bank for Reconstruction and Development
IBRD is an international financial institution which offers loans to middle-income developing countries. The IBRD is the first of five member institutions which compose the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1944 with the mission of financing the reconstruction of European nations devastated by World War II.Following the reconstruction of Europe, the Bank’s mandate expanded to advancing worldwide economic development and eradicating poverty. The IBRD provides commercial-grade or concessional financingto sovereign states to fund projects that seek to improve transportation and infrastructure, education, domestic policy, environmental consciousness, energy investments, healthcare, access to food and potable water, and access to improved sanitation.
The International Development Association (IDA)
The IDA is an international financial institution which offers concessional loans and grants to the world’s poorest developing countries.The IDA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1960 to complement the existing International Bank for Reconstruction and Development by lending to developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from the lowest per capita income.
International Finance Corporation (IFC)
The IFC was established in 1956 to support the growth of the private sector in the developing world. The IFC’s stated mission is “to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.”IFC provides loans and equity financing,advice, and technical services to the private sector. The IFC also plays a catalytic role, by mobilizing additional capital through loan syndication and by lessening the political risk for investors, enabling their participation in a given project.
The International Centre for Settlement of Investment Disputes (ICSID)
The ICSID is considered to be the leading international arbitration institution devoted to resolving disputes between States and foreign investors, also known as BIT arbitrations.Based in Washington, D.C. (U.S.A.) and operating under the World Bank, ICSID was established in 1965 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (known as the ICSID Convention or Washington Convention).
The Multilateral Investment Guarantee Agency (MIGA)
The MIGA is an international financial institution which offers political risk insurance and credit enhancement guarantees. Such guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries.MIGA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1988 as an investment insurance facility to encourage confident investment in developing countries.
World Bank Group Strategy to Help India Achieve Its Vision
The World Bank Group’s new Country Partnership Strategy will guide its support to India from 2013 through 2017. The strategy aims to help the country lay the foundations for achieving its longer-term vision of “faster, more inclusive growth.”
A key feature of the new strategy is the significant shift in support toward low-income and special category states, where many of India’s poor and disadvantaged live.The new strategy proposes a lending program of $3 billion to $5 billion each year over the next five years. Sixty percent of the financing will go to state government-backed projects. Half of this, or 30% of total lending, will go to low-income or special category states, up from 18% of lending under the previous strategy.