International Bank For Reconstruction And Development (IBRD) - World Bank

- IBRD and its associate institutions forms a group known as the World Bank.
- The Second World War damaged economies of the most of the countries particularly of those who were directly involved in the war.
- The global war had completely dislocated the multilateral trade and dislocated multilateral trade and had caused massive destruction of life and property.
- In 1945, it was realized to concentrate on reconstructing these war affected economies in a planned way.
- IBRD was established in December 1945 with the IMF on the basis of recommendation of Bretton Wood Conference.
- This is the reason why IMF and IBRD are called 'Bretton Wood Twins'.
- IBRD started functioning in June 1946.
- World Bank and IMF are complementary institutions.
- India is a member of four constituents of the World Bank Group i.e. IBRD, IDA, IFC, and MIGA (Multilateral Investment Guarantee Agency) but not of its fifth institute ICSID (International Centre for the Settlement of Investment Disputes).
Objective of world Bank
According to the Clause I of the agreement made at the time of establishment of World Bank, it was assigned the following objectives:
1. To provide long-run capital to member countries for economic reconstruction and development. World Bank provides capital mainly for following purposes - .
(i) To rehabilitate war ruined economies (this objective is fully achieved)
(ii) To finance productive efforts according to peace time requirement.
(iii) To develop resources and production facilities in underdeveloped countries.
2. To induce long-run capital investment for assuring BOP equilibrium and balanced development of international trade. (This objective was adopted to increase the productivity of member countries and to improve economic condition and standard of living among them).
3. To promote capital investment in member countries in following ways:
(i) To provide guarantee on private loans and capital investment.
(ii) If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities in considered conditions.
4. To provide guarantee for loans granted to small and large units and other projects of member countries.
5. To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace 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 World Bank provides long-term loans for various development projects of 5 to 20 years duration. The loaning system of the bank can be explained with the help of following points:
1. Bank can grant loans to a member country upto 20% of its share in paid up capital
2. Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those countries where the amount will be collected. For such loans the consent of that country is also required whose currency is given in loans. For granting such guarantee, the Bank charges 1% to 2% as service charge.
3. The quantum of loans, interest rate and term and conditions are determined by the Bank itself.
4. Generally, Bank grants loan for a particular project duly submitted by the member country.
5. The debtor nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned.
Besides, granting loans for reconstruction and development, World Bank also provides various technical services to the member countries. For this purpose, the Bank has established 'The Economic Development Institute' and a staff College in Washington.