World bank
INTRODUCTION
The World bank group consists of 3 international institutions - The World Bank itself ( formerly IBRD) and its 2 affiliates - IDA and IFC ( International Development Association and International Finance Corporation). All of them are devoted to the same general objective- The provision of financial and technical assistance for economic development.
The World Bank was established in 1945 under the Bretton Woods Agreement of 1944 to assist in bringing about a smooth transition from a war-time to peace-time economy. It is a sister institution of the IMF.
MEMBERSHIP
The members of the IMF are the members of the World Bank. It had 182 members in 2000. Currently it has 189 members. If a country resigns its membership, it is required to pay back all loans with interest on due dates. If the Bank incurs a financial loss in the years in which a member resigns, it is required to pay its share of the loss on demand.
OBJECTIVES
The World bank group consists of 3 international institutions - The World Bank itself ( formerly IBRD) and its 2 affiliates - IDA and IFC ( International Development Association and International Finance Corporation). All of them are devoted to the same general objective- The provision of financial and technical assistance for economic development.
The World Bank was established in 1945 under the Bretton Woods Agreement of 1944 to assist in bringing about a smooth transition from a war-time to peace-time economy. It is a sister institution of the IMF.
MEMBERSHIP
The members of the IMF are the members of the World Bank. It had 182 members in 2000. Currently it has 189 members. If a country resigns its membership, it is required to pay back all loans with interest on due dates. If the Bank incurs a financial loss in the years in which a member resigns, it is required to pay its share of the loss on demand.
OBJECTIVES
The following objectives are assigned by the World Bank:
1. To provide long-run capital to member countries for economic reconstruction and development.
2. To induce long-run capital investment for assuring Balance of Payments (BoP) equilibrium and balanced development of international trade.
3. To provide guarantee for loans granted to small and large units and other projects of member countries.
4. To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace economy.
5. To promote capital investment in member countries by the following ways;
(a) To provide guarantee on private loans or capital investment.
(b) If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities on considerate conditions.
FUNCTIONS:
World Bank is playing main role of providing loans for development works to member countries, especially to underdeveloped countries. The World Bank provides long-term loans for various development projects of 5 to 20 years duration.
The main functions can be explained with the help of the following points:
1. World Bank 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.
2. Bank can grant loans to a member country up to 20% of its share in the paid-up capital.
3. The quantities of loans, interest rate and terms and conditions are determined by the Bank itself.
4. Generally, Bank grants loans for a particular project duly submitted to the Bank 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.
6. 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 counties where this amount will be collected.
CRITICAL APPRAISAL OF WORLD BANK
The World Bank has been quite successful in achieving its principal objective of reconstruction and development. Still it is not free from some criticisms. They are:-
1) HIGH INTEREST RATE:- It is argued that the bank charges a very high rate of interest on loans. Recently the Bank has adopted a new procedure related to the cost of borrowing for calculating the interest rate. So they are no longer fixed arbitrarily at a high level. Still the interest rate continues to be high. It is 4.4% for India.
2) LESS AID TO DEVELOPING COUNTRIES:- The Bank has also been criticised for its failure to meet the financial needs of the developing countries fully. Its loans have just touched the fringes of the total capital requirements for their social and economic uplift.
3) FAULTY LENDING PROCEDURES:- The Bank's lending procedures is faulty because it lays emphasis on the repaying capacity of the borrowing country before granting any loan. Such a condition is very harsh and discriminatory for developing countries.
4) DISCRIMINATORY:- The Bank has been criticised for being discriminatory in its purpose-wise and region-wise assistance to its members. It mainly focuses on developed countries.
5) HARD CONDITIONALITIES:- The Bank sets up very hard and fast conditions for providing loans. The borrowing country has to follow an action programme set out in a letter of development policies.
INDIA AND WORLD BANK
India is one of the founder members of the Bank and held a permanent seat on its Board of Executive Directors for a number of years. India's share in the Bank's subscribed capital is $5.4 billion which is equal to the share of China and Russia. India's voting power in the Bank is 2.8%. The Bank has been assisting India in its planned economic development by grantig loans, conducting field surveys, rendering expert advice, sending missions, study teams and training Indian personnel. There is also a CHIEF OF MISSION of the Bank at New Delhi who represents it for monitoring and consultations on its aided projects in India.
The World Bank has been assisting India in such projects as:-
Development of parts, oil exploration and gas power projects, aircrafts, fertilisers, railway modernisation etc.
India has been receiving valuable assistance from IDA and IFC, which are the affiliates of World Bank. The Bank has also helped India in solving the river water disputes with Pakistan. It has already approved new loans worth over $1 billion in last years.
CONCLUSION
The Bank's overall performance must be judged not just on its lending but on its success in providing advice and technical assistance. It lays greater emphasis on developing human resources. It also provides assistance to private sector. In the fiscal year 2000, the World Bank disbursements totalled to $18.5 billion.
CRITICAL APPRAISAL OF WORLD BANK
The World Bank has been quite successful in achieving its principal objective of reconstruction and development. Still it is not free from some criticisms. They are:-
1) HIGH INTEREST RATE:- It is argued that the bank charges a very high rate of interest on loans. Recently the Bank has adopted a new procedure related to the cost of borrowing for calculating the interest rate. So they are no longer fixed arbitrarily at a high level. Still the interest rate continues to be high. It is 4.4% for India.
2) LESS AID TO DEVELOPING COUNTRIES:- The Bank has also been criticised for its failure to meet the financial needs of the developing countries fully. Its loans have just touched the fringes of the total capital requirements for their social and economic uplift.
3) FAULTY LENDING PROCEDURES:- The Bank's lending procedures is faulty because it lays emphasis on the repaying capacity of the borrowing country before granting any loan. Such a condition is very harsh and discriminatory for developing countries.
4) DISCRIMINATORY:- The Bank has been criticised for being discriminatory in its purpose-wise and region-wise assistance to its members. It mainly focuses on developed countries.
5) HARD CONDITIONALITIES:- The Bank sets up very hard and fast conditions for providing loans. The borrowing country has to follow an action programme set out in a letter of development policies.
INDIA AND WORLD BANK
India is one of the founder members of the Bank and held a permanent seat on its Board of Executive Directors for a number of years. India's share in the Bank's subscribed capital is $5.4 billion which is equal to the share of China and Russia. India's voting power in the Bank is 2.8%. The Bank has been assisting India in its planned economic development by grantig loans, conducting field surveys, rendering expert advice, sending missions, study teams and training Indian personnel. There is also a CHIEF OF MISSION of the Bank at New Delhi who represents it for monitoring and consultations on its aided projects in India.
The World Bank has been assisting India in such projects as:-
Development of parts, oil exploration and gas power projects, aircrafts, fertilisers, railway modernisation etc.
India has been receiving valuable assistance from IDA and IFC, which are the affiliates of World Bank. The Bank has also helped India in solving the river water disputes with Pakistan. It has already approved new loans worth over $1 billion in last years.
CONCLUSION
The Bank's overall performance must be judged not just on its lending but on its success in providing advice and technical assistance. It lays greater emphasis on developing human resources. It also provides assistance to private sector. In the fiscal year 2000, the World Bank disbursements totalled to $18.5 billion.
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