THE WORLD BANK

B

Presented By

Kashif Hussain

OUTLINE Introduction

Brief History

Mission

Goals

Objectives

Structure

Governance

Functions

Membership

Institutions of World Bank

Role of World Bank in Pakistan

Resources of World Bank

Conclusion

References

Introduction

An international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement.

Brief History

The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD) in Breton Wood Conference. 

The World Bank officially began operations in June 1946.

Beginning in the mid-1950s, it played a major role in financing investments in infrastructural projects in developing countries, including roads, hydroelectric dams, water and sewage facilities, maritime ports, and airports.

Since its inception, the World Bank has lent and given grants and credits worth $400 billion.

The International Bank for Reconstruction and Development (IBRD), established in 1945

Cont………

The International Finance Corporation (IFC), established in 1956

The International Development Association (IDA), established in 1960

the International Centre for Settlement of Investment Disputes (ICSID)

The Multilateral Investment Guarantee Agency (MIGA), established in 1988.

Mission

The World Bank Group’s mission is to reduce poverty and encourage economic growth and thereby contributing to the achievement of the Millennium Development Goals. Through its five institutions, the World Bank Group works in more than 100 developing economies, providing loans, grants, policy advice, and technical assistance to improve living standards and eliminate poverty.

Goals

Eradicate extreme poverty and hunger

Achieve universal primary education

Promote gender equality and empower women

Reduce child mortality

Improve maternal health

Combat HIV/AIDS, malaria and other diseases

Ensure environmental sustainability

Develop a global partnership for development

Objectives

To assist in the reconstruction and development of territories of members by facilitating the invest ment of capital for productive purpose.

To promote private investment by means of guarantee or participation in loans and other investments made by private investors.

When private capital is not available on reasonable terms, to supplement private investment by providing on suitable conditions finance for productive purpose out of its own capital funds raised by it and its other resources.

To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the produc tive resources of members, thereby assisting in raising productivity, the standard of living, and conditions of labor in their territories.

Cont….

To arrange the loans made or guaranteed by it in relation to international loans through other channels so that the more useful and urgent projects, large and small alike, will be dealt with first.

To conduct its operations with due regard to the effect of international investment on business conditions in the territories of members and in the immediate post war years, to assist in bringing about a smooth transition from a war time to peace time economy.

Structure of WB

Governance

It is directed by board of governors composed of one representative from each member country, and the governors direct the IBRD based on weighted voting rights that are determined by each country's agreed annual contributions to the World Bank.

The United States is the largest contributor and has the most weighted voting power

Twenty-four executive directors oversee the daily operations of the World Bank, including five permanent spots given to the United States, Japan, Great Britain, Germany, and France.

Twenty-four executive directors oversee the daily operations of the World Bank, including five permanent spots given to the United States, Japan, Great Britain, Germany, and France.

Cont…..

In total, the World Bank has more than 10,000 employees, spread out over 100 offices around the world and headquartered in Washington, D.C.

Functions of World Bank Granting reconstruction loans to war devastated countries.

Granting developmental loans to underdeveloped countries.

Providing loans to governments for agriculture, irrigation, power, transport, water supply, educations, health, etc

Providing loans to private concerns for specified projects.

Promoting foreign investment by guaranteeing loans provided by other organizations.

Providing technical, economic and monetary advice to member countries for specific projects

Encouraging industrial development of underdeveloped countries by promoting eco nomic reforms.

Institutions of World Bank

Hiroshi Naka is the current Vice President of World Bank while Dr. Jim Yong Kim is the president.

A family of five international organizations that make leveraged loans to poor countries:

1. International Bank for Reconstruction and Development (IBRD)

2. International Development Association (IDA)3. International Finance Corporation (IFC)4. Multilateral Investment Guarantee Agency (MIGA)5. International Centre for Settlement of Investment

Disputes (ICSID)

International Bank for Reconstruction and Development (IBRD)

IBRD offers loans, guarantees, and analytical and advisory services to middle-income countries and creditworthy poorer countries.

It provides its clients with access to capital on favorable terms in larger volumes, with longer maturities and in a more sustainable manner than the market.

IBRD raises most of its funding by selling bonds on the international capital markets.

International Development Association (IDA)

IDA provides grants and loans with 40 year maturity and no interest to the poorest countries.

IDA credits are granted to developing countries with a GDP per capita of less than $1,135, and which do not – or only to a limited extend – have access to commercial lending and IBRD loans.

In the fiscal year of 2011 IDA made commitments amounting to $16.3 billion for 228 new operations.

International Finance Corporation (IFC)

IFC facilitates private investment in regions and sectors not otherwise favored by private investors.

IFC is the largest single publicly funded source of financing of investments in the private sector in developing countries. It invests in and provides loans to private enterprises.

IFC invests in projects which are considered commercially sustainable, but cannot obtain financing or technical assistance from other sources.

Multilateral Investment Guarantee Agency (MIGA)

MIGA supports foreign investment in the developing countries by insuring against non-commercial risks, such as political unrest, currency constraints etc.

Through emission of guarantees, counseling and legal assistance, MIGA helps developing countries to attract and retain private investment.

International Centre for Settlement of Investment Disputes (ICSID)

ICSID is an international organ for settlement of disputes arising in connection with foreign investments in the member states of the Bank.

It intermediates in investment disputes between a government and a private foreign investor.

Membership of World Bank

Currently IBRD has 188 Members Countries which is the Primary part of World Bank

To become a member, however, a country must first join the International Monetary Fund (IMF).

The cost of a subscription to the World Bank is a factor of the quota paid to the IMF.

There is an obligatory subscription fee, is equivalent to 88.29% of the quota that a country has to pay to the IMF.

A country is obligated to buy 195 World Bank shares (US$120,635 per share, reflecting a capital increase made in 1988).

0.60% must be paid in cash in U.S. dollars while 5.40% can be paid in a country's local currency, in U.S. dollars, or in non-negotiable non-interest bearing notes.

Cont……..

The 195 shares are Callable capital act as a reserve in World Bank .

A country can subscribe a further 250 shares, which do not require payment at the time of membership but are left as "callable capital.

The president of the World Bank comes from the largest shareholder, which is the United States, and members are represented by a Board of Governors

The five largest shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies.

China, Russia and Saudi Arabia have opted to be single country constituencies, which mean that they each have one representative within the 19 EDs.

Resources of World Bank

IBRD ResourcesIDA Resources

IBRD Resources

IBRD issues bonds in international capital markets and provides loans, guarantees, and other risk management products, as well as technical assistance for economic reform projects and programs to middle-income countries and creditworthy low-income countries.

In fiscal 2014, it raised USDeq 51 billion by issuing bonds in 22 currencies.

IBRD has AAA credit Rating

IBRD’s equity comprises primarily paid-in capital and reserves.

Subscribed capital is expected to increase by $87.0 billion, of which $5.1 billion will be paid in over a five-year period. As of June 30, 2014, the cumulative increase in subscribed capital totaled $42.6 billion. Related paid-in amounts in connection with the capital increase were $2.5 billion.

Cont……..

Of fiscal 2013 allocable net income, the Board of Executive Directors approved the addition of $147 million to the general reserve and recommended to the Board of Governors the transfer of $621 million to IDA and the allocation of $200 million to surplus.

One summary measure of IBRD’s risk profile is the ratio of equity to loans, which is closely managed in line with its financial and risk outlook. This ratio stood at 25.7 percent as of June 30, 2014.

As one of the pioneers of the green bond market and one of the largest issuers of green bonds, IBRD has raised USDeq over $6.3 billion in 66 green bond transactions denominated in 17 currencies since its first green bond was issued in 2008.

Cont…..

IDA Resources IDA is financed largely by contributions from partner governments.

Additional financing comes from transfers from IBRD’s net income, grants from the International Finance Corporation (IFC), and borrowers’ repayments of earlier IDA credits.

Every three years, partner governments and representatives of borrower countries meet to agree on IDA’s strategic direction, priorities, and financing for the subsequent three-year implementation period.

During the IDA16 Replenishment amounted to 33.8 billion in Special Drawing Rights (SDR) (equivalent to $50.8 billion). Of this amount, SDR 31.7 billion (equivalent to $47.6 billion) was made available, including unqualified partner contributions of SDR 16.7 billion (equivalent to $25.1 billion) from 46 countries and contributions to the Multilateral Debt Relief Initiative (MDRI) of SDR 2.2 billion (equivalent to $3.3 billion).

Cont…… IDA16 funding also included credit reflows of SDR 8.9 billion (equivalent to

$13.4 billion); fully paid contributions from IBRD and IFC, including associated investment income, of SDR 1.8 billion (equivalent to $2.7 billion); and balances carried forward from prior replenishments of SDR 2.0 billion (equivalent to $3.0 billion).

IDA16 special themes included crisis response, gender, climate change, and fragile and conflict-affected situations

The process for the IDA17 Replenishment (IDA17), which will cover fiscal years 2015–17, was completed in December 2013. The record envelope of SDR 34.6 billion (equivalent to $52.1 billion) represented an increase over IDA16 of 5.3 percent in SDR terms (5.7 percent in U.S. dollar terms), as agreed upon at the final IDA16 pledging session.

Cont…….

Forty-seven partners, three of which are new contributing partners, pledged SDR 17.3 billion (equivalent to $26.1 billion) in grants, of which SDR 0.6 billion (equivalent to $0.9 billion) is the grant element from concessional partner loan contributions.

Contributions from World Bank Group resources, through transfers from IBRD and IFC, including associated investment income, are planned at SDR 2.1 billion (equivalent to $3.2 billion); such transfers are approved annually by the IBRD’s Board of Governors and the IFC’s Board of Directors, based on evaluations of the institutions’ annual results and financial capacities.

WORLD BANK AND PAKISTAN

sustaining high and broad based growth, and improving competitiveness

improving governance improving lives and protecting the vulnerable

Significance of the topic “Role of World Bank towards Developing economics: A case study for Pakistan The significance of the topic is because Pakistan is a

Developing Economy There are several development projects which are

financially supported by world bank Active projects 47 Closed projects 275 Dropped projects 32 Projects in Pipeline 7

7 Projects in Pipeline and commitment Amounts in U.S. million $ for Pakistan

Sindh Global Partnership for Education Project 66.0

PK Sindh Public Sector Management Reform Project 50.0

PK-Sindh Barrages Improvement Phase I Project 160.0 PK: Sindh Agricultural Growth Project 76.4

National Immunization Support Project 50.0

Global Partnership for Education - Balochistan Education Project 34.0

Enhanced Nutrition for Mothers and Children 36.24

Dasu Hydropower Stage I Project 588.4 IDA Partial Credit Guarantee for Dasu Hydropower

Phase-I Project 460.0 Power Sector Reform: Development Policy Credit 600.0 PK Fiscally Sustainable and Inclusive Growth DPC 400.0 MDTF KP Emergency Roads Recovery Project 9.0 MDTF KP Emergency Roads Recovery Project 9.1 Pakistan: Punjab Public Management Reform Program

50.0 Competitive Industries Project for Khyber Pakhtunkhwa

9.0 Punjab Health Sector Reform Project 100.0 Pakistan: Second Sindh Education Sector Project 400.0

47 Active Projects and commitment Amounts in U.S. million $ for Pakistan year 2013-14

Criticism Participation with IMF Environmental and Social Concerns Over Burden of Debt An Agency of US and Collation powers

Conclusion It is not surprising that there is a clash of opinion over how aid is

given. Indeed, those that offer assistance are going to want to have a say in how the loans are used and what kind of economic policies are fostered in a country's developmental process. Many developing and poor nations, however, are stuck in an enormous of debt and impoverishment, no matter how much assistance they receive. Given this, we may need to remember that the process of aid is also a developing state, in which both the giver and the receiver should be helping each other reach a poverty-free world.

References Investopedia (2013) What Is the World Bank [Online] Available from:

http://www.investopedia.com/articles/03/042303.asp [Accessed: May 12, 2015]

 

Your Article Library (2013) World Bank: its Objectives and Functions [Online] Available From: http://www.yourarticlelibrary.com/economics/world-bank-its-objectives-and-functions/23534/ [Accessed: May 12, 2015]

Preserve Article (2013) what are the objectives of World Bank? [Online] Available From: http://www.preservearticles.com/201012291899/objectives-of-world-bank.html [Accessed: May 12, 2015]

Preserve Article (2013) what are the Functions of World Bank [Online] Available From: http://www.preservearticles.com/2012022923911/what-are-the-functions-of-world-bank.html [Accessed: May 12, 2015] 

Cont……

World Bank (2014) the Roles of IBRD and IDA [Online] Available From: http://www.worldbank.org/en/about/annual-report/roles-resources [Accessed: May 12, 2015]

 

Pakistan Today (2014) IMF and World Bank’s restructuring agreement for Pakistan [Online] Available From: http://www.pakistantoday.com.pk/2014/11/15/comment/imf-and-world-banks-restructuring-agreement-for-pakistan/ [Accessed: May 12, 2015]

Madura (2009) International Financial Management McGraw-Hill Inc.