Role of Imf & World Bank in Economic Final (1)

8/12/2019 Role of Imf & World Bank in Economic Final (1)

1/18


2/18

The World Bank is an international financialinstitution that provides financial andtechnical assistance to developing countries

for development programs (e.g. bridges,roads, schools, etc.) with the stated goal ofreducing poverty.


3/18

Provide assistance to developing andtransition countries

Promote the economic development of the

world's poorer countries Finance the poorest developing countries

whose per capita GNP is less than $865 ayear special financial assistance through the

International Development Association (IDA)


4/18

Build capacity Infrastructure creation Development of Financial Systems Combating corruption Research, Consultancy and Training


5/18

Build Capacity

Build capacity is a conceptual approach to development thatfocuses on understanding the obstacles that inhibit people,governments, international organizations and non-governmental organizations from realizing theirdevelopmental goals while enhancing the abilities that willallow them to achieve measurable and sustainable results.

Infrastructure creationThe World Bank will increase infrastructure investments to

$45 billion over the next three years to provide thefoundation for rapid recovery from the global economic

crisis.( WB SITE NEWS) Investments in infrastructure can provide the platform for

job creation, sustainable economic growth and overcomingpoverty


6/18

Financial System

The financial systemis the system thatallows the transfer of money between savers

(and investors) and borrowers. A financialsystem can operate on a global, regional orfirm specific level


7/18


8/18

Focus on three priority areas:

Safety net programs

Global recession and the food

Fuel and financial crises

For this:

$8.3 billion to mitigate the crisis impact inpoor countries, over and above previouscommitments to the institution


9/18

An organization of 188 countries, workingto foster global monetary cooperation,secure financial stability, facilitate

international trade, promote highemployment and sustainable economicgrowth, and reduce poverty around the world


10/18


11/18

SURVEILLANCE ( Like a Doctor ):- Help in providing

policy advise to low income countries by:-

i. Establishing Economic Frameworks that

support sustained growth and poverty

reduction.

ii. Identify and manage sources of macroeconomic

risk and vulnerabilities.

iii. Strengthen institutions and policies that

underline sound macroeconomic management.

Progress report is annually published in Global

Monitoring Report by IMF and World Bank.


12/18

Technical Assistance (like a teacher) :-

Strengthening human skills and institutional

capacity of countries

Helps members in strengthening their policy

formulation and implementation, and the legal,

institutional, and market frameworks within

which they operate.

It also constitutes an important complement to

IMF surveillance and lending operations in

member countries.


13/18

Financial Assistance (like a banker) :-

Lending to countries to support reforms

Improving financial sector surveillance.

Development of standards and codes of good

practice.

Enhancement of transparency in the IMF and its

member countries.

Involvement of the private sector in crisis resolution


14/18

The IMF introduced the Extended Fund Facilityto help

countries address balance of payment difficulties relatedpartly to structural problems that may take longer to

correct than macroeconomic imbalance

Under its Poverty Reduction and Growth Facility, the

IMF provides concessional loans

loans with an annualinterest rate of 0.5 percent and a maturity of 10 years - to

its poorest member countries.

The IMF provides Emergency Assistanceto countries

coping with balance of payments problems caused bynatural disasters or military conflicts.

The Trade Integration Mechanismallows the IMF to

provide loans under one of its facilities to a developing

country whose balance of payments suffers.


15/18

Many observers thought the collapse of the Bretton

Woods system in 1973 would diminish the role of the

IMF within the international monetary system

However, the activities of the IMF have expanded dueto the periodic financial crises since 1973

IMF deals with three challenges

currency crises

banking crises

foreign debt crises


16/18

CURRENCY CRISIS

Speculative attack on a currencys exchange rate value results in:

a sharp depreciation in the value of the currency

forcing authorities/central bank to defend its currency and the

prevailing exchange rate by:

expending international currency reserves

sharply increasing interest rates

BANKING CRISIS

The loss of confidence in the banking system that leads to a run

on banks, as individuals and companies withdraw their deposits


17/18


18/18

Thank you

Documents

Role of Imf & World Bank in Economic Final (1)