Role of IMF & World Bank

Introduction to International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

History

1940’s proposals for monetary system by Harry Dexter White (U.S.) and John Keynes (UK) included the following point:

Establish the value of each currency Eliminate restrictions and certain practices on trade Assistance for post-war reconstruction

Bretton Woods Conference, New Hampshire, July 1944 with delegates of 44 nations as where final negotiations of the IMF and the World Bank took place.

Original Aims

The IMF was founded more than 60 years ago toward the end of World War II. The founders aimed to build a framework for economic cooperation that would avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s and the global conflict that followed.Since then the world has changed dramatically, bringing extensive prosperity and lifting millions out of poverty, especially in Asia.

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Key Activities of IMF

The IMF supports its membership by providing following:

The IMF is uniquely placed to help member governments take advantage of the opportunities and manage the challenges posed by globalization and economic development more generally.

The IMF tracks global economic trends and performance, alerts its member countries when it sees problems on the horizon, provides a forum for policy dialogue, and passes on know-how to governments on how to tackle economic difficulties.

The IMF provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. Marked by massive movements of capital and abrupt shifts in comparative advantage, globalization affects countries' policy choices in many areas, including labor, trade, and tax policies.

Helping a country benefit from globalization while avoiding potential downsides is an important task for the IMF.

Providing loans to help countries overcome economic difficulties and concessional loans to help fight poverty in developing countries.

Providing technical assistance and training to help countries improve the management of their economies.

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Role of IMF & World Bank

The global economic crisis has highlighted just how interconnected countries have become in today’s world economy.

An Adapting IMF

The IMF has evolved along with the global economy throughout its 65-year history, allowing the organization to retain its central role within the international financial architectureAs the world economy struggles to restore growth and jobs after the worst crisis since the Great Depression, the IMF has emerged as a very different institution. During the crisis, it mobilized on many fronts to support its member countries. It increased its lending, used its cross-country experience to advise on policy solutions, supported global policy coordination, and reformed the way it makes decisions. The result is an institution that is more in tune with the needs of its 187 member countries.

Stepping up crisis lending. The IMF responded quickly to the global economic crisis, with lending commitments reaching a record level of more than US$250 billion in 2010. This figure includes a sharp increase in concessional lending (that’s to say, subsidized lending at rates below those being charged by the market) to the world’s poorest nations.

Greater lending flexibility. The IMF has overhauled its lending framework to make it better suited to countries’ individual needs. It is also working with other regional institutions to create a broader financial safety net, which could help prevent new crises.

Providing analysis and advice. The IMF’s monitoring, forecasts, and policy advice, informed by a global perspective and by experience from previous crises, have been in high demand and have been used by the G-20.

Drawing lessons from the crisis. The IMF is contributing to the ongoing effort to draw lessons from the crisis for policy, regulation, and reform of the global financial architecture.

Historic reform of governance. The IMF’s member countries also agreed to a significant increase in the voice of dynamic emerging and developing economies in the decision making of the institution, while preserving the voice of the low-income members.

Roles of IMF

The IMF's main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises, and works with its member countries to promote growth and alleviate poverty. It has three main tools at its disposal to carry out its mandate: surveillance, technical assistance and training, and lending. These functions are underpinned by the IMF's research and statistics.

1. Surveillance: The IMF promotes economic stability and global growth by encouraging countries to adopt sound economic and financial policies. To do this, it regularly monitors global, regional, and national economic developments. It also seeks to assess the impact of the policies of individual countries on other economies. This process of monitoring and discussing countries’ economic and financial policies is known as bilateral surveillance.

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Role of IMF & World Bank

2. Technical Assistance and Training: IMF offers technical assistance and training to help member countries strengthen their capacity to design and implement effective policies. Technical assistance is offered in several areas, including fiscal policy, monetary and exchange rate policies, banking and financial system supervision and regulation, and statistics.The IMF provides technical assistance and training mainly in four areas: Monetary and financial policies (monetary policy instruments, banking system

supervision and restructuring, foreign management and operations, clearing settlement systems for payments, and structural development of central banks)

Fiscal policy and management (tax and customs policies and administration, budget formulation, expenditure management, design of social safety nets, and management of domestic and foreign debt)

Compilation, management, dissemination, and improvement of statistical data Economic and financial legislation.For more on technical assistance, go to Technical Assistance in the Our Work section or read an Issues Brief on the subject.

3. Lending: In the event that member countries experience difficulties financing their balance of payments, the IMF is also a fund that can be tapped to facilitate recovery. A policy program supported by financing is designed by the national authorities in close cooperation with the IMF. Continued financial support is conditional on the effective implementation of this program.The IMF also provides low-income countries with loans at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks Facility (ESF). For more on different types of IMF lending, go to Lending in the Our Work section.

4. Research and Data: Supporting all three of these activities is the IMF's economic and financial research and statistics. In recent years, the IMF has applied both its surveillance and technical assistance work to the development of standards and codes of good practice in its areas of responsibility, and to the strengthening of financial sectors. These are part of the IMF's continuing efforts to strengthen the international financial system and improve its ability to prevent and resolve crises.

Organization & Management

The IMF has a management team and 17 departments that carry out its country, policy, analytical, and technical work. One department is charged with managing the IMF's resources. This section also explains where the IMF gets its resources and how they are used.The IMF has a Managing Director (Christine Lagarde), who is head of the staff and Chairman of the Executive Board. She is assisted by a First Deputy Managing Director and two other Deputy Managing Directors. The Management team oversees the work of the staff, and maintains high-level contacts with member governments, the media, non-governmental organizations, think tanks, and other institutions.

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Role of IMF & World Bank

The Current Management Team

Managing Director, Christine Lagarde, a French national, joined the IMF as Managing Director in July 2011. Before coming to the IMF, she was France's Minister for Economy, Finance and Industry.

David Lipton, of the United States, joined the IMF as Special Advisor to the Managing Director in July 2011. On September 1, 2011 he became First Deputy Managing Director. Prior to joining the Fund, Lipton served as Special Assistant to the President and as Senior Director for International Economic Affairs at the U.S. National Economic Council and U.S. National Security Council at the White House.

Naoyuki Shinohara, a Japanese national, joined the IMF as Deputy Managing Director in March 2010. Previously, he was Japan's Vice-Minister of Finance for International Affairs.

Nemat Shafik, from Egypt, became Deputy Managing Director of the IMF in April, 2011. Previously she had worked at the U.K. Department for International Development (DFID), the World Bank, and the International Finance Corp.

Min Zhu, from China, joined the IMF as Special Advisor to the Managing Director in May 2010. On July 26, 2011 he became Deputy Managing Director. Before coming to the IMF, Min Zhu was a Deputy Governor of the People’s Bank of China and previously worked at the World Bank.

Membership: IMF Quotas

Quotas play several key roles in the IMF: A member's quota delineates basic aspects of its financial and organizational relationship.

Subscriptions (Quota Share): A member's quota subscription determines the maximum amount of financial resources the member is obliged to provide to the IMF. A member must pay its subscription in full upon joining the Fund: up to 25 percent must be paid in SDRs or widely accepted currencies (such as the U.S. dollar, the euro, the yen, or the pound sterling), while the rest is paid in the member's own currency.

Voting Power (Voting Share): The quota largely determines a member's voting power in IMF decisions. Each IMF member’s votes are comprised of basic votes plus one additional vote for each SDR 100,000 of quota. The 2008 reform fixed the number of basic votes at 5.502 percent of total votes. The current number of basic votes represents close to a tripling of the number prior to the effectiveness of the 2008 reform.

Access to Financing: The amount of financing a member can obtain from the IMF (its access limit) is based on its quota. For example, under Stand-By and Extended Arrangements, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances.

Special Drawing Right

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Role of IMF & World Bank

The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.

SDR’s value

The value of the SDR is based on a basket of key international currencies—the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF’s website. The basket composition is reviewed every five years by the Executive Board to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems.The SDR interest rate provides the basis for calculating the interest charged to members on regular (non concessional) IMF loans, the interest paid and charged to members on their SDR holdings, and the interest paid to members on a portion of their quota subscriptions. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on short-term debt in the money markets of the SDR basket currencies.

SDR allocations to IMF members

Under its Articles of Agreement, the IMF may allocate SDRs to members in proportion to their IMF quotas, providing each member with a costless asset. However, if a member’s SDR holdings rise above its allocation, it earns interest on the excess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall.

There are two kinds of allocations:

General allocations of SDRs

General allocations have to be based on a long-term global need to supplement existing reserve assets. Decisions to allocate SDRs have been made three times: in 1970-72, for SDR 9.3 billion; in 1979–81, for SDR 12.1 billion; and in August 2009, for an amount of SDR 161.2 billion.

Special allocations of SDRs

A special one-time allocation of SDRs through the Fourth Amendment of the Articles of Agreement was implemented in September 2009. The purpose of this special allocation was to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the fact that countries that joined the Fund after 1981—more than one-fifth of the current IMF membership—had never received an SDR allocation.

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Role of IMF & World Bank

With the general SDR allocation of August 2009 and the special allocation of Setember 2009, the amount of SDRs increased from SDR 21.4 billion to SDR 204.1 billion (currently equivalent to about $317 billion).

Doubling of quotas and major realignment of quota sharesOn December 15, 2010, the Board of Governors, the Fund’s highest decision-making body, approved a package of far-reaching reforms of the Fund’s quotas and governance, completing the 14th General Review of Quotas. Once the reform package is approved by member countries (it includes an amendment to the Articles of Agreement that requires acceptance by three-fifths of the members having 85 percent of the total voting power) and implemented, it will result in an unprecedented 100 percent increase in total quotas and a major realignment of quota shares to better reflect the changing relative weights of the IMF’s member countries in the global economy.The reform package builds on the 2008 reforms, which became effective on March 3, 2011. The 2008 reforms strengthen the representation of dynamic economies, many of which are emerging market countries, through ad hoc quota increases for 54 member countries, and enhance the voice and participation of low-income countries through a near tripling of basic votes.The 14th General Review of Quotas will: double quotas from approximately SDR 238.4 billion to approximately

SDR 476.8 billion, (about US$767 billion at current exchange rates). shift more than 6 percent of quota shares from over-represented to under-

represented member countries. shift more than 6 percent of quota shares to dynamic emerging market and

developing countries (EMDCs). significantly realign quota shares. China will become the 3rd largest member

country in the IMF, and there will be four EMDCs (Brazil, China, India, and Russia) among the 10 largest shareholders in the Fund, and

preserve the quota and voting share of the poorest member countries. This group of countries is defined as those eligible for the low-income Poverty Reduction and Growth Trust (PRGT) and whose per capita income fell below US$1,135 in 2008 (the threshold set by the International Development Association) or twice that amount for small countries.

A comprehensive review of the current quota formula, which formed the basis to work from during the 14th General Review, will be completed by January 2013. Completion of the 15th General Review of Quotas will be brought forward by about two years to January 2014.

How member countries’ quotas are determinedWhen a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members that are broadly comparable in economic size and characteristics. The IMF uses a quota formula to guide the assessment of a member’s relative position.The current quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent). For this purpose, GDP is measured as blends of GDP based on market exchange rates (weight of 60 percent) and on PPP exchange rates (40 percent). The formula also includes a “compression factor” that reduces the dispersion in calculated

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Role of IMF & World Bank

quota shares across members. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

How Quota Reviews Work

The IMF's Board of Governors conducts general quota reviews at regular intervals (usually every five years). Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s quota cannot be changed without its consent. There are two main issues addressed in a general quota review: the size of an overall increase and the distribution of the increase among the members. First, a general quota review allows the IMF to assess the adequacy of quotas both in terms of members’ balance of payments financing needs and in terms of its own ability to help meet those needs. Second, a general review allows for increases in members’ quotas to reflect changes in their relative positions in the world economy.

Country wise Quota and SDR allocation

IMF member country

Quota: Percent of Total

Quota: Millions of SDRs

GovernorAlternate Governor

Votes: Number

Votes: Percent of Total

United States 17.09 37149.3

Timothy F. Geithner Ben Bernanke 371743 16.74

Japan 6.12 13312.8 Naoto KanMasaaki Shirakawa 133378 6.01

Germany 5.98 13008.2 Axel A. WeberWolfgang Schäuble 130332 5.87

United Kingdom 4.94 10738.5 Alistair Darling Mervyn King 107635 4.85

France 4.94 10738.5 Christine Lagarde Christian Noyer 107635 4.85

China 3.72 8090.1 Zhou Xiaochuan Hu Xiaolian 81151 3.66

Italy 3.24 7055.5 Giulio Tremonti Mario Draghi 70805 3.19

Saudi Arabia 3.21 6985.5

Ibrahim A. Al-Assaf Hamad Al-Sayari 70105 3.16

Canada 2.93 6369.2 Jim Flaherty Mark Carney 63942 2.88

Russia 2.73 5945.4 Aleksei Kudrin Sergey Ignatyev 59704 2.69

Netherlands 2.37 5162.4 Nout Wellink L.B.J. van Geest 51874 2.34

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Belgium 2.12 4605.2 Guy QuadenJean-Pierre Arnoldi 46302 2.08

India 1.91 4158.2 Pranab MukherjeeDuvvuri Subbarao 41832 1.88

Switzerland 1.59 3458.5 Jean-Pierre RothHans-Rudolf Merz 34835 1.57

Australia 1.49 3236.4 Wayne Swan Ken Henry 32614 1.47

Mexico 1.45 3152.8 Agustín Carstens Guillermo Ortiz 31778 1.43

Spain 1.4 3048.9 Elena Salgado

Miguel Fernández Ordóñez 30739 1.38

Brazil 1.4 3036.1 Guido MantegaHenrique Meirelles 30611 1.38

South Korea 1.35 2927.3 Okyu Kwon Seong Tae Lee 29523 1.33

Venezuela 1.22 2659.1Gastón Parra Luzardo

Rodrigo Cabeza Morales 26841 1.21

17.09

6.12

5.98

4.944.943.723.24

3.21

2.932.73

2.37

2.121.91

1.591.49

1.451.4

1.4

1.35 1.22

Quota: Percent of TotalUnited States JapanGermany United KingdomFrance ChinaItaly Saudi ArabiaCanada RussiaNetherlands BelgiumIndia SwitzerlandAustralia MexicoSpain BrazilSouth Korea Venezuela

Country Representation

Unlike the General Assembly of the United Nations, where each country has one vote, decision making at the IMF was designed to reflect the position of each member country

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in the global economy. Each IMF member country is assigned a quota that determines its financial commitment to the IMF, as well as its voting power.To be effective, the IMF must be seen as representing the interests of all of its 187 member countries, from its smallest shareholder Tuvalu, to its largest, the United States.In November 2010, the IMF agreed on reform of its framework for making decisions to reflect the increasing importance of emerging market and developing economies.

Giving more say to emerging markets: In recent years, emerging market countries have experienced strong growth and now play a much larger role in the world economy. The reforms will produce a shift of 6 percent of quota shares to dynamic emerging market and developing countries. This realignment will give more say to a group of countries known as the BRICS: Brazil, Russia, India, and China.

Protecting the voice of low-income countriesThe reform package also contains measures to protect the voice of the poorest countries in the IMF. Without these measures, this group of countries would have seen its voting shares decline.

Timeline for implementing the reformThe Board of Governors, the IMF’s highest decision-making body, must ratify the new agreement by an 85 percent majority before it comes into effect.The plan is for the reform to be implemented in 2012.

Gold

The IMF holds a relatively large amount of gold among its assets, not only for reasons of financial soundness, but also to meet unforeseen contingencies. The IMF holds 103.4 million ounces (3,217 metric tons) of gold, worth about $83 billion as of end-August 2009, making it the third-largest official holder of gold in the world.

The IMF's Articles of Agreement strictly limit the use of the gold. But in some circumstances, the IMF may sell gold or accept gold as payment from member countries.

Gold played a central role in the international economic system after World War II. The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates pegged in terms of the dollar and, in the case of the United States, the value of the dollar in terms of gold. This "par value system" ceased to work after 1971.

Until the late 1970s, 25 percent of member countries' initial quota subscriptions and subsequent quota increases had to be paid for with gold. Payment of charges and repayments to the IMF by its members constituted other sources of gold. Through various transactions, the IMF acquired 12.97 million ounces (403.3 tons) of gold.

Today, the IMF is considering selling some of the gold it has acquired over time as its finances have become unsustainable following a large decline in outstanding credit in recent years. A limited sale of gold was recommended by the Committee of Eminent Persons chaired by Andrew Crockett (the Crockett Committee) as a means to develop a new income model that relies on more diverse sources of revenue (for more on this topic, go to the section on income model reform).

The proceeds from gold sales would not have to be returned to member countries. Instead, profits from any gold sales should be retained and could be invested in an income-generating

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Role of IMF & World Bank

fund to supplement IMF income. A proposal made by the Group of Twenty industrialized and emerging market economies calls for using additional resources from agreed sales of IMF gold to provide $6 billion in additional financing for poor countries, in a manner consistent with the IMF's new income model, over the next 2 to 3 years.

The selling of gold by the IMF is rare as it requires an Executive Board decision with an 85 percent majority of the total voting power. The last time gold was sold by the institution was through off-market transactions completed in April 2001, with 12.9 million ounces traded. This transaction was approved by the membership as a means to finance the IMF's participation in the Heavily Indebted Poor Countries Initiative and the continuation of the Poverty Reduction and Growth Facility.

Borrowing Arrangements

If the IMF believes that its resources might fall short of members' needs—for example, in the event of a major financial crisis—it can supplement its own resources by borrowing. It has had a range of bilateral borrowing arrangements in the 1970s and 1980s. Currently it has two standing multilateral borrowing arrangements and one bilateral borrowing agreement.

Through the New Arrangements to Borrow (NAB) and the General Arrangements to Borrow (GAB), a number of member countries and institutions stand ready to lend additional funds to the IMF. The GAB and NAB are credit arrangements between the IMF and a group of members and institutions to provide supplementary resources of up to SDR 34 billion (about US$50 billion) to the IMF to forestall or cope with an impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system.

In April 2009, the Group of Twenty industrialized and emerging market economies agreed to triple the Fund’s lending capacity to $750 billion, enabling it to inject extra liquidity into the world economy during this time of crisis. The additional support will come from several sources, including contributions from member countries that have pledged to help boost the Fund’s lending capacity.

Data Dissemination Systems

In 1995 the International Monetary Fund began work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public. The International Monetary and Financial Committee (IMFC) endorsed the guidelines for the dissemination standards and they were split into two tiers: The General Data Dissemination System (GDDS) and the Special Data Dissemination Standard (SDDS).

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IMF’s Data Standards Initiative –Two tiers:

The Special Data Dissemination Standard (SDDS)– Launched in 1996 to guide IMF members that have, or might seek, access to international capital markets in the provision of their economic and financial data to the public.

The General Data Dissemination System (GDDS) – Launched in 1997 as a development tool to enhance the availability of timely and comprehensive economic, financial and socio-demographic data in all IMF member countries.

Both the SDDS and GDDS aim to guide countries in providing the public with comprehensive, timely, accessible, and reliable data.

SDDS

Subscription focused on international capital market participants The dimensions: Data, Access by the public, Integrity, Quality A standard Precise, specific requirements for coverage, periodicity, and timeliness of data Primary focus: dissemination of frequent and timely data (subscribers

generally already meet high data quality standards) Subscribers must meet all requirements immediately (exceptional transition

periods)

Covers Macroeconomic data

GDDS

Participation for all member countries

The dimensions: Data Access by the Public, Integrity, Quality

A system  Less prescriptive emphasis on improvement over time  Primary focus: improvement in data quality by providing a process for

evaluating needs for data improvements and setting priorities No set future date by which improvements in present practices must be

completed. Covers macroeconomic and socio-demographic data

India’s Relations with the IMF

India joined on December 27, 1945. It owns SDR 4,158.20 million.

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Introduction To World Bank

The World Bank is an International Financial Institution that provides financial and technical assistance to developing countries with the stated goal of reducing poverty and provides loans to developing countries for capital programmes. The president of World Bank is Robert B. Zoellick.

The World Bank's official goal is the reduction of poverty. By law, all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment.

The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions:

The International Bank for Reconstruction and Development (IBRD) The International Development Association (IDA).

The World Bank Group

In addition to IBRD and IDA, three other organizations make up the World Bank Group.

The International Finance Corporation (IFC) promotes private sector investment by supporting high-risk sectors and countries.

The Multilateral Investment Guarantee Agency (MIGA) provides political risk insurance (guarantees) to investors in and lenders to developing countries.

The International Centre for Settlement of Investment Disputes (ICSID) settles investment disputes between foreign investors and their host countries.

History

The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. The International Monetary Fund, a related institution, is the second. Delegates from many countries attended the Bretton Woods Conference. The most powerful countries in attendance were the United States and United Kingdom, which dominated negotiations.

Although both are based in Washington, D.C., the World Bank is, by custom, headed by an American, while the IMF is led by a European.

Members

The International Bank for Reconstruction and Development (IBRD) has 187 member countries, while the International Development Association (IDA) has 171 members. Each member state of IBRD should be also a member of the International Monetary Fund (IMF) and only members of IBRD are allowed to join other institutions within the Bank (such as IDA).

Core Elements Of The WBG Governance

The legal framework includes the respective Articles of Agreement for IBRD, IDA and IFC and the MIGA Convention signed by all country members; the By-laws, issued by the Boards of Governors; and the Rules of Procedures for Meetings, issued by Executive Directors.

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The Boards of Governors is the highest governing body and contains a seat for every member of the institution.

The Development Committtee is an advisory body of 25 ministers who represent the membership at the annual and spring meetings of the IMF and the World Bank.

The Boards of Directors exercise powers delegated by the Boards of Governors and are “responsible for the conduct of the general operations of the Bank”. They are vested with specific powers to select the President, interpret the Articles, establish committees and take emergency actions.

Member Countries are represented in the World Bank Group by the Boards of Governors and the Boards of Executive Directors.

Management: The President heads the operating staff, and is formally charged with conducting the “ordinary business” of the Bank under the direction of the Executive Directors. As chief of the operating staff, the President is responsible for the organization, appointment, and dismissal of staff and Management.

Composition Of The Boards

The Boards of Executive Directors consists of the President and 25 Executive Directorsacting as a unit. The President is the presiding officer, and ordinarily has no vote except a deciding vote in case of an equal division. The Executive Directors as individuals cannot exercise any power nor commit or represent the Bank unless specifically authorized by the Board to do so. With the term beginning November 1, 2010, the number of Executive Directors increased by one, totalling 25.

Alternates to Executive Directors have full power to act in the absence of their respective Executive Directors. Furthermore, Senior Advisors and Advisors assist the Executive Directors in their work, who can, along with the Alternates to Executive Directors, attend most Board meetings in an advisory capacity, without voting rights.

Objectives And Functions

Provide assistance to developing and transition countries. Promote the economic development of the world's poorer countries. Finance the poorest developing countries whose per capita GNP is less than $865 a

year special financial assistance through the International Development Association (IDA).

Build capacity. Infrastructure creation. Development of financial systems. Combating corruption. Research ,consultancy and Training.

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Role of IMF & World Bank

Raising Capital

The IBRD raises almost all its money in the world’s financial markets. With a AAA credit rating, it issues bonds to raise money and then passes on the low interest rates to its borrowers.

World Bank A Competitive Source For India

The low cost and stable financing it provides with longer maturity periods. Financing through the International Development Association (IDA). Interest rate: 0.75% p.a. Repayable over a period of 35 years. Inclusive of a 10 year grace period. Government estimates investment of $475 billion.

Voting Power

In 2010, voting powers at the World Bank were revised to increase the voice of developing countries, notably China. The countries with most voting power are now the United States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), France (3.75%), and India (2.91%). Under the changes, known as 'Voice Reform - Phase 2', countries other than China that saw significant gains included South Korea, Turkey, Mexico, Singapore, Greece, Brazil, India, and Spain. Most developed countries' voting power was reduced, along with a few poor countries such as Nigeria. United States', Russia's and Saudi Arabia's voting power was unchanged.

The changes were brought about with the goal of making voting more universal in regards to standards, rule-based with objective indicators, and transparent among other things. Now, developing countries have an increased voice in the "Pool Model," backed especially by Europe. Additionally, voting power is based on economic size in addition to International Development Association contributions.

The Role Of World Bank

POWER REDUCTION STRATERGIES

For the poorest developing countries in the world, the bank's assistance plans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country's financial and economic situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country's priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly.

Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to the World Bank International Development Association (IDA) which distributes the loans to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the president of the World Bank, said when the loans were announced on

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December 15, 2007, that IDA money "is the core funding that the poorest developing countries rely on".

CLEAN TECHNOLOGY FUND MANAGEMENT

The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen climate change conference in December, 2009, because of the Bank's continued investment in coal-fired power plants.

CLEAN AIR INITIATIVE

Clean Air Initiative (CAI) is a World Bank initiative to advance innovative ways to improve air quality in cities through partnerships in selected regions of the world by sharing knowledge and experiences. It includes electric vehicles.

UNITED NATIONS DEVELOPMENT BUSINESS

Based on an agreement between the United Nations and the World Bank in 1981, Development Business became the official source for World Bank Procurement Notices, Contract Awards, and Project Approvals. In 1998, the agreement was re-negotiated, and included in this agreement was a joint venture to create an electronic version of the publication via the World Wide Web. Today, Development Business is the primary publication for all major multilateral development banks, United Nations agencies, and several national governments, many of whom have made the publication of their tenders and contracts in Development Business a mandatory requirement.Currently, the subscription to "online version only" is not free, but costs US$ 550.

The World Bank or the World Bank Group is also a sitting observer in the United Nations Development Group.

Role Of The World Bank In Globalization

Low-Income Countries – Debt relief would be given to the low income countries and the process should get going vigorously. It is here that the World Bank has a vital role to play by working with governments and ensure strong governance, effective judicial systems, and a robust financial system. All these would help fight corruption. If these initiatives are not taken, attracting foreign and domestic investment would be difficult and thus globalization shall fall back upon us.

Middle-Income Countries – Statistically, 80% of the world's poor live in middle-income countries. These are the countries which require utmost help for a strong financial stability. For that, the structural and social reforms should be in place for the next stage of development. The mission of tackling global poverty is the main agenda and the only important tool to achieve overall development.

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Role of IMF & World Bank

World Bank is focusing on –

Secure long-term funding Give advisory services Create the right policy and institutional framework Address weaknesses in the social, structural, and sectoral policies

Future of globalization and World Bank's role In next 25 years, the population of the entire world would go up by 2 billion to a figure of 8 billion people. The 98% of the surge in population would be in the developing countries. In 2008, more than 47% of the global population lived in urban areas. By 2020, 4.1 billion, or 55% would be living in urban areas. The World Bank is now aiming at maintaining parity in education and is also aiming at achieving the gender equality goals.

World Bank In India

The World Bank is one of the world’s largest sources of funding and knowledge for developing countries. India is one of our oldest members, having joined the institution at its inception in 1944.

In India, the World Bank works in close partnership with the Central and State Governments. It also works with other development partners: bilateral and multilateral donor organizations, nongovernmental organizations (NGOs), the private sector, and the general public—including academics, scientists, economists, journalists, teachers, and local people involved in development projects.

Partners

ONCHOCERCIASIS CONTROL PROGRAM (OCP)

Successfully halted transmission of river blindness in 11 countries with a collective population of 35 million.

GLOBAL ALLIANCE FOR VACCINES AND IMMUNIZATION (GAVI)

Seeks to protect public health worldwide through the widespread use of vaccines.

CONSULTATIVE GROUP FOR INTERNATIONAL AGRICULTURAL RESEARCH (CG1AR)

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Role of IMF & World Bank

Created and promoted crop improvements in developing countries over the last 30 years through a network of research centers.

THE CARBON FUND

Works to develop viable, flexible market mechanisms to reduce greenhouse gas emissions under the Kyoto Protocol.

GLOBAL ENVIRONMENTAL FACILITY (GEF)

Provides grants to developing countries to fund projects that benefit the global environment and promote sustainable livelihoods in local communities.

ROLL BACK MALARIA

Coordinates the international fight against malaria, which kills more than 1 million people a year, most of them children in Africa.

CONSULTATIVE GROUP TO ASSIST THE POOREST (CGAP)

Expands access to microfinance by the poor in developing countries through a consortium of 28 public and private development agencies.

JOINT UNITED NATIONS PROGRAMME ON HIV/AIDS (UNAIDS)

Advocates for global action on the HIV/AIDS epidemic and works with civil society, the business community and the private sector.

FINANCIAL SECTOR REFORM AND STRENGHTENING INITIATIVE (FIRST)

Provides flexible, practical assistance to developing countries to strengthen their financial systems and adopt international financial standards.

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Role of IMF & World Bank

EDUCATION FOR ALL

Focuses attention on education and strives to ensure an education for every citizen in every society.

GLOBAL WATER PATNERSHIPS (GWP)

Supports countries in the sustainable management of their water resources.

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Role of IMF & World Bank

Difference between IMF and World Bank

IMF

1. Oversees the international monetary system 2. Promotes exchange stability and orderly exchange relations among its member

countries 3. Assists all members--both industrial and developing countries--that find themselves in

temporary balance of payments difficulties by providing short- to medium-term credits

4. Supplements the currency reserves of its members through the allocation of SDRs (special drawing rights); to date SDR 21.4 billion has been issued to member countries in proportion to their quotas

5. Draws its financial resources principally from the quota subscriptions of its member countries

6. It has at its disposal fully paid-in quotas now totaling SDR 145 billion (about $215 billion)

7. It has a staff of 2,300 drawn from 182 member countries

World Bank

1. Seeks to promote the economic development of the world's poorer countries 2. Assists developing countries through long-term financing of development projects

and programs 3. provides to the poorest developing countries whose per capita GNP is less than $865 a

year special financial assistance through the International Development Association (IDA)

4. Encourages private enterprises in developing countries through its affiliate, the International Finance Corporation (IFC)

5. Acquires most of its financial resources by borrowing on the international bond market

6. It has an authorized capital of $184 billion, of which members pay in about 10 percent 7. It has a staff of 7,000 drawn from 180 member countries

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Role of IMF & World Bank

Criticism of IMF and World Bank

• Criticism about the governance structure which are dominated by the industrialized countries ( G – 7)

• The World Bank and the IMF often attach loan conditionality focusing on liberalization of trade, investment and financial sector

• IMF conditionality's may result in loss of a state’s authority to govern its economic policy

• With the World Bank, there are concerns about the types of development projects funded.

• Participating countries are asked to peg their currency to the dollar

• The World bank requires sovereign immunity from countries it deals with

• World Bank and IMF preferences for free-market solutions

Current news about IMF and World Bank

• The International Monetary Fund (IMF) has not requested India to provide funds to help combat the debt crisis in Europe

• World Bank arm IDA to keep lending to India at $5 billion

• World Bank plan for Kerala villagers

• Rupee depreciation not to hurt Indian economy: Arvind Virmani, IMF

• The reserve position in the International Monetory Fund (IMF) dropped by $5 million to $2.6 billion during the week.

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