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International Trade and Finance

Notes The IMF’s resources are provided by its member countries, primarily through payment of quotas,
which broadly reflect each country’s economic size. The total amount of quotas is the most important
factor determining the IMF’s lending capacity. The annual expenses of running the Fund are met
mainly by the difference between interest receipts (on outstanding loans) and interest payments (on
quota “deposits”).
India’s quota and ranking : India’s current quota in the IMF is SDR (Special Drawing Rights) 4,158.2
million in the total quota of SDR 212 billion, giving it a share holding of 1.961%. India’s relative
position based on quota is 13. However based on voting share, India (together with its constituency
countries, viz., Bangladesh, Bhutan and Sri Lanka) is ranked 21.
30.3 The World Bank

The World Bank is one of the world’s largest sources of funding and knowledge to support
governments of member countries in their efforts to invest in schools and health centres, provide
water and electricity, fight disease and protect the environment.
The World Bank is not a ‘bank’ in the common sense. The World Bank is an international organization
owned by the 184 countries—both developed and developing—that are its members.
Since it was set up in 1944 as the International Bank for Reconstruction and Development. The number
of member countries increased sharply in the 1950s and 1960s, when many countries became
independent nations. As membership grew and their needs changed, the World Bank expanded and
is currently made up of five different agencies.
All support to a borrowing country is guided by a single strategy (in the case of Afghanistan it is the
‘Transitional Support Strategy’) that the country itself designs with help from the World Bank and
many other donors, aid groups, and civil society organizations.
Difference between the World Bank and a Commercial Bank
While it lends and even manages funds much like a regular bank, the World Bank is different in
many important ways. The financial support and advice the World Bank provides its member countries
is designed to help them fight poverty. And unlike commercial banks, the World Bank often lends at
little or no interest to countries that are unable to raise money for development anywhere else.
Countries that borrow from the World Bank also have a much longer period to repay their loans than
commercial banks allow. In some cases, they don’t have to start repaying for ten years.
Basically, the World Bank borrows the money it lends. It has good credit because it has large, well-
managed financial reserves. This means it can borrow money at low interest rates from capital markets
all over the world and channel it to developing countries, often at much lower rates of interest than
what markets would charge these countries.
Loans

The World Bank offers two basic types of loans : investment loans for goods, work and services to
support economic and social development projects in a broad range of sectors; and adjustment loans
to support policy and institutional reforms.
During loan negotiations, the World Bank agrees with the borrowing country on the development
objective of the project or program, outputs, performance indicators (to measure the impact and
success of the project) and a plan to put it all into practice. Once a loan is approved and becomes
effective, the borrower puts the project or program into practice according to the terms agreed with
the World Bank.
The World Bank supervises how each loan is used and evaluate the results. All loans are governed by
operational policies, which make sure that operations are economically, financially, socially and
environmentally sound.

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