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Unit 10: International Financial Institutions-II
Hitesh Jhanji, Lovely Professional University

unit 10: international financial institutions-ii notes

contents
Objectives

Introduction
10.1 International Development Association (IDA)
10.2 International Liquidity
10.3 Special Drawing Rights (SDRs)
10.3.1 Features of SDRs
10.3.2 Allocation of SDRs
10.3.3 SDRs and India
10.3.4 Evaluation of the Functioning of IMF
10.3.5 Achievements
10.3.6 Failures of International Monetary Fund
10.3.7 Future Directions
10.4 International Finance Cooperation (IFC)
10.5 Summary

10.6 Keywords
10.7 Review Questions
10.8 Further Readings

objectives

After studying this unit, you should be able to:
l z Understand the scope of International Finance Corporation

l z Study the IDA and its role
l z Discuss the International Liquidity concept
l z Elaborate the concept of Special Drawing Rights (SDR)
10.1 international Development association (iDa)

The IDA was formed in 1960 as a part of the World Bank Group to provide financial support
to LDCs on a more liberal basis than could be offered by the IBRD. The IDA has 137 member
countries, although all members of the IBRD are free to join the IDA. IDA’s funds come from
subscriptions from its developed members and from the earnings of the IBRD. Credit terms
usually are extended to 40 to 50 years with no interest. Repayment begins after a ten-year grace
period and can be paid in the local currency, as long as it is convertible. Loans are made only to
the poorest countries in the world, those with an annual per capita gross national product of $480
or less. More than 40 countries are eligible for IDA financing.
An example of an IDA project is a $8.3 million loan to Tanzania approved in 1989 to implement
the first stage in the longer-term process of rehabilitating the country’s agricultural research
system. Co-financing is expected from several countries as well as other multilateral lending
institutions.

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