Page 67 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes 3.5.1 International Monetary Fund (IMF)

The role of the IMF as a super national organisation is being discussed here from the political
risk analysis point of view. It is useful to recall that the role of the IMF as a super national
organisation has been expanding in recent years with its efforts to coordinate the response of the
financial world to the debt crisis and make its own efforts in this regard. The other important
role of the IMF is making loans for structural adjustments in economies facing reverse macro
economic instability and distortions. There is an increasing emphasis on coordination of lending
activities between the IMF and other super national lenders as well as on assessing the social
impact of IMF programmes for structural adjustments in developing countries.

3.5.2 The World Bank

The World Bank was created (along with the IMF) at the Bretton Woods Conference in New
Hampshire in July 1944 and it officially came into existence on December 27, 1945. The initial
objective of the World Bank was to make financial resources available to European countries to
rebuild their war shattered economies and later to provide critically needed external financing
to developing countries at affordable rates of interest. The creation of the World Bank, together
with the IMF, was intended to strengthen the structure and encourage the development and
efficiency of international financial markets. The World Bank consists of four main agencies:

International Bank for Reconstruction and Development (IBRD – World Bank)
International Development Association (IDA)

International Financial Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
International Bank for Reconstruction and Development (IBRD)

The main objective of IBRD is to suggest social and economic development in developing
countries by promoting better productivity and utilisation of resources so that their citizens
may live a better than fuller life. The World Bank seeks to achieve its objectives by making
available financial assistance to developing countries, especially for specific economically sound
infrastructural projects, for example, in the areas of power and transport. The basic rationale for
the emphasis on such projects is that a good infrastructure is necessary for the developing
countries to carry out programmes of social and economic development. In the 1970s, World
Bank loans were also given for the development of the social services sectors of borrowing
countries – education, water supply and sanitation, housing and so on. The loans were also
given for the development of indigenous resources such as oil and natural gas.
In early 1980s, much World Bank lending was policy based, i.e. it had aimed to support economic
adjustment measures by borrowing countries particularly those faced with heavy external debt.
The use of guarantees is also being considered by the World Bank in order to help member
country borrowers to issue securities in the governmental financial markets.

There are five major categories of World Bank loans
1. Specific investment loans are loans made for specific projects in the areas of agriculture
and rural development, urban development and energy resources ranging from 5-10
years.
2. Sector operation loans comprise about a third of the World Bank lending and are aimed at
financing development of particular sectors of a country’s economy such as oil, energy or
agriculture.

62 LOVELY PROFESSIONAL UNIVERSITY