International Financial Institutions

Money & Banking International Financial Institutions
Presented to: Prof. Naseem Bukhari
Presented by: Nada Zain <36>

Hina Qamar<26>
Maria Ehsan<05>
Maryam Arshad<22>
Zohra Niazi<48>
BBA evening 2007-11

[4th semester]
Date: 27th of May, 2009

WEDNESDAY
Institute of Business Administration,

Punjab University, Lahore
Page 1 of 42
ACKNOWLEDGEMENT _____________________________________________________________ I
ABSTRACT ________________________________________________________________________II
FINANCIAL SYSTEM..................................................................................................................................4
1. MONEY.......................................................................................................................................................4
2. FINANCIAL INSTRUMENTS...............................................................................................................................4
3. FINANCIAL MARKETS....................................................................................................................................4
4. FINANCIAL INSTITUTIONS...............................................................................................................................4
5. CENTRAL BANKS..........................................................................................................................................4
FINANCIAL INSTITUTIONS......................................................................................................................4
INTERNATIONAL FINANCIAL INSTITUTIONS...................................................................................4
Definition................................................................................................................................................4
Explanation ............................................................................................................................................5
TYPES OF INTERNATIONAL FINANCIAL INSTITUTIONS.............................................................................................5
Bretton Woods institutions......................................................................................................................5
Regional development banks..................................................................................................................5
Bilateral development banks...................................................................................................................5
Other regional financial institutions.......................................................................................................5
HISTORY ........................................................................................................................................................6
Need for the IFIs.....................................................................................................................................6
Bretton woods conference.......................................................................................................................6
HOW IFIS WORK?............................................................................................................................................7
THE IMF.........................................................................................................................................................7
PURPOSES........................................................................................................................................................8
SOURCE OF FUNDING........................................................................................................................................8
1. The Quota system................................................................................................................................8
2. Gold holdings......................................................................................................................................8
3. Borrowing arrangements....................................................................................................................9
4. Interest charges and Fees ................................................................................................................10
FUNCTIONS....................................................................................................................................................10
Surveillance .........................................................................................................................................10
Technical Assistance.............................................................................................................................10
Lending .................................................................................................................................................11
QUOTAS........................................................................................................................................................14
Definition..............................................................................................................................................14
Quotas of some Member: [Table] .........................................................................................................15
The Multifaceted Role of Quotas..........................................................................................................15
SPECIAL DRAWING RIGHTS (SDRS).................................................................................................................16
SDR Valuation.......................................................................................................................................16
How is SDR calculated?.......................................................................................................................16
SDR Interest Rate..................................................................................................................................17
SDR Interest rate calculation...............................................................................................................17
PAKISTAN AND IMF..................................................................................................................................18
LENDING HISTORY:.........................................................................................................................................18
IMF’S ATTITUDE TOWARDS US..........................................................................................................................20
THE WORLD BANK...................................................................................................................................21
HISTORY.......................................................................................................................................................21
Page 2 of 42
OBJECTIVE....................................................................................................................................................21
WORLD BANK: A BANK?................................................................................................................................21
PURPOSES......................................................................................................................................................21
DIFFERENCE BETWEEN WORLD BANK AND THE IMF...........................................................................................22
MILLENNIUM DEVELOPMENT GOALS (MDGS)...................................................................................................23
WORLD BANK GROUP....................................................................................................................................25
International Bank for Recosruction and Delopment. (IBRD).............................................................25
The International Development Association (IDA)..............................................................................26
WORLD BANK’S AREAS OF OPERATION..............................................................................................................27
PROJECTS OF WORLD BANK IN PAKISTAN .........................................................................................................27
ASIAN DEVELOPMENT BANK...............................................................................................................30
ORGANIZATION...............................................................................................................................................30
LENDING.......................................................................................................................................................31
NOTABLE PROJECTS........................................................................................................................................31
MEMBERS.....................................................................................................................................................31
ISLAMIC DEVELOPMENT BANK..........................................................................................................31
ESTABLISHMENT.............................................................................................................................................31
PURPOSE ......................................................................................................................................................32
FUNCTIONS....................................................................................................................................................32
MEMBERSHIP.................................................................................................................................................32
HEAD OFFICE AND REGIONAL OFFICES ............................................................................................................32
RESOURCE MOBILIZATION ...............................................................................................................................33
CRITICISM ON IMF AND THE WORLD BANK...................................................................................33
1. CONDITIONALITIES......................................................................................................................................33
2. IMPACT ON PUBLIC HEALTH.........................................................................................................................34
3. DEVALUATIONS...........................................................................................................................................35
4. CRITICISM FROM FREE MARKET ADVOCATES....................................................................................................35
5. IMF/WORLD BANK SUPPORT OF MILITARY DICTATORSHIPS ...............................................................................35
6. IMF & WB : SECRETIVE INSTITUTIONS WITH NO ACCOUNTABILITY....................................................................36
7. DEMOCRACY IS BEING TORN APART BY A FINANCIAL OLIGARCHY (MIGHT IS RIGHT)...............................................36
8. VIOLATION OF ISLAMIC PRINCIPLES...............................................................................................................37
9. IMF POLICIES HURT THE ENVIRONMENT.........................................................................................................38
11. OTHER CONTROVERSIES............................................................................................................................38
SOME IRONIC FACTS ABOUT THE IFIS:...............................................................................................................38
CRITICISM BY SOME FAMOUS PERSONALITIES......................................................................................................39
WHY DO COUNTRIES SIGN AGREEMENTS WITH THE IFI’S IF THE CONSEQUENCES ARE ULTIMATELY NEGATIVE? ...............39
IMF & THE 3RD WORLD................................................................................................................................39
RESPONSE TO CRITICISM .....................................................................................................................41
SUGGESTIONS............................................................................................................................................42
CONCLUSION.............................................................................................................................................42
Page 3 of 42
Financial System
These are the five main parts that together make up financial system:
1. Money
To pay for purchases and store wealth
2. Financial Instruments
To transfer wealth from savers to investors and to transfer risk to those best equipped to
bear it.
3. Financial Markets
Buy and sell financial instruments
4. Financial Institutions.
Provide access to financial markets (a finical intermediary)
“A financial institution is an institution that provides financial services for its clients
or members.”
Financial institutions are often regulated be Government bodies
5. Central Banks
Monitor financial Institutions and stabilize the Economy
Financial Institutions
Financial Institutions are one important pillar of the financial system. Their main
functions include:
• Reduce transactions cost by specializing in the issuance of standardized securities
• Reduce information costs of screening and monitoring borrowers.
• Issue short term liabilities and purchase long-term loans.
International Financial Institutions

Definition
International Financial Institutions (IFIs) refers to financial institutions that have been
established (or chartered) by more than one country and hence are subject to international
law.
Page 4 of 42
Explanation
Their owners or shareholders are generally national governments, although other
international institutions and other organisations occasionally figure as shareholders. The
most prominent IFIs are creations of multiple nations, although some bilateral financial
institutions (created by two countries) exist and are technically IFIs. Many of these are
multilateral development banks.
The best-known IFIs are the World Bank, the IMF, and the regional development banks.
Some of the IFIs are considered UN agencies.
Types of International Financial Institutions

The IFIs can be classified into following main categories:
Bretton Woods institutions

The best-known IFIs were established after World War II to assist in the reconstruction of
Europe and provide mechanisms for international cooperation in managingthe global
financial system.
Examples: They include the World Bank, the IMF, the International Finance
Corporation, and other members of the World Bank Group.
Regional development banks

The regional development banks consist of several regional institutions that have
functions similar to the World Bank group's activities, but with particular focus on a
specific region. Shareholders usually consist of the regional countries plus the major
donor countries.
Examples: The best-known of these regional banks cover regions that roughly
correspond to United Nations regional groupings, including the Inter-American
Development Bank (which works in the Americas, but primarily for development in Latin
America and the Caribbean); the Asian Development Bank; the African Development
Bank; and the European Bank for Reconstruction and Development.
Bilateral development banks

Bilateral development banks are financial institutions set up by individual contries to
finance development projects in developing countries and emerging markets.
Examples: include the Netherlands Development Finance Company FMO and the
German Development Bank DEG.
Other regional financial institutions

Several regional groupings of countries have established international financial
institutions to finance various projects or activities in areas of mutual interest.
Examples: The largest and most important of these is the European Investment Bank, an
institution established by the members of the European Union.
Other examples include the Black Sea Development Bank, the International Investment
Bank (established by the countries of the former Soviet Union and Eastern Europe), the
Islamic Development Bank and the Nordic Investment Bank.
Page 5 of 42
History
Our main focus of our project is on the Bretton-Woods sister IFIs the International
Monetary Fund (IMF) and the World Bank so we added a brief history of these
institutions too.
Need for the IFIs

After the Great Depression in the 1930s there was a need for an organization to create a
system for exchange rate stability
Countries’ economies were adversely affected by WWII . There was a need for
reconstruction in well-developed nations. And also need for development in the lesser
developed nations
The World Bank and the International Monetary Fund were created in the aftermath of
World War II, to direct investments to the neediest countries of the world, the Bank, and
to ensure international monetary cooperation, the Fund.
However, these International Financial Institutions (IFIs) have changed their roles over
the last few decades, becoming international advocates of controversial economic
policies in developing countries. The governance of the Bank and the Fund is severely
skewed towards rich countries which dominate decision-making in these institutions.
Bretton woods conference

Meeting at Bretton Woods, N.H. (July 1–22, 1944), during World War II to make
financial arrangements for the postwar world after the expected defeat of Germany and
Japan. In the summer of 1944, delegates from 44 countries met in the midst of World War
II to reshape the world's international financial system.
The location of the meeting - in the plush Mount Washington Hotel in rural Bretton
Woods, New Hampshire - was designed to ensure that the delegates would have no
distractions, and no pressure from lobbyists or Congressmen, as they worked on their
plans for post-war reconstruction.
The meeting was born out of the determination by US President Franklin D Roosevelt
and UK Prime Minister Winston Churchill to ensure post-war prosperity through
economic co-operation, avoiding the economic conflicts between countries in the 1930s
that they believed contributed to the drift to war.
The principal negotiators at the meeting were the US, represented by the US Treasury's
Harry Dexter White, and the UK's John Maynard Keynes, who was serving as UK
Treasury adviser despite declining health.
Page 6 of 42
And chairing the proceedings was Henry Morgenthau, the US Treasury Secretary, from
the only country that was likely to emerge from the war with a strengthened economy.
President Roosevelt told the conference: "The economic health of every country is a
proper matter of concern to all its neighbors, near and distant.”
How IFIs work?

The Fund offers its programs to a government in need. The government is, however, said
to 'own' the program.
At the outset it signs a so-called Letter of Intent which lays out the elements of the
recovery plan and in return the Fund commits itself to grant loans in stages as and when
economic targets specified in the Letter are achieved. These will include cutting budget
deficits and inflation.
But today there are other components in IMF programs that have become more
important. In East Asia the Fund demanded the reform of the banking system in Thailand
and Indonesia and the introduction of proper formal accounting systems in South Korea.
Similarly the Bank now looks more at the long-term strategic goals of an economy than
at traditional development schemes such as new highways and dams.
One of the World Bank's priorities is therefore its commitment to achieve the Millennium
Development Goals (as agreed upon in Monterrey), which were designed to significantly
reduce the indebtedness of developing countries. These new approaches are gradually
taking hold as the influence of globalization becomes more apparent. The emphasis is on
providing better guiding and flanking measures whilst at the same time providing greater
coherence with the objectives pursued by other UN organizations. In addition, developing
countries want to have a greater say regarding the make-up of the IFI's structures, despite
their limited contribution to these bodies.
The IMF
The International Monetary Fund (IMF) is an international organization that oversees the
global financial system by following the macroeconomic policies of its member
countries, in particular those with an impact on exchange rates and the balance of
payments. It is an organization formed to stabilize international exchange.
The IMF was formally organized on December 27, 1945, when the first 29 countries
signed its Articles of Agreement. Now, the IMF has huge influence in the world economy.
It is a specialized agency of the United Nations but has its own charter, governing
structure, and finances. Its members are represented through a quota system broadly
based on their relative size in the global economy.
 The IMF has 185 member countries.

 The headquarter of the IMF is in Washington D.C.
Page 7 of 42
 IMF’s unit of account is SDR (-SDRs will further be elaborated later in this
report-).
 The current Managing Director of IMF is a French Jew named Dominique
Strauss-Kahn .
Balance of payments difficulties or to assist with poverty reduction. The IMF works with
other international organizations to promote growth and poverty reduction. It also
interacts with think tanks, civil society, and the media on a daily basis. [or at least that’s
what they say,- in the later half ( the critical review part) of this report you’ll see the
what the IMF is really doing-]
Purposes
Following are the main Articles of Agreement of the IMF:
i) promote international monetary cooperation
ii) expansion and balanced growth of international trade
iii) promote exchange rate stability
iv) help establish multilateral system of payments and eliminate foreign exchange
restrictions
v) make resources of the Fund available to members
vi) Shorten the duration and lessen the degree of disequilibrium in international balances
of payments
However, the real undisclosed purposes that the critics argue upon are highly
controversial and completely different from the above articles.
Source of Funding
Where does IMF get it’s money? The IMF gets the funding for the loans from the
following sources:
1. The Quota system

Most of the funding comes from the quota subscriptions.
“It is the money each member contributes when joining the IMF.”
2. Gold holdings
Total gold holdings 103.4 million ounces (3,217 metric tons). IMF is the third largest
official holder of gold in the world.
The IMF’s total gold holdings are valued on its balance sheet at SDR 5.9 billion (about
$8.7 billion) on the basis of historical cost. As of March 31, 2009, the IMF's holdings
amounted to $94.8 billion (at then current market prices).
Page 8 of 42
IMF is prohibited from buying gold or engaging in other gold transactions.85% majority
(of total voting power) needed for sale and purchase of gold.
How and when the IMF used gold

Outflows of gold from the IMF's holdings occurred under the original Articles of
Agreement through sales of gold for currency, and via payments of remuneration and
interest. As noted, since the Second Amendment of the Articles of Agreement, outflows
of gold can only occur through outright sales. Key gold transactions included:
• Sales for replenishment (1957-70). The IMF sold gold on several occasions to
replenish its holdings of currencies.
• South African gold (1970-71). The IMF sold gold to members in amounts
roughly corresponding to those purchased from South Africa during this period.
• Investment in U.S. government securities (1956-72). In order to generate income
to offset operational deficits, some IMF gold was sold to the United States and the
proceeds invested in U.S. government securities. Subsequently, a significant
buildup of IMF reserves prompted the IMF to reacquire this gold from the U.S.
government.
• Auctions and "restitution" sales (1976-80). The IMF sold approximately one
third (50 million ounces) of its then-existing gold holdings following an
agreement by its members to reduce the role of gold in the international monetary
system. Half of this amount was sold in restitution to members at the then-official
price of SDR 35 per ounce; the other half was auctioned to the market to finance
the Trust Fund, which supported concessional lending by the IMF to low-income
countries.
• Off-market transactions in gold (1999-2000). In December 1999, the Executive
Board authorized off-market transactions in gold of up to 14 million ounces to
help finance the IMF's participation in the Heavily Indebted Poor Countries
(HIPC) Initiative. Between December 1999 and April 2000, separate but closely
linked transactions involving a total of 12.9 million ounces of gold were carried
out between the IMF and two members (Brazil and Mexico) that had financial
obligations falling due to the IMF. In the first step, the IMF sold gold to the
member at the prevailing market price and the profits were placed in a special
account invested for the benefit of the HIPC Initiative. In the second step, the IMF
immediately accepted back, at the same market price, the same amount of gold
from the member in settlement of that member's financial obligations. In the end,
these transactions left balance of the IMF's holdings of physical gold unchanged.
3. Borrowing arrangements
If necessary, the IMF may borrow from a number of its financially strongest member
countries to supplement the resources available from its quotas. It has done so on several
occasions when borrowing countries needed large amounts of financing and a failure to
help them might have put the international monetary system at risk.
The IMF maintains two standing multilateral borrowing arrangements
1. the New Arrangement to Borrow (NAB)
2. the General Arrangements to Borrow (GABs)
Page 9 of 42
GAB
“Line of credit set up with several governments and banks throughout the world”
The General Arrangements to Borrow (GAB) was established in 1962 as a borrowing

facility between the IMF and the G10 (in 1962, the G10 consisted of eight industrialized
nations – Belgium, Canada, France, Italy, Japan, the Netherlands, the UK and the US –
and the central banks of two others – Germany and Sweden; the composition of the G10
has since changed); the G10 agreed in advance to a maximum amount it would loan to
the Fund in the event the Fund needed additional resources to finance drawings made by
member nations. The IMF repays the GABs less than a year later, following quota
increases.
The GAB has been utilized several times throughout the IMF's history, most recently In
February 2009, the IMF signed a bilateral borrowing agreement with Japan. For US$100
billion (about SDR 68 billion)
4. Interest charges and Fees

The IMF also earns income from the interest charges and fees levied on its loans. It uses
this income to meet funding costs, pay for administrative expenses, and maintain
precautionary balances.
Functions
The work of the IMF is of three main types:
 Surveillance
 Technical Assistance
 Lending
in addition to these three IMF also plays an important role in the fight against money-
laundering and terrorism
Surveillance
IMF’s regular monitoring of economies and associated provision of policy advice known
as surveillance.
The IMF oversees the international monetary system and monitors the financial and
economic policies of its members. It keeps track of economic developments on a
national, regional, and global basis
Technical Assistance
To assist mainly low- and middle-income countries in effectively managing their
economies, the IMF provides practical guidance and training on how to upgrade
institutions, and design appropriate macroeconomic, financial, and structural policies.
Page 10 of 42
Lending
The IMF provides loans to countries that have trouble meeting their international
payments and cannot otherwise find sufficient financing on affordable terms.
This financial assistance is designed to help countries restore macroeconomic stability by

rebuilding their international reserves, stabilizing their currencies, and paying for imports
—all necessary conditions for relaunching growth. The IMF also provides concessional
loans to low-income countries to help them develop their economies and reduce poverty
A country in severe financial trouble, unable to pay its international bills, poses potential
problems for the international financial system, which the IMF was created to protect.
Any member country, whether rich, middle-income, or poor, can turn to the IMF for
financing if it has a balance of payments need—that is, if it cannot find sufficient
financing on affordable terms in the capital markets to make its international payments
and maintain a safe level of reserves.
The changing nature of lending:
About four out of five member countries have used IMF credit at least once. But the
amount of loans outstanding and the number of borrowers have fluctuated significantly
over time.
In the first two decades of the IMF's existence, more than half of its lending went to
industrial countries. But since the late 1970s, these countries have been able to meet their
financing needs in the capital markets.
The oil shock of the 1970s and the debt crisis of the 1980s led many lower- and lower-
middle-income countries to borrow from the IMF.
In the 1990s, the transition process in central and Eastern Europe and the crises in
emerging market
economies led to a further
increase in the demand
for IMF resources.
In 2004, benign economic
conditions worldwide
meant that many
countries began to repay
their loans to the IMF. As
a consequence, the
demand for the Fund’s
resources dropped off
sharply (see graph).
But in 2008, the IMF

began making loans again
Page 11 of 42
to countries hit by the financial crisis and high food and fuel prices. In late 2008 and early
2009 the IMF lent $60 billion to emerging markets affected by the crisis.
While the financial crisis has sparked renewed demand for IMF financing, the decline in
lending that preceded the financial crisis also reflected a need to adapt the IMF's lending
instruments to the changing needs of member countries. In response, the IMF conducted
a wide-ranging review of its lending facilities and terms on which it provides loans.
In March 2009, the Fund announced a major overhaul of its lending framework,
including modernizing conditionality, introducing a new flexible credit line, enhancing
the flexibility of the Fund’s regular stand-by lending arrangement, doubling access limits
on loans, adapting its cost structures for high-access and precautionary lending, and
streamlining instruments that were seldom used. It has also speeded up lending
procedures and redesigned its Exogenous Shocks Facility to make it easier to access for
low-income countries.
Three main purposes of lending
Article I of the IMF's Articles of Agreement states that the purpose of lending by the IMF
is "...to give confidence to members by making the general resources of the Fund
temporarily available to them under adequate safeguards, thus providing them with
opportunity to correct maladjustments in their balance of payments without resorting to
measures destructive of national or international prosperity."
In practice, the purpose of the IMF's lending has changed dramatically since the
organization was created. Over time, the IMF's financial assistance has evolved from
helping countries deal with short-term trade fluctuations to supporting adjustment and
addressing a wide range of balance of payments problems resulting from terms of trade
shocks, natural disasters, post-conflict situations, broad economic transition, poverty
reduction and economic development, sovereign debt restructuring, and confidence-
driven banking and currency crises.
Today, IMF lending serves three main purposes.
1. First, it can smooth adjustment to various shocks, helping a member country avoid
disruptive economic adjustment or sovereign default, something that would be extremely
costly, both for the country itself and possibly for other countries through economic and
financial ripple effects (known as contagion).
2. Second, IMF programs can help unlock other financing, acting as a catalyst for other
lenders. This is because the program can serve as a signal that the country has adopted
sound policies, reinforcing policy credibility and increasing investors' confidence.
3. Third, IMF lending can help prevent crisis. The experience is clear: capital account
crises typically inflict substantial costs on countries themselves and on other countries
through contagion. Today, IMF lending serves three main purposes.
Page 12 of 42
Main lending facilities
The Stand-By Arrangement is a key lending facility established in 1952. Although its use
has been declining in recent years, it has remained the most popular facility for middle-
income countries that seek financial assistance. Under its structure, financing is provided
in support of adjustment to a balance of payments need and disbursed in tranches based
on conditions spelled out in the program. The IMF's largest loans have traditionally been
provided under SBAs.
LOAN INSTRUMENTS : briefly

1. Stand-By Arrangements (SBA):
o Countries address short-term BOP problems
o Provided greatest amount of IMF resources
o The length is typically 12-24 months
o Repayment within 2¼-4 years
o Surcharges apply to high access levels
2. Poverty Reduction and Growth Facility (PRGF) & Exogenous Shocks Facility (ESF):
o Low-income countries
o Largest number of IMF loans in recent years.
o Interest rate 0.5 percent
o Repaid over a period of 5½-10 years.
3. Extended Fund Facility (EFF):
o Countries with longer-term BOP problems
o Arrangements under usually 3 years.
o Repayment within 4½-7 years
o Surcharges apply to high levels of access.
4. Supplemental Reserve Facility (SRF):
o Short-term financing on a large scale
o Repayment within 1-1½ years.
o Surcharge of 3-5 percent
5. Short-Term Liquidity Facility (SLF):
o Countries with pure liquidity shocks
o Short duration
o Access limit of 500 % of quota
o Maturity of 3 months
o Renewal up to two times within a year
6. Compensatory Financing Facility (CFF):
o Countries experiencing a sudden shortfall in export earnings
o Increase in the cost of cereal imports
o Carry no surcharge
7. Emergency assistance:
o Countries that have experienced a natural disaster
o Emerging from conflict
o Subject to the basic rate of charge
Page 13 of 42
o Interest subsidies are available

o Must be repaid within 3¼-5 years.
8. The IMF has introduced a new Flexible Credit Line (FCL) for countries with very
strong fundamentals, policies, and track record of policy implementation.
Quotas
Definition
The IMF is working on wide-ranging reforms to make sure it meets the needs of its
member countries. One of the most important elements is governance reform, which
involves adjusting quota shares to better reflect the relative weight of member countries
in the world economy and enhancing the voice and participation of low-income members
within the institution.
IMF decides on the quota for each member, richer countries have larger quota. Each
member country of the IMF is assigned a quota, based broadly on its relative size in the
world economy and characteristics .Quotas are denominated in Special Drawing Rights
(SDRs), the IMF's unit of account. US, having largest economy, provides 44% of the total
quota US has largest voting power 17.09%.
Quotas are reviewed every 5 years by the IMF. They are calculated by a formula. Quotas
also determine how much each member can borrow from the IMF when in need of aid.
Page 14 of 42
Quotas of some Member: [Table]
The Multifaceted Role of Quotas

Currently, a member's quota plays a key role in defining four aspects of that member's
relationship with the IMF:
(1) The amount of financial resources that a member contributes to the IMF;
(2) The member's voting power in institutional decision making (along with basic votes);
(3) The level of access of the member to IMF financing; and
(4) The members' share of general Special Drawing Rights (SDR) allocations.
When is a country in need?

A country that had not taken in enough foreign currency to pay the other countries for
what they have bought. Spends more money than it takes in. So the gap between earnings
and payment is covered by taking loans from these IFI’s. That’s why IMF will lend
foreign exchange to that member hoping to stabilize its currency which will strengthen its
trade.
How much can a member borrow from the IMF?
Basically 25% of the country’s quota may be used. If this still is not sufficient, then
members can borrow up to 3 times the amount of its quota. In order to do so the country
Page 15 of 42
(in need) present plans for reform to Executive Directors. If these plans are sufficient for
the Executive Directors, the IMF grants the member a loan.
Special Drawing Rights (SDRs)
The SDR is an international reserve asset, created by the IMF in 1969 to supplement the
existing official reserves of member countries. SDRs are allocated to member countries in
proportion to their IMF quotas. The SDR also serves as the unit of account of the IMF
and some other international organizations. Its value is based on a basket of key
international currencies.
A country participating in this system needed official reserves—government or central

bank holdings of gold and widely accepted foreign currencies—that could be used to
purchase the domestic currency in world foreign exchange markets, as required
maintaining its exchange rate.
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.
SDR Valuation
The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold
—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the
Bretton Woods system in 1973, however, the SDR was redefined as a basket of
currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar.
in November 2005, the weights of the currencies in the SDR basket were revised based
on the value of the exports of goods and services and the amount of reserves denominated
in the respective currencies which were held by other members of the IMF. These
changes became effective on January 1, 2006.next revision will be in 2010.
With effect from January 1, 2006, the IMF has determined that the four currencies that
meet both selection criteria for inclusion in the SDR valuation basket will be assigned the
following weights based on their roles in international trade and finance: U.S. dollar (44
percent), euro (34 percent), Japanese yen (11 percent), and pound sterling (11 percent).
How is SDR calculated?

Monday, May 11, 2009
Weights Currency amount under U.S. dollar
Currency Exchange rate 1
Rule O-1 equivalent
Euro 44% 0.4100 1.35910 0.557231
Page 16 of 42
Japanese yen 34% 18.4000 97.89000 0.187966

Pound sterling 11% 0.0903 1.51090 0.136434
U.S. dollar 11% 0.6320 1.00000 0.632000
1.513631
U.S.$1.00 = SDR 0.660663 2
SDR1 = US$ 1.51363 4
Notes: (1) The exchange rate for the Japanese yen is
expressed in terms of currency units per U.S.
dollar; other rates are expressed as U.S. dollars
per currency unit.
SDR Interest Rate

The IMF also reviewed the method for determining the SDR interest rate and decided to
continue to set the weekly interest rate on the basis of a weighted average of interest rates
on short-term instruments in the markets of the currencies included in the SDR valuation
basket. However, the IMF has modified the representative interest rate for the euro, the
three-month Euribor (Euro Inter-bank Offered Rate). The interest rate on the three-month
United States and United Kingdom Treasury bills, and on the Japanese Government
thirteen-week financing bills, will continue to serve as the representative interest rates for
the U.S. dollar, pound sterling, and Japanese yen, respectively.
SDR Interest rate calculation

For the week of May 11, 2009 to May 17, 2009
(Data as of Friday, May 08, 2009)
Currency
Exchange rate
amount
Currency against the SDR 1 Interest rate 2 Product
under Rule O-1
(B) (C) (A) x (B) x (C)
(A)
Euro 0.4100 0.893571 0.7330 0.2685

Japanese Yen 18.4000 0.00670294 0.1950 0.0241
U.K. Pound Sterling 0.0903 1.0012 0.5500 0.0497
U.S. Dollar 0.6320 0.665602 0.1800 0.0757
Total 0.4180
SDR Interest Rate 3 0.42
Note: SDR per currency rates are based on the representative exchange rate for each
currency.
Potential pitfalls as a reserve currency

There are potential pitfalls of using the SDR as a reserve currency.
Page 17 of 42
• The current SDR is a relatively small basket of currencies; this is both a strong
point and weak point of the SDR.
• The US Dollar, Euro and UK Pound are contained in the SDR -- these currencies
have been losing value against a larger basket of secondary reserve currencies since the
late 2000s recession started in 2007.
• The SDR does not contain Chinese Yuan, Indian Rupee, Australian Dollar or
Canadian Dollar, which are important benchmark or secondary global reserve currencies.
• The lack of global banking support for consumers (that is to say private persons
and businesses) for the SDR.
Pakistan and IMF

Lending History:
Why does Pakistan need IMF?

As Pakistan is a developing country and has a struggling economy (i.e. devalued Rupee,
Political & economic instability, a monstrous 25% Inflation and a declining GDP etc...)
we often have to turn to IMF for help.
Pakistan gets loans from IMF for the following main purposes:
 Balance of payment deficits.

 Stabilization of currency.
 Rebuilding international reserves
 Managing liquidity problems.
History & Current Prospects:
Page 18 of 42
[* this graph is taken from IMF’s official site=== the first column shows the lending
instruments (explained earlier) used]
o Since 1988, 11 loan arrangements have taken place.
o Six loan arrangements were made during the regime of Benazir Bhutto.
o Two of them were made during Nawaz Sharif regime.
o Two under Musharraf regime (to stabilize the economy).
o One IMF loan is made in current regime. (It was a hard step for a newly formed
government to ask for IMF’s aid, just shortly after coming to power)
o 44% of the total lending amount has been drawn from the original 100% agreed
upon lending amount.
Page 19 of 42
IMF’s attitude towards us
As we all know that IMF attitude towards developing nations has always been
humiliating so same is the case with Pakistan as this report also shows:
Article from the News about the latest (24th Nov 2008) loan :
After minor changes in the 11-point agenda of

the International Monetary Fund (IMF), the
Pakistan government has agreed to gradually
impose the Central Excise Duty (CED) on
services and agriculture sectors at the rate of eight to 18 per cent in place of the General Sales
Tax (GST), The News learnt here on Saturday.
“In view of the IMF demand, the Pakistani currency will also be devalued after slight changes
in the discount rate and exchange rate will be decreased officially by six to seven per cent,” an
official in the Ministry of Finance disclosed, wishing to remain anonymous.
Moreover, the official said the release of 60 per cent funds for the next three quarters of the
current financial year, under the Public Sector Development Program (PSDP), would be
reviewed downward to 45 per cent.
According to the official, the foreign assistance flow had already declined by 40 per cent
because donors have refused to provide funds for new projects at the federal and provincial
levels under the PSDP against the ongoing projects funded by the Japan-IBRD, the World
Bank, the Islamic Development Bank and the Asian Development Bank.
The IMF proposal received by the federal government in the last week of October contained
16 conditions having 180 points that were discussed in four meetings between Pakistani and
IMF officials in Dubai, 1 the official disclosed.
The official said that major conditions accepted by the Pakistan government included changes
in the Islamic Development Bank loans and differentiation between loans and grants,
devaluation of rupee, freezing of non-development expenditure under the defense budget for
the last three quarters of the current financial year, non-provision of supplementary grants to
government departments, ending subsidy on gas and electricity, 20 per cent reduction in non-
development expenditure of civil departments and federal ministries, increase in markup rate
of banks and on inter-bank transactions, uniformity in the inter-bank and open market dollar
exchange rate and stoppage of government financial intervention in stock markets.
Under the conditions accepted by the government, the IMF will be informed at the time of the
issuance of credit line by any international financial institution, including the World Bank or
immediately after it, I the official said.
The matters on which the government and its financial managers have differed with the IMF
include release of $1.5 billion to$2 billion for the current financial year under the annual
assistance package, I he said.
The government wants the IMF to provide $3 billion and another $1.5 billion to $2 billion for
adjustment of the loan installments and maintenance of the balance of payments during the
current financial year, said the official.
Page 20 of 42
The World Bank

The World Bank is an international financial institution that
provides financial and technical assistance to developing
countries for development programs (e.g. bridges, roads,
schools, etc.) with the stated goal of reducing poverty.
History
World bank came lnto existance on 27th December, 1945. it is the part of the United
Nations with different governance structure.
The World Bank is one of two major financial institutions created as a result of the
Bretton Woods Conference in 1944. The International Monetary Fund, a related but
separate institution, is the second. Delegates from a wide variety of countries attended the
Bretton Woods Conference, but the most powerful countries in attendance, the United
States and Britain, mainly shaped negotiations.
World Bank conceived during World War II at Bretton Woods, New Hampshire, the
World Bank initially helped rebuild Europe after the war. Its first loan of $250 million
was to France in 1947 for post-war reconstruction. Reconstruction has remained an
important focus of the Bank's work, given the natural disasters, humanitarian
emergencies, and post conflict rehabilitation needs that affect developing and transition
economies. The first president of World Bank was Eugene Meyer (June 1946–December
1946) and current president is Robert Zoellick.
Objective
The World Bank provides over $20 billion in assistance to developing and transition
countries every year. The Bank's projects and policies affect the lives and livelihoods of
billions of people worldwide - sometimes for the better, but very often in controversial
and problematic ways.
World Bank: a Bank?

The World Bank isn’t like the usual conventional banks. A single person cannot open an
account or ask for a loan. Rather, the Bank provides loans, grants and technical
assistance to countries and the private sector to reduce poverty in developing and
transition countries.
Purposes
World Bank background and objectives have expanded and evolved over the years. The
original purpose and objectives as the International Bank for Reconstruction and
Development was a facilitator role in post-war reconstruction. Since 1944, this role has
expanded and World Bank's objectives have grown to develop its current mandate to
Page 21 of 42
alleviate worldwide poverty. They work closely with their affiliate, the International
Development Association.
With all this expansion and growth, World Bank's original focus has not changed. Today,
reconstruction remains a top priority in such situations as:
• Natural disasters
• Needs affecting developing economies
• Post conflict rehabilitation
• Needs affecting a transitioning economy
Difference between World Bank and the IMF
Most people have only the vaguest idea of what these institutions do, and very few people
indeed could, if pressed on the point, say why and how they differ. Even John Maynard
Keynes, a founding father of the two institutions and considered by many the most
brilliant economist of the twentieth century, admitted at the inaugural meeting of the
International Monetary Fund that he was confused by the names: he thought the Fund
should be called a bank, and the Bank should be called a fund. Confusion has reigned
ever since.
Both international organizations are known as the Bretton Woods Institutions. The actual
differences between the two organizations, in reality, can be somewhat mixed. However,
by principle, the IMF concerns itself with macroeconomics issues, such as balance of
payment issues, international trade policy, and exchange rates. The founding idea was
that there was a need for collective action on the international level for financial stability.
The World Bank, ideally, is to deal with issues more related to structure within a country,
such as how and what the government spends money on, financial institutions, labor
markets and trade policies. The World Bank concerns itself more with development
projects, which have been controversial in the past, such as dam construction.
Both institutions are major advocates of neo liberal concepts such as the ability of the
free market to solve many global economic problems.
We’ve listed down the main differences in a tabular form. So they could be understood
with a minimum time and effort:
International Monetary Fund World Bank
1 Purposes seeks to promote the economic

oversees the international monetary development of the world's poorer
system countries
2 Functions assists developing countries through

promotes exchange stability and orderly long-term financing of development
exchange relations among its member projects and programs
countries
Page 22 of 42
3 Recipients of Funding provides to the poorest developing

assists all members--both industrial and countries whose per capita GNP is less
developing countries--that find than $865 a year special financial
themselves in temporary balance of assistance through the International
payments difficulties by providing Development Association (IDA)
short- to medium-term credits
4 Operations encourages private enterprises in

supplements the currency reserves of its developing countries through its affiliate,
members through the allocation of the International Finance Corporation
SDRs (special drawing rights); to date (IFC)
SDR 21.4 billion has been issued to
member countries in proportion to their
quotas
5 Source of Funding
draws its financial resources principally acquires most of its financial resources by
from the quota subscriptions of its borrowing on the international bond
member countries market
6 Capital has an authorized capital of $184 billion,

has at its disposal fully paid-in quotas of which members pay in about 10
now totaling SDR 145 billion (about percent
$215 billion)
7 Size and Structure

• has a staff of 2,300 drawn from has a staff of 7,000 drawn from 180
182 member countries member countries
• has no affiliates or subsidiaries
•
Millennium Development Goals (MDGs)

The World Bank's current focus is on the achievement of the Millennium Development
Goals (MDGs), lending primarily to "middle-income countries" at interest rates which
reflect a small mark-up over its own (AAA-rated) borrowings from capital markets; while
the IDA provides low or no interest loans and grants to low income countries with little
or no access to international credit markets. The IBRD is a market-based nonprofit
organization, using its high credit rating to make up for the relatively low interest rate on
its loans, while the IDA is funded primarily by periodic "replenishments" (grants) voted
to the institution by its more affluent member countries.
Page 23 of 42
In light of the enormous challenge facing the global community to eradicate poverty --
which affects nearly half of the world’s population living on less than $2 dollars a day --
the international development community in 2000 adopted specific targets for poverty
reduction, now known as the Millennium Development Goals (MDGs). The MDGs
constitute 8 basic poverty reduction goals ranging from access to social services and
gender equity to environmental sustainability. The overarching goal is to halve income
poverty worldwide by 2015.
Goal 1: Eradicate extreme poverty and hunger
Goal 2: Achieve universal primary education
Goal 3: Promote gender equality and empower women
Goal 4: Reduce child mortality
Goal 5: Improve maternal health
Goal 6: Combat HIV/AIDS, malaria, and other diseases
Goal 7: Ensure environmental sustainability
Goal 8: Develop a global partnership for development
Improving Living Standards

Across the earth, World Bank objectives touch lives for the better. World Bank
development projects engage people to improve living standards while reducing poverty.
In 2006, the World Bank contributed $23.6 billion for projects worldwide. Current
projects within developing countries like Bosnia, Herzegovina, Mexico and India number
more than 1,800.
Comprehensive Development Framework

In 1998, the World Bank adopted a Comprehensive Development Framework. This
framework directs the development of poverty-reduction strategies and is specifically
designed to reach objectives. It outlines four principles:
Development strategies should be comprehensive and shaped by a long-term vision.
Each country should devise and direct its own development agenda based on citizen
participation.
Government donors, civil society, the private sector and other stakeholders should work
together in partnership led by recipient countries to carry out development strategies.
Development performance should be evaluated on the basis of measurable results.
Detailed assessments track progress made in each country.
A Vital financial source around the world

Currently, the more than 63,000 donor-funded development projects supported worldwide
by the World Wide bank are individually governed by guidelines and procedures put in
place to ensure aid gets into the hands of the poor. As donors coordinate their activities
and synchronize procedures, that capacity within developing countries can be
strengthened and improved.
Since its inception in 1944, World Bank has proven to be a vital financial source around
the world.
Page 24 of 42
World Bank Group

The World Bank differs from the World Bank Group, in that the World Bank comprises
only two institutions:
International Bank for Reconstruction and Development (IBRD)
International Development Association (IDA)
Whereas the latter incorporates these two in addition to three more.
International Finance Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
International Centre for Settlement of Investment Disputes (ICSID)
International Bank for Recosruction and Delopment. (IBRD)

Orign
The foundation of IBRD was laid in the same Bretton Wood conference in which IMF
was established.
Purpose
It was founded in 1944 as a way to finance reconstruction projects in war-ravaged
countries despite their poor creditworthiness.
Functions
The main functions of the bank are :
To assist in process of reconstruction, development and restoration of countries destroyed
by war.
To promote long term balanced growth all around the world.
To encourage international investments for development of the member countries.
To encourage private foreign investments by means of gurantees.
To help member countries in maintenances of equilibrium of BOP.
To play a role so that smooth transition may take place from war time to peace time
economies.
Mode of funding
The IBRD gets its money from regular subscriptions paid by member governments and
by borrowing money on international markets (through selling World Bank bonds). The
Bank then lends that money to borrowing governments at a lower rate than commercial
banks would. Although the IBRD still concentrates on development it operates primarily
in mid-middle-income developing countries; in FY 1994, the IBRD was funded at about
$17 billion.
Loans
The IBRD offers loans to developing country governments for a variety undertakings:
Sectoral loans support reform or infrastructure improvement in a specific economic
sector, i.e., mining, transport, energy, banking, etc.; project loans support the completion
of a specific project, such as a dam, highway or power plant; and macroeconomic loans
assist governments in achieving the economic objectives detailed in a structural
Page 25 of 42
adjustment program (more on structural adjustment programs, below). IBRD loans can
cover the entire cost of a project, but Bank clout attracts many other sources of financing,
especially from the private sector. Recently, the Bank has also started offering support for
private investors themselves, in an effort to attract development money to Southern
countries. Finally, IBRD also offers a host of technical assistance programs to its
developing country members for "capacity building" and "technology transfer."
Membership
To be eligible for IBRD loans, governments must be a member the World Bank, and
comply with Bank-imposed Structural Adjustment Programs (SAPs), which have been
severely criticized by NGOs worldwide as an unnecessarily harsh set of macroeconomic
policies. SAPs are aimed at reducing government budget deficits by decreasing
government expenditure (particularly on social programs), increasing export production,
privatization, and liberalizing trade and investment policies. The purpose of these reforms
is to help countries become more economically robust, creditworthy and able to pay off
its debts. These policies are prerequisites for loan eligibility and often include provisions
for reduced government spending on social services. The Bank offers advice and loans to
help implement SAPs
The International Development Association (IDA)

The World Bank is an internationally supported bank that provides financial help and
technical assistance to developing nations. They do this under the guise of reducing
poverty, although this group is highly controversial.
Orign
In 1959, the US made the resolution for the articles of agreement for IDA and in
September 1960 the IDA was established.
Objectives and functions

In words of articles of agreement of IDA, its function is
“To promote economic development, increase productivity and thus raise standard of
living in the low developed areas of the world.”
The basic idea behind the establishment of IDA was to help those countries who are
facing unfavorable BOP and simultaneously were in need of foreign investment but due
to unfavorable BOP they were facing difficulties to justify incurrence of further debt. IDA
in respect of such countries , help to finance developmental capital projects and long term
fiscal programmes.
And actually It was established to provide confessional (no interest or "soft") loans to the
world's poorest governments.
Loans
IDA's funding priorities are poverty alleviation, environmental protection, and
sustainable development. Its loans, however "soft" they might be, are conditioned by
harsh structural adjustment requirements. IDA and IBRD are often lumped in the same
category, because they lend for the same purposes and focus primarily on government
Page 26 of 42
borrowers. However, IDA funding is considerably lower than that of the World Bank,
amounting to $5.6 billion (about 34% that of IBRD's) in FY 1994.
IDA is considering the establishment of two new financing services to enhance the
private sector. The rationale is that through foreign investment, IDA countries could gain
much-needed infrastructure. The first is a guarantee program that would encourage the
penetration of foreign capital and multinational corporations. The second program is the
IDA Private Investment Fund which would be IDA money managed by the International
Finance Corporation
World Bank’s Areas of operation

The World Bank is active in the following areas:
• Agricultural and Rural • International Economics and
Development Trade
• Conflict and Development • Labor and social protection
• Development Operations and • Law and Justice
Activities • Macroeconomic and Economic
• Economic Policy Growth
• Education • Mining
• Energy • Poverty Reduction
• Environment • Poverty
• Financial Sector • Private Sector
• Gender • Public Sector Governance
• Governance • Rural Development
• Health, Nutrition and Population • Social Development
• Industry • Social Protection
• Information and Communication • Trade
Technologies • Transport
• Information, Computing and • Urban Development
Telecommunications • Water Resources
• Water Supply and Sanitation
Projects of World Bank in Pakistan
Support reforms at both the federal and provincial level.

The Federal and Provincial Governments have been implementing various reform
programs aimed at encouraging growth, investment, and employment generation.
Reforms at the provincial level are specifically aimed at improving delivery of social
services like education, health, clean drinking water, and sanitation.
In June 2007, the World Bank approved a US$350 million credit to support ongoing
implementation of the Government's Poverty Reduction Strategy. At the provincial level,
the Bank approved operations worth US$430 million for Punjab, Sindh and the North
West Frontier Province to help improve irrigation, education and human development
Page 27 of 42
indicators through improvements in public finance, governance and financial regulatory

frameworks. These interventions have been successful in bringing about concrete
changes in delivery of provincial services and thus are social and economic indicators in
these provinces.
Working with Pakistan Poverty Alleviation Fund to bring difference in the lives of
poor.
The World Bank funded Pakistan Poverty Alleviation Fund Project (PPAF) is designed to
reduce poverty and empower the rural and urban poor in Pakistan through the provision
of resources and services to the poor, especially women. This is being achieved through
an integrated approach that includes building institutions of the poor and then providing
them with micro-credit loans; grants for small scale infrastructure projects; training and
skill development and social sector interventions. The program is impacting over 10
million people and has mobilized over 66,000 community organizations (COs) in 27,000
localities across 111 districts in the country. More than 13,000 small scale village-based
projects have been identified, constructed and maintained by communities’ right across
the country benefiting nearly 6 million people. PPAF has issued 1.5 million micro-credit
loans, (average loan-size US$ 150), benefiting nearly 9 million people. Over the last 7
years PPAF has driven the microfinance sector growth from 60,000 borrowers to more
than 1.25 million active borrowers in the sector.
Helping the victims of the Earthquake.
The October 2005 earthquake in Pakistan destroyed or damaged around 575,000 rural
houses, leaving more than 73,000 dead, and rendering over 3 million people without
shelter in North West Frontier Province (NWFP) and Azad Jammu and Kashmir (AJ&K).
In response, the government created the Earthquake Relief and Reconstruction Authority
(ERRA) and launched an ambitious US$1.5 billion owner-driven rebuilding program -
largely suited to the mainly rural affected population. Under ERRA’s Rural Housing and
Reconstruction Program (RHRP), partially funded by the World Bank, homeowners are
given around US$3,000 in installments to build quake-resistant homes - with routine
visits by inspection teams to ensure compliance to agreed seismic-resistant standards.
Owner driven reconstruction and rehabilitation of an estimated 463,000 houses have
begun and is at various stages of completion. The RHRP has disbursed over $1.1 billion
to program beneficiaries or 75 percent of the overall $1.5 billion estimated cost.
Working with the government to improve education outcomes.

The World Bank is providing assistance to the Government of Pakistan in education
reforms, at both the national and the provincial level. This support is provided through
development policy operations with a strong focus on primary and secondary education.
These programs target increasing participation of girls and children from poorer
household through interventions such as student stipends and conditional grant systems
and by working in partnership with the private sector to provide access to low cost
quality education. Our work has a strong focus on improving the quality of education
through initiatives such as the National Education Assessment System (NEAS), which
Page 28 of 42
measures student achievement and uses the findings to address gaps in student learning.
NEAS has established, piloted and improved assessment mechanisms and instruments,
which are now being regularly administered.
Joining with international partners to help Pakistan fight polio.

As part of our efforts to help eradicate polio globally, we approved two projects
US$42.71 million in 2003 and US $ 74.27 million in 2006 for Pakistan to purchase the
oral polio vaccine. The money is part of an innovative financing partnership (IDA Buy-
down) between the World Bank, the Bill & Melinda Gates Foundation, Rotary
International, and the United Nations Foundation. These organizations have formed the
Investment Partnership for Polio, an initiative to help eradicate polio worldwide. The loan
to Pakistan will help the country’s Polio Eradication Initiative which aims to make
Pakistan a Polio free country.
Helping Pakistan prevent the spread of HIV/AIDS.
The HIV-AIDS situation is changing rapidly in Pakistan; the latest data indicate a
concentrated epidemic among injecting drug users in several cities. The key challenge
facing the country is to expand and improve quality of HIV preventive services to
vulnerable groups that are most at risk of contracting and transmitting the disease. These
include sex workers and injecting drug users. The Bank is supporting the Government
efforts to control AIDS through the HIV/AIDS Prevention Project designed to prevent the
disease from becoming established in these populations, while at the same time working
to protect these groups from stigmatization. A key focus of the project is delivery of HIV
preventive services to high risk populations through public-private partnerships. A total of
17 service delivery packages for injecting drug users (IDUs), sex workers, truckers and
jail inmates have been contracted out to NGOs by the National and Provincial AIDS
Control Programs covering most major cities across the country.
The World Bank: relying on local expertise
Around 90 percent of our staff in Islamabad office, plus additional staff in our
Washington office are Pakistanis. While a large part of World Bank’s value is it’s global
experience and expertise, local knowledge is indispensable to effective development. We
also work closely with the Pakistan government, civil society and communities in
designing our support for the country. Most importantly our overall assistance to the
country is specifically designed to support its own development goals. We have periodic
client satisfaction surveys through which we assess how our services are perceived by a
cross section of society including the government, private sector, civil society, academia,
and media etc. These polls are carried out globally by reputed international firms.
Evaluating Results
It’s one thing to set goals and objectives, but without an effective way to measure the
results it's difficult to know if they are effectively being met.
Page 29 of 42
Asian Development Bank

The Asian Development Bank (ADB) is a regional development bank established in 1966
to promote economic and social development in Asian and Pacific countries through
loans and technical assistance. It is a multilateral development financial institution owned
by 67 members (as of 2 February 2007), 48 from the region and 19 from other parts of
the globe. ADB's vision is a region free of poverty. Its mission is to help its developing
member countries reduce poverty and improve the quality of life of their citizens.
Aim: The work of the Asian Development Bank (ADB) is aimed at improving the
welfare of the people in Asia and the Pacific, particularly the 1.9 billion who live on less
than $2 a day. Despite many success stories, Asia and the Pacific remains home to two
thirds of the world's poor.
The bank was conceived with the vision of creating a financial institution that would be
"Asian in character" to foster growth and cooperation in a region that back then was one
of the world's poorest. ADB raises funds through bond issues on the world's capital
markets, while also utilizing its members' contributions and earnings from lending. These
sources account for almost three quarters of its lending operations.
The primary human capital asset of the bank is its staff of professionals, encompassing
academic and/or practical experts in the areas of agriculture, civil engineering,
economics, environment, health, public policy and finance. Professional staff are drawn
from its member countries and given various incentives to relocate to Manila.
It is conceivable that once all of Asia-Pacific reaches a certain level of living standard the
bank will be wound down or reconfigured to operate as a commercial enterprise.
Organization
The highest policy-making body of the bank is the Board of Governors composed of one
representative from each member state. The Board of Governors, in turn, elect among
themselves the 12 members of the Board of Directors and their deputy. Eight of the 12
members come from regional (Asia-Pacific) members while the others come from non-
regional members.
The Board of Governors also elect the bank's President who is the chairperson of the
Board of Directors and manages ADB. The president has a term of office lasting five
years, and may be reelected. Traditionally, and because Japan is one of the largest
shareholders of the bank, the President has always been Japanese. The current President
is Haruhiko Kuroda.
The headquarters of the bank is at 6 ADB Avenue, Mandaluyong City, Metro Manila,
Philippines, and it has representative offices around the world. The bank employs
approximately 2,400 people, coming from 55 of its 67 member countries, and with more
than half of the staff being Filipino.
Page 30 of 42
Lending
ADB's annual project lending amounts to about US$7 billion per year with typical
lending per project being in the $100 million range.
Notable Projects
 Afghan Diaspora Project
 Funding Utah State University led projects to bring labor skills in
Thailand
 Earthquake and Tsunami Emergency Support Project in Indonesia
 Greater Mekong Subregional Program
 ROC Ping Hu Offshore Oil and Gas Development
 Solar energy development funds in India
 Strategic Private Sector Partnerships for Urban Poverty Reduction in the
Philippines
 Trans-Afghanistan Gas Pipeline Feasibility Assessment
 Loan of $1.2 billion to bail it out of an impending economic crisis in
Pakistan
Members
ADB has 67 members (Georgia being the 67th member joined in 2007)
Islamic Development Bank

Islamic Development Bank (also known as IsDB), is a multilateral development
financing institution located in Jeddah, Saudi Arabia.
Establishment
The Islamic by the Conference of Finance Ministers of Muslim Countries held in Jeddah
in Dhul Q'adah 1393H, corresponding to December 1973. The Inaugural Meeting of the
Board of Governors took place in Rajab 1395H, corresponding to July 1975, and the
Bank was formally opened on 15 Shawwal 1395H corresponding to 20 October 1975.
On the basis of paid-up capital, the main shareholders of the Bank are from these
countries:
 Saudi Arabia  UAE
 Sudan  Iran
 Kuwait  Egypt
 Libya  Indonesia
 Turkey  Pakistan
Page 31 of 42
Purpose
The purpose of the Bank is to foster the economic development and social progress of
member countries and Muslim communities individually as well as jointly in accordance
with the principles of Shari'ah i.e., Islamic Law.
Functions
The functions of the Bank are to participate in equity capital and grant loans for
productive projects and enterprises besides providing financial assistance to member
countries in other forms for economic and social development.
The Bank is authorized to accept deposits and to mobilize financial resources through
Shari'ah compatible modes. It is also charged with the responsibility of assisting in the
promotion of foreign trade especially in capital goods, among member countries;
providing technical assistance to member countries; and extending training facilities for
personnel engaged in development activities in Muslim countries to conform to the
Shari'ah.
Shari'ah compatible practices include:

 Istisna'a
 Loan  Equity Participation
 Leasing  Lines of Financing
 Installment Sale
• The unit of account of the bank is the Islamic Dinar.

• The Bank's financial year is the lunar Hijri year.
• The official language of the Bank is Arabic, but English and French are
additionally used as working languages.
Membership
The present membership of the Bank consists of 56 countries. The basic condition for
membership is that the prospective member country should be a member of the
Organization of the Islamic Conference, pay its contribution to the capital of the Bank
and be willing to accept such terms and conditions as may be decided upon by the IsDB
Board of Governors.
Head Office and Regional Offices

The Bank's principal office is in Jeddah in the Kingdom of Saudi Arabia. Two regional
offices were opened in 1994; one in Rabat, Morocco, and the other in Kuala Lumpur,
Malaysia. In July 1996, the board of Executive Directors also approved the establishment
of an IDB Representative Office at Almaty, Kazakhstan, to serve as a link between IDB
member countries and Central Asian Republics. The office became operational in July
1997 and is now a full-fledged Regional Office. The Bank also has field representatives
in eleven member countries. These are: Indonesia, Iran, Kazakhstan, Libya, Pakistan,
Senegal, Sudan, Gambia, Guinea Bissau, Mauritania and Algeria.
Page 32 of 42
Resource Mobilization
As of 30/12/1428H (09/01/2008), the IDB’s total shareholders’ equity stood at ID 5.4

billion (US$ 8.5 billion equivalent) which is the main source of funding the IDB’s
operations. In addition to this, IDB has mobilized US$ 900 million by way of issuance of
two Sukuks. The first Sukuk was issued in 2003 for US$ 400 million which will mature
in August, 2008 and the second one of US$ 500 million was issued in 2005 which will
mature in 2010. IDB also mobilizes short-term resources from the market, as and when
needed, using the Reverse Murabaha.
In order to meet the future funding requirements of the Bank, it is planned that IDB will
tap the international market some time during 2008 to raise additional resources through
issuance of Sukuk. The size and the currency of the Sukuk issues will be decided close to
the time of issuance.
Criticism on IMF and the World Bank

Criticism of the World Bank and the IMF encompasses a whole range of issues but they
generally centre around concern about the approaches adopted by the World Bank and the
IMF in formulating their policies. This includes the social and economic impact these
policies have on the population of countries who avail themselves of financial assistance
from these two institutions.
1. Conditionalities
On giving loans to countries, the IMF makes the loan conditional on the implementation
of certain economic policies.
These policies tend to involve:
o Reducing government borrowing - Higher taxes and lower spending
o Higher interest rates to stabilize the currency. Allow failing firms to go
bankrupt.
o Structural adjustment. Privatization, deregulation, reducing corruption and
bureaucracy.
Critics of the World Bank and the IMF are concerned about the conditionalities imposed
on borrower countries. The World Bank and the IMF often attach loan conditionalities
based on what is termed the 'Washington Consensus', focusing on liberalisation—of
trade, investment and the financial sector—, deregulation and privatisation of
nationalised industries. Often the conditionalities are attached without due regard for the
borrower countries' individual circumstances and the prescriptive recommendations by
the World Bank and IMF fail to resolve the economic problems within the countries.
Page 33 of 42
It is claimed that retard social stability and hence inhibit the stated goals of the IMF,
while Structural Adjustment Programs lead to an increase in poverty in recipient
countries.
The main problem is that these policies of structural adjustment and macro economic
intervention make the situation worse; we’ll take these two cases for an example to
support this point:
Case I: (Asian Crisis), in the Asian crisis of 1997, many countries such as Indonesia,
Malaysia and Thailand were required by IMF to pursue tight monetary policy (higher
interest rates) and tight fiscal policy to reduce the budget deficit and strengthen exchange
rates. However, these policies caused a minor slowdown to turn into a serious recession
with mass unemployment.
A Case II (Argentina): In 2001, Argentina was forced into a similar policy of fiscal
restraint. This led to a decline in investment in public services which arguably damaged
the economy
Argentina, which had been considered by the IMF to be a model country in its
compliance to policy proposals by the Bretton Woods institutions, experienced a
catastrophic economic crisis back in year 2001, which some believe to have been caused
by IMF-induced budget restrictions — which undercut the government's ability to sustain
national infrastructure even in crucial areas such as health, education, and security — and
privatization of strategically vital national resources. Others attribute the crisis to
Argentina's mis-designed fiscal federalism, which caused sub-national spending to
increase rapidly. The crisis added to widespread hatred of this institution in Argentina and
other South American countries, with many blaming the IMF for the region's economic
problems. The current (as of early 2006)trend towards moderate left-wing governments in
the region and a growing concern with the development of a regional economic policy
largely independent of big business pressures has been ascribed to this crisis.
2. Impact on Public Health

There had been several occasions on which the World Bank and IMF have been held
responsible for negligence regarding public health thus causing hundreds to die,
mentioned below are just two of those:
Cambridge and Yale’s research (IMF and tuberculosis)

In 2008, a study by analysts from Cambridge and Yale universities published on the open-
access Public Library of Science concluded that strict conditions on the international
loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as
public health care had to be weakened. In the 21 countries which the IMF had given
loans, tuberculosis deaths rose by 16.6 %
World Bank’s AIDS Controversy

The World Bank is a major source of funding for combating AIDS in poor countries. In
the past, it has committed about US$2 billion through grants, loans and credits for
programs to fight HIV/AIDS. Its critics, however, claim these financial expenditures to
Page 34 of 42
be insufficient. In the 2005 Massey Lecture, entitled "Race Against Time", Stephen Lewis
argued that the structural adjustment policies of the World Bank and the International
Monetary Fund have aggravated and aided the spread of the AIDS pandemic by limiting
the funding allowed to health and education sectors.
3. Devaluations
The IMF has also been criticized for allowing inflationary devaluations. Currency
devaluation is recommended by the IMF to the governments of poor nations. E.g
As a part of conditions (for the last loan by IMF, Nov 2008) The Pakistani currency was
devalued after slight changes in the discount rate and exchange rate decreased officially
by 6-7% .
4. Criticism from free market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents
of supply-side economics generally find themselves in open disagreement with the IMF.
The IMF frequently advocates currency devaluation, criticized by proponents of supply-
side economics as inflationary. Secondly they link higher taxes under "austerity
programmes"* with economic contraction. (*austerity is when a national government
reduces its spending in order to pay back creditors. Austerity is usually required when a
government's fiscal deficit spending is felt to be unsustainable.)
Currency devaluation is recommended by the IMF to the governments of poor nations

with struggling economies. Some economists claim these IMF policies are destructive to
economic prosperity.
Complaints are also directed toward International Monetary Fund gold reserve being
undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy ounce of
gold. In 1973 the Nixon administration lifted the fixed asset value of gold in favor of a
world market price. Hence the fixed exchange rates of currencies tied to gold were
switched to a floating rate, also based on market price and exchange. This largely came
about because Petrodollars outside the United States were more than could be backed by
the gold at Fort Knox under the fixed exchange rate system. The fixed rate system only
served to limit the amount of assistance the organisation could use to help debt-ridden
countries. Current IMF rules prohibit members from linking their currencies to gold.
5. IMF/World Bank support of military dictatorships

The role of the Bretton Woods institutions has been controversial since the late Cold War
period, as the IMF policy makers supported military dictatorships friendly to American
and European corporations. Critics also claim that the IMF is generally apathetic or
hostile to their views of democracy, human rights, and labor rights. The controversy has
helped spark the anti-globalization movement.
Arguments in favor of the IMF say that economic stability is a precursor to democracy;
however, critics highlight various examples in which democratized countries fell after
receiving IMF loans.
Page 35 of 42
Case I (Brazil) : In the 1960s, the IMF and the World Bank supported the government of
Brazil’s military dictator Castello Branco with tens of millions of dollars of loans and
credit that were denied to previous democratically-elected governments.
They support military dictators just for their own interests and to make their policies
imposed on such countries.
Case II (Pakistan) :For instance, In Pakistan, the IMF used a military government to
impose the General Sales Tax (GST), a national sales tax on most consumer items. At the
same time, they pressured the government to eliminate the Wealth Tax. The most ironic
twist in IMF tax policy is that the IMF itself is exempt from all taxes, along with its sister
institutions, the World Bank and the Inter-American Development Bank, in spite of the
fact that the trio of institutions own $1.4 billion worth of property in Washington DC.
“Evidently, the IMF exempts itself from the requirement of paying taxes to ensure
adequate governmental revenues,”
Furthermore, illegitimate debts made to dictatorial governments have further worsened

the debt crisis. As a responsible organization, IMF should evaluate the creditworthiness
and legitimacy of the receivers before making any loan arrangements. In the case of
illegitimate debt, the problem is not necessarily with borrowers, but with lenders.
6. IMF & WB : secretive institutions with no

accountability
These agencies are not accountable to anyone but top financial officials of the wealthiest
nations, they make decisions in closed meetings, and they fail to produce the desired
results.
The IMF is funded with taxpayer money, yet it operates behind a veil of secrecy. In case
of designing a loan package for a country the members of affected communities do not
participate in designing loan packages.
The IMF works with a select group of central bankers and finance ministry staff to decide
polices without input from other government agencies such as health, education and
environment departments. Furthermore, the IMF has resisted attempts to open up to
public scrutiny and independent evaluation. The IMF has made elites from the Global
South more accountable to First World elites than their own people.
7. Democracy is being torn apart by a financial

oligarchy (Might is right)
While the WB represents 185 countries, it is run by a small number of economically
powerful countries
The developed nations who act as lenders are bestowed with enormous power that can
easily overturn the proposals of weaker countries.
Page 36 of 42
Past Manging Directors

Historically the IMF's managing director has been European and the president of the
World Bank has been from the United States. However, this standard is increasingly
being questioned and competition for these two posts may soon open up to include other
qualified candidates from any part of the world.
Undemocratic System
Unlike a democratic system in which each member country would have an equal vote,
rich countries dominate decision-making in the IMF because voting power is determined
by the amount of money that each country pays into the IMF's quota system. It's a system
of one dollar, one vote. The U.S. is the largest shareholder with a quota of 17 percent.
Germany, Japan, France, Great Britain, and the US combined control about 38 percent.
The disproportionate amount of power held by wealthy countries means that the interests
of bankers, investors and corporations from industrialized countries are put above the
needs of the world's poor majority.
Amercanization
Many critics and economists consider IMF & World Bank: an instrument for the
promotion of US or Western interests in certain regions of the world
US has a veto on major constitutional decisions with just over 16% of the shares in the
bank. The U.S. is the largest shareholder with a quota. The headquarters of both these
IFIs is in Washington D.C., (US capital), too. Further more the President of the World
Bank is has always been a US national.
In short, the IMF mainly serves wealthy countries and Wall Street
8. Violation of Islamic Principles

The case against IMF from the Islamic perspective is based on the discussion of morality
and human well being. In the Islamic economic system, Income distribution is regarded
as a vital element in realizing economic goals. This is achieved by elimination of income
inequalities to a level that every individual enjoys a fair share in the economy. In the
broader perspective, equality of economic opportunity is essential to elevate poverty and
social distress . The economic policy of Islam has also been explained in the Quran in the
most unequivocal terms
“so that this (wealth) may not circulate solely among the rich from among you "
(Al-Quran. 59: 7).
Therefore, the economic system should ensure to redress social injustice and guarantee
equality of economic condition. In contrast, IMF policy prescription has disregarded the
above mentioned Islamic norms and principles rather nurturing the wealthy. As a result,
income disparity in developing countries has widened and created a social distress in the
civil society. IMF adjustment programs have limited the expansion of agriculture sector
where majority of the low income groups depend as the main source of income.
IMF has disregarded all these Islamic Norms by only nurturing the rich.
Page 37 of 42
Moreover, reduction in government social spending in health and education means poor
no longer can afford these services. Liberalists backed by IMF maintain that poverty as
unfortunate or even unfair but not unjust, even if people die of hunger.
9. IMF Policies hurt the environment

IMF loans and bailout packages are paving the way for natural resource exploitation on a
staggering scale. The IMF does not consider the environmental impacts of lending
policies, and environmental ministries and groups are not included in policy making. The
focus on export growth to earn hard currency to pay back loans has led to an
unsustainable liquidation of natural resources.
For example, the Ivory Coast's increased reliance on cocoa exports has led to a loss of
two-thirds of the country's forests.
10.The IMF bails out rich bankers, creating a moral

hazard and greater instability in the global economy
The IMF routinely pushes countries to deregulate financial systems. The removal of
regulations that might limit speculation has greatly increased capital investment in
developing country financial markets. More than $1.5 trillion crosses borders every day.
Most of this capital is invested short-term, putting countries at the whim of financial
speculators. The Mexican 1995 peso crisis was partly a result of these IMF policies.
When the bubble popped, the IMF and US government stepped in to prop up interest and
exchange rates, using taxpayer money to bail out Wall Street bankers. Such bailouts
encourage investors to continue making risky, speculative bets, thereby increasing the
instability
11. Other Controversies

These two IFI are also blamed (rightly) for several other problems all over the world like:
Human rights and Labor rights being violated
Women not being given their full rights
Some Ironic facts about the IFIs:

 IMF itself is exempt from all taxes, along with its sister institutions, the World
Bank and the Inter-American Development Bank, in spite of the fact that the trio
of institutions own $1.4 billion worth of property in Washington DC.
 IMF’s Dominique Strauss Kahn is no stranger to controversies about his public as
well as personal life either. He is a person whose character is full of controversial
realities.
Page 38 of 42
Criticism by some Famous Personalities

Here are some critical review about IMF and the World Bank by so famous economists
and analysts:
• “They [WB] focused on growth-based development and thus invest in energy
sectors, setting up ports and infrastructure, instead of this they must focus on
poor.”
~PROF MUHAMMAD YUNUS~ [Nobel laureate, Bangladeshi banker and
economist, founder of Grameen Bank]
• “…the IMF is not serving a useful role in low-income countries, and that low-
income national governments need more policy space and less IMF
interventions.”
~JACK JONES ZULU~ [Southern African Regional Poverty Network]
• “American diplomats wanted to lock foreign countries into further dependency on
paper dollars.”
~MICHAEL HUDSON~ [a Wall Street analyst, economist and Historian]
Why do countries sign agreements with the IFI’s if the

consequences are ultimately negative?
After so many critical opinions and controversies surrounding these two sister, Bretton
Woods IFIs. A curious thought arises in most people’s minds: ‘Why do countries still turn
to IMF for help?’ So we tried to find out the reason for that and here’s what we came
across these two main points:
Lender of last resort

Most countries that accept the loans do so because they have no other way of
avoiding total financial collapse (i.e. when other friendly countries had refused the
help too)
External Pressures
And there often are international pressures on such countries (in need) to get “Aids”
from the IMF and World Bank
IMF & the 3rd World

As the above mentioned critical points about the IFIs suggest, the IMF and the World
Bank are the major reason for which the developing nations are suffering the way they
are.
They give loans with so difficult conditions that most of the times the 3rd world countries
(Pakistan not being an exeption)remain trapped in the loans for ever. In return the rich
countries exploit the poor ones by asking for a free access to their natural resources, and
constantly imposing their policies that not only affect the economy of the debtor
(developing) country but also their political, social, health, environmental and other
affairs as well .
Page 39 of 42
Here are some articles (/ selective extracts from articles) concerning the cruel attitude of
IMF and WB concerning the poor countries.
The IMF and the World Bank: protectors of capitalism
By Daniel Vila, People’s Weekly World, 17 January 1998
Imagine applying for a loan at a bank and being told that in order to receive the money
you must agree to being hit in the face by Mike Tyson, in the stomach with a bat
swung by Jose Canseco and kicked in the rear by a soccer player every morning for
the rest of your life. Paying the money back is not as difficult as surviving the
humiliating conditions of the loan.
The IMF is hurting poor countries

Mark Weisbrot guardian.co.uk, Wednesday 13 May 2009 22.00 BST
The IMF's conditions on financial aid to poor countries are unnecessary. It can afford to
be more generous
The IMF: Raping the World, One Poor Nation at a Time

Saturday April 25, 2009 by Dana Gabriel
There exists a double standard which allows richer countries to use fiscal expansion in
the face of recession while poorer nations are forced into stricter economic restraints.
Under the guise of helping economic distraught countries, the IMF is really bailing out
foreign investors and multinational corporations. They have further fueled chaos and
instability in some of the poorest regions in the world.
The International Monetary Fund (IMF) has been described as one of the enforcers of
globalization. Nations who receive IMF assistance are often forced to surrender more
sovereignty and further open up their borders to international banks and multinational
corporations. Much of their wealth is then sucked dry by foreign predators with its
resources and population essentially becoming the collateral for such financial aid. As a
result of the global economic crisis, many more nations are having to turn to the IMF for
help. At the recent G-20 Summit in London, the IMF’s role was expanded and its
powers enhanced. There was little mention of its failed policies and its less then stellar
record of effectively promoting development and democracy around the world. While
some talk of reform, the IMF continues to rape the world, one poor nation at a time.
Some IMF conditions that countries have been forced to comply with can only be
described as harsh and undemocratic. Often the devaluation of a nation’s currency has
been a precondition for IMF assistance. In order to qualify for IMF loans, some nations
have also been forced to lower tariffs, restrict governmental subsidies and spending,
balance budgets, as well as sell-off state institutions to foreign interests. In some cases,
the IMF has even prohibited wage increases as some countries have tried to do so, in
order to compensate for a sharp rise in food prices and other commodities.
Environmental and labor rights have also taken a hit as a result of IMF policies. Under
the guise of helping economic distraught countries, the IMF is really bailing out foreign
investors and multinational corporations. They have further fueled chaos and instability
in some of the poorest regions in the world.
Page 40 of 42
Response to Criticism
Here is what IMF and it’s supporter say in response to all the critics:
1. Crisis always leads to some Difficulties.

Because the IMF deal with economic crisis, whatever policy they offer, there is likely to
be difficulties. It is not possible to deal with a balance of payments without some painful
readjustment.
2. IMF has had Some Successes.

The Failures of the IMF tend to be widely publicized. But, its successes less so. Also
criticism tends to focus on short term problems and ignores longer term view
3. Confidence
The fact there is a lender of last resort provides an important confidence boost for
investors. This is important during current financial turmoil
4. Countries are not obliged to take an IMF loan

It is countries who approach the IMF for a loan. The fact so many take loans suggests
there must be at least some benefits of the IMF.
5. IMF Easy target.

Sometimes countries may want to undertake painful short term adjustment but there is a
lack of political will. An IMF intervention enables the government to secure a loan and
then pass the blame on to the IMF for the difficulties.
What we Think: Though there might be some (next to negligible) truth about these
counter arguments. But we can surely see that the stated objectives are totally
contradicting what these organizations really do.
Page 41 of 42
Suggestions
IMF and World Bank should use their power in the positive sense, to help the third world
not to create problems for them. The government of developing countries who is
successful in getting funds from the IFIs, they must use it in efficiently and sincerely. The
IMF should be accountable to all of its members (even if they have a 0.001% share)
There is so much criticism about IFIs and we think most of the critics are true.
The IMF requires deep, comprehensive, structural reforms. it should start by deciding
whether it wants to be a main player in the international financial architecture, or whether
it wishes to remain only a trusted advisor. If it wants to be a key player, it must greatly
increase its independence, boost its financial capacity and adopt an automatic insurance
facility. Otherwise its influence will be dependent on the political skills of its managing
directors. As regards its function as facilitator in the multilateral surveillance process, it
will be critical to craft political agreement, which will solve thorny issues. Moreover
unless emerging markets are provided with the viable insurance facility, it will be very
difficult to induce the needed changes in the incentive structure that lead these countries
to accumulate massive foreign reserves. Global imbalances and national financial crises
that can spill over into global markets are best addressed by a global institution like IFIs.
The IMF can work to try to insure that financial and current account imbalances are
addressed rather than ignored, and that they are addressed by policies that are not
destructive of global prosperity. The World Bank country offices should be autonomous
in designing policies and implementation strategies on the basis of a certain nation’s
needs. We can’t apply the same policy in all countries. The country offices should
identify problems of a certain country and then formulate policies to solve those. Instead
of focusing on growth-based development, it should pay attention on involvement of the
poor in their efforts for sustainable development. As Prof. Muhammad Yunus founder of
Grameen bank said “I told them you have forgot the people, who should be the centre of
any development program. Yes, infrastructure can also help in eradicating poverty. But it
will be successful only when the poor have ownership in that infrastructure, The World
Bank should lend at least 5 percent of its total lending money for micro credit programs.”
Conclusion
In short, the world can turn into a much better place to live in, for everyone. If only the
IMF and World Bank use their enormous authority and the immensely great economic
power in a healthier way.
Page 42 of 42

International Financial Institutions

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

International Financial Institutions

Hochgeladen von

Copyright:

Verfügbare Formate

Money & Banking International Financial Institutions

Presented to: Prof. Naseem Bukhari

Presented by: Nada Zain <36>

BBA evening 2007-11

Date: 27th of May, 2009

Institute of Business Administration,

International Financial Institutions

Types of International Financial Institutions

Bretton Woods institutions

Regional development banks

Bilateral development banks

Other regional financial institutions

Need for the IFIs

Bretton woods conference

How IFIs work?

 The IMF has 185 member countries.

1. The Quota system

How and when the IMF used gold

The General Arrangements to Borrow (GAB) was established in 1962 as a borrowing

4. Interest charges and Fees

This financial assistance is designed to help countries restore macroeconomic stability by

The changing nature of lending:

But in 2008, the IMF

Three main purposes of lending

Today, IMF lending serves three main purposes.

Main lending facilities

LOAN INSTRUMENTS : briefly

o Interest subsidies are available

Quotas of some Member: [Table]

The Multifaceted Role of Quotas

When is a country in need?

How much can a member borrow from the IMF?

Special Drawing Rights (SDRs)

A country participating in this system needed official reserves—government or central

How is SDR calculated?

Japanese yen 34% 18.4000 97.89000 0.187966

SDR Interest Rate

SDR Interest rate calculation

Euro 0.4100 0.893571 0.7330 0.2685

Potential pitfalls as a reserve currency

Pakistan and IMF

Why does Pakistan need IMF?

 Balance of payment deficits.

History & Current Prospects:

o Since 1988, 11 loan arrangements have taken place.

o Two of them were made during Nawaz Sharif regime.

o Two under Musharraf regime (to stabilize the economy).

IMF’s attitude towards us

After minor changes in the 11-point agenda of

The World Bank

World Bank: a Bank?

Difference between World Bank and the IMF

International Monetary Fund World Bank

1 Purposes seeks to promote the economic

2 Functions assists developing countries through

3 Recipients of Funding provides to the poorest developing

4 Operations encourages private enterprises in

6 Capital has an authorized capital of $184 billion,

7 Size and Structure

Millennium Development Goals (MDGs)

Improving Living Standards

Comprehensive Development Framework

A Vital financial source around the world