International Bank for Reconstruction and Development (IBRD)

 

(IBRD), specialized agency of the United Nations, with headquarters at Washington, D.C.; also called the World Bank. Plans were laid at the Bretton Woods Conference (1944) for the formation of a world bank; it was formally organized in 1945, when 28 countries ratified the agreement; there are now 185 members. The bank not only makes loans to member nations, but, under government guarantee, to private investors, for the purpose of facilitating productive investment, encouraging foreign trade, and discharging burdens of international debt. All members of the bank must also belong to the International Monetary Fund. The bank is self-sustaining and has maintained a profit on its lending activities. It is controlled by a board of governors, one from each member state. Votes are allocated according to capital subscription. Ordinary affairs are conducted by 22 executive directors, five appointed by the five largest capital subscribers, the United States, Germany, Japan, Great Britain, and France, and 17 elected by the remaining members. Regional vice presidents oversee the bank's operations in five regions: Asia, Latin America and the Caribbean, East Africa, West Africa, and (in one grouping) Europe, the Middle East, and North Africa.

The bank also operates the Economic Development Institute, which offers training in economic development for officials of member countries. Closely affiliated with the bank is the International Finance Corporation (est. 1956), which invests in private enterprises without government guarantee. The bank organized the International Development Association (1960) to extend credit on easier terms, mainly to developing countries. The group of institutions is known as the World Bank Group. Criticism that the IBRD-financed projects were environmentally destructive led the bank to establish an environmental fund (1990) providing low-interest loans for developing countries. Developing nations have complained that the IBRD imposes the free-market system on them, thereby discouraging planning, nationalization, and public investment.

Bibliography

See the World Bank's publication, World Bank Operations: Sectoral Programs and Policies (1972); E. S. Mason and R. E. Asher, The World Bank since Bretton Woods (1973); C. Payer, The World Bank: A Critical Analysis (1982); S. Please, The Hobbled Giant: Essays on the World Bank (1984).

The International Bank for Reconstruction and Development (IBRD) is one of five institutions that comprise the World Bank Group. The IBRD is an international organisation whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the United Nations Monetary and Financial Conference of July 1 to July 22, 1944 in Bretton Woods, New Hampshire.

The IBRD provides loans to governments, and public enterprises, always with a government (or "sovereign") guarantee of repayment. The funds for this lending come primarily from the issuing of World Bank bonds on the global capital markets—typically $12–15 billion per year. These bonds are rated AAA (the highest possible) because they are backed by member states' share capital, as well as by borrowers' sovereign guarantees. (In addition, loans that are repaid are recycled, or relent.) Because of the IBRD's credit rating, it is able to borrow at relatively low interest rates. As most developing countries have considerably lower credit ratings, the IBRD can lend to countries at interest rates that are usually quite attractive to them, even after adding a small margin (about 1%) to cover administrative overheads.

History

Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).

The IBRD was established mainly as a vehicle for reconstruction of Europe and Japan after World War II, with an additional mandate to foster economic growth in developing countries in Africa, Asia and Latin America. Originally the bank focused mainly on large-scale infrastructure projects, building highways, airports, and powerplants. As Japan and its European client countries "graduated" (achieved certain levels of income per capita), the IBRD became focused entirely on developing countries. Since the early 1990s the IBRD has also provided financing to the post-Socialist states of Eastern Europe and the former Soviet Union.

See also

• World Bank Group
• Bretton Woods system

External links

• Bank Information Center—World Bank
• IBRD website

Central Banking
List of Central Banks
Bank for International Settlements · Central Bank of Brazil · Bank of Canada · People's Bank of China · Bank of England · Bank of Japan · Federal Reserve System · European Central Bank · Reserve Bank of India · Bank of Mexico · Central Bank of Russia · Central Bank of Turkey
Policies:	Expansionary monetary policy · Contractionary monetary policy · Monetary policy of the USA · Monetary policy of Sweden · Capital requirement
Implementation:	Open market operations · Capital control · Discount rate · Money creation · Interest rates
Bretton Woods system:	World Bank · International Bank for Reconstruction and Development · International Finance Corporation · International Development Association · Multilateral Investment Guarantee Agency · International Centre for Settlement of Investment Disputes

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