What is the World Bank? its support for developing countries.

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World Bank, is fully International Bank for Reconstruction and Development Group, a world organization affiliated with the United Nations (UN) and designed to finance projects that enhance the economic development of member states. Head office in Washington, D.C., this bank is the largest source of financial support to developing countries. It also provides technical support and policy advice and supervises—on behalf of international creditors—the implementation of free-market reforms. Together with the International Fund (IMF) and therefore the World Trade Organization, it plays a central role in overseeing policy reforming public institutions in developing countries and defining the global macroeconomic agenda.


Established in 1944 at the United Nations Monetary and Financial Conference (commonly known as the Bretton Woods Conference), which convened to determine the replacement of the international financial system after World War II, Planet Bank officially Started operations in June 1946. The loans were geared toward the post-war reconstruction of Western Europe. From the mid-1950s, it played a serious role in funding investments in infrastructure projects in developing countries, including roads, hydroelectric dams, water and sewage facilities, ports, and airports. The World Bank Group consists of five constituent institutions: the International Bank for Reconstruction and Development (IBRD) the International Development Association (IDA) the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), and therefore the International Investment Disputes Center. for disposal (ICSID). The IBRD provides loans at market interest rates to middle-income developing countries and creditworthy low-income countries. Established in 1960, IDA provides interest-free long-term loans, technical assistance, and policy advice to low-income developing countries in areas such as health, education, and rural development. While the IBRD mobilizes most of its funds in the world’s capital markets, IDA’s lending operations are financed through contributions from developed countries. IFC, working in partnership with private investors, provides loans credit guarantees, and equity financing to business ventures in developing countries. MIGA provides credit guarantees and insurance to foreign investors against losses due to non-business risks in developing countries. Finally, the ICSID, which operates independently of the IBRD, is responsible for the settlement or settlement by arbitration of investment disputes between foreign investors and their host developing countries. The president of Planet Bank from 1968 to 1981 was former US Secretary of Defense, Robert S. McNamara. Under his leadership, the bank formulated the concept of “sustainable development”, which attempted to reconcile the economic process and environmental protection in developing countries. Another feature of the concept was the use of capital flows (in the shape of development aid and foreign investment) to developing countries as a way of bridging the income gap between rich and poor countries. The Bank has expanded its lending activities and has grown into a strong and authoritative intergovernmental body with its multiple research and policy divisions.

The World Bank is a related organization:

The World Bank belongs to the United Nations, although it is answerable to neither the General Assembly nor the Security Council. Each of the bank’s more than 180 member states is represented on a board of governors, which meets once a year. Governors are usually finance ministers or central bank governors of their countries. Although the Board of Governors has some influence over IBRD policies, the actual decision-making power is primarily exercised by the bank’s 25 executive directors. The five major countries—the United States, Japan, Germany, the United Kingdom, and France—appoint their own executive directors. Other countries are divided into regions, each of which elects an executive director. Throughout the history of the World Bank, the bank president, who serves as the chairman of the executive board, has been a US citizen. Voting power is based on a country’s capital membership, which in turn is based on its economic resources. The wealthier and more developed countries are the major shareholders of the bank and thus exercise more power and influence. For example, at the beginning of the 21st century, the United States exercised nearly one-sixth of the vote in the IBRD, more than twice that of Japan’s second-largest contributor. Because developing countries have a small number of votes, the system does not provide a significant voice for these countries, which are the primary recipients of World Bank loans and policy advice. The bank derives its funding from the capital subscriptions of member countries, bond floatation in the world’s capital markets, and net income earned from interest payments on IBRD and IFC loans. About one-tenth of the subscribed capital is paid directly to the bank, with the balance as may be called for to meet the obligations. The World Bank employs more than 10,000 people, of whom about a quarter are stationed in developing countries. The Bank has over 100 offices in member countries, and staff members in several countries act directly as policy advisors to the Ministry of Finance and other ministries. The Bank has advisory as well as informal relationships with the world’s financial markets and institutions and maintains relationships with non-governmental organizations in both developed and developing countries.

Debt and policy reform of world bank

World Bank

The debt crisis of the early 1980s – during which many developing countries had to service their external debt to multilateral lending institutions due to a recession in the world economy, high interest rates, falling commodity prices, and wide fluctuations in oil prices were unable. Along with other factors played a significant role in the development of the operations of the World Bank. The bank was increasingly involved in shaping economic and social policies in indebted developing countries. As a condition of receiving loans, borrowing countries were required to implement stringent “structural adjustment programs”, which generally included severe cuts in spending for health and education, the abolition of price controls, the liberalization of trade, and The regulation of the financial sector was involved. and privatization of state-run enterprises. Although intended to restore economic stability, these programs, which were implemented in a large number of countries throughout the developing world, often resulted in rising poverty levels, rising unemployment, and rising external debt. In the wake of the debt crisis, the World Bank focused its efforts on providing financial assistance in the form of balance of payments support and loans for infrastructure projects such as roads, port facilities, schools, and hospitals. Although emphasizing poverty alleviation and debt relief for the world’s least developed countries, the Bank has maintained its commitment to economic stabilization policies that require the implementation of austerity measures by recipient countries. The World Bank and the IMF played a central role in overseeing free-market reforms in Eastern and Central Europe after the fall of communism in the 1980s and 90s. The reforms, which included bankruptcy and the creation of privatization programs, were controversial because they often closed down state-run industrial enterprises. An “exit mechanism” was implemented to allow the liquidation of so-called “problem enterprises”, and labor laws were amended to enable enterprises to lay off unnecessary workers. Large state enterprises were often sold to foreign investors or split into smaller, privately owned companies. For example, in Hungary, some 17,000 businesses were liquidated in 1992–93 and 5,000 were reorganized, leading to a substantial increase in unemployment. The World Bank also provided reconstruction loans to countries experiencing internal conflicts or other crises (e.g., the successor republics of the former Yugoslavia in the late 1990s). However, this financial assistance did not succeed in rehabilitating the productive infrastructure. Macroeconomic reforms in many countries resulted in an increase in inflation and a significant drop in the standard of living. The World Bank is the largest multilateral lending institution in the world, and therefore many of the world’s poorest countries owe large sums of money. In fact, for dozens of the most indebted poor countries, the largest portion of their foreign debt – in some cases more than 50 percent – ​​is owed to the World Bank and multilateral regional development banks. According to some analysts, the burden of these loans – which cannot be canceled or rescheduled according to bank statutes – has caused economic stagnation throughout the developing world.

For more information visit https://www.worldbank.org/en/home.

Also read, What is the International Monetary Fund? Its foundation and operation?

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