1. International Monetary Fund
The Bretton-woods Conference proposed IMF, World Bank and International Trade
Organisation (ITO) in 1944. The IMF and World Bank were started in 1945. The
managing director Christian Lagarde.
Aim
The purpose of International Monetary Fund is to secure and promote economic and
financial cooperation among member countries. The IMF was established to assist the
member nations to tide over the Balance of Payments disequilibrium in the short term.
At present, the IMF has 189 member countries with Republic of Nauru joined in 2016.
Objectives Of IMF
1. To promote international monetary cooperation among the member nations.
2. To facilitate faster and balanced growth of international trade.
3. To ensure exchange rate stability by curbing competitive exchange depreciations.
4. To eliminate or reduce exchange controls imposed by member nations.
5. To establish multilateral trade and payment system in respect of current
transactions instead of bilateral trade agreements.
6. To promote the flow of capital from developed to developing nations.
7. To solve the problem of international liquidity.
Functions of IMF
1. Bringing stability in exchange rate
The IMF is maintaining exchange rate stability and emphasizing devaluation criteria,
restricting members to go in for multiple exchange rates and also to buy or sell gold at
prices other than declared par value.
2. Correcting BOP Disequilibrium
The IMF is helping the member countries in eliminating or minimizing the shortperiod disequilibrium in their balance of payments either by selling or lending foreign
currencies to the member nation.

3. Determining par values
IMF enforces the system of determination of par values of the currencies of the
member countries. The IMF, every member nation should declare the par value of its
currency in terms of gold or US dollars. Under this article, IMF ensures smooth
working of the international monetary system, in favour of some developed countries.
4. Balancing demand and supply of currencies
IMF is entrusted with the important function of maintaining balance between
demand and supply of various currencies. The Fund (IMF) can declare a currency as
scarce currency which is in great demand and can increase its supply by borrowing it
from the country concerned or by purchasing the same currency in exchange of gold.
5. Reducing trade restrictions
The Fund also aims at reducing tariffs and other trade barriers imposed by the member
countries with the purpose of removing restrictions on remittance of funds or to avoid
discriminating practices.
6. Providing credit facilities
IMF is providing different borrowing and credit facilities with the objective of helping
the member countries. These credit facilities offered by it include basic credit facility,
extended fund facility for a period of three years, compensatory financing facility and
structural adjustment facility.
The functions of the IMF are grouped under three heads.
1. Financial – Assistance to correct short- and medium-term deficit in BOP.
2. Regulatory – Code of conduct.
3. Consultative – Counselling and technical consultancy.
Facilities offered by IMF
The Fund has created several new credit facilities for its members. Chief among them
are:
1. Basic Credit Facility:
The IMF provides financial assistance to its member nations to overcome their
temporary difficulties relating to balance of payments. A member nation can purchase
from the Fund other currencies or SDRs, in exchange for its own currency, to finance

payment deficits. The loan is repaid when the member repurchases its own currency
with other currencies or SDRs. A member can unconditionally borrow from the Fund in
a year equal to 25% of its quota. This unconditional borrowing right is called the
reserve tranche.
2. Extended Fund Facility
The IMF provides additional borrowing facility up to 140% of the member’s quota, over
and above the basic credit facility. The extended facility is limited for a period up to 3
years and the rate of interest is low.
3. Compensatory Financing Facility
IMF established compensatory financing facility to provide additional financial
assistance to the member countries, particularly primary producing countries facing
shortfall in export earnings. In 1981, the coverage of the compensatory financing
facility was extended to payment problem caused by the fluctuations in the cost of
cereal inputs.
4.Buffer Stock Facility
The buffer stock financing facility was started in 1969. The purpose of this
scheme was to help the primary goods (food grains) producing countries to finance
contributions to buffer stock arrangements for the stabilisation of primary product
prices.
5. Supplementary Financing Facility
The IMF makes temporary arrangements to provide supplementary financial
assistance to member countries facing payments problems relating to their present
quota sizes.
6. Structural Adjustment Facility
The IMF established Structural Adjustment Facility (SAF) in March 1986 to provide
additional balance of payments assistance on concessional terms to the poorer member
countries. In December 1987, the Enhanced Structural Adjustment Facility (ESAF) was
set up to augment the availability of concessional resources to low income countries.
The purpose of SAF and ESAF is to force the poor countries to undertake strong

macroeconomic and structural programmes to improve their balance of payments
positions and promote economic growth.
Special Drawing Rights (SDRs)
The Fund has succeeded in establishing a scheme of Special Drawing Rights (SDRs)
which is otherwise called ‘Paper Gold’. They are a form of international reserves
created by the IMF in 1969 to solve the problem of international liquidity. They are
allocated to the IMF members in proportion to their Fund quotas. SDRs are used as a
means of payment by Fund members to meet balance of payments deficits and their
total reserve position with the Fund. Thus, SDRs act both as an international unit of
account and a means of payment. All transactions by the Fund in the form of loans and
their repayments, its liquid reserves, its capital, etc., are expressed in the SDR.
The achievement called ‘Fund is like an International Reserve Bank.’
Achievements Of IMF
The main achievements of International Monetary Fund are as follows:
1.Establishment of monetary reserve fund
The Fund has played a major role in achieving the sizeable stock of the national
currencies of different countries. To meet the foreign exchange requirements of the
member nations, IMF uses its stock to help the member nations to meet foreign
exchange requirements.
2.Monetary discipline and cooperation
The IMF has shown keen interest in maintaining monetary discipline and cooperation
among the member countries. To achieve this objective, it has provided assistance only
to those countries which make sincere efforts to solve their problems.
3.Special interest in the problems of UDCs
The notable success of the Fund is the maintenance of special interest in the
acute problems of developing countries. The Fund has provided financial assistance to
solve the balance of payment problem of UDCs. However, many UDCs continue to be
UDCs, while the developed countries have achieved substantial growth.
India and IMF
Till 1970, India stood fifth in the Fund and it had the power to appoint a permanent
Executive Director. India has been one of the major beneficiaries of the Fund

assistance. It has been getting aid from the various Fund Agencies from time to time
and has been regularly repaying its debt. India’s current quota in the IMF is SDRs
(Special Drawing Rights) 5,821.5 million, making it the 13th largest quota holding
country at IMF with shareholdings of 2.44%. Besides receiving loans to meet deficit in
its balance of payments, India has benefited in certain other respects from the
membership of the Fund.
2. World Bank
The International Bank for Reconstruction and Development (IBRD), otherwise called
the World Bank (WB) was established in 1945 under the Bretton Woods Conference in
1944. Current president David Malpass.
Aim
To make smooth transition from a war-time to peace-time economy. It is known as a
sister institution along with the International Monetary Fund. The membership in
International Monetary Fund is a prerequisite to become a member of IBRD. The IBRD
was established to provide long term financial assistance to member countries.
Objectives of IBRD
The following are the objectives of the World Bank:
1. To help member countries for economic reconstruction and development.
2. To stimulate long-run capital investment for restoring Balance of Payments
(BoP) equilibrium and there by ensure balanced development of international
trade among the member nations.
3. To provide guarantees for loans meant for infrastructural and industrial
projects of member nations.
4. To help war ravaged economies transform into peace economies.
5. To supplement foreign private investment by direct loans out of its own funds
for productive purposes.
World Bank’s Lending Procedure:
1. The Bank advances loans to members in three ways
a. Loans out of its own fund.
b. Loans out of borrowed capital.
c. Loans through Bank’s guarantee.

The Bank (WB) has changed its development loan strategy and lays more emphasis on
financing schemes which directly influence the well-being of poor masses of the
member countries, especially the developing countries. The amount of agricultural
loans has increased more rapidly than in any other sector. The bank now also takes
interest in the activities of the development of rural areas such as:
a. Spread of education among the rural people
b. Development of roads in rural areas
c. Electrification of the villages.
Functions of IBRD
The World Bank performs the major role of providing loans for development
works to member countries, especially to underdeveloped countries. The World Bank
provides long-term loans for various development projects. Article 1 of the Agreement
states the functions performed by the world bank as follows.
1. Investment for productive purposes
The World Bank performs the function of assisting in the reconstruction and
development of territories of member nations through facility of investment for
productive purposes. It also encourages the development of productive facilities and
resources in less developed countries.
2. Balanced growth of international trade
Promoting the long-range balanced growth of trade at international level and the
maintaining equilibrium in BOPs of member nations by encouraging international
investment.
3. Provision of loans and guarantees
Arranging the loans or providing guarantees on loans by various other channels so as to
execute important projects.
4. Promotion of foreign private investment
The promotion of private foreign investment by means of guarantees on loans and
other investment made by private investors. The Bank supplements private investment

by providing finance for productive purpose out of its own resources or from borrowed
funds.
5. Technical services
The World Bank facilitates different kinds of technical services to the member
countries through Staff College and experts.
Achievements of World Bank
The World Bank is said to be successful in achieving its primary objective of
reconstruction and development of war-ravaged nations. It helped greatly in the
reconstruction of Europe after the World War II. It has been providing the developed
and developing countries the same treatment in the process of growth
1. It is noted that the Bank’s membership has increased from the initial number of
30 countries to 68 countries in 1960 and to 151 countries in 1988. The IBRD has
189 member countries.
2. The Bank grants medium and long-term loans (i.e., payable over a period
of 15-20 years) for reconstruction and development purposes to the member
countries. The actual term of a loan depends upon the estimated useful life
of the equipment or plant financed.
3. Initially the World Bank’s loans were mainly directed at the European
countries for financing their programmes of reconstruction. Later it changed its
development loan strategy and lays more emphasis of financing schemes for the
poor masses of the developing countries.
4. The World Bank grants loans to member countries only for productive
purposes particularly for agriculture, irrigation, power and transport. In
other words, the Bank strengthens infrastructure needed for further
development.
5. The International Development Association (IDA), the Soft Loan Window of the
Bank provides loans to UDCs at very low rate of interest. However, the economic
inequality among the member-countries goes on increasing. Many African
countries are yet to improve their economic status.

India and World Bank:
1. The name “International Bank for Reconstruction and Development” was first
suggested by India to the drafting committee.
2. Since then the two have developed close relationship with each other from
framing the policies of economic development in India to financing the
implementation of these policies.
3. The World Bank has given large financial assistance to India for economic
development.
4. Special mention may be made of the assistance World Bank has given to India in
the development of infrastructure such as electric power, transport,
communication, irrigation projects and steel industry. The World Bank has
assisted a number of projects in India. The IFC has identified five priority areas,
namely, capital market development, direct foreign investment, access to foreign
markets, equity investments in new and expanding companies and
infrastructure.
5. The World Bank has also assisted India in accelerating programmes of poverty
alleviation and economic development. Until China became the member of
World Bank in 1980, India was the largest beneficiary of the World Bank
assistance.
3. BRICS
1. The term ‘BRIC’ was coined in 2001.The BRICS members are known for their
significant influence on regional affairs. Since 2009, the BRICS nations have met
annually at formal summits. South Africa hosted the 10th BRICS summit
2. in July 2018. The agenda for BRICS summit 2018 includes Inclusive growth,
Trade issues, Global governance, Shared Prosperity, International peace and
security. BRICS is the acronym for an association of five major emerging
national economies: Brazil, Russia, India, China and South Africa.
3. Its headquarters is at Shanghai, China. The first BRICS summit was held at
Moscow and South Africa hosted the Tenth Conference at Johanesburg in July
2018. India had an opportunity of hosting fourth and Eighth summits in 2012
and 2016 respectively.

Objectives of BRICS
1. To increase trade co-operation by making an exclusive trade block.
2. To use currency other than US Dollar. Since Dollar is a dominant currency and
US can control the flow of dollar, BRICS helps in the countries operating with
alternative currencies. How far have they succeeded in this respect? Not much.
3. To increase regional co-operation.
4. To create a separate trade block made for developing countries for trade cooperation.
Functions of BRICS
1. It acts as a promoter of more legitimate international system and also advocating
reform of the UN Security Council.
2. This group of nations is especially meant for South-South framework for
cooperation.
3. It performs as an agent to bridge the increasing gap between developed and
developing countries. For instance, in the WTO, the BRICS countries are
emphasizing to promote a fair order regarding agricultural policies.
4. It performs a commendable contribution for assisting developing countries in
gaining in areas such as an advantage in trade and climate change negotiations.
5. It disseminates information and exchange platform beyond economic
cooperation.
6. It acts as a catalytic in protecting the interests of middle powers on global forum.
Achievements of BRICS
1. The establishment of the Contingent Reserve Arrangement (CRA) has further
deepened and consolidated the partnership of its members in the economicfinancial area.
2. In the sixth BRICS summit in Brazil, the member countries, signed an
agreement to create a development bank (New Development Bank) with
headquarters at Shanghai, China in 2015 on the lines of Asian Development
Bank and the World Bank.
3. The economic potential and demographic development are putting the BRICS
countries, increasingly in a leading position in setting the global agenda and
having a greater say in the global governance.

4. It has to be remembered that BRICS share 43% of world population, but only
21% of the global GDP.
4.South Asian Association for Regional Co-Operation (SAARC)
The South Asian Association for Regional Co-operation (SAARC) is an organisation of
South Asian nations, which was established on 8 December 1985 for the promotion of
economic and social progress, cultural development within the South Asia region and
also for friendship and co-operation with other developing countries. The SAARC
Group (SAARC) comprises of Bangladesh, Bhutan, India, The Maldives, Nepal,
Pakistan and Sri Lanka, Afghanistan. The SAARC Secretariat was established in
Kathmandu (Nepal) on 16th January 1987. The first SAARC summit was held at Dhaka
in the year 1985. SAARC meets once in two years. Recently, the 20th SAARC summit
was hosted by Srilanka in 2018.
Aim
The basic aim of the organisation is to accelerate the process of economic and social
development of member states through joint action in the agreed areas of cooperation.
Objectives of SAARC
1. To promote the welfare of the people of South Asia and improve their quality of
life;
2. To accelerate economic growth, social progress and cultural development in the
region;
3. To promote and strengthen collective self-reliance among the countries of South
Asia;
4. To contribute to mutual trust, understanding and appreciation of one another’s
problems;
5. To promote active collaboration and mutual assistance in the economic, social,
cultural, technical and scientific fields;
6. To strengthen co-operation with other developing countries;
7. To strengthen cooperation among themselves in international forums on matters
of common interest;
8. To cooperate with international and regional organisations with similar aims
and purposes.

Functions of SAARC
1. Maintenance of the cooperation in the region
2. Prevention of common problems associated with the member nations.
3. Ensuring strong relationship among the member nations.
4. Removal of the poverty through various packages of programmes.
5. Prevention of terrorism in the region.
Achievements of SAARC
1. The establishment of SAARC Preferential Trading Agreement (SAPTA) and
reduction in tariff and non-tariff barriers on imports.
2. The setting up of Technical Committees for economic cooperation among
SAARC countries relating to agriculture, communications, education, health and
population, rural development, science and technology, tourism, etc.
3. SAARC has established a three-tier mechanism for exchanging information on
poverty reduction programmes which is passed on to member countries.
4. SAARC Agricultural Information Centre (SAIC) in 1988 works as a central
information institution for agriculture related resources like fisheries, forestry,
etc.
5. South Asian Development Fund (SADF) for development projects, human
resource development and infrastructural development projects. With all these
tall claims, the inter-SAARC Trade has not gone beyond three percent in the last
30 years
5.Association of South East Asian Nations (ASEAN)
ASEAN was established on 8 August 1967 in Bangkok called BANGOK declaration.
Originally five countries Now it has ten southeast ASEAN countries with six dialogue
partners. The ASEAN nations are expected to benefit from the FTA as it will reduce
tariff and non-tariff barriers and maintain their unity and solidarity by establishing a
trade block. Foreign trade is the life blood of the ASEAN countries following
globalization and prudent macroeconomic policies.
ASEAN India
India’s relationship with ASEAN started in 1992 when India became a “sectoral
dialogue partner” of ASEAN. The geographic proximity of ASEAN countries to India
facilitates faster exports and lower freight costs.

Objectives of ASEAN
The aims and purposes of the Association
1. To accelerate the economic growth, social progress and cultural development in
the region;
2. To promote regional peace and stability and adherence to the principles of the
United Nations Charter;
3. To promote cooperation among the members of ASEAN through the exchange of
knowledge and experience in the field of public sector auditing.
4. To provide a conducive environment and facilities for research, training, and
education among the members
5. To serve as a centre of information and as an ASEAN link with other
international organizations.
Functions of the ASEAN
1. It facilitates free movement of goods, services and investments within ASEAN by
creating a single regional market like the European Union.
2. It provides free access to the marketers of one-member country to the markets of
all other member countries, thus fostering growth in the region.
3. It improves business competitiveness between businesses from different
countries and also narrow developmental gaps between member countries.
4. It paves way for market and investment opportunities for the member nations.
5. It fosters co-operations in many areas including industry and trade.
6. All the ASEAN economies experienced a great economic crisis in the year 1997.
Questions:
1. Write a note on
a) SAARC b) BRICS
2. List out the Objectives and Achievements IMF.
3. Bring out the Functions and Achievements of WORLD BANK.