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Money & Banking International Financial Institutions

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Presented to: Prof. Naseem Bukha

Presented by: Nada Zain


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ACKNOWLEDGEMENT _____________________________________________________________ I

ABSTRACT ________________________________________________________________________II

FINANCIAL SYSTEM ............. .............. .............. ............... .............. .............. .............. ........... ...... ..... ..... .....4

1! M"#$% !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!42! FI##'ILI#()*UM$#)( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4+! FI##'ILM*$)( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!44! FI##'ILI#()I)U)I"#(! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4-! '$#)*LB#( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!4

FINANCIAL INSTITUTIONS ............. .............. .............. .............. .............. .............. ............... .......... ...... ....4

INTERNATIONAL FINANCIAL INSTITUTIONS ............. ............... .............. .............. .......... ..... ..... ..... ..4

Definition ................................................................................................................................................4

Explanation ............................................................................................................................................5)%P$("F I#)$*#)I"#LFI##'ILI#()I)U)I"#( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-

Bretton Woods institutions ......................................................................................................................5Regional development banks ..................................................................................................................5

Bilateral development banks ...................................................................................................................5

Oter regional finan!ial institutions .......................................................................................................5

.I()"*% !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!/"eed for te I#Is .....................................................................................................................................$

Bretton %oods !onferen!e .......................................................................................................................$."0IFI(0"* !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!! !!

THE IMF ............. .............. .............. .............. .............. ............... .............. .............. .............. ............. ...... ...... ..7

PU*P"($( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3("U*'$"FFU#I#5 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3

&. 'e (uota s)stem ................................................................................................................................*

+. ,old oldings ......................................................................................................................................*

-. Borro%ing arrangements ....................................................................................................................

4. Interest !arges and #ees ................................................................................................................&/FU#')I"#( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!16

0urveillan!e .........................................................................................................................................&/

'e!ni!al Assistan!e .............................................................................................................................&/

1ending .................................................................................................................................................&&7U")( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!14

Definition ..............................................................................................................................................&4(uotas of some 2ember3 'able .................................................................................................. ...... .&5

'e 2ultifa!eted Role of (uotas ................................................................................................... ...... .&5(P$'IL*0I#5*I5.)(8(*(9 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!1/

0DR 6aluation .......................................................................................................................................&$

7o% is 0DR !al!ulated8 .......................................................................................................................&$

0DR Interest Rate ..................................................................................................................................&90DR Interest rate !al!ulation ...............................................................................................................&9

PAKISTAN AND IMF .............. .............. ............... .............. .............. .............. .............. .............. ........ ...... ...18

L$#I#5.I()"*%: !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!13IMF;())I)U$)"0*(U( !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!26

THE WORLD BANK ............. .............. .............. .............. ............... .............. .............. .............. ............ ..... ..21

.I()"*% !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!21

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"B


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Financial System)ese are te five Aain arts tat togeter Aake u financial systeA:

1. Money

)o ay for urcases anC store Dealt

2. Financial Instruments

)o transfer Dealt froA savers to investors anC to transfer risk to tose best eEuieC tobear it!

3. Financial Markets

Buy anC sell financial instruAents

4. Financial Institutions.

ProviCe access to financial Aarkets 8a finical interAeCiary9 financial institution is an institution tat roviCes financial services for its clientsor AeAbers!G

Financial institutions are often regulateC be 5overnAent boCies

5. Central Banks

Monitor financial Institutions anC stabiliHe te $conoAy

Financial InstitutionsFinancial Institutions are one iAortant illar of te financial systeA! )eir Aainfunctions incluCe:

*eCuce transactions cost by secialiHing in te issuance of stanCarCiHeC securities

*eCuce inforAation costs of screening anC Aonitoring borroDers!

Issue sort terA liabilities anC urcase longterA loans!

International Financial Institutions

Definition

International Financial Institutions 8IFIs9 refers to financial institutions tat ave beenestabliseC 8or cartereC9 by Aore tan one country anC ence are subject tointernationallaD.

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http://en.mimi.hu/business/subject_to.htmlhttp://en.mimi.hu/business/subject_to.html


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Explanation

)eir oDners or sareolCers are generally national governAents, altoug oterinternational institutionsanC oter organisations occasionally figure as sareolCers! )eAost roAinent IFIs are creations of Aultile nations, altoug soAe bilateral financialinstitutions 8createC by tDo countries9 eJist anC are tecnically IFIs! Many of tese are

Aultilateral CeveloAent banks!

)e bestknoDn IFIs are te 0orlC Bank,te IMF,anC te regional CeveloAent banks!(oAe of te IFIs are consiCereC U# agencies!

Types of International Financial Institutions

)e IFIs can be classifieC into folloDing Aain categories:

Bretton Woods institutions

)e bestknoDn IFIs Dere establiseC after 0orlC 0ar II to assist in te reconstruction of$uroe anC roviCe AecanisAs for international cooeration in Aanagingte globalfinancial systeA!E!"#$%&'()ey incluCe te World Bank) the IMF, te International #inan!e


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History

"ur Aain focus of our roject is on te Bretton0ooCs sister IFIs te InternationalMonetary FunC 8IMF9 anC te 0orlC Bank so De aCCeC a brief istory of tese

institutions too!

Need for the IFIs

fter te 5reat eression in te 1@+6s tere Das a neeC for an organiHation to create asysteA for eJcange rate stability

'ountries; econoAies Dere aCversely affecteC by 00II ! )ere Das a neeC forreconstruction in DellCeveloeC nations! nC also neeC for CeveloAent in te lesserCeveloeC nations

)e 0orlC Bank anC te International Monetary FunC Dere createC in te afterAat of0orlC 0ar II, to Cirect investAents to te neeCiest countries of te DorlC, te Bank, anCto ensure international Aonetary cooeration, te FunC!.oDever, tese International Financial Institutions 8IFIs9 ave cangeC teir roles overte last feD CecaCes, becoAing international aCvocates of controversial econoAicolicies in Ceveloing countries! )e governance of te Bank anC te FunC is severelyskeDeC toDarCs ric countries Dic CoAinate CecisionAaking in tese institutions!

Bretton oods conference

Meeting at Bretton 0ooCs, #!.! 8


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nC cairing te roceeCings Das .enry Morgentau, te U( )reasury (ecretary, froAte only country tat Das likely to eAerge froA te Dar Dit a strengteneC econoAy!PresiCent *oosevelt tolC te conference: N)e econoAic ealt of every country is aroer Aatter of concern to all its neigbors, near anC Cistant!G

How IFIs work)e FunC offers its rograAs to a governAent in neeC! )e governAent is, oDever, saiCto KoDnK te rograA!

t te outset it signs a socalleC Letter of Intent Dic lays out te eleAents of terecovery lan anC in return te FunC coAAits itself to grant loans in stages as anC DeneconoAic targets secifieC in te Letter are acieveC! )ese Dill incluCe cutting buCgetCeficits anC inflation!

But toCay tere are oter coAonents in IMF rograAs tat ave becoAe AoreiAortant! In $ast sia te FunC CeAanCeC te reforA of te banking systeA in )ailanC

anC InConesia anC te introCuction of roer forAal accounting systeAs in (out orea!

(iAilarly te Bank noD looks Aore at te longterA strategic goals of an econoAy tanat traCitional CeveloAent sceAes suc as neD igDays anC CaAs!

"ne of te 0orlC BankKs riorities is terefore its coAAitAent to acieve te MillenniuAeveloAent 5oals 8as agreeC uon in Monterrey9, Dic Dere CesigneC to significantlyreCuce te inCebteCness of Ceveloing countries! )ese neD aroaces are graCuallytaking olC as te influence of globaliHation becoAes Aore aarent! )e eAasis is onroviCing better guiCing anC flanking Aeasures Dilst at te saAe tiAe roviCing greatercoerence Dit te objectives ursueC by oter U# organiHations! In aCCition, Ceveloing

countries Dant to ave a greater say regarCing te Aakeu of te IFIKs structures, Cesiteteir liAiteC contribution to tese boCies!

The IMF'e International 2onetar) #und8IMF9 is an international organiHation tat oversees teglobal financial systeA by folloDing te AacroeconoAic olicies of its AeAbercountries, in articular tose Dit an iAact on eJcange rates anC te balance ofayAents! It is an organiHation forAeC to stabiliHe international eJcange!

)e IMF Das forAally organiHeC on eceAber 2, 1@4-, Den te first 2@ countries

signeC its rticles of greeAent! #oD, te IMF as uge influence in te DorlC econoAy!It is a secialiHeC agency of te UniteC #ations but as its oDn carter, governingstructure, anC finances! Its AeAbers are reresenteC troug a Euota systeA broaClybaseC on teir relative siHe in te global econoAy!

)e IMF as 13- AeAber countries!

)e eaCEuarter of te IMF is in 0asington !'!

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IMF;s unit of account is (* :=0DRs %ill furter be elaborated later in tisreport=;.

)e current Managing irector of IMF is a Frenc s%at te) sa)?= in te later alf : te !riti!al revie% part; of tis report )ou>ll see te%at te I2# is reall) doing=

!urposes

FolloDing are te Aain rticles of greeAent of te IMF:i9 roAote international Aonetary cooeration

ii9 eJansion anC balanceC groDt of international traCe

iii9 roAote eJcange rate stability

iv9 el establis Aultilateral systeA of ayAents anC eliAinate foreign eJcange

restrictions

v9 Aake resources of te FunC available to AeAbers

vi9 (orten te Curation anC lessen te Cegree of CiseEuilibriuA in international balances

of ayAents

.oDever, te real unCiscloseC uroses tat te critics argue uon are igly

controversial anC coAletely Cifferent froA te above articles!

"ource of Fun#in$

0ere Coes IMF get it;s Aoney )e IMF gets te funCing for te loans froA tefolloDing sources:

!" #he $uota s%stem

Most of te funCing coAes froA te @uota subs!riptions.It is te Aoney eac AeAber contributes Den joining te IMF!G

&" 'old holdings)otal golC olCings 16+!4 Aillion ounces 8+,21 Aetric tons9! IMF is te tirC largestofficial olCer of golC in te DorlC!

)e IMF;s total golC olCings are valueC on its balance seet at (* -!@ billion 8aboutO3! billion9 on te basis of istorical cost! s of Marc +1, 266@, te IMFKs olCingsaAounteC to O@4!3 billion 8at ten current Aarket rices9!

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IMF is roibiteC froA buying golC or engaging in oter golC transactions!3- Aajority8of total voting oDer9 neeCeC for sale anC urcase of golC!

H/ ", &, 0& IMF '& /%

"utfloDs of golC froA te IMFKs olCings occurreC unCer te original rticles of

greeAent troug sales of golC for currency, anC via ayAents of reAuneration anCinterest! s noteC, since te (econC AenCAent of te rticles of greeAent, outfloDsof golC can only occur troug outrigt sales! ey golC transactions incluCeC:

Q (ales for relenisAent 81@-69! )e IMF solC golC on several occasions torelenis its olCings of currencies!Q (out frican golC 81@619! )e IMF solC golC to AeAbers in aAountsrougly corresonCing to tose urcaseC froA (out frica Curing tis erioC!Q InvestAent in U!(! governAent securities 81@-/29! In orCer to generate incoAeto offset oerational Ceficits, soAe IMF golC Das solC to te UniteC (tates anC teroceeCs investeC in U!(! governAent securities! (ubseEuently, a significantbuilCu of IMF reserves roAteC te IMF to reacEuire tis golC froA te U!(!

governAent!Q uctions anC NrestitutionN sales 81@/369! )e IMF solC aroJiAately onetirC 8-6 Aillion ounces9 of its teneJisting golC olCings folloDing anagreeAent by its AeAbers to reCuce te role of golC in te international AonetarysysteA! .alf of tis aAount Das solC in restitution to AeAbers at te tenofficialrice of (* +- er ounce te oter alf Das auctioneC to te Aarket to financete )rust FunC, Dic suorteC concessional lenCingby te IMF to loDincoAecountries!5"ffAarket transactions in golC 81@@@26669! In eceAber 1@@@, te $JecutiveBoarC autoriHeC offAarket transactions in golC of u to 14 Aillion ounces toel finance te IMFKs articiation in te.eavily InCebteC Poor 'ountries8.IP'9 Initiative! BetDeen eceAber 1@@@ anC ril 2666, searate but closelylinkeC transactions involving a total of 12!@ Aillion ounces of golC Dere carrieCout betDeen te IMF anC tDo AeAbers 8BraHil anC MeJico9 tat aC financialobligations falling Cue to te IMF! In te first ste, te IMF solC golC to teAeAber at te revailing Aarket rice anC te rofits Dere laceC in a secialaccount investeC for te benefit of te .IP' Initiative! In te seconC ste, te IMFiAAeCiately acceteC back, at te saAe Aarket rice, te saAe aAount of golCfroA te AeAber in settleAent of tat AeAberKs financial obligations! In te enC,tese transactions left balance of te IMFKs olCings of ysical golC uncangeC!

(" Borroing arrangements

If necessary, te IMF Aay borroD froA a nuAber of its financially strongest AeAbercountries to suleAent te resources available froA its Euotas! It as Cone so on severaloccasions Den borroDing countries neeCeC large aAounts of financing anC a failure toel teA Aigt ave ut te international Aonetary systeA at risk!)e IMF Aaintains tDo stanCing Aultilateral borroDing arrangeAents

1! te #eD rrangeAent to BorroD 8#B92! te 5eneral rrangeAents to BorroD 85Bs9

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GAB

Line of creCit set u Dit several governAents anC banks trougout te DorlCG

)e 5eneral rrangeAents to BorroD 85B9 Das establiseC in 1@/2 as a borroDingfacility betDeen te IMF anC te 516 8in 1@/2, te 516 consisteC of eigt inCustrialiHeC

nations BelgiuA, 'anaCa, France, Italy,


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,ending

)e IMF roviCes loans to countries tat ave trouble Aeeting teir internationalayAents anC cannot oterDise finC sufficient financing on afforCable terAs!

)is financial assistance is CesigneC to el countries restore AacroeconoAic stability byrebuilCing teir international reserves, stabiliHing teir currencies, anC aying for iAortsRall necessary conCitions for relauncing groDt! )e IMF also roviCes concessionalloans to loDincoAe countries to el teA Cevelo teir econoAies anC reCuce overty

country in severe financial trouble, unable to ay its international bills, oses otentialrobleAs for te international financial systeA, Dic te IMF Das createC to rotect!ny AeAber country, Deter ric, AiCCleincoAe, or oor, can turn to te IMF forfinancing if it as a balance of ayAents neeCRtat is, if it cannot finC sufficientfinancing on afforCable terAs in te caital Aarkets to Aake its international ayAentsanC Aaintain a safe level of reserves!

T& -",+, ,"0*& /6 %&,+,(

bout four out of five AeAber countries ave useC IMF creCit at least once! But teaAount of loans outstanCing anC te nuAber of borroDers ave fluctuateC significantlyover tiAe!

In te first tDo CecaCes of te IMFKs eJistence, Aore tan alf of its lenCing Dent toinCustrial countries! But since te late 1@6s, tese countries ave been able to Aeet teirfinancing neeCs in te caital Aarkets!

)e oil sock of te 1@6s anC te Cebt crisis of te 1@36s leC Aany loDer anC loDerAiCCleincoAe countries to borroD froA te IMF!In te 1@@6s, te transition rocess in central anC $astern $uroe anC te crises in

eAerging AarketeconoAies leC to a furterincrease in te CeAanCfor IMF resources!In 2664, benign econoAicconCitions DorlCDiCeAeant tat Aanycountries began to reay

teir loans to te IMF! sa conseEuence, teCeAanC for te FunC;sresources CroeC offsarly 8see gra9!

But in 2663, te IMFbegan Aaking loans again

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to countries it by te financial crisis anC ig fooC anC fuel rices! In late 2663 anC early266@ te IMF lent O/6 billion to eAerging Aarkets affecteC by te crisis!

0ile te financial crisis as sarkeC reneDeC CeAanC for IMF financing, te Cecline inlenCing tat receCeC te financial crisis also reflecteC a neeC to aCat te IMFKs lenCing

instruAents to te canging neeCs of AeAber countries! In resonse, te IMF conCucteCa DiCeranging revieD of its lenCing facilities anC terAs on Dic it roviCes loans!

In Marc 266@, te FunC announceC a Aajor overaul of its lenCing fraAeDork,incluCing AoCerniHing conCitionality, introCucing a neD fleJible creCit line, enancingte fleJibility of te FunC;s regular stanCby lenCing arrangeAent, Coubling access liAitson loans, aCating its cost structures for igaccess anC recautionary lenCing, anCstreaAlining instruAents tat Dere selCoA useC! It as also seeCeC u lenCingroceCures anC reCesigneC its $Jogenous (ocks Facility to Aake it easier to access forloDincoAe countries!

T*&& #"+, $*$/'&' /6 %&,+,

rticle I of te IMFKs rticles of greeAent states tat te urose of lenCing by te IMFis N!!!to give confiCence to AeAbers by Aaking te general resources of te FunCteAorarily available to teA unCer aCeEuate safeguarCs, tus roviCing teA Ditoortunity to correct AalaCjustAents in teir balance of ayAents Ditout resorting toAeasures Cestructive of national or international roserity!N

In ractice, te urose of te IMFKs lenCing as cangeC CraAatically since teorganiHation Das createC! "ver tiAe, te IMFKs financial assistance as evolveC froAeling countries Ceal Dit sortterA traCe fluctuations to suorting aCjustAent anC

aCCressing a DiCe range of balance of ayAents robleAs resulting froA terAs of traCesocks, natural Cisasters, ostconflict situations, broaC econoAic transition, overtyreCuction anC econoAic CeveloAent, sovereign Cebt restructuring, anC confiCenceCriven banking anC currency crises!

)oCay, IMF lenCing serves tree Aain uroses!

1! First, it can sAoot aCjustAent to various socks, eling a AeAber country avoiCCisrutive econoAic aCjustAent or sovereign Cefault, soAeting tat DoulC be eJtreAelycostly, bot for te country itself anC ossibly for oter countries troug econoAic anCfinancial rile effects 8knoDn as contagion9!

2! (econC, IMF rograAs can el unlock oter financing, acting as a catalyst for oterlenCers! )is is because te rograA can serve as a signal tat te country as aCoteCsounC olicies, reinforcing olicy creCibility anC increasing investorsK confiCence!

+! )irC, IMF lenCing can el revent crisis! )e eJerience is clear: caital accountcrises tyically inflict substantial costs on countries teAselves anC on oter countriestroug contagion! )oCay, IMF lenCing serves tree Aain uroses!

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M"+, %&,+, 6"-+%+0+&'

)e 0tand=B) Arrangementis a key lenCing facility establiseC in 1@-2! ltoug its useas been Ceclining in recent years, it as reAaineC te Aost oular facility for AiCCleincoAe countries tat seek financial assistance! UnCer its structure, financing is roviCeC

in suort of aCjustAent to a balance of ayAents neeC anC CisburseC in trances baseCon conCitions selleC out in te rograA! )e IMFKs largest loans ave traCitionally beenroviCeC unCer (Bs!

LOAN INSTRUMENTS ( *+&6%

1. S0",9B A**",&,0' :SBA;(

o 'ountries aCCress sortterA B"P robleAs

o ProviCeC greatest aAount of IMF resources

o )e lengt is tyically 1224 Aonts

o *eayAent Ditin 2S4 years

o (urcarges aly to ig access levels

2. P/


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o Interest subsiCies are available

o Must be reaiC Ditin +S- years!

8.)e IMF as introCuceC a neD Flexible Credit Line :FCL; for countries Dit verystrong funCaAentals, olicies, anC track recorC of olicy iAleAentation!

%uotas

Definition

)e IMF is Dorking on DiCeranging reforAs to Aake sure it Aeets te neeCs of itsAeAber countries! "ne of te Aost iAortant eleAents is governance reforA, Dicinvolves aCjusting Euota sares to better reflect te relative Deigt of AeAber countriesin te DorlC econoAy anC enancing te voice anC articiation of loDincoAe AeAbersDitin te institution!IMF CeciCes on te Euota for eac AeAber, ricer countries ave larger Euota! $acAeAber country of te IMF is assigneC a Euota, baseC broaCly on its relative siHe in te

DorlC econoAy anC caracteristics !7uotas are CenoAinateC in (ecial raDing *igts8(*s9, te IMFKs unit of account! U(, aving largest econoAy, roviCes 44 of te totalEuota U( as largest voting oDer 1!6@!7uotas are revieDeC every - years by te IMF! )ey are calculateC by a forAula! 7uotasalso CeterAine oD Auc eac AeAber can borroD froA te IMF Den in neeC of aiC!

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$uotas of some -ember. /#able0

#he -ultifaceted Role of $uotas

'urrently, a AeAberKs Euota lays a key role in Cefining four asects of tat AeAberKsrelationsi Dit te IMF:819 )e aAount of financial resources tat a AeAber contributes to te IMF829 )e AeAberKs voting oDer in institutional Cecision Aaking 8along Dit basic votes98+9 )e level of access of te AeAber to IMF financing anC849 )e AeAbersK sare of general (ecial raDing *igts 8(*9 allocations!

W&, +' " -/,0* +, ,&&

country tat aC not taken in enoug foreign currency to ay te oter countries forDat tey ave bougt! (enCs Aore Aoney tan it takes in! (o te ga betDeen earningsanC ayAent is covereC by taking loans froA tese IFI;s! )at;s Dy IMF Dill lenCforeign eJcange to tat AeAber oing to stabiliHe its currency Dic Dill strengten itstraCe!

H/ #- -", " #&* /**/ 6*/# 0& IMF

Basically 2- of te country;s Euota Aay be useC! If tis still is not sufficient, tenAeAbers can borroD u to + tiAes te aAount of its Euota! In orCer to Co so te country

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8in neeC9 resent lans for reforA to $Jecutive irectors! If tese lans are sufficient forte $Jecutive irectors, te IMF grants te AeAber a loan!

"pecial &rawin$ 'i$(ts )"&'s*

)e (* is an international reserve asset, createC by te IMF in 1@/@ to suleAent teeJisting official reserves of AeAber countries! (*s are allocateC to AeAber countries inroortion to teir IMF Euotas! )e (* also serves as te unit of account of te IMFanC soAe oter international organiHations! Its value is baseC on a basket of keyinternational currencies!

country articiating in tis systeA neeCeC official reservesRgovernAent or centralbank olCings of golC anC DiCely acceteC foreign currenciesRtat coulC be useC tourcase te CoAestic currency in DorlC foreign eJcange Aarkets, as reEuireCAaintaining its eJcange rate!

)e (* is neiter " -**&,-) ,/* " -%"+#on te IMF! *ater) +0 +' "$/0&,0+"% -%"+#on te freely usable currencies of IMF AeAbers! .olCers of (*s can obtain tesecurrencies in eJcange for teir (*s in tDo Days: first, troug te arrangeAent ofvoluntary eJcanges betDeen AeAbers anC seconC, by te IMF Cesignating AeAbersDit strong eJternal ositions to urcase (*s froA AeAbers Dit Deak eJternalositions!

*DR 1aluation

)e value of te (* Das initially CefineC as eEuivalent to 6!333/1 graAs of fine golC

RDic, at te tiAe, Das also eEuivalent to one U!(! Collar! fter te collase of teBretton 0ooCs systeA in 1@+, oDever, te (* Das reCefineC as a basket ofcurrencies, toCay consisting of te euro,


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=aanese yen 3% +&.%!!! 0).&0!!! !.+&)066

Pound ster7in( ++ !.!0!3 +."+!0! !.+36%3%

.. do77ar ++ !.632! +.!!!!! !.632!!!

+."+363+

..?+.!! @ !.66!663 2

+ @ ? +."+363 %

+otes, (1) The exchange rate for the Japanese yen isexpressed in terms of currency units per U.S.dollar other rates are expressed as U.S. dollarsper currency unit.

*DR Interest Rate

)e IMF also revieDeC te AetoC for CeterAining te (* interest rate anC CeciCeC tocontinue to set te Deekly interest rate on te basis of a DeigteC average of interest rates

on sortterA instruAents in te Aarkets of te currencies incluCeC in te (* valuationbasket! .oDever, te IMF as AoCifieC te reresentative interest rate for te euro, tetreeAont $uribor 8$uro Interbank "ffereC *ate9! )e interest rate on te treeAontUniteC (tates anC UniteC ingCoA )reasury bills, anC on te


18/42


Q )e current (* is a relatively sAall basket of currencies tis is bot a strongoint anC Deak oint of te (*!Q )e U( ollar, $uro anC U PounC are containeC in te (* tese currenciesave been losing value against a larger basket of seconCary reserve currencies since telate 2666s recession starteC in 266!

Q )e (* Coes not contain 'inese %uan, InCian *uee, ustralian ollar or'anaCian ollar, Dic are iAortant bencAark or seconCary global reserve currencies!Q )e lack of global banking suort for consuAers 8tat is to say rivate ersonsanC businesses9 for te (*!

!a"istan and IMF

-en#in$ History,

W /&' P">+'0", ,&& IMF

s Pakistan is a Ceveloing country anC as a struggling econoAy 8i!e! CevalueC *uee,

Political & econoAic instability, a Aonstrous 2- Inflation anC a Ceclining 5P etc!!!9De often ave to turn to IMF for el!

Pakistan gets loans froA IMF for te folloDing Aain uroses:

Balance of ayAent Ceficits!

(tabiliHation of currency!

*ebuilCing international reserves

Managing liEuiCity robleAs!

H+'0/* = C**&,0 P*/'$&-0'(

Page 13 of 42


19/42


V tis gra is taken froA IMF;s official siteWWW te first coluAn soDs te lenCinginstruAents 8eJlaineC earlier9 useCX

o (ince 1@33, 11 loan arrangeAents ave taken lace!

o (iJ loan arrangeAents Dere AaCe Curing te regiAe of BenaHir Butto!

o )Do of teA Dere AaCe Curing #aDaH (arif regiAe!

o )Do unCer Musarraf regiAe 8to stabiliHe te econoAy9!

o "ne IMF loan is AaCe in current regiAe! 8It Das a arC ste for a neDly forAeC

governAent to ask for IMF;s aiC, just sortly after coAing to oDer9

o 44 of te total lenCing aAount as been CraDn froA te original 166 agreeC

uon lenCing aAount!

Page 1@ of 42


20/42


IMFs attitu#e towar#s us

s De all knoD tat IMF attituCe toDarCs Ceveloing nations as alDays beenuAiliating so saAe is te case Dit Pakistan as tis reort alsosoDs:

rticle froA te"e%s about te latest 824t#ov 26639 loan :

fter Ainor canges in te 11oint agenCa ofte International Monetary FunC 8IMF9, tePakistan governAent as agreeC to graCuallyiAose te 'entral $Jcise uty 8'$9 onservices anC agriculture sectors at te rate of eigt to 13 er cent in lace of te 5eneral (ales)aJ 85()9, )e #eDs learnt ere on (aturCay!

In vieD of te IMF CeAanC, te Pakistani currency Dill also be CevalueC after sligt cangesin te Ciscount rate anC eJcange rate Dill be CecreaseC officially by siJ to seven er cent,G an

official in te Ministry of Finance CiscloseC, Dising to reAain anonyAous!

Moreover, te official saiC te release of /6 er cent funCs for te neJt tree Euarters of tecurrent financial year, unCer te Public (ector eveloAent PrograA 8P(P9, DoulC berevieDeC CoDnDarC to 4- er cent!

ccorCing to te official, te foreign assistance floD aC alreaCy CeclineC by 46 er centbecause Conors ave refuseC to roviCe funCs for neD rojects at te feCeral anC rovinciallevels unCer te P(P against te ongoing rojects funCeC by te


21/42


The #orld $an"

)e 0orlC Bank is an international financial institution tatroviCes financial anC tecnical assistance to Ceveloingcountries for CeveloAent rograAs 8e!g! briCges, roaCs,

scools, etc!9 Dit te stateC goal of reCucing overty!

History

0orlC bank caAe lnto eJistance on 2teceAber, 1@4-! it is te art of te UniteC#ations Dit Cifferent governance structure!)e 0orlC Bank is one of tDo Aajor financial institutions createC as a result of teBretton 0ooCs 'onferencein 1@44! )e International Monetary FunC, a relateC butsearate institution, is te seconC! elegates froA a DiCe variety of countries attenCeC teBretton 0ooCs 'onference, but te Aost oDerful countries in attenCance, te UniteC(tates anC Britain, Aainly saeC negotiations!

0orlC Bank conceiveC Curing 0orlC 0ar II at Bretton 0ooCs, #eD .aAsire, te0orlC Bank initially eleC rebuilC $uroe after te Dar! Its first loan of O2-6 AillionDas to France in 1@4 for ostDar reconstruction! *econstruction as reAaineC aniAortant focus of te BankKs Dork, given te natural Cisasters, uAanitarianeAergencies, anC ost conflict reabilitation neeCs tat affect Ceveloing anC transitioneconoAies! )e first resiCent of 0orlC Bank DasE&,& M&&*8.

/0ectie

)e 0orlC Bank roviCes over O26 billion in assistance to Ceveloing anC transitioncountries every year! )e BankKs rojects anC olicies affect te lives anC liveliooCs ofbillions of eole DorlCDiCe soAetiAes for te better, but very often in controversialanC robleAatic Days!

orl# Bank, a Bank

)e 0orlC Bank isn;t like te usual conventional banks! single erson cannot oen anaccount or ask for a loan! *ater, te Bank roviCes loans, grants anC tecnicalassistance to countries anC te rivate sector to reCuce overty in Ceveloing anC

transition countries!

!urposes

0orlC Bank backgrounC anC objectives ave eJanCeC anC evolveC over te years! )eoriginal urose anC objectives as te International Bank for *econstruction anCeveloAent Das a facilitator role in ostDar reconstruction! (ince 1@44, tis role aseJanCeC anC 0orlC BankKs objectives ave groDn to Cevelo its current AanCate to

Page 21 of 42
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22/42


alleviate DorlCDiCe overty! )ey Dork closely Dit teir affiliate, te InternationaleveloAent ssociation!0it all tis eJansion anC groDt, 0orlC BankKs original focus as not cangeC! )oCay,reconstruction reAains a to riority in suc situations as:

#atural Cisasters

#eeCs affecting Ceveloing econoAies Post conflict reabilitation

#eeCs affecting a transitioning econoAy

&ifference 0etween orl# Bank an# t(e IMF

Most eole ave only te vaguest iCea of Dat tese institutions Co, anC very feD eoleinCeeC coulC, if resseC on te oint, say Dy anC oD tey Ciffer! $ven


23/42


+ R&-+$+&,0' /6 F,+,assists all AeAbersbot inCustrial anCCeveloing countriestat finCteAselves in teAorary balance of

ayAents Cifficulties by roviCingsort to AeCiuAterA creCits

roviCes to te oorest Ceveloingcountries Dose er caita 5#P is lesstan O3/- a year secial financialassistance troug te International

eveloAent ssociation 8I9

4 O$&*"0+/,'suleAents te currency reserves of itsAeAbers troug te allocation of(*s 8secial CraDing rigts9 to Cate(* 21!4 billion as been issueC toAeAber countries in roortion to teirEuotas

encourages rivate enterrises inCeveloing countries troug its affiliate,te International Finance 'ororation8IF'9

- S/*-& /6 F,+,CraDs its financial resources rinciallyfroA te Euota subscritions of itsAeAber countries

acEuires Aost of its financial resources byborroDing on te international bonCAarket

/ C"$+0"%as at its Cisosal fully aiCin EuotasnoD totaling (* 14- billion 8aboutO21- billion9

as an autoriHeC caital of O134 billion,of Dic AeAbers ay in about 16ercent

S+& ", S0*-0*&

as a staff of 2,+66 CraDn froA132 AeAber countries

as no affiliates or subsiCiaries

as a staff of ,666 CraDn froA 136AeAber countries

Millennium &eelopment oals )M&s*

)e 0orlC BankKs current focus is on te acieveAent of te MillenniuA eveloAent5oals 8M5s9, lenCing riAarily to NAiCCleincoAe countriesN at interest rates Dicreflect a sAall Aarku over its oDn 8rateC9 borroDings froA caital Aarkets Dilete I roviCes loD or no interest loansanC grantsto loD incoAe countries Dit littleor no access to international creCit Aarkets! )e IB* is a AarketbaseC nonrofitorganiHation, using its ig creCit rating to Aake u for te relatively loD interest rate onits loans, Dile te I is funCeC riAarily by erioCic NrelenisAentsN 8grants9 voteCto te institution by its Aore affluent AeAber countries!

Page 2+ of 42
http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Grant_(money)http://en.wikipedia.org/wiki/Nonprofit_organizationhttp://en.wikipedia.org/wiki/Nonprofit_organizationhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Grant_(money)http://en.wikipedia.org/wiki/Nonprofit_organizationhttp://en.wikipedia.org/wiki/Nonprofit_organization


24/42


In ligt of te enorAous callenge facing te global coAAunity to eraCicate overty Dic affects nearly alf of te DorlC;s oulation living on less tan O2 Collars a Cay te international CeveloAent coAAunity in 2666 aCoteC secific targets for overtyreCuction, noD knoDn as te MillenniuA eveloAent 5oals 8M5s9! )e M5sconstitute 3 basic overty reCuction goals ranging froA access to social services anC

genCer eEuity to environAental sustainability! )e overarcing goal is to alve incoAeoverty DorlCDiCe by 261-!5oal 1: $raCicate eJtreAe overty anC unger5oal 2: cieve universal riAary eCucation5oal +: ProAote genCer eEuality anC eAoDer DoAen5oal 4: *eCuce cilC Aortality5oal -: IArove Aaternal ealt5oal /: 'oAbat .I=?I(, Aalaria, anC oter Ciseases5oal : $nsure environAental sustainability5oal 3: evelo a global artnersi for CeveloAent

I#$*/


25/42


orl# Bank roup

)e 0orlC Bank Ciffers froA te 0orlC Bank 5rou, in tat te 0orlC Bank coArisesonly tDo institutions:International Bank for *econstruction anC eveloAent 8IB*9International eveloAent ssociation 8I9

0ereas te latter incororates tese tDo in aCCition to tree Aore!International Finance 'ororation 8IF'9Multilateral InvestAent 5uarantee gency 8MI59International 'entre for (ettleAent of InvestAent isutes 8I'(I9

International Bank for Recosruction and Delopment" 4IBRD5

O*+,

)e founCation of IB* Das laiC in te saAe Bretton 0ooC conference in Dic IMFDas establiseC!

P*$/'&It Das founCeC in 1@44 as a Day to finance reconstruction rojects in DarravageCcountries Cesite teir oor creCitDortiness!

F,-0+/,'

)e Aain functions of te bank are :)o assist in rocess of reconstruction, CeveloAent anC restoration of countries CestroyeCby Dar!)o roAote long terA balanceC groDt all arounC te DorlC!)o encourage international investAents for CeveloAent of te AeAber countries!

)o encourage rivate foreign investAents by Aeans of gurantees!)o el AeAber countries in Aaintenances of eEuilibriuA of B"P!)o lay a role so tat sAoot transition Aay take lace froA Dar tiAe to eace tiAeeconoAies!

M/& /6 6,+,

)e IB* gets its Aoney froA regular subscritions aiC by AeAber governAents anCby borroDing Aoney on international Aarkets 8troug selling 0orlC Bank bonCs9! )eBank ten lenCs tat Aoney to borroDing governAents at a loDer rate tan coAAercialbanks DoulC! ltoug te IB* still concentrates on CeveloAent it oerates riAarilyin AiCAiCCleincoAe Ceveloing countries in F% 1@@4, te IB* Das funCeC at about

O1 billion!

L/",'

)e IB* offers loans to Ceveloing country governAents for a variety unCertakings:(ectoral loans suort reforA or infrastructure iAroveAent in a secific econoAicsector, i!e!, Aining, transort, energy, banking, etc! roject loans suort te coAletionof a secific roject, suc as a CaA, igDay or oDer lant anC AacroeconoAic loansassist governAents in acieving te econoAic objectives CetaileC in a structural

Page 2- of 42


26/42


aCjustAent rograA 8Aore on structural aCjustAent rograAs, beloD9! IB* loans cancover te entire cost of a roject, but Bank clout attracts Aany oter sources of financing,esecially froA te rivate sector! *ecently, te Bank as also starteC offering suort forrivate investors teAselves, in an effort to attract CeveloAent Aoney to (outerncountries! Finally, IB* also offers a ost of tecnical assistance rograAs to its

Ceveloing country AeAbers for Ncaacity builCingN anC Ntecnology transfer!N

M&*'+$

)o be eligible for IB* loans, governAents Aust be a AeAber te 0orlC Bank, anCcoAly Dit BankiAoseC (tructural CjustAent PrograAs 8(Ps9, Dic ave beenseverely criticiHeC by #5"s DorlCDiCe as an unnecessarily ars set of AacroeconoAicolicies! (Ps are aiAeC at reCucing governAent buCget Ceficits by CecreasinggovernAent eJenCiture 8articularly on social rograAs9, increasing eJort roCuction,rivatiHation, anC liberaliHing traCe anC investAent olicies! )e urose of tese reforAsis to el countries becoAe Aore econoAically robust, creCitDorty anC able to ay offits Cebts! )ese olicies are rereEuisites for loan eligibility anC often incluCe rovisions

for reCuceC governAent senCing on social services! )e Bank offers aCvice anC loans toel iAleAent (Ps

#he International Development +ssociation 4ID+5

)e 0orlC Bank is an internationally suorteC bank tat roviCes financial el anCtecnical assistance to Ceveloing nations! )ey Co tis unCer te guise of reCucingoverty, altoug tis grou is igly controversial!

O*+,

In 1@-@, te U( AaCe te resolution for te articles of agreeAent for I anC in(eteAber 1@/6 te I Das establiseC!

O&-0+


27/42


borroDers! .oDever, I funCing is consiCerably loDer tan tat of te 0orlC Bank,aAounting to O-!/ billion 8about +4 tat of IB*Ks9 in F% 1@@4!I is consiCering te establisAent of tDo neD financing services to enance terivate sector! )e rationale is tat troug foreign investAent, I countries coulC gainAucneeCeC infrastructure! )e first is a guarantee rograA tat DoulC encourage te

enetration of foreign caital anC Aultinational cororations! )e seconC rograA is teI Private InvestAent FunC Dic DoulC be I Aoney AanageC by te InternationalFinance 'ororation

orl# Banks reas of operation

)e 0orlC Bank is active in te folloDing areas:

gricultural anC *ural

eveloAent

'onflict anC eveloAent

eveloAent "erations anC

ctivities

$conoAic Policy

$Cucation

$nergy

$nvironAent

Financial (ector

5enCer

5overnance

.ealt, #utrition anC Poulation

InCustry

InforAation anC 'oAAunication

)ecnologies

InforAation, 'oAuting anC

)elecoAAunications

International $conoAics anC

)raCe

Labor anC social rotection

LaD anC


28/42


inCicators troug iAroveAents in ublic finance, governance anC financial regulatoryfraAeDorks! )ese interventions ave been successful in bringing about concretecanges in Celivery of rovincial services anC tus are social anC econoAic inCicators intese rovinces!

W/*>+, +0 P">+'0", P/


29/42


Aeasures stuCent acieveAent anC uses te finCings to aCCress gas in stuCent learning!#$( as establiseC, iloteC anC iAroveC assessAent AecanisAs anC instruAents,Dic are noD being regularly aCAinistereC!

/+,+, +0 +,0&*,"0+/,"% $"*0,&*' 0/ &%$ P">+'0", 6+0 $/%+/.

s art of our efforts to el eraCicate olio globally, De aroveC tDo rojectsU(O42!1 Aillion in 266+ anC U( O 4!2 Aillion in 266/ for Pakistan to urcase teoral olio vaccine! )e Aoney is art of an innovative financing artnersi 8I BuyCoDn9 betDeen te 0orlC Bank, te Bill & MelinCa 5ates FounCation, *otaryInternational, anC te UniteC #ations FounCation! )ese organiHations ave forAeC teInvestAent Partnersi for Polio, an initiative to el eraCicate olio DorlCDiCe! )e loanto Pakistan Dill el te country;s Polio $raCication Initiative Dic aiAs to AakePakistan a Polio free country!

H&%$+, P">+'0", $*&


30/42


%sian &e'elopment $an")e sian eveloAent Bank 8B9 is a regional CeveloAent bank establiseC in 1@//to roAote econoAic anC social CeveloAent in sian anC Pacific countries trougloans anC tecnical assistance! It is a Aultilateral CeveloAent financial institution oDneCby / AeAbers 8as of 2 February 2669, 43 froA te region anC 1@ froA oter arts of

te globe! BKs vision is a region free of overty! Its Aission is to el its CeveloingAeAber countries reCuce overty anC iArove te Euality of life of teir citiHens!

im: )e Dork of te sian eveloAent Bank 8B9 is aiAeC at iAroving teDelfare of te eole in sia anC te Pacific, articularly te 1!@ billion Do live on lesstan O2 a Cay! esite Aany success stories, sia anC te Pacific reAains oAe to tDotirCs of te DorlCKs oor!

)e bank Das conceiveC Dit te vision of creating a financial institution tat DoulC beNsian in caracterN to foster groDt anC cooeration in a region tat back ten Das oneof te DorlCKs oorest! B raises funCs troug bonC issues on te DorlCKs caitalAarkets, Dile also utiliHing its AeAbersK contributions anC earnings froA lenCing! )esesources account for alAost tree Euarters of its lenCing oerations!

)e riAary uAan caital asset of te bank is its staff of rofessionals, encoAassingacaCeAic anC?or ractical eJerts in te areas of agriculture, civil engineering,econoAics, environAent, ealt, ublic olicy anC finance! Professional staff are CraDnfroA its AeAber countries anC given various incentives to relocate to Manila!

It is conceivable tat once all of siaPacific reaces a certain level of living stanCarC tebank Dill be DounC CoDn or reconfigureC to oerate as a coAAercial enterrise!

/r$ani6ation

)e igest olicyAaking boCy of te bank is te BoarC of 5overnors coAoseC of onereresentative froA eac AeAber state! )e BoarC of 5overnors, in turn, elect aAongteAselves te 12 AeAbers of te BoarC of irectors anC teir Ceuty! $igt of te 12AeAbers coAe froA regional 8siaPacific9 AeAbers Dile te oters coAe froA nonregional AeAbers!

)e BoarC of 5overnors also elect te bankKs PresiCent Do is te cairerson of teBoarC of irectors anC Aanages B! )e resiCent as a terA of office lasting fiveyears, anC Aay be reelecteC! )raCitionally, anC because


31/42


-en#in$

BKs annual roject lenCing aAounts to about U(O billion er year Dit tyicallenCing er roject being in te O166 Aillion range!

+ota0le !roects fgan iasora Project

FunCing Uta (tate University leC rojects to bring labor skills in)ailanC

$artEuake anC )sunaAi $Aergency (uort Project in InConesia

5reater Mekong (ubregional PrograA

*"' Ping .u "ffsore "il anC 5as eveloAent

(olar energy CeveloAent funCs in InCia

(trategic Private (ector Partnersis for Urban Poverty *eCuction in tePiliines

)ransfganistan 5as Pieline Feasibility ssessAent Loan of O1!2 billion to bail it out of an iAenCing econoAic crisis in

Pakistan

Mem0ers

B as /AeAbers 85eorgia being te /tAeAber joineC in 2669

Islamic &e'elopment $an"

IslaAic eveloAent Bank 8also knoDn as IsB9, is a Aultilateral CeveloAent

financing institution locateC in


32/42


!urpose

)e urose of te Bank is to foster te econoAic CeveloAent anC social rogress ofAeAber countries anC MusliA coAAunities inCiviCually as Dell as jointly in accorCanceDit te rinciles of (ariKa i!e!, IslaAic LaD!

Functions)e functions of te Bank are to articiate in eEuity caital anC grant loans forroCuctive rojects anC enterrises besiCes roviCing financial assistance to AeAbercountries in oter forAs for econoAic anC social CeveloAent!

)e Bank is autoriHeC to accet Ceosits anC to AobiliHe financial resources troug(ariKa coAatible AoCes! It is also cargeC Dit te resonsibility of assisting in teroAotion of foreign traCe esecially in caital gooCs, aAong AeAber countriesroviCing tecnical assistance to AeAber countries anC eJtenCing training facilities forersonnel engageC in CeveloAent activities in MusliA countries to conforA to te(ariKa!

(ariKa coAatible ractices incluCe:

Loan

Leasing

InstallAent (ale

IstisnaKa

$Euity Particiation

Lines of Financing

)e unit of account of te bank is te IslaAic inar!

)e BankKs financial year is te lunar .ijri year!

)e official language of te Bank is rabic, but $nglis anC Frenc are

aCCitionally useC as Dorking languages!

Mem0ers(ip

)e resent AeAbersi of te Bank consists of -/ countries! )e basic conCition forAeAbersi is tat te rosective AeAber country soulC be a AeAber of te"rganiHation of te IslaAic 'onference, ay its contribution to te caital of te BankanC be Dilling to accet suc terAs anC conCitions as Aay be CeciCeC uon by te IsBBoarC of 5overnors!

Hea# /ffice an# 'e$ional /ffices

)e BankKs rincial office is in


33/42


'esource Mo0ili6ation

s of +6?12?1423. 86@?61?26639, te IB;s total sareolCers; eEuity stooC at I -!4

billion 8U(O 3!- billion eEuivalent9 Dic is te Aain source of funCing te IB;soerations! In aCCition to tis, IB as AobiliHeC U(O @66 Aillion by Day of issuance oftDo (ukuks! )e first (ukuk Das issueC in 266+ for U(O 466 Aillion Dic Dill Aaturein ugust, 2663 anC te seconC one of U(O -66 Aillion Das issueC in 266- Dic DillAature in 2616! IB also AobiliHes sortterA resources froA te Aarket, as anC DenneeCeC, using te *everse Murabaa!

In orCer to Aeet te future funCing reEuireAents of te Bank, it is lanneC tat IB Dillta te international Aarket soAe tiAe Curing 2663 to raise aCCitional resources trougissuance of (ukuk! )e siHe anC te currency of te (ukuk issues Dill be CeciCeC close tote tiAe of issuance!

riticism on IMF and the #orld $an"'riticisA of te 0orlC Bank anC te IMF encoAasses a Dole range of issues but teygenerally centre arounC concern about te aroaces aCoteC by te 0orlC Bank anC teIMF in forAulating teir olicies! )is incluCes te social anC econoAic iAact teseolicies ave on te oulation of countries Do avail teAselves of financial assistancefroA tese tDo institutions!

1. Con#itionalities

"n giving loans to countries, te IMF Aakes te loan conCitional on te iAleAentationof certain econoAic olicies!)ese olicies tenC to involve:

o *eCucing governAent borroDing .iger taJes anC loDer senCing

o .iger interest rates to stabiliHe te currency! lloD failing firAs to go

bankrut!o (tructural aCjustAent! PrivatiHation, Ceregulation, reCucing corrution anC

bureaucracy!

'ritics of te 0orlC Bank anC te IMF are concerneC about te conCitionalities iAoseCon borroDer countries! )e 0orlC Bank anC te IMF often attac loan conCitionalities

baseC on Dat is terAeC te K0asington 'onsensusK, focusing on liberalisationRoftraCe, investAent anC te financial sectorR, Ceregulation anC rivatisation ofnationaliseC inCustries! "ften te conCitionalities are attaceC Ditout Cue regarC for teborroDer countriesK inCiviCual circuAstances anC te rescritive recoAAenCations byte 0orlC Bank anC IMF fail to resolve te econoAic robleAs Ditin te countries!

Page ++ of 42


34/42


It is claiAeC tat retarC social stability anC ence inibit te stateC goals of te IMF,Dile (tructural CjustAent PrograAs leaC to an increase in overty in reciientcountries!)e Aain robleA is tat tese olicies of structural aCjustAent anC Aacro econoAicintervention Aake te situation Dorse De;ll take tese tDo cases for an eJaAle to

suort tis oint:

C"'& I( :A'+", C*+'+';, in te sian crisis of 1@@, Aany countries suc as InConesia,Malaysia anC )ailanC Dere reEuireC by IMF to ursue tigt Aonetary olicy 8igerinterest rates9 anC tigt fiscal olicy to reCuce te buCget Ceficit anC strengten eJcangerates! .oDever, tese olicies causeC a Ainor sloDCoDn to turn into a serious recessionDit Aass uneAloyAent!

A C"'& II :A*&,0+,";: In 2661, rgentina Das forceC into a siAilar olicy of fiscalrestraint! )is leC to a Cecline in investAent in ublic services Dic arguably CaAageCte econoAy

rgentina, Dic aC been consiCereC by te IMF to be a AoCel country in itscoAliance to olicy roosals by te Bretton 0ooCs institutions, eJerienceC acatastroic econoAic crisis back in year 2661, Dic soAe believe to ave been causeCby IMFinCuceC buCget restrictions R Dic unCercut te governAentKs ability to sustainnational infrastructure even in crucial areas suc as ealt, eCucation, anC security R anCrivatiHation of strategically vital national resources! "ters attribute te crisis torgentinaKs AisCesigneC fiscal feCeralisA, Dic causeC subnational senCing toincrease raiCly! )e crisis aCCeC to DiCesreaC atreC of tis institution in rgentina anCoter (out Aerican countries, Dit Aany blaAing te IMF for te regionKs econoAicrobleAs! )e current 8as of early 266/9trenC toDarCs AoCerate leftDing governAents in

te region anC a groDing concern Dit te CeveloAent of a regional econoAic olicylargely inCeenCent of big business ressures as been ascribeC to tis crisis!

2. Impact on !u0lic Healt(

)ere aC been several occasions on Dic te 0orlC Bank anC IMF ave been elCresonsible for negligence regarCing ublic ealt tus causing unCreCs to Cie,AentioneC beloD are just tDo of tose:

C"#*+& ", Y"%&' *&'&"*- :IMF ", 0&*-%/'+';

In 2663, a stuCy by analysts froA 'aAbriCge anC %ale universities ubliseC on te oenaccess Public Library of (cience concluCeC tat strict conCitions on te international

loans by te IMF resulteC in tousanCs of Ceats in $astern $uroe by tuberculosis asublic ealt care aC to be DeakeneC! In te 21 countries Dic te IMF aC givenloans, tuberculosis Ceats rose by 1/!/

W/*% B",>' AIDS C/,0*/


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be insufficient! In te 266- Massey Lecture, entitleC N*ace gainst )iAeN, (teen LeDisargueC tat te structural aCjustAent olicies of te 0orlC Bank anC te InternationalMonetary FunC ave aggravateC anC aiCeC te sreaC of te I( anCeAic by liAitingte funCing alloDeC to ealt anC eCucation sectors!

3. &ealuations)e IMF as also been criticiHeC for alloDing inflationary Cevaluations! 'urrencyCevaluation is recoAAenCeC by te IMF to te governAents of oor nations! $!gs a art of conCitions 8for te last loan by IMF, #ov 26639 )e Pakistani currency DasCevalueC after sligt canges in te Ciscount rate anC eJcange rate CecreaseC officiallyby / !

4. Criticism from free market a#ocates

)yically te IMF anC its suorters aCvocate a Aonetarist aroac! s suc, aCerentsof sulysiCe econoAics generally finC teAselves in oen CisagreeAent Dit te IMF!)e IMF freEuently aCvocates currency Cevaluation, criticiHeC by roonents of suly

siCe econoAics as inflationary! (econCly tey link iger taJes unCer NausterityrograAAesNV Dit econoAic contraction! 8Vausterity is Den a national governAentreCuces its senCing in orCer to ay back creCitors! usterity is usually reEuireC Den agovernAentKs fiscal Ceficit senCing is felt to be unsustainable!9

'urrency Cevaluation is recoAAenCeC by te IMF to te governAents of oor nationsDit struggling econoAies! (oAe econoAists claiA tese IMF olicies are Cestructive toeconoAic roserity!

'oAlaints are also CirecteC toDarC International Monetary FunC golC reserve beingunCervalueC! t its incetion in 1@4-, te IMF eggeC golC at U(O+- er )roy ounce of

golC! In 1@+ te #iJon aCAinistration lifteC te fiJeC asset value of golC in favor of aDorlC Aarket rice! .ence te fiJeC eJcange rates of currencies tieC to golC DeresDitceC to a floating rate, also baseC on Aarket rice anC eJcange! )is largely caAeabout because PetroCollars outsiCe te UniteC (tates Dere Aore tan coulC be backeC byte golC at Fort noJ unCer te fiJeC eJcange rate systeA! )e fiJeC rate systeA onlyserveC to liAit te aAount of assistance te organisation coulC use to el CebtriCCencountries! 'urrent IMF rules roibit AeAbers froA linking teir currencies to golC!

5. IMF8orl# Bank support of military #ictators(ips

)e role of te Bretton 0ooCs institutions as been controversial since te late 'olC 0arerioC, as te IMF olicy Aakers suorteC Ailitary Cictatorsis frienCly to Aerican

anC $uroean cororations! 'ritics also claiA tat te IMF is generally aatetic orostile to teir vieDs of CeAocracy, uAan rigts, anC labor rigts! )e controversy aseleC sark te antiglobaliHation AoveAent!rguAents in favor of te IMF say tat econoAic stability is a recursor to CeAocracyoDever, critics igligt various eJaAles in Dic CeAocratiHeC countries fell afterreceiving IMF loans!

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C"'& I :B*"+%; : In te 1@/6s, te IMF anC te 0orlC Bank suorteC te governAent ofBraHil;s Ailitary Cictator +'0",;:For instance, In Pakistan, te IMF useC a Ailitary governAent toiAose te 5eneral (ales )aJ 85()9, a national sales taJ on Aost consuAer iteAs! t tesaAe tiAe, tey ressureC te governAent to eliAinate te 0ealt )aJ! )e Aost ironictDist in IMF taJ olicy is tat te IMF itself is eJeAt froA all taJes, along Dit its sisterinstitutions, te 0orlC Bank anC te InterAerican eveloAent Bank, in site of tefact tat te trio of institutions oDn O1!4 billion Dort of roerty in 0asington '!$viCently, te IMF eJeAts itself froA te reEuireAent of aying taJes to ensureaCeEuate governAental revenues,G

FurterAore, illegitiAate Cebts AaCe to Cictatorial governAents ave furter DorseneCte Cebt crisis! s a resonsible organiHation, IMF soulC evaluate te creCitDortinessanC legitiAacy of te receivers before Aaking any loan arrangeAents! In te case ofillegitiAate Cebt, te robleA is not necessarily Dit borroDers, but Dit lenCers!

9. IMF : B , secretie institutions wit( noaccounta0ility

)ese agencies are not accountable to anyone but to financial officials of te Dealtiestnations, tey Aake Cecisions in closeC Aeetings, anC tey fail to roCuce te CesireC

results!)e IMF is funCeC Dit taJayer Aoney, yet it oerates beinC a veil of secrecy! In caseof Cesigning a loan ackage for a country te AeAbers of affecteC coAAunities Co notarticiate in Cesigning loan ackages!

)e IMF Dorks Dit a select grou of central bankers anC finance Ainistry staff to CeciCeolices Ditout inut froA oter governAent agencies suc as ealt, eCucation anCenvironAent CeartAents! FurterAore, te IMF as resisteC atteAts to oen u toublic scrutiny anC inCeenCent evaluation! )e IMF as AaCe elites froA te 5lobal(out Aore accountable to First 0orlC elites tan teir oDn eole!

;. &emocracy is 0ein$ torn apart 0y a financialoli$arc(y )Mi$(t is ri$(t*

0ile te 0B reresents 13- countries, it is run by a sAall nuAber of econoAicallyoDerful countries)e CeveloeC nations Do act as lenCers are bestoDeC Dit enorAous oDer tat caneasily overturn te roosals of Deaker countries!

Page +/ of 42


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P"'0 M",+, D+*&-0/*'

.istorically te IMFKs Aanaging Cirector as been $uroean anC te resiCent of te0orlC Bank as been froA te UniteC (tates! .oDever, tis stanCarC is increasinglybeing EuestioneC anC coAetition for tese tDo osts Aay soon oen u to incluCe oter

EualifieC canCiCates froA any art of te DorlC!

U,/-*"0+- S'0

Unlike a CeAocratic systeA in Dic eac AeAber country DoulC ave an eEual vote,ric countries CoAinate CecisionAaking in te IMF because voting oDer is CeterAineCby te aAount of Aoney tat eac country ays into te IMFKs Euota systeA! ItKs a systeAof one Collar, one vote! )e U!(! is te largest sareolCer Dit a Euota of 1 ercent!5erAany,


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Moreover, reCuction in governAent social senCing in ealt anC eCucation Aeans oorno longer can afforC tese services! Liberalists backeC by IMF Aaintain tat overty asunfortunate or even unfair but not unjust, even if eole Cie of unger!

>. IMF !olicies (urt t(e enironment

IMF loans anC bailout ackages are aving te Day for natural resource eJloitation on astaggering scale! )e IMF Coes not consiCer te environAental iAacts of lenCingolicies, anC environAental Ainistries anC grous are not incluCeC in olicy Aaking! )efocus on eJort groDt to earn arC currency to ay back loans as leC to anunsustainable liEuiCation of natural resources!For eJaAle, te Ivory 'oastKs increaseC reliance on cocoa eJorts as leC to a loss oftDotirCs of te countryKs forests!

1?.T(e IMF 0ails out ric( 0ankers@ creatin$ a moral(a6ar# an# $reater insta0ilityin te global econoAy)e IMF routinely uses countries to Ceregulate financial systeAs! )e reAoval of

regulations tat Aigt liAit seculation as greatly increaseC caital investAent inCeveloing country financial Aarkets! More tan O1!- trillion crosses borCers every Cay!Most of tis caital is investeC sortterA, utting countries at te DiA of financialseculators! )e MeJican 1@@- eso crisis Das artly a result of tese IMF olicies!0en te bubble oeC, te IMF anC U( governAent steeC in to ro u interest anCeJcange rates, using taJayer Aoney to bail out 0all (treet bankers! (uc bailoutsencourage investors to continue Aaking risky, seculative bets, tereby increasing teinstability

11. /t(er Controersies

)ese tDo IFI are also blaAeC 8rigtly9 for several oter robleAs all over te DorlC like:.uAan rigts anC Labor rigts being violateC0oAen not being given teir full rigts

"ome Ironic facts a0out t(e IFIs,

IMF itself is eJeAt froA all taJes, along Dit its sister institutions, te 0orlCBank anC te InterAerican eveloAent Bank, in site of te fact tat te trioof institutions oDn O1!4 billion Dort of roerty in 0asington '!

IMF;s oAiniEue (trauss an is no stranger to controversies about is ublic asDell as ersonal life eiter! .e is a erson Dose caracter is full of controversial

realities!

Page +3 of 42


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Criticism 0y some Famous !ersonalities

.ere are soAe critical revieD about IMF anC te 0orlC Bank by so faAous econoAistsanC analysts:

)ey 0BX focuseC on groDtbaseC CeveloAent anC tus invest in energy

sectors, setting u orts anC infrastructure, insteaC of tis tey Aust focus onoor!GYP*"F MU.MM %U#U(Y #obel laureate, BanglaCesi banker anCeconoAist, founCer of 5raAeen BankX

Zte IMF is not serving a useful role in loDincoAe countries, anC tat loD

incoAe national governAents neeC Aore olicy sace anC less IMFinterventions!GY


40/42


.ere are soAe articles 8? selective eJtracts froA articles9 concerning te cruel attituCe ofIMF anC 0B concerning te oor countries!

T& IMF ", 0& W/*% B",>( $*/0&-0/*' /6 -"$+0"%+'#By anie7 Fi7a/ Peoples Weekly World,+) =anuary +00&

IAagine alying for a loan at a bank anC being tolC tat in orCer to receive te Aoney

you Aust agree to being it in te face by Mike )yson, in te stoAac Dit a batsDung by


41/42


esponse to riticism.ere is Dat IMF anC it;s suorter say in resonse to all te critics:

1. C*+'+' "%"' %&"' 0/ '/#& D+66+-%0+&'.

Because te IMF Ceal Dit econoAic crisis, Datever olicy tey offer, tere is likely tobe Cifficulties! It is not ossible to Ceal Dit a balance of ayAents Ditout soAe ainfulreaCjustAent!

2. IMF "' " S/#& S--&''&'.

)e Failures of te IMF tenC to be DiCely ubliciHeC! But, its successes less so! lsocriticisA tenCs to focus on sort terA robleAs anC ignores longer terA vieD

3. C/,6+&,-&

)e fact tere is a lenCer of last resort roviCes an iAortant confiCence boost forinvestors! )is is iAortant Curing current financial turAoil

4. C/,0*+&' "*& ,/0 /%+& 0/ 0">& ", IMF %/",

It is countries Do aroac te IMF for a loan! )e fact so Aany take loans suggeststere Aust be at least soAe benefits of te IMF!

?. IMF E"' 0"*&0.

(oAetiAes countries Aay Dant to unCertake ainful sort terA aCjustAent but tere is alack of olitical Dill! n IMF intervention enables te governAent to secure a loan anCten ass te blaAe on to te IMF for te Cifficulties!W"0 & T+,>()oug tere Aigt be soAe 8neJt to negligible9 trut about tese

counter arguAents! But De can surely see tat te stateC objectives are totallycontraCicting Dat tese organiHations really Co!

Page 41 of 42


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SuggestionsIMF anC 0orlC Bank soulC use teir oDer in te ositive sense, to el te tirC DorlCnot to create robleAs for teA! )e governAent of Ceveloing countries Do issuccessful in getting funCs froA te IFIs, tey Aust use it in efficiently anC sincerely! )e

IMF soulC be accountable to all of its AeAbers 8even if tey ave a 6!661 sare9

)ere is so Auc criticisA about IFIs anC De tink Aost of te critics are true!)e IMF reEuires Cee, coAreensive, structural reforAs! it soulC start by CeciCingDeter it Dants to be a Aain layer in te international financial arcitecture, or Deterit Dises to reAain only a trusteC aCvisor! If it Dants to be a key layer, it Aust greatlyincrease its inCeenCence, boost its financial caacity anC aCot an autoAatic insurancefacility! "terDise its influence Dill be CeenCent on te olitical skills of its AanagingCirectors! s regarCs its function as facilitator in te Aultilateral surveillance rocess, itDill be critical to craft olitical agreeAent, Dic Dill solve torny issues! Moreoverunless eAerging Aarkets are roviCeC Dit te viable insurance facility, it Dill be very

Cifficult to inCuce te neeCeC canges in te incentive structure tat leaC tese countriesto accuAulate Aassive foreign reserves! 5lobal iAbalances anC national financial crisestat can sill over into global Aarkets are best aCCresseC by a global institution like IFIs!)e IMF can Dork to try to insure tat financial anC current account iAbalances areaCCresseC rater tan ignoreC, anC tat tey are aCCresseC by olicies tat are notCestructive of global roserity! )e 0orlC Bank country offices soulC be autonoAousin Cesigning olicies anC iAleAentation strategies on te basis of a certain nation;sneeCs! 0e can;t aly te saAe olicy in all countries! )e country offices soulCiCentify robleAs of a certain country anC ten forAulate olicies to solve tose! InsteaCof focusing on groDtbaseC CeveloAent, it soulC ay attention on involveAent of teoor in teir efforts for sustainable CeveloAent! s Prof! MuaAAaC %unus founCer of

5raAeen bank saiC I tolC teA you ave forgot te eole, Do soulC be te centre ofany CeveloAent rograA! %es, infrastructure can also el in eraCicating overty! But itDill be successful only Den te oor ave oDnersi in tat infrastructure, )e 0orlCBank soulC lenC at least - ercent of its total lenCing Aoney for Aicro creCit rograAs!G

onclusionIn sort, te DorlC can turn into a Auc better lace to live in, for everyone! If only teIMF anC 0orlC Bank use teir enorAous autority anC te iAAensely great econoAicoDer in a ealtier Day!

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