International Financial Institutions

Bretton Woods is the name of a town in New Hampshire, USA. It was here that an international conference was convened in July 1944 to discuss ways and means of avoiding the international economic difficulties which were expected to occur after the Second World War. As a result, the International Bank for Reconstruction and Development, known as the World Bank, was established in December 1945. The World Bank is owned by more than 125 member countries and has its headquarters in Washington, D.C. The World Bank extends long-term loans to member countries for development projects such as dam's, electrification, general infrastructure, agricultural development and public health. World Bank loans are made in hard currencies at market interest rates. Loans are to be repaid in the same currency within 25 years. The World Bank is the largest source of development assistance, providing nearly 30 billion US dollars in loans annually to its clients. The World Bank today consists of 5 closely associated institutions:

IBRD - The International Bank for Reconstruction and Development, which provides loans and development assistance to middle-income countries and creditworthy poor countries.

IDA - The International Development Association, which focuses its assistance on the poorest countries and provides interest-free loans and other services. IFC - The International Finance Corporation, which finances private sector investments and provides technical assistance and advice to governments and businesses in the developing countries.

MIGA - The Multilateral Investment Guarantee Agency, which provides guarantees to foreign investors in developing countries against loss caused by non­commercial risks and disseminates information on investment opportunities.

ICSID - The International Centre for Settlement of Investment Disputes, which provides facilities for settlement of investment disputes between foreign investors and their host countries.

The Bretton Woods conference also established the International Monetary Fund (IMF), which came into operation in 1947, with its headquarters in Washington, D.C. Its objectives are 1) to stabilize rates of exchange, 2) to facilitate multilateral clearing system, and 3) to eliminate unnecessary restrictions on foreign trade. The IMF provides short-term loans of about 5 years to countries in balance of payments difficulties. It supplies a country with currency it needs in return for that country's own currency. The resources of the IMF come from contributions of the member countries. Another means of increasing the reserves of the Fund was the establishment of the Special Drawing Rights (SDR) in the late 60s. Since then SDR has become the standard unit of account of the IMF and is used in transactions between central banks and governments.

The European Bank for Reconstruction and Development - the EBRD- was set up with the specific aim of assisting the countries in Eastern Europe and the countries of CIS - the Commonwealth of the Independent States - in their transition towards a market economy. The Bank works with various partners: foreign investors, local businessmen, domestic financial institutions. The projects it finances include financial institutions, telecommunications, energy saving, power generation, transport construction, manufacturing and agriculture. The EBRD has become the leading investor in the private sector with the overall total benefit to the countries in which it operates of 13.7 billion euro. The headquarters of the EBRD are in London, Great