The World Bank is a part of the World Bank Group. It makes loans to developing countries. These loans are for development programs which are meant to reduce poverty in these countries.
The World Bank was established on December 27, 1945, soon after the ratification of the Bretton Woods agreement. The idea of the bank was first mooted in July 1944, at the United Nations Monetary and Financial Conference. In 1946, the bank issued its first and largest loan to France for post- war reconstruction.
The amount was $250 million. The bank issues loans for many purposes like reconstruction after natural disasters, humanitarian emergencies, and post- conflict rehabilitation needs which affect developing and transition economies.
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The World Bank is one of the three Bretton Wood institutions established in 1944 to rebuild Europe which had been devastated by World War II. After Europe recovered, the bank began to focus on developing countries. Now it is focusing on the Millennium Development Goals.
These include the elimination of poverty and the implementation of sustainable development. The bank has two constituent parts – the IBRD and the IDA. They provide low or zero interest loans to countries which are unable to tap international credit markets. The bank uses its high credit rating to compensate for the low interest rates on its loans.
The bank helps developing countries to fight poverty by creating an environment for investment, employment and sustainable growth. The bank gets funds for its activities through IBRD’s sale of AAA-rated bonds in the world’s financial markets. The IDA gets funds mostly from 40 donor countries.
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The bank provides two kinds of loans – investment loans and development policy loans. The first is for supporting economic and social development projects and the second for supporting countries’ policy and institutional reforms. The IDA’s loans are interest free.
Some critics say that the World Bank is a stooge of America and supports US business interests. They also claim that the bank has increased poverty and caused damage to the environment, public health and cultural diversity of the borrower countries.