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The International Bank for Reconstruction and Development (IBRD) is an international financial institution, established in 1944 and headquartered in Washington, D.C.,
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, that is the lending arm of
World Bank Group The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and best-known development bank in the world and an observer at the United Nations Development Gr ...
. The IBRD offers
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
s to middle-income
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
. The IBRD is the first of five member institutions that compose the World Bank Group. The initial mission of the IBRD in 1944, was to finance the reconstruction of European nations devastated by World War II. The IBRD and its concessional lending arm, the International Development Association (IDA), are collectively known as the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
as they share the same leadership and staff. Following the reconstruction of Europe, the Bank's mandate expanded to advancing worldwide
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and ...
and eradicating poverty. The IBRD provides commercial-grade or concessional financing to
sovereign state A sovereign state or sovereign country, is a political entity represented by one central government that has supreme legitimate authority over territory. International law defines sovereign states as having a permanent population, defined ter ...
s to fund projects that seek to improve transportation and
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
, education, domestic policy, environmental consciousness, energy investments, healthcare, access to food and potable water, and access to
improved sanitation Improved sanitation (related to but distinct from a " safely managed sanitation service") is a term used to categorize types of sanitation for monitoring purposes. It refers to the management of human feces at the household level. The term was co ...
. The IBRD is owned and governed by its 189 member states, with each country represented on the Board of Governors. The IBRD has its executive leadership and staff which conduct its normal business operations. The Bank's member governments are
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal o ...
s which contribute and have the right to vote on its matters. In addition to contributions from its member nations, the IBRD acquires most of its capital by borrowing on international capital markets through bond issues at a preferred rate because of its AAA credit rating. In 2011, it raised US$29 billion in capital from bond issues made in 26 different currencies. The Bank offers several financial services and products, including flexible loans, grants, risk guarantees, financial derivatives, and catastrophic risk financing. It reported lending commitments of $26.7 billion made to 132 projects in 2011.


Governance

There are five "closely associated institutions" that each have a "distinct role" and together form the World Bank—the IBRD, the International Development Association (IDA), the International Finance Corporation (IFC), that "invests in private firms and promotes entrepreneurship", the Multilateral Investment Guarantee Agency (MIGA), that guarantees loans, and the International Centre for Settlement of Investment Disputes (ICSID). Their mission is to "fight poverty and improve living standards for people in the developing world." By 2018, the World Bank Group was "one of the world's largest sources of funding and knowledge for developing countries." Of the five institutions, the IBRD and the IDA are the World Bank's two largest units. When a country reaches a GDP per person over US$1,145, they are no longer eligible for IDA financial support. For example, of the BRIC countries, China was no longer eligible in 1999 and by 2014, neither was India. The IBRD is governed by the World Bank's Board of Governors which meets annually and consists of one governor per member country (most often the country's finance minister or treasury secretary). The Board of Governors delegates most of its authority over daily matters such as lending and operations to the board of directors. The Board of Directors consists of 25 executive directors and is chaired by the
President of the World Bank Group The president of the World Bank Group is the head of World Bank Group. The president is responsible for chairing the meetings of the boards of directors and for overall management of the World Bank Group. Traditionally, the World Bank Group presi ...
. The executive directors collectively represent all 189 member states of the World Bank. The president oversees the IBRD's overall direction and daily operations. The Bank and IDA operate with a staff of approximately 10,000 employees. On 9 April 2019, United States President
Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021. Trump graduated from the Wharton School of the University of P ...
nominated
David Malpass David Robert Malpass (born March 8, 1956) is an American economic analyst and former government official serving as President of the World Bank Group since 2019. Malpass previously served as Under Secretary of the Treasury for International Aff ...
as the World Bank Group's president. Malpass had served as one of President Trump's economic advisers and as a senior official in the
United States Treasury Department The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
. The IBRD member nations did not sponsor a "rival candidate" and Malpass became president, in spite of the fact that he is critical of the role of the IBRD.


Background

The International Bank for Reconstruction and Development (IBRD) and
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF) were established by delegates at the Bretton Woods Conference in 1944 and became operational in 1946. According to a March 2012 ''
Washington Post ''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large na ...
'' article, IBRD was the "original 'world bank'". IBRD field offices were opened in
Paris Paris () is the capital and most populous city of France, with an estimated population of 2,165,423 residents in 2019 in an area of more than 105 km² (41 sq mi), making it the 30th most densely populated city in the world in 2020. Si ...
, France,
Copenhagen Copenhagen ( or .; da, København ) is the capital and most populous city of Denmark, with a proper population of around 815.000 in the last quarter of 2022; and some 1.370,000 in the urban area; and the wider Copenhagen metropolitan a ...
, Denmark, and
Prague Prague ( ; cs, Praha ; german: Prag, ; la, Praga) is the capital and largest city in the Czech Republic, and the historical capital of Bohemia. On the Vltava river, Prague is home to about 1.3 million people. The city has a temperate ...
in the former Czechoslovakia. The IBRD was established with the original mission of financing the reconstruction efforts of war-torn European nations following World War II, with goals shared by the later
Marshall Plan The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred over $13 billion (equivalent of about $ in ) in economic re ...
. The Bank issued its inaugural loan of $250 million ($2.6 billion in 2 dollars) to France in 1947 to finance infrastructure projects. In 1946, a few months after it became operational, Chile sought financial help from the IBRD—the first of the developing countries to do so. Throughout the remainder of the 1940s and 1950s, the Bank-financed projects sought to dam rivers, generate electricity and improve access to water and sanitation. It also invested in France, Belgium, and Luxembourg's steel industry. Following the reconstruction of Europe, the Bank's mandate has transitioned to eradicating poverty around the world. In 1960, the International Development Association (IDA) was established to serve as the Bank's concessional lending arm and provide low and no-cost finance and grants to the poorest of the developing countries as measured by gross national income per capita. At the time of its creation, the IBRD was the only Multilateral Development Bank. During the period of decolonization—the mid‐1950s to the mid‐1970s—several MDBs were created—the International Finance Corporation, the International Development Association. They were both WBG members. During this period other MDBs that were similar to the IBRD in their governance and operations, were established by countries that were not member nations of the WBG. This included the Inter‐American Development Bank (IDB), the
African Development Bank The African Development Bank Group (AfDB) or (BAD) is a multilateral development finance institution headquartered in Abidjan, Ivory Coast, since September 2014. The AfDB is a financial provider to African governments and private companies ...
(AfDB), the
Asian Development Bank The Asian Development Bank (ADB) is a regional development bank established on 19 December 1966, which is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro Manila, Philippines. The bank also maintains 31 field of ...
(ADB), the Andean Development Corporation (CAF), and the Islamic Development Bank (IsDB). Both the CAF and IsDB are "primarily owned and controlled by borrower countries." In the early 1990s, European nations established the European Bank of Reconstruction and Development (EBRD) and expanded
European Investment Bank The European Investment Bank (EIB) is the European Union's investment bank and is owned by the EU Member States. It is one of the largest supranational lenders in the world. The EIB finances and invests both through equity and debt solution ...
, to foster European integration and to assist post‐communist countries to transform their economies to become more market‐oriented. By 2012, according to ''The Post'', IBRD was using "its AAA credit rating to sell bonds at interest rates close to those of U.S. Treasury bonds." It loaned money to developing nations, such as China and Brazil. According to the '' Global Policy'', journal, While the IBRD and the IDA historically prioritized funding infrastructure projects, since the 1990s, the Bank has directed less lending to infrastructure projects in favour of other development projects such as fighting
climate change In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to ...
, eradicating poverty and ensuring good governance.


Financial model

The IBRD finances its activities from the shares its members hold, as well as borrowing on international capital markets by issuing World Bank bonds. The Bank raised US$54.0 billion worth of capital in fiscal 2019 from bonds issued in 27 different currencies. Since 1959, the IBRD, which is backed by world governments has had a triple-A credit rating, which allows it to borrow capital at lower rates. According to a 2015 article, commissioned by the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development—also known as the Group of 24 (G-24)—multilateral development banks (MDBs)—such as the IBRD—"represent one of the most successful types of international organization created in the post-World War II era." By October 2015, although the WBG—with its lending arms—was the only "global institution, there were more than twenty operational 20 MDBs in the world. In 2016, the
Asian Infrastructure Investment Bank The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to improve economic and social outcomes in Asia. The bank currently has 105 members, including 14 prospective members from around the world. The br ...
and BRICs
New Development Bank The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states ( Brazil, Russia, India, China and South Africa). According to the Agreement on the ND ...
began operations. Like other multilateral development banks, (MDBs), the IBRD has a preferred credit treatment (PCT), through which borrowers grant the MDBs a "privileged position to be first in line for repayment, should a country face financial restrictions." The bank also generates income from the return on its equity and the small margins on the loans. As the IBRD does not seek profit, it transfers part of its excess income to the IDA ($259 million in fiscal 2019). In 2011, the IBRD loaned about US$26 billion, which represented just a "fraction of the $72 billion the IMF approved as a credit line to a single nation, Mexico." In the early 2010s, the total of "capital investments in emerging markets from all sources have topped $1 trillion annually". According to the
Institute of International Finance An institute is an organisational body created for a certain purpose. They are often research organisations (research institutes) created to do research on specific topics, or can also be a professional body. In some countries, institutes can ...
, in 2011, the "combined net investment of the World Bank and other international development banks and agencies" was about $20 billion in 2011. According to a 2019 ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
'' article, the IBRD is "more controversial" than the International Development Association (IDA) lending arm. With its AAA credit rating, the IBRD can "borrow money cheaply on the international financial markets". Middle-income countries, like Brazil and China, that currently borrow from the IBRD, could "borrow in abundance from foreign investors" on their own.


Services

The IBRD provides financial services as well as strategic coordination and information services to its borrowing member countries. The Bank only finances sovereign governments directly, or projects backed by sovereign governments. The World Bank Treasury is the division of the IBRD that manages the Bank's debt portfolio of over $100 billion and financial derivatives transactions of $20 billion. The Bank offers flexible loans with maturities as long as 30 years and custom-tailored repayment scheduling. The IBRD also offers loans in local currencies. Through a joint effort between the IBRD and the International Finance Corporation, the Bank offers financing to subnational entities either with or without sovereign guarantees. For borrowers needing quick financing for an unexpected change, the IBRD operates a Deferred Drawdown Option which serves as a line of credit with features similar to the Bank's flexible loan program. Among the World Bank Group's credit enhancement and guarantee products, the IBRD offers policy-based guarantees to cover countries' sovereign default risk, partial credit guarantees to cover the credit risk of a sovereign government or subnational entity, and partial risk guarantees to private projects to cover a government's failure to meet its contractual obligations. The IBRD's Enclave Partial Risk Guarantee covers private projects in member countries of the IDA against sovereign governments' failures to fulfil contractual obligations. The Bank provides an array of financial risk management products including
foreign exchange swap In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) and may use foreign exchange derivatives ...
s, currency conversions, interest rate swaps, interest rate caps and floors, and commodity swaps. To help borrowers protect against catastrophes and other special risks, the bank offers a Catastrophe Deferred Drawdown Option to provide financing after a natural disaster or declared state of emergency. It also issues catastrophe bonds which transfer catastrophic risks from borrowers to investors. The IBRD reported $23.2 billion in lending commitments for 100 projects in fiscal year 2019. The top 10 borrowers were India, Indonesia, Jordan, Egypt, Argentina, China, Morocco, Turkey, Ukraine and Colombia. The most supported sector was Public Administration.


See also

*
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...


References


External links

*
World Bank Open Data website
{{Authority control * *International B International development agencies International banking institutions International finance institutions United Nations Development Group Organizations established in 1944 Non-profit organizations based in Washington, D.C. 1944 establishments in Washington, D.C.