17th Aug, 2021

Bank for International Settlements (BIS)

• Bank for International Settlements (BIS) – is an intergovernmental organization of central banks which “fosters international monetary and financial cooperation and serves as a bank for central banks.”
• It is not accountable to any national government.
• The mission of the Bank for International Settlements (BIS) is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
• The Basel Committee for Banking Supervision (BCBS), while technically separate from the BIS, is a closely associated international forum for financial regulation that is housed in the BIS’ offices in Basel, Switzerland
• The BCBS is responsible for the Basel Accords, which recommend capital requirements and other banking regulations that are widely implemented by national governments.
• The BIS also conducts research on economic issues and publishes reports.

European Central Bank (ECB)

• The European Central Bank (ECB) is the central bank responsible for monetary policy of those European Union (EU) member countries which have adopted the euro currency.
• This region is known as the eurozone and currently comprises 19 members.
  The principal goal of the ECB is to maintain price stability in the euro area, thus helping preserve the purchasing power of the euro.
• The European Central Bank (ECB) is headquartered in Frankfurt am Main, Germany. It has been responsible for monetary policy in the Euro area since January 1, 1999.

Key Takeaways

• The European Central Bank (ECB) is the central bank of the combined Eurozone.
• The ECB coordinates EU monetary policy, including setting the region’s target interest rates and controlling the supply of the Euro common currency.
• The ECB’s primary mandate is to achieve price stability through low inflation.

International Monetary Fund (IMF)

• The International Monetary Fund (IMF) is the inter-governmental organisation established to stabilize the exchange rate in the international trade.
• It helps the member countries to improve their Balance of Payment (BOP) condition thorough the adequate liquidity in the international market, promote the growth of global monetary cooperation, secure financial stability, facilitate international trade.
• It is one of the Bretton woods twins, which came into existence in 1945, is governed by and accountable to the 189 countries that make up its near-global membership.

Objectives of IMF:

• To promote international monetary co-operation.
• To ensure balanced international trade
• To ensure exchange rate stability
• To eliminate or to minimize exchange restrictions by promoting the system of multilateral payments.
• To grant economic assistance to members countries for eliminating the adverse balance of payment
• To minimize the imbalances in quantum and duration of international trade.

IMF Quota & Voting Rights

• Quotas was assigned to member countries reflecting their relative economic power & credit deposit to IMF
• Subscription was to be paid 25% in gold or currency convertible into gold (effectively the dollar, which was the only currency then, still directly gold convertible for central banks) and 75% in the member’s own currency
• Members were provided voting rights in proportion to their quota, hence member countries with higher quota have a higher say at IMF

Special Drawing Rights

• Special drawing rights (SDRs) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF)
• SDR is not a currency, instead represents a claim to currency held by IMF member countries for which they may be exchanged.
• The value of an SDR is defined by a weighted currency basket of four major currencies: the US dollar, the euro, the British pound, the Chinese Yuan and the Japanese yen
• The central bank of member countries held SDR with IMF which can be used by them to access funds from IMF in case of financial crises in their domestic market

Reverse Transche

• A certain proportion of a member country’s quota is specified as its reserve tranche.
• The member country can access its reserve tranche funds at its discretion and is not under an immediate obligation to repay those funds to the IMF.
• Member nation reserve tranches are typically 25% of the member’s quota.

Organization for Economic Cooperation and Development (OECD)

• Organisation for Economic Co-operation and Development (OECD) is an inter-governmental organization founded in 1961 to accelerate economic progress and world trade.
• It is a very unique organization where 34 Democracies work together with market economies and 70 non-member economies promote economic growth, prosperity, and sustainable development.
• The setting of the OECD reflects the peripheral discussion forum based on the policy research and analysis that helps governments in order to shape their policies that may lead to a formal agreement among member governments or be acted on in domestic or other international stages.
• Most OECD members are high-income economies with a very high Human Development Index (HDI) and are regarded as developed countries.
• The OECD headquarters at Paris, France. The OECD is funded by contributions from member states.

United Nations Conference on Trade and Development (UNCTAD)

• The United Nations Conference on Trade and Development (UNCTAD) was established in 1964. It is an intergovernmental body of the United Nations Generally Assembly for promoting the development-friendly integration of developing countries into the world economy.
• UNCTAD grew from the view that existing institutions like GATT (now WTO), the International Monetary Fund (IMF), and World Bank were not properly organized to handle the particular problems of developing countries.

Functions of UNCTAD

• UNCTAD Objective is to maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis.
• It functions as a forum for intergovernmental deliberations, supported by discussions with experts and exchanges of experience, aimed at consensus building.
• It undertakes research, policy analysis and data collection for the debates of government representatives and experts.
• It provides technical assistance tailored to the specific requirements of developing countries, with special attention to the needs of the least developed countries and of economies in transition.

United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)

• The Economic and Social Commission for Asia and the Pacific (ESCAP) serves as the United Nations’ regional hub promoting cooperation among countries to achieve inclusive and sustainable development.
• Established in 1947 with its headquarters in Bangkok, Thailand.
• The largest regional intergovernmental platform with 53 Member States and 9 associate members, ESCAP has emerged as a strong regional think-tank offering countries sound analytical products that shed insight into the evolving economic, social and environmental dynamics of the region.
• The Commission’s strategic focus is to deliver on the 2030 Agenda for Sustainable Development, which is reinforced and deepened by promoting regional cooperation and integration to advance responses to shared vulnerabilities, connectivity, financial cooperation and market integration.
• ESCAP’s research and analysis coupled with its policy advisory services, capacity building and technical assistance to governments aims to support countries’ sustainable and inclusive development ambitions

UN-ESCAP providing results-oriented projects, technical assistance and capacity building to member States in the following areas:

• Macroeconomic Policy, Poverty Reduction and Financing for Development
• Trade, Investment and Innovation
• Transport
• Environment and Development
• Information and Communications Technology and Disaster Risk Reduction
• Social Development
• Statistics
• Subregional activities for development
• Energy

United Nations Economic Commission for Africa (UNECA)

• United Nations Economic Commission for Africa (UNECA) was established by the Economic and Social Council (ECOSOC) of the United Nations (UN) in 1958 as one of the UN’s five regional commissions, ECA’s mandate is to promote the economic and social development of its member States, foster intra-regional integration, and promote international cooperation for Africa’s development.
• Made up of 54 member States, and playing a dual role as a regional arm of the UN and as a key component of the African institutional landscape, ECA is well-positioned to make unique contributions to address the Continent’s development challenges.
• ECA’s strength derives from its role as the only UN agency mandated to operate at the regional and subregional levels to harness resources and bring them to bear on Africa’s priorities. T
• o enhance its impact, ECA places a special focus on collecting up to date and original regional statistics in order to ground its policy research and advocacy on clear objective evidence; promoting policy consensus; providing meaningful capacity development; and providing advisory services in key thematic fields.

ECA’s thematic areas of focus are as follows:

1. Macroeconomic Policy
2. Regional Integration and Trade
3. Social Development
4. Natural Resources
5. Innovation and Technology
6. Gender
7. Governance
8. Statistic

United Nations Economic Commission for Europe (UNECE)

• The United Nations Economic Commission for Europe (UNECE) was set up in 1947 by ECOSOC. It is one of five regional commissions of the United Nations.
• UNECE’s major aim is to promote pan-European economic integration. UNECE includes 56 member States in Europe, North America and Asia. However, all interested United Nations member States may participate in the work of UNECE. Over 70 international professional organizations and other non-governmental organizations take part in UNECE activities.
• Providing legal frameworks and assistance activities through instruments like the UNECE Multilateral Environmental Agreements.
• Developing expertise and policy solutions in areas such as resource efficiency, environmental performance, environmental democracy, sustainable transport, sustainable energy, sustainable housing, green real estate markets, and sustainable forest products.
• Measuring sustainable development and improving capacities for environmental monitoring and assessment.
• Encouraging eco-innovations and green investment.
• Raising awareness to change behavioral patterns towards sustainable consumption and production, for example through the UNECE Strategy for
• Education for Sustainable Development.
• Developing green standards, for example the standards for cleaner and smarter vehicles developed by the World Forum for the Harmonization of Vehicle Regulations.
• The Customs Convention on International Transport of Goods under Cover of TIR Carnets, 1975 (TIR Convention) is an international customs transit system under the auspices of the United Nations Economic Commission for Europe (UNECE)
• India has become the 71st nation to join the United Nations TIR (Transports Internationaux Routiers) Convention.

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 most famous development bank in the world and is an observer at the United Nations Development Group.
• Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank (IBRD)

• IBRD provides loans and other assistance primarily to middle income and poor but creditworthy countries at interest rates slightly lower than that offered by other financial institutions but with long term maturity<countries which have the capacity to repay the loan amount with interest>

Origins: IBRD, as the name suggests, was created in 1944 to help Europe reconstruct/ rebuild after World War II. To be a member of IBRD, a country has t join IMF first.

Main function:

• Long-term capital assistance to its member-countries for their reconstruction and development
• It works closely with the rest of the World Bank Group to help developing countries reduce poverty, promote economic growth, and build prosperity.

Other functions of IBRD Bank –

• Supports long-term human and social development that private creditors do not finance.
• Preserves borrowers’ financial strength by providing support in times of crisis, when poor people are most adversely affected
• Promotes policy and institutional reforms (such as safety net or anti-corruption reforms)
• Creates a favourable investment climate to catalyze the provision of private capital
• Facilitates access to financial markets often at more favorable terms than members can achieve on their own
• Resources of the Bank consist of the capital and borrowings.

International Development Association

• The International Development Association (IDA) is the part of the World Bank group that helps the world’s poorest countries.
• Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.
• IDA complements the World Bank’s original lending arm—the International Bank for Reconstruction and Development (IBRD). IBRD was established to function as a self-sustaining business and provides loans and advice to middle-income and credit-worthy poor countries.
• IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards.
• IDA is one of the largest sources of assistance for the world’s 771 poorest countries, 39 of which are in Africa, and is the single largest source of donor funds for basic social services in these countries.
• IDA lends money on concessional terms. This means that IDA credits have a zero or very low-interest charge and repayments are stretched over 25 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.
• In addition to concessional loans and grants, IDA provides significant levels of debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).
• IDA’s work covers primary education, basic health services, clean water and sanitation, agriculture, business climate improvements, infrastructure, and institutional reforms.

IFC

Largest global development institution focused exclusively on the private sector in developing countries established in 1956

Objectives of the IFC

• To further economic development by encouraging the growth of private enterprise in member-countries
• Invests in private enterprise in member-countries in association with private investors and without a Government guarantee, in cases where sufficient private capital is not available on reasonable terms
• Seeks to bring together investment opportunities, private capital of both foreign and domestic origin, and experienced management
• Stimulates conditions conducive to the flow of private capital – domestic and foreign – into productive investments in member-countries
• IFC investment normally does not exceed 40% of the total investment of the enterprise.
• In case of its investment by equity participation, it does not exceed 25% of the share capital.

IFC and India

• IFC makes strategic investments and advisory interventions to promote inclusive growth, help address climate change impacts, and encourage global and regional integration
• In India, IFC is sharpening its focus on increasing access to energy, finance and healthcare; providing the sustainable infrastructure; and boosting regional linkages

Focus Areas –

Building infrastructure
Facilitating renewable energy generation
Promoting cleaner production, energy and water efficiency
Supporting agriculture for improved food security
Creating growth opportunities for small businesses
Helping reform investment climate

The Multilateral Investment Guarantee Agency (MIGA)

• It is an international financial institution which offers political risk insurance and credit enhancement guarantees. Such guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries.
• MIGA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1988 as an investment insurance facility to encourage confident investment in developing countries.
• MIGA’s stated mission is “to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives”. It targets projects that endeavour to create new jobs, develop infrastructure, generate new tax revenues, and take advantage of natural resources through sustainable policies and programs.
• MIGA is owned and governed by its member states, but has its own executive leadership and staff which carry out its daily operations. Its shareholders are member governments which provide paid-in capital and have the right to vote on its matters.
• It ensures long-term debt and equity investments as well as other assets and contracts with long-term periods. The agency is assessed by the World Bank’s Independent Evaluation Group each year.

International Centre for the Settlement of Investment Disputes (ICSID)

• It encourages the flow of foreign investment to develop countries through arbitration and conciliation facilities
• Except for ICSID, India is a member of the other four groups <We don’t like external interference such as arbitration in our decision-making process, hence not the member of ICSID>

Let’s revise World Bank in brief

Name	Main Function	Comment
IBRD (WB)	Infrastructure loan to poor middle income but creditworthy countries at just below market rates	India founder member, the largest recipient of the loan
IDA	Soft loan at virtually zero rates for poverty eradication to poorest countries	India founder largest recipient has crossed the per capita threshold for funding but will continue to receive IDA funds
IFC	The private sector arm of the WB group supports private enterprises in developing countries	India founder, IFC launched India’s offshore masala bond
MIGA	Provide a guarantee to investors against non-commercial political risk	India is not a founding member
ICSID	Resolve disputes through arbitration and conciliation	India is not a member

World Trade Organization (WTO)

• The WTO is an intergovernmental organization that is concerned with the regulation of international trade between nations.
• The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994.
• It replaced the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.
• It is the largest international economic organization in the world.

Functions of WTO

• The WTO deals with regulation of trade in goods, services and intellectual property between participating countries.
• It provides a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.

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