Unit II: International Financial Institutions

Overview of International Financial Institutions (IFIs)

International Financial Institutions are global or regional organisations that provide financial assistance, policy guidance, and development support to member countries.
Their main objectives include:

• Promoting global economic stability
• Supporting development projects
• Reducing poverty
• Financial cooperation among nations
• Infrastructure & social sector development

International Monetary Fund (IMF)

Established: 1944 (Bretton Woods)
Headquarters: Washington, D.C.
Members: 190+ countries

Primary Roles

1. Promotes global monetary and financial stability

• Ensures stable exchange rates
• Monitors economic conditions worldwide (surveillance)

2. Provides financial assistance

• Emergency loans to countries facing balance-of-payments crises
• Helps stabilise currencies and economies
• Often requires structural reforms (conditionality)

3. Capacity development

• Technical assistance and training in finance, taxation, banking, and regulation.

Key IMF Facilities

• Stand-by Arrangements (SBA)
• Extended Fund Facility (EFF)
• Rapid Financing Instruments (RFI)
• Poverty Reduction and Growth Trust (PRGT)

World Bank Group (WBG)

Established: 1944
Headquarters: Washington, D.C.

Components:

• IBRD – International Bank for Reconstruction and Development
• IDA – International Development Association

Primary Roles

1. Provides long-term development loans

• Infrastructure (roads, ports, electricity)
• Education, health, sanitation, water
• Economic reforms & poverty alleviation

2. Offers low-interest or zero-interest loans

• IBRD → middle-income countries
• IDA → low-income, least developed countries

3. Promotes sustainable development

• Climate finance, renewable energy, rural development

4. Knowledge partner

• Publishes reports like World Development Report & Ease of Doing Business data (old).

Asian Development Bank (ADB)

Established: 1966
Headquarters: Manila, Philippines
Members: 68 countries (Asia-Pacific focus)

Primary Roles

1. Promotes economic and social development in Asia-Pacific

2. Provides loans, grants, technical assistance

• Infrastructure (transport, energy, urban development)
• Health, education, agriculture

3. Supports regional cooperation (e.g., South Asia Subregional Economic Cooperation – SASEC)
4. Focus on poverty reduction and sustainable growth

Key Sectors

• Energy transition
• Transport and connectivity
• Gender equality
• Climate resilience

BRICS Development Bank (New Development Bank – NDB)

Established: 2014
Headquarters: Shanghai, China
Members: BRICS nations (Brazil, Russia, India, China, South Africa) + expanding membership

Purpose

Created as an alternative to Western-dominated institutions (IMF, World Bank).

Primary Roles

1. Funds infrastructure and sustainable development projects
2. Provides loans in local currencies to reduce dependence on USD
3. Supports projects in renewable energy, transport, water, and sanitation
4. Promotes south–south cooperation among developing nations.

Importance

• Strengthens financial autonomy of emerging economies
• Increases investment in developing countries
• Encourages multi-polar financial governance

European Bank for Reconstruction and Development (EBRD)

Established: 1991
Headquarters: London, UK
Members: 73 countries + EU + European Investment Bank

Purpose

Created after the fall of the Soviet Union to help Eastern European and Central Asian countries transition to market economies.

Primary Roles

1. Supports economic transition from centrally-planned to open markets

2. Finances private-sector development

• SMEs
• Banking sector reforms
• Commercialisation and privatisation

3. Invests in green energy, infrastructure, and industry

• Provides technical assistance in governance & regulatory reforms

Focus Areas

• Democratic institutions
• Market liberalisation
• Infrastructure modernisation
• Environmental sustainability

Summary Table 

Institution	Year	HQ	Main Role
IMF	1944	Washington D.C.	Global financial stability; crisis lending
World Bank	1944	Washington D.C.	Long-term development & poverty reduction
ADB	1966	Manila	Development in Asia-Pacific
BRICS–NDB	2014	Shanghai	Infrastructure & sustainable development for emerging economies
EBRD	1991	London	Transition to market economies in Europe/Central Asia