Should the World Bank be reformed?

Should the World Bank be reformed?

Introduction

World Bank can be defined as 'An international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement.' (www.globalresearch.ca)

The main goal of World Bank is to reduce poverty and to ensure this, the bank takes various measures. According to the Articles of Agreement, the bank should work to ensure that international trade and foreign investment is promoted and that capital investment is facilitated. Jim Yong Kim is the current President of the World Bank and is responsible for conducting meetings. This paper will discuss the operation of World Bank and also explain as to why there is a need of World Bank reform.

Discussion

What the World Bank is and how does it operate

According to the Article One of the Articles of Agreement, the main objective of World Bank help the countries in economic development by providing them capital investment for purpose of production. In addition to this, another objective was to promote the long range balanced growth for helping and promoting the international trade. It is also the responsibility of the World Bank to ensure that equilibrium is maintained in the balance of payment by increasing international imnvestment. This helps in raising the standard of living of the people and also in improving the condition of the territory (www.brettonwoodsproject.org).

In order to achieve the above mentioned objectives, the bank provides long term loans to the governments so that the economy can be stabilized. World Bank believes that the solution of the economic problems is providing loans to them and also making sure that the economic stability can be achieved with the international investment programs. In addition to this, there is a voting power given to all the countries. The United States has a voting power equal to 15.85%, Japan - 6.84%, China - 4.42%, Germany - 4 %, the United Kingdom and France - 3.75%, India - 2.91%, Russia - 2.77%, Saudi Arabia - 2.77% and Italy - 2.64% (www.fas.org).

Interest loans of the World Bank are revised after every six months and a borrower's rate of interest is charged by the bank that is equal of 0.05%. In addition to this, each member of the bank has to pay 2 percent of its subscription in US dollars or gold and 18 percent in its national currency. This guarantee helps the bank in raising money for the purpose of lending on international capital markets by selling bonds. When the bank was formed, loans were provided to countries under specific projects; however, by the 1980s, under the structural adjustment program (SAP) loans were provided to countries for ensuring that the economy is stabilized and appropriate measures are taken (web.worldbank.org). There are conditions that the World Bank imposes while providing loans so that the economies can be stabilized.

Reasons behind Reforming World Bank

Creates Inequality

The framework that has been designed by the World Bank creates inequality. There are a number of countries that have not been provided the facilities ...