The Agreement Which Created the World Bank: A Historical Overview
The World Bank, officially known as the International Bank for Reconstruction and Development (IBRD), was created in 1944 to help rebuild Europe after the devastation of World War II. The Bank`s mission was to promote economic development and reduce poverty in developing countries by providing loans and technical assistance to governments and private sector entities.
The Agreement which created the World Bank was signed on July 22, 1944, in Bretton Woods, New Hampshire, USA. This historic agreement was the result of discussions among 44 countries, led by the United States and the United Kingdom, on how to rebuild Europe and prevent future economic crises. The final agreement also included the creation of the International Monetary Fund (IMF), which would provide short-term loans and support exchange rate stability.
The Agreement established the IBRD as a specialized agency of the United Nations. Its purpose was to provide long-term loans for reconstruction and development projects. The Bank`s resources would come from the subscriptions of member countries as well as borrowing from international capital markets.
The initial capital of the Bank was $10 billion, which was divided into paid-in capital and callable capital. Paid-in capital was to be contributed by member countries in the form of gold, currency, or other acceptable assets. Callable capital was to be provided by member countries for use in emergencies.
The Agreement also established the governance structure of the Bank. The highest decision-making body was the Board of Governors, made up of one governor and one alternate governor from each member country. The Board of Governors would meet once a year to discuss policy and approve the Bank`s annual report and financial statements.
The Board of Executive Directors was responsible for the day-to-day operations of the Bank. The Board consisted of 21 members, including a president and managing directors. The President of the Bank was to be appointed by the Board of Executive Directors and would be responsible for the Bank`s overall management and direction.
The Agreement also included provisions for the Bank`s lending activities. The Bank was to make loans for development projects that were economically sound and socially beneficial. Loans were to be made at market interest rates and were to be repaid within 20-25 years.
The Agreement was a landmark in the history of international economic cooperation. It laid the foundation for the creation of the World Bank and the IMF, which have played a significant role in promoting global economic development for more than 75 years. The Agreement recognized the importance of international cooperation in promoting economic growth and reducing poverty and set the stage for further cooperation in the years to come.