World Bank & IMF — Set 2

Correct Answer: A. MIGA

• **MIGA** = The Multilateral Investment Guarantee Agency (MIGA) provides political risk insurance to investors and lenders. • **Non-commercial risks** — MIGA offers guarantees against risks like war or civil disturbance, encouraging foreign direct investment (FDI) in developing countries. • 💡 Wrong-option analysis: IFC: Focuses on private sector development through investment and advisory services; IDA: Provides interest-free loans and grants to the poorest countries; ICSID: Facilitates arbitration and conciliation for international investment disputes.

Correct Answer: C. IMF

• **IMF** = The 'Extended Fund Facility' (EFF) is a lending program associated with the International Monetary Fund. • **Medium-term balance of payments problems** — EFF provides assistance to countries facing these issues, often involving longer repayment periods and supporting structural reforms. • 💡 Wrong-option analysis: World Bank: Primarily provides long-term development loans and grants, not short-to-medium-term balance of payments support like EFF; New Development Bank: A multilateral development bank established by the BRICS states; European Bank: A general term, not a specific lending program for global balance of payments issues.

Correct Answer: D. A European citizen

• **A European citizen** = By informal agreement, the Managing Director of the IMF is traditionally a European citizen. • **Informal agreement** — This power-sharing arrangement dates back to the founding of the Bretton Woods institutions, while the World Bank President is traditionally an American. • 💡 Wrong-option analysis: A US citizen: Traditionally heads the World Bank, not the IMF; Rotating by continent: While there are calls for this, it is not the traditional or current informal agreement; An Asian citizen: Not the traditional head of the IMF, though calls for more diverse leadership exist.

Correct Answer: A. IMF

• **IMF** = The 'Global Financial Stability Report' is a semi-annual publication of the International Monetary Fund. • **Semi-annual publication** — This report assesses global financial market stability and identifies potential risks to the international financial system. • 💡 Wrong-option analysis: World Bank: Publishes the 'World Development Report' and 'Doing Business' report; Federal Reserve: The central bank of the United States, focuses on domestic monetary policy and reports; Bank of England: The central bank of the United Kingdom, publishes reports relevant to the UK economy and financial system.

Correct Answer: C. Must be a member of the IMF

• **Must be a member of the IMF** = This is the primary requirement for a country to become a member of the World Bank. • **World Bank's articles of agreement** — These articles state that a country must first join the IMF to be eligible for IBRD membership. • 💡 Wrong-option analysis: Must be a member of the UN: While many World Bank members are also UN members, it's not a direct requirement; Must have a high GDP: The World Bank serves countries across all income levels, especially low and middle-income; Must be located in the Northern Hemisphere: Geographical location is not a criterion for World Bank membership.

Correct Answer: D. Foreign investors and host states

• **Foreign investors and host states** = ICSID provides facilities for the conciliation and arbitration of investment disputes. • ICSID was established in **1966** — to reduce non-commercial risks for international investors and foster mutual confidence. • 💡 Wrong-option analysis: 'Two different countries': Such disputes are typically handled by international courts or specific treaties, not ICSID; 'The IMF and World Bank': These institutions cooperate, and disputes between them are handled internally or via high-level negotiations; 'Private companies only': ICSID specifically deals with state involvement in investment disputes, not purely private company-to-company disagreements.

Correct Answer: A. Monitoring the economic policies of member countries

• **Monitoring the economic policies of member countries** = IMF surveillance involves the formal monitoring of the global economy and the policies of individual member countries. • द IMF typically conducts '**Article IV**' consultations annually — this process helps identify economic weaknesses and provides policy advice for stability. • 💡 Wrong-option analysis: 'Military monitoring of borders': This is a function of national defense or peacekeeping forces, unrelated to the IMF's economic mandate; 'Keeping track of criminal financial activities': This is mainly done by national financial intelligence units and FATF, not the IMF's core surveillance function; 'Watching over the printing of physical currency': This is the domain of national central banks, not the IMF.

Correct Answer: C. IBRD

• **IBRD (International Bank for Reconstruction and Development)** = The IBRD is the core of the World Bank, providing loans and grants for sustainable development and poverty reduction. • It was originally created after the destruction of **world wars** — to help rebuild nations and promote economic recovery. • 💡 Wrong-option analysis: 'IMF': The IMF focuses on monetary cooperation and financial stability, providing short-term loans, not long-term development; 'WTO': The World Trade Organization deals with rules of trade, not financial lending for reconstruction or development; 'BIS': The Bank for International Settlements serves as a bank for central banks, not a development lender.

Correct Answer: C. 180-195

• **Approximately 190 member countries** = Both the World Bank and IMF have near-universal membership, reflecting their global reach and influence. • This broad participation makes them the most influential economic organizations on earth. • 💡 Wrong-option analysis: '100-120': This range is too low for global institutions aiming for near-universal membership; '150-170': While closer, this range is still lower than the actual number of member countries; 'Over 210': This range is too high, as there are fewer than 200 recognized sovereign states, and not all are members.

Correct Answer: D. IMF

• **IMF (International Monetary Fund)** = The GAB is a set of standing arrangements that allows the IMF to borrow specified amounts of currencies from a group of member countries and institutions. • It serves as a backstop to ensure the IMF has enough resources for large-scale lending, especially in times of financial stress. • 💡 Wrong-option analysis: 'World Bank': The World Bank raises funds primarily through bond issuance on capital markets, not GAB-like arrangements; 'African Development Bank': While regional development banks have their own funding mechanisms, the GAB is specifically an IMF arrangement; 'Asian Development Bank': Similar to the African Development Bank, the ADB has its own financial structure, separate from the IMF's GAB.