Official sources of long term funfs

Multilateral agencies

The large scale economic development programmes, growth of international trade, and the fast growing activities of multinational corporations has resulted the change in demand and supply of international funds. But till mid-1940s, there was no multilateral agency to provide international funds and only in 1945 was the International Bank for Reconstruction and Development (IBRI) established that provide international funds and only in 1945 was the International Bank for Reconstruction and Development (IBRI) established that provided loans for reconstruction of the war-ravaged economies of Western Europe and then from 1948 began providing development loans. The IBRD’s function was limited to lending after the guarantee by the borrowing government and provision of equity finance lay beyond its scope. To overcome these problems, the International Finance Corporation (IFC) was established in 1956 which provides loan even without government guarantee and provides equity finance as well. But the poor countries of the developing world were not in a position to utilise the costly resources of the IBRD because funds carried market rate of interest and poor countries were not in capacity to pay high rate of interest. For the benefit of poor countries, another sister institution was created in 1960 name as International Development Association (IDA). In 1988, the Multilateral Investment Guarantee Agency (MIGA) was established to cover the non-commercial risks of the foreign investors. These four institutions namely, IBRD, IDA, IFC and MIGA- together are now known as the World Bank Group.

Bilateral Agencies

During the first half of the twentieth century, funds flowed from the empire to its colonies for meeting a part of the budgetary deficit of the colonial government but neither it was normal practice nor external assistance that mean in the present day context. The US president Truman in January 1951 announced bilateral economic assistance first time. The motivation behind the announcement was primarily political and economic because the cold war between the USA and then USSR was at its peak those days and government of USA tried to be the friend of developing countries to bring them into its own camp in order to make itself more powerful politically. This bilateral may help the US economy to come closer to the developing economies and also helpful to get the desired raw material and foodstuffs therefrom.

In the second half of the 1950s, the USSR bloc too announced its external assistance programme in order to counter the US Move. In the late 1950s, many other governments of the Organisation of Economic Co-operation and Development (OECD) announced external assistance programmes and bilateral lending boom came into the 1960s.

Date: 2014-12-28; view: 1186