International Bank for Reconstruction and Development (IBRD)

9 min readAug 2, 2021

The International Bank for Reconstruction and Development (IBRD) and International Monetary Fund (IMF) were established by delegates at the Bretton Woods Conference in 1944 and became operational in 1946.[10] According to a March 2012 Washington Post article, IBRD was the “original ‘world bank’”.[11]

IBRD field offices were opened in Paris, France, Copenhagen, Denmark, and Prague in the former Czechoslovakia.[12]

The IBRD was established with the original mission of financing the reconstruction efforts of war-torn European nations following World War II,[5] with goals shared by the later Marshall Plan. The Bank issued its inaugural loan of $250 million ($2.6 billion in 2012 dollars[13]) to France in 1947 to finance infrastructure projects.

In 1946, a few months after in became operational, Chile sought financial help from the IBRD — the first of the developing countries to do so.[5]

Throughout the remainder of the 1940s and 1950s, the Bank financed projects seeking to dam rivers, generate electricity, and improve access to water and sanitation. It also invested in France, Belgium, and Luxembourg’s steel industry. Following the reconstruction of Europe, the Bank’s mandate has transitioned to eradicating poverty around the world.

In 1960, the International Development Association (IDA) was established to serve as the Bank’s concessional lending arm and provide low and no-cost finance and grants to the poorest of the developing countries as measured by gross national income per capita.[2]

At the time of its creation, the IBRD was the only Multilateral Development Bank. During the period of decolonization — the mid‐1950s to the mid‐1970s — a number of MDB’s were created — the International Finance Corporation, the International Development Association. They were both WBG members.[14] During this period other MDBs that were similar to the IBRD in their governance and operations, were established by countries that were not member nations of the WBG. This included the Inter‐American Development Bank (IDB), the African Development Bank (AfDB), the Asian Development Bank (ADB), the Andean Development Corporation (CAF), and the Islamic Development Bank (IsDB). Both the CAF and IsDB are “primarily owned and controlled by borrower countries.”[14]

In the early 1990s, European nations established the European Bank of Reconstruction and Development (EBRD) and expanded European Investment Bank, to foster European integration and to assist post‐communist countries to transform their economies to become more market‐oriented.[14]

By 2012, according to The Post, IBRD was using “its AAA credit rating to sell bonds at interest rates close to those of U.S. Treasury bonds.” It loaned money to developing nations, such as China and Brazil.[11]

According to the Global Policy, journal, While the IBRD and the IDA historically prioritized funding infrastructure projects, since the 1990s, the Bank has directed less lending to infrastructure projects in favor of other development projects such as fighting climate change, eradicating poverty and ensuring good governance.[14]

Financial model[edit]

The IBRD finances its activities from the shares its members hold, as well as borrowing on international capital markets by issuing World Bank bonds. The Bank raised US$54.0 billion worth of capital in fiscal 2019 from bonds issued in 27 different currencies.[15]

Since 1959, the IBRD, which is backed by world governments[5] has had a triple-A credit rating, which allows it to borrow capital at lower rates.[16]

According to a 2015 article, commissioned by the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development — also known as the Group of 24 (G-24) — multilateral development banks (MDBs) — such as the IBRD — “represent one of the most successful types of international organization created in the post-World War II era.” By October 2015, although the WBG — with its lending arms — was the only “global institution,[14]:1 there were more than twenty operational 20 MDBs in the world.[17] In 2016, the Asian Infrastructure Investment Bank and BRICs New Development Bank began operations.[17] Like other multilateral development banks, (MDBs), the IBRD has a preferred credit treatment (PCT), through which borrowers grant the MDBs a “privileged position to be first in line for repayment, should a country face financial restrictions.”[17]:5

The bank also generates income from the return on its equity and from the small margins on the loans. As the IBRD does not seek profit, it transfers part of its excess income to the IDA ($259 million in fiscal 2019).[15]

International Bank for Reconstruction and Development (IBRD)

Financial model[edit]

Written by Caxec