The Indian rupee fell to its lowest level in over 16 months closing at 67.8750 per dollar on Wednesday, 16th May. It closed at 68.57 at the time of writing this article (12th July 2018) just a smidgen above the lowest value. It is the worst performing Asian currency and has fallen by over 5% to the dollar since the beginning of 2018. It is thought that the RBI has intervened to lend some support to the currency, as some state-owned banks were selling dollars intensively.
After World War II, Asia and Europe were devastated, over 80 million had died, many, many more injured and much of the world lived in abject poverty. Countries were in the process of rising from the ashes (literally, in some cases) and for this, they needed some strong financial support. From the Bretton Woods Conference, held near the end of the war, diplomats talked about the need for financial institutions to restore the World Economy after the devastating war. Soon after, in 1945, the World Bank and the International Monetary Fund were born. The aim being that the two institutions combined would regulate and rebuild the international monetary system. Over time the integrity of the two institutions grew leaps and bounds and together are now viewed as the dependable backbone of the international economy.
What do the World Bank & IMF do and what have critics said?
Simply put, the World Bank provides loans for capital projects to help promote economic development and infrastructure undertaken by countries and the IMF offers loans to countries facing monetary issues. Over the years, the 2 institutions have received flak from critics all over the world. Loans issued by the World Bank and the IMF have a number of fiscal and policy conditions the recipient must accept or else they run the risk of not receiving the loan.
Renowned economist Joseph Stiglitz, former Chief Economist of the World Bank, has stated the conditions are very rigid and sometimes dictated without thought, no matter the recipient country’s individual characteristics. Some of the conditions include limitations on Government Expenditure and reduced roles for the State among others.
President of the Eurasia group and American political scientist, Ian Bremmer stated that America had used its authority in the affairs of the World Bank and IMF to influence developing countries into adopting western values. America and its allies seemed to dominate the working of both institutions. China, for its part, held very small roles in the two institutions – although the country is the second largest economy.