UPSC Prelims 2025 Q67: IBRD Role and Origin — Explained
Consider the following statements in respect of the International Bank for Reconstruction and Development (IBRD):
I. It provides loans and guarantees to middle income countries.
II. It works single-handedly to help developing countries to reduce poverty.
III. It was established to help Europe rebuild after the World War II.
Which of the statements given above are correct?
- I and II only
- II and III only
- I and III only
- I, II and III
Answer: (c) I and III only
Statement-wise explanation
- I: correct — The World Bank's official IBRD page says it provides loans, guarantees, risk management products and advisory services to middle-income and creditworthy low-income countries. The statement says 'middle income countries' and does not say 'only', so it is accurate. India, a lower-middle-income country, is IBRD's largest borrower. Of the World Bank's $17.8 billion India portfolio, $17.5 billion comes from IBRD.
- II: incorrect — IBRD does not work 'single-handedly'. In the World Bank's own words, it works closely with all institutions of the World Bank Group and with the public and private sectors in developing countries to reduce poverty. It is one of five World Bank Group bodies, alongside IDA, IFC, MIGA and ICSID. IBRD and IDA together make up 'the World Bank'.
- III: correct — IBRD was created at the Bretton Woods Conference in July 1944, which 44 countries attended. The World Bank says it was 'created in 1944 to help Europe rebuild after World War II', which is why 'Reconstruction' is in its name. Its first loan was $250 million to Crédit National of France, signed on 9 May 1947, for post-war reconstruction.
How to eliminate
Statement II gives itself away with the absolute word 'single-handedly'. No multilateral development bank works alone. Co-financing, partnerships and the World Bank Group's five-institution structure are basic knowledge. Once II is out, every option that contains II drops: 'I and II only', 'II and III only' and 'I, II and III'. Only one option is left. You do not even need to check I or III. Statement III can also be confirmed from the name: the 'R' in IBRD stands for Reconstruction, which points to post-war Europe. Rule to remember: in statements about international bodies, words like 'single-handedly', 'only', 'solely' or 'exclusively' are usually false.
Know more
The World Bank Group: five institutions, two make up 'the World Bank'
The 1944 Bretton Woods Conference created two institutions. The IMF handles balance-of-payments stability. The IBRD handles long-term reconstruction and development lending. Over time the Bank grew into a group of five bodies:
| Institution | Year | What it does |
|---|---|---|
| IBRD | 1944 | Market-based loans and guarantees to middle-income and creditworthy low-income governments |
| IFC | 1956 | Invests in the private sector of developing countries |
| IDA | 1960 | Grants and zero- or low-interest 'credits' to the poorest countries, repaid over 30–40 years |
| ICSID | 1966 | Settles investment disputes between investors and states |
| MIGA | 1988 | Insures foreign investors against political risk |
'World Bank' = IBRD + IDA. 'World Bank Group' means all five.
Key IBRD facts
- 189 member countries own it as a cooperative. Voting power depends on capital subscribed.
- It raises most of its money by selling bonds on world capital markets and lends on near-market terms. IDA, by contrast, is funded mostly by donor replenishments.
- First loan: $250 million to France in May 1947. After Europe's recovery, its lending moved to developing countries.
- Which countries can borrow depends on the World Bank income classification (low, lower-middle, upper-middle, high).
India and the Bank: India is a founding member and now borrows mainly from IBRD. IDA lending to India is legacy only. India is not a member of ICSID, which UPSC tests often.
NCERT Concepts to Revise
- World Bank: The World Bank's formal name is the IBRD, so how the Bank is structured matters for all three statements.
- Bretton Woods Conference: Statement III depends on why the 1944 Bretton Woods Conference created the IBRD.
- World Bank income classification: Statement I uses 'middle income countries', a category from the World Bank's four-group income classification.
- International Monetary Fund: The IMF was the IBRD's twin at Bretton Woods. Knowing how their roles differ helps separate lending facts from monetary-stability facts.