World Bank

The World Bank is an international organization dedicated to providing financing, advice, and research to developing countries to help their economies develop. The bank primarily functions as an organization that attempts to combat poverty by providing development assistance to low- and middle-income countries. The World Bank Group provides low-interest loans to poor countries. It aims to promote the overall economic development of all countries and increase their gross domestic product (GDP). They mainly target underdeveloped countries. Originally established at the Bretton Woods Conference in 1944, it officially began operations in 1946. The blue outline of the globe is considered the logo of the World Bank. The World Bank headquarters is located in Washington, DC.

By 2022, the World Bank has identified 17 goals to be achieved by 2030. The first two goals are stated in its mission statement. The first is to end extreme poverty by reducing the number of people living on less than $1.90 a day to less than 3% of the world’s population. The second is to boost overall prosperity by increasing income growth for the bottom 40% of every country in the world.

Functions of World Bank 

1. Eliminate (eliminate) poverty in underdeveloped countries by providing financial support.

2. Promote shared prosperity by raising incomes for the poor (40%).

3. Encourage less developed countries to engage in international trade.

4. Preserve global peace by avoiding conflicts within member states.

5. Protect the environment and natural habitats by providing necessary support.

6. Provide long-term capital to maintain the balance of payments. In addition, reduce the debt crisis of these emerging countries.

The Impact of the World Bank on the Forex Market

Positive Influence

• The World Bank helps developing countries reduce poverty and promote economic growth and social development by providing loans, technical assistance and policy advice, which is conducive to increasing international trade and investment and expanding demand and supply in the foreign exchange market.

• The World Bank also supports private sector investment projects in developing countries through its International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), improves the confidence and competitiveness of enterprises, and promotes the activity and diversification of the foreign exchange market.

• The World Bank also provides low-interest or interest-free long-term loans to the poorest countries through its International Development Association (IDA) to help these countries improve infrastructure, education, health and other fields, and enhance the economic resilience and foreign exchange of these countries. Earning capacity.

Negative Impact

• World Bank loans usually come with some policy conditions, requiring borrowing countries to implement structural adjustment plans, such as cutting public expenditures, relaxing foreign exchange controls, implementing liberalization and privatization, etc. These policies may have adverse effects on social welfare, environmental protection, human rights and other aspects of borrowing countries, trigger social instability and public protests, and affect the stability and predictability of the foreign exchange market.

• World Bank loans may also increase the foreign debt burden of borrowing countries, exposing them to debt crises and default risks, negatively affecting their credit ratings and exchange rates, and weakening their status and influence in the foreign exchange market.

• As a multilateral development institution, the World Bank's decision-making process is affected by the political factors of its shareholder countries. In particular, the United States, as the largest shareholder country, has a significant voice and control over the World Bank. This may lead to the World Bank being biased or unfair in allocating resources and formulating policies, neglecting or sacrificing the interests of some countries or regions, and causing imbalances and injustices in the foreign exchange market.