International financial organizations

UNIT 2

INTERNATIONAL FINANCIAL ORGANIZATIONS

_______________________________________________

SECTION A

1.  The International Monetary Fund (IMF) = Международный валютный фонд (МВФ)

2.  The Bretton Woods Agreement = Бреттонвудское соглашение о послевоенной валютной системе

3.  to promote = способствовать, содействовать

4.  to abide by the terms = соблюдать условия

5.  the Board of Governors = Cовет управляющих

6.  voting power = право участия в голосовании

7.  monetary system = валютная система; кредитно-денежная система

8.  quota (subscription fee) = взнос страны-члена в МВФ

9.  balance of payments = платежный баланс

10.  below-market rate of interest = процентная ставка ниже рыночной

11.  surveillance = наблюдение, надзор

12.  to keep a watchful eye over smth = проявлять бдительность в отношении чего-либо

13.  to be entitled to smth = иметь право на что-либо

14.  to recover from a crisis = восстановиться, оправиться от кризиса

15.  emerging markets = финансовые рынки стран с развивающейся экономикой

16.  to go beyond resources = выходить за пределы собственных ресурсов

17.  lending = предоставление займов/кредитов/ссуд

18.  self-sufficiency = независимость, самостоятельность, самообеспеченность

19.  recklessness = безрассудство

20.  to reel from the financial turmoil = пошатнуться от финансовых потрясений

21.  to come to a halt = остановиться

22.  to establish economic collaboration = упрочить экономическое сотрудничество

23.  to prevent competition = не допускать конкуренцию

24.  to expand international trade = развивать международную торговлю

25.  exchange rate = валютный курс

26.  unfettered globalization = неограниченная, несдерживаемая глобализация

2.A.1. Read the text:

THE INTERNATIONAL MONETARY FUND

The International Monetary Fund (IMF) is a specialized agency of the United Nations that promotes financial cooperation, economic stability and fair trade among its member nations. The primary mission of the IMF is to provide financial assistance to countries which experience serious financial difficulties. Membership in the IMF is open to countries willing to abide by the terms established by the Board of Governors which is composed of banking leaders and ministers of finance from each member country. A country’s voting power is based on the position in the world economy which is measured by the size of the country’s economy, foreign trade and relative importance in the international monetary system. These indicators determine the amount of the quota (subscription fee) a country pays when it joins the IMF. Each subscription forms a part of the reserve available to countries suffering from balance-of-payments problems. The IMF offers below-market rates of interest for using these funds.

The IMF currently has three main responsibilities: surveillance, financial assistance and technical assistance. The Fund keeps a watchful eye over its member nations throughout the year, monitoring each country’s exchange rate and economic policies to protect the stability of the world economy. All member countries are entitled to financial assistance to help them recover from an economic crisis or to pay off foreign debt.

Since 1982 the IMF has concentrated on the problems of developing nations, focusing on emerging markets, such as Asia and Latin America. It has gone beyond its own resources, encouraging additional lending from commercial banks. As the IMF strategies are based on the belief that the key to worldwide economic stability is financial self-sufficiency, it has programs that teach countries how to plan and implement their own monetary tax and exchange rate policies. These programs are intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.

Comprehension

2.A.2. Answer the questions based on the text:

1.  How would you describe the world economic situation in the 1940s?

2.  What was the purpose of signing the Bretton Woods Agreement in 1945?

3.  What were the initial goals of the IMF?

4.  What is the current mission of the IMF? What are the Fund’s primary responsibilities?

5.  What does a member country’s voting power depend on?

6.  What are all member countries entitled to?

7.  What were the conditions of integrating developing countries into the global economy under the so-called “Washington Consensus”?

8.  What is the relationship between the G7 and the IMF?

2.A.3. Agree or disagree with the following statements:

1.  The amount of the subscription fee a member country pays depends on the size of the country.

2.  The IMF uses its own resources to give financial assistance to the member countries.

3.  The IMF plans monetary, tax and exchange rate policies for the member countries.

4.  At the end of World War II countries tried to protect their weakened economies by expanding international trade.

5.  Borrower countries were expected to implement trade liberalization policies in exchange for credit.

6.  The IMF globalization policy has helped to overcome poverty and environmental destruction in developing countries.

2.A.4. Open the brackets and supply the correct verb forms:

In the 1940s the world still 1________(to reel) from the financial turmoil of the Great Depression. As markets in the United States and around the world 2________(to collapse), countries 3________(to try) to protect their weakened economies by closing their doors to foreign imports and restricting their citizens from making purchases abroad. The result 4________(to be) catastrophic: world trade nearly 5________(to come) to a halt. In order to protect the world economy from suffering another similar blow, and to hasten financial recovery among war-torn nations, leaders from forty-two counties 6________(to come) together during the summer of 1944. Their historic meeting in Bretton Woods, New Hampshire, 7________(to establish) a new international system of economic collaboration called the IMF. In December 1945, representatives from twenty-nine member nations 8________(to sign) the Articles of Agreement aimed at preventing currency competition and promoting cooperation among nations. The initial goals of the organization 9________(to be) to expand international trade and to protect the stability of international currencies and exchange rates.

Since the IMF 10________(to establish), its purposes 11________(to remain) unchanged, but its operations 12________(to develop) to meet the changing needs of its member countries in an evolving world economy.

2.A.5. Read the text and fill the gaps with the prepositions where necessary:

The IMF is often criticized (1)… its policies that were established (2)… 1989 (3)… the so-called “Washington Consensus” (4)… the IMF, the World Bank and the US Government. (5)… exchange (6)… credits, borrower countries were obliged to implement fiscal discipline, trade liberalization, tax reform and the privatization (7)… state enterprises. These were the conditions (8)… which developing countries were to be integrated (9)… the global economy. As the conditions focus (10)… reduction (11)… balance-of-payments deficit (12)… a set period (13)… time, usually (14)… reducing expenditure and/or raising taxes, they often hit the poor the hardest. The IMF policies promote unfettered globalization, causing more poverty and environmental destruction (15)… developing countries. These policies, say critics, are a direct result (16)… the G7’s domination (17)… the Fund’s decision-making structure, the IMF being, (18)… fact, an instrument (19)… Western financial and economic interest.

2.A.6. Match the term on the left with the definition on the right:

1. interest rate a. account of all recorded financial exchanges made

between the residents of a country and those of

other countries

2. exchange rate b. the state of extreme personal or collective

autonomy

3. balance of payments c. increasing internationalization of all markets,

industries and commerce

4. self-sufficiency d. payment made to an investor, usually expressed

as a percentage per year

5. lending e. countries or territories that are undergoing rapid

growth characterized by high potential as well as

high risk

6. emerging markets f. the price of one currency expressed in terms of

another

7. globalization g. temporary grant of money, goods, etc. made on an understanding that the thing granted, or its

equivalent, will be returned, often with additional

payment

SECTION B

1.  The World Bank = Всемирный банк

2.  to issue a loan = выпустить заем

3.  elimination of poverty = ликвидация бедности

4.  sustainable development = устойчивое развитие

5.  The International Bank for Reconstruction and Development (IBRD) = международный банк реконструкции и развития (МБРР)

6.  The International Development Association (IDA) = Международная ассоциация развития (МАР)

7.  a markup = наценка, надбавка

8.  to obtain funding = привлекать средства

9.  AAA-rated bonds = облигации, имеющие высший рейтинг (по шкале агентства Standard & Poor’s)

10.  to replenish funds = пополнять фонды

11.  to delegate power = передавать полномочия

12.  constituency = представляемые страны

13.  to dilute (зд.) = ослаблять

14.  alleviation = облегчение, смягчение

15.  emergency = чрезвычайные обстоятельства

16.  to impose smth on smb = навязывать что-либо кому-либо

17.  governance = управление, руководство

18.  lack of transparency = отсутствие гласности, открытости

19.  biofuels = биологическое топливо

20.  to withhold from publication = воздерживаться, отказываться от публикации

2.B.1. Read the text:

THE WORLD BANK

The World Bank (WB) is one of the two Bretton Woods institutions which were created to rebuild a war-torn Europe after World War II. It is an internationally supported bank that provides financial and technical assistance to developing countries for development programs (e. g. construction of bridges, roads, schools, etc.). The Bank was formally established on December 27, 1945. Two years later it issued its first loan: $250 million to France for post-war reconstruction.

The World Bank’s current focus is on the achievement of the Millennium Development Goals (MDGs), calling for the elimination of poverty and the implementation of sustainable development. Its mission is to help developing countries reduce poverty and promote economic growth.

The two constituent parts of the Bank are the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The IBRD lends primarily to the middle-income countries at interest rates which reflect a small markup over its own borrowings from capital markets, while the IDA provides low or no interest loans to low-income countries with little or no access to international credit markets. The Bank obtains funding for its operations mainly through the IBRD’s sale of AAA-rated bonds in the world’s financial markets. The IDA obtains most of its funding from 40 donor countries who replenish the Bank’s funds every three years.

There are 184 member countries that are shareholders in the IBRD. To become a member, however, a country must first join the International Monetary Fund (IMF). Thus, the cost of a subscription to the Bank is a factor of the quota paid to the IMF. There is an obligatory subscription fee which is equivalent to 88.29 % of the quota that a country has to pay to the Fund. In addition, a country has to buy 195 Bank shares.

The President of the World Bank comes from the largest shareholder, which is the United States, while the member states are represented by a Board of Governors. Throughout the year, however, powers are delegated to a board of 24 Executive Directors (EDs). The five largest shareholders – the US, the UK, France, Germany and Japan – each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. However, China, Russia and Saudi Arabia have opted to be single-country constituencies, which means that they each have one representative within the 19 EDs. This decision is based on the fact that these countries have large, influential economies, which requires that their interests be voiced individually rather than be diluted within a group.

Today the World Bank is still involved in poverty alleviation, as well as post-conflict reconstruction, rehabilitation after natural disasters and response to humanitarian emergencies.

2.B.2. Fill each gap with one word from the box:

established, increased, driven, started, pushed, concerns, nominated, reduce, withheld, imposing, claim, published, minimize, suggested, refer, believed, argue, support

Some critics of the World Bank believe that the institution was not (1)______ in order to (2)_______ poverty, but rather to (3)_______ the United States’ business interests, and (4)_______ that the Bank has actually (5)_______ poverty and has been detrimental to the environment, public health, and cultural diversity. Some critics also (6)_______ that the World Bank has consistently (7)_______ a “neo-liberal” agenda, (8)_______ policies on developing countries which have been damaging, destructive and anti-developmental. It has also been (9)_______ that the World Bank is an instrument for the promotion of the US or Western interests in certain regions of the world. Consequently, seven South American nations have (10)_______ the Bank of the South in order to (11)_______ US influence in the region. Criticisms of the structure of the World Bank (12)_______ to the fact that the President of the Bank is always a citizen of the United States, (13)_______ by the President of the United States (though subject to the approval of the other member countries). There have been accusations that the decision-making structure is undemocratic, as the US actively has a veto on some constitutional decisions. A further criticism (14)_______ internal governance and the lack of transparency. In 2008 a World Bank report which found that biofuels had (15)_______ food prices up 75% was not (16)_______. Officials confided that they (17)_______ it was (18)_______ from publication to avoid embarrassing the President of the United States, George W. Bush.

plete the text using the words in the box:

foreign exchange price stability foreign reserves define and implement inflation monetary payment system Governing Council

The European System of Central Banks (ESCB) is composed of the European Central Bank (ECB) and the national central banks (NCBs) of all the European Union Member States. The ECB was established by the European Union (EU) in 1998 with its headquarters in Frankfurt, Germany. It is responsible for the (1)__________ policy covering the 15 member states of the Eurozone (in 2008).

The primary objective of the ECB and the ESCB is to maintain (2)__________ within the Eurozone, in other words, to keep (3)__________ low. The present target is to keep it below, but close to, 2%.

Second to this objective, the key tasks of the ECB and ESCB are to (4)__________ the monetary policy for the Eurozone, support the economic policies of the member states, conduct (5)__________ operations and promote smooth operation of the banking (6)__________.

The decision-making bodies of the ECB are the (7)__________ and the Executive Board. The ECB is designed to be independent of political intervention, both from the EU institutions and from the Member States. It has its own budget, separate from the EU budget, sourced from NCBs. The ECB capital amounts to € 5 billion. In addition, the NCBs of the Member States participating in the euro area have provided the ECB with (8)__________ of up to an amount equivalent to around € 40 billion.

2.B.4. Match the words from the text above with their Russian equivalents:

нести ответственность за кредитно-денежную политику; сдерживать инфляцию; Совет управляющих; определять и проводить валютную политику; поддерживать стабильность цен; резервный капитал в иностранной валюте; проводить финансовые операции в иностранной валюте; банковская система расчетов

Comprehension

2.B.5. Answer the questions based on the texts:

1.  What was the purpose of establishing the World Bank?

2.  What are the present-day goals of the World Bank?

3.  Why are there two constituent parts within the framework of the World Bank?

4.  What are the terms of becoming a member of the World Bank?

5.  In what way are the member states represented in the World Bank?

6.  Why are the policies of the World Bank criticized?

7.  What are the primary objectives of the ECB and the ESCB?

8.  What are the sources of the ECB budget?

2.B.6. Agree or disagree with the following statements:

1.  The interest rates at which the IBRD lends to the middle-income countries are below the rates of its own borrowings from capital markets.

2.  The IDA obtains most of its funding through the sale of AAA-rated bonds.

3.  Russia, China and Saudi Arabia are represented in the World Bank as a single group of constituencies.

4.  There is clear evidence that the World Bank’s policy has been beneficial to the environment, public health and cultural diversity of the developing countries.

5.  The reason why seven South American nations have set up the Bank of the South is to decrease the US influence in the region.

6.  The primary objective of the ECB is to maintain low inflation rates in the world.

7.  The ECB formulates its policy in close collaboration with the EU institutions.

2.B.7. Read the dialogue, translate the Russian remarks into English and act it out:

A.  Общеизвестно, что Всемирный Банк имеет одну основную цель – содействовать экономическому и социальному прогрессу в развивающихся странах, помогая им повысить свой жизненный уровень. Вы предоставляете кредиты развивающимся странам для реализации проектов в области образования, здравоохранения, защиты окружающей среды и т. д. Сумма кредитов, предоставленных Банком в прошедшем году, была рекордно высокой. Чем это было вызвано?

B.  The World Bank’s lending really jumped to record levels boosted by its support for countries hit by the financial crisis and by the support for social safety nets, I mean social security for the unemployed and pensioners in some countries.

A.  Вы также оказывали значительную помощь странам, пострадавшим от ураганов, наводнений, засух, землетрясений. Используя различные механизмы финансирования, вы помогали восстанавливать дороги, мосты, строить новые школы, больницы, развивать бизнес. Какие финансовые средства вы использовали для этих целей?

B.  We used our own resources, mobilized donor resources, we also worked in tandem with the IMF.

A.  Это понятно, вы две родственные организации, созданные после Второй мировой войны для поддержания всей структуры мирового экономического и финансового порядка.

B.  That’s right, but there is a great difference between us. The World Bank is an investment bank. The IMF is an association of governments.

A.  Да, те, кто профессионально связаны с МВФ и ВБ, понимают, что в противовес вам, главной целью МВФ является достижение экономической стабильности в мире, устойчивого роста, помощь странам, имеющим сложности с платежным балансом. МВФ считает, что необходимым условием этого является упорядоченная валютная система, которая содействует торговле, создает рабочие места, расширяет экономическую активность и поднимает жизненный уровень во всем мире.

B.  I can’t agree more with you here.

2.B.8. Read the text below quickly to find the names of the countries mentioned.

Words you may need:

debt rescheduling реструктурирование долга

to defer payments отсрочивать платежи

principal сумма долга

falling due наступающий (о платеже)

schedule график

to service debts обслуживать долг

Paris Club Парижский клуб

owe быть должным

London Club Лондонский клуб

misleading вводящий в заблуждение

ad hoc institution специальная организация

to prevent smb from (doing smth) мешать, препятствовать

refrain (from) воздерживаться

pertaining to относящийся к

debt relief помощь в погашении долга

onset начало

disequilibria (pl) неустойчивость

rests on to pillars покоится на двух столпах

Debt rescheduling is a form of debt reorganization in which debtors and creditors negotiate to defer payments of a principal and interest falling due in a specified interval for repayment on a new schedule.

Some countries find it almost impossible to service their external debts. Recently, rescheduling external debts has become a widely accepted practice. Debt rescheduling occurs at the Paris Club for government and private debt owed to official creditors and at the London Club for debt owed to commercial creditors.

The Paris Club is an informal forum where countries experiencing difficulties in paying their debts to governments and private institutions meet with their creditors to restructure these debts. The name might be quite misleading because in reality the Paris Club is not a club, nor is it a formal international organization. It has no offices, no secretariat, and above all, no charter. The Paris Club is an ad hoc institution with no legal status.

In part, the Paris Club’s confidentiality policy has prevented it from becoming known to a wider public. Creditors refrain from releasing any information pertaining to their assessment of a given debtor’s economic and financial situation or to the scope of debt relief granted. The onset of the international debt crisis in the early 1980s, however, brought public attention to the Paris Club and to its contribution to resolving the balance-of-payments disequilibria experienced by a growing number of developing countries and by some Central and Eastern European countries.

Over the years, the Paris Club has become a key instrument in implementing the international debt strategy. This strategy rests on two main pillars: internal reform and structural adjustment, supplemented by external financial assistance in the form of fresh money and debt relief. Despite the public’s recent discovery of the Paris Club, this forum has existed since 1956, when Argentina agreed to meet in Paris with official creditors to find a mutually acceptable basis for rescheduling payments due on officially supported export credits. In the late 1950s and 1960s, Brazil, Chile, and Turkey sought similar Paris Club reschedulings. Since 1980, 54 countries have rescheduled the total of 186 debt agreements.

2.B.9. Reread the text carefully and underline all parts saying about the Paris Club.

2.B.10. Give extensive answers to these discussion questions:

1.  What is the international monetary system?

2.  When did the system emerge?

3.  What institutions does it comprise?

4.  What functions does the IMF perform? What powers does it have?

5.  Is Russia an IMF’s member?

6.  What role does the World Bank play?

Write a short essay on:

a)  The World Bank.

b)  The IMF.

2.B.11. Prepare a talk on the following:

a)  In what ways are individuals affected by international monetary developments?

b)  Relations between Russia and international institutions such as WTO, IMF, OECD.

c)  Your opinion on Russia’s relations with the Paris Club and the London Club.

SECTION C

Modal Verbs

Function	Present/ Future	Past
Ability	Can He can read English now. I can help you tomorrow. Be able to I am able to help you now. I’ll be able to help you tomorrow. (When it is nece-ssary to stress the reference to the future)	Could/ was able to He could/ was able to speak three languages before he was twelve. (General ability for repeated actions in the past) Was/ were able to He was able to win the game. (Managed to do smth in a particular situation; past single action)
Lack of Ability	Can’t She can’t swim.	Couldn’t/wasn’t able to He couldn’t/ wasn’t able to swim when he was younger. (past repeated action) She couldn’t/ wasn’t able to finish the test on time. (past single action)
Possibility	Can You can always be delayed in traffic. (It is theoretically possible, general possibility) Could/ May/ Might He could be delayed in tra-ffic tomorrow afternoon be-cause there is a demonstra-tion. (It is possible, it is likely in a specific situation)	Could have done You could have helped her. (It didn’t actually happen) May/ might have done He might have been late. (It was possible but luckily it didn’t happen)
Probability	Will He will be at home soon. (I’m sure) Sould/Ought to He sould/ ought to be at home soon. (Less certain, probably, likely to happen)	Sould/ Ought to have been He should/ ought to have been at home yesterday. (We don’t know whether he was there or not)
Logical assumption	Must His fase is red. He must be cold. (Positive: I am sure he is; logical probable) Can’t/ Couldn’t It’s too late. She can’t be working now. (Negative: I am sure she isn’t; logically improbable)	Must have been She has a runny nose. She must have had the flu. (Positive: it’s very probable that this happened in the past) Can’t have/ Couldn’t have been She couldn’t have done that. I don’t believe it. (Negative: it’s impossible that this happened in the past)

2.plete the sentences using the verb can. Make use of the phrases from the box.

Park (your car), ride a bicycle, understand, trust, wait for us, close the window, swim, phone

… you …? I’m cold.

You … here. Look for another place to park your car.

I … when I was three. My father taught me.

She … . She is afraid of water.

I … him yesterday. I didn’t remember his number.

We … him. He is a liar.

She … . She was in a hurry.

… you … him? I think he is speaking English.

2.C.2. Fill in the blanks with the verbs can, could, be able to.

I … drive now but next year I … drive.

Last year he … speak English as well as he … speak this year.

I’ve never … remember his name.

I … cook a month ago but I’m taking a course and next month I … to cook.

She might … babysit but I’m not sure of that.

… I help you? Do you need help?

… you do the shopping in the evening? The fridge is empty.

… skate when you were six?

2.C.3. Supply the correct form of the verbs must и have to.

He says I … tell him the truth.

He … to drive last year.

He said I … win the game.

I … look for another job next month.

I … wake up early yesterday.

… I type this article now,

I was late because I … type an article.

I’ll prove it and you … admit I’m right.

The house was too small for them and they … look for another house last year.

I … leave in an hour.

2.C.4. Choose the correct alternative to express ability or the lack of ability.

After graduation from the University Jack could find/ could have found a good job somewhere in New Jersey and moved there.

I wish I had your opportunities. With a proper education I can/ could have been a rich man now.

James broke his leg last summer, so he couldn’t/ wasn’t able to play tennis.

Catherine couldn’t/ wasn’t able to speak any Dutch when they moved to the Netherlands last year.

My appointment was cancelled at the last moment, so I could/ was able to go to the fitness center with my friends.

I had no key so I couldn’t/ wasn’t able to lock the door.

When I arrived yesterday everyone was asleep. Fortunately I could/ was able to wake my brother and he let me in.

I couldn’t/have found/ haven’t been able to find my keys for days. It’s very inconvenient.

Although it was dark, Robin could/ was able to find his way through the woods.

We could save/ could have saved a lot of the animals that were extinct.

2.C.5. Fill in the blanks with the verbs must, have to, be to.

As we had agreed I … meet him at 7.

I know I … do the work myself. It’s my duty.

Susan says I … drive her to the station. She thinks it’s my duty.

The babysitter was ill and Ellen … look after the child herself.

“You … look after the children properly, feed them and take them for a walk” Mrs.

The guide … meet the group and take them to the hotel yesterday.

The children didn’t understand the rule and the teacher … explain it again.

“You … cross the road alone” the mother said to the child.

I … take the umbrella because the forecast was bad.

The bell had gone and I … answer the question.

I didn’t know I … to work extra hours. We hadn’t agreed on that.

“When … (I) return the book? Steve asked the librarian.

I … interrupt the speaker because I didn’t get the point.

You … shout at children.

I … sell the car one of these days. It keeps breaking down.

2.C.6. Rewrite the sentences using modal verbs.

I don’t think he did it all by himself.

It is possible that they forgot it in the car.

It was some special occasion, I am sure.

He looks wet and muddy. I’m sure he has been fishing.

It is possible that the news is being broadcast on all the channels.

It is just impossible for you to get this thing done so soon.

Let’s give her a call again. It is possible that she was asleep and didn’t hear the telephone.

It is possible that he doesn’t know we are here.

It’s a secret. It is necessary that you do not tell it to anyone.

It is not necessary to wear a suit to work but I usually do.

It was not necessary to go to the university yesterday, but I didn’t know and went.

We are obliged to clock in and out every day.

He has been listening to their conversation. It was a wrong thing to do.

Tom borrowed your mobile phone without asking. It was a wrong thing to do.

It is not necessary for you to wake me up in the morning. I have a day off tomorrow.

We were obliged to have cold shower every morning in the army.

She refused to eat cake and ice-cream. I’m sure that she is on a diet.

2.C.7. Paraphrase the following sentences using must to express supposition. Try to avoid using the negative particle not.

I am perfectly certain that he did not manage to catch the train.

I am sorry! Now I see that I did not recognize you.

I am sure that he was not noticed by anyone of us.

She definitely did not understand this rule.

He obviously did not know that he was awkward.

He evidently did not answer his mother’s message.

He evidently wasn’t worrying about anything.

He is sure to be not very careful to have broken your favourite vase.

I am sure the information they have given us is not perfectly correct.

He was certain he had not a fair chance of winning: he wasn’t in good form for recently he had gone through a serious trauma.

He did not seem to be conscious of having said the wrong thing.

I am sure they did not do anything about their report. I don’t see any changes.

She did not seem to be experienced in swimming though she said she was.