What Is the International Bank of Reconstruction and Development (IBRD)?

The International Bank of Reconstruction and Development (IBRD) is a development bank administered by the World Bank. The IBRD offers financial products and policy advice to countries aiming to reduce poverty and promote sustainable development. The International Bank of Reconstruction and Development is a cooperative owned by 189 member countries.

Key Takeaways

  • The International Bank of Reconstruction and Development (IBRD) is one of two major institutions that make up the World Bank. 
  • The IBRD advises countries that are interested in limiting poverty and enabling sustainable development.   
  • Its main focus is on providing financing and economic policy advice to help the leaders of middle-income countries navigate the path toward greater prosperity.

Understanding the IBRD

The International Bank of Reconstruction and Development (IBRD) is one of the two major institutions that make up the World Bank, with the other being the International Development Association (IDA). The IDA is a financial institution dedicated to making developmental loans to the world’s poorest countries. The IBRD was founded in 1944 with the goal of helping war-torn European countries rebuild their infrastructure and their economies.

Following the recovery from World War II, the International Bank of Reconstruction and Development broadened its mandate to increasing global economic growth and eliminating poverty. Today, the IBRD focuses its services on middle-income countries or countries where the per capita income ranges from $1,026 to $12,375 per year. The IBRD adjusts these and other figures a bit yearly to account for inflation, economic changes within middle-income countries, and other factors.

These countries, like Indonesia, India, and Thailand, are often home to fast-growing economies that attract a lot of foreign investment and large infrastructure building projects. At the same time, middle-income countries are home to 70% of the world’s poor people, as the benefits of this economic growth are unevenly distributed across their populations. The success of middle-income countries is precarious, as many economies that look promising will collapse under the weight of corruption and economic mismanagement. 

The goal of the International Bank of Reconstruction and Development is to provide financing and economic policy advice to help the leaders of middle-income countries navigate the path toward greater prosperity. It will often help finance infrastructure projects that grow a country’s economic potential while helping governments manage public finances and cultivate the confidence of foreign investors.

History of the IBRD

The IBRD was founded in anticipation of the end of World War II, during the Bretton Woods Conference of 1944, a gathering of the 44 Allied Nations of the Second World War meant to establish the post-war global financial order. Along with establishing a new global monetary policy regime, the Bretton Woods Conference was also where the International Monetary Fund and the IBRD were formed.

The first loan ever issued by the International Bank Of Reconstruction and Development was to the government of France, to help finance the reconstruction of critical infrastructure. Following the reconstruction of Europe, the IBRD shifted its focus to promoting economic development in other parts of the world.