Examine the working of the International Development Association.

Examine the working of the International Development Association. 

Ans. IDA was established in 1960. It is an associate of IBRD. 

(a) It gives loans for such projects which fall under high priority of the country but are not so return giving due to its their social welfare nature. 

(b) It gives finance not only to member countries’ governments but also to private enterprises which may be without government guarantee. It gives technical assistance as well to the less developed countries. 

(c) No interest is charged except a service charge of 0.75% p.a. of the outstanding amount to recover administrative expenses. 

(a) Repayment period is long enough, 50 years. Initial 10 years are moratorium period and repayment is done in next 40 years. 

(b) It finances not only foreign currency component but also domestic cost. 

(c) Repayment can be in domestic currency as well. Hence, BOP accounts are not adversely affected. 

(d) Assistance is given to only poorest of the poor nations. 

(e) Members of IDA are divided into parts: Part I includes industrially developed nations whose funds can be freely used for loans and part II consists of other countries that need to contribute 10% of the subscription in foreign currency 90% in domestic currency.