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Which one of the following is not the guiding principle of the World Bank regarding it’s lending operations ?

Which one of the following is not the guiding principle of the World Bank regarding it’s lending operations ? Correct Answer The bank does expect the borrowing country to spend the loan in a particular country.

Following the Bretton Woods Conference in 1945, the world's major economic powers established the World Bank as "the first and largest multilateral financial institution." Under its Charter or Articles of Agreement, the World Bank was established in part "to assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes and the encouragement of the development of productive facilities and resources in less developed countries."

In its lending operations, the bank is guided by certain policies that have been formulated on the basis of Articles Of Association.

  1. The bank should properly assess the repayment prospects of the loans. For this purpose, it should consider the availability of natural resources and existing production plant capacity to exploit the resources, and open to the plant and the country's post-debt record.
  2. The bank should lend only for specific projects which are economically and technically sound and of a high priority nature.
  3. The bank lends only to enable a country to meet the foreign exchange context of any project cost. It normally expects the borrowing country to mobilize its domestic resources.
  4. The bank does not expect the borrowing country to spend the loan in a particular country. In fact, it encourages the borrower to procure machinery and goods for the bank's financial projects in the cheapest possible market consistent with satisfactory performance.
  5. It is the bank's policy to maintain continuing relations with borrowers with a view to check the progress of projects and keep in touch with the financial and economic development in borrowing countries. This also helps in the solution of any problem, which might arise in the technical and administrative fields.
  6. The bank indirectly attaches special attention to the promotion of local private enterprise.

Thus, option 4 is not the guiding principle of the World Bank regarding its lending operations.

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