The Global Architecture of Multilateral Development Banks: A System of Debt or Development? by Adrian Robert Bazbauers & Susan Engel

Author:Adrian Robert Bazbauers & Susan Engel [Bazbauers, Adrian Robert & Engel, Susan]
Language: eng
Format: epub
Tags: Intergovernmental Organizations, Globalization, Banks & Banking, Finance, Developing & Emerging Countries, Social Science, Political Science, Business & Economics, General
ISBN: 9781000361315
Google: WwsVEAAAQBAJ
Goodreads: 55561330
Publisher: Routledge
Published: 2021-03-11T00:00:00+00:00

7.2 International Bank for Economic Cooperation

The IBEC was established on 22 October 1963 as the first multilateral bank of the former USSR. It preceded the IIB by several years. Its initial aims were to build economic and trade cooperation between Council of Mutual Economic Assistance (CMEA) countries, also known as COMECON, by means of multilateral settlements in transferable rubles and convertible currency. Just like the IIB, IBEC would revise its operational approach following the collapse of the Soviet Union and the end of the Cold War. As per its current Establishing Agreement, the former Soviet MDB’s aims in the 21st century include promoting the development of foreign economic ties between member countries and facilitating the transition of interested member countries from command- to market-based economics (IBEC 2019).

From its establishment, IBEC was created as a Soviet alternative to the Global North-led international financial institutions (IFIs), just like the IIB, although its original role was envisaged as an early IMF-like clearing or settlements house. However, it also included an MDB element as it provided credits for expanding exports and industrial investment and other productive investments (Francuz 1969). It originally used transferable rubles as its currency and subscriptions were relative to the size of exports in intra-CMEA trade (Francuz 1969). Of an initial capital of 300 million transferable rubles, 20% was initially to be paid-in but this quickly increased to 30%. Interestingly for a Soviet MDB, it began purchasing and selling securities in 1986 to develop its capital base and operational reach. With the end of the Cold War, it discarded the ruble on 1 January 1991 and replaced it with the ECU, the currency predecessor to the Euro. At the time, its authorised capital was ECU 400 million. On 1 January 1999, the Euro became its currency of balance.

Beginning in 2002, IBEC undertook several institutional and organisational restructurings in order to better reflect a ‘modern MDB’ (IBEC 2018). In 2015, the IBEC Council approved the 2016–20 Strategy to develop the MDB’s role in the former CMEA region, prioritising foreign trade operations in IBEC member countries. In 2018, its mission was revised to focus on lending financial support to foreign trade operations conducted by companies in member states and facilitating integration into global value chains and boosting competitiveness with priorities on social and economic development in member states (IBEC 2018). At the same time, the IBEC in 2017 received its first international credit rating: BBB-.

IBEC now has eight member countries: Bulgaria, Czech Republic, Mongolia, Poland, Romania, Russian Federation, Slovak Republic, and Vietnam. Cuba was a member country, joining in 1974, but mutual financial relations were settled in 2013, meaning that Cuba formally cut ties with the MDB. Vietnam joined in 1977, at the formal end of the Vietnam War. The Russian Federation is the largest shareholder with 51.6% shareholding, followed by the Czech Republic (13.3%) and Poland (12%). This trend is reflective of the other Russian-led MDBs, whereby IBEC could be argued to be an extension of Russian foreign and economic policy.

The Council

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