How Are Countries Borrowing Money From IMF?

****How Are Countries Borrowing Money From IMF?****

IMF is always in News due to bail-out packages to crashing economies e.g. Sri Lanka,Pakistan etc.

But Q)What is it?

Ans: It is a UN agency,headquartered in Washington D.C.,formed as part of the Bretton Woods(a place in USA) Conference(World Bank is also a product of that conference).

Q)What are India's concerns?

Ans: Historically the Managing Director of IMF(the most powerful position) has been an European. Now BRICS countries want this appointment to be merit based.

Voting rights in IMF is as per the strength of the economy & share to quota pool i.e. the corpus money. USA is the largest contributor to quota pool with 16.50% of voting rights. China's voting right is 6.08% and that of India is 2.63%. 85% of the fund's voting power is required for reforms to take effect(USA has 16%,hence approval of US Congress is needed for major decisions).

Q)What are the reports published by IMF?

Ans: 1)World Economic Outlook

2)Global Financial Stability Report.

These two are important.

Q)What are the IMF's policies to help Balance of Payment(BoP) crisis?

Ans: 1) Rapid Financing Instrument(RFI): (UPSC-CSE Pre 2023): For commodity price shock,natural disasters,conflict etc related BoP crisis.

2)Rapid Credit Facility(RCF): For poverty reduction & developmental work.

3)Flexible Credit Line(FCL).

4)Precautionary & Liquidity Line(PLL).

5)Stand by Arrangements(SBA)

6)Extended Fund/Credit Facility(EFF/ECF)

7)Policy Co-ordination Instrument

8)Policy Support Instrument.

9)The Resilience & Sustainability Facility.

(No need to remember these terms. A first hand reading is sufficient.)

(To Be Continued)

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By,Hemen Sarma,Civil Service School

70024-05918(Telegram/WhatsApp)