International Monetary Fund (IMF) Part-2: Membership and SDRs

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International Monetary Fund

Membership

  • 189 member countries
  • 2 types of membership – Original and ordinary
  • To join, a country must be accepted by majority of existing members
  • Each member assigned a quota upon joining

SDRs

  • An international reserve asset
  • Created in 1969
  • Also known as Paper Gold
  • Value based on a basket of five major currencies of the world
  • Currencies reviewed every 5 years

Those currencies are:

a) US Dollar

b) Euro

c) Chinese Yuan (Renminbi)

d) Japanese Yen

e) British Pound

Quota Subscriptions

  • Amount of funds all members are obliged to pay to IMF
  • 25 % to be paid in SDRs and rest in country՚s own currency
  • Larger the economy, larger its quota
  • Voting powers – Quota determines voting powers in IMF decisions
Quota Subscriptions

Governance Structure

  • Board of governors – one governor and one alternate governor of each member country
  • Ministerial committee – International Monetary and Financial Committee (IMFC) and Development Committee
  • Executive board – 24 members, takes care of daily business

Financial Resources

Quotas

a) Main source

b) Larger the country, larger its quota

Gold

a) To meet unforeseen expenses

b) Total gold holdings - $ 4.9 billion (SDR 3.2 billion)

MCQs

Q 1 – The value of Special Drawing Rights (SDR) is determined by a basket of how many currencies?

a) 4

b) 5

c) 6

d) 7

Ans – b) 5

Q 2 – Voting rights in the IMF are determined on the basis of:

a) One country, one vote

b) Size of the economy

c) Proportion to contributions given by each country

d) Proportion to quota allotted to countries from time to time

Ans – b) Size of the economy

Q 3 – Special Drawing Rights (SDRs) is also known as:

a) Quota currency

b) Gold

c) Basket currency

d) Paper Gold

Ans – d) Paper Gold

Q 4 – Which of the following countries has the largest quota subscription?

a) India

b) China

c) USA

d) Germany

Ans – c) USA

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