UPSC Prelims 2011 · Question 85 of 100

UPSC Prelims 2011 question on IMF Lending Members

Regarding the International Monetary Fund, which one of the following statements is correct?

  1. It can grant loans to any country
  2. It can grant loans to only developed countries
  3. It grants loans to only member countries
  4. It can grant loans to the central bank of a country
Show answer

Answer: C. It grants loans to only member countries

Verdict

Correct Answer: It grants loans to only member countries

Analysis

The International Monetary Fund provides financial assistance to its member countries facing balance of payments problems.

1. It can grant loans to any country — Incorrect

IMF cannot lend to any country in the world.

Only countries that are members of the IMF can access its financial assistance.

2. It can grant loans to only developed countries — Incorrect

IMF lending is not limited to developed countries.

It mainly supports member countries facing external payment difficulties, including developing and emerging economies.

3. It grants loans to only member countries — Correct

IMF provides loans only to its member countries.

The purpose is usually to help them manage balance of payments crises, currency instability or macroeconomic adjustment.

4. It can grant loans to the central bank of a country — Incorrect

IMF assistance is given to member countries, not simply to any central bank as an independent borrower.

Central banks may be involved in implementation, but the loan is to the member country.

Extra UPSC info

* IMF was created in 1944 at the Bretton Woods Conference.

* It became operational in 1945.

* Its headquarters is in Washington, D.C.

* IMF mainly deals with monetary cooperation, exchange rate stability and balance of payments support.

* Voting power in IMF depends largely on quota contribution.

* India is a founding member of the IMF.

How to crack it

IMF grants loans only to its member countries, mainly to help them overcome balance of payments difficulties.

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