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International Business

notes 1. The share of a member country in the capital of the fund.
2. Loan a member-country can receive from the fund.

3. The total number of votes that a member-country can cast.
4. America has the maximum quota. It constitutes 17.7 per cent of the total capital of the
fund. As of end-August 2009, IMF’s total quotas stood at SDR 217.4 billion (about US $325
billion).
!

Caution Neglection of IMF membership regulations and rules can result in determination
of membership with immediate effect.

9.3 operational strategy of the fund

9.3.1 Borrowing strategy of the fund

The Fund is an important financial institution besides performing regulatory and consultative
functions. The Fund’s bulk financial resources come in the form of quota subscriptions from
member countries. Further, it can borrow from governments, central banks or private institutions
of industrialized countries, the Bank for International Settlements and even from OPEC countries,
like Saudi Arabia.

General arrangements to Borrow (GaB)

The Fund can borrow from its 20 industrialized members under GAB and NAB (New Arrangements
to Borrow) The GAB and NAB are credit arrangements between the IMF and a group of members
and institutions to provide supplementary resources of up to SDR 34 billion (about US$50 billion)
to the IMF to forestall or cope with an impairment of the international monetary system or to deal
with an exceptional situation that poses a threat to the stability of that system.

9.3.2 lending strategy of the fund

Under tranche policies, members may use the reserve tranche and the four credit tranches
and three permanent facilities for specific purposes. The facility for compensatory financing
of export fluctuations (established in 1963 and liberalized in 1975 and 1979), the Buffer stock
financing facility (established in 1969), and the Extended Fund ‘facility (established in 1974)
and the Structural Adjustment Facility (SAF) established in March, 1986 – can be accessed by
the members. Lending by the Fund is made to members temporarily in disequilibrium in their
balance of payments on current accounts. If the currency of the member country falls below than
its quota, the difference is called reserve tranche. It can draw up to 25 per cent on its reserve
tranche automatically upon representation to the Fund for its balance needs. The Fund does not
charge any interest on such drawings. The borrowing is to be repaid by the borrowing country
within a period of 3 to 5 years.

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