2.1.3.4. How it lends?

IMF does not allow any member to enjoy financial assistance over a long time period. The total amount that a country is entitled to draw is determined by the amount of its quota. A member is entitled to draw an amount not exceeding 25 p.c. of its quota. The first 25 p.c. called the ‘gold tranche’ or ‘reserve tranche’ can easily be drawn by countries with BOP problems.

This 25 p.c. of the quota is the members’ owned reserves and therefore no conditions are attached to such drawings. This may be called ‘ordinary, drawing rights; even the Fund cannot deny its use. However, no interest for the first credit tranche is required to be paid though such drawings are subject to repayment within 3-5 years period. Beyond this, the credit is available with limits on its amount and subjected to IMF approval.

2.2. Analysis of working of IMF