Question 17
AOptions
BSolution
The term "Gold Tranche" or "Reserve Tranche" refers to a component of a member country's quota within the International Monetary Fund (IMF).
When a country joins the IMF, it is assigned a quota, which largely determines its financial contribution to the IMF, its voting power, and its access to IMF financing. A portion of this quota is contributed in reserve assets (like Special Drawing Rights - SDRs, or formerly, gold). This portion is known as the reserve tranche.
Key characteristics of the reserve tranche:
- It represents a country's own reserves held by the IMF.
- A member country can draw upon its reserve tranche position at any time without any conditions or obligations to implement economic policy reforms. It is effectively an unconditional line of credit or a readily available portion of its own international reserves.
- It is distinct from other IMF lending facilities, which often come with policy conditions.
Therefore, the correct answer is that it refers to a credit system granted by the IMF to its members, allowing unconditional access to a portion of their quota.
CStrategy
For questions on international financial institutions, know their primary functions and the specific terminology they use. Differentiate between the IMF, World Bank, and WTO based on their core mandates (e.g., balance of payments support vs. development lending vs. trade rules).
DSyllabus Analysis
This question falls under the Indian Economy and International Organizations sections, specifically focusing on global financial institutions and their mechanisms.
EQuestion Analysis
Medium. While IMF is a well-known organization, the specific term 'Gold Tranche' might be less familiar to some, requiring precise knowledge of IMF terminology and operations.