UPSC Prelims 2011 question on IMF Lending Members

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.