UPSC Prelims 2020 Question:

Gold Tranche” (Reserve Tranche) refers to

Explanation:

• The International Monetary Fund (IMF) is funded through its members and their quota contributions.
  
  
• The “Gold Tranche” (Reserve Tranche) is basically an emergency account that IMF members can access at any time without agreeing to conditions or paying a service fee. In other words, it is a portion of a member country’s quota that can be withdrawn free of charge at its own discretion. The is a segment of an IMF member country’s quota that is accessible without fees or economic reform conditions.
  
  
• Initially, member nations’ reserve tranches are 25% of their quota, but this position can change according to any lending that the IMF does with its holdings of the member’s currency.
  
  
• The reserve tranches that countries hold with the IMF are considered their facilities of first resort. It mean that the country will tap into them before seeking a formal credit tranche that charges interest.
  
  

Therefore, option (4) is the correct answer.

Subject: Economics | Balance of Payments and Foreign Reserves