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We will post 5 questions daily on static topics mentioned in the UPSC civil services preliminary examination syllabus. Each week will focus on a specific topic from the syllabus, such as History of India and Indian National Movement, Indian and World Geography, and more.
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Question 1 of 5
1. Question
Consider the following statements regarding Extended Credit Facility of IMF.
- The Extended Credit Facility (ECF) provides financial assistance to countries with very short-term balance of payments problems.
- The ECF was created under the Poverty Reduction and Growth Trust (PRGT) to make IMFs financial support more flexible and better tailored to the diverse needs of low-income countries (LICs).
Which of the above statements is/are incorrect?
Correct
Solution: a)
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
Incorrect
Solution: a)
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
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Question 2 of 5
2. Question
Structural adjustment programs (SAPs) that aims to adjust the country’s economic structure and improve international competitiveness, is related to
Correct
Solution: d)
Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their purpose is to adjust the country’s economic structure, improve international competitiveness, and restore its balance of payments. SAPs are created with the stated goal of reducing the borrowing country’s fiscal imbalances in the short and medium term or in order to adjust the economy to long-term growth.
Incorrect
Solution: d)
Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their purpose is to adjust the country’s economic structure, improve international competitiveness, and restore its balance of payments. SAPs are created with the stated goal of reducing the borrowing country’s fiscal imbalances in the short and medium term or in order to adjust the economy to long-term growth.
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Question 3 of 5
3. Question
Consider the following statements regarding International Development Association (IDA).
- The International Development Association (IDA) is the part of IMF that helps the world’s poorest countries.
- IDA lends money on concessional terms i.e., at zero or very low interest charge and repayments are stretched over 30 to 40 years.
- IDA does not provide any grants to countries.
How many of the above statements is/are correct?
Correct
Solution: a)
Only Statement 2 is correct.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries.
IDA lends money on concessional terms. This means that IDA credits have a zero or very low interest charge and repayments are stretched over 30 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.
Incorrect
Solution: a)
Only Statement 2 is correct.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries.
IDA lends money on concessional terms. This means that IDA credits have a zero or very low interest charge and repayments are stretched over 30 to 40 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.
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Question 4 of 5
4. Question
Countries that are included in the FATF Grey list may face which of the following?
- Economic sanctions from World Bank
- International boycott.
- Problem in getting loans from other countries.
How many of the above statements is/are correct?
Correct
Solution: c)
Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
Considered in the grey list may face:
- Economic sanctions from IMF, World Bank, ADB.
- Problem in getting loans from IMF, World Bank, ADB and other countries.
- Reduction in international trade.
- International boycott.
Incorrect
Solution: c)
Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
Considered in the grey list may face:
- Economic sanctions from IMF, World Bank, ADB.
- Problem in getting loans from IMF, World Bank, ADB and other countries.
- Reduction in international trade.
- International boycott.
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Question 5 of 5
5. Question
Consider the following statements regarding International Monetary Fund (IMF) Quotas.
- An individual member country’s quota broadly reflects its relative position in the world economy.
- Quotas are denominated in Special Drawing Rights (SDRs).
- Any changes in quotas must be approved by a two-thirds majority of the total voting power, and a member’s own quota cannot be changed without its consent.
How many of the above statements is/are correct?
Correct
Solution: b)
Statement 3 is incorrect.
The IMF is a quota-based institution. Quotas are the building blocks of the IMF’s financial and governance structure. An individual member country’s quota broadly reflects its relative position in the world economy. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.
The IMF’s Board of Governors conducts general quota reviews at regular intervals (no more than five years). Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s own quota cannot be changed without its consent.
Incorrect
Solution: b)
Statement 3 is incorrect.
The IMF is a quota-based institution. Quotas are the building blocks of the IMF’s financial and governance structure. An individual member country’s quota broadly reflects its relative position in the world economy. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.
The IMF’s Board of Governors conducts general quota reviews at regular intervals (no more than five years). Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s own quota cannot be changed without its consent.
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