With reference to the Resource building and mobilization of the IMF, which of the following statements is/are correct?

        I.            Resources for IMF loans to its members on non-concessional terms are provided by member countries, primarily through their payment of quotas.

      II.            Multilateral and bilateral borrowing serve as a second and third line of defense, respectively, by providing a temporary supplement to quota resources.

Solution

The money the IMF loans to its members on its best – or non-concessional – terms comes from member countries, mainly through their payment of quotas. Quotas are the IMF’s main source of financing. Each member of the IMF is assigned a quota, based broadly on its relative position in the world economy. The New Arrangements to Borrow (NAB) constitutes a second line of defense to supplement IMF resources to forestall or cope with an impairment of the international monetary system. Through the NAB, a number of member countries and institutions stand ready to lend additional resources to the IMF. Bilateral borrowing Agreements serve as a third line of defense after quotas and the NAB.