Q. "Gold Tranche" (Reserve Tranche) refers to (UPSC Prelims 2020)
Answer:
a credit system granted by IMF to its members
Notes: The correct answer is
[D] a credit system granted by IMF to its members. The Reserve Tranche (Gold Tranche) is a fundamental component of a member country's quota with the International Monetary Fund.
- Definition: A reserve tranche is a portion of a member country's quota that can be accessed without any conditions or service fees. It represents the difference between the member's quota and the IMF's holdings of that member's domestic currency.
- Historical Context: Originally, 25% of a member's quota had to be paid in gold, giving rise to the term "Gold Tranche." Today, this portion is typically provided in Special Drawing Rights (SDRs) or widely accepted foreign currencies.
- Accessibility: Unlike other IMF credit facilities (credit tranches), which often come with "conditionality" (requirements for economic reforms), the Reserve Tranche is effectively a "window" through which a country can withdraw its own contributed assets to address balance of payment difficulties.
- Other Options:
- World Bank (A): Focuses on long-term developmental loans and projects, not short-term liquidity tranches.
- WTO (C): Deals with global trade rules and dispute settlements, not credit or monetary systems.
- Central Bank (B): While Central Banks manage these reserves, the Tranche system is a specific mechanism of the IMF.