The resources of the IMF are subscribed by the members. The subscription quota of each member is based on its national income and its position in the international trade.
Every member nation must contribute 25% of its quota in international reserve assets and the remaining 75% in its own currency. The payment of 25% part of the quota was originally in gold, but now it is in Special Drawing Rights (SDRs).
SDRs are an international reserve asset created by the IMF in 1969. The Fund may also enlarge its resources by borrowing, by selling gold to the public and by receiving fee from the borrowing members.
Quota of a member nation is significant because of its implications as given below:
ADVERTISEMENTS:
(i) It determines a member’s subscription to the IMF, which, m turn, determines the magnitude of the IMF resources and their composition in terms of gold and national currencies.
(ii) It determines a country’s access to IMF resources through drawings or borrowing from the Fund.
(iii) It determines a country’s voting power in the IMF management.
(iv) It determines the share of a member country in the allocation of S.D.Rs.