The instrument chosen for enhancement of international liquidity is :
Special Drawing Rights (SDRs)
International liquidity means the stock of internationally acceptable reserve assets (gold, reserve currencies, reserve positions in the IMF) available to countries to settle payment imbalances.
In 1969 the IMF created Special Drawing Rights (SDRs) as an international reserve asset to supplement members' existing reserves, because gold and the US dollar were not growing fast enough to meet the needs of expanding world trade. SDRs are allocated to members in proportion to their quotas and their value is based on a basket of major currencies.
SWIFT is only a secure messaging network for banks, and multilateral netting or netting of payments are cash-management techniques that reduce the number and size of cross-border transfers within a group of firms; none of these adds to the stock of reserve assets.
Thus the instrument created to enhance international liquidity is the SDR.
Hence, the answer is Special Drawing Rights (SDRs).
Similar Questions
Any country consistently facing balance of payment deficiency can approach :
Assertion (A) : The member nations, consistently finding balance of payments crisis, may approach the World Bank seeking financial accommodation to mitigate the cirsis.
Reasoning (R) : The member nations facing balance of payments crisis can approach the IMF seeking redressal of the BOP crisis.
Codes :
The different forms of IMF assistance are given below. Identify the one which is mainly meant for Less Developed Countries (LDCs)
Important Questions from IMF
- IMF provides __________ assistance to correct the Balance of payment disequilibrium of member countries.
- Which one among the following is not correct ?
- Statement (I) : Developing countries can borrow more than their quota under Extended Fund Facility (EFF) of IMF.
Statement (II) : The Extended Fund Facility (EFF) was created in 1984 to help the developing countries over longer period upto 3 years. Match the items of List – I with those of List – II with regard to international monetary fund’s various schemes :
List – I List – II a. Extended Fund Facility (EFF) i. Repayment period 4 to 10 years b. Stan Arrangements ii. Repayment period 3 to 5 years c. Supplemented Reserve Fund (SRF) iii. Repayment period 2 to 5 years d. Poverty Reduction and Growth Facility (PRGF) iv. Repayment period 10 years Codes :
Any country consistently facing balance of payment deficiency can approach :
