At $14 bn, India goes generous with IMF
The additional contribution of $4 billion is under discussion now and will be finalised after approval of Prime Minister Manmohan Singh. IMF | More on Financial crisis
By Dheeraj Tiwari, 
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| NEW DELHI: The government's contribution to IMF���s new arrangements to borrow (NAB) programme is likely to go up to $14 billion as compared to the initial estimate of $10 billion. The move is aimed at strengthening India���s role in IMF, which has assumed a more active role after the global financial slowdown.
The additional contribution of $4 billion is under discussion now and will be finalised after approval of Prime Minister Manmohan Singh.
According to a senior official in the finance ministry, who wishes to remain anonymous, India may buy IMF bonds worth $14 billion. The move is expected to strengthen India���s claim for increasing its existing quota in the multilateral financial institution.
Earlier, Planning Commission deputy chairman Montek Singh Ahluwalia had indicated that India is ready to contribute $10 billion to the IMF���s programme.
���We are currently examining the amount that we may allocate towards IMF Bonds. Since the review of IMF quota is only scheduled for 2011, we may increase our support to IMF to present a strong case,��� he said.
It is expected that the IMF may consider raising India���s quota to 2.4% before the official review in 2011. In 2006, IMF had increased the quota of four countries-China, South Korea, Turkey and Mexico-as a part of its first phase of reforms.
India���s existing quota in IMF is around 2%. Quotas determine the maximum amount which each country can contribute to the IMF and their voting power in the financial institution.
The government is now working out the details with RBI on how it will allocate the sum of $14 billion. It is expected that RBI will redeploy its foreign exchange reserves for buying IMF bonds and it will pull out some money invested in US Treasury Bonds. ���Some initial discussions have been held but we���re still awaiting clarity from IMF on whether if they���ll need the money in trenches or as and when required,��� the official said.
Currently, IMF has not indicated any timeline for issuance and maturity period of its bonds. The Indian government, however, has indicated its preference for buying IMF Bonds. Since the IMF has already said the bonds will pay interest similar to US treasuries, the $14 billion invested in IMF notes will be less exposed to any decline in the dollar (since the weight of dollar in SDR is 44%). The SDRs, an international reserve asset and the fund���s internal unit of account, are disbursed in proportion to eassch member���s IMF quota.
The additional contribution of $4 billion is under discussion now and will be finalised after approval of Prime Minister Manmohan Singh.
According to a senior official in the finance ministry, who wishes to remain anonymous, India may buy IMF bonds worth $14 billion. The move is expected to strengthen India���s claim for increasing its existing quota in the multilateral financial institution.
Earlier, Planning Commission deputy chairman Montek Singh Ahluwalia had indicated that India is ready to contribute $10 billion to the IMF���s programme.
���We are currently examining the amount that we may allocate towards IMF Bonds. Since the review of IMF quota is only scheduled for 2011, we may increase our support to IMF to present a strong case,��� he said.
It is expected that the IMF may consider raising India���s quota to 2.4% before the official review in 2011. In 2006, IMF had increased the quota of four countries-China, South Korea, Turkey and Mexico-as a part of its first phase of reforms.
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India���s existing quota in IMF is around 2%. Quotas determine the maximum amount which each country can contribute to the IMF and their voting power in the financial institution.
The government is now working out the details with RBI on how it will allocate the sum of $14 billion. It is expected that RBI will redeploy its foreign exchange reserves for buying IMF bonds and it will pull out some money invested in US Treasury Bonds. ���Some initial discussions have been held but we���re still awaiting clarity from IMF on whether if they���ll need the money in trenches or as and when required,��� the official said.
Currently, IMF has not indicated any timeline for issuance and maturity period of its bonds. The Indian government, however, has indicated its preference for buying IMF Bonds. Since the IMF has already said the bonds will pay interest similar to US treasuries, the $14 billion invested in IMF notes will be less exposed to any decline in the dollar (since the weight of dollar in SDR is 44%). The SDRs, an international reserve asset and the fund���s internal unit of account, are disbursed in proportion to eassch member���s IMF quota.
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