Toeing the line of other BRIC countries, India today announced that it will buy bonds worth $10 billion from the International Monetary Fund. This was announced by finance minister Pranab Mukherjee who is attending the G-20 finance ministers' meet in London. China yesterday committed to buy bonds worth $50 billion from the IMF and there have been talks that Russia and Brazil may do the same.
After the IMF bailed out India from one of its worst ever economic crisis in the 1990s, this comes as a kind of role reversal where the government would contribute to the kitty of the multi-lateral institution to revive the world economy and provide funds to needy developing nations. "However, this participation in IMF's debt would not load India and not further stretch its resources," an official statement said on Friday. The amount of $10 billion is in proportion to India's current quota share at the IMF.
A decision to raise IMF's lendable resources to $500 billion through bilateral financing and the New Arrangements to Borrow (NAB) was taken at the G-20 summit held at London in April 2009. India's announcement comes in the backdrop of the recent decision of the IMF announcing a framework for the issuance of notes to the official sector. The design of these Notes will allow investments to be treated as international reserves.
This would enable the Reserve Bank of India to invest a portion of its foreign exchange reserves in these financial instruments. The decision will bring India in the forefront as a significant partner in the global economic and financial framework.
"India believes that the IMF is a quota-based institution and raising resources through bilateral financing and the expansion of the NAB are not a substitute for quota resources, but a temporary bridge to a quota increase. We fully expect that the next general quota review, which is now agreed to be concluded by January 2011, will result in the long overdue substantial re-balancing of quota and voting power in favour of emerging market economies and developing countries," the official statement said.
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