the goals of the IMF (5)

When all countries subscribed their quotas,the IMF became a holder of gold and of a pool of member country currencies.how do these quotas link up with balance-of-payment loans to member countries ?suppose that Kenya has a BOP deficit and that it needs,because of a foreign exchange shortage,to obtain British pounds to pay for some of its imports.Kenya can"borrow" or"draw" pounds from the IMF since the IMF has a quantity of pounds on hand from the united kingdom quota . According to IMF rules,a country can potentially obtain loans of up to 125 percent of its quota.This figure of 125 percent is divided into five segments (or tranches,as they are officially called),with the first 25 percent called the gold tranche or reserve tranche,the next 25 percent called the first credit tranche, the next 25 percent the second credit tranche,and so on.the application for the first 25 percent is automatically approved by the IMF ,but,as a country gets further and further into the credit tranches,the IMF will attach increasingly stringent conditions before approving the additional loans .these conditions are designed to ensure that the borrowing country is taking action to reduce its BOP deficit. For example ,the IMF may prescribe that the country adopt certain monetary and fiscal policies or may even recommend a change in the value of the borrowing country is currency .These potential interferences by an international agency with the national policies of members have generated considerable ill will,because they are regarded by would -be borrowers as intrusions upon national sovereignty.Incidentally ,the IMF levies a small service charge on these BOP loans; there is no interest charge on reserve tranche loans ,but interest is assessed on credit tranche loans.