Back Matter

Back Matter

Author(s):
International Monetary Fund
Published Date:
January 1969
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    Appendix: The Original and the Amended Provisions of the Articles of Agreement Relating to the Reform of the Fund

    Introductory Article

    Original

    The International Monetary Fund is established and shall operate in accordance with the following provisions:

    Amended

    • (i) The International Monetary Fund is established and shall operate in accordance with the provisions of this Agreement as originally adopted, and as subsequently amended in order to institute a facility based on special drawing rights and to effect certain other changes.

    • (ii) To enable the Fund to conduct its operations and transactions, the Fund shall maintain a General Account and a Special Drawing Account. Membership in the Fund shall give the right to participation in the Special Drawing Account.

    • (iii) Operations and transactions authorized by this Agreement shall be conducted through the General Account except that operations and transactions involving special drawing rights shall be conducted through the Special Drawing Account.

    Article I. Purposes

    Original

    The purposes of the International Monetary Fund are:

    • (v) To give confidence to members by making the Fund’s resources available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

    The Fund shall be guided in all its decisions by the purposes set forth in this Article.

    Amended

    The purposes of the International Monetary Fund are:

    • (v) To give confidence to members by making the Fund’s resources temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

    The Fund shall be guided in all its policies and decisions by the purposes set forth in this Article.

    Article III. Quotas and Subscriptions

    Original

    SEC. 2. Adjustment of quotas.—The Fund shall at intervals of five years review, and if it deems it appropriate propose an adjustment of, the quotas of the members. It may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned. A four-fifths majority of the total voting power shall be required for any change in quotas and no quota shall be changed without the consent of the member concerned.

    Amended

    SEC. 2. Adjustment of quotas.—The Fund shall at intervals of not more than five years conduct a general review, and if it deems it appropriate propose an adjustment, of the quotas of the members. It may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned. An eighty-five percent majority of the total voting power shall be required for any change in quotas proposed as the result of a general review and a four-fifths majority of the total voting power shall be required for any other change in quotas. No quota shall be changed without the consent of the member concerned.

    SEC. 4. Payments when quotas are changed.—

    (c) A majority of eighty-five percent of the total voting power shall be required for any decisions dealing with the payment, or made with the sole purpose of mitigating the effects of the payment, of increases in quotas proposed as the result of a general review of quotas.

    Article IV. Par Values of Currencies

    Original

    SEC. 7. Uniform changes in par values.—Notwithstanding the provisions of Section 5(b) of this Article, the Fund by a majority of the total voting power may make uniform proportionate changes in the par values of the currencies of all members, provided each such change is approved by every member which has ten percent or more of the total of the quotas. The par value of a member’s currency shall, however, not be changed under this provision if, within seventy-two hours of the Fund’s action, the member informs the Fund that it does not wish the par value of its currency to be changed by such action.

    SEC. 8. Maintenance of gold value of the Fund’s assets.—

    (d) The provisions of this Section shall apply to a uniform proportionate change in the par values of the currencies of all members, unless at the time when such a change is proposed the Fund decides otherwise.

    Amended

    SEC. 7. Uniform changes in par values.—Notwithstanding the provisions of Section 5(b) of this Article, the Fund by an eighty-five percent majority of the total voting power may make uniform proportionate changes in the par values of the currencies of all members. The par value of a member’s currency shall, however, not be changed under this provision if, within seventy-two hours of the Fund’s action, the member informs the Fund that it does not wish the par value of its currency to be changed by such action.

    SEC. 8. Maintenance of gold value of the Fund’s assets.—

    (d) The provisions of this Section shall apply to a uniform proportionate change in the par values of the currencies of all members, unless at the time when such a change is made the Fund decides otherwise by an eighty-five percent majority of the total voting power.

    Article V. Transactions with the Fund

    Original

    SEC. 3. Conditions governing use of the Fund’s resources.—(a) A member shall be entitled to buy the currency of another member from the Fund in exchange for its own currency subject to the following conditions:

    • (i) The member desiring to purchase the currency represents that it is presently needed for making in that currency payments which are consistent with the provisions of this Agreement;

    • (iii) The proposed purchase would not cause the Fund’s holdings of the purchasing member’s currency to increase by more than twenty-five percent of its quota during the period of twelve months ending on the date of the purchase nor to exceed two hundred percent of its quota, but the twenty-five percent limitation shall apply only to the extent that the Fund’s holdings of the member’s currency have been brought above seventy-five percent of its quota if they had been below that amount;

    SEC. 7. Repurchase by a member of its currency held by the Fund.—

    (b) At the end of each financial year of the Fund, a member shall repurchase from the Fund with gold or convertible currencies, as determined in accordance with Schedule B, part of the Fund’s holdings of its currency under the following conditions:

    • (i) Each member shall use in repurchases of its own currency from the Fund an amount of its monetary reserves equal in value to one-half of any increase that has occurred during the year in the Fund’s holdings of its currency plus one-half of any increase, or minus one-half of any decrease, that has occurred during the year in the member’s monetary reserves. This rule shall not apply when a member’s monetary reserves have decreased during the year by more than the Fund’s holdings of its currency have increased.

    (c) None of the adjustments described in (b) above shall be carried to a point at which

    • (i) the member’s monetary reserves are below its quota, or

    • (ii) the Fund’s holdings of its currency are below seventy-five percent of its quota, or

    • (iii) the Fund’s holdings of any currency required to be used are above seventy-five percent of the quota of the member concerned.

    SEC. 8. Charges.—(a) Any member buying the currency of another member from the Fund in exchange for its own currency shall pay a service charge uniform for all members of three-fourths percent in addition to the parity price. The Fund in its discretion may increase this service charge to not more than one percent or reduce it to not less than one-half percent.

    Amended

    SEC. 3. Conditions governing use of the Fund’s resources.—(a) A member shall be entitled to buy the currency of another member from the Fund in exchange for its own currency subject to the following conditions:

    • (i) The member desiring to purchase the currency represents that it is presently needed for making in that currency payments which are consistent with the provisions of this Agreement;

    • (iii) The proposed purchase would be a gold tranche purchase, or would not cause the Fund’s holdings of the purchasing member’s currency to increase by more than twenty-five percent of its quota during the period of twelve months ending on the date of the purchase or to exceed two hundred per cent of its quota;

    (c) A member’s use of the resources of the Fund shall be in accordance with the purposes of the Fund. The Fund shall adopt policies on the use of its resources that will assist members to solve their balance of payments problems in a manner consistent with the purposes of the Fund and that will establish adequate safeguards for the temporary use of its resources.

    (d) A representation by a member under (a) above shall be examined by the Fund to determine whether the proposed purchase would be consistent with the provisions of this Agreement and with the policies adopted under them, with the exception that proposed gold tranche purchases shall not be subject to challenge.

    SEC. 7. Repurchase by a member of its currency held by the Fund.—

    (b) At the end of each financial year of the Fund, a member shall repurchase from the Fund with each type of monetary reserve, as determined in accordance with Schedule B, part of the Fund’s holdings of its currency under the following conditions:

    • (i) Each member shall use in repurchases of its own currency from the Fund an amount of its monetary reserves equal in value to the following changes that have occurred during the year: one-half of any increase in the Fund’s holdings of the member’s currency, plus one-half of any increase, or minus one-half of any decrease, in the member’s monetary reserves, or, if the Fund’s holdings of the member’s currency have decreased, one-half of any increase in the member’s monetary reserves minus one-half of the decrease in the Fund’s holdings of the member’s currency. This rule shall not apply when a member’s monetary reserves have decreased during the year by more than the Fund’s holdings of its currency have increased.

    (c) None of the adjustments described in (b) above shall be carried to a point at which

    • (i) the member’s monetary reserves are below one hundred fifty percent of its quota, or

    • (ii) the Fund’s holdings of its currency are below seventy-five percent of its quota, or

    • (iii) the Fund’s holdings of any currency required to be used are above seventy-five percent of the quota of the member concerned, or

    • (iv) the amount repurchased exceeds twenty-five percent of the quota of the member concerned.

    (d) The Fund by an eighty-five percent majority of the total voting power may revise the percentages in (c)(i) and (iv) above and revise and supplement the rules in paragraph 1(c), (d), and (e) and paragraph 2(b) of Schedule B.

    SEC. 8. Charges.—(a) Any member buying the currency of another member from the Fund in exchange for its own currency shall pay, in addition to the parity price, a service charge uniform for all members of not less than one-half percent and not more than one percent, as determined by the Fund, provided that the Fund in its discretion may levy a service charge of less than one-half percent on gold tranche purchases.

    SEC. 9. Remuneration.—(a) The Fund shall pay remuneration, at a rate uniform for all members, on the amount by which seventy-five percent of a member’s quota exceeded the average of the Fund’s holdings of the member’s currency, provided that no account shall be taken of holdings in excess of seventy-five percent of quota. The rate shall be one and one-half percent per annum, but the Fund in its discretion may increase or reduce this rate, provided that a three-fourths majority of the total voting power shall be required for any increase above two percent per annum or reduction below one percent per annum.

    (b) Remuneration shall be paid in gold or a member’s own currency as determined by the Fund.

    Article VI. Capital Transfers

    Original

    SECTION 1. Use of the Fund’s resources for capital transfers.—(a) A member may not make net use of the Fund’s resources to meet a large or sustained outflow of capital, and the Fund may request a member to exercise controls to prevent such use of the resources of the Fund. If, after receiving such a request, a member fails to exercise appropriate controls, the Fund may declare the member ineligible to use the resources of the Fund.

    SEC. 2. Special provisions for capital transfers.—If the Fund’s holdings of the currency of a member have remained below seventy-five percent of its quota for an immediately preceding period of not less than six months, such member, if it has not been declared ineligible to use the resources of the Fund under Section 1 of this Article, Article IV, Section 6, Article V, Section 5, or Article XV, Section 2(a), shall be entitled, notwithstanding the provisions of Section 1(a) of this Article, to buy the currency of another member from the Fund with its own currency for any purpose, including capital transfers. Purchases for capital transfers under this Section shall not, however, be permitted if they have the effect of raising the Fund’s holdings of the currency of the member desiring to purchase above seventy-five percent of its quota, or of reducing the Fund’s holdings of the currency desired below seventy-five percent of the quota of the member whose currency is desired.

    Amended

    SECTION 1. Use of Fund’s resources for capital transfers.—(a) A member may not use the Fund’s resources to meet a large or sustained outflow of capital except as provided in Section 2 of this Article, and the Fund may request a member to exercise controls to prevent such use of the resources of the Fund. If, after receiving such a request, a member fails to exercise appropriate controls, the Fund may declare the member ineligible to use the resources of the Fund.

    SEC. 2. Special provisions for capital transfers.—A member shall be entitled to make gold tranche purchases to meet capital transfers.

    Article XII. Organization and Management

    Original

    SEC. 2. Board of Governors.—

    (b) The Board of Governors may delegate to the Executive Directors authority to exercise any powers of the Board, except the power to:

    • (ii) Approve a revision of quotas.

    • (iii) Approve a uniform change in the par value of the currencies of all members.

    SEC. 6. Distribution of net income.—(a) The Board of Governors shall determine annually what part of the Fund’s net income shall be placed to reserve and what part, if any, shall be distributed.

    (b) If any distribution is made, there shall first be distributed a two percent non-cumulative payment to each member on the amount by which seventy-five percent of its quota exceeded the Fund’s average holdings of its currency during that year. The balance shall be paid to all members in proportion to their quotas. Payments to each member shall be made in its own currency.

    Amended

    SEC. 2. Board of Governors.—

    (b) The Board of Governors may delegate to the Executive Directors authority to exercise any powers of the Board, except the power to:

    • (ii) Approve a revision of quotas, or to decide on the payment, or on the mitigation of the effects of payment, of increases in quotas proposed as the result of a general review of quotas.

    • (iii) Approve a uniform change in the par values of the currencies of all members, or to decide when such a change is made that the provisions relating to the maintenance of gold value of the Fund’s assets shall not apply.

    • (ix) Revise the provisions on repurchase or to revise and supplement the rules for the distribution of repurchases among types of reserves.

    • (x) Make transfers to general reserve from any special reserve.

    SEC. 6. Reserves and distribution of net income.—(a) The Board of Governors shall determine annually what part of the Fund’s net income shall be placed to reserve and what part, if any, shall be distributed.

    (b) If any distribution is made of the net income of any year, there shall first be distributed to members eligible to receive remuneration under Article V, Section 9, for that year an amount by which two percent per annum exceeded any remuneration that has been paid for that year. Any distribution of the net income of that year beyond that amount shall be made to all members in proportion to their quotas. Payments to each member shall be made in its own currency.

    (c) The Fund may make transfers to general reserve from any special reserve.

    Article XVIII. Interpretation

    Original

    (b) In any case where the Executive Directors have given a decision under (a) above, any member may require that the question be referred to the Board of Governors, whose decision shall be final. Pending the result of the reference to the Board the Fund may, so far as it deems necessary, act on the basis of the decision of the Executive Directors.

    Amended

    (b) In any case where the Executive Directors have given a decision under (a) above, any member may require, within three months from the date of the decision, that the question be referred to the Board of Governors, whose decision shall be final. Any question referred to the Board of Governors shall be considered by a Committee on Interpretation of the Board of Governors. Each Committee member shall have one vote. The Board of Governors shall establish the membership, procedures, and voting majorities of the Committee. A decision of the Committee shall be the decision of the Board of Governors unless the Board by an eighty-five percent majority of the total voting power decides otherwise. Pending the result of the reference to the Board the Fund may, so far as it deems necessary, act on the basis of the decision of the Executive Directors.

    Article XIX. Explanation of Terms

    Original

    In interpreting the provisions of this Agreement the Fund and its members shall be guided by the following:

    (a) A member’s monetary reserves means its net official holdings of gold, of convertible currencies of other members, and of the currencies of such non-members as the Fund may specify.

    (e) A member’s monetary reserves shall be calculated by deducting from its central holdings the currency liabilities to the Treasuries, central banks, stabilization funds, or similar fiscal agencies of other members or non-members specified under (d) above, together with similar liabilities to other official institutions and other banks in the territories of members, or non-members specified under (d) above. To these net holdings shall be added the sums deemed to be official holdings of other official institutions and other banks under (c) above.

    Amended

    In interpreting the provisions of this Agreement the Fund and its members shall be guided by the following:

    (a) A member’s monetary reserves means its official holdings of gold, of convertible currencies of other members, and of the currencies of such non-members as the Fund may specify.

    (e) The sums deemed to be official holdings of other official institutions and other banks under (c) above shall be included in the member’s monetary reserves.

    (j) Gold tranche purchase means a purchase by a member of the currency of another member in exchange for its own currency which does not cause the Fund’s holdings of the member’s currency to exceed one hundred percent of its quota, provided that for the purposes of this definition the Fund may exclude purchases and holdings under policies on the use of its resources for compensatory financing of export fluctuations.

    Original

    Article XX. Final Provisions

    Amended

    Article XX. Inaugural Provisions

    Schedule B. Provisions with Respect to Repurchase by a Member of Its Currency Held by the Fund

    Original

    1. In determining the extent to which repurchase of a member’s currency from the Fund under Article V, Section 7(b), shall be made with each type of monetary reserve, that is, with gold and with each convertible currency, the following rule, subject to 2 below, shall apply:

    • (a) If the member’s monetary reserves have not increased during the year, the amount payable to the Fund shall be distributed among all types of reserves in proportion to the member’s holdings thereof at the end of the year.

    • (b) If the member’s monetary reserves have increased during the year, a part of the amount payable to the Fund equal to one-half of the increase shall be distributed among those types of reserves which have increased in proportion to the amount by which each of them has increased. The remainder of the sum payable to the Fund shall be distributed among all types of reserves in proportion to the member’s remaining holdings thereof.

    • (c) If after all the repurchases required under Article V, Section 7(b), had been made, the result would exceed any of the limits specified in Article V, Section 7(c), the Fund shall require such repurchases to be made by the members proportionately in such manner that the limits will not be exceeded.

    2. The Fund shall not acquire the currency of any non-member under Article V, Section 7(b) and (c).

    Amended

    1. In determining the extent to which repurchase of a member’s currency from the Fund under Article V, Section 7(b), shall be made with each convertible currency and each of the other types of monetary reserve, the following rule, subject to 2 below, shall apply:

    • (a) If the member’s monetary reserves have not increased during the year, the amount payable to the Fund shall be distributed among all types of reserves in proportion to the member’s holdings thereof at the end of the year.

    • (b) If the member’s monetary reserves have increased during the year, a part of the amount payable to the Fund equal to one-half of the increase, minus one-half of any decrease in the Fund’s holdings of the member’s currency that has occurred during the year, shall be distributed among those types of reserves which have increased in proportion to the amount by which each of them has increased. The remainder of the sum payable to the Fund shall be distributed among all types of reserves in proportion to the member’s remaining holdings thereof.

    • (c) If after the repurchases required under Article V, Section 7(b), had been made, the result would exceed either of the limits specified in Article V, Section 7(c)(i) or (ii), the Fund shall require such repurchases to be made by the member proportionately in such manner that these limits will not be exceeded.

    • (d) If after all the repurchases required under Article V, Section 7(b), had been made, the result would exceed the limit specified in Article V, Section 7(c)(iii), the amount by which the limit would be exceeded shall be discharged in convertible currencies as determined by the Fund without exceeding that limit.

    • (e) If a repurchase required under Article V, Section 7(b), would exceed the limit specified in Article V, Section 7(c) (iv), the amount by which the limit would be exceeded shall be repurchased at the end of the subsequent financial year or years in such a way that total repurchases under Article V, Section 7(b), in any year would not exceed the limit specified in Article V, Section 7(c) (iv).

    2. (a) The Fund shall not acquire the currency of any non-member under Article V, Section 7(b) and (c).

    (b) Any amount payable in the currency of a non-member under 1(a) or 1(b) above shall be paid in the convertible currencies of members as determined by the Fund.

    5. In calculating monetary reserves and the increase in monetary reserves during any year for the purpose of Article V, Section 7(b) and (c), the Fund may decide in its discretion, on the request of a member, that deductions shall be made for obligations outstanding as the result of transactions between members under a reciprocal facility by which a member agrees to exchange on demand its currency for the currency of the other member up to a maximum amount and on terms requiring that each such transaction be reversed within a specified period not in excess of nine months.

    6. In calculating monetary reserves and the increase in monetary reserves for the purpose of Article V, Section 7(b) and (c), Article XIX(e) shall apply except that the following provision shall apply at the end of a financial year if it was in effect at the beginning of that year:

    “A member’s monetary reserves shall be calculated by deducting from its central holdings the currency liabilities to the Treasuries, central banks, stabilization funds, or similar fiscal agencies of other members or non-members specified under (d) above, together with similar liabilities to other official institutions and other banks in the territories of members, or non-members specified under (d) above. To these net holdings shall be added the sums deemed to be official holdings of other official institutions and other banks under (c) above.”

    International Monetary FUND Pamphlet Series

    (All pamphlets have been published in English, French, and Spanish, unless otherwise stated)

    *1. Introduction to the Fund, by J. Keith Horsefield. First edition, 1964. Second edition, 1965. Second edition also in German.

    *2. The International Monetary Fund: Its Form and Functions, by J. Marcus Fleming. 1964. In English only.

    3. The International Monetary Fund and Private Business Transactions: Some Legal Effects of the Articles of Agreement, by Joseph Gold. 1965.

    4. The International Monetary Fund and International Law: An Introduction, by Joseph Gold. 1965.

    *5. The Financial Structure of the Fund, by Rudolf Kroc. First edition, 1965. Second edition, 1967.

    6. Maintenance of the Gold Value of the Fund’s Assets, by Joseph Gold. First edition, 1965. Second edition, 1971.

    7. The Fund and Non-Member States: Some Legal Effects, by Joseph Gold. 1966.

    8. The Cuban Insurance Cases and the Articles of the Fund, by Joseph Gold. 1966.

    9. Balance of Payments: Its Meaning and Uses, by Poul H0st-Madsen. 1967.

    *10. Balance of Payments Concepts and Definitions. First edition, 1968. Second edition, 1969.

    11. Interpretation by the Fund, by Joseph Gold. 1968.

    12. The Reform of the Fund, by Joseph Gold. 1969.

    13. Special Drawing Rights, by Joseph Gold. First edition, 1969. Second edition, with subtitle Character and Use, 1970.

    14. The Fund’s Concepts of Convertibility, by Joseph Gold. 1971.

    15. Special Drawing Rights: The Role, of Language, by Joseph Gold. 1971.

    16. Some Reflections on the Nature of Special Drawing Rights, by J.J. Polak. 1971.

    17. Operations and Transactions in SDRs: The First Basic Period, by Walter Habermeier. 1973.

    18. Valuation and Rate of Interest of the SDR, by J.J. Polak. 1974.

    19. Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, by Joseph Gold. 1976. Also in German.

    20. Voting Majorities in the Fund: Effects of Second Amendment of the Articles, by Joseph Gold. 1977.

    21. International Capital Movements Under the Law of the International Monetary Fund, by Joseph Gold. 1977.

    22. Floating Currencies, SDRs, and Gold: Further Legal Developments, by Joseph Gold. 1977. Concluding section also in German.

    23. Use, Conversion, and Exchange of Currency Under the Second Amendment of the Fund’s Articles, by Joseph Gold. 1978.

    24. The Rise in Protectionism, by Trade and Payments Division. 1978.

    25. The Second Amendment of the Fund’s Articles of Agreement, by Joseph Gold. 1978.

    26. SDRs, Gold, and Currencies: Third Survey of New Legal Developments, by Joseph Gold. 1979. Concluding section also in German.

    27. Financial Assistance by the International Monetary Fund: Law and Practice, by Joseph Gold. First edition, 1979. In English only. Second edition, 1980.

    28. Thoughts on an International Monetary Fund Based Fully on the SDR, by J.J. Polak. 1979.

    29. Macroeconomic Accounts: An Overview, by Poul H0st-Madsen. 1979.

    30. Technical Assistance Services of the International Monetary Fund. 1979.

    31. Conditionality, by Joseph Gold. 1979.

    32. The Rule of Law in the International Monetary Fund, by Joseph Gold. 1980.

    33. SDRs, Currencies, and Gold: Fourth Survey of New Legal Developments, by Joseph Gold. 1980.

    34. Compensatory Financing Facility, by Louis M. Goreux. 1980.

    35. The Legal Character of the Fund’s Stand-By Arrangements and Why It Matters, by Joseph Gold. 1980.

    36. SDRs, Currencies, and Gold: Fifth Survey of New Legal Developments, by Joseph Gold. 1981.

    37. The International Monetary Fund: Its Evolution, Organization, and Activities. First edition, 1981. Fourth edition, 1984.

    38. Fund Conditionality: Evolution of Principles and Practices, by Manuel Guitian. 1981.

    39. Order in International Finance, the Promotion of IMF Stand-By Arrangements, and the Drafting of Private Loan Agreements, by Joseph Gold. 1982.

    40. SDRs, Currencies, and Gold: Sixth Survey of New Legal Developments, by Joseph Gold. 1983. In English. French and Spanish in preparation.

    41. The General Arrangements to Borrow, by Michael Ainley. 1984. In English. French and Spanish in preparation.

    42. The International Monetary Fund: Its Financial Organization and Activities, by Anand G. Chandavarkar. 1984. In English. French and Spanish in preparation.

    43. The Technical Assistance and Training Services of the International Monetary Fund.

    In English. French and Spanish in preparation.

    *Out of print. Photographic or microfilm copies of all English editions, including numbers that are out of print, may be purchased direct from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Michigan 48106, U.S.A., or, for those living outside the Western Hemisphere, from University Microfilms Limited, 30/32 Mortimer St., London, WIN 7RA, England.

    Copies (unless out of print) may be requested from:

    External Relations Department, Attention: Publications

    International Monetary Fund, Washington, D.C. 20431, U.S.A.

    Telephone number: 202 623-7430

    Cable address: Interfund

    See Establishment of a Facility Based on Special Drawing Rights in the International Monetary Fund and Modifications in the Rules and Practices of the Fund: A Report by the Executive Directors to the Board of Governors Proposing Amendment of the Articles of Agreement, April 1968 (hereinafter referred to as the Report). For convenience, it will be assumed ordinarily in the course of this pamphlet that the amendments proposed in the Report have taken effect.

    Article XXI, Section 1; Article XXIII, Section 1; Article XXIV.

    Article IV, Sections 3 and 4(b).

    See, for example, the Managing Director’s opening address at the Twenty-Second Annual Meeting of the Board of Governors, Rio de Janeiro, Summary Proceedings of the Annual Meeting of the Board of Governors, 1967 (hereinafter referred to as Summary Proceedings), p. 21.

    See Decision No. 1371-(62/36) of July 20, 1962 entitled “Currencies to Be Drawn and to Be Used in Repurchases,” Selected Decisions of the Executive Directors and Selected Documents (Washington, Third Issue, January 1965; hereinafter referred to as Selected Decisions), pp. 33–39.

    For the statistics on the cumulative effect of Fund transactions on May 31, 1968, see International Monetary Fund, International Financial Statistics (July 1968), pp. 4–7.

    Article XII, Section 5. Under Section 5(b), for the purpose of voting on two categories of decisions, weighted voting is adjusted in relation to the net purchases that a member makes of other members’ currencies and in relation to the net sales made by the Fund of a member’s currency.

    Summary Proceedings, pp. 46–47. Cf. EEC Ministerial Communiqué (Munich), April 18, 1967.

    Summary Proceedings, p. 170. See also pp. 69 (France), 134 (Belgium), and 145 (Netherlands).

    Summary Proceedings, pp. 59 (United Kingdom), 66 (India), and 84–85 (United States).

    Resolution No. 22–8, Summary Proceedings, p. 272.

    Resolution No. 23–5, Summary Proceedings, 1968, pp. 293–94.

    “The Amendment also contains proposals to modify certain of the provisions of the existing Articles of Agreement. These changes fall under six heads, constituting those proposals for change which have been agreed upon, out of a rather longer and more difficult group of proposals that at one time had achieved some status among the EEC countries” (Hearings Before the Committee on Banking and Currency, House of Representatives, Ninetieth Congress, Second Session, on H.R. 16911, May 1 and 2, 1968, p. 157). Much material on the amendments, particularly on the views of the United States can be found in those hearings as well as in Hearing Before the Committee on Foreign Relations, United States Senate, Ninetieth Congress, Second Session on S. 3423 and H.R. 16911, May 13, 1968. See also Report No. 1349 of the House of Representatives, Ninetieth Congress, Second Session, and Report No. 1164 of the Senate, Ninetieth Congress, Second Session, on Special Drawing Rights; Special Report on National Advisory Council on International Monetary and Financial Problems to the President and to the Congress on the Proposed Establishment of a Facility Based on Special Drawing Rights in the International Monetary Fund and Modifications in the Rules and Practices of the Fund: A Report by the Executive Directors to the Board of Governors Proposing Amendment of the Articles of Agreement, April 1968; Summary Proceedings, pp. 94, 167, and 190.

    H.C.L. Merillat (ed.), Legal Advisers and International Organizations (Dobbs Ferry, N.Y., 1966), pp. 30–31; Sir Gerald Fitzmaurice, “Legal Advisers and International Organizations,” American Journal of International Law, Vol. 62 (1968), pp. 114–27, at p. 124.

    Introductory Article (amended); Article XXII; Report, Section 2, p. 5.

    Article V, Section 3.

    Article III, Section 3. It is the “normal” or “ideal” subscription because the gold portion may be decreased and the currency portion correspondingly increased if a member’s reserves are low.

    For the precise meaning of 25 per cent of quota for this purpose, see Selected Decisions, p. 20.

    Article V, Section 3(a) (iii).

    Article V, Section 4. The first of these limitations has been waived frequently in the practice of the Fund and the second occasionally.

    Selected Decisions, pp. 21–24.

    Selected Decisions, p. 23.

    The word “net” in this description means that the Fund’s acquisition of the member’s currency must be taken into account. For example, if a member made a gold subscription equal to 25 per cent of quota, and the Fund sold the member’s currency in amounts equal to 15 per cent of quota, but the member purchased the currencies of other members in amounts equal to 35 per cent of its quota, its gold tranche would be equal to only 5 per cent of quota. Even this is a simplification because all dispositions of the member’s currency and all acquisitions affected the calculation of the gold tranche. Dispositions could result from operations and transactions other than sales, e.g., the payment of administrative expenses by the Fund. Similarly, acquisitions would result from operations and transactions other than the member’s purchases, e.g., its payment of charges. The precise formulation of the gold tranche of a member, therefore, would be the gold subscription plus or minus the difference between the Fund’s total dispositions of the member’s currency and the Fund’s total acquisitions of it.

    Article IV, Section 6; Article V, Section 5; Article VI, Section 1(a); Article XV, Section 2(a).

    Article V, Section 3(a)(i).

    Selected Decisions, p. 19. Strictly speaking, it is the correctness of the representation which accompanies a request to purchase exchange that would be challenged. For convenience, however, the text usually refers to the challenge of a request.

    Article I(v).

    Joseph Gold, “The Next Stage in the Development of International Monetary Law: The Deliberate Control of Liquidity,” American Journal of International Law, Vol. 62 (1968), pp. 365–402, at pp. 371–73.

    This does not mean that the gold tranche could be included in the definition of “monetary reserves” in the Articles. “Monetary reserves” are relevant for certain specific purposes in the Articles (see Article III, Section 4(a); Article V, Section 7(b) and (c), and Section 8(f)), and for these purposes “monetary reserves” were defined to include only gold and currencies (Article XIX(a)-(e)). Under the amendments, the definition is extended to include special drawing rights (Article XXV, Section 7(a), but even though the gold tranche is included in the new legal concept of “reserve position in the Fund” (Article XXXII(c)) it is not included in the more extended definition of “monetary reserves” for the purposes of the Articles.

    They are popularly referred to as “credit” tranche purchases in contrast to gold tranche purchases which do not exceed a member’s net contribution in economic terms. Legally, however, the exchange transactions of the Fund with its members throughout the tranches are sales of one currency in return for the purchasing member’s currency, and they are not “credit” or “loan” transactions between a “lender” and a “borrower.”

    Selected Decisions, p. 49.

    Selected Decisions, pp. 56–68.

    Paragraph 11(f), General Arrangements to Borrow (Selected Decisions, p. 62). It is arguable that legally the claim to early repayment is an asset somewhat superior to the gold tranche because ineligibility to use the Fund’s resources would prevent a member from making purchases in the gold tranche but would not disentitle the member to early repayment. In addition, the claim to early repayment could be made on the basis of “balance of payments need” and not a need for “making … payments which are consistent with the provisions of this Agreement” (Article V, Section 3(a)(i)).

    See, for example, Banca d’Italia, Abridged Version of the Report for the Year 1966, p. 61; De Nederlandsche Bank N.V., Report for the Year 1965, p. 85.

    Article XXV, Section 3; Schedule G, Paragraph 1(b).

    Article XXXII(c).

    Article XIX(j); Report, Section 33, pp. 24–25.

    See footnote 23.

    The original policy was adopted on February 27, 1963 without the “floating” feature. Selected Decisions, pp. 40–43. For the amending decision of September 20, 1966, see International Monetary Fund, Compensatory Financing of Export Fluctuations: Developments in the Fund’s Facility, Second Report (Washington, 1966), pp. 37–42.

    It will be apparent from this example that a member’s gold tranche can be equated no longer with its net contribution in economic terms. A member may have a gold tranche even though it is receiving and not making such a contribution.

    Under the original policy of February 27, 1963, purchases by a member under the compensatory financing policy that increased the Fund’s holdings of the member’s currency to the level of its quota would constitute, in addition, the use of its gold tranche. Therefore, resort to the compensatory financing policy, which was intended to give special assistance to members, would deprive them in these circumstances of the assistance that would have been available under the gold tranche policy.

    It follows that a proposed purchase under the compensatory financing policy is not considered to be within the tranches for the purpose of applying the Fund’s criteria for purchases in the hierarchy of tranches. For example, the Fund’s holdings of a member’s currency may be at a high level so that any purchase under the tranche policies would have to meet strict standards, but if at that point a member can make a purchase under the compensatory financing policy, the request to make that purchase will be considered according to the criteria of that policy and not the stricter criteria of the tranche policies. In addition, if a purchase is made under the compensatory financing policy, the Fund’s holdings of the member’s currency resulting from that purchase are notionally excluded from the Fund’s holdings in determining the tranche in which subsequent purchases under the tranche policies are made. In short, the compensatory financing purchase does not drive subsequent noncompensatory financing purchases into higher tranches to which stricter criteria would apply. There is, therefore, a double aspect to the “floating” character of the compensatory financing policy, and it is reflected in the words “purchases and holdings” in the proviso in the definition of gold tranche purchases under Article XIX(j).

    In giving legal recognition to the compensatory financing policy the amendments have gone beyond the former policy in one respect. Before the amendments, the compensatory financing policy “floated” only for the purposes of tranche policies as explained in footnote 42. The holdings of a member’s currency resulting from its compensatory financing purchases were not excluded from the Fund’s total holdings for the purpose of applying the various provisions of the Articles under which the level of the Fund’s holdings affect a member’s rights and duties. This continues to be the legal position, but with one exception. Under the original Article V, Section 3(a) (iii), the Fund’s actual holdings determined whether a waiver was necessary under Article V, Section 4, to enable a member to make a purchase, and no waiver was necessary even for purchases equivalent to more than 25 per cent of quota provided that they did not increase the Fund’s holdings above quota. This provision has been amended in view of the possibility that there may be a gold tranche purchase even though the Fund’s holdings are above quota because those holdings include some that resulted from a compensatory financing purchase. Without amendment, the effect would have been that the gold tranche purchase would have required a waiver if it increased the Fund’s holdings by more than 25 per cent of quota within 12 months. This would have been difficult to reconcile with the new legal quality of the gold tranche as a readily available asset, because representations connected with requests to make gold tranche purchases could not be challenged. It is provided, therefore, that a waiver is never required for a gold tranche purchase whatever the level of the Fund’s holdings and whatever the amount by which they may have been increased during 12 months. By contrast, a compensatory financing purchase which increases the Fund’s holdings by more than 25 per cent of quota during 12 months will require a waiver even though the purchase does not increase the Fund’s holdings above quota. See Report, Section 33, pp. 24–25.

    Article V, Section 3(d). One effect of this provision is to give statutory recognition to the Fund’s power to challenge representations. It is one of a number of “codifying” amendments that incorporate decisions of an interpretative character in the text of the Articles.

    This is subject to the amendment of Article VI, Sections 1 and 2.

    Article V, Section 5. For the purposes of the provision a member may be found to be “using” the Fund’s resources improperly even though the Fund’s holdings of the member’s currency are at or below 75 per cent of quota if the Fund finds that the member is currently disposing improperly of exchange purchased from the Fund. It may be doubted that this is a practical possibility. Selected Decisions, p. 33.

    For a suggested corrective not involving a sanction, see the penultimate paragraph of Section 32 of the Report, p. 23.

    See footnote 5.

    Article V, Section 8(a). See Report, Section 36, p. 28, in which the Executive Directors state the belief that when the amendments take effect initially no service charge should be levied on gold tranche purchases, subject to any change in this policy that would be appropriate in the light of subsequent developments.

    Article V, Section 9.

    The formula for the calculation in Article V, Section 9, has been drafted in a way that clarifies the formula in the original Article XII, Section 6(b), and the clarified formula applies to the amended Article XII, Section 6(b) as well.

    In the Report, the Executive Directors state that they do not expect that the rate would be moved outside the band unless it were necessary in the light of developments in international money markets (Section 37, p. 28).

    The Executive Directors state their belief that the Fund should pay remuneration in gold to the extent that the Fund receives gold in payment of charges under Article V, Section 8, subject again to any change in this policy that would be appropriate in the light of subsequent developments (Report, Section 37, p. 28).

    Selected Decisions, pp. 112–16.

    Article XII, Sections 2(b) (x) and 6(c). In view of Section 6(c), the title of Section 6 has been changed from “Distribution of net income” to “Reserves and distribution of net income.”

    Report, Section 38, pp. 28–29.

    Article XII, Section 6(b). See also Section 2(b)(v) of Article XII.

    Article V, Section 3.

    Selected Decisions, p. 54.

    Report, Section 31, pp. 22–23.

    Selected Decisions, pp. 21–23.

    International Monetary Fund, Annual Report, 1963, p. 16.

    Report, Sections 28 (p. 20), 31 (pp. 22–23), and 34 (p. 25).

    Report, Section 28, p. 20. See, however, p. 48, below.

    Article XXIV, Section 4(a) and (d); Article XXVII(a)(i).

    Report, Section 34, p. 25.

    Selected Decisions, pp. 36–37.

    Article V, Section 7; Article XIX; and Schedule B.

    See, for example, Selected Decisions, pp. 22–23.

    See, for example, Article V, Sections 4 and 8(d).

    Use of the Fund’s resources in this context also was represented by that part of the Fund’s holdings of a member’s currency that exceeded 75 per cent of the member’s quota.

    This assumes that none of the qualifications in the Articles comes into play so as to reduce the obligation based on the principle of equal use.

    The two concepts could operate in respect of the same year, and this might mean that all of a member’s outstanding purchases would be the subject of a repurchase obligation at the end of that year.

    See footnote 72.

    Article V, Section 7(c) (ii).

    Article XIX(a), (b), (d), and (e).

    Article XIX(e).

    Hearings Before the Committee on Banking and Currency …on H.R. 16911 (see footnote 13), p. 159.

    There were, however, fairly substantial deductions for currency liabilities in the calculation of the monetary reserves of some nonreserve currency countries. For example, a number of members were entitled to deductions because of the holding of their currency by the United States as a result of operations under Public Law 480 of the United States (68 Stat. 454 et seq; U.S.C.A. Title 7, Chapter 41).

    Selected Decisions, p. 109. A convertible currency for this purpose is the currency of a member that has notified the Fund that it is prepared to accept the obligations of Article VIII, Sections 2, 3, and 4 (Article XIV, Section 3; Article XIX(d)).

    Cf. the reference to initiative in Article V, Section 2.

    Selected Decisions, pp. 35 and 38.

    Article XIX(a) and (e); Report, Section 35(a), p. 26.

    Schedule B, Paragraph 6; Report, Section 35(a), p. 26.

    Schedule B, Paragraph 1(d); Report, Section 35(b), p. 26.

    Article V, Section 7(b)(i); Report, Section 35(f), p. 27.

    Article V, Section 7(c)(iv); Report, Section 35(e), p. 27.

    The period of three to five years is not statutory even under the amendments. It continues to be the Fund’s understanding of the maximum period consistent with the concept of temporary use, but the Fund could change its understanding of the period without the need to amend the Articles.

    Article V, Section 7(c) (i); Report, Section 35(d), p. 26.

    See, for example, “Treasury and Federal Reserve Foreign Exchange Operations,” Federal Reserve Bulletin, Vol. 48 (September 1962), pp. 1138–53.

    Schedule B, Paragraph 3.

    Schedule B, Paragraph 5; Report, Section 35(g), p. 27.

    Report, Section 35(c) and (i), pp. 26 and 27–28.

    Article XIX(a).

    Schedule B, Paragraph 2.

    Report, Section 35(c), p. 26.

    Schedule B, Paragraph 2.

    Technical amendments have been made as the consequence of other amendments and not in order to introduce improvements in the original provisions. The words “with gold or convertible currencies” have been replaced by “each type of monetary reserve” in Article V, Section 7(b), and the words “each type of monetary reserve, that is, with gold and with each convertible currency” have been replaced by “each convertible currency and each of the other types of monetary reserve” in Schedule B, Paragraph 1. These changes were made because a member’s holdings of special drawing rights are included in the calculation of its monetary reserves (Article XXV, Section 7(a)).

    Article XII, Section 3(b).

    Article XII, Section 3(d).

    Article V, Section 7(d); Article XII, Section 2(b)(ix); Report, Section 35(h), p. 27.

    Article III, Section 3.

    Article V, Section 3(a)(iii).

    Article XII, Section 5(a).

    Article XXIV, Section 2(b).

    Article II, Section 1.

    International Monetary Fund, Annual Report, 1959, pp. 13–18 and 185–88.

    International Monetary Fund, Annual Report, 1965, pp. 31–34 and 124–32.

    Article XII, Section 2(b)(ii).

    Article XXIV, Section 4(d).

    Report, Section 29, pp. 21–22.

    Hearings Before the Committee on Banking and Currency … on H.R. 16911 (see footnote 13), p. 157.

    Report, Section 29, pp. 21–22.

    Article XXIV, Section 2(b).

    Article III, Section 4(a).

    International Monetary Fund, Annual Report, 1959, pp. 13–18 and 185–88; Annual Report, 1965, pp. 31–43 and 124–32; Selected Decisions, pp. 6–7.

    International Monetary Fund, Annual Report, 1965, pp. 33–34 and 127–28.

    Ibid., pp. 34 and 127.

    Article III, Section 4(c).

    Article XII, Section 2(b) (ii).

    Article IV, Section 1.

    Article IV, Section 5.

    Article IV, Section 5(b).

    Article IV, Section 7.

    Article XII, Section 2(b)(iii).

    Hearings Before the Committee on Banking and Currency … on H.R. 16911 (see footnote 13), p. 157.

    The reasoning that led to the provision was described as follows in the Answer to Question 35 in Questions and Answers on the International Monetary Fund issued by the U.S. Treasury on June 10, 1944, as a commentary on the Joint Statement by Experts:

    “There are two matters of an extraordinary character involving the safeguarding of the resources of the Fund and of member countries and matters of the highest policy which are reserved for decision by a larger than majority vote of the Board:

    2. A uniform change in the gold value of the member currencies can be made only by a majority including the approval of every member country having 10 percent or more of the votes. Because a uniform change in the price of gold can have far-reaching effects, it is thought essential to require the unanimous approval of the countries with the largest gold holdings and the greatest production of gold for such action.

    It will be observed that the two actions of the Fund requiring more than a majority vote would only be necessary as a result of special circumstances and can in no way be considered as a part of the ordinary operations of the Fund. It is felt that on policy questions of such far-reaching importance, a safeguard against hasty and unwarranted action is needed in the form of a favorable vote larger than a majority.”

    See Joseph Gold, Interpretation by the Fund, International Monetary Fund, Pamphlet Series No. 11 (Washington, 1968), pp. 19–20.

    Report, Section 30, p. 22.

    Article IV, Section 8(a).

    See Joseph Gold, Maintenance of the Gold Value of the Fund’s Assets, International Monetary Fund, Pamphlet Series No. 6 (Washington, 1965).

    Article IV, Section 8(d).

    Joseph Gold, Maintenance of the Gold Value of the Fund’s Assets, International Monetary Fund, Pamphlet Series No. 6 (Washington, 1965), pp. 33–40.

    Report, Section 30, p. 22.

    Hence the substitution of “made” in the amendment of Article IV, Section 8(d), for “proposed” in the original provision.

    Joseph Gold, Interpretation by the Fund, International Monetary Fund, Pamphlet Series No. 11 (Washington, 1968).

    International Development Association (Article X); International Finance Corporation (Article VIII); Inter-American Development Bank (Article XIII); African Development Bank (Article 61, paragraphs 2 and 3, and Article 62); Asian Development Bank (Articles 60–61); Central American Bank for Economic Integration (Articles 25 and 26); Central American Clearing House (Article 23).

    See also Section 23 of the By-Laws.

    Report, Section 39, pp. 29–30.

    Lester H. Phillips, “Constitutional Revision in the Specialized Agencies,” American Journal of International Law, Vol. 62 (1968), pp. 654–78. Ralph Zacklin, The Amendment of the Constitutive Instruments of the United Nations and Specialized Agencies (Leyden, 1968).

    Resolution No. 22–8 of the Board of Governors adopted at the Rio de Janeiro Annual Meeting, Summary Proceedings, p. 272.

    “World Payments Problems,” Address to the New York Financial Writers’ Association, June 12, 1968, International Monetary Fund, International Financial News Survey, Vol. XX (1968), p. 202.

    “New Arrangements to Supplement World Reserves and Their Implications for the Developing Countries,” Arthur K. Salomon Lecture, December 5, 1967, International Monetary Fund, International Financial News Survey, Vol. XIX (1967), p. 419.

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