Abstract

This paper discusses Article IV, Section 8 of the Articles of Agreement which states the requirement of maintenance of the gold value of the IMF’s assets. Each member of the IMF is bound to maintain the gold value of the IMF’s holdings of the member’s currency notwithstanding changes in the par or foreign exchange value of the currency. This obligation applies to devaluation, depreciation, revaluation, and appreciation. It prevents the IMF from making profits or sustaining losses as a result of changes in the value of its currency holdings. An additional purpose is to enable the IMF to continue to conduct its operations in a manner consistent with its purposes, notwithstanding such changes.

Second Edition

Contents

  • Prefatory Note

  • References to Articles of Agreement and Executive Directors’ Decisions

  • Purpose of the Provision

  • Terminology

  • Change of Par Value

  • Depreciation

  • Appreciation

  • Fluctuating Rates

  • Stand-By Arrangements

  • “Assets”

  • Borrowing

  • Uniform Proportionate Changes in Par Values

    • Application of Maintenance of Gold Value Provisions

    • Nonapplication of Maintenance of Gold Value Provisions

  • Opting Out of a Uniform Proportionate Devaluation

  • Special Drawing Rights

  • Summary

  • APPENDICES: EXECUTIVE DIRECTORS’ DECISIONS

  • Transactions and Computations Involving Fluctuating Currencies

  • Investment of Fund’s Assets

Prefatory Note to the Second Edition

The first edition of this pamphlet was published in 1965. Since then the Articles of Agreement of the International Monetary Fund have been amended. The second edition takes into account those modifications of the Articles that affect the subject matter of the pamphlet.

The opinions expressed are those of the author, who is the General Counsel and Director of the Legal Department of the Fund, and not necessarily those of the Fund itself.

References to Articles of Agreement and Executive directors’ Decisions

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Article IV, Section 8, of the Articles of Agreement of the International Monetary Fund provides that the gold value of the Fund’s assets shall be maintained:

Section 8. Maintenance of gold value of the Fund’s assets

(a) The gold value of the Fund’s assets shall be maintained notwithstanding changes in the par or foreign exchange value of the currency of any member.

(b) Whenever (i) the par value of a member’s currency is reduced, or (ii) the foreign exchange value of a member’s currency has, in the opinion of the Fund, depreciated to a significant extent within that member’s territories, the member shall pay to the Fund within a reasonable time an amount of its own currency equal to the reduction in the gold value of its currency held by the Fund.

(c) Whenever the par value of a member’s currency is increased, the Fund shall return to such member within a reasonable time an amount in its currency equal to the increase in the gold value of its currency held by the Fund.

(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.1