Abstract

If conditions that relate to the Fund or to the use of its resources are included in loan agreements, lenders want to know whether the conditions are satisfied. The Fund has cooperated with members when they have requested statements that provide the necessary information, and in particular the information that a member was able to make purchases under a stand-by arrangement. Members prefer this procedure to a practice, which was followed sometimes in the past, of making small purchases under a stand-by arrangement in order to demonstrate that their right to engage in transactions was not impeded. Sometimes, however, a loan agreement calls for a statement that, as of a certain date, the member has made all the purchases for which the stand-by arrangement provides. Some provisions that were intended to have this effect have used the possibly ineffective, and certainly ambiguous, language of “all purchases of funds which could be made under such stand-by arrangement.” If, because of the nonobservance of performance criteria, purchases could not be made, it might be contended that all the purchases that could be made under the terms of the stand-by arrangement had been made.