Early Repurchases
1. In applying the first sentence of Article V, Section 7(b) of the Second Amendment the Fund will be guided by the Summary of Guidelines attached to this decision.
2. This decision will be reviewed after one year from the date of its adoption.
Summary of Guidelines
The following paragraphs are intended to provide members with the assurance that if they repurchase the amount indicated by the agreed guidelines they will be meeting the expectation of Article V, Section 7(b). These guidelines would need to be reviewed from time to time in the light of experience.
a. A member’s balance of payments and reserve position would normally be deemed to have improved sufficiently for repurchases to be expected under Article V, Section 7(6), if the member’s position is judged sufficiently strong in the context of a quarterly designation plan and currency budget. However, a member that makes a purchase in the credit tranches or under a special facility would not be expected to make repurchases under Article V, Section l(b) until the quarter following the second full quarter after its purchase, provided that at that time its balance of payments and reserve position was judged sufficiently strong.
b. During the quarter following the decisions on the designation plan and currency budget, it would be expected that the member’s outstanding purchases would be reduced by a specified amount, either by repurchases or by sales of the member’s currency, or by some combination of the two. The method employed would be at the option of the member.
c. Subject to paragraphs (d) and (e) below, the specified amount for the expected quarterly repurchase would be 1.5 percent of the member’s latest gross reserves plus (minus) 5 percent of the increase (decrease) in gross reserves over the latest six-month period for which data are available. The quarterly amount would be subject to a limit of 4 percent of a member’s latest gross reserves, and the amount of a quarterly repurchase would be limited to an amount that would not reduce the member’s latest gross reserves below 250 percent of the member’s quota.
d. The specified amount would represent the minimum reduction in the Fund’s holdings of the member’s currency expected during the quarter. Repurchases under Article V, Section l(c) and (d), and Schedule B, and sales of the member’s currency, would count toward meeting that minimum. If the minimum is exceeded in one quarter, the excess amount shall be deducted from expected repurchases in the subsequent quarter or quarters.
e. If, during the six months prior to the date when a member is added to the list of those members whose positions are considered sufficiently strong, a member makes repurchases in amounts in excess of amounts it was obliged or expected to make during those six months, these excess amounts shall be deducted from expected repurchases in the subsequent quarter or quarters.
f. If a member opted to have its currency sold, the specified amount (less any other expected reductions in the Fund’s holdings) would also serve as the amount of the currency the Fund might sell in the quarter under Article V, Section 3(d). If the Fund did not sell the currency in the specified amount before the end of the second month of the quarter, the member would be expected to repurchase any balance remaining before the end of the quarter.
Decision No. 5704-(78/39)
March 22, 1978, effective April 1, 1978
Guidelines for Early Repurchase
Preamble
This decision sets forth guidelines for members regarding early repurchase under the first sentence of Article V, Section 7(b) when the balance of payments and reserve position of members improves. The guidelines apply to the Fund’s holdings of currency that result from the purchases under Article V, Section 3 that are referred to in the following sentence and are subject to repurchase under the provisions of the Articles and policies of the Fund. This decision, and any future changes in it, shall apply in respect of holdings of currency resulting from purchases made either (i) under stand-by or extended arrangements approved by the Fund after October 1, 1977, or (ii) after the date of this decision, but not under stand-by or extended arrangements approved by the Fund before October 1, 1977. Decision No. 5704-(78/39) shall continue to apply in respect of holdings of currency resulting from purchases made after April 1, 1978 and before the date of this decision that were not made under a stand-by or extended arrangement.
The Fund’s authority to select the currencies to be used in purchases in accordance with the Articles and its policies is not modified by these guidelines.
1. A member’s balance of payments and reserve position will be deemed normally to have improved sufficiently for early repurchases to be expected in accordance with these guidelines if the member’s position is judged sufficiently strong for the purposes of a quarterly designation plan and operational budget as determined by the Fund from time to time in the light of the relevant factors. A member that makes a purchase in the credit tranches or under a special policy of the Fund will not be expected, however, to make early repurchases until the quarter following the second full quarter after its purchase.
2. During the quarter following the decisions adopting the designation plan and operational budget, it will be expected that the Fund’s holdings of the member’s currency will be reduced by a specified amount, either by repurchases or by sales of the member’s currency, or by some combination of the two. The method employed will be at the option of the member.
3. Subject to paragraphs 4 and 5 below, the specified amount for the expected quarterly repurchase will be 1.5 percent of the member’s gross reserves plus (minus) 5 percent of the increase (decrease) in gross reserves over the latest six-month period for which data are available (“latest gross reserves”). The quarterly amount will be subject to a limit of 4 percent of the member’s latest gross reserves. A quarterly repurchase will be limited to an amount that will not (i) reduce the member’s latest gross reserves below 250 percent of the member’s quota, and (ii) exceed, together with the member’s early repurchases and sales of its currency during the preceding three quarters, 10 percent of these reserves.
4. The specified amount in accordance with paragraph 3 above will represent the minimum reduction in the Fund’s holdings of the member’s currency expected during the quarter. Repurchases by the member and sales of the member’s currency during the quarter will be included in calculating the reductions for this purpose. If the member’s repurchases made during a quarter in advance of repurchase maturities, or the sale of its currency during that quarter, exceed the minimum reduction expected during that quarter, the excess will give rise to a credit that will meet pro tanto the expectations of early repurchase for the next five quarters. At the end of a quarter the credit will be reduced by the larger of (i) the repurchase expectation for the quarter that is deemed to be satisfied by the credit, and (ii) the repurchase obligations that would have matured during the quarter but have been discharged by the advance repurchase or by the sale.
5. If, during the two quarters prior to the date when a member is added to the list of members whose positions are considered sufficiently strong for the purposes of the quarterly designation plan and operational budget, the member’s repurchases in advance of maturity, or the sale of its currency, exceed the minimum reduction expected during those two quarters, a credit will be given in accordance with paragraph 4 above. Any credit still available when a member’s balance of payments and reserve position is no longer considered sufficiently strong for the purposes of a quarterly designation plan and operational budget will continue to apply in accordance with paragraph 4 above.
6. If a member has opted to have its currency sold, it will be included in the operational budget for the amount calculated in accordance with paragraphs 3, 4, and 5 above, less the amount of its repurchase obligations maturing during the quarter. If the Fund has not sold the currency in the specified amount before the end of the second month of the quarter, the member will be expected to repurchase any balance remaining before the end of the quarter.
7. In each operational budget the Managing Director will report on the observance by members of the guidelines for early repurchase.
8. This decision will be reviewed from time to time in the light of experience.
Decision No. 6172-(79/101)
June 28, 1979
Repurchase
1. (a) Repurchases of the outstanding amount of a member’s currency that results from a purchase under the credit tranches and is subject to charges under Article V, Section 8(b), or under the decision on Compensatory Financing of Export Fluctuations (Decision No. 4912-(75/207), as amended) or the decision on The Problem of Stabilization of Prices of Primary Products (Decision No. 2772-(69/47), as amended), or the decision on Compensatory Financing of Fluctuations in the Cost of Cereal Imports (Decision No. 6860-(81/81), as amended), or the decision on the Compensatory and Contingency Financing Facility (Decision No. 8955-(88/126), as amended), shall be completed, pursuant to Article V, Section 7(c), five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule.
(b) A member that has outstanding purchases under the decision on The Problem of Stabilization of Prices of Primary Products (Decision No. 2772-(69/47), as amended) will be expected to make a repurchase at an earlier date than would be required under (a) above when, and to the extent that, the international buffer stock for the financing of which the purchase was made makes distributions in currency to the member.
2. Decisions with respect to the timing of repurchases shall be understood to permit a member to combine all repurchases to be made within a calendar month and to complete them not later than the last business day of the month, provided however that the maximum period for use of the Fund’s resources according to the policy under which a repurchase is to be made shall not be exceeded.
3. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with special drawing rights in discharge of a commitment the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2.
4. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with currencies of other members in discharge of a commitment, the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2, provided that if the currencies paid are not acceptable in repurchase as of the date of the Second Amendment, the member shall substitute an equivalent amount of the currencies of other members specified by the Fund in accordance with Article V, Section 7(i).
5. If a member that has an outstanding obligation to pay gold in repurchase has not made an equivalent repurchase with special drawing rights or with the currencies of other members in discharge of a commitment, within two months after the date of the Second Amendment of the Articles of Agreement, the member shall make a repurchase equivalent to the outstanding obligation in gold with special drawing rights or, at its option, with the currencies of other members specified by the Fund in accordance with Article V, Section 7(i). The repurchase shall be regarded as a discharge of the member’s obligation in accordance with Schedule B, paragraph 2.
6. The dates for the payment of special drawing rights or currencies of other members in discharge of any obligation to pay gold to the Fund in repurchase, and for any substitution under paragraph 5 above, after the date of the Second Amendment of the Articles of Agreement shall be determined in accordance with Schedule B, paragraph 1.
7. Repurchase under Schedule B, paragraph 4 shall be completed four years after the date of the Second Amendment of the Articles of Agreement. If the Fund’s holdings of a member’s currency that are subject to paragraph 4(ii) are in excess of 10 percent of the member’s quota on the date of the Second Amendment, the member shall be requested to agree to make the repurchase in four equal installments beginning not later than one year after that date.
Decision No. 5703-(78/39)
March 22, 1978, effective April 1, 1978,
as amended by
Decision No. 6862-(81/81)
May 13, 1981, and
Decision No. 8955-(88/126)
August 23, 1988
____________
A member shall discharge any repurchase obligation that accrued in gold before the date of the Second Amendment with special drawing rights or, at its option, with the currencies of other members specified by the Fund in accordance with Article V, Section 7(i).
Decision No. 5809-(78/88)
June 12, 1978
Attribution of Reductions in Fund’s Holdings of Currencies
1. (a) Subject to paragraphs (b) and (c) below a member shall be free to attribute a reduction in the Fund’s holdings of its currency (i) to any of its obligations to repurchase, and (ii) to enlarge its reserve tranche.
(b) If the reduction results from the sale of a member’s currency or from operational payments by the Fund, an attribution may not be made to an obligation to repurchase financed from borrowed resources unless the Fund is obligated or entitled immediately to repay the lender on the occasion of such attribution. A member would be able to combine an attribution under this decision to an obligation to repurchase financed with ordinary resources with a repurchase of an outstanding obligation financed with borrowed resources, provided this repurchase and the attribution would result in a joint reduction of repurchase obligations as required under Decision No. 5508-(77/127) and Decision No. 6783-(81/40).
(c) An attribution to create a reserve tranche may only be made if the reduction results from the sale of the member’s currency or from operational payments by the Fund in that currency and if the member’s obligations to repurchase do not include an obligation relating to a purchase financed through borrowing under the GAB.
2. A reduction attributed to a reserve tranche position will not discharge an expectation of repurchase under the Guidelines for Early Repurchase.
3. If the member when asked does not make an attribution in accordance with 1 above, it will be deemed to be discharging the first maturing repurchase obligation.
4. The Fund will review this decision before April 30, 1984.
Decision No. 6831-(81/65)
April 22, 1981, effective May 1, 1981,
as amended by
Decision No. 7059-(82/23)
February 22, 1982
____________
The Executive Board has reviewed Decision Nos. 6830-(81/65), adopted April 22, 1981, effective from May 1, 1981 and 6831-(81/65), adopted April 22, 1981, effective from May 1, 1981, as amended by Decision No. 7059-(82/23), adopted February 22, 1982. It has concluded that the decisions shall remain in effect without any change.
Decision No. 7704-(84/78)
May 14, 1984