Pamphlet Series
No. 41
The General Arrangements to Borrow
Michael Ainley
INTERNATIONAL MONETARY FUND
Washington, D.C.
1984
International Standard Serial Number: ISSN 0538-8759
Reprinted March 1986
Reprinted March 1995
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CONTENTS
Prefatory Note
I. Introduction
II. Origins
1. Short-Term Expedients
2. The Fund’s Response
3. Radical Reform
4. The General Arrangements to Borrow (GAB)
III. Main Provisions, 1962-82
1. Purpose
2. Overall Size
3. Individual Credit Lines
4. Activation
5. Calls
6. Repayment
7. Transferability
8. Interest Rate
9. Renewal and Modifications
10. Association of Switzerland
11. Increase in Japan’s Credit Line
IV. The GAB in Operation, 1962-82
1. Activations
a. The 1960s
b. The 1970s
2. Principles and Practices
3. Critics
4. Reforms Postponed
V. Reform, 1982-83
1. The Reason Why
2. The Response
3. The Changes
a. Overall Size
b. Individual Credit Lines
c. Participation of Switzerland
d. Associated Borrowing Arrangements
e. Associated Arrangement with Saudi Arabia
f. Use of the GAB for the Benefit of Nonparticipants
g. Other Changes
Interest Rate
Denomination
Repayment
Transferability
Tidying Up
h. Period of Renewal and Review
VI. A Look Ahead
VII. Conclusion
Appendices
I. General Arrangements to Borrow: Original Decision
II. The Baumgartner Letter
III. General Arrangements to Borrow: Revised Text
IV. Borrowing Arrangement with Saudi Arabia in Association with the General Arrangements to Borrow
V. Distribution of Calls on the General Arrangements to Borrow
Selected Bibliography
Tables
1. GAB: Individual Credit Arrangements, 1962
2. Fund Financing Involving the GAB, 1964-70
3. Fund Financing Involving the GAB, 1977-78
4. Enlarged GAB: Individual Credit Arrangements
5. Borrowing by the Fund Under the GAB, 1964-70
6. Borrowing by the Fund Under the GAB, 1977-78
PREFATORY NOTE
This pamphlet examines the role of the Fund’s first and longest-lasting borrowing arrangements, the General Arrangements to Borrow (GAB), from their inception in 1961-62 to their fundamental reform and enlargement in 1983. They have played an important, but controversial, part in the Fund’s history, and will almost certainly do so in its future.
The author has been involved in Fund issues since 1974, initially at the Bank of England and, since 1980, on secondment and leave of absence at the Fund as Assistant, first to the Executive Director for the United Kingdom and then to the Executive Director for Saudi Arabia. He was present at many of the discussions in 1982-83 leading to the reform and enlargement of the GAB and the associated borrowing arrangement with Saudi Arabia.
The author is indebted to several colleagues in the Fund and member governments for advice, comments, and assistance. He is particularly grateful to Sir Joseph Gold, Yusuf A. Nimatallah, J.J. Polak, and David Williams for sharing their first-hand knowledge and experience of the issues and events discussed in the pamphlet. He would also like to thank Margaret Garritsen de Vries for her encouragement and permission to draw on her forthcoming history of the Fund (1972-78); Neil Ainley and John Anson for their informed guidance; and Dominique Berthet for his technical help. He is also grateful to Paul Gleason (editor), Cecilia Poppe and Bruce Barrington (secretaries), and the Composition Unit of the Graphics Section.
The pamphlet was completed in September 1984 and does not take account of developments since then. The opinions expressed, and any errors or omissions, are those of the author and should not be construed as those of the International Monetary Fund.
September 1984