Chapter

APPENDIX VII. Financial statements April 30, 2006

Author(s):
International Monetary Fund
Published Date:
September 2006
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Independent Auditors’ Report

To the Board of Governors

of the International Monetary Fund

Washington, DC

We have audited the accompanying consolidated balance sheets of the General Department of the International Monetary Fund and subsidiary (the “Department”) as of April 30, 2006, and 2005, and the related consolidated statements of income, changes in reserves and resources, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Department’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the General Department of the International Monetary Fund at April 30, 2006, and 2005, and the results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedules listed on pages 183 to 188 are presented for the purpose of additional analysis and are not a required part of the basic consolidated financial statements. These schedules are the responsibility of the Department’s management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic consolidated financial statements taken as a whole.

June 12,2006

Member of Deloitte Touche Tohmatsu

General Department

Consolidated balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
2006200520062005
AssetsLiabilities (including quotas)
Usable currencies151,132,488122,388,465Remuneration payable117,354247,798
Credit outstanding (Note 4)19,227,21949,853,664Other liabilties93,901151,530
Other currencies40,519,67441,244,248
Total currencies (Note 6)210,879,381213,486,377Accrued MDRI-I Trust grants (Note 5)380,198
SDR holdings3,640,792574,310Special Contingent Account (Note 13)1,683,0191,589,019
Gold holdings (Note 7)5,851,7715,851,771Quotas, represented by (Note 6):
Receivables (Note 8)295,054568,416Reserve tranche positions21,826,02249,848,798
Other assets (Notes 9 and 16)661,169709,940Subscription payments191,652,378163,629,602
Total quotas213,478,400213,478,400
Investments held inTotal liabilities (including quotas)215,752,872215,466,747
Special Disbursement Account (Note 10)2,518,613
MDRI-I Trust (Note 10)384,296Reserves of the General Resources Account5,959,5915,724,067
Structural Adjustment Facility loans (Note 4)8,84045,566Resources of the Special Disbursement Account8,8402,564,179
Total assets221,721,303223,754,993Total liabilities, reserves, and resources221,721,303223,754,993
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

/s/ Michael G. Kuhn Director, Finance Department

/s/ Rodrigo de Rato Managing Director

General Department Consolidated income statements for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062006
Operational income
Interest and charges (Note 8)1,671,5022,270,044
Interest on SDR holdings58,33016,322
Investment income of
Special Disbursement Account (Note 10)44 77052,157
MDRI-I Trust (Note 10)3,940
Other charges and income (Note 8)22,55834,035
1,801,1002,372,558
Operational expenses
Remuneration (Note 14)828 2981,033,847
Administrative expenses (Note 15)692,666673,204
1,520,9641,707,051
Net operational income280,136665,507
MDRI grant assistance (Note 5)(1,499,842)
Contributions from the Special Disbursement Account to Administered Accounts (Note 10):
PRGF-ESF Trust(507,109)(40,592)
PRGF-HIPC Trust(593 000)(164 098)
Total net (loss)/income(2,319,815)460,817
Net income (loss) of the General Department comprises
Net income of the General Resources Account235 524613,350
Loss of the Special Disbursement Account(2,555,339)(152,533)
(2,319,815)460,817
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
General Department Consolidated statements of changes in reserves and resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
General Resources Account
Special resourcesGeneral reserveTotal reserveSpecial Disbursement Account reserve
Balance at April 30, 20042,415,4352,695,2825,110,7172,716,712
Net income (loss)31,394581,956613,350(152,533)
Balance at April 30, 20052,446,8293,277,2385,724,0672,564,179
Net income (loss)(7,510)243,034235,524(2,555,339)
Balance at April 30, 20062,439,3193,520,2725,959,5918,840
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
General Department Consolidated statements of cash flows for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Usable currencies and SDRs from operating activities
Net (loss)/income(2,319,815)460,817
Adjustments to reconcile net (loss)/income to usable resources generated by operations:
Depreciation18 55215,236
Changes in receivables and other assets323 66134,176
Changes in remuneration payable and other liabilities(188,073)86,485
Changes in accrued MDRI-I Trust grants380 198
Increase in the Special Contingent Account94 00094,000
Usable currencies and SDRs from credit to members:
Purchases in currencies and SDRs, including reserve tranche purchases(2,156,025)(1,613,933)
Repurchases in currencies and SDRs32 782 47013,907,177
Repayments of Structural Adjustment Facility loans36,72640,342
Net usable currencies and SDRs provided by operating activities28,971,69413,024,300
Usable currencies and SDRs from investment activities
Acquisition of fixed assets(20,080)(59,111)
Net disposition of investments by the Special Disbursement Account2,518,613112,191
Net acquisition of investments by the MDRI-I Trust(384,296)
Net usable currencies and SDRs provided by investment activities2,114,23753,080
Usable currencies and SDRs from financing activities
Subscription payments in SDRs and usable currencies171,100
Changes in composition of usable currencies724,5745,946,355
Net usable currencies and SDRs provided by financing activities724, B746,117,455
Net increase in usable currencies and SDRs31 810 50519,194,835
Usable currencies and SDRs, beginning of year122,962,775103,767,940
Usable currencies and SDRs, end of the year154,773,280122,962,775
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

General Department Notes to the consolidated financial statements as at April 30, 2006, and 2005

1. Purpose and organization

The International Monetary Fund (IMF) is an international organization of 184 member countries. It was established to promote international monetary cooperation and exchange stability and to maintain orderly exchange arrangements among members; to facilitate the expansion and balanced growth of international trade, and contribute thereby to the promotion and maintenance of high levels of employment; and to provide temporary financial assistance to member countries under adequate safeguards to assist in solving their balance of payments problems in a manner consistent with the provisions of the IMF’s Articles of Agreement. The IMF conducts its operations and transactions through the General Department and the Special Drawing Rights Department (the SDR Department). The General Department consists of the General Resources Account (GRA), the Special Disbursement Account (SDA), including the Multilateral Debt Relief Initiative-I Trust (MDRI-I Trust), over which the SDA has substantial control, and the Investment Account. The IMF also administers trusts and accounts established to perform financial and technical services and financial operations consistent with the purposes of the IMF. The resources of these trusts and accounts are contributed by members or the IMF through the SDA. With the exception of the MDRI-I Trust, whose financial statements are consolidated with those of the General Department, the financial statements of the SDR Department and these trusts and accounts are presented separately.

General Resources Account

The GRA holds the general resources of the IMF. Its resources reflect the payment of quota subscriptions, use and repayment of IMF credit, collection of charges on the use of credit, payment of remuneration on creditor positions, borrowings, and payment of interest and repayment of borrowings.

Special Disbursement Account

The assets and resources of the SDA are held separately from the GRA and the Investment Account of the General Department. The SDA is the vehicle for receiving and investing profits from the sale of the IMF’s gold and for making transfers to other accounts for special purposes authorized in the Articles, in particular for financial assistance on special terms to low-income members of the IMF. Resources of the SDA included proceeds from the sales of the IMF’s gold in the past, including income from the investment of gold profits. The SDA holds claims receivable from outstanding loans extended under the Structural Adjustment Facility (SAF), and repayments of Trust Fund loans to the Trust Fund (in liquidation) are transferred to the SDA (see Note 10 below). Repayments of principal and interest from SAF loans and resources derived from the termination of the Trust Fund are transferred from the SDA to the Reserve Account of the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (PRGF-ESF Trust), which is administered separately by the IMF as Trustee.

Effective January 5, 2006, the IMF adopted the legal framework applicable to the Multilateral Debt Relief Initiative (MDRI) to provide full debt relief to low-income member countries. For this purpose, the MDRI-I and MDRI-II Trusts were established to provide grant assistance under the MDRI. Subsequent to the adoption of the MDRI, the resources held in the SDA were transferred to the MDRI-I Trust, the PRGF-HIPC Trust, and the PRGF-ESF Trust Subsidy Account (Note 10).

Investment Account

On April 28, 2006, the Executive Board of the IMF approved the establishment of the Investment Account within the General Department and authorized the transfer of currencies from the GRA in an amount equivalent to the total amount of the General and Special Reserves of the GRA on April 30, 2006. The transfers to the Investment Account were made subsequent to the financial year ended April 30, 2006.

2. Summary of significant accounting policies

Basis of accounting

The consolidated financial statements of the General Department are prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements include the accounts of the GRA, the SDA, the Investment Account (inactive in financial year ended April 30, 2006), and the MDRI-I Trust, an entity that is determined to be substantially controlled by the SDA owing primarily to the existence of the Trustee’s power to terminate the Trust and the SDA’s claim to the Trust’s entire residual assets upon termination as long as there are no contributor resources in the MDRI-I Trust. All transactions and balances between these entities have been eliminated during the consolidation. Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The consolidated financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005, and the new composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062006
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (one SDR was equal to 1.51678 U.S. dollars as of April 30, 2005).

Currencies

Currencies consist of members’ currencies and securities held by the IMF. Each member has the option of substituting non-negotiable and non-interest-bearing securities for the IMF’s holdings of its currency that exceed ¼ of 1 percent of the member’s quota. These securities are encashable by the IMF on demand.

Each member is required to pay to the IMF its initial quota and subsequent quota increases partly in its own currency, with the remainder to be paid in usable currencies prescribed by the IMF or SDRs. The only exception was the quota increase of 1978, which was paid entirely in members’ own currencies.

Usable currencies consist of currencies of member countries considered by the IMF to have strong balance of payments and reserve positions. These currencies are included in the IMF’s Financial Transactions Plan to finance purchases and other transfers of the IMF. Participation in the Financial Transactions Plan is reviewed on a quarterly basis. Usable currencies and SDR holdings readily available to finance IMF operations and transactions are considered cash equivalents. The changes in non-usable currencies result from the IMF’s transactions (purchases and repurchases) where a member’s currency is exchanged for another member’s currency, or from the inclusion/ exclusion of a member’s currency in the IMF’s Financial Transactions Plan.

Currencies, including securities, are valued in terms of the SDR on the basis of the currency/SDR exchange rate determined for each currency. Securities can be substituted by members for currencies at their option. These securities are not marketable but can be converted into currencies on demand. Each member is obligated to maintain, in terms of the SDR, the value of the balances of its currency, including its securities, held by the IMF in the GRA. This requirement is referred to as the maintenance-of-value obligation. Whenever the IMF revalues its holdings of a member’s currency, a receivable or a payable is established for the amount required to maintain the SDR value of the IMF’s holdings of that currency. The currency balances in the balance sheet include these receivables and payables. All currencies are revalued periodically in terms of the SDR, including at each financial year end.

Credit outstanding

The IMF provides balance of payments assistance in accordance with established policies by selling to members, in exchange for their own currencies, SDRs or currencies of other members. When members make purchases, they incur obligations to repurchase the IMF’s holdings of their currencies arising from the purchases within specified periods by payments in SDRs or other currencies, as determined by the IMF. IMF credit is subject to specific repayment schedules over periods that vary depending on the type of facility used. Members are entitled to repurchase, at any time, the IMF’s holdings of their currencies on which charges are levied and are expected to make repurchases as and when their balance of payments and reserve position improve.

The repurchase policies of the IMF are intended to ensure the revolving character of its resources. Purchases of currencies from the GRA are subject to repurchase obligations, which can differ depending on the policy or facility under which purchases are made. In keeping with a long-standing principle of the IMF that its resources should be repaid as soon as the balance of payments and reserve position improve, members in a position to do so are expected to make repurchases under predetermined time-based expectation schedules. However, if a member’s external position is not sufficiently strong, it may request that repurchases on the expectation schedule be extended to the original obligation schedule. A member is considered overdue only after failure to make a payment on the repurchase obligation schedule.

Overdue obligations and the burden-sharing mechanism

It is the policy of the IMF to exclude from current income charges due from members that are six months or more overdue in meeting any financial obligation to the IMF. The IMF fully recovers this lost income from the burden-sharing mechanism, through adjustments, in the current period, to the rates of charge and remuneration. Members that have borne the financial consequences of overdue charges receive refunds to the extent that overdue charges that had given rise to burden-sharing adjustments are subsequently settled.

An impairment loss would be recognized if there is objective evidence of impairment as a result of a past event that occurred after initial recognition, and is determined as the difference between the outstanding credit’s carrying value and the present value of the estimated future cash flows. No impairment losses have been recognized.

First Special Contingent Account

In view of the risk resulting from overdue obligations, the IMF accumulates balances in the first Special Contingent Account (SCA-1) by collecting resources under the burden-sharing mechanism. Losses arising from overdue principal, if realized, would be charged against the SCA-1. The IMF has not realized any losses on overdue financial obligations. However, the IMF considers it prudent to maintain the SCA-1 as an added protection until all arrears are fully settled. Balances in the SCA-1 are refundable to the members that shared the cost of its financing in proportion to their contributions when there are no outstanding overdue repurchases and charges, or at such earlier time as the IMF may decide.

SDR holdings

Although SDRs are not allocated to the IMF, the IMF may acquire, hold, and dispose of SDRs through the GRA. The IMF receives SDRs from members in the settlement of their financial obligations to the IMF and uses SDRs in transactions and operations with members. The IMF earns interest on its SDR holdings at the same rate as all other holders of SDRs.

Gold holdings

The Articles of Agreement limit the use of gold in the IMF’s operations and transactions. Any use provided for in the Articles requires a decision adopted by an 85 percent majority of the total voting power. Under the Articles, the IMF may sell gold outright on the basis of prevailing market prices but cannot engage in any other gold transactions, such as loans, leases, swaps, or the use of gold as collateral. In addition, the IMF does not have the authority to buy gold, but it may accept payments from a member in gold instead of SDRs or currencies in any operation or transaction under the IMF’s Articles at prevailing market prices.

In accordance with the provisions of the Articles, whenever the IMF sells gold held on the date of the Second Amendment of the IMF’s Articles of Agreement (April 1, 1978), the portion of the proceeds equal to the historical cost must be placed in the GRA. Any portion of the proceeds in excess of the historical cost will be held in the SDA or transferred to the Investment Account. The IMF may also sell gold held on the date of the Second Amendment to those members that were members on August 31, 1975, in proportion to their quotas on that date, in exchange for their own currencies at the historical cost.

The IMF values its gold holdings at historical cost using the specific identification method. The carrying value of the Fund’s gold holdings is derived from quota subscriptions prior to the Second Amendment and the settlement of financial obligations by members in 1992 and 1999 (see Note 7).

Other assets

Other assets primarily include fixed assets, net pension plan assets, and net assets for other post-retirement benefits.

Fixed assets with a cost in excess of a threshold amount are capitalized at cost and depreciated over the estimated useful lives of the assets, using the straight-line method. Buildings, equipment, and furniture are depreciated over 30, 3, and 7 years, respectively. Software is amortized over 3 to 5 years.

The IMF operates two defined-benefit pension plans and provides post-retirement benefits to staff. The pension plans are funded by payments from staff and the IMF, taking into account the recommendations of independent actuaries. Assets of the pension plans are held in separate trustee-managed funds. The IMF also established a Retired Staff Benefits Investment Account (RSBIA) to hold and invest funds set aside to finance the cost of post-retirement employee benefits. The assets of the RSBIA are administered by the IMF. Pension plans and other post-retirement assets are measured at fair value as of the balance sheet date. Pension costs and expected costs of the post-retirement medical and life insurance benefits are determined using the Projected Unit Credit Method, which measures the present value of the estimated future cash outflows, using yields on high-quality corporate bonds that have maturities approximating the terms of the pension liabilities and accrued over the period of employment. Valuations of these obligations are carried out annually by independent actuaries.

Special Disbursement Account

Investments

Investments held in the SDA and the MDRI-I Trust are made in short-term deposits denominated in SDRs with maturities of less than one year and are classified as fair-value-through-profit-and-loss securities. Investments are recorded on the settlement date at cost and the carrying value of the investments approximate their fair value. Investment income comprises interest earned on investments.

The investments in the MDRI-I Trust are set aside for grant assistance to qualifying members under the MDRI.

Contributions to Administered Accounts

In connection with the implementation of the MDRI, the IMF transferred the resources of the SDA to the MDRI-I Trust, the PRGF-ESF Trust Subsidy

Account, and the PRGF-HIPC Trust. Since the transfers were intended to benefit these trusts and there is no expectation of repayment, the IMF adopted a change in the method of accounting for the transfers and is now treating them as contributions. The change in accounting policy was adopted with retrospective effect as of May 1, 2004. The impact of the change in accounting policy on the income statements was to reduce the income of the SDA by SDR 1,100 million for the year ended April 30, 2006 (SDR 205 million for the year ended April 30, 2005).

SAF Loans

SAF loans provided financial assistance to low-income members at an interest rate of ½ of 1 percent per annum for a period of 10 years. Repayments of all SAF loans are transferred to the PRGF-ESF Trust Reserve Account when received. Allowances for loan losses would be established if and when there is objective evidence that an impairment loss on loans has been incurred.

Reserve tranche position

A member has a reserve tranche in the IMF when the IMF’s holdings of its currency, excluding holdings that reflect the member’s use of IMF credit, are less than the member’s quota. Reserve tranches result from quota payments, part of which are to be made in reserve assets, and the use of the member’s currency in the IMF’s transactions or operations. A member’s reserve tranche is considered a part of its external reserves and a liquid claim against the IMF. The member may draw on the reserve tranche at any time when it represents that it has a balance of payments need. Reserve tranche purchases are not subject to repurchase obligations or charges.

Quotas

Each member is assigned a quota that forms the basis of its financial and organizational relationship with the IMF. A member’s quota is related to, but not strictly determined by, economic factors such as national income, the value of external trade and payments, and the level of official reserves. Quotas determine members’ subscriptions to the IMF, their relative voting power, access to financing, and their share in SDR allocations. Should a member withdraw from the Fund, quota subscriptions are repayable to the extent they are not needed to settle other net obligations of the member to the IMF.

Reserves of the General Resources Account

The IMF’s reserves, consisting of the General Reserve and the Special Reserve, provide it with protection against financial risk of a general nature. The IMF determines annually what part of its net income will be retained and placed to the General Reserve or the Special Reserve, and what part, if any, will be distributed. The General Reserve may be used to meet capital losses or operational deficits or for distribution. The Articles of Agreement permit the IMF to use the Special Reserve for any purpose for which it may use the General Reserve, except distribution. After meeting the cost of administering the PRGF-ESF Trust, net operational income generated from surcharges on purchases under the SRF, the credit tranches, and the EFF has been placed to the General Reserve. All other income (losses) has been placed to (have been charged against) the Special Reserve.

SDR interest rate

The SDR interest rate is determined weekly by reference to a combined market interest rate, which is a weighted average of yields on short-term instruments in the capital markets of the euro area, Japan, the United Kingdom, and the United States.

Charges

The IMF levies periodic charges on members’ use of GRA credit. The basic rate of charge is set at the beginning of each financial year as the SDR interest rate plus a margin expressed in basis points determined by the Executive Board (a proportion of the SDR interest rate in financial year ended April 30, 2005). Under the burden-sharing mechanism (see Note 13), the basic rate of charge is increased (i) to offset the effect on the IMF’s income of the nonpayment of charges and (ii) to finance the additions to the SCA-1.

A surcharge progressing from 300 to 500 basis points above the rate of charge applies to the use of credit under the Supplemental Reserve Facility (SRF). In addition, credit outstanding exceeding 200 percent of quota, resulting from purchases in the credit tranches and under the Extended Fund Facility (EFF) (other than those under the SRF) after November 28, 2000, is subject to a surcharge of 100 basis points, and credit in excess of 300 percent of quota, to a surcharge of 200 basis points. Special charges are levied on members’ currency holdings that are not repurchased when due and on overdue charges. Special charges do not apply to members that are six months or more overdue to the IMF. A service charge is levied by the IMF on all purchases, except reserve tranche purchases. A refundable commitment fee is charged on Stand-By and Extended Arrangements. At the expiration or cancellation of an arrangement, the unrefunded portion of the commitment fee is recognized as current income.

Remuneration

The IMF pays interest, referred to as remuneration, on a member’s reserve tranche position. A portion of the reserve tranche is unremunerated and is equal to 25 percent of the member’s quota on April 1, 1978 (that part of the quota that was paid in gold prior to the Second Amendment of the Fund’s Articles). For a member that joined the Fund after that date, the unremunerated reserve tranche is the same percentage of its initial quota as the average unremunerated reserve tranche was as a percentage of the quotas of all other members when the new member joined the Fund. The unremunerated reserve tranche remains fixed for each member in nominal terms, but, because of subsequent quota increases, it is now significantly lower when expressed as a percentage of quota. The average is equal to 3.8 percent of quota at April 30, 2006, and 2005, but the actual percentage is different for each member.

The rate of remuneration, which is equivalent to the effective interest rate, is equal to the SDR interest rate, adjusted downward to finance a share of the nonpayment of charges and additions to the SCA-1 under the burden-sharing mechanism (see Note 13).

Adoption of New International Financial Reporting Standards

In December 2004, the International Accounting Standards Board issued an amendment to IAS 19, “Employee Benefits, Actuarial Gains and Losses, Group Plans, and Disclosures.” The amended IAS 19 provides an additional option for recognizing actuarial gains and losses and requires additional disclosures on the plan assets held by the employee benefit plans as well as further disclosure on the net periodic cost and reconciliation of the funded status. The revised standard will become effective for financial year 2007.

The implementation of this amended standard will result in additional disclosures in the notes to the General Department’s financial statements.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

3. Financial risk management

In providing financial assistance to member countries and conducting its operations, the IMF is exposed to various types of risks, including credit, interest rate, exchange rate, liquidity, and operational risks. Because of its unique role in the international monetary system, the principal risk facing the IMF is credit risk.

Credit risk

Credit risk refers to potential losses on the credit outstanding owing to the inability, or unwillingness, of member countries to make repurchases. While the IMF is accorded preferred creditor status, i.e., the claims of other creditors are subordinate to those of the IMF, credit risk is inherent since the IMF generally provides financing when other sources are not available to a member and has limited ability to diversify its loan portfolio. As a result, credit concentration is high (see Note 4).

The IMF’s credit-risk-mitigating measures comprise policies on access limits; program design and monitoring, including conditionality attached to its financing; early repurchase policies; and preventative, precautionary, and remedial measures to cope with the financial consequences of protracted arrears.

The IMF has established access limits, including limits on overall access to resources in the GRA, as well as limits on access to the credit tranches under the Extended Fund Facility. The overall limit is currently set at an annual limit of 100 percent of a member’s quota, with a cumulative limit of 300 percent of a member’s quota. Access in excess of these limits can be granted in exceptional circumstances (exceptional access cases) subject to certain procedural requirements and substantive criteria that have been adopted by the Executive Board.

The IMF generally provides financial assistance to members in the context of a program that is designed to help the member overcome its balance of payments difficulties during the program period. IMF assistance is normally disbursed in tranches and subject to conditionality in the form of performance criteria and periodic reviews. To ensure the integrity of data provided to the Fund in the context of access to Fund resources and compliance with performance criteria, the IMF may apply remedies for misreporting by member countries by expecting early repurchases for non-complying purchases.

In accordance with the Articles of Agreement, member countries using IMF resources are expected to make early repurchases as their balance of payments and reserve positions improve. Moreover, members are expected to make repurchases resulting from purchases in the credit tranches or under the Compensatory Financing Facility made after November 20, 2000, under predetermined expectation schedules ahead of the obligation date to preserve the revolving character of the IMF’s resources and reduce the duration of IMF credit exposure. The IMF maintains precautionary balances consisting of its reserves and the SCA-1 to cover possible overdue principal and losses in income, and to preserve the IMF’s reputation as a prudent financial organization. A target level of precautionary balances is determined by taking into consideration the amount of credit in protracted arrears and a margin for risk associated with credit in good standing. The Executive Board decided that, in the current circumstances, the IMF should aim at precautionary balances in an amount of SDR 10 billion. In addition, the burden-sharing arrangement for overdue charges is another risk-mitigating mechanism unique to the IMF whereby the financial risk from such charges is passed on to creditor and debtor members and allows for the strengthening of the IMF’s overall financial position.

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. The IMF’s cost structure and its income position are interest-rate driven. Fluctuations in interest rates could widen or narrow the spread between the rate of charge on credit outstanding and the rate of remuneration paid to member countries with remunerated reserve tranche positions. To minimize the effect of interest rate fluctuations on income, the IMF links the rate of charge directly to the SDR interest rate (which is equal to the rate of remuneration).

Exchange rate risk

Exchange rate risk is the exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on an entity’s financial position and cash flows. The IMF uses the SDR as the unit of account and conducts its transactions in terms of the SDR. It has no exchange rate risk exposure on its holdings of members’ currencies since, under the Articles of Agreement, members are required to maintain the value of such holdings in terms of the SDR. Any depreciation/appreciation in their currency vis-à-vis the SDR gives rise to a currency valuation adjustment receivable or payable that must be settled on an annual basis and that is included in the stock of the IMF’s currency holdings. Therefore, the value of the IMF’s currency holdings does not fluctuate in SDR terms.

Exchange rate risk on IMF investments is managed by investing in securities denominated in SDRs or in the constituent currencies of the SDR valuation basket. The IMF also has other assets and liabilities, such as trade receivables and payables, denominated in currencies other than SDRs and makes administrative payments largely in U.S. dollars, but the exchange rate risk exposure is very limited.

Liquidity risk

Liquidity risk is the risk of non-availability of resources to meet the IMF’s financing needs and obligations. The IMF must have usable resources available to meet members’ demand for credit. While the IMF’s sources are revolving, uncertainties in timing and amount of credit extended to members during financial crises expose the IMF to liquidity risk. Moreover, the IMF must also stand ready to meet the potential demands from members drawing upon their reserve tranche positions, which have no fixed maturity and are part of members’ reserves.

The IMF manages its liquidity risk not by matching the maturity of assets and liabilities but by closely scrutinizing developments in its liquidity position, especially as they relate to the adequacy of quota-based resources to meet liquidity needs. The Articles of Agreement require the IMF to conduct a general review of members’ quotas at intervals of no more than five years in order to assess the adequacy of quota-based resources to meet members’ demand for IMF financing. There have been eight quota increases, including an ad hoc increase, as a result of the reviews. The last general review (the twelfth) was completed in January 2003 with no proposed quota increase. Should the available quota-based resources be inadequate to meet financing needs, the IMF may activate its standing credit lines totaling SDR 34 billion under the General Arrangements to Borrow and the New Arrangements to Borrow, and its associated agreement with Saudi Arabia for an additional SDR 1.5 billion. The IMF also monitors its liquidity position over a shorter term, using objective criteria such as the forward commitment capacity for the next twelve-month period. (Schedule 2 provides the IMF’s available resources and liquidity position.)

Operational risk

Operational risk includes risk of loss attributable to errors or omissions because of failures in executing or processing transactions, inadequate controls, human factors, and/or failures in underlying support systems.

The IMF mitigates operational risk by (i) identifying key operational risks, (ii) maintaining a system of internal controls, (iii) documenting policies and procedures on administrative and accounting and reporting processes, and (iv) conducting internal audits to ensure accurate processing of transactions and minimize the possibility of undetected errors. The design and effectiveness of controls are evaluated continuously and improvements are implemented on a timely basis. The results of the internal evaluation of the effectiveness of internal controls are reported by the Office of Internal Audit and Inspection to the External Audit Committee, which also exercises oversight over the external audit of the IMF’s accounts and its controls.

The IMF has adopted a Code of Ethics to promote the highest standards of ethics among its staff, including senior management and members of the Executive Board. The enforcement of the Code of Ethics is supplemented by procedures for the reporting and investigation of irregularities and improprieties, including fraudulent acts.

4. Credit and loans outstanding

Credit outstanding in the GRA and SAF loans in the SDA are carried at amortized cost.

Changes in the outstanding use of IMF credit under the various facilities of the GRA were as follows:

April 30, 2004PurchasesRepur-chasesApril 30, 2005PurchasesRepur-chasesApril 30, 2006
(In millions of SDRs)
Credit tranches41,7301,445(7,717)35,4581,967(26,108)11,317
Extended Fund Facility13,751163(4,549)9,365189(2,077)7,477
Supplemental Reserve Facility6,028(1,459)4,569(4,569)
Systemic Transformation Facility154(136)18(18)
Enlarged access276(5)271(3)268
Compensatory and Contingency Financing Facility120(36)8484
Supplementary Financing Facility94-(5)89-(8)81
Total credit outstanding62,1531,608-(13,907)49,8542,156(32,783)19,227

The following repurchases were made by members during the financial years ended April 30:

20062005
(In millions of SDRs)
Early repurchases21,9682,645
Repurchase expectations2,9105,854
Repurchase obligations7,9055,408
Total repurchases32,78313,907

Repurchases for the year ended April 30, 2006, include Bolivia’s repurchase of SDR 90 million that was part of its stock of debt eligible for debt relief under the MDRI (see Note 5). In addition, two members with total outstanding credit from the GRA of SDR 19 million as of April 30, 2006, are eligible for MDRI debt relief upon reaching the completion point under the HIPC Initiative.

The IMF approved the following members’ requests to extend repurchases from the expectation to the obligation schedule during the financial years ended April 30:

Repurchase expectations extended
20062006
(In millions of SDRs)
Argentina1,683
Dominica11
Dominican Republic11
Ecuador33
Macedonia, FYR18
Sri Lanka74
Turkey2,521
Uruguay541434

Subsequent to the extension of its repurchase expectations, Argentina made repurchases of all of its outstanding credit to the GRA in January 2006.

As of April 30, 2006, and 2005, outstanding SAF loans amounted to SDR 9 million and SDR 46 million, respectively.

Scheduled repurchases in the GRA and repayment of SAF loans in the SDA are summarized below:

Financial year ending April 30General Resources AccountSpecial Disbursement Account
(In millions of SDRs)
20078,019
20084,816
20093,439
20101,831
2011427
2012 and beyond101
Overdue5949
Total19,2279

The use of credit in the GRA by the largest users was as follows at April 30:

20062005
(In millions of SDRs and as a percentage of total GRA credit outstanding)
Largest user of credit8,89846.3%15,35630.8%
Three largest users of credit15,34779.8%36,53973.3%
Five largest users of credit16,73887.1%44,19088.6%

The five largest users of credit as of April 30, 2006, were Turkey, Indonesia, Uruguay, Ukraine, and Serbia and Montenegro. Outstanding credit by member is provided in Schedule 1.

The concentration of GRA outstanding credit by region was as follows as of April 30:

20062006
(In millions of SDRs and as a percentage of total GRA credit outstanding)
Africa6673.5%1,1682.3%
Asia and Pacific5,61629.2%6,76013.6%
Europe1,93410.0%2,7015.4%
Latin America and the Caribbean1,6488.6%25,61751.4%
Middle East and Turkey9,36248.7%13,60827.3%
Total19,227100%49,854100%

Overdue obligations

At April 30, 2006, three members (four members as of April 30, 2005) were six months or more overdue in settling their financial obligations to the General Department.

GRA repurchases, GRA charges, SAF loan repayments, and SAF interest that are six or more months overdue were as follows:

Repurchases and SAF loansCharges and SAF interest
2006200520062005
(In millions of SDRs)
Total overdue6037321,0391,030
Overdue for six months or more6037301,0261,018
Overdue for three years or more603661984970

The type and duration of the overdue amounts in the General Department were as follows as of April 30, 2006:

Repurchases and SAF loansCharges and SAF interestTotal obligationLongest overdue obligation
(In millions of SDRs)
Liberia201262463May 1985
Somalia105102207July 1987
Sudan297675972August 1985
Total6031,0391,642

5. Multilateral Debt Relief Initiative

Under the MDRI, debt relief is provided to Heavily Indebted Poor Countries (HIPCs) and non-HIPCs with annual per capita income of $380 or less, and to HIPCs with an annual per capita income of more than $380. Grant assistance from the MDRI Trusts (together with assistance under the HIPC Initiative) provides debt relief to cover the full stock of debt owed to the IMF as of December 31, 2004, that remains outstanding at the time the member qualifies for such relief.

During the financial year ended April 30, 2006, debt relief under the MDRI was granted to 20 members amounting to SDR 2,503 million, consisting of outstanding credit in the GRA of SDR 90 million and PRGF-ESF Trust loans of SDR 2,413 million. MDRI grant assistance provided from resources held in the MDRI-I Trust amounted to SDR 1,120 million. All HIPCs will receive MDRI assistance upon reaching the completion point under the HIPC Initiative. Since the stock of debt owed to the IMF as of December 31, 2004, decreases over time, the actual debt eligible for MDRI assistance for the remaining members depends on the timing of their completion points. The IMF periodically reviews the qualification of members for MDRI debt relief as these members make progress toward reaching the completion point under the HIPC Initiative.

MDRI grant assistance to the remaining eligible members is subject to the availability of resources and is accrued when it is probable that a liability has been incurred and the amount of such grant assistance can be reasonably estimated. The liability recorded in the MDRI-I Trust amounted to SDR 380 million as of April 30, 2006, and is based on the evaluation of currently available facts with respect to each individual eligible member and includes factors such as progress made toward reaching the completion point under the HIPC Initiative and the capacity to meet the macroeconomic performance and other objective criteria after reaching the completion point. As the qualification of members for MDRI debt relief is assessed, the amounts recorded are reviewed periodically and adjusted to reflect additional information that becomes available.

6. Currencies

Net changes in the IMF’s holdings of members’ currencies for the years ended April 30, 2006, and 2005 were as follows:

April 30, 2004Net changeApril 30, 2005Net changeApril 30, 2006
(In millions of SDRs)
Members’ quotas212,794684213,478213,478
Members’ outstanding use of
IMF credit in the GRA62,153(12,299)49,854(30,627)19,227
Members’ reserve tranche
positions in the GRA(62,856)13,007(49,849)28,023(21,826)
Administrative currency
balances(5)83(3)-
Total currencies212,0861,400213,486(2,607)210,879

Receivables and payables arising from valuation adjustments at April 30, 2006, when all holdings of currencies of members were last revalued, amounted to SDR 4,103 million and SDR 7,074 million, respectively (SDR 8,521 million and SDR 5,435 million, respectively, at April 30, 2005). Settlements of these receivables or payables are required to be made by members promptly after the end of each financial year.

7. Gold holdings

At April 30, 2006, and 2005, the IMF held 3,217,341 kilograms of gold, equal to 103,439,916 fine ounces of gold, at designated depositories. Gold holdings were valued at a historical cost of SDR 5,852 million as of April 30, 2006, and 2005.

Cost
OuncesPer ounceTotal
(In millions)(In SDRs)(In millions of SDRs)
Gold acquired from quota subscriptions90.474353,167
Gold acquired from Cambodia in 1992.0212415
Gold acquired through off-market transaction in 199912.9442072,680
Total103.4395,852

As of April 30, 2006, the market value of the IMF’s holdings of gold was SDR 45.3 billion (SDR 29.7 billion at April 30, 2005).

8. Interest and charges

As of April 30, 2006, the total holdings on which the IMF levies charges amounted to SDR 19,227 million (SDR 49,854 million as of April 30, 2005). For financial year 2006, the basic rate of charge was set at a fixed margin of 108 basis points above the SDR interest rate (for financial year 2005, it was set at 154 percent of the SDR interest rate for the first half of the year and 136 percent for the second half). The average adjusted rate of charge before applicable surcharges for financial year 2006 was 4.18 percent (3.10 percent for financial year 2005).

Charges and other receivables as of April 30 were as follows:

20062006
(In millions of SDRs)
Periodic charges1,3081,598
Amount paid through burden sharing(859)(848)
Unpaid charges(186)(187)
Other receivables263563
325
Total receivables295568

Interest and periodic charges consisted of the following for the years ended April 30:

20062006
(In millions of SDRs)Interest and periodic charges1,6672,259
Amounts paid through burden-sharing adjustments, net of refunds511
Total interest and charges1,6722,270

Interest earned on SAF loans for the years ended April 30, 2006, and 2005 amounted to SDR 0.1 million and SDR 0.3 million, respectively.

Service charges and commitment fees on cancelled or expired arrangements, which amounted to SDR 23 million (SDR 34 million for the year ended April 30, 2005), are included in Other Charges and Income.

9. Other assets–fixed assets

Other assets include fixed assets, which at April 30, 2006, and 2005 amounted to SDR 313 million and SDR 311 million, respectively, and consisted of land, buildings, construction in progress, and equipment.

LandBuildingsOtherTotal
(In millions of SDRs)
Cost
Beginning of the year96215152463
Additions51520
Disposals(14)(14)
Reclassifi cation75(75)-
End of the year9629578469
Accumulated depreciation
Beginning of the year11438152
Additions81018
Disposals--(14)(14)
End of the year-12234156
Net book value as at April 30, 20069617344313
Net book value as at April 30, 200596101114311

10. Special Disbursement Account

Investments

As at April 30, 2006, there were no investments in the SDA. Investments in the MDRI-I Trust consisted of short-term fixed-term deposits with maturities of less than one year and amounted to SDR 384 million. As at April 30, 2005, the investments in the SDA consisted of short-term fixed-term deposits with maturities of less than one year and amounted to SDR 2,519 million.

Investment income of the SDA and the MDRI-I Trust for the years ended April 30, 2006, and 2005 was SDR 49 million and SDR 52 million, respectively.

Contributions to Administered Accounts

Assets in the SDA can be used for special purposes authorized in the Articles, including providing financial assistance on special terms to low-income member countries.

Proceeds from the repayment of SAF loans are transferred from the SDA to the Reserve Account of the PRGF-ESF Trust as contributions. During the financial years ended April 30, 2006, and 2005, such contributions amounted to SDR 37 million and SDR 41 million, respectively.

In addition, the accumulated investment earnings in the SDA are available for financing the PRGF-HIPC Trust on an as-needed basis. During the financial year ended April 30, 2006, the SDA contributed SDR 63 million to the PRGF-HIPC Trust (SDR 164 million during the financial year ended April 30, 2005).

Following the implementation of the MDRI, effective January 5, 2006, the resources held in the SDA were contributed to other accounts as follows:

(In millions of SDRs)
PRGF-HIPC Trust Account530
MDRI-I Trust1,500
PRGF-ESF Trust Subsidy Account470
Total2,500

Trust Fund

The IMF is the Trustee of the Trust Fund, which was established in 1976 to provide balance of payments assistance on concessional terms to eligible members that qualify for assistance. The Trust Fund is in liquidation.

In 1980, the IMF, as Trustee, decided that, upon the completion of the final loan disbursements, the Trust Fund would be terminated as of April 30, 1981. Since that date, the activities of the Trust Fund have been confined to the conclusion of its affairs. The Trust Fund has no assets other than claims receivable, including interest and special charges, from Liberia, Somalia, and Sudan amounting to SDR 118 million at April 30, 2006, and 2005. All interest is deferred. Cash receipts on these loans are to be transferred to the Special Disbursement Account.

11. Borrowings

Under the General Arrangements to Borrow (GAB) and an associated agreement with Saudi Arabia, the IMF may borrow up to SDR 18.5 billion when supplementary resources are needed, in particular, to forestall or to cope with an impairment of the international monetary system. The GAB became effective on October 24, 1962, and has been renewed through December 25, 2008. Interest on borrowings under the GAB is set at a rate equal to the SDR interest rate.

Under the New Arrangements to Borrow (NAB), the IMF may borrow up to SDR 34 billion of supplementary resources. The NAB is the facility of first and principal recourse, but it does not replace the GAB, which will remain in force. Outstanding drawings and commitments under these two borrowing arrangements are limited to a combined total of SDR 34 billion. The NAB became effective for a five-year period on November 17, 1998, and has been renewed through November 16, 2008. Interest on borrowings under the NAB is payable to the participants at the SDR interest rate or any such higher rate as may be agreed between the IMF and participants representing 80 percent of the total credit arrangements. There was no balance outstanding as at April 30, 2006, and 2005 under the GAB or the NAB.

12. Arrangements

An arrangement is a decision of the IMF that gives a member the assurance that the IMF stands ready to provide SDRs or usable currencies during a specified period and up to a specified amount, in accordance with the terms of the arrangement. At April 30, 2006, the undrawn balances under the 11 arrangements that were in effect in the GRA amounted to SDR 7,539 million (SDR 7,927 million under 12 arrangements at April 30, 2005).

13. Burden sharing and the Special Contingent Account

Under the burden-sharing mechanism, the basic rate of charge is increased and the rate of remuneration is adjusted downward to offset the effect on the IMF’s income of the nonpayment of charges and also to finance the additions to the SCA-1.

Cumulative charges, net of settlements, that have resulted in adjustments to charges and remuneration since May 1, 1986 (the date the burden-sharing mechanism was adopted) amounted to SDR 859 million at April 30, 2006, (SDR 848 million at April 30, 2005). The cumulative refunds for the same period, resulting from the settlements of overdue charges for which burden-sharing adjustments have been made, amounted to SDR 1,080 million and SDR 1,073 million, at April 30, 2006, and 2005, respectively.

The SCA-1 is financed by adjustments to the rate of charge and the rate of remuneration. Balances in the SCA-1 are to be distributed to the members that shared the cost of its financing when there are no outstanding overdue repurchases and charges, or at such earlier time as the IMF may decide. Amounts collected from members for the SCA-1 are akin to refundable cash deposits and are recorded as collections of cash and as a liability to those who paid it. Losses arising from overdue obligations, if realized, would be shared by members in proportion to their cumulative contributions to the SCA-1. For the financial years ended April 30, 2006, and 2005, the annual addition to the SCA-1 amounted to SDR 94 million.

14. Remuneration

At April 30, 2006, total creditor positions on which the IMF paid remuneration amounted to SDR 15,051 million (SDR 43,209 million at April 30, 2005). The average adjusted rate of remuneration for the financial year ended April 30, 2006, was 2.68 percent (1.98 percent for the financial year ended April 30, 2005). Remuneration consisted of the following for the years ended April 30:

20062006
(In millions of SDRs)
Remuneration8331,045
Amount withheld for burden-sharing adjustment, net of refunds(5)(11)
8281,034

15. Administrative expenses

Administrative expenses, the majority of which were incurred in U.S. dollars, were as follows for the years ended April 30:

20062006
(In millions of SDRs)
Personnel355343
Pension and other long-term employee benefits153160
Travel6762
Exchange gains and losses2
Other118106
Total administrative expenses, net of reimbursements693673

16. Pension and other post-retirement benefits

The IMF has a defined-benefit Staff Retirement Plan (SRP) that covers substantially all eligible staff and a Supplemental Retirement Benefits Plan (SRBP) for selected participants of the SRP. Participants contribute 7 percent of their pensionable remuneration and the IMF contributes the remainder of the cost of funding the plans and pays certain administrative costs of the plans. In addition, the IMF provides other employment and post-retirement benefits, including medical and life insurance, and other long-term benefits. In 1995, the IMF established a separate account, the Retired Staff Benefits Investment Account (RSBIA), to hold and invest resources set aside to fund the cost of the post-retirement benefits.

The defined benefit obligations are valued annually by independent actuaries. The latest actuarial valuations were carried out as at April 30, 2006, using the Projected Unit Credit Method.

The amounts recognized in the balance sheet are determined as follows:

2006
SRPSRBPOtherTotal2005 Total
(In millions of SDRs)
Fair value of plan assets4,00374584,4683,504
Present value of the defined benefit obligation(2,982)(279)(573)(3,834)(3,720)
Unrecognized actuarial losses/(gains)(271)50(120)(341)560
Unrecognized prior service cost--779
Net balance sheet asset/(liability)750(222)(228)300353

The movement in the net balance sheet asset is reconciled as follows:

2006
SRPSRBPOtherTotal2005 Total
(In millions of SDRs)
Beginning of year758(182)(223)353443
Expense recognized in the income statement(57)(49)(47)(153)(175)
Contributions paid4994210085
End of year750(222)(228)300353

The pension and other post-retirement benefits expenses recognized in the income statement include the amortization, over the estimated average remaining service lives of IMF staff, of actuarial gains and losses in excess of a corridor. The corridor is the higher of 10 percent of either the defined benefit obligation or the fair value of assets at the beginning of the financial year.

The amounts recognized in the income statements are as follows:

2006
SRPSRBPOtherTotal2005 Total
(In millions of SDRs)
Current service cost1063142179172
Interest cost1691534218210
Expected returns on assets(236)(27)(263)(244)
Amortization of actuarial (gain)/loss183(4)1734
Prior service cost-223
Total expense recognized in income statement574947153175
Actual return on assets77382855380

The principal actuarial assumptions used in the actuarial valuations were as follows:

20062005
(In percent)
Discount rate6.255.7
Expected return on plan assets7.57.5
Future salary increases6.4-10.86.4-10.8
Ultimate health-care-costs growth rates4.04.0

17. Related-party transactions

The GRA conducts its transactions with the SDR Department on the same terms and conditions applicable to participants in the SDR Department. During the financial years ended April 30, 2006, the receipts (consisting of repurchases, charges, and interest on SDR holdings) and uses (consisting of purchases and remuneration) of SDRs by the GRA amounted to SDR 5,867 million (SDR 3,100 million for the financial year ended April 30, 2005) and SDR 2,801 million (SDR 3,032 million for the financial year ended April 30, 2005), respectively. As of April 30, 2006, and 2005, the GRA’s SDR holdings amounted to SDR 3,641 million and SDR 574 million, respectively.

The administrative expenses of operating the SDR Department, the PRGF-ESF Trust, the PRGF-HIPC Trust, and the MDRI-I and MDRI-II Trusts are paid by the GRA. The SDR Department reimbursed the GRA SDR 1.2 million and SDR 1.5 million for the financial years ended April 30, 2006, and 2005, respectively. The MDRI-I Trust will reimburse the GRA SDR 4.1 million for the financial year ended April 30, 2006. The IMF decided to forgo the reimbursements by the PRGF-ESF Trust to the GRA, amounting to SDR 50.9 million and SDR 54.4 million for the financial years ended April 30, 2006, and 2005, respectively. The PRGF-HIPC Trust and the MDRI-II Trust do not reimburse the GRA.

General Department Quotas, IMF’s holdings of currencies, reserve tranche positions, and outstanding credit and loans as at April 30, 2006(In thousands of SDRs)
General Resources Account
IMF’s holdings

of currencies1
Reserve

tranche

position
Outstanding credit and loans
GRASDA3

(B)+
PRGF-ESF

Trust4

(C)=
Total5

(D)
AmountPercent2
MemberQuotaTotalPercent

of quota
(A)+
Afghanistan, Islamic Republic of161,900161,916100.0
Albania48,70046,56895.63,3551,2180.0163,70264,919
Algeria1,254,7001,169,61993.285,082
Angola286,300286,445100.1
Antigua and Barbuda13,50013,499100.06
Argentina2,117,1002,116,919100.0195
Armenia92,00092,005100.0116,263116,263
Australia3,236,4002,833,49487.6403,156
Austria1,872,3001,692,53190.4179,778
Azerbaijan160,900179,576111.61018,6760.1085,713104,389
Bahamas, The130,300124,04195.26,260
Bahrain135,00063,84347.371,203
Bangladesh533,300533,079100.0230283,060283,060
Barbados67,50062,14492.15,348
Belarus386,400386,400100.020
Belgium4,605,2004,069,81888.4535,402
Belize18,80014,56277.54,239
Benin61,90059,72096.52,188880880
Bhutan6,3005,28083.81,020
Bolivia171,500172,298100.58,8759,6600.059,660
Bosnia and Herzegovina169,100205,505121.50636,4000.1936,400
Botswana63,00055,89288.77,109
Brazil3,036,1003,036,538100.0
Brunei Darussalam215,200190,82788.724,576
Bulgaria640,200900,215140.633,045293,0421.52293,042
Burkina Faso60,20052,85887.87,34613,76013,760
Burundi77,00076,64199.536040,70040,700
Cambodia87,50087,500100.0
Cameroon185,700184,99899.67072,6502,650
Canada6,369,2005,649,90388.7719,307
Cape Verde9,6009,59399.9168,6408,640
Central African Republic55,70068,079122.215912,5330.0717,88830,421
Chad56,00055,71999.528252,85652,856
Chile856,100759,60888.796,493
China6,369,2005,629,97488.4739,273
Colombia774,000488,20263.1285,803
Comoros8,9008,35893.9544
Congo, Democratic Republic of the533,000533,000100.0553,467553,467
Congo, Republic of84,60084,07099.453617,11017,110
Costa Rica164,100144,11387.820,000
Côte d’Ivoire325,200324,55699.8646130,476130,476
Croatia365,100364,943100.0159
Cyprus139,600123,58288.516,033
Czech Republic819,300728,23388.991,072
Denmark1,642,8001,513,20292.1129,602
Djibouti15,90014,80093.11,10012,54012,540
Dominica8,20010,652129.992,4600.015,3667,826
Dominican Republic218,900488,154223.03269,2551.40269,255
Ecuador302,300322,899106.817,15337,7500.2037,750
Egypt943,700943,723100.0
El Salvador171,300171,303100.0
Equatorial Guinea32,60032,605100.0
Eritrea15,90015,900100.05
Estonia65,20065,195100.06
Ethiopia133,700126,47494.67,241
Fiji70,30054,93478.115,372
Finland1,263,8001,142,00690.4121,863
France10,738,5009,765,04590.9973,646
Gabon154,300201,726130.721947,6400.2547,640
Gambia, The31,10029,61895.21,48513,88213,882
Georgia150,300150,300100.010159,335159,335
Germany13,008,20011,208,82986.21,799,457
Ghana369,000369,004100.00626,35026,350
Greece823,000745,91890.677,095
Grenada11,70017,190146.95,4890.031,5607,049
Guatemala210,200210,206100.0
Guinea107,100107,02699.97557,57057,570
Guinea-Bissau14,20014,200100.067,3647,364
Guyana90,90090,902100.027,81027,810
Haiti81,900102,308124.96820,4750.113,03523,510
Honduras129,500120,87493.38,62720,34220,342
Hungary1,038,400917,14888.3121,254
Iceland117,60099,01484.218,589
India4,158,2003,642,21587.6515,990
Indonesia2,079,3007,122,583342.5145,4995,188,77926.995,188,779
Iran, Islamic Republic of1,497,2001,497,204100.0
Iraq1,188,4001,314,413110.6171,100297,1001.55297,100
Ireland838,400764,23091.274,177
Israel928,200823,01788.7105,191
Italy7,055,5006,175,15487.5880,367
Jamaica273,500273,550100.0
Japan13,312,80011,829,00888.91,485,034
Jordan170,500314,229184.3144143,8580.75143,858
Kazakhstan365,700365,700100.05
Kenya271,400258,65595.312,747107,733107,733
Kiribati5,6005,601100.04
Korea1,633,6001,449,57688.7184,035
Kuwait1,381,1001,223,04388.6158,077
Kyrgyz Republic88,80088,800100.05116,773116,773
Lao People’s Democratic Republic52,90052,900100.0619,88019,880
Latvia126,800126,762100.055
Lebanon203,000184,16890.718,833
Lesotho34,90031,32489.83,60124,50024,500
Liberia71,300271,854381.331200,5731.04223,463
Libya1,123,700728,20264.8395,505
Lithuania144,200144,185100.016
Luxembourg279,100252,30690.426,805
Macedonia, former Yugoslav Republic of68,90099,763144.8630,8610.1611,72542,587
Madagascar122,200122,174100.02711,34811,348
Malawi69,40080,124115.52,29013,0130.0740,82053,833
Malaysia1,486,6001,310,69588.2175,911
Maldives8,20010,746131.11,5544,1000.024,100
Mali93,30084,11490.29,1943,9933,993
Malta102,00061,74160.540,261
Marshall Islands3,5003,500100.01
Mauritania64,40064,404100.044,47544,475
Mauritius101,60089,84388.411,758
Mexico2,585,8002,293,04088.7292,808
Micronesia, Federated States of5,1005,100100.01
Moldova123,200155,908126.5532,7080.1727,72060,428
Mongolia51,10050,96799.713622,78422,784
Morocco588,200517,75688.070,447
Mozambique113,600113,600100.074,8604,860
Myanmar258,400258,402100.0
Namibia136,500136,438100.071
Nepal71,30071,311100.014,26014,260
Netherlands5,162,4004,513,85887.4648,588
New Zealand894,600792,15788.5102,463
Nicaragua130,000130,010100.013,93013,930
Niger65,80057,19386.98,61111,75011,750
Nigeria1,753,2001,753,121100.0143
Norway1,671,7001,554,10893.0117,604
Oman194,000176,98191.217,067
Pakistan1,033,7001,080,976104.611847,3930.25975,1501,022,543
Palau3,1003,100100.01
Panama206,600210,585101.911,86015,8330.0815,833
Papua New Guinea131,600131,16399.7438
Paraguay99,90078,42878.521,475
Peru638,400665,183104.226,7500.1426,750
Philippines879,9001,001,594113.887,486209,1711.09209,171
Poland1,369,0001,258,35191.9110,654
Portugal867,400786,16590.681,268
Qatar263,800233,40388.530,398
Romania1,030,2001,161,094112.7130,8890.68130,889
Russian Federation5,945,4005,808,29597.7137,141
Rwanda80,10080,113100.01,1421,142
St. Kitts and Nevis8,9008,81999.182
St. Lucia15,30015,295100.07
St. Vincent and the Grenadines8,3007,80094.0500
Samoa11,60010,91894.1693
San Marino17,00012,90075.94,101
São Tomé and Príncipe7,4007,403100.062,6532,653
Saudi Arabia6,985,5006,005,95886.0979,546
Senegal161,800160,22899.01,58217,33017,330
Serbia and Montenegro467,7001,123,964240.3656,2503.41656,250
Seychelles8,8008,798100.03
Sierra Leone103,700103,685100.024133,375133,375
Singapore862,500765,32988.797,196
Slovak Republic357,500357,505100.0
Slovenia231,700205,38388.626,324
Solomon Islands10,4009,85294.7550
Somalia44,200140,907318.896,7010.508,840112,004
South Africa1,868,5001,867,671100.0843
Spain3,048,9002,709,06688.9339,839
Sri Lanka413,400531,865128.747,855166,3030.8738,390204,693
Sudan169,700466,300274.811296,5801.54355,808
Suriname92,10085,97693.46,125
Swaziland50,70044,14787.16,562
Sweden2,395,5002,098,12187.6297,382
Switzerland3,458,5003,075,14988.9383,388
Syrian Arab Republic293,600293,603100.05
Tajikistan87,00087,000100.0229,40029,400
Tanzania198,900188,90395.09,9998,4008,400
Thailand1,081,900960,30188.8121,607
Timor-Leste8,2008,200100.01
Togo73,40073,06999.53327,6027,602
Tonga6,9005,18975.21,712
Trinidad and Tobago335,600298,19888.937,408
Tunisia286,500266,27692.920,249
Turkey964,0009,748,9631,011.3112,7758,897,73546.288,897,735
Turkmenistan75,20075,200100.05
Uganda180,500180,506100.066,0006,000
Ukraine1,372,0002,106,268153.53734,2683.82734,268
United Arab Emirates611,700541,97788.670,324
United Kingdom10,738,5009,511,43288.61,227,173
United States37,149,30032,236,91786.84,907,329
Uruguay306,5001,567,265511.31,260,7586.561,260,758
Uzbekistan275,600275,600100.05
Vanuatu17,00014,50685.32,496
Venezuela, República Bolivariana de2,659,1002,337,19987.9321,902
Vietnam329,100329,100100.05136,280136,280
Yemen, Republic of243,500266,488109.41323,0000.12168,150191,150
Zambia489,100489,101100.01822,00922,009
Zimbabwe353,400353,07599.932875,01375,013
Total213,478,400210,879,38121,826,02219,227,219100.008,8403,819,76023,144,400

Includes nonnegotiable, non-interest-bearing notes that members are entitled to issue in substitution for currencies, and outstanding currency valuation adjustments.

Represents the percentage of total use of GRA resources (column A).

The Special Disbursement Account (SDA) of the General Department had financed loans under Structural Adjustment Facility (SAF) and Poverty Reduction and Growth Facility (PRGF) arrangements.

For information purposes only. The PRGF-ESF Trust provides financing under PRGF arrangements and is not a part of the General Department.

Includes outstanding Trust Fund loans to Liberia (SDR 22.9 million), Somalia (SDR 6.5 million), and Sudan (SDR 59.2 million).

Less than SDR 500.

Includes nonnegotiable, non-interest-bearing notes that members are entitled to issue in substitution for currencies, and outstanding currency valuation adjustments.

Represents the percentage of total use of GRA resources (column A).

The Special Disbursement Account (SDA) of the General Department had financed loans under Structural Adjustment Facility (SAF) and Poverty Reduction and Growth Facility (PRGF) arrangements.

For information purposes only. The PRGF-ESF Trust provides financing under PRGF arrangements and is not a part of the General Department.

Includes outstanding Trust Fund loans to Liberia (SDR 22.9 million), Somalia (SDR 6.5 million), and Sudan (SDR 59.2 million).

Less than SDR 500.

General Department Financial resources and liquidity position in the General Resources Account as at April 30, 2006, and 2005(In thousands of SDRs)
20062005
Total resources
Currencies210,879,381213,486,377
SDR holdings3,640,792574,310
Gold holdings5,851,7715,851,771
Other assets1744,968879,028
Total resources221,116,912220,791,486
Less: Non-usable resources266,343,63297,828,711
of which: Credit outstanding19,227,21949,853,664
Equals: Usable resources3154,773,280122,962,775
Less: Undrawn balances under GRA arrangements7,539,0697,926,545
Equals: Uncommitted usable resources147,234,211115,036,230
Plus: Repurchases one year forward47,005,60713,320,313
Less: Prudential balance534,162,44034,017,800
Equals: One-year forward commitment capacity120,077,37894,338,743
Memorandum items:
Resources available under borrowing arrangements34,000,00034,000,000
Quotas of members that finance IMF transactions170,812,200170,089,000
Net uncommitted usable resources131,652,91499,882,010
Liquid liabilities21,826,02249,848,798
Liquidity ratio6603.2%200.4%

Other assets reflect current assets (charges, interest, and other receivables) and other assets (which include capital assets such as land, buildings, and equipment), net of other liabilities including remuneration payable.

Resources are regarded as non-usable if they cannot be used in the financing of the IMF’s ongoing operations and transactions. These resources include (1) gold holdings, (2) currencies of members that are using IMF credit, (3) currencies of other members with relatively weak external positions, and (4) other assets.

Usable resources consist of (1) holdings of currencies of members considered by the IMF as having balance of payments and reserve positions sufficiently strong for their currencies to be used in transfers, (2) SDR holdings, and (3) any unused amounts under credit lines that have been activated.

Repurchases by member countries during the coming one-year period. It is assumed that repurchases would be made on an expectation basis for the SRF, and on an obligation basis under all other facilities.

Prudential balance is set at 20 percent of quotas of members that issue the currencies that are used in the financing of IMF transactions and any amounts activated under borrowing arrangements.

The liquidity ratio is a measure of the IMF’s liquidity position, represented by the ratio of its net uncommitted usable resources to its liquid liabilities (i.e., members’ reserve tranche positions plus outstanding borrowing).

Other assets reflect current assets (charges, interest, and other receivables) and other assets (which include capital assets such as land, buildings, and equipment), net of other liabilities including remuneration payable.

Resources are regarded as non-usable if they cannot be used in the financing of the IMF’s ongoing operations and transactions. These resources include (1) gold holdings, (2) currencies of members that are using IMF credit, (3) currencies of other members with relatively weak external positions, and (4) other assets.

Usable resources consist of (1) holdings of currencies of members considered by the IMF as having balance of payments and reserve positions sufficiently strong for their currencies to be used in transfers, (2) SDR holdings, and (3) any unused amounts under credit lines that have been activated.

Repurchases by member countries during the coming one-year period. It is assumed that repurchases would be made on an expectation basis for the SRF, and on an obligation basis under all other facilities.

Prudential balance is set at 20 percent of quotas of members that issue the currencies that are used in the financing of IMF transactions and any amounts activated under borrowing arrangements.

The liquidity ratio is a measure of the IMF’s liquidity position, represented by the ratio of its net uncommitted usable resources to its liquid liabilities (i.e., members’ reserve tranche positions plus outstanding borrowing).

General Department Status of arrangements in the General Resources Account as at April 30, 2006(In thousands of SDRs)
MemberDate of arrangementExpirationTotal amount agreedUndrawn balance
Stand-By Arrangements
BulgariaAugust 6, 2004September 5, 2006100,000100,000
ColombiaMay 2, 2005November 2, 2006405,000405,000
CroatiaAugust 4, 2004November 15, 200699,00099,000
Dominican RepublicJanuary 31, 2005May 31, 2007437,800288,940
IraqDecember 23, 2005March 22, 2007475,360475,360
Macedonia, former Yugoslav Republic ofAugust 31, 2005August 30, 200851,67541,175
PeruJune 9, 2004August 16, 2006287,279287,279
RomaniaJuly 7, 2004July 6, 2006250,000250,000
TurkeyMay 11, 2005May 10, 20086,662,0404,996,530
UruguayJune 8, 2005June 7, 2008766,250588,480
Total Stand-By Arrangements9,534,4047,531,764
Extended Arrangements
AlbaniaFebruary 1, 2006January 31, 20098,5237,305
Total Extended Arrangements8,5237,305
Total General Resources Account9,542,9277,539,069

Deloitte

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Tel: +1202 879 5600

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Independent Auditors’ Report

To the Board of Governors of the International Monetary Fund Washington, DC

We have audited the accompanying balance sheets of the SDR Department of the International Monetary Fund (the “Department”) as of April 30, 2006, and 2005, and the related statements of income and cash flows for the years then ended. These financial statements are the responsibility of the Department’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the SDR Department of the International Monetary Fund at April 30, 2006, and 2005, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed on pages 194 to 199 are presented for the purpose of additional analysis and are not a required part of the basic financial statements. These schedules are the responsibility of the Department’s management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.

June 12,2006

Member of Deloitte Touche Tohmatsu

SDR Department

Balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
2006200520062005
AssetsLiabilities
Net charges receivable70,21749,889Net interest payable70,41950,090
Overdue assessments and charges (Note 3)37,87535,968Participants with holdings above allocations (Note 2)
SDR holdings13,280,52016,617,864
Participants with holdings above allocations (Note 2)Less: allocations8,955,6519,299,794
Allocations12,477,67912,133,536Holdings in excess of allocations4,324,8697,318,070
Less: SDR holdings4,253,3034,006,504Holdings by the General Resources Account3,640,792574,310
Allocations in excess of holdings8,224,3768,127,032Holdings of SDRs by prescribed holders296,388270,419
Total assets8,332,4688,212,889Total liabilities8,332,4688,212,889
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

/s/ Michael G. Kuhn Director, Finance Department

/s/ Rodrigo de Rato Managing Director

SDR Department Income statements for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Revenue
Net charges from participants with holdings below allocations245,826173,782
Assessment on SDR allocations1,2001,500
247,026175,282
Expenses
Interest on SDR holdings
Net interest to participants with holdings above allocations179,686149,673
General Resources Account58,34016,322
Prescribed holders7,8007,787
245,826173,782
Administrative expenses1,2001,500
247,026175,282
Net income
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
SDR Department Statements of cash flows for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Cash flows from operating activities
Receipts of SDRs
Transfers among participants and prescribed holders4,336,6754,499,083
Transfers from participants to the General Resources Account5,867,2613,100,437
Transfers from the General Resources Account to participants2,800,7793,032,157
Total receipts of SDRs13,004,71510,631,677
Uses of SDRs
Transfers among participants and prescribed holders4,142,5214,356,089
Transfers from participants to the General Resources Account5,835,9163,085,510
Transfers from the General Resources Account to participants2,800,7793,032,157
Charges paid in the SDR Department223,593210,741
Other1,906(52,820)
Total uses of SDRs13,004,71510,631,677
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

SDR Department Notes to the financial statements as at April 30, 2006, and 2005

1. Nature of operations

The International Monetary Fund (the IMF) conducts its operations and transactions through the General Department and the Special Drawing Rights Department (the SDR Department). The Special Drawing Right (SDR) is an international interest-bearing reserve asset created by the IMF following the First Amendment of the Articles of Agreement in 1969. All transactions and operations involving SDRs are conducted through the SDR Department. The SDR may be allocated by the IMF, as a supplement to existing reserve assets, to members participating in the SDR Department. Its value as a reserve asset derives, essentially, from the commitments of participants to hold and accept SDRs and to honor various obligations connected with its proper functioning as a reserve asset.

The resources of the SDR Department are held separately from the assets of all the other accounts of, or administered by, the IMF. They may not be used to meet the liability, obligations, or losses of the Fund incurred in the operations of the General Department or other accounts, except that the SDR Department reimburses the General Department for expenses incurred in conducting the business of the SDR Department.

At April 30, 2006, all members of the IMF were participants in the SDR Department. SDRs have been allocated by the IMF to members that are participants in the SDR Department at the time of the allocation in proportion to their quotas in the IMF. Six allocations have been made (in 1970, 1971, 1972, 1979, 1980, and 1981) for a total of SDR 21.4 billion. A proposed amendment of the IMF’s Articles of Agreement was approved by the Board of Governors in January 1998 to allow for a special one-time allocation of SDRs equal to SDR 21.4 billion. The amendment will enter into force after three-fifths of the members, having 85 percent of the total voting power, have accepted it. Upon termination of participation or liquidation of the SDR Department, the IMF will provide to holders the currencies received from the participants in settlement of their obligations. The IMF is empowered to prescribe certain official entities as holders of SDRs; at April 30, 2006, 15 institutions were prescribed as holders (14 institutions at April 30, 2005). Prescribed holders do not receive allocations.

The SDR is also used by a number of international and regional organizations as a unit of account or as the basis for their units of account. Several international conventions also use the SDR as a unit of account, notably those expressing liability limits for the international transport of goods and services.

Uses of SDRs

Participants and prescribed holders can use and receive SDRs in transactions and operations by agreement among themselves. Participants can also use SDRs in operations and transactions involving the General Resources Account, such as the payment of charges and repurchases. By designating participants to provide freely usable currency in exchange for SDRs, the IMF ensures that a participant can use its SDRs to obtain an equivalent amount of currency if it has a need because of its balance of payments, its reserve position, or developments in its reserves.

General allocations and cancellations of SDRs

The IMF has the authority to provide unconditional liquidity through general allocations of SDRs to participants in the SDR Department in proportion to their quotas in the IMF. The IMF cannot allocate SDRs to itself or to other holders it prescribes. The Articles also provide for the cancellation of SDRs, although to date there have been no cancellations. In its decisions on general allocations of SDRs, the IMF, as prescribed under its Articles, has sought to meet the long-term global need to supplement existing reserve assets in such a manner as will promote the attainment of the IMF’s purposes and avoid economic stagnation and deflation, as well as excess demand and inflation.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the SDR Department are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005 and the new composition of the SDR valuation basket became effective on January 1, 2006.

The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062005
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (one SDR was equal to 1.51678 U.S. dollars as of April 30, 2005).

Allocations and holdings

At April 30, 2006, and 2005, IMF net cumulative allocations to participants totaled SDR 21.4 billion. Participants with holdings in excess of their allocations have established a net claim on the SDR Department, which is represented on the balance sheet as a liability. Participants with holdings below their allocations have used part of their allocations, which results in a net obligation to the SDR Department and is presented as an asset of the SDR Department. Participants’ net SDR positions as of April 30, 2006, and 2005 were as follows:

20062005
TotalBelow allocationsAbove allocationsTotalBelow allocationsAbove allocations
(In millions of SDRs)
Cumulative allocations21,433.312,477.78,955.621,433.312,133.59,299.8
Holdings of SDRs by participants17,533.84,253.313,280.520,624.44,006.516,617.9
Net SDR positions3,899.58,224.4(4,324.9)808.98,127.0(7,318.1)

A summary of SDR holdings is provided below:

20062005
(In millions of SDRs)
Participants17,533.820,624.4
General Resources Account3,640.8574.3
Prescribed holders296.5270.4
21,471.121,469.1
Less: Overdue charges receivable37.835.8
Total holdings21,433.321,433.3

Interest and charges

Interest is paid on holdings of SDRs. Charges are levied on each participant’s net cumulative allocations plus any allocations in excess of holdings of the participant and unpaid charges. Interest on SDR holdings is paid quarterly. Charges on net cumulative allocations are also collected quarterly. Interest and charges are levied at the same rate and are settled by crediting and debiting individual holdings accounts on the first day of the subsequent quarter. The SDR Department is required to pay interest to each holder, whether or not sufficient SDRs are received to meet the payment of interest. If sufficient SDRs are not received because charges are overdue, additional SDRs are temporarily created.

The rate of interest on the SDR is determined by reference to a combined market interest rate, which is a weighted average of yields or rates on short-term instruments in the capital markets of the euro area, Japan, the United Kingdom, and the United States. The combined market interest rate used to determine the SDR interest rate is calculated each Friday, using the yields or rates of that day. The SDR interest rate, which is set equal to the combined market interest rate, enters into effect on the following Monday and applies through the following Sunday. The average SDR interest rate was 2.92 percent for the year ended April 30, 2006 (2.08 percent for the year ended April 30, 2005).

Administrative expenses

The expenses of conducting the business of the SDR Department are paid by the IMF from the General Resources Account, which is reimbursed in SDRs by the SDR Department at the end of each financial year. For this purpose, the SDR Department levies an assessment on all participants in proportion to their net cumulative allocations.

Overdue obligations

An allowance for losses resulting from overdue SDR obligations would be created if the IMF expected a loss to be incurred; no losses have been incurred to date.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

3. Overdue assessments and charges

At April 30, 2006, assessments and charges amounting to SDR 37.8 million were overdue to the SDR Department (SDR 36.0 million at April 30, 2005). At April 30, 2006, and 2005, three members were six months or more overdue in meeting their financial obligations to the SDR Department.

Assessments and charges due from members that are six months or more overdue to the SDR Department were as follows as of April 30:

20062005
(In millions of SDRs)
Total37.836.0
Overdue for six months or more36.835.2
Overdue for three years or more33.532.1

The amount and duration of arrears as of April 30, 2006, were as follows:

TotalLongest overdue obligation
(In millions of SDRs)
Liberia26.3April 1986
Somalia11.4February 1991
Sudan0.1April 1991
Total37.8
SDR Department Statements of changes in SDR holdings for the years ended April 30, 2006, and 2005(In thousands of SDRs)
Total
ParticipantsGeneral Resources AccountPrescribed holders20062005
Total holdings, beginning of the year20,624,368574,310270,41921,469,09721,521,916
Receipts of SDRs
Transfers among participants and prescribed holders
Transactions by agreement3,394,768102,6753,497,4433,039,600
Operations
Settlement of financial obligations10,20033,58243,782152,413
IMF-related operations
SAF/PRGF loan38,47338,473238,394
SAF repayments and interest1,5491,5492,639
PRGF contributions and payments. . .132,91447,713180,627332,906
PRGF repayments and interest367,069367,069584,772
PRGF-HIPC contributions and interest9331,3732,3064,949
Emergency Assistance subsidy payments4,5724,572416
Net interest on SDRs187,0607,094194,154142,994
MDRI grant assistance6,7006,700
Transfers from participants to the General Resources Account
Repurchases3,791,6003,791,600739,803
Charges2,043,1182,043,1182,344,061
Assessment on SDR allocation (Note 2)1,1981,1981,646
Interest on SDRs31,34531,34514,927
Transfers from the General Resources Account to participants
Purchases437,046437,046501,091
In exchange for currencies of other members
Acquisitions to pay charges1,393,5731,393,5731,577,043
Remuneration903,429903,429950,317
Other
Refunds and adjustments66,73166,7313,706
Total receipts6,576,3995,867,261561,05513,004,71510,631,677
Uses of SDRs
Transfers among participants and prescribed holders
Transactions by agreement3,156,149341,2943,497,4433,039,600
Operations
Settlement of financial obligations33,58210,20043,782152,413
IMF-related operations
SAF/PRGF Loan38,47338,473238,394
SAF repayments and interest1,5491,5492,639
PRGF contributions and payments47,713132,914180,627332,906
PRGF repayments and interest367,069367,069584,772
PRGF-HIPC contributions and interest1,3739332,3064,949
Post-conflict subsidy payments4,5724,572416
MDRI grant assistance6,7006,700
Transfers from participants to the General Resources Account
Repurchases3,791,6003,791,600739,803
Charges2,043,1182,043,1182,344,061
Assessment on SDR allocation (Note 2)1,1981,1981,646
Transfers from the General Resources Account to participants
Purchases437,046437,046501,091
In exchange for currencies of other members
Acquisitions to pay charges1,393,5731,393,5731,577,043
Remuneration903,429903,429950,317
Other
Refunds and adjustments66,73166,7313,706
Charges paid in the SDR Department
Net charges due225,499225,499157,921
Total uses9,668,8502,800,779535,08613,004,71510,631,677
Charges not paid when due2,0212,0212,805
Settlement of unpaid charges(115)(115)(55,625)
Total holdings, end of the year17,533,8233,640,792296,38821,471,00321,469,097
The ending balances contain rounding differences.
The ending balances contain rounding differences.
SDR Department Allocations and holdings of participants as at April 30, 2006(In thousands of SDRs)
Holdings
ParticipantNet cumulative allocationsTotalPercent cumulative allocations(+)Above (-) Below allocations
Afghanistan, Islamic Republic of26,703230.1(26,680)
Albania9,4759,475
Algeria128,6401,2731.0(127,367)
Angola151151
Antigua and Barbuda66
Argentina318,370192,02660.3(126,344)
Armenia9,0349,034
Australia470,545135,93328.9(334,612)
Austria179,045103,89158.0(75,154)
Azerbaijan432432
Bahamas, The10,2301071.0(10,123)
Bahrain6,2002,14334.6(4,057)
Bangladesh47,1204481.0(46,672)
Barbados8,039670.8(7,972)
Belarus2323
Belgium485,246210,67743.4(274,569)
Belize1,7981,798
Benin9,4091481.6(9,261)
Bhutan304304
Bolivia26,70325,91797.1(786)
Bosnia and Herzegovina20,4819334.6(19,548)
Botswana4,35935,888823.331,529
Brazil358,67013,7983.8(344,872)
Brunei Darussalam10,48310,483
Bulgaria4,1604,160
Burkina Faso9,409971.0(9,312)
Burundi13,6971321.0(13,565)
Cambodia15,4171491.0(15,268)
Cameroon24,4637503.1(23,713)
Canada779,290632,76681.2(146,524)
Cape Verde620121.9(608)
Central African Republic9,3253,07933.0(6,246)
Chad9,4092502.7(9,159)
Chile121,92436,89630.3(85,028)
China236,800927,840391.8691,040
Colombia114,271122,525107.28,254
Comoros716111.5(705)
Congo, Democratic Republic of the86,3098090.9(85,500)
Congo, Republic of9,7193123.2(9,407)
Costa Rica23,7261720.7(23,554)
Côte d’Ivoire37,8284561.2(37,372)
Croatia44,2054881.1(43,718)
Cyprus19,4382,93215.1(16,506)
Czech Republic9,2389,238
Denmark178,86471,68740.1(107,177)
Djibouti1,17826522.5(913)
Dominica592579.7(535)
Dominican Republic31,5854,14013.1(27,445)
Ecuador32,9295,51716.8(27,412)
Egypt135,92475,05655.2(60,868)
El Salvador24,98524,978100.0(7)
Equatorial Guinea5,8124407.6(5,372)
Eritrea
Estonia5656
Ethiopia11,1601441.3(11,016)
Fiji6,9585,66681.4(1,292)
Finland142,69098,99169.4(43,699)
France1,079,870622,23557.6(457,635)
Gabon14,0917035.0(13,388)
Gambia, The5,1211362.7(4,985)
Georgia1,5211,521
Germany1,210,7601,340,859110.7130,099
Ghana62,9837991.3(62,184)
Greece103,54420,46619.8(83,078)
Grenada9301,567168.5637
Guatemala27,6784,39715.9(23,281)
Guinea17,6043,15017.9(14,454)
Guinea-Bissau1,21239232.4(820)
Guyana14,5309,50465.4(5,026)
Haiti13,6978,53662.3(5,161)
Honduras19,0571690.9(18,888)
Hungary46,00246,002
Iceland16,4091030.6(16,306)
India681,1703,8050.6(677,365)
Indonesia238,95674,27531.1(164,681)
Iran, Islamic Republic of244,056274,877112.630,821
Iraq68,464293,105428.1224,641
Ireland87,26362,28971.4(24,974)
Israel106,36013,39312.6(92,967)
Italy702,400176,07725.1(526,323)
Jamaica40,6134921.2(40,121)
Japan891,6901,810,377203.0918,687
Jordan16,8872,50314.8(14,384)
Kazakhstan815815
Kenya36,9903,1748.6(33,816)
Kiribati1010
Korea72,91132,28744.3(40,625)
Kuwait26,744131,270490.8104,525
Kyrgyz Republic12,07112,071
Lao People’s Democratic Republic9,4099,859104.8450
Latvia102102
Lebanon4,39322,254506.617,861
Lesotho3,7393028.1(3,437)
Liberia21,007(21,007)
Libya58,771501,034852.5442,263
Lithuania6363
Luxembourg16,95511,70469.0(5,251)
Macedonia, former Yugoslav Republic of8,3792,24726.8(6,132)
Madagascar19,2702351.2(19,035)
Malawi10,9757216.6(10,254)
Malaysia139,048138,79699.8(252)
Maldives282323114.441
Mali15,9121911.2(15,721)
Malta11,28832,525288.121,237
Marshall Islands
Mauritania9,7191281.3(9,591)
Mauritius15,74418,081114.82,337
Mexico290,020314,656108.524,636
Micronesia, Federated States of1,2571,257
Moldova496496
Mongolia1414
Morocco85,68946,72254.5(38,967)
Mozambique163163
Myanmar43,4745251.2(42,949)
Namibia1818
Nepal8,1056,13175.7(1,973)
Netherlands530,340508,54295.9(21,798)
New Zealand141,32223,99017.0(117,332)
Nicaragua19,4832161.1(19,267)
Niger9,4091781.9(9,231)
Nigeria157,1551,6781.1(155,477)
Norway167,770201,044119.833,274
Oman6,26210,578168.94,316
Pakistan169,989150,38488.5(19,605)
Palau
Panama26,3225622.1(25,760)
Papua New Guinea9,300911.0(9,209)
Paraguay13,69788,905649.175,208
Peru91,3191,6161.8(89,703)
Philippines116,5953,7463.2(112,849)
Poland56,17956,179
Portugal53,32073,051137.019,731
Qatar12,82225,823201.413,001
Romania75,9502,8193.7(73,131)
Russian Federation4,4334,433
Rwanda13,69715,162110.71,465
St. Kitts and Nevis22
St. Lucia7421,530206.2788
St. Vincent and the Grenadines35430.9(350)
Samoa1,1422,473216.61,331
San Marino686686
São Tomé and Príncipe62044772.0(173)
Saudi Arabia195,527396,485202.8200,959
Senegal24,4627813.2(23,681)
Serbia and Montenegro56,66541,68473.6(14,981)
Seychelles406112.6(396)
Sierra Leone17,45522,010126.14,555
Singapore16,475202,0901,226.6185,615
Slovak Republic907907
Slovenia25,4318,25932.5(17,172)
Solomon Islands654101.6(644)
Somalia13,697(13,697)
South Africa220,360222,874101.12,514
Spain298,805216,31672.4(82,489)
Sri Lanka70,8683,1144.4(67,754)
Sudan52,1925471.0(51,645)
Suriname7,7501,01413.1(6,736)
Swaziland6,4322,48338.6(3,949)
Sweden246,525108,84044.1(137,685)
Switzerland14,42814,428
Syrian Arab Republic36,56436,575100.011
Tajikistan3,8513,851
Tanzania31,3723031.0(31,069)
Thailand84,6525770.7(84,075)
Timor-Leste
Togo10,9751291.2(10,846)
Tonga296296
Trinidad and Tobago46,2312,6225.7(43,609)
Tunisia34,2439422.8(33,301)
Turkey112,307155,317138.343,010
Turkmenistan
Uganda29,3965892.0(28,807)
Ukraine9,5959,595
United Arab Emirates38,7377,30118.8(31,436)
United Kingdom1,913,070218,73311.4(1,694,337)
United States4,899,5305,790,474118.2790,474
Uruguay49,97724,07048.2(25,907)
Uzbekistan1010
Vanuatu1,0111,011
Venezuela316,8902,6200.8(314,270)
Vietnam47,6587131.5(46,945)
Yemen, Republic of28,7436,43922.4(22,304)
Zambia68,29810,60715.5(57,691)
Zimbabwe10,2001021.0(10,098)
Above allocations8,955,65113,280,520148.34,324,869
Below allocations12,477,6794,253,30334.1(8,224,376)
Total participants21,433,33017,533,823
General Resources Account3,640,792
Prescribed holders296,388
Overdue charges37,673
21,471,00321,471,003

Deloitte

Deloitte & Touche LLP

Suite 500

555 12th Street, NW

Washington, DC 20004-1207

USA

Tel: +1 202 879 5600

Fax: +1 202 879 5309

www.deloitte.com

Independent Auditors’ Report

To the Board of Governors of the International Monetary Fund Washington, DC

We have audited the accompanying combined balance sheets of the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (formerly known as Poverty Reduction and Growth Facility Trust) (the “Trust”) as of April 30, 2006, and 2005, and the related combined statements of income and changes in resources and of cash flows for the years then ended. These combined financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust at April 30, 2006, and 2005, and the combined results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards.

Our audits were conducted for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The supplemental schedules listed on pages 208 to 212 are presented for the purpose of additional analysis and are not a required part of the basic combined financial statements. These schedules are the responsibility of the Trust’s management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic combined financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic combined financial statements taken as a whole.

June 12,2006

Member of Deloitte Touche Tohmatsu

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust

Combined balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
20062005
Assets
Cash and cash equivalents747,3261,945,902
Investments (Note 4)4,882,3953,900,371
Loans receivable (Note 5)3,819,7606,588,065
Interest receivable29,33325,669
Total assets9,478,81412,460,007
Liabilities and resources
Borrowings (Note 6)4,979,4667,411,651
Interest payable41,50747,477
Other liabilities9,1266,399
Total liabilities5,030,0997,465,527
Resources4,448,7154,994,480
Total liabilities and resources9,478,81412,460,007
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

/s/ Michael G. Kuhn Director, Finance Department

/s/ Rodrigo de Rato Managing Director

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Combined statements of income and changes in resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Balance, beginning of the year4,994,4804,925,784
Investment income (Note 8)140,40798,373
Interest on loans27,93632,961
Interest expense(154,379)(126,912)
Other expenses(2,886)(2,986)
Operational income11,0781,436
Contributions
Bilateral contributions (Note 9)56,04826,668
Special Disbursement Account (Note 9)507,10940,592
Contributions to MDRI-II Trust (Note 7)(1,120,000)
Net (loss) income/changes in resources(545,765)68,696
Balance, end of the year4,448,7154,994,480
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Combined statements of cash flows for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Cash flows from operating activities
Net (loss)/income(545,765)68,696
Adjustments to reconcile net income to cash generated by operations
Changes in interest receivable(3,664)(4,754)
Changes in interest payable and other liabilities(3,243)14,875
Cash from credit to members
Loan disbursements(402,743)(770,672)
Loan repayments3,171,048882,335
Net cash provided by operating activities2,215,633190,480
Cash flows from investment activities
Net acquisition of investments(982,024)(865,243)
Net cash used in investment activities(982,024)(865,243)
Cash flows from financing activities
Borrowings412,029769,614
Repayment of borrowings(2,844,214)(870,619)
Net cash used in financing activities(2,432,185)(101,005)
Cash and cash equivalents, beginning of the year1,945,9022,721,670
Cash and cash equivalents, end of the year747,3261,945,902
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Notes to the combined financial statements as at April 30, 2006, and 2005

1. Nature of operations

The Poverty Reduction and Growth Facility Trust (the PRGF Trust), for which the IMF is Trustee, was established in December 1987 to provide loans on concessional terms to qualifying low-income country members. Assistance under the Poverty Reduction and Growth Facility (PRGF) is made available under three-year arrangements in support of macroeconomic and adjustment programs. Effective January 5, 2006, the PRGF Trust was renamed the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (the Trust) to also support programs under the Exogenous Shocks Facility (ESF) to facilitate member countries’ adjustment to sudden and exogenous shocks. Programs under the ESF range from one to two years.

The operations of the Trust are conducted through the Loan Account, the Reserve Account, and three Subsidy Accounts–the PRGF-ESF Subsidy Account, the PRGF Subsidy Account, and the ESF Subsidy Account. The resources of the Trust are held separately from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts. Combining balance sheets and statements of income and changes in resources for the Trust are provided in Note 13 of these financial statements.

Loan Account

The resources of the Loan Account consist of the proceeds from borrowings, repayments of principal, and interest payments on loans extended by the Trust.

Reserve Account

The resources of the Reserve Account consist of amounts transferred by the IMF from the Special Disbursement Account and net earnings from investment of resources held in the Reserve Account.

The resources held in the Reserve Account are to be used by the Trustee, in the event that borrowers’ principal repayments and interest payments, together with the authorized interest subsidy, are insufficient to repay loan principal and interest on borrowings of the Loan Account. The Trustee reviews the adequacy of the Reserve Account semiannually to determine whether sufficient resources are available to meet all obligations to the lenders to the Loan Account.

Subsidy Accounts

The resources held in the Subsidy Accounts consist of bilateral contributions to the Trust, including transfers of net earnings from the PRGF Administered Accounts, contributions by the IMF from the Special Disbursement Account, net earnings on loans made to the Trust for the Subsidy Accounts, and net earnings from investment of Subsidy Accounts resources.

The resources available in the Subsidy Accounts are drawn by the Trustee to pay the difference, with respect to each interest period, between the interest due from the borrowers under the Trust and the interest due on Loan Account borrowings.

The resources in the PRGF Subsidy Account are earmarked for PRGF loans only, while the resources in the ESF Subsidy Account are earmarked for ESF loans only. The PRGF-ESF Subsidy Account can be used for both PRGF and ESF loans.

To the extent that resources in the PRGF-ESF Subsidy Account and the PRGF Subsidy Account are insufficient for PRGF subsidy operations, the Trustee will transfer to the PRGF Subsidy Account resources in the PRGF-HIPC Trust Account not earmarked for debt relief under the HIPC Initiative.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the PRGF-ESF Trust are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005, and the new composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062005
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (one SDR was equal to 1.51678 U.S. dollars as of April 30, 2005).

Foreign currency translation

Foreign currency transactions are recorded at the rate of exchange on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported using the closing exchange rates. Exchange differences arising from the settlement of transactions at rates different from those at the originating date of the transaction and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are included in the determination of net income.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

Investments are made in fixed-term deposits; domestic government bonds of the euro area, Japan, the United Kingdom, and the United States; and obligations of multilateral organizations. For deposits, the Trust may invest only in obligations issued by institutions with a credit rating of A and above. For other investments, the Trust may invest only in obligations issued by an agency of a government and a multilateral organization with a minimum credit rating of AA.

Investments in debt securities, classified as securities at fair-value-through-profit-and-loss, are measured initially at cost. Subsequent to initial recognition, all fair-value-through-profit-and-loss assets are remeasured to fair value based on the quoted market price at the balance sheet date. Gains and losses arising from a change in the fair value are recognized in the statement of income.

Investment income comprises interest income and realized and unrealized gains and losses on investments, including currency valuation differences arising from exchange rate movements against the SDR.

Loans

Loans in the Trust are initially recorded at the amount disbursed provided that the present value of the cash flows from stated interest due and the Subsidy Accounts is equal to or exceeds the disbursed amount. Thereafter, the carrying value of the loans is amortized cost.

Both PRGF and ESF loans are repayable in 5½ to 10 years in semiannual installments. Interest on loans accrues at the stated interest rate of ½ of 1 percent per annum. It is the Trust’s policy to exclude from income interest on loans that are six months or more overdue. At each balance sheet date, the loans are reviewed to determine whether there is objective evidence of loan impairment. If any such evidence exists, an impairment loss is recognized to the extent that the present value of estimated future cash flows falls below the carrying amount.

Contributions

Contributions are reflected as increases in resources after the achievement of specified conditions and are subject to bilateral agreements stipulating how the resources are to be used.

Transfers

Internal transfers of resources within the Trust are accounted for under the accrual method of accounting.

Administrative costs

The expenses of conducting the activities of the Trust are paid by the General Resources Account of the IMF. In financial years 2006 and 2005, the IMF decided to forgo reimbursements for these costs.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

Accounting and reporting developments

In December 2003, the International Accounting Standards Board revised International Accounting Standard 39, “Financial Instruments: Recognition and Measurement,” which became effective for financial year 2006. Upon adoption of the revised standard, and as permitted by the transition provisions, investments previously classified as available-for-sale were reclassified as securities at fair-value-through-profit-and-loss. After the reclassification, changes in fair value of the investments continued to be recognized in the income statement.

3. Financial risk management

In providing financial assistance to eligible country members and conducting its operations, the Trust is exposed to various types of risks, including credit, interest rate, exchange rate, and liquidity risks.

Credit risk refers to potential losses on credit outstanding owing to the inability, or unwillingness, of member countries to make loan repayments. To mitigate credit risk, the amounts that eligible member countries may borrow under the PRGF and ESF are limited to 140 percent and 50 percent of their IMF quota, respectively. Disbursements under PRGF and ESF arrangements are linked to performance criteria, and the IMF, as Trustee, conducts periodic reviews to ensure that such criteria are met. To protect the lenders to the Trust, resources are accumulated in the Reserve Account. These resources are available to repay the lenders in the event of delays in repayment or nonpayment by borrowers.

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. Interest rate risk on the Trust’s investments is managed by limiting the investment portfolio to a weighted-average effective duration that does not exceed three years.

Exchange rate risk is the exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on the Trust’s financial position and cash flows. Exchange rate risk on the Trust’s investments is managed by investing in securities denominated in SDRs or in the constituent currencies, with the same composition, of the SDR valuation basket.

Liquidity risk is the risk of non-availability of resources to meet the Trust’s financing needs and obligations. The Trust conducts semiannual reviews to determine the adequacy of the resources accumulated in the Subsidy and Reserve accounts to meet liquidity needs. Resources in the Subsidy Accounts are expected to exceed estimated needs based on the present level of loans outstanding, and the balance in the Reserve Account is projected to increase until it reaches the level sufficient to cover all outstanding PRGF-ESF Trust obligations to lenders.

4. Investments

Investments consisted of the following at April 30:

20062005
(In thousands of SDRs)
Fixed-term deposits1,838,9611,185,595
Debt securities3,043,4342,714,776
Total4,882,3953,900,371

The maturities of the investments are as follows at April 30:

20062005
(In thousands of SDRs)
Less than 1 year4,571,0893,635,060
1–3 year298,294228,811
3–5 year2,25736,500
Over 5 year10,755
Total4,882,3953,900,371

5. Loans receivable

Resources of the Loan Account of the PRGF-ESF Trust are committed to qualifying members for a three-year period, upon approval by the Trustee of three-year PRGF arrangements or ESF arrangements with durations of one to two years in support of the members’ macroeconomic and structural adjustment programs. Interest on the outstanding loans, which is repayable in 10 equal semi-installments beginning 5½ years after disbursement, is set at the rate of ½ of 1 percent per annum.

At April 30, 2006, and 2005, the resources of the Loan Account included cumulative advances from the Reserve Account of SDR 75 million resulting from the nonpayment of principal by Zimbabwe.

PRGF-ESF Trust loan repayments for the year ended April 30, 2006, include repayments totaling SDR 2,413 million made to the Loan Account by members that received MDRI debt relief on January 6, 2006, and April 28, 2006 (see Schedule 5).

Scheduled repayments of loans by borrowers, including Zimbabwe’s overdue obligations, are summarized below:

Period of repayment,

financial year ending April 30
(In thousands of SDRs)
200765,189
2008214,607
2009185,740
2010117,813
2011209,786
2012 and beyond2,951,612
Overdue75,013
Total3,819,760

As of April 30, 2006, scheduled repayments of loans include loans totaling SDR 1,164 million due from members, including potentially HIPC-eligible members under the sunset clause, that are potentially eligible for MDRI debt relief.

As of April 30, use of credit in the Trust by the largest users was as follows:

20062005
(In millions of SDRs and percent of total PRGF-ESF credit)
Largest user of credit975.125.5%1,028.215.6%
Three largest users of credit1,811.747.4%2,095.431.8%
Five largest users of credit2,139.256.0%2,655.940.3%

The five largest users of credit as of April 30, 2006, were Pakistan, the Democratic Republic of the Congo, Bangladesh, the Republic of Yemen, and Georgia.

6. Borrowings

The Trust borrows on such terms and conditions as agreed between the Trustee and the lenders. Interest rates on borrowings as at April 30, 2006, were at a weighted average rate of 2.38 percent per annum (1.69 percent per annum as at April 30, 2005). The principal amounts of the borrowings are repayable between 5½ and 16 years after the first drawing.

During the year ended April 30, 2006, the PRGF-ESF Trust made early repayments of SDR 1,438 million to lenders following the repayment of Trust loans by members that received MDRI debt relief.

Scheduled repayments of borrowings are summarized below:

Period of repayment,

financial year ending April 30
(In thousands of SDRs)
2007345,344
2008249,691
2009338,543
2010318,677
2011302,054
2012 and beyond3,425,157
Total4,979,466

The following summarizes the borrowing agreements concluded as of April 30:

Amount undrawn
20062005
(In thousands of SDRs)
Loan Account3,690,7364,092,456
Subsidy Account49,14858,435

7. Multilateral Debt Relief Initiative

Under the Multilateral Debt Relief Initiative (MDRI), the IMF administers resources to provide debt relief to Heavily Indebted Poor Countries (HIPCs) and non-HIPCs with annual per capita income of $380 or less and to HIPCs with annual per capita income of more than $380. Qualifying members at or below the per capita income threshold receive grant assistance from the MDRI-I Trust, which was funded initially by resources transferred from the Special Disbursement Account (SDR 1.5 billion). Grant assistance to the HIPCs with per capita income above the threshold is provided from the MDRI-II Trust by resources contributed by individual members. The initial contributions to the MDRI-II Trust were received through the transfer of a portion of members’ contributions to the PRGF-ESF Trust Subsidy Account (SDR 1.12 billion). Grant assistance from the MDRI Trusts (together with assistance under the HIPC Initiative) provides debt relief to cover the full stock of debt owed to the IMF (including the PRGF-ESF Trust) as of December 31, 2004, that remains outstanding at the time the member qualifies for such relief.

During the financial year ended April 30, 2006, debt relief under the MDRI was provided to 18 members that had already reached the completion point under the enhanced HIPC Initiative and two non-HIPCs (a total amount of SDR 2,503 million, of which SDR 90 million was for debt owed to the GRA and SDR 2,413 million was for debt owed to the PRGF-ESF Trust). No impairment loss has been recognized in the Loan Account. Since the stock of debt owed to the IMF as of December 31, 2004, decreases over time, the actual debt eligible for MDRI assistance for the remaining potentially eligible members depends on the timing of their completion points. The qualification of members for MDRI debt relief is reviewed periodically as progress by these members toward reaching the completion point under the HIPC Initiative is being made.

8. Investment income

Investment income comprised the following for the financial years ended April 30:

20062005
(In thousands of SDRs)
Interest income161,763142,021
Realized gains/(losses), net16,620(7,915)
Unrealized losses, net(37,848)(35,427)
Exchange rate losses, net(128)(306)
Total140,40798,373

9. Contributions

The Trustee accepts contributions for the Subsidy Accounts of the PRGF-ESF Trust on such terms and conditions as agreed between the Trustee and the contributors. At April 30, 2006, cumulative contributions amounted to SDR 2,983 million (SDR 2,457 million as of April 30, 2005).

10. Commitments under loan arrangements

An arrangement under the PRGF-ESF is a decision of the IMF, as Trustee, that gives a member the assurance that the Trust stands ready to provide foreign exchange or SDRs during a specified period and up to a specified amount in accordance with the terms of the decision. At April 30, 2006, undrawn balances under 27 loan arrangements amounted to SDR 736 million (SDR 1,315 million under 31 arrangements at April 30, 2005).

11. Related-party transactions

The expenses of conducting the business of the Trust are paid by the General Resources Account of the IMF and reimbursed by the Trust through the Special Disbursement Account. However, in financial years 2006 and 2005, the Executive Board of the IMF decided to forgo the reimbursement, which would have amounted to SDR 51 million and SDR 54 million, respectively.

The cumulative contributions from the IMF, through the Special Disbursement Account, as of April 30, 2006, and April 30, 2005, were as follows:

20062005
(In millions of SDRs)
PRGF-EST Trust:
Reserve Account2,6672,630
Subsidy Account870400
Total3,5373,030

The PRGF-ESF Subsidy Account also receives contributions from member countries that had placed deposits in the Poverty Reduction and Growth Facility Administered Accounts at low interest rates. Net investment income transferred from the Poverty Reduction and Growth Facility Administered Accounts to the PRGF-ESF Subsidy Account amounted to SDR 0.1 million and SDR 0.3 million for financial years 2006 and 2005, respectively.

12. Loans under the Saudi Fund for Development Special Account

The Saudi Fund for Development (SFD) Special Account was established at the request of the SFD to provide supplementary financing in association with loans under the PRGF-ESF Trust. The SFD makes funds available after a bilateral agreement between it and a recipient country has been effected. The SFD places funds, denominated in SDRs, in the SFD Special Account for disbursement to a recipient country simultaneously with disbursements under a PRGF arrangement. These loans are repayable in 10 equal semiannual installments commencing 5½ years after the date of disbursement and interest on these loans is set at a rate of ½ of 1 percent per annum.

The cumulative receipts and uses of resources for the Saudi Fund for Development Special Account were SDR 101 million as of April 30, 2006, and 2005.

13. Combining balance sheets and statements of income and changes in resources

The balance sheets and statements of income and changes in resources of the PRGF-ESF Trust are presented below:

Note 13 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Combining balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
Loan AccountReserve AccountSubsidy AccountsCombined
20062005200620052006200520062005
Assets
Cash and cash equivalents274,873178,230888,457294,2231,057,445747,3261,945,902
Investments944,080885,5953,077,3072,252,108861,008762,6684,882,3953,900,371
Loans receivable3,819,7606,588,0653,819,7606,588,065
Accrued account transfers15,45023,27558,41256,196(73,862)(79,471)
Interest receivable22,11423,8275,1231,7892,0965329,33325,669
Total assets5,076,2777,520,7623,319,0723,198,5501,083,4651,740,6959,478,81412,460,007
Liabilities and resources
Borrowings4,950,2497,391,72129,21719,9304,979,4667,411,651
Interest payable41,45447,407537041,50747,477
Other liabilities9,1056,399219,1266,399
Total liabilities5,000,8087,445,52729,29120,0005,030,0997,465,527
Resources75,46975,2353,319,0723,198,5501,054,1741,720,6954,448,7154,994,480
Total liabilities and resources
5,076,2777,520,7623,319,0723,198,5501,083,4651,740,6959,478,81412,460,007
schedual 1 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Combining statements of income and changes in resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
Loan AccountReserve AccountSubsidy AccountsCombined
20062005200620052006200520062005
Balance, beginning of the year75,23574,6983,198,5503,098,3401,720,6951,752,7464,994,4804,925,784
Investment income10,75485,15161,64644,50236,727140,40798,373
Interest on loans27,93632,96127,93632,961
Interest expense(154,255)(126,828)(124)(84)(154,379)(126,912)
Other expenses(1,640)(1,491)(1,246)(1,495)(2,886)(2,986)
Operational (loss)/income(115,565)(93,867)83,51160,15543,13235,14811,0781,436
Contributions
Bilateral contributions56,04826,66856,04826,668
Special Disbursement Account36,78940,592470,320507,10940,592
Contributions to MDRI–II Trust(1,120,000)(1,120,000)
Transfers between:
Loan and Reserve Accounts(222)537222(537)
Loan and Subsidy Accounts116,02193,867(116,021)(93,867)
Net income (loss)/changes in resources234537120,522100,210(666,521)(32,051)(545,765)68,696
Balance, end of the year75,46975,2353,319,0723,198,5501,054,1741,720,6954,448,7154,994,480
Note 13: Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Schedule of outstanding loans as at April 30, 2006(In thousands of SDRs)
PRGF LoansStructural Adjustment Facility1
MemberBalancePercentBalancePercent
Albania63,7021.67
Armenia116,2623.04
Azerbaijan85,7132.24
Bangladesh283,0607.41
Benin8800.02
Burkina Faso13,7600.36
Burundi40,7001.07
Cameroon2,6500.07
Cape Verde8,6400.23
Central African Republic17,8880.47
Chad52,8561.38
Congo, Democratic Republic of the553,46714.49
Congo, Republic of17,1100.45
Cĉte d’Ivoire130,4763.42
Djibouti12,5400.33
Dominica5,3660.14
Gambia, The13,8820.36
Georgia159,3354.17
Ghana26,3500.69
Grenada1,5600.04
Guinea57,5701.51
Guinea-Bissau7,3640.19
Guyana27,8100.73
Haiti3,0350.08
Honduras20,3420.53
Kenya107,7322.82
Kyrgyz Republic116,7723.06
Lao People’s Democratic Republic19,8800.52
Lesotho24,5000.64
Macedonia, former Yugoslav Republic of11,7250.31
Madagascar11,3480.30
Malawi40,8201.07
Mali3,9930.10
Mauritania44,4741.16
Moldova27,7200.73
Mongolia22,7840.60
Mozambique4,8600.13
Nepal14,2600.37
Nicaragua13,9300.36
Niger11,7500.31
Pakistan975,15025.53
Rwanda1,1420.03
São Tomé and Príncipe2,6530.07
Senegal17,3300.45
Sierra Leone133,3753.49
Somalia8,840100.00
Sri Lanka38,3901.01
Tajikistan29,4000.77
Tanzania8,4000.22
Togo7,6020.20
Uganda6,0000.16
Vietnam136,2803.57
Yemen, Republic of168,1504.40
Zambia22,0090.58
Zimbabwe75,0131.96
Total loans outstanding3,819,760100.008,840100.00

Since Structural Adjustment Facility (SAF) loans have been disbursed in connection with PRGF arrangements, the above list includes these loans, as well as loans disbursed to members under SAF arrangements. These loans are held by the Special Disbursement Account, and repayments of all SAF loans are transferred to the PRGF-ESF Reserve Account when received.

Since Structural Adjustment Facility (SAF) loans have been disbursed in connection with PRGF arrangements, the above list includes these loans, as well as loans disbursed to members under SAF arrangements. These loans are held by the Special Disbursement Account, and repayments of all SAF loans are transferred to the PRGF-ESF Reserve Account when received.

Schedule 2 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Cumulative contributions to and resources of the Subsidy Accounts as at April 30, 2006(In thousands of SDRs)
Subsidy Accounts
Contributor1PRGF-ESFPRGFESFTotal
Direct contributions to the Subsidy Accounts
Argentina27,06827,068
Australia9,2469,246
Bangladesh578578
Canada198,268198,268
China9,9009,900
Czech Republic10,00410,004
Denmark38,29938,299
Egypt10,00210,002
Finland22,68422,684
Germany132,832132,832
Iceland3,2003,200
India8,5808,580
Ireland5,8025,802
Italy158,982158,982
Japan506,997506,997
Korea33,85633,856
Luxembourg9,64259,647
Morocco7,2847,284
Netherlands99,27899,278
Norway28,07428,074
Oman2,2432,243
Sweden110,887110,887
Switzerland41,20541,205
Turkey8,0008,000
United Kingdom345,280345,280
United States126,079126,079
Total direct contributions to the Subsidy Accounts1,954,27051,954,275
Net income transferred to the Subsidy Accounts
Austria40,45140,451
Belgium77,95377,953
Botswana1,3521,352
Chile2,9102,910
Greece25,94125,941
Indonesia5,0035,003
Iran, Islamic Republic of1,3461,346
Portugal3,4023,402
Spain (ICO)168168
Total net income transferred to the Subsidy Accounts158,526158,526
Total bilateral contributions received2,112,79652,112,801
Contributions from Special Disbursement Account870,320870,320
Total contributions received2,983,11652,983,121
Cumulative net income of the Subsidy Accounts939,316403939,719
Contributions to MDRI-II Trust(1,120,000)(1,120,000)
Transfers to PRGF Subsidy Account(95,042)95,042
Transfers to ESF Subsidy Account(35)35
Resources disbursed to subsidize Trust lending(1,718,926)(29,740)(1,748,666)
Total resources of the Subsidy Accounts988,42965,710351,054,174

In addition to direct contributions, a number of members also make loans available to the Loan Account on concessional terms. See Schedule 3.

In addition to direct contributions, a number of members also make loans available to the Loan Account on concessional terms. See Schedule 3.

Schedule 3 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Schedule of borrowing agreements as at April 30, 2006(In thousands of SDRs)
MemberInterest rate

(In percent)
Amount of

agreement
Amount

drawn
Outstanding

balance
Loan Account
Prior to enlargement of PRGF
France0.501800,000800,00015,870
GermanyVariable2700,000700,00014,999
JapanVariable22,200,0002,200,00053,995
Total prior to enlargement of PRGF3,700,0003,700,00084,864
For enlargement of PRGF
BelgiumVariable2350,000242,331150,211
CanadaVariable2400,000400,000218,991
ChinaVariable2200,000155,05274,195
DenmarkVariable2100,000100,00068,070
EgyptVariable2155,600100,00038,910
FranceVariable12,100,0001,197,827592,559
GermanyVariable22,050,0001,032,730568,262
ItalyVariable21,010,000707,944434,484
JapanVariable22,934,8002,450,2822,057,034
KoreaVariable227,70027,70014,982
NetherlandsVariable2450,000153,41698,237
NorwayVariable260,00060,00025,951
OPEC Fund for International DevelopmentVariable233,989336,99020,167
Spain–Bank of SpainVariable2425,000144,234102,824
Spain–Government of Spain (ICO)Fixed67,00067,00047,819
SwitzerlandVariable2401,700199,54789,609
Total for enlargement of PRGF10,765,7897,075,0534,602,305
Resources held pending repayment4263,0804
Total–Loan Account14,465,78910,775,0534,950,249
PRGF-ESF Subsidy Account
Malta0.501,3651,3651,365
Spain–Government of Spain (ICO)0.5067,00019,18119,181
Pakistan0.5010,0008,6718,671
Total–Subsidy Accounts78,36529,21729,217

The agreement with France made before the enlargement of PRGF (SDR 800 million) provides that the interest rate shall be 0.5 percent on the first SDR 700 million drawn, and for variable, market-related rates of interest thereafter. The agreement with France made for the enlargement of the PRGF (SDR 2.1 billion) provides that the interest rate shall be 0.5 percent until the cumulative implicit interest subsidy reaches SDR 250 million, and at variable, market-related rates of interest thereafter.

The loans under these agreements are made at variable, market-related rates of interest.

The agreement with the OPEC Fund for International Development is for the amount of $50 million, converted at the exchange rate of April 30, 2006.

This amount represents principal repayments held and invested on behalf of a lender.

The agreement with France made before the enlargement of PRGF (SDR 800 million) provides that the interest rate shall be 0.5 percent on the first SDR 700 million drawn, and for variable, market-related rates of interest thereafter. The agreement with France made for the enlargement of the PRGF (SDR 2.1 billion) provides that the interest rate shall be 0.5 percent until the cumulative implicit interest subsidy reaches SDR 250 million, and at variable, market-related rates of interest thereafter.

The loans under these agreements are made at variable, market-related rates of interest.

The agreement with the OPEC Fund for International Development is for the amount of $50 million, converted at the exchange rate of April 30, 2006.

This amount represents principal repayments held and invested on behalf of a lender.

Schedule 4 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Status of loan arrangements as at April 30, 2006(In thousands of SDRs)
MemberDate of arrangementExpiration dateAmount agreedUndrawn balance
AlbaniaFeb. 1, 2006Jan. 31, 20098,5237,305
ArmeniaMay 25, 2005May 24, 200823,00016,440
BangladeshJun. 20, 2003Dec. 31, 2006400,330117,270
BeninAug. 5, 2005Aug. 4, 20086,1905,310
Burkina FasoJun. 11, 2003Sep. 30, 200624,0803,440
BurundiJan. 23, 2004Jan. 22, 200769,30028,600
CameroonOct. 24, 2005Oct. 23, 200818,57015,920
ChadFeb. 16, 2005Feb. 15, 200825,20021,000
Congo, Republic ofDec. 6, 2004Dec. 5, 200754,99039,270
DominicaDec. 29, 2003Dec. 28, 20067,6882,322
GeorgiaJun. 4, 2004Jun. 3, 200798,00042,000
GhanaMay 9, 2003Oct. 31, 2006184,50079,100
GrenadaApr. 17, 2006Apr. 16, 200910,5308,970
GuyanaSep. 20, 2002Sep. 12, 200654,5509,250
HondurasFeb. 27, 2004Feb. 26, 200771,20030,516
KenyaNov. 21, 2003Nov. 20, 2006225,000150,000
Kyrgyz RepublicMar. 15, 2005Mar. 14, 20088,8806,350
MalawiAug. 5, 2005Aug. 4, 200838,17027,827
MaliJun. 23, 2004Jun. 22, 20079,3304,007
MozambiqueJul. 6, 2004Jul. 5, 200711,3604,880
NepalNov. 19, 2003Nov. 18, 200649,91035,650
NicaraguaDec. 13, 2002Dec. 12, 200697,50027,850
NigerJan. 31, 2005Jan. 30, 200826,32014,570
RwandaAug. 12, 2002Jun. 11, 20064,000571
São Tomé and PríncipeAug. 1, 2005Jul. 31, 20082,9602,114
TanzaniaAug. 16, 2003Aug. 15, 200619,6002,800
ZambiaJun. 16, 2004Jun. 15, 2007220,09533,014
1,769,776736,346
Schedule 5 Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust Disbursed Multilateral Debt Relief Initiative assistance as of April 30, 2006(in thousands of SDRs)
Eligible debtSources of grant assistance
MemberPRGF-ESFGRATotalMDRI-I TrustMDRI-II TrustPRGF-HIPC Trust
Benin36,06036,06034,1111,949
Burkina Faso62,12062,12057,0535,067
Bolivia71,15489,780160,934154,8196,115
Cameroon173,260173,260149,16924,091
Ethiopia112,073112,07379,64532,428
Ghana265,389265,389220,02045,369
Guyana45,05845,05831,57213,486
Honduras107,457107,45798,2409,217
Cambodia56,82956,82956,829
Madagascar137,286137,286128,4928,794
Mali75,06675,06662,43412,632
Mozambique106,560106,56083,03923,521
Niger77,55477,55459,81517,739
Nicaragua140,481140,48191,76248,719
Rwanda52,74352,74320,17432,569
Senegal100,323100,32394,7625,561
Tajikistan69,30869,30869,308
Tanzania234,031234,031206,99027,041
Uganda87,72887,72875,84511,883
Zambia402,592402,592398,4714,121
Total2,413,07289,7802,502,8521,119,6441,052,906330,302

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Independent Auditors’ Report

To the Board of Governors of the International Monetary Fund Washington, DC

We have audited the accompanying balance sheets as of April 30, 2006, and 2005, and the related statements of income and changes in resources and of cash flows for the years then ended of the following entities:

Poverty Reduction and Growth Facility Administered Accounts (the “Accounts”)

  • Austria

  • Indonesia

  • Islamic Republic of Iran

  • Portugal

These financial statements are the responsibility of Accounts management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Accounts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Poverty Reduction and Growth Facility Administered Accounts at April 30, 2006, and 2005, and the results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards.

June 12,2006

Member of Deloitte Touche Tohmatsu

Poverty Reduction and Growth Facility Administered Accounts

Balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
AustriaIndonesiaIran, I. R. ofPortugal
20062005200620052006200520062005
Assets
Cash and cash equivalents1,3994,3821,838
Investments (Note 4)3,60125,00025,0004,735
Advance payments to the PRGF-ESF Trust Subsidy Account312132
Interest/other receivable399192
Total assets5,03125,39925,1924,4036,605
Liabilities and resources
Deposits (Note 5)5,00025,00025,0004,3826,573
Interest payable31193282132
Total liabilities5,03125,19325,0284,4036,605
Resources206164
Total liabilities and resources5,03125,39925,1924,4036,605
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

/s/ Michael G. Kuhn Director, Finance Department

/s/ Rodrigo de Rato Managing Director

Poverty Reduction and Growth Facility Administered Accounts Statements of income and changes in resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
AustriaIndonesiaIran, I. R. ofPortugal
20062005200620052006200520062005
Balance, beginning of the year1641
Investment income (Note 4)352077065107129136
Other expenses(1)(6)(1)(4)
Interest expense on deposits(7)(51)(206)(28)(2)(22)(33)
Operational income27150500482510699
Transfers to the
PRGF-ESF Trust Subsidy Account(27)(150)(67)(5)(106)(99)
PRGF-HIPC Trust(458)(252)
Net income/changes in resources42163
Balance, end of the year206164
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
Poverty Reduction and Growth Facility Administered Accounts Statements of cash flows for the years ended April 30, 2006, and 2005(In thousands of SDRs)
AustriaIndonesiaIran, I. R. ofPortugal
20062005200620052006200520062005
Cash flows from operating activities
Net income42163
Adjustments to reconcile net income to cash generated by operations
Changes in interest payable(31)(36)16528(23)(11)(10)
Changes in interest receivable and other assets3136(207)(191)231110
Net cash used in operating activities
Cash flow from investment activities
Net disposal/(acquisition) of investments3,6016,686(25,000)3,4294,7351,275
Net cash provided by/(used in) investment activities3,6016,686(25,000)3,4294,7351,275
Cash flow from financing activities
Repayment of deposits(5,000)(10,000)(5,000)(2,191)(2,191)
Net cash used by financing activities(5,000)(10,000)(5,000)(2,191)(2,191)
Cash and cash equivalents, beginning of year1,3994,71325,0001,5711,8382,754
Cash and cash equivalents, end of year1,3994,3821,838
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Poverty Reduction and Growth Facility Administered Accounts Notes to the financial statements as at April 30, 2006, and 2005

1. Nature of operations

At the request of certain member countries, the IMF established the Poverty Reduction and Growth Facility Administered Accounts (“PRGF Administered Accounts” or “Administered Accounts”) for the benefit of the PRGF-ESF Subsidy Account of the PRGF-ESF Trust and PRGF-HIPC Trust Account. The IMF is the Trustee of each of the Administered Accounts. The Administered Accounts comprise deposits made by contributors. The difference between interest earned by the Administered Accounts and the interest payable on deposits is transferred to the PRGF-ESF Subsidy Account of the PRGF-ESF Trust and PRGF-HIPC Trust Account.

The resources of each Administered Account are held separately from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the Administered Accounts are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005 and the new composition of the SDR valuation basket became effective on January 1, 2006.

The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062005
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (1.51678 U.S. dollars as of April 30, 2005).

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

Investments in debt securities, classified as securities at fair-value-through-profit-and-loss, are measured initially at cost. Subsequent to initial recognition, all fair-value-through-profit-and-loss assets are remeasured to fair value, based on the quoted market price at the balance sheet date. Gains and losses arising from a change in the fair value are recognized in the statement of income.

Administrative costs

The expenses of conducting the activities of the Administered Accounts are incurred and borne by the General Department of the IMF.

Accounting and reporting developments

In December 2003, the International Accounting Standards Board revised International Accounting Standard 39, “Financial Instruments: Recognition and Measurement,” which became effective for financial year 2006. Upon adoption of the revised standard, and as permitted by the transition provisions, investments previously classified as available-for-sale were reclassified as securities at fair-value-through-profit-and-loss. After the reclassification, changes in the fair value of the investments continued to be recognized in the income statement.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

3. Financial risk management

In conducting their operations, the PRGF Administered Accounts are exposed to various types of risks, including interest rate and exchange rate risks.

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. Interest rate risk on the PRGF Administered Accounts’ investments is managed by limiting the investment portfolio to a weighted-average effective duration that does not exceed three years.

Exchange rate risk is the exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on the PRGF Administered Accounts’ financial position and cash flows. Exchange rate risk on the investments is managed by investing in securities denominated in SDRs or in the constituent currencies, with the same composition of the SDR valuation basket.

4. Investments

Investments consisted of the following at April 30:

20062005
(In thousands of SDRs)
Fixed-term deposits25,00025,000
Debt securities8,336
Total25,00033,336

The maturities of the Administered Accounts’ investments are as follows at April 30:

20062005
(In thousands of SDRs)
Less than 1 year25,00032,833
1–3 years503
Total25,00033,336

Investment income comprised the following for the financial years ended April 30:

20062005
(In thousands of SDRs)
Interest income8881,094
Realized gains/(losses), net51(115)
Unrealized losses, net(69)(119)
Total870860

5. Deposits

Austria

The Administered Account Austria was established on December 27, 1988, for the administration of resources deposited in the account by the Austrian National Bank. Two deposits (SDR 60.0 million made on December 30, 1988, and SDR 50.0 million on August 10, 1995) are to be repaid in 10 equal semiannual installments beginning five and a half years after the date of each deposit and ending at the end of the tenth year after the date of each deposit. The deposits bear interest at a rate of ½ of 1 percent a year. Both deposits from Austria have been repaid in full.

Indonesia

The Administered Account Indonesia was established on June 30, 1994, for the administration of resources deposited in the account by Bank Indonesia. The deposit, totaling SDR 25.0 million, is to be repaid in one installment 10 years after the date the deposit was made. The interest payable on the deposit is equivalent to that obtained for the investment of the deposit less 2 percent a year. Upon maturity in June 2004, the deposit was reinvested for another 10 years (according to the amendment of the instrument), and investment income of 2 percent per annum (or any lesser amount if investment returns are below 2 percent) is to be transferred to the PRGF-HIPC Trust.

Islamic Republic of Iran

The Administered Account Islamic Republic of Iran was established on June 6, 1994, for the administration of resources deposited in the account by the Central Bank of the Islamic Republic of Iran (CBIRI). The CBIRI has made five annual deposits, each of SDR 1.0 million. All of the deposits are to be repaid at the end of 10 years after the date of the first deposit. Each deposit bears interest at a rate of ½ of 1 percent a year. All deposits have been repaid in full.

Portugal

The Administered Account Portugal was established on May 16, 1994, for the administration of resources deposited in the account by the Banco de Portugal (BdP). The BdP has made six annual deposits, each of SDR 2.2 million. Each deposit is to be repaid in five equal annual installments beginning six years after the date of the deposit and will be completed at the end of the tenth year after the date of the deposit. Each deposit bears interest at a rate of ½ of 1 percent a year.

6. Related-party transactions

The difference between the income earned by the Administered Accounts on the amounts invested and the interest payable on the deposits of the Administered Accounts, net of any cost, is contributed to the PRGF-ESF Subsidy Account of the PRGF-ESF Trust and PRGF-HIPC Trust Account. For the financial years ended April 30, 2006, and 2005, net investment income contributed from the Administered Accounts to the PRGF-ESF Subsidy Account amounted to SDR 0.1 million and SDR 0.3 million, respectively; contributions to the PRGF-HIPC Trust amounted to SDR 0.5 million and SDR 0.3 million, respectively.

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Independent Auditors’ Report

To the Board of Governors

of the International Monetary Fund

Washington, DC

We have audited the accompanying combined balance sheets of the Poverty Reduction and Growth Facility-Heavily Indebted Poor Countries Trust and Related Accounts (the “Trust”) as of April 30, 2006, and 2005, and the related combined statements of income and changes in resources and of cash flows for the years then ended. These combined financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Poverty Reduction and Growth FacilityHeavily Indebted Poor Countries Trust and Related Accounts at April 30, 2006, and 2005, and the combined results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards.

Our audits were conducted for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The supplemental schedules listed on pages 226 to 229 are presented for the purpose of additional analysis and are not a required part of the basic combined financial statements. These schedules are the responsibility of the Trust’s management. Such schedules have been subjected to the auditing procedures applied in our audits of the basic combined financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic combined financial statements taken as a whole.

June 12,2006

Member of

Deloitte Touche Tohmatsu

PRGF-HIPC Trust and Related Accounts

Combined balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
20062005
Assets
Cash and cash equivalents346 630503,226
Investments (Note 4)897,128705,406
Interest receivable6,7592,272
Total assets1,250,5171,210,904
Liabilities and resources
Borrowings (Note 5)609,723610,324
Interest payable1,2411,277
Total liabilities610 964611 601
Resources639 553599 303
Total liabilities and resources1,250,5171,210,904
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

/s/ Michael G. Kuhn

Director, Finance Department

/s/ Rodrigo de Rato

Managing Director

PRGF-HIPC Trust and Related Accounts Combined statements of income and changes in resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Balance, beginning of the year599,303546,700
Investment income (Note 6)32 34522,408
Interest expense(1 775)(2,053)
Other expenses(209)(254)
Operational income30,36120,101
Contributions
Bilateral contributions7,47924,456
Special Disbursement Account593,000164,097
Disbursements(590,590)(156,051)
Net income/changes in resources40,25052,603
Balance, end of the year639,553599,303
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
PRGF-HIPC Trust and Related Accounts Combined statements of cash flows for the years ended April 30, 2006, and 2005(In thousands of SDRs)
20062005
Cash flows from operating activities
Net income40,25052,603
Adjustments to reconcile net income to cash generated by operations
Change in interest receivable(4,487)(961)
Change in interest payable(36)(42)
Foreign currency translation: Investments601(9,406)
Borrowings(601)9,406
Net cash provided by operating activities35,72751,600
Cash flows from investment activities
Net acquisition of investments(192,323)(126,987)
Net cash used in investment activities(192,323)(126,987)
Cash flows from financing activities
Borrowings3,000
Repayment of borrowings(15,000)
Net cash used in financing activities(12,000)
Cash and cash equivalents, beginning of the year503,226590,613
Cash and cash equivalents, end of the year346,630503,226
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

PRGF-HIPC Trust and Related Accounts Notes to the combined financial statements as at April 30, 2006, and 2005

1. Nature of operations

The Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and for Interim PRGF Subsidy Operations (the PRGF-HIPC Trust, or the Trust) and Related Accounts comprise the PRGF-HIPC Trust Account, the Umbrella Account for HIPC Operations, and the Post-SCA-2 Administered Account. The IMF is the Trustee of the Trust and the related accounts. The PRGF-HIPC Trust Account comprises three subaccounts: the PRGF-HIPC, PRGF, and HIPC subaccounts. Combining balance sheets and income statements and changes in resources for each of these accounts are provided in Note 10. Transactions between the above accounts are eliminated on combination in the combined balance sheets and combined income statements and changes in resources.

PRGF-HIPC Trust

The PRGF-HIPC Trust was established on February 4, 1997, to provide balance of payments assistance to low-income developing members by making grants or loans to eligible members for the purpose of reducing their external debt burden and for interim PRGF subsidy purposes. The resources of the PRGF-HIPC Trust are held separately from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

The operations of the PRGF-HIPC Trust are conducted through the PRGF-HIPC Trust Account and the Umbrella Account for HIPC Operations.

PRGF-HIPC Trust Account and related accounts

The resources of the PRGF-HIPC Trust Account consist of grant contributions, borrowings, and other types of investments made by contributors; amounts transferred by the IMF from the Special Disbursement Account (SDA) and the General Resources Account; and net earnings from investment of resources held in the PRGF-HIPC Trust Account.

The PRGF-HIPC subaccount holds resources that can finance either HIPC operations or interim PRGF subsidy operations; the PRGF subaccount holds resources earmarked for interim PRGF subsidy operations, while the HIPC subaccount holds resources earmarked for HIPC operations. PRGF-HIPC subaccount resources used to finance HIPC operations through the HIPC subaccount gave rise to interest-bearing balances between the two subaccounts, which were eliminated following the MDRI-related transfers (Note 7). The investment earnings in the SDA were transferred to the HIPC subaccount on an as-needed basis.

The resources held in the PRGF-HIPC Trust Account are to be used by the Trustee to make grants or loans to eligible members that qualify for assistance under the HIPC Initiative and for subsidizing the interest rate on interim PRGF operations to PRGF-eligible members.

Umbrella Account for HIPC Operations

The Umbrella Account for HIPC Operations (the Umbrella Account) receives and administers the proceeds of grants or loans made to eligible members that qualify for assistance under the terms of the PRGF-HIPC Trust. Within the Umbrella Account, resources received are administered through the establishment of subaccounts for each eligible member upon the approval of disbursements under the PRGF-HIPC Trust.

The resources of a subaccount of the Umbrella Account consist of (1) amounts disbursed from the PRGF-HIPC Trust Account as grants or loans for the benefit of a member, and (2) net earnings from investment of the resources held in the subaccount.

The resources held in a subaccount of the Umbrella Account are to be used to repay the member’s existing debt to the IMF, or accounts administered by it, in accordance with the schedule for using the proceeds of the Trust grants or loans agreed by the Trustee and the member.

Post-SCA-2 Administered Account

The Post-SCA-2 Administered Account, which is administered by the IMF on behalf of members, was established on December 8, 1999, for the temporary administration of resources transferred by members following the termination of the second Special Contingent Account (SCA-2) in the General Department of the IMF, prior to the final disposition of those resources.

Resources received from a member’s cumulative SCA-2 contributions, together with the member’s pro rata share of investment returns, shall be transferred to the PRGF-HIPC Trust or to the member, in accordance with the member’s instructions. The assets held in the Post-SCA-2 Administered Account are held separately from the assets and property of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the PRGF-HIPC Trust and Related Accounts are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005 and the new composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062005
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (one SDR was equal to 1.51678 U.S. dollars as of April 30, 2005).

Foreign currency translation

Foreign currency transactions are recorded at the rate of exchange on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported using the closing exchange rates. Exchange differences arising from the settlement of transactions at rates different from those at the originating date of the transaction and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are included in the determination of net income.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

Investments are made in fixed-term deposits; domestic government bonds of the euro area, Japan, the United Kingdom, and the United States; and obligations of multilateral organizations. For deposits, the Trust may invest only in obligations issued by institutions with a credit rating of A and above. For other investments, the Trust may invest only in obligations issued by an agency of a government and a multilateral organization with a minimum credit rating of AA.

Investments in debt securities, classified as securities at fair-value-through-profit-and-loss, are measured initially at cost. Subsequent to initial recognition, all fair-value-through-profit-and-loss assets are remeasured to fair value based on the quoted market price at the balance sheet date. Gains and losses arising from a change in the fair value are recognized in the statement of income.

Investment income comprises interest income and realized and unrealized gains and losses on investments, including currency valuation differences arising from exchange rate movements against the SDR.

Contributions

Bilateral contributions are reflected as increases in resources and are subject to bilateral agreements stipulating how the resources are to be used.

Transfers

Internal transfers of resources within the Trust are accounted for under the accrual method of accounting.

Administrative costs

The expenses of conducting activities of the Trust and related accounts were paid for by the General Resources Account of the IMF.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

Accounting and reporting developments

In December 2003, the International Accounting Standards Board revised International Accounting Standard 39, “Financial Instruments: Recognition and Measurement,” which became effective for financial year 2006. Upon adoption of the revised standard, and as permitted by the transition provisions, investments previously classified as available-for-sale were reclassified as securities at fair-value-through-profit-and-loss. After the reclassification, changes in the fair value of the investments continued to be recognized in the income statement.

3. Financial risk management

In providing financial assistance to eligible country members and conducting its operations, the Trust is exposed to various types of risks, including interest rate and exchange rate risks.

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. Interest rate risk on the Trust’s investments is managed by limiting the investment portfolio to a weighted-average effective duration that does not exceed three years.

Exchange rate risk is the exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on the Trust’s financial position and cash flows. Exchange rate risk on the Trust’s investments is managed by investing in securities denominated in SDRs or in the constituent currencies, with the same composition, of the SDR valuation basket.

4. Investments

Investments consisted of the following at April 30:

20062005
(In thousands of SDRs)
Fixed-term deposits897,128414,213
Debt securities291,193
Total897,128705,406

The maturities of the investments are as follows at April 30:

20062005
(In thousands of SDRs)
Less than 1 year897,128687,839
1-3 years17,567
Total897,128705,406

5. Borrowings

The Trust borrows on such terms and conditions as agreed between the Trust and the lenders. Interest rates on borrowings at April 30, 2006, and 2005 varied between 0 percent and 2 percent a year. The principal amounts of the borrowings are repayable in one installment at their maturity dates. Scheduled repayments of borrowings are summarized below:

Financial year

ending April 30
(In thousands of SDRs)
2007310
200820,066
200925,000
2010276,816
201170,842
2012 and beyond216,689
Total609,723

There were no borrowings, net of the effect of foreign currency fluctuations, or repayments during the financial year ended April 30, 2006 (borrowings and repayments for the financial year ended April 30, 2005, amounted to SDR 3 million and SDR 15 million, respectively).

6. Investment income

Investment income comprised the following for the financial years ended April 30:

20062006
(In thousands of SDRs)
Interest income33,48927,873
Realized losses, net(15,865)(3,418)
Unrealized gains/(losses), net14,720(2,087)
Exchange rate gains, net140
Total32,34522,408

7. Transfers receivable and payable

The HIPC subaccount had been accumulating a negative balance to the PRGF-HIPC subaccount arising from past disbursements to the Umbrella Account under the HIPC Initiative. Following the implementation of the MDRI during the financial year ended April 30, 2006, the resources of the SDA were no longer available to finance operations in the HIPC subaccount. Consequently, the inter-subaccount balance of SDR 1,182 million, including accrued interest, was eliminated.

8. Related-party transactions

The expenses of conducting the business of the Trust were paid by the General Resources Account of the IMF.

Cumulative transfers from the SDA of the IMF to the PRGF-HIPC Trust amounted to SDR 1,167 million as of April 30, 2006 (SDR 573 million as of April 30, 2005). The PRGF-HIPC Trust also receives contributions from member countries that had placed deposits in the Poverty Reduction and Growth Facility Administered Accounts. Net investment income transferred from the Poverty Reduction and Growth Facility Administered Account to the PRGF-HIPC Trust amounted to SDR 0.5 million for financial year 2006 (SDR 0.3 million for financial year 2005).

9. Multilateral Debt Relief Initiative

Effective January 5, 2006, the IMF adopted the Multilateral Debt Relief Initiative (MDRI) to provide debt relief to Heavily Indebted Poor Countries (HIPC) and non-HIPC members with an annual per capita income of $380 or less and to HIPCs with an annual per capita income of more than $380, and for this purpose established the MDRI-I and MDRI-II Trusts, respectively. Grant assistance from the MDRI Trusts (together with assistance under the HIPC Initiative) provides debt relief to cover the full stock of debt owed to the IMF (including the PRGF-ESFTrust) as of December 31, 2004, that remains outstanding at the time the member qualifies for such relief.

During the financial year ended April 30, 2006, debt relief under the MDRI was provided to 18 members that had already reached the completion point under the enhanced HIPC Initiative and two non-HIPCs (for a total amount of SDR 2,503 million, of which SDR 90 million for debt owed to the GRA and SDR 2,413 million for debt owed to PRGF-ESF Trust). Since the stock of debt owed to the IMF as of December 31, 2004, decreases over time, the actual debt eligible for MDRI assistance for the remaining potentially eligible members depends on the timing of their completion points. The IMF periodically reviews the qualification of members for MDRI debt relief as progress by these members toward reaching the completion point under the HIPC Initiative is being made.

10. Combining balance sheets and statements of income and changes in resources

The balance sheets and statements of income and changes in resources for the accounts and subaccounts in the PRGF-HIPC Trust and Related Accounts are presented below.

Note

PRGF-HIPC Trust and Related Accounts Combining balance sheets as at April 30, 2006, and 2005(In thousands of SDRs)
20062005
PRGF-HIPC Trust Account

Subaccount PRGF
PRGF-HIPCPRGFHIPCCombinedUmbrella

Account

for HIPC

Operations
Post-SCA-2

Administered

Account
Combined

total
PRGF-HIPC

Trust

Account
Umbrella

Account

for HIPC

Operations
Post-SCA-2

Administered

Account
Combined

total
Assets
Cash and cash equivalents158,73416,004124,050298,7885,52742,315346,630123,564338,46041,202503,226
Investments496,97715,151385,000897,128897,128555,406150,000705,406
Interest receivable2,3754,0316,4063536,7595291,5012422,272
Total assets658,08631,155513,0811,202,3225,52742,6681,250,517679,499489,96141,4441,210,904
Liabilities and resources
Borrowings609,723609,723609,723610,324610,324
Interest payable1,2411,2411,2411,2771,277
Total liabilities610,964610,964610,964611,601611,601
Accumulated resources47,12231,155513,081591,3585,52742,668639,55367,898489,96141,444599,303
Total liabilities and resources658,08631,155513,0811,202,3225,52742,6681,250,517679,499489,96141,4441,210,904
Balance, beginning of the year1,357,65826,540(1,316,300)67,898489,96141,444599,303152,623353,48740,590546,700
Investment income33,6478425,49823,41617,7051,22432,34514,2647,29085422,408
Interest expense(1,775)(16,571)(1,775)1(1,775)(2,053)(2,053)
Other expenses(196)(13)(209)(209)(254)(254)
Operational income/(loss)31,676829(11,073)21,4327,7051,22430,36111,9577,29085420,101
Contributions
Bilateral contributions3,6933,7867,4797,47924,45624,456
Special Disbursement Account(164,097)757,097593,000593,000164,097164,097
Grants(98,451)(98,451)98,451(285,235)285,235
Disbursements(590,590)(590,590)(156,051)(156,051)
Reversal of subaccount transfers (Note 7)(1,181,808)1,181,808
Net (losses) income/changes in resources(1,310,536)4,6151,829,381523,460(484,434)1,22440,250(84,725)136,474854,52,603
Balance, end of the year47,12231,155513,081591,3585,52742,668639,55367,898489,96141,444599,303

Interest payable between subaccounts amounting to SDR 16.6 million (SDR 19.1 million at April 30, 2005) has been eliminated in the combined totals.

Interest payable between subaccounts amounting to SDR 16.6 million (SDR 19.1 million at April 30, 2005) has been eliminated in the combined totals.

Schedule

Post-SCA-2 Administered Account Holdings, interest, and transfers for the year ended April 30, 2006(In thousands of SDRs)
MemberBalance

beginning of year
Interest earnedTransfers to

PRGF-HIPC Trust
Balance

end of year
Argentina5,6301665,796
Dominican Republic1,042311,073
Jordan1,183351,218
Trinidad and Tobago2,542752,617
Vanuatu50151
Venezuela30,99791631,913
41,4441,22442,668

Schedule

PRGF-HIPC Trust Account Contributions and transfers for the years ended April 30, 2006, and 2005(In thousands of SDRs)
Subaccount
PRGF-HIPCPRGFHIPCCombined
Period ended April 30,2005
Belgium3,7313,731
Belize2020
Mexico8,1198,119
Netherlands3,7903,790
Norway1,0891,089
Indonesia251251
Poland258258
South Africa4,0004,000
St. Vincent and the Grenadines1111
Switzerland3,1873,187
20,6663,79024,456
Contributions from SDA164,097164,097
184,7633,790188,553
Period ended April 30, 2006
Belize2020
Indonesia458458
Netherlands3,7863,786
St. Vincent and the Grenadines1111
Switzerland3,2043,204
3,6933,7867,479
Contributions from SDA(164,097)757,097593,000
(160,404)3,786757,097600,479

Schedule

Umbrella Account for HIPC Operations Grants, interest, disbursements, and changes in resources for the years ended April 30, 2006, and 2005(In thousands of SDRs)
MemberOpening

balance
Grants from

PRGF-HIPC

Trust Account
Interest

earned
DisbursementsEnding

balance
Period ended April 30, 2005
Benin5,256752,8852,446
Bolivia23,64736211,29412,715
Burkina Faso10,88311,59522910,48512,222
Cameroon1,989181,98423
Chad4921,37558081,064
Congo, Democratic Republic of the5731,131161,138582
Ethiopia17,25219,3643593,60333,372
Gambia, The11
Ghana18169,23990013,86656,454
Guinea281128
Guinea-Bissau55
Guyana25,809174348,74417,516
Honduras4,34113,860686,89911,370
Madagascar62810,804862,1159,403
Malawi1,828101,81028
Mali25,3854299,13316,681
Mauritania10,1551633,8276,491
Mozambique39,0266789,31330,391
Nicaragua67,2001,20213,88354,519
Niger15,34312,2052976,11821,727
Rwanda8023,843823,91820,087
Senegal19,5284,60230113,18111,250
Sierra Leone5,369515,35763
Tanzania40,6426789,87931,441
Uganda36,36954315,18321,729
Zambia1,477117,200303626118,354
353,487285,2357,290156,051489,961
Period ended April 30, 2006
Benin2,446332,479
Bolivia12,71516512,880
Burkina Faso12,22215912,381
Burundi8714246
Cameroon2328,1187628,217
Chad1,064121,06313
Congo, Democratic Republic of the5821,132201,141593
Ethiopia33,37236663734,375
Gambia, The11
Ghana56,4541,00257,456
Guinea28127
Guinea-Bissau55
Guyana17,51627617,792
Honduras11,3703,69719715,264
Madagascar9,4031779,580
Malawi284,628663,3271,395
Mali16,68125616,937
Mauritania6,4911403,2223,409
Mozambique30,39147530,866
Nicaragua54,51991855,437
Niger21,72719837022,295
Rwanda20,08716,75249437,333
Senegal11,25015311,403
Sierra Leone634,000304,05538
Tanzania31,44150731,948
Uganda21,72927322,002
Zambia118,35439,4731,267159,094
489,96198,4517,705590,5905,527

Schedule

PRGF-HIPC Trust Account Cumulative contributions and transfers as at April 30, 2006(In thousands of SDRs)
Subaccount
MemberPRGF-HIPCPRGFHIPCCombined
Algeria412412
Australia17,01917,019
Austria9,9819,981
Bangladesh1,1631,163
Barbados250250
Belgium25,93025,930
Belize160160
Brazil11,03311,033
Brunei Darussalam44
Cambodia2727
Canada32,92932,929
China13,13213,132
Colombia1313
Croatia3131
Cyprus544544
Denmark13,06813,068
Egypt3737
Estonia372372
Fiji2121
Finland2,5832,583
France55,89255,892
Gabon458458
Greece2,2002,200
Iceland643643
India390390
Indonesia833833
Ireland3,9373,937
Israel1,1891,189
Italy43,30943,309
Jamaica1,8001,800
Japan98,35598,355
Korea10,62510,625
Kuwait108108
Latvia710710
Luxembourg488488
Malaysia478478
Malta706706
Mauritius4040
Mexico39,97739,977
Morocco4949
Netherlands27,59516,34743,942
New Zealand1,1581,158
Nigeria6,1506,150
Norway12,94212,942
Oman7373
Pakistan105105
Philippines4,5004,500
Poland5,0005,000
Portugal4,4304,430
Russian Federation10,20010,200
Samoa33
San Marino3232
Saudi Arabia978978
Singapore249249
Slovak Republic2,6692,669
Slovenia311311
South Africa20,89520,895
Spain16,55016,550
Sri Lanka1212
St. Vincent and the Grenadines6666
Swaziland2020
Sweden5,3225,322
Switzerland19,21919,219
Thailand350350
Tonga33
Tunisia136136
United Arab Emirates353353
United Kingdom23,55133,83757,388
United States221,932221,932
Vietnam1010
499,18327,595299,116825,894
Contributions from SDA409,697757,0971,166,794
Contributions from GRA72,45672,456
482,153757,0971,239,250
981,33627,5951,056,2132,065,144

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Independent Auditors’ Report

To the Board of Governors of the International Monetary Fund Washington, DC

We have audited the accompanying balance sheet of the Multilateral Debt Relief Initiative-II Trust (the “Trust”) as of April 30, 2006, and the related statements of income and changes in resources and of cash flows for the period from January 5, 2006 (date of inception) to April 30, 2006. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such 2006 financial statements present fairly, in all material respects, the financial position of the Multilateral Debt Relief Initiative-II Trust at April 30, 2006, and the results of its operations and its cash flows for the above stated period in conformity with International Financial Reporting Standards.

June 12,2006

Member of Deloitte Touche Tohmatsu

Multilateral Debt Relief Initiative-II Trust

Balance sheet as at April 30, 2006(In thousands of SDRs)
Assets
Cash and cash equivalents43,941
Investments (Note 4)25,000
Interest receivable305
Total assets69,246
Liabilities and resources
Accrued MDRI grant assistance69,246
Total liabilities69,246
Resources
Total liabilities and resources69,246
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

/s/ Michael G. Kuhn Director, Finance Department

/s/ Rodrigo de Rato Managing Director

Multilateral Debt Relief Initiative-II Trust Statement of income and changes in resources from inception to April 30, 2006(In thousands of SDRs)
Investment income (Note 4)2,153
Operational income2,153
Contributions1,120,000
MDRI grant assistance (Note 2)(1,122,153)
Net income/changes in resources
Balance, end of the period
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
Multilateral Debt Relief Initiative-II Trust Statement of cash flows from inception to April 30, 2006(In thousands of SDRs)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to cash generated by operations
Change in interest receivable(305)
Change in accrued MDRI grant assistance69,246
Net cash provided by operating activities68,941
Cash flows from investment activities
Net acquisition of investments(25,000)
Net cash used in investment activities(25,000)
Cash flows from financing activities
Net cash provided by financing activities
Cash and cash equivalents, end of the period43,941
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Multilateral Debt Relief Initiative-II Trust Notes to the financial statements as at April 30, 2006

1. Nature of operations

Effective January 5, 2006, the IMF adopted the Multilateral Debt Relief Initiative (MDRI) to provide full debt relief to qualifying low-income countries. For this purpose, the IMF established the Multilateral Debt Relief Initiative-I (MDRI-I) Trust and the Multilateral Debt Relief Initiative-II (MDRI-II) Trust. The IMF acts as Trustee for both trusts.

Under the MDRI, the IMF provides debt relief to HIPC and non-HIPC members with annual per capita income of $380 or less and to HIPCs with annual per capita income of more than $380. Qualifying members at or below the per capita income threshold receive grant assistance from the MDRI-I Trust, which was initially funded by resources transferred from the Special Disbursement Account (SDR 1.5 billion). Grant assistance to the remaining HIPC members with per capita income above the threshold is provided from the MDRI-II Trust by resources contributed by individual members. The initial contributions to the MDRI-II Trust were received through the transfer of a portion of members’ contributions to the PRGF-ESF Trust Subsidy Account (SDR 1.12 billion). Grant assistance from the MDRI Trusts (together with assistance under the HIPC Initiative) provides debt relief to cover the full stock of debt owed to the IMF (including the PRGF-ESF Trust) as of December 31, 2004, that remains outstanding at the time the member qualifies for such relief.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the MDRI-II Trust (the Trust) are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

The financial statements are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005, and the new composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as of April 30, 2006, were as follows:

CurrencyAmount
Euro0.4100
Japanese yen18.4000
Pound sterling0.0903
U.S. dollar0.6320

As of January 5, 2006, and April 30, 2006, one SDR was equal to 1.44408 and 1.47106 U.S. dollars, respectively.

Foreign currency translation

Foreign currency transactions are recorded at the rate of exchange on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported using the closing exchange rates. Exchange differences arising from the settlement of transactions at rates different from those at the originating date of the transaction and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are included in the determination of net income.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

Investments are made in fixed-term deposits. For these deposits, the Trust may invest only in obligations issued by institutions with a credit rating of A and above. The Trust may invest only in obligations issued by an agency of a government and a multilateral organization with a minimum credit rating of AA.

Investment income comprises interest income and currency valuation differences arising from exchange rate movements against the SDR.

Contributions

Contributions are reflected as increases in resources and are subject to bilateral agreements stipulating how the resources are to be used.

MDRI grant assistance

During the financial year ended April 30, 2006, the IMF provided debt relief under the MDRI to 18 members that had already reached the completion point under the enhanced HIPC Initiative and two non-HIPCs (for a total amount of SDR 2,503 million, of which SDR 1,053 million was provided by the MDRI-II Trust).

MDRI grant assistance to the remaining eligible members is subject to the availability of resources and is accrued when it is probable that a liability has been incurred and the amount of such grant assistance can be reasonably estimated. The amount of liability recorded (SDR 69 million) is based on the evaluation of currently available facts with respect to each individual eligible member and includes factors such as progress made toward reaching the completion point under the HIPC Initiative, and the capacity to meet the macroeconomic performance and other objective criteria after reaching the completion point. As the qualification of members for MDRI debt relief is assessed, the amounts recorded are reviewed periodically and adjusted to reflect additional information that becomes available.

Administrative costs

The expenses of conducting the business of the MDRI-II Trust were paid by the General Resources Account.

3. Financial risk management

In providing grant assistance to eligible country members and conducting its operations, the Trust is exposed to various types of risks, including exchange rate and liquidity risks.

Exchange rate risk is the exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on the Trust’s financial position and cash flows. Exchange rate risk on the Trust’s investments is managed by investing in securities denominated in SDRs or in the constituent currencies, with the same composition, of the SDR valuation basket.

Liquidity risk is the risk of non-availability of resources to meet the Trust’s obligations. The Trust conducts periodic reviews to determine the adequacy of the resources accumulated to meet liquidity needs.

4. Investments and investment income

Investments at April 30, 2006, consisted of fixed-term deposits maturing in one year or less, and investment income comprised interest income (SDR 2.19 million) and exchange rate losses (SDR 0.04 million).

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Independent Auditors’ Report

To the Board of Governors of the International Monetary Fund Washington, DC

We have audited the accompanying balance sheets as of April 30, 2006, and 2005, and the related statements of income and changes in resources and of cash flows for the years then ended of the following entities:

Other Administered Accounts (the “Accounts”)

  • Administered Account Japan

  • Administered Account for Selected Fund Activities–Japan

  • Framework Administered Account for Technical Assistance Activities

  • Supplementary Financing Facility Subsidy Account

  • The Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account

We have also audited the accompanying balance sheets of Administered Account–Spain as of April 28, 2006, and April 30, 2005, and the related statements of income and changes in resources and of cash flows for the years then ended.

These financial statements are the responsibility of the Accounts’ management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with International Standards on Auditing and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Accounts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Other Administered Accounts at April 30, 2006, and 2005, and the results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards.

June 12,2006

Member of Deloitte Touche Tohmatsu

Other Administered Accounts

Balance sheets as at April 30, 2006, and 2005
Administered Account JapanAdministered Account for Selected Fund Activities–JapanFramework Administered Account for Technical Assistance ActivitiesAdministered Account–SpainSupplementary Financing Facility Subsidy AccountThe Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account
200620052006200520062005200620052006200520062005
←(In thousands of U.S. dollars)→←(In thousands of SDRs)→
Assets
Cash and cash equivalents127,127122,40224,26621,69129,64223,9482,3452,28312,54718,684
Investments12,000
Interest/other receivables40191356
Total assets127,127122,40224,26621,69129,64223,948402,3642,29624,60318,684
Liabilities
Other liabilities40
Total liabilities40
Resources
Total resources127,127122,40224,26621,69129,64223,9482,3642,29624,60318,684
The accompanying notes are an integral part of these financial statements./s/ Michael G. Kuhn Director, Finance Department/s/ Rodrigo de Rato Managing Director
The accompanying notes are an integral part of these financial statements./s/ Michael G. Kuhn Director, Finance Department/s/ Rodrigo de Rato Managing Director
Other Administered Accounts Statements of income and changes in resources for the years ended April 30, 2006, and 2005
Administered

Account Japan
Administered

Account for

Selected Fund

Activities–Japan
Framework

Administered Account

for Technical

Assistance Activities
Administered

Account–Spain
Supplementary

Financing Facility

Subsidy Account
The Post-Conflict and

Natural Disaster

Emergency Assistance

Subsidy Account
200620052006200520062005200620052006200520062005
←(In thousands of U.S. dollars)→←(In thousands of SDRs)→
Balance, beginning of the year122,402120,23521,69122,69923,94818,9122,2962,24918,6847,850
Interest and investment income4,7252,1676245621,0244386847615199
Contributions received22,13320,84921,63424,407409,87711,051
Payments to and on behalf of beneficiaries(20,182)(22,419)(16,964)(19,809)(40)(4,573)(416)
Operational income/(loss)4,7252,1672,575(1,008)5,6945,03668475,91910,834
Net income (loss)/changes in resources4,7252,1672,575(1,008)5,6945,03668475,91910,834
Balance, end of the year127,127122,40224,26621,69129,64223,9482,3642,29624,60318,684
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
Other Administered Accounts Statements of cash flows for the years ended April 30, 2006, and 2005
Administered

Account Japan
Administered

Account for

Selected Fund

Activities–Japan
Framework

Administered Account

for Technical

Assistance Activities
Administered

Account–Spain
Supplementary

Financing Facility

Subsidy Account
The Post-Conflict and

Natural Disaster

Emergency Assistance

Subsidy Account
200620052006200520062005200620052006200520062005
←(In thousands of U.S. dollars)→←(In thousands of SDRs)→
Cash flows from operating activities
Net income/(loss)4,7252,1672,575(1,008)5,6945,03668475,91910,834
Adjustments to reconcile net income to cash generated by operations
Changes in other liabilities40
Changes in interest receivable and other assets(40)(6)(4)(56)
Net cash provided by/(used in) operating activities4,7252,1672,575(1,008)5,6945,03662435,86310,834
Cash flow from investment activities(12,000)
Net cash provided by/(used in) investment activities(12,000)
Cash flow from financing activities
Net cash used by financing activities
Cash and cash equivalents, beginning of year122,402120,23521,69122,69923,94818,9122,2832,24018,6847,850
Cash and cash equivalents, end of year127,127122,40224,26621,69129,64223,9482,3452,28312,54718,684
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Other Administered Accounts Notes to the financial statements as at April 30, 2006, and 2005

1. Nature of operations

At the request of members, the IMF has established special purpose accounts to administer contributed resources and to perform financial and technical services consistent with the purposes of the IMF. The IMF is the Trustee of each account. The assets of each account and each subaccount are separate from the assets of all other accounts of, or administered by, the IMF and are not to be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

Administered Account Japan

At the request of Japan, the IMF established an account on March 3, 1989, to administer resources made available by Japan or other countries with Japan’s concurrence that are to be used to assist certain members with overdue obligations to the IMF. The resources of the account are to be disbursed in amounts specified by Japan and to members designated by Japan.

Administered Account for Selected Fund Activities–Japan

At the request of Japan, the IMF established the Administered Technical Assistance Account–Japan on March 19, 1990, to administer resources contributed by Japan to finance technical assistance to member countries. On July 21, 1997, the account was renamed the Administered Account for Selected Fund Activities–Japan and amended to include the administration of resources contributed by Japan in support of the IMF’s Regional Office for Asia and the Pacific (OAP). The resources of the account designated for technical assistance activities are used with the approval of Japan and include the provision of scholarships. The resources designated for the OAP are used as agreed between Japan and the IMF for certain activities of the IMF with respect to Asia and the Pacific through the OAP. Disbursements can also be made from the account to the General Resources Account to reimburse the IMF for qualifying technical assistance projects and OAP expenses.

Framework Administered Account for Technical Assistance Activities

The Framework Administered Account for Technical Assistance Activities (the Framework Account) was established by the IMF on April 3, 1995, to receive and administer contributed resources that are to be used to finance technical assistance consistent with the purposes of the IMF. The financing of technical assistance activities is implemented through the establishment and operation of subaccounts within the Framework Account. Resources are to be used in accordance with the written understandings between the contributor and the Managing Director. Disbursements can also be made from the Framework Account to the General Resources Account to reimburse the IMF for its costs incurred on behalf of technical assistance activities financed by resources from the Framework Account.

As of April 30, 2006, the Framework Account comprised the following subaccounts:

Subaccount for Japan Advanced Scholarship Program

At the request of Japan, this subaccount was established on June 6, 1995, to finance the cost of studies and training of nationals of member countries in macroeconomics and related subjects at selected universities and institutions. The scholarship program focuses primarily on the training of nationals of Asian member countries, including Japan.

Rwanda–Macroeconomic Management Capacity Subaccount

At the request of Rwanda, this subaccount was established on December 20, 1995, to finance technical assistance to rehabilitate and strengthen Rwanda’s macroeconomic management capacity.

Australia–IMF Scholarship Program for Asia Subaccount

At the request of Australia, this subaccount was established on June 5, 1996, to finance the cost of studies and training of government and central bank officials in macroeconomic management so as to enable them to contribute to their countries’ achievement of sustainable economic growth and development. The program focuses primarily on the training of nationals of Asian countries.

Switzerland Technical Assistance Subaccount

At the request of Switzerland, this subaccount was established on August 27, 1996, to finance the costs of technical assistance activities of the IMF that consist of policy advice and training in macroeconomic management.

French Technical Assistance Subaccount

At the request of France, this subaccount was established on September 30, 1996, to cofinance the costs of training in economic fields for nationals of certain member countries.

Denmark Technical Assistance Subaccount

At the request of Denmark, this subaccount was established on August 25, 1998, to finance the costs of technical assistance activities of the IMF that consist of advising on policy and administrative reforms in the fiscal, monetary, and related statistical fields.

Australia Technical Assistance Subaccount

At the request of Australia, this subaccount was established on March 7, 2000, to finance the costs of technical assistance activities of the IMF that consist of advising on the design of policy and administrative reforms in the fiscal, monetary, and related statistical fields, as well as to provide training in the formulation and implementation of macroeconomic and financial policies.

The Netherlands Technical Assistance Subaccount

At the request of the Netherlands, this subaccount was established on July 27, 2000, to finance projects that seek to enhance the capacity of the members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

The United Kingdom Department for International Development (DFID) Technical Assistance Subaccount

At the request of the United Kingdom, this subaccount was established on June 29, 2001, to finance projects that seek to enhance the capacity of the members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

Italy Technical Assistance Subaccount

At the request of Italy, this subaccount was established on November 16, 2001, to finance projects that seek to enhance the capacity of certain members to formulate and implement policies related to fiscal, financial, and statistical standards and codes, including training programs and projects that strengthen the legal and administrative framework in these core areas.

Pacific Financial Technical Assistance Centre Subaccount

At the request of Australia and New Zealand, this subaccount was established on May 22, 2002, to finance activities of the Pacific Financial Technical Assistance Centre that seek to enhance the capacity of Pacific island countries and territories to formulate and implement policies related to macroeconomic, fiscal, monetary, financial, and statistical fields, including training and activities that strengthen the legal and administrative framework in these core areas.

Africa Regional Technical Assistance Centers Subaccount

At the request of France, Germany, Italy, the Netherlands, Norway, Sweden, and the United Kingdom, this subaccount was established on August 9, 2002, to finance activities of the Africa Regional Technical Assistance Centers that seek to support the Poverty Reduction Strategy Paper process in sub-Saharan African countries by fostering the capacity for sound macroeconomic management, strong fiscal institutions and financial systems, and timely and accurate collection and dissemination of economic data, including training and activities that strengthen the legal and administrative framework in these core areas. The resources of this subaccount are contributed by the above governments and other governments or official agencies, including those of China, Luxembourg, the Russian Federation, and Switzerland, that reached an understanding with the IMF subsequent to the establishment.

Sweden Technical Assistance Subaccount

At the request of Sweden, this subaccount was established on November 25, 2002, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

China Technical Assistance Subaccount

At the request of the People’s Republic of China, this subaccount was established on May 23, 2003, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

Technical Assistance Subaccount for Iraq

At the request of Australia, Canada, Italy, and the United Kingdom, this subaccount was established on July 22, 2003, to finance technical assistance activities that seek to enhance the capacity of Iraq to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and activities that strengthen the legal and administrative framework in these core areas. The resources of this subaccount are contributed by the above governments and the Government of Sweden, which reached an understanding with the IMF subsequent to the establishment.

Canada Technical Assistance Subaccount

At the request of Canada, this subaccount was established on January 28, 2004, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

Middle East Regional Technical Assistance Center Subaccount

At the request of France and Lebanon, this subaccount was established on August 20, 2004, to finance the technical assistance activities of the Middle East Regional Technical Assistance Center (METAC). METAC seeks to support the efforts of the participating countries/territories to achieve effective macroeconomic management, strong fiscal institutions and financial systems, and timely and accurate collection and dissemination of economic data, including training and activities that strengthen the legal and administrative framework in these areas. The current METAC’s participating countries/territories include the Islamic Republic of Afghanistan, Iraq, Jordan, Lebanon, Libya, Sudan, Syria, West Bank and Gaza, and Yemen. The resources of this subaccount are contributed by the above governments and other governments or official agencies, including Egypt and Kuwait, that reached an understanding with the IMF subsequent to the establishment.

Technical Assistance Subaccount to Support Macroeconomic and Financial Policy Formulation and Management

At the request of Norway, this subaccount was established on September 29, 2004, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas. The activities to be financed from the subaccount will seek in the first instance to enhance the capacity of Poverty Reduction and Growth Facility–eligible countries to formulate and implement the strategies needed to achieve the goals described in their Poverty Reduction Strategy Papers in those core areas of competence of the Fund, including strengthening their anti-money-laundering and countering the financing of terrorism legislation and implementation capacity, and improving central bank functions and operations in low-income countries.

Spain Technical Assistance Subaccount

At the request of Spain, this subaccount was established on March 2, 2005, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

European Commission Technical Assistance Subaccount for the Middle East Regional Technical Assistance Center

At the request of European Commission, this subaccount was established on June 13, 2005, to finance technical assistance activities of the Middle East Regional Technical Assistance Center.

European Investment Bank Technical Assistance Subaccount

At the request of European Investment Bank, this subaccount was established on June 29, 2005, to finance projects that seek to enhance the capacity of members to formulate and implement policies in the macroeconomic, fiscal, monetary, financial, and related statistical fields, including training programs and projects that strengthen the legal and administrative framework in these core areas.

Administered Account–Spain

At the request of Spain, the IMF established an account on March 20, 2001, to receive and disburse resources up to $1 billion contributed by Spain for Argentina. The resources of this account are to be used to assist Argentina in the implementation of the adjustment program supported by the IMF under the Stand-By Arrangement for Argentina approved on March 10, 2000, and augmented on January 12, 2001. The account was terminated on April 28, 2006, as agreed between Spain and the IMF.

Supplementary Financing Facility Subsidy Account

The Supplementary Financing Facility Subsidy Account administered by the IMF was established in December 1980 to assist low-income developing country members to meet the costs of using resources made available through the IMF’s Supplementary Financing Facility and under the policy on exceptional use. All repurchases due under these policies were scheduled for completion by January 31, 1991, and the final subsidy payments were approved in July 1991. However, two members (Liberia and Sudan), overdue in the payment of charges, remain eligible to receive previously approved subsidy payments of SDR 2.2 million when their overdue charges are settled. Accordingly, the Account remains in operation and has retained amounts for payment to these members after the overdue charges are paid.

The Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account

The Post-Conflict Emergency Assistance Subsidy Account for PRGF-Eligible Members was established in May 2001 to administer contributed resources for the purpose of providing assistance to PRGF-eligible members in support of their adjustment efforts. The account was amended on January 21, 2005, to provide for the subsidization of emergency assistance for natural disasters for PRGF-eligible members. Contributions to this account will be used to provide grants to PRGF-eligible members that have made post-conflict and natural disaster emergency assistance purchases under the IMF General Resources Account, effectively subsidizing the basic rate of charge on these purchases to 0.5 percent per annum. The subsidy to each eligible member would be prorated if resources are insufficient to reduce the basic rate of charge to 0.5 percent.

Austria-II Administered Account

At the request of the Austrian National Bank, the IMF established this account on April 3, 2006, to provide resources to subsidize charges due by PRGF-eligible countries on purchases under the policy on emergency assistance for natural disasters (“ENDA”). The account has no assets or liabilities as of April 30, 2006. The Austrian National Bank made a deposit of SDR 7 million on May 2, 2006, for a period of five years at an interest rate of ½ of 1 percent per annum. The resources in the account are to be invested, and the difference between the investment earnings and the interest due on the deposit is to be transferred to the ENDA subaccount of the Post-Conflict and Natural Disasters Emergency Assistance Subsidy Account for PRGF-eligible members.

2. Summary of significant accounting policies

Basis of accounting

The financial statements of the Other Administered Accounts are prepared in accordance with International Financial Reporting Standards (IFRS). Specific accounting principles and disclosure practices are explained further below.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unit of account

Administered Account Japan, Administered Account for Selected Fund Activities–Japan, Framework Administered Account for Technical Assistance Activities, and Administered Account–Spain

These accounts are expressed in U.S. dollars. All transactions and operations of these accounts, including the transfers to and from the accounts, are denominated in U.S. dollars, except for transactions and operations in respect of the OAP, which are denominated in Japanese yen, or transactions in other currencies as agreed between Japan and the IMF. Contributions denominated in other currencies are converted into U.S. dollars upon receipt of the funds.

The Supplementary Financing Facility Subsidy Account, the Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account, and Austria-II Administered Account

These accounts are expressed in terms of SDRs. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005 and the composition of the SDR valuation basket became effective from January 1, 2006. The currencies in the basket as of April 30, 2006, and 2005 and their amounts were as follows:

CurrencyAmount
20062005
Euro0.41000.4260
Japanese yen18.400021.0000
Pound sterling0.09030.0984
U.S. dollar0.63200.5770

As of April 30, 2006, one SDR was equal to 1.47106 U.S. dollars (one SDR was equal to 1.51678 U.S. dollars as of April 30, 2005).

Transactions and operations of the accounts are denominated in SDRs. Contributions denominated in other currencies are converted into SDRs upon receipt of the funds.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

As at April 30, 2006, the investments in the Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account consisted of short-term fixed-term deposits with maturities of less than one year and amounted to SDR 12 million.

Contributions

Bilateral contributions are reflected as increases in resources after the achievement of specified conditions and are subject to bilateral agreements stipulating how the resources are to be used.

Payments to and on behalf of beneficiaries

Payments to and on behalf of beneficiaries are recognized when the specified conditions in the respective agreements are achieved.

Transfers

Internal transfers of resources within the IMF are accounted for under the accrual method of accounting.

Foreign currency translation

Foreign currency transactions are recorded at the rate of exchange on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported using the closing exchange rates. Exchange differences arising from the settlement of transactions at rates different from those at the date of the transactions and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are included in the determination of net income.

Administrative expenses

The expenses of conducting the activities of the Other Administered Accounts are incurred and borne by the General Department of the IMF. To help defray the expenses incurred by the IMF in the administration of the Administered Account for Selected Fund Activities–Japan and the Framework Administered Account for Technical Assistance Activities, reimbursement equal to 13 percent of the expenses financed from the accounts is paid to the General Resources Account from these accounts. As at April 30, 2006, the administrative costs for the Administered Account for Selected Fund Activities–Japan amounted to $2.1 million ($2.3 million at April 30, 2005), and, for the Framework Administered Account for Technical Assistance Activities, $1.9 million ($2.2 million at April 30, 2005). These amounts are included in payments to and on behalf of beneficiaries on the statements of income and changes in resources.

Comparatives

When necessary, comparative figures have been reclassified to conform with changes in the presentation of the current year.

3. Cumulative contributions and disbursements

The cumulative contributions to and disbursements from these Administered Accounts are as follows:

April 30, 2006April 30, 2005
AccountCumulative

contributions1
Cumulative

disbursements2
Cumulative

contributions1
Cumulative

disbursements2
(In millions of U.S. dollars)
Administered Account Japan135.272.5135.272.5
Administered Account for Selected Fund Activities–Japan267.4251.9245.3231.7
Technical Assistance235.3223.3217.7207.2
Scholarships21.018.418.315.8
Office of Asia and Pacific11.110.29.38.7
Framework Administered Account for Technical Assistance Activities104.377.582.760.6
Subaccount for Japan Advanced Scholarship Program14.813.813.212.3
Rwanda–Macroeconomic Management Capacity Subaccount1.51.61.51.6
Australia–IMF Scholarship Program for Asia Subaccount3.93.53.43.0
Switzerland Technical Assistance Subaccount17.513.216.112.1
French Technical Assistance Subaccount1.20.71.20.5
Denmark Technical Assistance Subaccount6.84.85.63.9
Australia Technical Assistance Subaccount0.30.20.30.1
The Netherlands Technical Assistance Subaccount4.64.45.14.3
The United Kingdom DFID Technical Assistance Subaccount8.17.36.65.4
Italy Technical Assistance Subaccount3.71.82.81.0
Pacific Financial Technical Assistance Centre Subaccount4.43.62.82.6
Africa Regional Technical Assistance Centers Subaccount20.815.014.910.0
Sweden Technical Assistance Subaccount1.30.91.10.5
China Technical Assistance Subaccount0.20.20.20.1
Canada Technical Assistance Subaccount1.90.81.50.6
Technical Assistance Subaccount for Iraq5.82.94.52.1
Middle East Regional Technical Assistance Center Subaccount3.22.61.30.5
Technical Assistance Subaccount to Support Macroeconomic and Financial Policy Formulation and Management0.60.10.6
Spain Technical Assistance Subaccount2.0
(In millions of U.S. dollars)
European Commission Technical Assistance Subaccount for METAC1.1
European Investment Bank Technical Assistance Subaccount0.60.1
Administered Account–Spain835.5835.6835.5835.6
The Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account30.56.920.62.3

Net of refunds of contributions to donors due to termination of projects financed by resources in the Administered Account.

Disbursements had been made from resources contributed to these accounts as well as from interest earned on these resources..

Net of refunds of contributions to donors due to termination of projects financed by resources in the Administered Account.

Disbursements had been made from resources contributed to these accounts as well as from interest earned on these resources..

4. Transfer of resources

Resources of the Supplementary Financing Facility Subsidy Account in excess of the remaining subsidy payments are to be transferred to the Special Disbursement Account. At April 30, 2006, and 2005, subsidy payments totaling SDR 2.2 million had not been made to Liberia and Sudan and were being held pending the payment of overdue charges by these members.

5. Accounts termination

Administered Account Japan

The account can be terminated by the IMF or by Japan at any time. Any remaining resources in the account at termination are to be returned to Japan.

Administered Account for Selected Fund Activities–Japan

The account can be terminated by the IMF or by Japan at any time. Any resources that may remain in the account at termination, net of accrued liabilities under technical assistance projects or in respect of the OAP, are to be returned to Japan.

Framework Administered Account for Technical Assistance Activities

The Framework Account or any subaccount thereof may be terminated by the IMF at any time. The termination of the Framework Account shall terminate each subaccount thereof. A subaccount may also be terminated by the contributor of the resources to the subaccount or, in the case of a subaccount comprising resources from more than one contributor, by all the contributors participating in the subaccount at the time of termination, provided that a contributor to such a subaccount may cease its own participation in the subaccount at any time without termination of the subaccount. Termination shall be effective on the date that the IMF or the contributor, as the case may be, receives notice of termination. The disposition of any balances, net of continuing liabilities and commitments under the activities financed, is governed by the conditions agreed between the IMF and the contributor, or contributors in the case of a subaccount with more than one contributor. Absent such agreement, the balances are returned to the contributor(s).

The Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account

The account can be terminated by the IMF at any time. Any balance remaining in the account after discharge of all obligations of the account upon its termination are to be transferred to each contributor in the proportion that the SDR equivalent of its respective contribution bears to the total contributions. In the case of earmarked contributions that have been fully used, no such transfer shall be made. A contributor may also designate its share or a specified portion for such other purposes as may be mutually agreed between the contributor and the IMF.

Austria-II Administered Account

The account will be terminated upon completion of its operation. Any assets remaining after the repayment of the deposit and interest due thereon will be transferred to the Natural Disaster Emergency Assistance subaccount of the Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account for PRGF-eligible members.

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