Appendix I: Executive Board Decisions
- International Monetary Fund
- Published Date:
- September 1971
A. Effects of Amended Articles on Calculation of Monetary Reserves and Repurchase Obligations Pursuant to Article V, Section 7(b)
1. If the repurchase which a member is required to make under Article V, Section 7(b), would exceed the limit specified in Article V, Section 7(c)(iii), the member may use any convertible currency in making the repurchase pursuant to Schedule B, Paragraph 1(d), provided that at the time of discharge the repurchase will not increase the Fund’s holdings of any member’s currency beyond 75 per cent of that member’s quota, and provided further that the member making the repurchase has consulted the Managing Director on the currencies, and the amount of each, to be used in the repurchase. The consultations by the Managing Director and the currency composition of repurchases shall be used on the statement entitled “Currencies to be Drawn and to be Used in Repurchases” (approved by Executive Board Decision No. 1371-(62/36), adopted July 20, 19621).
2. If a repurchase required under Article V, Section 7(b), would exceed the limit specified in Article V, Section 7(c)(iv), the portion of the repurchase obligation which is to be paid forthwith and the portion which is to be repurchased at the end of the subsequent financial year or years in accordance with Paragraph 1(e) of Schedule B, shall be determined as follows:
(a) If the member’s monetary reserves have not increased (i) the excess amount shall be distributed proportionately among the types of monetary reserve (gold, special drawing rights, and convertible currencies taken as a whole) in which the repurchase obligation has been calculated, and (ii) the currencies and amount of each to be paid forthwith shall be determined by the Fund in the light of the principles of Section II of the statement entitled “Currencies to be Drawn and to be Used in Repurchases” (approved by Executive Board Decision No. 1371-(62/36), adopted July 20, 1962), taking into account also the operational convenience of the member and of the Fund;
(b) If the member’s monetary reserves have increased the member may, at its option, elect to pay the amount payable forthwith either in accordance with the principles set forth in (a) above or in accordance with (c) below;
(c) If the member’s monetary reserves have increased during the year (i) the amount to be paid forthwith shall be distributed proportionately among the media which have increased, up to one half of the increase in monetary reserves, (ii) any remainder of the amount to be paid forthwith shall be distributed among the member’s remaining holdings of monetary reserves, and (iii) the balance of the repurchase obligation shall be discharged at the end of the subsequent financial year or years in the types of monetary reserve determined in accordance with the provisions of Schedule B.
3. In the calculations of monetary reserves and repurchase obligations under Article V, Section 7(b), and Schedule B, Article V, Section 7(c)(iv), and Schedule B, Paragraph 1(e), shall be applied before Article V, Section 7(c)(iii), and Schedule B, Paragraph 1(d).
4. Rule 1-62 shall be amended to read as follows:
(c) When a repurchase obligation has thus been computed for a member, the Managing Director, after consultation with the Executive Director appointed or elected by the member, shall notify the member by letter containing all the necessary details of the computation, including the distribution of the amount payable among the types of reserves and any amount to be postponed.
(d) If the member is in agreement with the aforesaid computation, the member shall so advise the Fund within thirty days from the day on which the member receives notice thereof. The Managing Director shall then send to the member a formal request for payment, and shall at the same time notify the Board of such request. The member shall discharge the amount due within thirty days from the day on which the member receives the formal request for payment.
(f) After agreement with the member if reached under (e) above, or after a decision by the Executive Board determining the member’s repurchase obligation, the Managing Director shall send to the member a formal request for payment, and shall at the same time notify the Board of such request. The member shall discharge the amount due within thirty days from the day on which the member receives the formal request for payment or within such other period as may be decided by the Executive Board.
5. Paragraph 2 of Executive Board Decision No. 1813-(65/4), adopted January 18, 1965,3 as amended by Executive Board Decision No. 2499-(68/77), adopted April 19, 1968,4 shall be amended to read as follows:
2. The Fund will make a provisional calculation of the amount and distribution of the repurchase obligations of such members and will inform them of the results of the calculation not later than June 15. Members shall discharge any repurchase obligations as thus provisionally calculated and agreed with the member within thirty days from the date of agreement, subject to the limit specified in Article V, Section 7(c)(iv), and to Paragraph 1(e) of Schedule B.
Decision No. 3049-(70/44) May 20, 1970
B. Use of Special Drawing Rights in Distribution of Net Income
Pursuant to Article XXV, Section 7(f), the Fund shall pay, at the option of a participant, an equivalent amount of special drawing rights in substitution for the amount of currency payable to it as a distribution of net income for the financial year ended April 30, 1970, provided that the General Account’s holdings of special drawing rights at the time of payment exceed the amount of distribution to which all such participants may be entitled.
Decision No. 3130-(70/87) September 11, 1970
C. Disinvestment of $400 Million in U.S. Government Securities
The Managing Director shall arrange to reacquire gold in an amount equivalent to not more than US$400 million from the United States on or before September 30, 1970, pursuant to Executive Board Decision No. 488-(56/5), adopted January 25, 1956 (as amended by Executive Board Decision No. 2844-(69/90), adopted September 19, 1969 5), Executive Board Decision No. 708-(57/57), adopted November 27, 1957,6 Executive Board Decision No. 905-(59/32), adopted July 24, 1959,7 and Executive Board Decision No. 1107-(60/50), adopted November 30, 1960.8 The gold shall be reacquired with the U.S. dollar proceeds, excluding those proceeds credited to the Special Reserve as income, received on the maturity or by the sale of U.S. Government securities held for investment.
Decision No. 3132-(70/87) September 11,1970
D. Sales of Gold by the Fund Under Article VII, Section 2(ii), in Accordance with Board of Governors Resolution: Increases in Quotas of Members—Fifth General Review 9
1. Pursuant to paragraph 7 of Board of Governors Resolution No. 25-3,9 the Managing Director shall arrange for sales of gold not exceeding the equivalent of US$700 million pursuant to Article VII, Section 2(ii), for the replenishment of the Fund’s holdings of the currencies of members which sell gold to other members in connection with the payment of increases in their quotas under Resolution No. 25-3, provided that the amount of gold sold by the Fund to a member shall not exceed the amount of gold sold by the member to other members for that purpose, and provided further that a replenishment shall not increase the Fund’s holdings of the currency being replenished above 75 per cent of that member’s quota. The arrangements shall be in accordance with paragraphs 17 and 18 of the Report of the Executive Directors to the Board of Governors entitled Increases in Quotas of Members—Fifth General Review.
2. These sales of gold to members and any purchases of excess amounts of gold paid by members up to one standard gold bar shall be made without payment of charges and shall be at the parity price as determined by the par value of the member’s currency or the applicable rate of exchange pursuant to Article IV, Section 8.
3. In connection with sales of gold by the Fund, under paragraph 1 of this decision, there shall be transferred to the Fund’s gold bar holdings from the general deposits of gold with the Bank of England the Federal Reserve Bank of New York an amount of gold calculated on each occasion of sales of gold by the Fund on the basis of the proportions which each of those deposits bear to the Fund’s total gold holdings. The transfer of gold from the general deposits to the Fund’s gold bar holdings shall take place either on the occasion of the sale of gold or shortly after the sales of gold have taken place or when the amount of gold sold by the Fund in replenishment reaches an amount equivalent to $100 million.
Decision No. 3150-(70/93) October 23, 1970
E. Payments Arrears in Current International Transactions
The Executive Board has reviewed the Fund’s policy with respect to payments arrears. The Fund shall be guided by the approach in the conclusion set forth [below].
Decision No. 3153-(70/95) October 26, 1970
1. Undue delays in the availability or use of exchange for current international transactions that result from a governmental limitation give rise to payments arrears and are payments restrictions under Article VIII, Section 2(a), and Article XIV, Section 2. The limitation may be formalized, as for instance compulsory waiting periods for exchange, or informal or ad hoc.
2. The need for the Fund to define its policy on payments arrears is emphasized by the fact that restrictions resulting in payments arrears arising from informal or ad hoc measures do particular harm to a country’s international financial relationships because of the uncertainty they generate. This uncertainty is particularly harmful to the smooth functioning of the international payments system and has pronounced adverse effects on the creditworthiness of the debtor country which may extend beyond the period of the existence of the restrictions.
3. In the light of these considerations it is believed that the Fund should aim in consultation reports at a more systematic treatment of restrictions on payments and transfers for current international transactions that produce payments arrears. In all cases where payments arrears arise from a governmental limitation on, or interference with, the availability of foreign exchange at the time a payment for a current international transaction falls due, or with the timely transfer of the proceeds of such transactions, the payments arrears should be treated in the consultation papers as evidence of a payments restriction requiring approval in Article VIII or Article XIV consultation decisions. The staff, in the consultation discussions, will have to establish whether payments arrears exist by ascertaining whether there has been a substantial delay beyond that usually required for ascertaining the bona fides of exchange applications or the time that can be regarded as normally required for the administrative processing of applications for exchange. If payments arrears exist and approval of the restriction giving rise to them is requested by the member, the member should be expected to submit a satisfactory program for their elimination. Approval if given should be only for a temporary period and generally with a fixed terminal date. Because of the difficulty in surveillance, approval should be wherever feasible in terms of the level of arrears outstanding. The program for the elimination of the payments arrears should provide for a maximum permissible delay to which a payment or transfer could be subjected, together with a phased reduction in the outstanding level.
4. Fund financial assistance to members having payments arrears should be granted on the basis of performance criteria or policies with respect to the treatment of arrears similar to the criteria or policies described in the preceding paragraph for the approval of the payments restrictions. In general, the understandings should provide for the elimination of the payments arrears within the period of the stand-by arrangement. Such understandings should be based on the concept of a given level of payments arrears and should be reflected in the performance criteria included in stand-by arrangements in the higher credit tranches. To support the policies designed to deal with arrears the letter of intent should include a statement that there would be no imposition of new restrictions or increase in the level of delayed payments. Where Fund financial assistance is being provided, but only through the first credit tranche, the adoption of a viable program directed toward the elimination of the payments arrears should be an important factor in considering whether the country was making reasonable efforts to redress its international financial situation.
F. Fourth International Tin Agreement: Buffer Stock Financing Facility
(i) The Fund, having considered the text of the Fourth International Tin Agreement, as adopted by the UN Tin Conference on May 15, 1970, finds that the terms of this Agreement relating to the international tin buffer stock to be established under the Agreement are consistent with the principles referred to in Executive Board Decision No. 2772-(69/47) of June 25, 1969.10 The Fund expects that an amount equal to not less than one third of the compulsory contributions due on entry into force of the Agreement under Article 21(a)(ii) of the Agreement will be met from financing other than the use of the Fund’s resources under Executive Board Decision No. 2772-(69/47).
(ii) In view of (i) above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), a member’s requests for purchases in connection with the financing by the member of that part of its compulsory contribution to the buffer stock established under the Fourth International Tin Agreement which the member has been called upon to make under Article 21 of the Agreement and which is in excess of one third of the member’s compulsory contribution due under Article 21(a)(ii) of the Agreement.
(iii) The staff will keep the Executive Directors informed on the operation of the buffer stock and other developments in connection with the Fourth International Tin Agreement by reports that will be made at least once a year, and the Fund may make such review of this Decision as is appropriate in the light of these reports.
Decision No. 3179-(70/102) November 25,1970
G. Replenishment of Currency Holdings by Sales of Gold
The Executive Directors agreed that the Fund would be guided by the revised conclusions regarding the replenishment of currency holdings by sales of gold as set forth [below].
Decision No. 3294-(71/22) March 22, 1971
The following policy is suggested for gold sales other than those designed to mitigate the effects of quota increases:
A. With respect to sales of gold acquired under Article V, Section 6(a):
(1) such sales should be considered regularly at six-monthly intervals;
(2) unless there is no case for replenishment, it should be presumed that sales of gold would be justified in amounts roughly corresponding to the amounts acquired under that provision since the last preceding sale.
B. With respect to general sales of gold other than under A:
(1) such sales should be made at times and in amounts determined by the Fund’s need for replenishment;
(2) in seeking to establish this need account should be taken inter alia of the Fund’s stock of currencies that are currently considered suitable for drawings, relative to the amount of potential drawings on the Fund’s resources;
(3) where appropriate and feasible, the Fund should combine with sales of gold replenishment through borrowing.
C. With respect to the currency distribution of gold sales:
(1) sales under both A and B should be distributed among net creditor countries whose currencies are currently considered suitable for drawings, in proportion to their average net creditor position, provided that the Fund would not purchase any currency beyond the point where its holdings of that currency equaled 75 per cent of quota;
(2) for this purpose these averages would be calculated over a period ending at the end of the month preceding the date of the proposal, and beginning either six months before that date, or at the end of the period on which the distribution of gold sales was based on the occasion of the last preceding gold sale, whichever was the earlier;
(3) from the amount of gold that would be sold to a member in a gold sale under A according to the calculation under this paragraph, there should be deducted the amount of any gold sold by the Fund to acquire that member’s currency in preceding replenishment transactions not made under A or B.
D. Pending the elaboration of a general policy on replenishment with SDRs, the Fund should normally on the occasion of each gold sale under A or B give members the option to have their currencies replenished with SDRs rather than with gold, provided the Fund’s holdings of SDRs were considered adequate at the time of such sale.
E. These policies should be reviewed not later than two years after their adoption, without prejudice to earlier reconsideration if that were requested.
H. Monetary Reserves: Abolition of Provisional Reporting, Speeding Up of Final Reporting, and Simplification of Report Forms and Calculations
a. Calculation of Repurchase Obligations
(1) Rule 1-6 of the Fund’s Rules and Regulations is amended to read as follows: (a) Each member shall furnish the data necessary for the calculation of its monetary reserves and its repurchase obligation, if any, within two months after the end of each financial year of the Fund, subject to (h) below. All data shall be supplied to the Fund in the monetary reserve report forms sent to members by the Fund.
(h) Notwithstanding (a) above, a member which is unable to report within two months after the end of a financial year of the Fund the necessary data with respect to holdings of its other official institutions and the other banks within its territories and the amounts of currency due to official institutions and banks in the territories of members or nonmembers specified by the Fund shall furnish these data not later than six months after the end of the financial year of the Fund. On the basis of these data and Article XIX(c) the Fund may decide to recalculate the member’s monetary reserves and repurchase obligation calculated in accordance with (b) above. Paragraphs (c) through (g) above shall apply to the recalculated repurchase obligation. (2) This Decision supersedes Executive Board Decision No. 1510-(63/23), adopted May 3, 1963,11 as amended by Executive Board Decision No. 1813-(65/4), adopted January 18, 196512 and Executive Board Decision No. 3049-(70/44), adopted May 20, 1970.13
Decision No. 3314-(71/33) April 21, 1971
b. Repurchases: Small Amounts Included in Article V, Section 7(b), Obligations
Executive Board Decision No. 2499-(68/77), adopted April 19, 196814 is abrogated.
Decision No. 3315-(71/33) April 21,1971
I. Exclusion of Special Drawing Rights in Certain Calculations of Monetary Reserves for the Fund’s Financial Years Ending April 30, 1971 and 1972
Executive Board Decision No. 3034-(70/38) adopted April 29, 197015 shall be applied in accordance with the following rule:
In calculating monetary reserves and increases in them for the purposes of Article V, Section 7(b), and Schedule B for each of the Fund’s financial years ending
April 30, 1971 and 1972, (1) a use of special drawing rights by a participant in the period January 1 to April 30 shall be considered first to constitute a use pro tanto of the special drawing rights held by the participant immediately before the latest allocation, and (2) if the participant’s use exceeds the amount of special drawing rights held at the time of the allocation, the lowest amount of special drawing rights held by the participant in the period January 1 to April 30 shall be excluded from the calculation.
Decision No. 3320-(71/34) G/S April 21, 1971
Annual Report, 1962, page 245.
By-Laws, Rules and Regulations (Twenty-Ninth Issue, Washington, November 1970), pages 37-38.
Annual Report, 1965, page 123.
Annual Report, 1968, page 127.
Selected Decisions of the Executive Director and Selected Documents (Fourth Issue, Washington, April 1970), pages 138-40.
Ibid., pages 140-41.
Ibid., page 141.
Ibid., pages 141-42.
Annual Report, 1970, pages 181-84.
Annual Report, 1970, page 175.
Annual Report, 1963, page 195.
Annual Report, 1965, page 123.
See pages 205-206.
Annual Report, 1968, page 127.
Annual Report, 1970, page 190.