Chapter

Appendix II. Principal Policy Decisions of the Executive Board

Author(s):
International Monetary Fund
Published Date:
September 1972
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A. Buffer Stock Financing Facility: Contributions Under the Fourth International Tin Agreement

In applying the provisions of E. B. Decision No. 3179-(70/102),1 dated November 25, 1970, the Fund decides that, for the purpose of determining the appropriate use of Fund resources under the Decision, any initial contribution made in the form of tin metal under Article 21 (a) (ii) of the Fourth International Tin Agreement shall be regarded as equivalent to contributions in cash, valued at the floor price ruling on entry into force of the Agreement.

Decision No. 3351-(71/51)

June 21, 1971

B. Use of Special Drawing Rights in Distribution of Net Income, Fiscal Year 1970/71

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 fiscal year ended April 30, 1971, provided that the Fund’s holdings of special drawing rights in the General Account at the time of payment exceed the amount of distribution to which all such participants may be entitled.

Decision No. 3383-(71/81) G/S

August 2, 7977

C. Gold Tranche Purchases and Buffer Stock Financing Facility

The Executive Directors will not challenge a member’s representation under Article V, Section 3(a)(i) made in connection with a request for a purchase under paragraph 1 of Executive Board Decision No. 2772-(69/47), adopted June 25, 19692 if the purchase is a gold tranche purchase.

Decision No. 3386-(71/83)

August 6, 1971

D. Transfer of Special Drawing Rights Held in the General Account to Participants Making Purchases from the Fund

a. Authorization

When a member which is a participant in the Special Drawing Account consults in accordance with Executive Board Decision No. 1371-(62/36), adopted July 20, 1962, on Currencies to Be Drawn and to Be Used in Repurchases,3 the Managing Director may propose that the participant request the purchase of special drawing rights not in excess of the amount which he shall indicate, for immediate use by the participant in a transaction under Article XXV, Section 2(a).

Decision No. 3414-(71/98) G/S

September 10, 1971

b. Amendment of Rule I-24

Rule 1-2 shall be amended to read as follows:

1-2. The service charge payable by a member buying, in exchange for its own currency, the currency of another member or special drawing rights shall be ½ of 1 per cent, except that no service charge shall be payable in respect of any purchase to the extent that it is a gold tranche purchase. The service charge shall be paid at the time the transaction is consummated. The service charge shall be reviewed in connection with any review of charges under Rule 1-4.5

Decision No. 3415-(71/98) G/S

September 10, 1971

E. Principles and Procedures for Reconstitution

1. For the purposes of Rule P-2 and without prejudice to any future decisions on allocations or cancellations of special drawing rights, it shall be assumed that an allocation of special drawing rights will be made on January 1, 1972, in accordance with Board of Governors Resolution No. 24-12,6 and that no allocations or cancellations will be made thereafter. This assumption shall be subject to review at any time and shall be reviewed not later than December 31, 1972.

2. Pursuant to Article XXV, Section 2(b)(ii), the Fund prescribes that a participant may obtain special drawing rights from another participant in a transaction with that other participant that would promote reconstitution under Article XXV, Section 6(a), and Schedule G, paragraph 1 (a). The maximum amount that may be obtained in this way in any calendar quarter shall be the single sum based on calculations by the Fund under Rule P-2 at the end of the previous month which will meet the participant’s entire need to reconstitute for any reconstitution period covered by those calculations.

3. Pursuant to Article XXV, Section 7(f), a participant that makes a purchase from the Fund under Article V, Section 3, may obtain special drawing rights from the Fund through the General Account in that purchase to the extent of any need it has to acquire special drawing rights in order to promote reconstitution under Article XXV, Section 6(a) and Schedule G, paragraph 1(a).

Decision No. 3457-(71/121) G/S

December 3, 1971

F. Central Rates and Wider Margins: A Temporary Regime

Preamble

This decision is adopted by the Executive Directors in order to indicate practices that members may wish to follow in present circumstances consistently with Article IV, Section 4(a) and Board of Governors Resolution No. 26-9,7 which called on all members to collaborate with the Fund and with each other in order to maintain a satisfactory structure of exchange rates within appropriate margins. The decision is intended to enable members to observe the purposes of the Fund to the maximum extent possible during the temporary period preceding the resumption of effective par values with appropriate margins in accordance with the Articles.

Paragraph 1. Par Values and Wider Margins

(a) A member will be deemed to be acting in accordance with Article IV, Section 4(a) and Resolution No. 26-9 if it takes appropriate measures, consistent with the Articles, to permit spot exchange transactions between its currency and the currencies of other members taking place within its territories only at rates within 2¼ per cent from the effective parity relationship among currencies as determined by the Fund, provided that these margins may be within 4½ per cent from the said relationship if they result from the maintenance by the member of rates within margins of 2¼ per cent from the said relationship for spot exchange transactions between its currency and its intervention currency.

(b) A member that avails itself of wider margins under (a) above shall notify the Fund. Paragraphs 5 and 6 of this decision shall then apply to the member.

(c) A member’s intervention currency means a currency which the member represents to the Fund that it stands ready to buy and sell in order to perform its obligations regarding exchange stability.

Paragraph 2. Central Rates

(a) A member which temporarily does not maintain rates based on a par value for its currency in accordance with Article IV, Section 3 and Decision No. 904-(59/32) 8 but, by means of appropriate measures consistent with the Articles, maintains a stable rate as the basis for exchange transactions in its territories may communicate to the Fund a rate for its currency for the purposes of this decision. This rate or a rate subsequently communicated in accordance with this Paragraph shall take effect as the central rate for the purposes of this decision unless the Fund finds it unsatisfactory.

(b) A central rate for a member’s currency may be communicated in gold, units of special drawing rights, or another member’s currency.

Paragraph 3. Central Rates with Wider Margins

A member that communicates a central rate under Paragraph 2(a) and avails itself of the wider margins of Paragraph 1 (a) on the basis of its central rate shall notify the Fund, and if the Fund has not found the central rate unsatisfactory the member will be deemed to be acting in accordance with Article IV, Section 4(a) and Resolution No. 26-9 if it takes appropriate measures, consistent with the Articles, to permit spot exchange transactions between its currency and the currencies of other members taking place within its territories only at rates within 2¼ per cent from the central rate, provided that these margins may be within 4½ per cent from the central rate if they result from the maintenance by the member of rates within margins of 2¼ per cent from the central rate for spot exchange transactions between its currency and its intervention currency. In addition, Paragraphs 5 and 6 shall apply.

Paragraph 4. Central Rates Without Wider Margins

If a member that communicates a central rate under Paragraph 2(a) does not notify the Fund under Paragraph 3 that it avails itself of the wider margins of that Paragraph, the member shall take appropriate measures to ensure that the margins on either side of the central rate for exchange transactions between its currency and the currencies of other members taking place within its territories shall be no wider than the equivalent of the margins of Article IV, Section 3 and Decision No. 904-(59/32).

Paragraph 5. Multiple Currency Practices and Discriminatory Currency Arrangements

Notwithstanding Paragraphs 1 and 3 above, no member shall permit, except as approved or authorized under Article VIII, Section 3 or Article XIV, Section 2, that the Fund regards as inconsistent with promotion of exchange stability, the maintenance of orderly exchange arrangements with other members, and the avoidance of competitive exchange alterations.

  • (i) a spread between the buying and selling rates for spot exchange transactions between its currency and the currencies of other members in excess of 2 per cent, or

  • (ii)

    • (1) a difference between buying or between selling rates for spot exchange transactions between its currency and the currency of another member, or

    • (2) a relationship among the buying rates, or among the selling rates, for the currencies of other members,

Paragraph 6. Intervention

Appropriate measures for the purposes of Paragraphs 1(a), 2(a), and 3 above shall include intervention by a member’s authorities in the exchange markets within the member’s territories in order to maintain rates for spot exchange transactions in accordance with this decision. In their intervention in exchange markets members shall refrain from actions incompatible with the purposes of the Fund.

Paragraph 7. Members Maintaining Narrow Margins Against an Intervention Currency

(a) A member will be deemed to be acting in accordance with Article IV, Section 4(a) and Board of Governors Resolution No. 26-9, if (a) the rate for its currency is maintained consistently with the Articles or the member’s membership resolution, (b) the member permits transactions between its currency and its intervention currency only within margins of 1 per cent of the said rate in terms of the intervention currency, and (c) the intervention currency is the currency of a member which maintains rates within margins consistent with this decision.

(b) Subparagraph (a) shall apply to a member in respect of the separate currency of a territory under Article XX, Section 2(g) for which margins of 1 per cent are maintained for transactions between the separate currency and the metropolitan currency.

Decision No. 3463-(71/126)

December 18, 1971

G. Adjustment of the Fund’s Holdings of Currencies and Exchange Rates for Transactions Between Participants in Special Drawing Rights

The following decision is adopted as a temporary measure in order to facilitate the resumption of the orderly conduct of the operations of the Fund in present circumstances.

I.1. Within a reasonable period after a member establishes a central rate for its currency under Decision No. 3463-(71/126),9 the Fund shall adjust its holdings of the member’s currency under Article IV, Section 8 in accordance with the central rate.

2.(a) The Fund’s holdings of the currency of a member which has informed the Fund that it avails itself of the wider margins of paragraph 1 of Decision No. 3463-(71/126) or has established a central rate under paragraph 2 of that decision shall be adjusted in accordance with paragraphs 3 and 4 below (i) whenever a transaction with the Fund involves the purchase or sale of that currency by another member and (ii) at such other times as the Fund may decide. The adjustment shall be based on the ratio of the representative rate for the member’s currency of the type described in Rule O-3(ii)-(iv)10 to the effective parity relationship between that currency and the member’s intervention currency or, where appropriate, the intervention currency of the issuer of the member’s intervention currency.

(b) In addition, the Fund’s holdings of the currency to which Decision No. 3087-(70/64) adopted July 14, 1970 applied shall be adjusted in accordance with the provisions of the present decision. Decision No. 3087-(70/64) is terminated.

3. Whenever the Fund adjusts its holdings of a member’s currency in accordance with paragraph 1 or 2 above, the Fund shall establish an account receivable or an account payable, as the case may be, in respect of the amount of the currency payable by or to the member under Article IV, Section 8. The amount shall be equal to the change in the gold value of the member’s currency held by the Fund. Settlements of accounts receivable or payable shall be made as of April 30 and at other times when requested by the member or the Fund.

4. The representative rate for computations under Article V, Sections 7(b) and 8(f) shall be the rate of the day for which the computation is made. For computations relating to other transactions under paragraph 2 above, the representative rate shall be, whenever possible, the representative rate for that currency two business days before the value date of the transaction, and in other cases the day closest thereto that is practicable.

II. The operation of Rule 0-3(i) is suspended until further notice. During the period of its suspension the amounts of French francs or pounds sterling to be provided against special drawing rights in transactions between participants shall be determined by the relationship between the gold value of special drawing rights and the par values of those currencies adjusted by the ratios of the representative rates for these currencies to their effective parity relationships to the intervention currency of the issuers of these currencies.

III. The Fund determines under Decision No. 3463-(71/126) that the effective parity relationship of a member’s currency to the member’s intervention currency (or to the intervention currency of the issuer of the member’s intervention currency) is the exchange rate of the member’s currency for the member’s intervention currency (or, where appropriate, for the intervention currency of the issuer of the member’s intervention currency) corresponding to the par value or central rate of the member’s currency.

IV. The Fund shall review this decision in connection with the adoption of a designation plan pursuant to Rule 0-14 or, as necessary, for any other reason connected with the orderly conduct of the operations of the Fund.

Decision No. 3537-(72/3) G/S

January 4, 1972

The above Decision was replaced on May 8, 1972 by the following Decision.

Rates for Computations and Adjustment of the Fund’s Holdings of Currencies

The following decision is adopted in order to facilitate the conduct of the operations of the Fund involving currencies for which rates are not maintained within the margins under Article IV, Section 3 of the Articles or Executive Board Decision No. 904-(59/32).11

1. Computations by the Fund under the Articles of Agreement relating to a member’s currency for which rates within the margins of Article IV, Section 3 or Executive Board Decision No. 904-(59/32) are not maintained will be made on the basis of the representative rate for that currency under Rule 0-3 12 whenever these calculations are made (i) for the purpose of a transaction with the Fund involving the purchase or sale of that member’s currency by another member, and (ii) for such other purposes as the Fund may decide. Computations under this paragraph will be made on the basis of the representative rate for the currency on the day specified in paragraph 2 below.

2. For computations for the purpose of Article V, Sections 1(b) and 8(f) the rate shall be that at which the Fund values its holdings of the currency on the day for which the computation is made. For computations relating to other transactions, including computations involving currency substituted pursuant to Schedule B, paragraph 1(d) and paragraph 1 of Executive Board Decision No. 3049-(70/44),13 the rate shall be that of two business days before the value date of the transaction and, if this is not possible, the rate of the day closest thereto that is practicable.

3. Whenever a computation relating to a member’s currency is made on the basis of a representative rate in accordance with paragraph 1 above, the Fund will adjust all of its holdings of the currency on the basis of that rate, and such adjustment will take effect as of the day specified for the computation in paragraph 2 above.

4. Whenever the Fund adjusts its holdings of a member’s currency in accordance with paragraph 3 above, the Fund shall establish an account receivable or an account payable, as the case may be, in respect of the amount of the currency payable by or to the member under Article IV, Section 8. For the purpose of applying the provisions of the Articles as of any date, the Fund’s holdings of the currency will be deemed to be its actual holdings plus the balance in any such account receivable or minus the balance in any such account payable as of that date. Settlements of accounts receivable or payable shall be made promptly after each April 30 and at other times when requested by the Fund or the member.

5. The suspension of Rule 0-3(i) pursuant to Paragraph II of Executive Board Decision No. 3537-(72/3) G/S is terminated. Executive Board Decision No. 3537-(72/3) G/S 14 and Executive Board Decision No. 321-(54/32), as amended,15 are terminated.

6. This decision shall be reviewed as necessary.

Decision No. 3637-(72/41) G/S

May 8, 1972

H. Fund’s Gold Investment and General Deposits of Gold: Liquidation

1. The Fund shall reacquire 11,428,329.237 fine ounces of gold from the United States on or before February 15, 1972, 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), Executive Board Decision No. 708-(57/57), adopted November 27, 1957, Executive Board Decision No. 905-(59/32), adopted July 24, 1959, and Executive Board Decision No. 1107-(60/50), adopted November 30, I960.16 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. The gold investment account maintained with the Federal Reserve Bank of New York shall be closed following the termination of the investment and the reacquisition of gold.

2. The Fund shall request the Federal Reserve Bank of New York and the Bank of England to transfer to the Fund’s gold bar holdings on or before February 15, 1972 the gold held on general deposit with them. The general deposit accounts maintained with these institutions shall be closed upon completion of the transfers.

3. The Managing Director shall make the necessary arrangements for the purposes of paragraph 1 and paragraph 2 above.

Decision No. 3573-(72/13)

February 14, 1972

I. General Account: Accounting in Special Drawing Rights

a. Amendment of Section 20(b) of the By-Laws

1. Following the realignment of the exchange rates of members’ currencies the Fund has reviewed its accounting practices. In view of the fixed gold value of special drawing rights, their international character, and their role as an international reserve asset, the Executive Directors have concluded that it would be appropriate for the accounts of the General Account to be summarized in special drawing rights.

2. Accordingly, the Executive Directors of the Fund have approved the submission of the following draft Resolution to the Board of Governors of the Fund for a vote without meeting pursuant to Section 13 of the By-Laws....

DRAFT RESOLUTION 17

Amendment of Section 20(b) of the By-Laws of the Fund

Resolved:

That the first sentence of the fifth paragraph of Section 20(b) of the By-Laws shall be amended, effective March 20, 1972, to read as follows:

“All accounts of the General Account shall be summarized in special drawing rights of the value prescribed in Article XXI, Section 2. The currencies of members shall be converted at their par values, or in accordance with decisions of the Fund.”

Decision No. 3577-(72/16)

February 25, 1972

b. Amendment of Rule J-1(a)18

Rule J-1 (a) shall be amended, effective March 20, 1972, to read:

“The accounts of the General Account shall be kept in terms of the currencies held in the General Account and in terms of special drawing rights, except that administrative receipts and expenditures shall be recorded in terms of currencies and summarized in special drawing rights. For this purpose, currencies shall be converted at their par values or in accordance with decisions of the Fund.”

Decision No. 3578-(72/16)

February 25, 1972

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