Chapter

Chapter 3 Activities of the Fund

Author(s):
International Monetary Fund
Published Date:
September 1980
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The financial year ended April 30, 1980 was again an active one for the Fund, in terms of its financial and other activities and the evolution of its policies.

The most notable development was the substantial increase in the total volume of financial activity, which in the financial year 1979/80 reached a record level of SDR 9.7 billion. This figure takes into account gross drawings on the General Resources Account, Trust Fund loans, gold distribution, distribution to the developing member countries of profits from gold sales, and allocation of SDRs. (See Table 19.) Of this total volume of financial activity in 1979/80, about SDR 5.6 billion was on account of developing countries. During 1979/80 stand-by arrangements were approved for 24 member countries, the highest number of such arrangements approved in any one year since 1970. Together with the four extended arrangements approved during the year, the total number of adjustment programs approved was 28, a level previously exceeded only in 1968. At the end of 1979/80, member countries had substantial undrawn balances under stand-by and extended arrangements, which amounted to about SDR 2.7 billion.

Table 19.Selected Financial Activities by Type and Country, 1974-80(In millions of SDRs)
Financial Years Ended April 30
19741975197619771978197919801974-80
By Type
Gross drawings1450.24,121.35,267.44,749.72,367.31,239.22,211.120,406.2
Trust Fund loans31.7268.2670.0961.71,931.6
Gold distribution2209.7212.6220.4230.8873.5
Profits of gold sales
distributed to
developing countries3222.670.6292.7585.8
SDR allocations4,032.64,033.28,065.8
Total450.24,121.35,267.44,991.13,070.76,232.87,729.431,862.9
Total adjusted for

market value of gold4
450.24,121.35,267.45,448.53,672.77,067.49,675.835,703.2
Memorandum: Undrawn balances
under stand-by and extended
arrangements as of April 30,

1974-80
1,231.8156.01,085.83,581.13,638.81,377.52,718.0
By Country5
Industrial countries2,103.62,391.32,674.22,011.53,309.14,027.616,517.3
United States159.6192.21,114.21,347.42,813.5
United Kingdom1,000.01,766.71,330.3404.6501.95,003.6
Italy1,675.1780.223.8118.7164.8199.62,962.3
Others428.5611.1724.0370.21,625.51,978.75,738.0
Developing countries450.22,017.72,876.12,774.31,661.23,758.35,648.319,185.9
Oil exporting33.975.6436.6514.41,060.5
Other developing450.22,017.72,876.12,740.41,585.63,321.65,133.918,125.4
Africa44.0243.6578.1655.5404.3934.71,403.34,263.4
Asia207.8926.5871.0633.4534.61,114.31,572.45,860.0
Europe47.5380.0611.5360.2312.7288.0851.12,851.0
Middle East47.0158.8133.3207.7164.1305.1193.91,209.9
Western Hemisphere103.9308.8682.3883.6169.9679.61,113.13,941.1
All countries450.24,121.35,267.45,448.53,672.77,067.49,675.835,703.2

Excluding drawings in the reserve tranche.

Valued at SDR 35 per fine ounce.

Distribution in U.S. dollars converted into SDRs at prevailing rate.

Annual average London price of gold.

Breakdown of total financial actions adjusted for market value of gold.

Excluding drawings in the reserve tranche.

Valued at SDR 35 per fine ounce.

Distribution in U.S. dollars converted into SDRs at prevailing rate.

Annual average London price of gold.

Breakdown of total financial actions adjusted for market value of gold.

As discussed in Chapter 2, during the year consultations with member countries under Article IV continued to be central to the Fund’s work and to be the principal means of carrying out the Fund’s surveillance over the exchange rate policies of individual member countries. Regular consultations were completed for 94 countries during 1979/80. In addition, there were special consultations with member countries in connection with the periodic review of the World Economic Outlook by the Executive Board, as well as ad hoc consultations in accordance with the procedures relating to the Fund’s surveillance over members’ exchange rate policies.

During the past several years, the Fund has shaped its policies to meet the balance of payments needs of its members in the light of changing world economic conditions. Innovations during this period have included the 1974 and 1975 oil facilities, the Subsidy Account for the 1975 oil facility, the liberalization of the compensatory financing facility, the extended facility, gold sales, the Trust Fund, and the supplementary financing facility. In connection with the Second Amendment of the Articles of Agreement, which became effective in April 1978, the Fund undertook a wide-ranging review and revision of its procedures and policies.

The establishment of new facilities and the evolution of its policies on the use of its resources have enabled the Fund to make a considerable contribution to its members’ balance of payments needs over the period. Thus, in the difficult circumstances confronting members since 1973/74, gross drawings on the Fund and loans from the Trust Fund amounted to about SDR 22 billion. In addition, other activities of the Fund (gold sales, distribution of profits from gold sales, and SDR allocations) added about SDR 13 billion to the total volume of financial activity, amounting to about SDR 35 billion, of which over one half went to developing countries.

Since the assistance provided by the Fund (i.e., drawings on the General Resources Account and Trust Fund loans) is of a short-term to medium-term character and is related to the balance of payments needs of its individual members, use of the Fund’s resources in one period is followed by repurchases in subsequent periods. The charges payable by members on the Fund’s balance of payments assistance are lower than would otherwise be payable by them on credits from private international markets.

In March 1979, the Executive Board carried out a comprehensive review—the first for over a decade—of the guidelines governing the conditionality attached to the use of the Fund’s resources in the credit tranches.1 The review confirmed and clarified the main elements of the guidelines that had been operative since 1968, and also introduced several modifications to provide for greater flexibility in exceptional cases and to take account of individual circumstances of members. The results of programs under stand-by arrangements are reviewed periodically by the Executive Board, but it is too early for programs under the new guidelines to have been evaluated. Such reviews will enable the Executive Board to determine when it may be appropriate to carry out the next comprehensive review of conditionality.

Adaptation of the Fund’s policies continued in the year under review. In December 1979, the Fund adopted a decision extending the maximum repurchase period under the extended Fund facility from eight years to ten years.2 Also, members’ access to the compensatory financing facility was further liberalized by abolishing the limit of 50 per cent of quota on purchases in a single 12-month period, by raising the limit of outstanding purchases from 75 per cent to 100 percent of a member’s quota, and by changes in calculation of export shortfalls.3

At its meeting in Belgrade in September 1979, the Development Committee asked the Executive Board to examine in depth the Program of Immediate Action of the Ministers of the Group of 24, and to report its findings to the Committee at the time of the next Annual Meeting.4 The Program covers, inter alia, proposals relating to the Fund facilities, quotas, SDRs, conditionally, appropriate measures for recycling, the substitution account, and adjustment policies with due regard to structural and supply-side aspects of programs.

At its meeting in Hamburg in April 1980, the Interim Committee recognized that, although, in present circumstances, the Fund is in a relatively liquid position, it should stand ready to play a growing role in the adjustment and financing of payments imbalances and the recycling process. The Committee encouraged the Managing Director to start discussions with potential lenders on the terms and conditions under which the Fund could borrow to supplement its resources, if and when the need arose. Meanwhile, supplementary financing facility borrowing arrangements are being utilized increasingly, and the General Arrangements to Borrow and the associated borrowing agreement with Switzerland have been renewed for another period of five years until October 23, 1985.

Although the Resolution of the Board of Governors on the Seventh General Review of Quotas was approved nearly one and a half years ago, the quota increases of SDR 19.6 billion approved under it have not yet come into effect. The minimum participation requirement for the quota increases to be effective will be met when members having not less than three fourths (SDR 29.3 billion) of the total of quotas on November 1, 1978 have consented to increases in their quotas. By June 30, 1980, 62 members accounting for about 34 per cent of the total quotas in the Fund as of November 1, 1978 had consented to increases in their quotas under the Seventh General Review. In the longer run, the Fund’s liquidity needs have to be met primarily through increases in quotas, which, relative to international trade and payments, have been markedly reduced since the early days of the Fund. However, the Fund’s policies in regard to the relationship between utilization of Fund resources and quotas have been flexible. The use of Fund resources may extend beyond existing quota ceilings on members’ use of Fund resources, if and when special circumstances arise, and depending upon the type and combination of facilities used.

The Fund’s gold sales program that was agreed by the Interim Committee in August 1975, in accordance with the objective of the gradual reduction of the role of gold in the international monetary system, was completed in May 1980. Under this provision, the Fund completed the fourth sale of gold (at the former official price of SDR 35 per ounce) to countries that were members of the Fund on August 31, 1975. This brought the total amount sold to members under this program to approximately 25 million ounces. The four-year program of gold auctions (25 million ounces), which was also completed with the final auction taking place on May 7, 1980, yielded sales proceeds of US$4.6 billion, of which US$1.3 billion has been distributed directly to 104 developing member countries, and the balance, together with the income from investments, is available for concessionary loans by the Trust Fund to 62 eligible countries.

The Executive Board discussed in July 1980 the future of the Trust Fund and reached a broad consensus on a number of issues. These discussions are continuing.

Special drawing rights amounting to about SDR 4 billion were allocated to 139 members that were participants in the Special Drawing Rights Department on December 31, 1979. This allocation was the second of three consecutive annual allocations, each of SDR 4 billion, that the Fund’s Board of Governors decided should be made as of January 1, 1979-81. The allocations totaling SDR 8 billion at the beginning of 1979 and 1980 supplemented the reserve assets of member countries and raised the total amount of SDRs in existence to SDR 17.3 billion. Since April 1980, all the Fund’s 140 member countries have been participants in the Special Drawing Rights Department.

In accordance with one of the major objectives of the Second Amendment, the Fund took further decisions designed to enhance the role of the special drawing right as an international reserve asset by permitting its use in swap arrangements, forward operations, and donations (grants), and by increasing the number of official institutions that may hold, acquire, and use SDRs, by prescribing five additional institutions as “other holders” of SDRs. The Executive Board, and subsequently the Interim Committee, examined the SDR valuation and interest rate baskets, and the Committee reached a general understanding that, in principle, it would be desirable for the two baskets to be identical. The Executive Board is to consider how and when this objective should be implemented.

Prior to the meeting of the Interim Committee in Hamburg in April 1980, the Executive Board reached provisional agreement on a wide range of features of a plan for a substitution account to be administered by the Fund that would accept deposits of foreign exchange for an equivalent amount of SDR-denominated claims. However, some basic issues remained to be solved, such as the maintenance of financial balance in the account. In its communiqué following the Hamburg meeting, the Interim Committee expressed its intention to continue its work on this subject.

The Fund’s training facilities and technical assistance programs have continued to be made available to members in the monetary, banking, fiscal, and balance of payments fields, as well as in other areas of special interest to the Fund, in response to requests from members. This assistance has taken the form of training at headquarters through the IMF Institute, the stationing of staff members and outside experts in member countries, visits by technical assistance missions, and the Fund’s regular consultation procedures. Directed primarily, but not exclusively, to developing countries, these services have again covered a broad spectrum of countries at all stages of development.

Transactions and Operations in the General Resources Account

Purchases in the financial year 1979/80 totaled SDR 2.4 billion, about a third less than the total of the preceding year, and were made almost exclusively by developing countries. (See Table 20.) The largest amount of purchases was in the credit tranches (SDR 1,106 million) followed by purchases under the compensatory financing facility (SDR 863 million), in the reserve tranche (SDR 222 million), and under the extended Fund facility (SDR 216 million). The increase in compensatory financing purchases to about double the amount of the previous year reflected a fall in export earnings of developing countries and the liberalization in the use of the facility up to the maximum of 100 per cent of quota. Repurchases totaled the equivalent of SDR 3.8 billion, compared with SDR 4.9 billion in 1978/79. About 50 per cent of total repurchases related to purchases made in 1973/74 and 1974/75 under the oil facility. The total use of the Fund’s resources as represented by outstanding purchases at the end of the financial year has declined steadily from the peak of about SDR 16 billion in 1976/77 to about SDR 10 billion in 1978/79 and to SDR 8.8 billion in 1979/80. (See Chart 15.)

Table 20.Flow of Transactions in the General Resources Account and Resulting Stocks, Financial Years Ended April 30,1974-80(In millions of SDRs)
Financial Year Ended April 30
Type of Transaction1974197519761977197819791980
Total purchases1,0585,1026,5914,9102,5033,7202,433
Reserve tranche6079811,3241611362,480222
Credit tranche2391,6044612,3701,9374851,106
Buffer stock54826
Compensatory financing212188281,753 1322465863
Extended facility8190109242216
Oil facility2,4993,966437
Total repurchases6725189608684,4854,8593,776
Gold sales—.411452453419
Replenishment up to May 31, 1978201239
Competitive bids181187
Noncompetitive bids511
In distributions210213220231
Outstanding borrowings
In connection with oil facility2,4996,4656,7026,3294,2572,474
Under the General Arrangements to Borrow9111,576777777
From Swiss National Bank89154
Supplementary financing facility502
Holdings of the General Resources Account at end of year
Usable currencies26,50010,1007,8005,30011,2008,80010,600
SDRs4995104617711,3711,2901,407
Gold35,3705,3705,3704,9594,5074,0553,636

In addition, credit tranche purchases equivalent to SDR 39.56 million in the financial year ended April 30, 1976 were reclassified as having been made under the compensatory financing decision.

“Usable currencies” are those that are available to the Fund for net sales through the operational budget, except for those currencies held by the Fund in excess of quota. Since the Second Amendment became effective on April 1, 1978, the criterion for including currencies for net sales is that the members concerned have a balance of payments and reserve position that is considered “sufficiently strong” for that purpose.

Valued at SDR 35 per fine ounce.

In addition, credit tranche purchases equivalent to SDR 39.56 million in the financial year ended April 30, 1976 were reclassified as having been made under the compensatory financing decision.

“Usable currencies” are those that are available to the Fund for net sales through the operational budget, except for those currencies held by the Fund in excess of quota. Since the Second Amendment became effective on April 1, 1978, the criterion for including currencies for net sales is that the members concerned have a balance of payments and reserve position that is considered “sufficiently strong” for that purpose.

Valued at SDR 35 per fine ounce.

Chart 15.Use of Fund’s Resources as at April 30, 1970-80

(In billions of SDRs)

During the year, 24 stand-by arrangements were approved for a total equivalent to SDR 2,479 million, compared with 14 arrangements totaling SDR 508 million in the previous year. All the arrangements approved during 1979/80 were for developing countries; amounts equivalent to SDR 1,448 million were to be financed from resources available to the Fund under the supplementary financing facility.

Four extended arrangements—all with developing countries—were approved for a total of SDR 570 million (of which SDR 362 million was to be financed from borrowings under the supplementary financing facility), about one half of the amount approved for the same number of arrangements during 1978/79. One arrangement (with Jamaica) was for an amount in excess of the normal limit of 140 per cent of quota, in view of the member’s special circumstances, as provided for in the supplementary financing decision.

Purchases under the buffer stock financing facility by four members amounted to a total of SDR 26 million, compared with SDR 47.6 million purchased by two members in the previous year.

As mentioned earlier, the Fund completed the last of the four sales of gold in distribution to those countries that were members of the Fund on August 31, 1975. A total of 6,593,368 fine ounces of gold amounting to the equivalent of SDR 231 million was sold for members’ own currencies at SDR 35 per fine ounce. Total sales of gold in the four distributions amounted to 24,977,769 fine ounces, or SDR 874.2 million.

Purchases

Reserve Tranche Purchases

Purchases in the reserve tranche (the gold tranche prior to the Second Amendment of the Fund’s Articles of Agreement), which increased from SDR 136 million in 1977/78 to SDR 2,480 million in 1978/79 as a result of the SDR 2,275 million purchased by the United States, declined to SDR 222 million in 1979/80. All purchases during the year, except one by New Zealand for SDR 49 million, were made by 14 developing countries, 9 of which made subsequent use of Fund resources under various facilities. The purchases ranged from SDR 0.36 million (Dominica) to SDR 60.5 million (Yugoslavia).

Credit Tranche Purchases and Stand-By Arrangements

There was a sharp increase in credit tranche purchases during the financial year, mostly under stand-by arrangements, from SDR 485 million in 1978/79 to SDR 1.1 billion. This reflects larger purchases under ordinary resources (SDR 643 million) compared with the previous year (SDR 437 million), as well as the use of resources for the first time under the supplementary financing facility (SDR 383 million). The largest credit tranche purchases during the financial year were made by Turkey (SDR 230 million), Peru (SDR 194 million), and the Philippines (SDR 111.25 million).

The 24 stand-by arrangements approved during 1979/80 included 6 in the first credit tranche and 18 in the second and upper credit tranches. The two-year stand-by arrangement with Korea for an amount of SDR 640 million was the largest. Three other stand-by arrangements were also for two years—Costa Rica (SDR 60 million), Kenya (SDR 123 million), and Mauritius (SDR 73 million)—and one, Malawi (SDR 26 million), was for a little more than two years. Of the other 19 arrangements approved, 7 were for periods ranging between 13 and 23 months, 10 for one year, and 2 for less than one year. Among the 9 standby arrangements that included supplementary financing, 4 (with Korea, Mauritius, Peru, and the Philippines) were approved under the special circumstances clause for amounts in excess of the normal maximum entitlements. The total use of Fund resources under stand-by arrangements by 23 members during 1979/80 amounted to SDR 1,026 million, of which 8 members drew SDR 383 million under the supplementary financing facility, and the balance was purchased from ordinary resources.

Extended Fund Facility

Four extended arrangements were approved by the Executive Board during 1979/80 in support of programs presented by Guyana, Honduras, Jamaica, and Sudan. These arrangements represent an aggregate commitment of SDR 570 million, of which SDR 362 million would be provided with supplementary financing. Of this latter amount, SDR 124 million would be provided to Jamaica under the special circumstances clause of the decision on the supplementary financing facility. A total of SDR 216 million was purchased under the seven arrangements outstanding (including those approved in earlier financial years). Egypt and Haiti made no purchases under their arrangements, and the extended arrangement with Mexico expired during the financial year. The undrawn balances under the extended Fund facility decision amounted to SDR 1,132 million on April 30, 1980.

In its review of the facility in June 1979, the Executive Board decided that the facility should be reviewed again when the possibility of access to the supplementary financing facility comes to an end. The maximum repurchase period under the facility was extended in December 1979 from eight years to ten years from the date of purchase; and the number and frequency of repurchase installments under the facility were also reduced. These changes are intended to afford greater leeway to members for implementing corrective adjustments to take effect in the light of their particular circumstances. Recent developments in the international economy, such as the rising costs of energy, and the protectionist measures by some countries have not only caused a sharp deterioration in the external payments position of many countries but have also added to the complexity of adjustments in member countries.

Compensatory Financing Facility

In 1979/80, 19 members purchased a total of SDR 863 million under the compensatory financing facility, compared with purchases amounting to SDR 465 million in 1978/79 by the same number of countries. The total amount purchased under the facility during the four years ended April 30, 1980 was equivalent to SDR 3.4 billion, representing about a third of the total purchases other than those made in the reserve tranche or under the oil facility. Total outstanding purchases under the facility on April 30, 1980, at SDR 2.9 billion, were unchanged from the level a year earlier. Of the SDR 863 million purchased under the compensatory financing facility during 1979/80, SDR 615 million was purchased by 18 members under the amended decision adopted by the Executive Board on August 2, 1979.5

The amended decision, the adoption of which was preceded by a comprehensive review of the facility by the Executive Board, resulted in the following principal changes: (i) the quota limit on outstanding purchases was raised from 75 per cent to 100 per cent of a member’s quota; (ii) the limit of 50 per cent of quota on purchases in a single 12-month period was eliminated; (iii) receipts from travel and from workers’ remittances could be included with merchandise exports in the calculation of the shortfall if adequate statistical data were available—the option, once exercised by the member, is to be irreversible for five years; and (iv) the five-year trend in export earnings (and travel and workers’ remittances) was to be calculated as a geometric instead of as an arithmetic average.

Buffer Stock Facility

Four purchases (by Australia, Guyana, Jamaica, and Nicaragua) totaling SDR 26 million were made in 1979/80 in connection with special stocks of sugar constituted under the terms of the 1977 International Sugar Agreement. This brought the total amount purchased in connection with that Agreement to SDR 74 million, all of which was repurchased by May 21, 1980, following the release in February 1980 of all the special stocks from the control of the International Sugar Organization.

With the repurchase of the outstanding amounts in connection with special stocks of sugar, no purchases are presently outstanding under the buffer stock facility. Financing assistance under the buffer stock facility has also been provided since July 1971 in connection with members’ contributions to the buffer stock established under the Fifth International Tin Agreement, but no contributions to the tin buffer stock were called up in 1979/80. Although Fund financing of loans extended by members in connection with the cocoa buffer stock had been envisaged when the International Cocoa Agreement came into force in 1973, no loans were necessary throughout the lifetime of that Agreement. The Cocoa Agreement lapsed in March 1980.

Supplementary Financing Facility

This facility, which was established on August 29, 1977 to provide supplementary financing in conjunction with the use of the Fund’s ordinary resources to members facing serious payments imbalances that are large in relation to their Fund quotas, became operational on February 23, 1979. Its main features are as follows:

  • 1. Members can use the facility only under a standby arrangement (normally of more than one year and up to three years) reaching into the upper credit tranches, or under an extended arrangement (usually up to three years), subject to the usual policy conditions, phasing, and performance criteria.

  • 2. The amounts available to a member will be apportioned between ordinary resources and supplementary financing in prescribed proportions as follows:

  • (a) Under a stand-by arrangement, the equivalent of 12.5 per cent of its quota along with its first credit tranche, and 30 per cent of its quota along with each of its three upper credit tranches, totaling 102.5 per cent of quota.

  • (b) Under an extended arrangement, which permits drawings up to 140 per cent of quota, in an equivalent amount of supplementary finance.

  • (c) If a member has already used part or all of its credit tranches, the stand-by or extended arrangement will include the amount of supplementary financing that would have been available under the supplementary financing decision if the earlier use had been made under that decision.

  • (d) Purchases may be made beyond the upper credit tranches wholly with supplementary financing in special circumstances.

3. Holdings resulting from these purchases will be subject to repurchase in equal semiannual installments that begin not later than three and one-half years, and are to be completed not later than seven years, after the purchase. As of April 30, 1980, 13 members had obtained total commitments of SDR 2,523 million under stand-by and extended arrangements in connection with the supplementary financing facility (Table 21). Out of that total, SDR 1,810 million is available in supplementary resources and the balance, amounting to 28 per cent of the total commitment, is available in ordinary resources. Out of the supplementary resources, SDR 1,448 million is available under stand-by arrangements and SDR 362 million under extended arrangements.

Table 21.Supplementary Financing Facility Commitments and Purchases Under Stand-By and Extended Arrangements, April 30,1980(In millions of SDRs)
Supplementary Financing
Undrawn
CountryQuotaArrangementAmountCommitmentPurchasebalance
Bolivia45SBA166.37532.6310.80721.818
Costa Rica41SBA260.50029.705.12524.575
Guyana25EFF362.75035.008.62526.375
Jamaica74EFF4260.000227.1031.000
31.000
15.850149.250
Kenya69SBA5122.47570.7370.725
Korea160SBA6640.000480.0030.909449.091
Malawi19SBA726.34413.782.37511.405
Mauritius27SBA873.02554.006.611
6.50040.889
Panama45SBA966.37532.6332.625
Peru164SBA10285.000232.09100.000
22.273
20.18289.635
Philippines210SBA11410.000333.0020.000313.000
Sudan88EFF12200.000100.007.500
7.500
17.50067.500
Turkey200SBA13250.000169.5570.000
55.909
32.72710.914
SubtotalEFF522.750362.10118.975243.125
SBA2,000.0941,448.11383.4181,064.677
Total2,522.8441,810.21502.3931,307.802

One-year stand-by arrangement (SBA) approved February 1, 1980.

Two-year SBA approved March 12, 1980.

Three-year extended Fund facility (EFF) arrangement approved June 25, 1979.

Two-year EFF arrangement approved June 11, 1979.

Two-year SBA approved August 20, 1979.

Two-year SBA approved March 3, 1980.

Twenty-six month SBA approved October 31, 1979.

Two-year SBA approved October 31, 1979.

SBA approved April 18, 1980 for the period April 18, 1980 to December 31, 1980.

SBA approved July 23, 1979 for the period August 10, 1979 to December 31, 1980.

SBA approved February 27, 1980 for the period February 27, 1980 to December 31, 1981.

Three-year EFF arrangement approved May 4, 1979.

One-year SBA approved July 19, 1979.

One-year stand-by arrangement (SBA) approved February 1, 1980.

Two-year SBA approved March 12, 1980.

Three-year extended Fund facility (EFF) arrangement approved June 25, 1979.

Two-year EFF arrangement approved June 11, 1979.

Two-year SBA approved August 20, 1979.

Two-year SBA approved March 3, 1980.

Twenty-six month SBA approved October 31, 1979.

Two-year SBA approved October 31, 1979.

SBA approved April 18, 1980 for the period April 18, 1980 to December 31, 1980.

SBA approved July 23, 1979 for the period August 10, 1979 to December 31, 1980.

SBA approved February 27, 1980 for the period February 27, 1980 to December 31, 1981.

Three-year EFF arrangement approved May 4, 1979.

One-year SBA approved July 19, 1979.

Of the total supplementary financing resources committed as of April 30, 1980, about SDR 744 million has been made available under the special circumstances clause 6 to five members—Jamaica, Korea, Mauritius, Peru, and the Philippines—(Table 22).

Table 22.Use of Supplementary Financing Facility Under Special Circumstances Clause, April 30, 1980
Special Use as
Per Cent of
Total SupplementaryTotal
Financing FacilityOf Which,supplementary
Per centSpecialfinancing
Quota1of quotaUse1Quotafacility
Member(1)(2)1(3)(4)(5)(6)
Jamaica74227.10306.9123.50166.954.4
Korea160480.00300.0316.00197.565.8
Mauritius2754.00200.026.3397.548.4
Peru164232.09141.563.9939.027.6
Philippines210333.00158.6214.35102.164.4
Total1,326.19744.1756.1

In millions of SDRs.

In millions of SDRs.

All purchases under the facility, amounting to SDR 502 million on April 30, 1980, have been made by non-oil developing countries. (See Table 21.) The use of resources available under the facility has been relatively small up to the present but is expected to expand appreciably in coming months. The Executive Board is also considering possible mechanisms to lower the cost of using the facility. The facility will be reviewed by the Executive Board not later than two years after its effective date, or earlier if the Seventh General Review of Quotas becomes effective before the end of the two-year period.

Repurchases

In 1979/80, aggregate repurchases amounted to the equivalent of SDR 3,776 million, which was about 22 per cent below the peak of SDR 4,859 million in 1978/79. Repurchases by industrial countries (SDR 1,757 million) represented 47 per cent of the total, including SDR 1,293 million by Italy and the United Kingdom. The largest amount, 46 per cent of the total, represented repurchases in respect of purchases made under the oil facility for 1974 and 1975. About 25 per cent of total repurchases related to purchases made under the compensatory financing facility and about 23 per cent were with respect to purchases in the credit tranches, including those made under standby arrangements or extended arrangements. The remaining 5 per cent, SDR 202 million, represented repurchases of members’ currencies held by the Fund in excess of 75 per cent of quota on the date of the Second Amendment (SDR 178 million), which did not result from purchases, and repurchases in connection with the gold distributions (SDR 24 million).

Following the release, completed on February 21, 1980, of special stocks accumulated under the 1977 International Sugar Agreement, the six members that had used the Fund’s resources in connection with their holdings of special stocks were required to repurchase all outstanding amounts within 90 days from that date.7 Thus, a total amount equivalent to SDR 74 million was repurchased by May 21, 1980. In addition, two members (the Dominican Republic and Western Samoa) were requested to repurchase the amount by which the drawing made in 1979 under the compensatory financing facility, based on partly estimated export data, exceeded the actual shortfall. While the Dominican Republic completed the repurchase, Western Samoa requested postponement for balance of payments reasons, which was agreed to by the Executive Board. The equivalent of SDR 559 million was repurchased by 13 members in partial and full discharge of obligations incurred under Article V, Section 7(b) in effect before the Second Amendment. The Executive Board agreed to the requests of 37 members to schedule their repurchases, totaling SDR 1,654 million, over periods up to five years from the date of purchases under facilities for which the repurchase period is three to five years.

The guidelines adopted by the Executive Board for early repurchases apply to the Fund’s holdings of members’ currencies acquired under a stand-by or extended arrangement approved after October 1, 1977 and to all holdings acquired after April 1, 1978.8 No early repurchase expectations arose during the year, since members that had made purchases subject to the guidelines for early repurchases were not considered to be in sufficiently strong balance of payments and reserve positions.

Fund Liquidity

The Fund’s overall liquidity position—that is, the relationship between its liquid liabilities and its readily usable assets comprising usable currencies and SDRs in the General Resources Account—was under some strain when liquid liabilities were at their peak in mid-1977, but improved considerably thereafter.9 The Fund’s liquid liabilities (as measured by outstanding reserve positions, including loan claims on the Fund encashable in the event of need by the lender, and undrawn balances under stand-by and extended arrangements) increased from SDR 7.4 billion at the end of April 1974 to a peak of SDR 22.5 billion in the middle of 1977 as the counterpart of the very large expansion of Fund credit that took place over that period, including purchases under the oil facility, the compensatory financing facility, and stand-by arrangements by the United Kingdom and Italy. Subsequently, the total declined to SDR, 14.9 billion at the end of April 1980. This improvement in the Fund’s liquidity reflected partly the decline in liabilities, but also stemmed from increases in the Fund’s holdings of usable currencies as a result of the payment of quota increases under the Sixth Review of Quotas. During 1979/80 the Fund’s holdings of usable currencies increased from SDR 8.8 billion at the end of 1978/79 to SDR 10.6 billion at the end of April 1980.

The Fund’s policies and procedures under Article V, Section 3(d) for inclusion in the operational budgets of currencies to be sold take into account, in consultation with members, their balance of payments and reserve positions and developments in the exchange markets, as well as the desirability of promoting, over time, balanced positions in the Fund. The Executive Board’s review of these policies and procedures in August 1979 endorsed general guidelines for allocating currencies to be used, so as to harmonize to the extent possible members’ positions in the Fund through the equalization of the ratios of members’ Fund positions to their gold and foreign exchange holdings.10 Subsequently, the Fund adopted decisions setting forth guidelines for: (a) the assessment of the strength of a member’s balance of payments and gross reserve position for the purposes of designation plans, operational budgets, and repurchases under Article V, Section 7(b);11 and (b) the selection and use of currencies and SDRs in the General Resources Account.12 The general approach is to use in transfers by the Fund the currencies of members whose Fund positions represent relatively low proportions of their gold and foreign exchange holdings, and in receipts by the Fund the currencies of members with relatively high proportions. This has yielded a fairly long list of currencies for use in transfers, and has placed some emphasis on the use of the currencies of those members whose ratios are furthest from the average ratio, that is to say, those who have made available resources through the Fund in amounts that are small in relation to their reserves. The guidelines also aim at moderating the use of a currency as the Fund’s holdings reach low levels in relation to the member’s quota. In practice, a large part of the Fund’s usable currency holdings usually tends to be represented by a small number of currencies. Thus, at the end of the financial year 1979/80, the Fund’s holdings of just five creditor currencies represented about one half of the total usable currency holdings.

The Fund’s liquidity is currently not under pressure, and the quota increases under the Seventh General Review will, at least initially, improve the liquidity position as a result of increases in the Fund’s holdings of usable currencies and SDRs. But the quota increases will also expand members’ drawing rights commen-surately. At the same time, in view of the prospects of larger and more widespread balance of payments deficits with surpluses concentrated on relatively few members, there is likely to be a reduction in the number, and therefore in the amounts available, of currencies that can be considered usable. Moreover, existing creditors may draw on their Fund positions. For these reasons, and also because of the magnitude of the recycling problem, the Fund is keeping its liquidity under close review and is exploring the possibility of augmenting its resources by borrowing. As mentioned above, the Interim Committee, at its meeting in Hamburg on April 25, 1980, encouraged the Managing Director to initiate discussions with potential lenders on the terms and conditions under which the Fund could borrow funds to increase its resources, if and when the need arose.

Borrowing

Over the past six years, the Fund has supplemented its resources by borrowing a total of SDR 9.9 billion from some of its members and Switzerland under the General Arrangements to Borrow, the oil facility, and the supplementary financing facility. During 1979/80 there was a net reduction of about SDR 1.3 billion in the Fund’s total outstanding borrowing, from about SDR 5 billion to about SDR 3.8 billion (equivalent to 9.6 per cent of total quotas at the end of April 1980).

General Arrangements to Borrow

The General Arrangements to Borrow (GAB), originally concluded in 1962 for four years between the Fund and ten industrial member countries, have been extended a number of times, and, during the year under review, all GAB participants formally agreed to renew the arrangement for another period of five years from October 24, 1980.13 Switzerland’s association with the GAB, under a separate agreement of June 11, 1964 with the Fund, has also been extended until October 23, 1985 in parallel with the latest GAB renewal. The maximum credit available to the Fund through the GAB in lenders’ currencies is equivalent to about SDR 6.5 billion, and the balance available on April 30, 1980 was SDR 5.7 billion. The last use of the GAB was in connection with a reserve tranche purchase, equivalent to SDR 777 million, made in November 1978 by the United States, which was financed entirely by borrowings from the Deutsche Bundesbank (SDR 583 million) and Japan (SDR 194 million). During the last five years, borrowings by the Fund under the GAB totaled the equivalent of SDR 2,353 million to finance purchases by Italy, the United Kingdom, and the United States. In connection with the purchases by the United Kingdom and Italy, the Fund also concluded borrowing agreements with the Swiss National Bank, and a total amount equivalent to SDR 154 million was called up under these agreements during the financial years 1976/77 and 1977/78.

Oil Facility

The borrowing arrangements under this facility were originally entered into by the Fund with 17 lender countries, including Switzerland, in 1974 and 1975 for a total amount of SDR 6.9 billion. During the financial year 1979/80, the Fund repaid the equivalent of about SDR 1.8 billion to these lenders. Several of these repayments were in advance of the original repayment schedules, as members made advance repurchases that they attributed to the oil facility purchases. By April 30, 1980, the Fund had repaid the equivalent of SDR 4.43 billion of indebtedness incurred in connection with the oil facility; the balance of indebtedness on that date amounted to SDR 2.47 billion.

Supplementary Financing Facility

The Fund has borrowing agreements with 13 members and the Swiss National Bank to provide, in different currencies, the equivalent of SDR 7.8 billion as supplementary financing. The individual lenders, amounts, and currencies to be made available under the agreements are as follows:

Amount
Lender(millions of

SDRs)
Currency14
Abu Dhabi150U.S. dollars
Austrian National Bank50U.S. dollars
National Bank of Belgium150Belgian francs
Canada200U.S. dollars
Deutsche Bundesbank1,050U.S. dollars
Banco de Guatemala30U.S. dollars
Japan900Japanese yen
Central Bank of Kuwait400Kuwaiti dinars
Netherlands Bank100U.S. dollars
Central Bank of Nigeria220U.S. dollars
Saudi Arabian MonetarySaudi Arabian
Agency1,934riyals
Swiss National Bank650U.S. dollars
United States1,450U.S. dollars
Central Bank of Venezuela500Venezuelan bolívares
Total7,784

Participation in the financing of the facility remains open to other lenders whose external positions are strong, on the same terms as applicable to existing lenders, if the Fund finds it necessary to enter into further agreements. A creditor’s loan claims on the Fund are encashable on demand by the Fund if the creditor represents that it has a balance of payments need, and lenders can, without prior reference to the Fund, transfer their claims to any other lender, any Fund member, or certain other official entities at prices agreed between the transferor and transferee. Additional lenders may also include institutions that perform the functions of a central bank for more than one member.

The first borrowing by the Fund under the facility was made in May 1979, and by the end of April 1980 the Fund had borrowed a total of SDR 502.4 million from 11 lenders.

The interest payable by the Fund on its borrowings is at a rate equal to the average yield for each six-month period starting July 1, 1978 for U.S. Government securities with a maturity of five years, rounded upward to the nearest ⅛ of 1 per cent. For the six-month period ended June 30, 1980, this rate was 11.375 per cent a year.

Membership and Quotas

Membership and Participation in the Special Drawing Rights Department

Two countries joined the Fund in 1979/80, raising the total membership on April 30, 1980 from 138 to 140: St. Lucia on November 15, 1979, with a quota of SDR 3.6 million, and St. Vincent and the Grenadines on December 28, 1979, with a quota of SDR 1.7 million.

The Executive Board of the Fund decided, with effect from April 17, 1980, that the Government of the People’s Republic of China represents China in the Fund and shall exercise all the rights and obligations of China as the member of the Fund and the participant in the Special Drawing Rights Department. China’s quota in the Fund is currently SDR 550 million, and its allocations of special drawing rights amount to SDR 114.4 million. On May 25, 1980, the Executive Board considered the application for membership by Zimbabwe and agreed with the recommendation of the Committee on Membership of a quota of SDR 100 million for Zimbabwe, and a proposed maximum quota of SDR 150 million under the Seventh General Review.

Both St. Lucia and St. Vincent and the Grenadines elected to participate in the Special Drawing Rights Department. In addition, Kuwait became a participant as of April 7, 1980. At the end of the financial year 1979/80, all 140 members of the Fund were participants in the Special Drawing Rights Department.

Seventh General Review of Quotas

The Seventh General Review of Quotas was approved by the Board of Governors, with effect from December 11, 1978.15 The proposed increases in quotas will become effective for an individual member on the latest of the following three dates: (a) the date of the member’s consent to the increase; (b) the date of payment of its increased subscription; and (c) the date on which the Fund determines that members having not less than three fourths of the total of quotas on November 1, 1978 have consented to increases in their quotas. However, if the Fund’s determination is in the period between July 1, 1980 and October 5, 1980, no increase in quota will become effective until after October 5, 1980. This provision was designed to ensure that there would be no changes in quotas during, or shortly before, the 1980 Annual Meeting, when the next election of Executive Directors will take place. Total quotas on November 1, 1978 were equivalent to SDR 39.0 billion, so that the minimum participation requirement will be met when members accounting for at least SDR 29.3 billion of total quotas have consented to an increase in their quotas.

A member may consent to an increase in its quota on or before November 1, 1980. The Executive Board may extend this period as it may determine. A member can consent to an increase smaller than the amount proposed for it in the Annex to the Resolution, and later could consent to an additional amount, up to the proposed maximum, at any time prior to the expiration of the period for consent. As of June 30, 1980, 62 members accounting for 34.20 per cent of total quotas in the Fund on November 1, 1978 had consented to increases in their quotas to the respective proposed maximum amounts. In addition, Dominica and St. Lucia, which joined the Fund after November 1, 1978, have consented to the corresponding quota increases provided for under their membership resolutions. Cape Verde, which was not included in the Resolution, was granted the opportunity by a Resolution of the Board of Governors to increase its quota by 50 per cent, to SDR 3 million, in accordance with the Board of Governors Resolution on the Seventh General Review.

If all members accept increases in their quotas to the maximum amounts proposed, total quotas in the Fund would rise as a result of the Seventh General Review from the current SDR 39,016.5 million to SDR 58,625.6 million.

Charges and Remuneration

The rates of charges levied by the Fund on its holdings of currency subject to charges were unchanged during the year except for charges on use of the supplementary financing facility and, for one member, charges on balances of currency in excess of 200 per cent of the member’s quota that resulted from purchases made under a stand-by arrangement that took effect prior to February 23, 1979, the date on which the supplementary financing facility became operational. For the year as a whole, the average rate of charge received by the Fund on balances that arise from use of the Fund’s regular and compensatory financing facilities was 5.25 per cent, appreciably less than the average rate of remuneration—7.06 per cent—paid by the Fund on creditor positions in the Fund. Charges for the use of the supplementary financing facility are based on the rate of interest paid by the Fund on amounts borrowed from lenders under the facility and are adjusted half-yearly. For the six-month periods ended June 30 and December 31, 1979, and June 30, 1980, the applicable rates of charge for use of the supplementary financing facility were 9.45, 10.075, and 11.575 per cent per annum, respectively.

The rate of remuneration during the year was maintained at 90 per cent of the SDR rate of interest, which was set at 80 per cent of the combined interest rate on short-term instruments in the United States, the Federal Republic of Germany, the United Kingdom, France, and Japan, rounded to the nearest ¼ of 1 per cent. The SDR rates of interest and the rates of remuneration (Chart 16) applicable over the six quarters beginning April 1, 1979 were as follows:

Calendar quarter

beginning
SDR interest

rate
Rate of

remuneration
April 1, 19796.505.85
July 1, 19796.756.075
October 1, 19797.756.975
January 1, 19809.258.325
April 1, 198010.259.225
July 1, 19808.257.425

Shortly before the end of each financial year, the Fund considers whether the net income of the Fund for the year is sufficient to allow the rate of remuneration to be raised above 90 per cent but not above 100 percent of the SDR average rate of interest for the year. In considering whether to establish a higher rate of remuneration for a particular year, the Fund is required also to consider the possibility of reducing its rates of charges for use of its regular facilities from the beginning of the subsequent financial year. For the financial year ended April 30, 1980, it was decided not to raise the rate of remuneration above 90 per cent and it was also decided not to reduce the Fund’s charges with effect from May 1, 1980. These decisions were taken in the light of the estimated net income for the year and the outlook for income for the financial year ending April 30, 1981.

Gold

Gold Sales

The Fund’s gold sales program that was agreed by the Interim Committee in August 1975, as part of the program for gradually reducing the role of gold in the international monetary system, was completed in May 1980. Under that program, 50 million ounces of gold, or about one third of the Fund’s gold holdings as at August 31, 1975, were sold. One half of the amount, 25 million ounces, was sold to countries that were members of the Fund on August 31, 1975 at the former official price of SDR 35 an ounce. These sales were carried out in four annual installments, the last of which took place in December 1979 and January 1980. The other 25 million ounces were sold in public auctions over a period of four years, and the profits from these sales—i.e., the sales proceeds in excess of SDR 35 an ounce—were transferred to the Trust Fund for the benefit of developing countries.

Chart 16.SDR Interest Rate, Rate of Remuneration, and Short-Term Interest Rates, July 1974-September 1980

1 For the United Kingdom and the United States, the yield on three-month treasury bills; for France and the Federal Republic of Germany, the rate for three-month interbank deposits; and for Japan, the call money market rate (unconditional).

Under the Second Amendment of the Articles of Agreement, the Fund is given a range of powers with respect to sales of gold on the basis of which it could dispose of its remaining gold holdings of about 104 million ounces after completion of the agreed sales program. An 85 per cent majority of the voting power would be required for a decision to exercise any of these powers. Possible further uses of the Fund’s remaining gold holdings were considered by the Executive Board in April 1980, but no decisions were taken.

Gold Auctions

During the year, the Fund held 12 auctions in which it sold 5.3 million ounces (165.7 tons) of gold to the market; the sales program was completed with the monthly auction of 444,000 ounces in May 1980. As mentioned in the 1979 Annual Report, the amount of gold auctioned each month was reduced in June 1979 from 470,000 ounces (14.6 tons) a month to 444,000 ounces (13.8 tons) in view of the gold acquired by monetary authorities entitled to submit noncompetitive bids.16 The auctions continued to attract substantial interest, mainly from the major private international gold traders. Bidding in the last 13 auctions of the sales program ranged from 665,000 ounces (20.7 tons), or 1½ times the amount on offer, to 1.94 million ounces (60.3 tons), or almost 4½ times the amount to be sold. As in the past, auction prices were close to the prevailing market prices and, over the year, increased dramatically with them; the highest average price in the auctions (US$712.12 an ounce in February 1980) was 6½ times as much as the lowest average auction price recorded in September 1976. (See Table 23.)

Table 23.Fund Gold Auctions: Summary Statistics, June 2, 1976-May 7, 1980
DatePlace of DeliveryOunces Bid (thousands)Ounces Awarded (thousands)Subscription Ratio 1Ounces Awarded to Noncompetitive Bidders (thousands)Competitive BidsNo. of Noncompetitive BidsPrice Range of Successful Bids (US$ per fine ounce)Average Award PriceProfits (In millions of U.S. dollars)
Number of

Bidders
Number

of Bids
TotalSuccessfulTotalSuccessful
(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)
1976
June 2New York2,320.0780.02.97302022059126.00-134.00126.0067.10
July 14New York2,114.0780.02.71231719656122.05-126.50122.0564.00
Sept. 15New York3,662.4780.04.70231438041108.76-114.00109.4053.82
Oct. 27New York4,214.4779.65.40241638337116.77-119.05117.7160.25
Dec. 8London4,307.2780.05.52251326533137.00-150.00137.0075.35
1977
Jan. 26New York2,003.2780.02.57211519249133.26-142.00133.2672.50
Mar. 2New York1,632.8524.83.1121718714145.55-148.00146.5155.60
Apr. 6New York1,278.0524.82.43181113622148.55-151.00149.1857.02
May 4New York1,316.4524.82.51171410738147.33-150.26148.0256.37
June 1New York1,014.0524.81.9314137535143.32-150.00143.3253.87
July 6Paris1,358.4524.82.5915158335140.26-145.00140.2652.16
Aug. 3London1,439.2524.82.74181613644146.26-150.00146.2655.31
Sept. 7New York1,084.4524.82.07151111521147.61-149.65147.7856.24
Oct. 5New York971.2524.81.85171210332154.99-157.05155.1459.97
Nov. 2London1,356.4524.82.581879021161.76-163.27161.8663.29
Dec. 7New York1,133.6524.82.16191910858160.03-165.00160.0362.13
1978
Jan. 4New York984.8524.81.88191910364171.26-180.00171.2667.68
Feb. 1Paris598.4524.81.1417177662175.00-181.25175.0069.65
Mar. 1New York1,418.0524.82.70191612776181.13-185.76181.9572.92
Apr. 5New York1,367.6524.82.60211512230177.61-180.26177.9270.78
May 3London3,104.0524.85.91241719236170.11-171.50170.4066.83
June 7New York1,072.4470.02.28925.22115137285182.86-183.92183.09195.64
July 5New York797.2470.01.7020.82219101442183.97-185.01184.1468.96
Aug. 2New York1,467.6470.03.1270.02120117422203.03-205.11203.2885.84
Sept. 6New York773.2470.01.65133.6201089252212.39-213.51212.50101.42
Oct. 4London805.6470.01.71134.4181276251223.57-224.62223.68107.74
Nov. 1New York689.6470.01.4780.014750241223.03-230.00224.0298.37
Dec. 6Paris1,965.2470.04.1820.01613102311195.51-196.75196.0674.23
1979
Jan. 3New York1,479.6470.03.1516.4179159231219.13-221.00219.3484.73
Feb. 7New York1,489.6470.03.1759.2195123111252.47-252.77252.53109.60
Mar. 7London1,534.4470.03.26181712750241.28-243.26241.6892.62
Apr. 4New York1,186.8470.02.53171410744238.71-240.27239.2191.37
May 2New York1,514.8470.03.2220.02017155561245.86-247.01246.1898.79
June 6New York1,452.4444.03.2719510919280.22-281.37280.39104.73
July 3New York1,518.8444.03.42201311323281.06-281.87281.52104.84
Aug. 1New York1,138.8444.02.56201613363288.95-291.07289.59107.84
Sept. 5Paris1,646.0444.03.71214816332.01-333.50333.24127.73
Oct. 10New York665.6444.01.501695215412.51-420.80412.78163.20
Nov. 7New York1,798.4444.04.05161318953391.77-398.01393.55154.26
Dec. 5London1,746.0444.03.9318159738425.40-429.31426.37169.27
1980
Jan. 2New York1,342.4444.03.021055210561.00-564.01562.85229.17
Feb. 6New York1,939.6444.04.37175808711.99-718.01712.12295.24
Mar. 5New York1,412.4444.03.1816148454636.16-649.07641.23263.52
Apr. 2New York802.8444.01.8116166966460.00-503.51484.01194.97
May 7New York1,822.0443.24.10212122567500.20-511.15504.90203.51
Total 223,517.51,480.34,640.44

The ratio of total bids to the amount on auction.

Ounces awarded do not add up exactly to the total representing the amount sold owing to variations in the weight of standard gold bars.

The ratio of total bids to the amount on auction.

Ounces awarded do not add up exactly to the total representing the amount sold owing to variations in the weight of standard gold bars.

In all, the Fund held 45 public auctions in which it awarded 23.52 million ounces (731.6 tons) to 51 bidders on competitive bids, and 1.48 million ounces (46.0 tons) to 13 monetary authorities on noncompetitive bids. As discussed further below, the proceeds of these gold sales amounted to US$5.7 billion, of which US$1.1 billion represented the capital value equivalent to SDR 35 an ounce that was added to the Fund’s general resources, and US$4.6 billion represented profits that were channeled to the Trust Fund for the benefit of developing member countries.

Gold Distribution

Under the agreement reached in the Interim Committee in August 1975 to distribute one sixth (25 million ounces) of the Fund’s gold to members, the Fund completed during the financial year the last of four annual sales to countries that were members on August 31, 1975 and to Papua New Guinea. Sales of gold to members in the fourth distribution were made to 127 members and amounted to 6,593,368 ounces of fine gold (205.1 tons), sold at a price equivalent to SDR 35 per fine ounce. The sale proceeds amounting to SDR 230.8 million were added to the holdings of currencies of the Fund’s General Resources Account. Details of the total amounts of gold sold to individual members over the period are shown in Table 24. Each member’s share was calculated in proportion to its quota on August 31, 1975, and the gold was sold to participating members under the provisions of the Second Amendment of the Fund’s Articles of Agreement.

Table 24.Sales of Gold to Members in Four Distributions
MemberFine Ounces
Afghanistan31,665.860
Algeria111,258.000
Argentina376,564.794
Australia569,126.658
Austria231,072.187
Bahamas17,116.997
Bahrain8,557.999
Bangladesh106,978.879
Barbados11,125.930
Belgium556,289.958
Benin11,123.669
Bolivia31,665.985
Botswana4,278.867
Brazil376,564.569
Burma51,349.512
Burundi16,260.984
Cameroon29,953.907
Canada941,394.291
Central African Republic11,125.995
Chad11,125.762
Chile135,220.043
China1470,705.277
Colombia134,364.514
Congo11,126.000
Costa Rica27,386.995
Cyprus22,251.563
Denmark222,515.702
Dominican Republic36,800.979
Ecuador28,241.989
Egypt160,894.508
El Salvador29,953.988
Equatorial Guinea6,691.724
Ethiopia23,106.991
Fiji11,125.708
Finland162,607.999
France1,283,718.053
Gabon12,836.997
Gambia, The5,819.577
Germany, Fed. Rep. of1,369,327.945
Ghana74,456.884
Greece118,104.738
Grenada1,711.539
Guatemala30,810.000
Guinea20,497.774
Guyana17,116.904
Haiti16,260.997
Honduras21,395.994
Iceland19,683.995
India804,429.402
Indonesia222,515.983
Iran164,311.978
Iraq93,273.618
Ireland103,554.980
Israel111,257.225
Italy855,829.551
Ivory Coast44,483.056
Jamaica45,358.961
Japan1,026,995.292
Jordan19,683.976
Kenya41,079.961
Korea68,465.912
Kuwait55,628.986
Lao People’s Democratic Republic11,125.533
Lebanon7,701.998
Lesotho4,278.316
Liberia24,818.989
Libyan Arab Jamahiriya20,505.334
Luxembourg17,116.999
Madagascar22,252.000
Malawi12,836.998
Malaysia159,165.213
Mali18,826.368
Malta13,692.991
Mauritania11,124.698
Mauritius18,827.858
Mexico316,656.950
Morocco96,625.279
Nepal10,611.998
Netherlands599,080.944
New Zealand172,877.650
Nicaragua23,105.366
Niger11,124.483
Nigeria115,536.844
Norway205,398.687
Oman5,990.856
Pakistan201,097.447
Panama30,807.853
Papua New Guinea17,116.813
Paraguay16,260.994
Peru105,266.981
Philippines132,653.664
Portugal100,131.991
Qatar17,116.942
Romania162,589.303
Rwanda16,260.959
Saudi Arabia114,680.688
Senegal29,024.482
Sierra Leone21,395.847
Singapore31,665.603
Somalia16,260.991
South Africa273,865.222
Spain338,052.863
Sri Lanka83,870.981
Sudan61,619.962
Swaziland6,846.993
Sweden278,144.648
Syrian Arab Republic42,791.963
Tanzania35,944.820
Thailand114,680.978
Togo12,834.765
Trinidad and Tobago53,916.983
Tunisia41,066.775
Turkey129,229.953
Uganda34,232.819
United Arab Emirates12,836.804
United Kingdom2,396,322.177
United States5,734,062.882
Upper Volta11,124.368
Uruguay59,051.913
Venezuela282,422.976
Viet Nam53,044.523
Western Samoa1,711.788
Yemen Arab Republic8,557.999
Yemen, People’s Democratic Republic of24,819.000
Yugoslavia177,144.008
Zaïre96,708.971
Zambia65,042.532
Total224,977,768.637

Distribution was effected before April 17, 1980, when the Fund decided that the Government of the People’s Republic of China represents China in the Fund.

As noted in the text, arrangements have not yet been completed for sale of gold to Democratic Kampuchea. The notional share of this member in 25 million ounces is 21,396 fine ounces.

Distribution was effected before April 17, 1980, when the Fund decided that the Government of the People’s Republic of China represents China in the Fund.

As noted in the text, arrangements have not yet been completed for sale of gold to Democratic Kampuchea. The notional share of this member in 25 million ounces is 21,396 fine ounces.

The major portion of the gold sold in the fourth distribution, 5,410,459 fine ounces (168.3 tons), was purchased by 110 members in December 1979. An amount of 711,142 fine ounces (22.1 tons) was purchased by 15 members in January 1980, and an amount of 1,062 fine ounces (0.03 ton) was purchased by one member in February 1980. With the completion of this fourth distribution, total sales of gold to the 127 members over the four-year period amounted to 24,977,769 fine ounces (776.9 tons), which added the equivalent of SDR 874.2 million to the currency holdings of the General Resources Account.17

Trust Fund

The Trust Fund, established by the Executive Board in May 1976 and administered by the Fund, provides additional balance of payments assistance on concessionary terms to eligible developing member countries that qualify for assistance by carrying out programs of balance of payments adjustment.18 Its resources are derived mainly from the profits realized on the sale of 25 million ounces of the Fund’s gold for the benefit of developing member countries. A part of these profits has been paid directly to 104 developing countries, while the remainder—together with income from investments, income from loans already made to members, and other transfers to the Trust, less expenses—is available for concessionary lending.

Total profits from the sale of 25 million ounces of gold over the four-year sales program amounted to US$4.6 billion, of which US$1.3 billion was distributed directly to the 104 developing members. The amount of profit distributed to each member was calculated on the basis of its share of Fund quotas at August 31, 1975; the quotas of the eligible members were equivalent to 27.771 per cent of total Fund quotas. The remainder of the profits, together with interest income and other transfers to the Trust, amounted to SDR 2.9 billion at the end of July 1980. A total of over SDR 2.1 billion has already been used to make loan disbursements to eligible low-income members that qualified for balance of payments assistance; a further amount of about SDR 800 million remains available. The final disbursement of loans is to be made in January 1981.

While 104 developing member countries were eligible to participate in the direct distributions of profits from gold sales, the Ministers of Finance of 8 members of the Organization of Petroleum Exporting Countries (OPEC) had decided in 1976 to recommend to their governments that they contribute to the Trust Fund their shares in the direct distributions of profits. Of these 8 members, 6—Iraq, Kuwait, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela—have made irrevocable transfers of the full amounts of their profit shares to the Trust Fund to add to the resources available for loan assistance.19 In addition, Yugoslavia has transferred one third of its share of profits and Romania is lending 10 per cent of its share to the Trust Fund. As of July 31, 1980 the total value of the amounts transferred to the Trust by all these members was US$122 million.

The profits and loans actually disbursed by the Trust Fund so far, including the profit and loan disbursements in July 1980, totaled about SDR 3.1 billion, of which over half was disbursed during 1979/80 (Table 25). About three fourths of this total was disbursed among members in Africa and Asia, and the remainder to developing members in Europe, the Middle East, and the Western Hemisphere. For members that qualified for loans in both periods of the Trust Fund, total disbursements of loans and profits represented about 85 per cent of their present quotas, or the equivalent of more than three tranches.

Table 25.Trust Fund: Loan Disbursements and Distributions of Profits from Gold Sales, by Region, 1977-80

(In millions of SDRs)1

Financial Years Ended April 30
19771978197919802Total
Africa20.0130.0286.5660.51,097.0
Asia9.1199.0322.0635.31,165.4
Europe16.78.661.386.6
Middle East1.661.587.4185.1335.6
Western Hemisphere1.083.636.1288.7409.4
Total31.7490.8740.61,830.93,094.0

Amounts distributed as profits converted to SDRs at exchange rates prevailing on dates of payment.

Includes profit and loan disbursements in July 1980.

Amounts distributed as profits converted to SDRs at exchange rates prevailing on dates of payment.

Includes profit and loan disbursements in July 1980.

Profits from the sale of gold are available for loan disbursements in each of the two periods of the Trust Fund. The first period was for two years and ended on June 30, 1978, while the second period covers the subsequent years through December 31, 1980. Balance of payments assistance for a total of SDR 841 million was provided to 43 of the 61 eligible members that had qualified for the first period.20 This represented nearly one third of these members’ present quotas and one half or more of the assessed need for almost three fourths of the qualified members.

As regards the second period, because of the more difficult economic conditions during 1979 and 1980 and because higher gold prices resulted in much larger amounts being available for loans (over SDR 2 billion) than had been anticipated, the Executive Board took several decisions during 1979/80 to permit a greater number of eligible members to qualify for assistance and to accelerate the rate of loan disbursements. In July 1979 the Board decided that subsequent interim loan disbursements would be made on a quarterly, instead of a half-yearly, basis. In April 1980 the Board decided to extend the second period by six months (to December 31, 1980) and to extend to November 1, 1980 the final date by which a program had to begin for a member to qualify for a loan. It was also agreed at that time that an interim loan disbursement would be made at the end of July 1980 and that the seventh loan disbursement in respect of the Trust’s second period would be made in January 1981.21

At the end of July 1980 the total amount available for disbursement as loans in the Trust Fund’s second period was SDR 2.1 billion, taking account of investment income and the annual reimbursement of expenses to the General Resources Account for conducting the business of the Trust Fund, which amounted to SDR 700,000 in 1979/80. By July 31, 1980, a total of SDR 1.3 billion had been transferred as interim loan disbursements in the Trust Fund’s second period to 49 of the 59 eligible members that had qualified for assistance. This represents over two fifths of the qualified members’ present quotas. All interim disbursements have been made on the assumption that all 59 eligible members will qualify for loans in the second period.

Trust Fund loans are made on the basis of 12-month balance of payments programs of at least first-credit-tranche conditionality; however, programs in the second period must be separate from those used as the basis for loans in the first period. Trust Fund loans must be made to each qualified member in amounts representing the same percentage of members’ quotas on December 31, 1975, subject to any limitation of need as decided by the Fund as Trustee after a re-examination if necessary.

Trust Fund loans are disbursed in U.S. dollars, but the amounts are denominated in SDRs. They bear interest at a rate of ½ of 1 per cent per annum, payable half-yearly in a currency specified by the Fund (U.S. dollars, thus far), and, unless otherwise decided, are to be repaid in ten semiannual installments between six years and ten years from the dates of the loan disbursements. The terms of repayment will be reviewed, on the basis of uniform criteria, toward the end of five years after the first interim disbursement.

As mentioned in the 1979 Annual Report, the Executive Board decided in June 1978 that, in principle, the assets of the Trust, pending disbursements as loans, should be held in SDR-denominated assets with the Bank for International Settlements (BIS), unless the Managing Director found the interest rate offered on such proposed deposits not to be sufficiently attractive. In December 1978 the Executive Board broadened the Trustee’s authority to make investments, allowing it, under certain conditions, to make deposits with other institutions including commercial banks. All SDR-denominated deposits in the period July 1978-July 1980 were in fact made with the BIS, and on July 31, 1980 totaled SDR 815 million with an average interest rate of 11 per cent per annum. Some deposits matured and were either used for loan assistance or reinvested with the BIS. The remainder of the Trust’s assets, held for the direct distribution of profits, continued to be invested in U.S. Government obligations. The Trust’s resources are invested, as soon as they are available, in investments with maturities matching the expected timing and amounts of Trust disbursements.

The Subsidy Account

The Subsidy Account, which is administered by the Fund, was established by the Executive Board on August 1, 1975 to assist members most seriously affected by oil price increases by reducing the cost of using the 1975 oil facility. The subsidy has been 5 percentage points per annum, so that the cost to the beneficiaries of using the 1975 oil facility has been reduced to an average of 2.7 per cent per annum.

The 18 original beneficiaries, which had purchased a total of SDR 551 million under the 1975 oil facility, received payments from the Subsidy Account that amounted to SDR 99 million by June 1980. Members that were added to the list of beneficiaries in November 1978 received subsidy payments for the first time in June 1980 in amounts totaling SDR 14 million. These members had purchased a total of SDR 222 million under the 1975 oil facility (Table 26).

Table 26.Subsidy Account: Total Use of 1975 Oil Facility by Beneficiaries, and Subsidy Payments in the Financial Year Ended April 30, 19801(In millions of SDRs)
Total UseSubsidy at 5 Per Cent
of 1975Cumulative
Oil FacilityAmountto date
Original Beneficiaries:
Subsidy for financial year

ended April 30, 1980
Bangladesh40.471.688.36
Cameroon11.790.502.40
Central African Republic2.660.110.56
Egypt31.681.406.30
Haiti4.140.170.86
India201.3426.95
Ivory Coast10.351.42
Kenya27.931.105.93
Mali3.990.180.79
Mauritania5.320.231.08
Pakistan111.014.3823.48
Senegal9.910.382.15
Sierra Leone4.970.220.99
Sri Lanka34.131.437.01
Sudan18.300.753.85
Tanzania20.610.764.50
Western Samoa0.420.020.09
Yemen, People’s
Democratic
Republic of12.020.502.47
Total551.0313.7999.17
Additional Beneficiaries:
Subsidy for financial years
ended April 30, 1975/76
and 1976/77
Grenada0.490.030.03
Malawi3.730.240.24
Morocco18.000.890.89
Papua New Guinea14.800.800.80
Philippines152.0310.4410.44
Zaïre32.531.591.59
Total221.5813.9813.98

Purchases began in July 1975 and continued until May 1976. The subsidy amounts shown are calculated as a percentage per annum of the average daily balances, subject to charges, of the Fund’s holdings of each eligible member’s currency outstanding under the 1975 oil facility during the year. Since the average cost of using the facility is about 7.7 per cent per annum, a rate of subsidy of 5 per cent would reduce the effective cost of using the facility to 2.7 per cent.

Purchases began in July 1975 and continued until May 1976. The subsidy amounts shown are calculated as a percentage per annum of the average daily balances, subject to charges, of the Fund’s holdings of each eligible member’s currency outstanding under the 1975 oil facility during the year. Since the average cost of using the facility is about 7.7 per cent per annum, a rate of subsidy of 5 per cent would reduce the effective cost of using the facility to 2.7 per cent.

The Subsidy Account is funded by contributions from 24 members of the Fund and Switzerland (Table 27).

Table 27.Subsidy Account: Contributions(In millions of SDRs)
AnticipatedContributions
TotalReceived as of
ContributorsContributions1April 30, 1980
Australia5.7005.700
Austria2.3002.300
Belgium5.6004.200
Brazil1.8501.850
Canada9.5009.500
Denmark2.2001.270
Finland1.6001.200
France12.9009.773
Germany, Fed Rep. of13.70013.720
Greece0.6000.597
Iran6.0006.000
Italy8.6008.600
Japan10.3008.054
Luxembourg0.1100.108
Netherlands6.0006.000
New Zealand1.7001.187
Norway2.1002.100
Saudi Arabia40.00040.000
South Africa1.3501.350
Spain3.4002.450
Sweden2.8002.800
Switzerland3.2853.285
United Kingdom12.05010.573
Venezuela6.0006.000
Yugoslavia0.9000.900
Total160.545149.517

In some cases where contributions are being made in installments, budgetary approval will be required in each year that a contribution is to be made. SDR amounts may be subject to small adjustments owing to exchange rate changes.

In some cases where contributions are being made in installments, budgetary approval will be required in each year that a contribution is to be made. SDR amounts may be subject to small adjustments owing to exchange rate changes.

The funds received are invested in U.S. Government obligations pending payment of subsidies to the beneficiaries. Promised contributions over the life of the Account total SDR 160 million; actual contributions to April 30, 1980 amounted to SDR 150 million.

The decision establishing the Subsidy Account was amended in November 1978 to permit the use of any surplus, after providing for payments to the original beneficiaries at the rate of 5 per cent per annum, to make payments at a rate not exceeding 5 per cent per annum to 7 additional beneficiaries, namely, Grenada, Malawi, Morocco, Papua New Guinea, the Philippines, Zaïre, and Zambia. With the addition of these members, the list of beneficiaries included all members eligible to receive assistance from the Trust Fund that had also used the 1975 oil facility. The Executive Board also decided that subsidy payments to Zambia should be made in respect of 1975 oil facility purchases subject to charges from July 1, 1978, since that member was not eligible for Trust Fund loans before that date.

At the end of the financial year 1979/80, the Subsidy Account held a surplus (of about SDR 44 million) that was available to be disbursed for the first time to the 7 members that became beneficiaries in November 1978. However, as the surplus together with anticipated contributions was insufficient to pay the additional beneficiaries at the full 5 per cent rate over the life of the Subsidy Account (1976-83), the Executive Board decided to retain the bulk of the surplus in the Account to earn investment income, and to begin payments to the additional beneficiaries by subsidizing the cost to those members of using the 1975 oil facility for the financial years 1975/76 and 1976/77.

Subsidy payments totaling SDR 13.8 million were made to 16 original beneficiaries for the financial year 1979/80, and a total of SDR 14 million was paid to 6 of the 7 (excluding Zambia) additional beneficiaries for the financial years 1975/76 and 1976/77. All these payments were made in June 1980. Of the 18 original beneficiaries, India and Ivory Coast did not receive a subsidy in 1980 as they no longer had any 1975 oil facility purchases outstanding.

Special Drawing Rights

The Fund has acted in a number of ways, over the past two years or so, to enhance the yield and liquidity characteristics of the SDR and thereby to make the asset more comparable with reserve currencies. The improvements have been made in the light of the intention of all members, as expressed in the Second Amendment of the Articles of Agreement that became effective in April 1978, to make the SDR “the principal reserve asset in the international monetary system.” The main developments are as follows:

  • Allocations—that is, the mechanism by which SDRs are created by the Fund—have been resumed from January 1, 1979 for a period of three years during which about SDR 12 billion will be allocated to Fund members that are participants in the Special Drawing Rights Department. These allocations follow a period of six years when no allocations were made.

  • With the participation of Kuwait in April 1980, all 140 Fund members are now participants in the Special Drawing Rights Department.

  • The valuation of the SDR and its interest rate are determined by reference to baskets of currencies and are thus related directly to developments in the foreign exchange and financial markets. The valuation basket, on the basis of which the value of the SDR is computed daily, is composed of the currencies of the 16 Fund member countries with the largest shares of world exports of goods and services.22 The interest rate on the SDR is fixed each quarter at 80 per cent (60 per cent until January 1, 1979) of a weighted average of short-term domestic interest rates in the five member countries with the largest Fund quotas.23 (See Chart 16.) The Executive Board is considering the simplification of the method of valuation, in particular, by reducing the number of currencies in the basket, and by making the SDR valuation and interest rate baskets identical in accordance with the views expressed by the Interim Committee at its meeting in Hamburg in April 1980.

  • SDRs may now be freely transferred, by agreement between participants, in transactions and operations that include purchases and sales of SDRs, both spot and forward, loans, donations (grants), swaps, and pledges of SDRs. The terms and conditions of individual operations can be set by agreement between the parties concerned, although the official (spot) valuation of the SDR must be observed in most cases (see below). Participants having a balance of payments need continue to be guaranteed that they can use SDRs to obtain foreign exchange from other participants designated by the Fund, and SDRs may be used for payments to the Fund, such as repurchases or the payment of charges on indebtedness to the Fund.

  • The “reconstitution” obligation, which requires participants to maintain a minimum level of average holdings of SDRs over time, has been reduced from 30 per cent to 15 per cent of average allocations with effect from January 1, 1979.

  • The Fund has widened thé circle of authorized holders of SDRs beyond participants and the Fund’s General Resources Account by prescribing certain official financial institutions as “other holders” of SDRs. These institutions have been authorized to deal in SDRs, by agreement with participants or other prescribed holders, with the same freedom as participants among themselves.

  • The SDR has been adopted as a unit of account (or as the basis for a unit of account) for a number of private contracts and international treaties, and by international and regional organizations. SDR-denom-inated currency deposits are being accepted in growing amounts by the Bank for International Settlements and more than 30 commercial banks based in European centers, North America, and Japan. In addition, there have been eight SDR-denominated bond issues on the Eurobond market for a total value of about SDR 263 million over the period 1974-80, and recently the first certificates of deposit denominated in SDRs were issued in London and Tokyo. One of the objectives of the Fund’s present review of the SDR valuation basket is to enhance the attractiveness of the SDR as a unit of account for all such purposes, as well as to promote the SDR as a reserve asset for official holders.

A summary of transfers of SDRs over the ten-year period May 1, 1970-April 30, 1980 is presented in Table 28, which also contains memorandum items showing the evolution in the numbers of Fund members and participants in the Special Drawing Rights Department, the total of SDR allocations, and the Fund’s holdings of SDRs in the General Resources Account. Allocations and transfers of SDRs during the financial year ended April 30, 1980 are discussed below.

Table 28.Summary of Transfers of SDRs, May 1, 1970-April 30, 1980(In millions of SDRs)
Annual Average
May 1, 1970-Financial Years Ended April 30
April 30, 197519761977197819791980
Transfers by participants
To other participants
By agreement4431763179271,533362
With designation
From holdings2462921165474346
From purchases of
SDRs from Fund33441,0061,025
6894684361,3252,6131,733
To the Fund
Repurchases19644073844502994
Charges (net)49354709801715553
Quota payments201191
Assessment and interest
on Fund’s SDR holdings112324415983
2568178061,8871,2951,631
Transfers by the Fund
To participants
Purchases61443256621,1061,283
Reconstitution85404445474755
Remuneration121024122136140
Fund borrowings
Interest and transfer charges8291221
Repayments3864
Other3818
1968654951,2871,3751,513
Total transfers1,1422,1501,7364,4995,2834,877
Memoranda1
SDR participants120122128137140
Fund members128130134138140
Total allocations of SDRs9,3159,3159,31513,34717,381
Fund holdings of SDRs4617711,3711,2901,407

Position at April 30 each year.

Position at April 30 each year.

Allocations

On January 1, 1980, the Fund made an allocation of SDR 4,033 million to the 139 members that were participants in the Fund’s Special Drawing Rights Department on December 31, 1979, including two new participants—St. Lucia, and St. Vincent and the Grenadines—that received allocations for the first time. The amount allocated to each participant was equal to 10.4 per cent of the participant’s quota in the Fund on December 31, 1979. (See Appendix I, Table I.15.)

The allocation in 1980 was made in accordance with a Board of Governors Resolution that provides for allocations of SDR 4 billion on January 1 each year in 1979, 1980, and 1981.24 Taking into account the allocation of SDR 9.3 billion during the first three years (1970-72) and the subsequent allocations of SDR 8 billion in 1979 and 1980, total allocations amount to SDR 17.3 billion at present and will exceed SDR 21 billion after the allocation on January 1, 1981. As regards subsequent allocations, the Managing Director is required to make a proposal by June 30, 1981 (i.e., six months before the end of the present period for allocations), or report to the Board of Governors and the Executive Board that there is no proposal for allocations that he considers to be consistent with the Articles of Agreement that has broad support among participants.

Transactions and Operations in the Special Drawing Rights Department

Between Participants

Important changes have been made in recent years that have progressively enlarged the scope for participants to acquire and to use SDRs in voluntary, bilateral transactions and operations by agreement with other participants. Following the Second Amendment, with effect from April 1, 1978, SDRs can be freely transitferred by agreement in exchange for an equivalent amount of currency. Furthermore, under the amended, Articles, the Fund adopted a series of decisions25 during the period December 1978-March 1980 to permit additional uses of SDRs, as follows:

  • (i) In swap arrangements, in which a participant would transfer SDRs to another participant in exchange for an equivalent amount of currency or another monetary asset, other than gold, with an agreement to reverse the exchange at a specified future date and at an exchange rate agreed between the participants.

  • (ii) In forward operations, in which participants can buy or sell SDRs for delivery at a future date against a currency or another monetary asset, other than gold, at an exchange rate agreed by the participants.

  • (iii) In loans of SDRs at interest rates and maturities agreed between the parties. Repayment of loans and payment of interest may be made with SDRs.

  • (iv) In the settlement of financial obligations.

  • (v) As security for the performance of financial obligations, in either of two ways: (a) participants may pledge SDRs, which can be earmarked for the duration of the pledge by being recorded in a special register kept by the Fund; or (b) participants may agree that SDRs will be transferred as security for the performance of an obligation and that the SDRs will be returned to the transferor when its obligations under the agreement have been fulfilled.26

  • (vi) In donations (grants).

The amounts used in these operations are left for the parties to agree. However, in certain operations—the first part of a swap agreement, the use of SDRs for repayment of a currency loan, or the settlement of a financial obligation—the equal value principle must be observed; that is, the exchange rates to be used must be the same as the exchange rates that are calculated by the Fund for spot transactions in SDRs.

All the decisions permitting additional uses of SDRs are to be reviewed by the Fund once each year. To date, there have been no transfers of SDRs in any of the operations authorized by these decisions.

Transactions by Agreement

The amount of SDRs transferred by participants in transactions by agreement with other participants amounted to SDR 362 million in the year ended April 30, 1980. In the previous year such transfers totaled SDR 1,533 million, mainly as a result of the transfer by the United States of SDR 1,100 million to the Federal Republic of Germany and Japan in two transactions to obtain deutsche mark and Japanese yen as part of a package of measures announced on November 1, 1978 to strengthen the U.S. dollar.

Belgium transferred SDR 42.5 million to the Federal Republic of Germany in May 1979 in exchange for Belgian francs, in a transaction to settle an obligation arising from intervention under the European Monetary System. The remaining transfers in 1979/80 were made by Canada and the Federal Republic of Germany under arrangements with the Fund for sales of SDRs in bilateral transactions to other participants that wished to acquire them. In all cases, these transactions were arranged at the initiative of the recipient, usually because SDRs were needed to make payments to the Fund, for example, in repurchases or charges, or because SDRs needed to be acquired for reconstitution. Details of transactions by agreement in 1979/80 are shown in Table 29. Information concerning the currencies transferred in exchange for SDRs in transactions by agreement is presented in Appendix I, Table I.18.

Table 29.Use and Receipt of SDRs in Transactions by Agreement, Financial Year Ended April 30, 1980(In millions of SDRs)
ParticipantUseReceipt
Belgium42.5
Burma16.1
Cameroon2.6
Canada80.9
Egypt4.3
El Salvador0.8
Fiji0.5
Germany, Fed. Rep. of238.442.5
Greece14.8
Grenada0.4
Guyana0.6
Iceland5.0
Israel88.0
Jamaica3.1
Madagascar1.1
Nicaragua1.9
Panama2.0
Papua New Guinea5.0
Peru124.6
Portugal3.0
Sierra Leone0.2
Sudan14.5
Turkey28.0
Western Samoa0.3
Zaïre2.6
Total361.8361.8

Transactions with Designation

Transactions with designation, in which participants with a balance of payments need use SDRs to obtain currency from other participants designated by the Fund, amounted to SDR 1,372 million in 1979/80, the largest amount in any financial year to date.

A total of 47 participants were designated to provide currency; the largest amounts were provided by the United Kingdom (equivalent to SDR 355 million), Italy (SDR 154 million), France (SDR 144 million), Saudi Arabia (SDR 102 million), and India (SDR 101 million). Details of transactions with designation in 1979/80 are shown in Table 30.

As a participant designated by the Fund to provide currency in such a transaction may also choose which of the five freely usable currencies (the deutsche mark, French franc, Japanese yen, pound sterling, and U.S. dollar) it will provide, arrangements are in place for the exchange of freely usable currencies when the currency requested by the user of SDRs differs from that provided by the designated participant. Details of the currencies transferred against SDRs are presented in Appendix I, Table I.18.

Table 30.Use and Receipt of SDRs in Transactions with Designation, Financial Year Ended April 30, 1980(In millions of SDRs)
ParticipantUseReceipt
Afghanistan2.7
Algeria2.0
Argentina36.0
Australia130.0
Austria7.0
Bangladesh47.0
Benin4.0
Bolivia26.8
Brazil31.7
Burma11.0
Canada28.6
Central African Republic5.9
Chile41.0
Colombia20.1
Congo2.0
Costa Rica7.5
Denmark7.5
Dominica1.9
Dominican Republic23.3
Ecuador1.3
El Salvador17.70.5
Equatorial Guinea1.8
Ethiopia36.0
Finland9.5
France143.8
Gabon7.5
Gambia, The1.6
Germany, Fed. Rep. of8.5
Grenada0.6
Guatemala1.3
Guinea3.0
Guyana6.1
Honduras0.5
India100.8
Indonesia23.5
Iraq22.7
Ireland2.0
Israel31.53.0
Italy154.0
Ivory Coast13.03.0
Jamaica20.4
Jordan1.6
Korea35.02.0
Liberia19.5
Libyan Arab Jamahiriya18.0
Luxembourg0.6
Madagascar11.3
Malawi19.0
Malaysia22.0
Malta2.1
Mauritius1.0
Mexico30.5
Netherlands29.0
New Zealand25.1
Nicaragua48.5
Nigeria4.0
Norway7.3
Pakistan10.0
Papua New Guinea1.8
Paraguay0.3
Peru68.0
Philippines149.0
Qatar0.3
Saudi Arabia101.9
Senegal18.3
Sierra Leone6.5
Singapore7.5
Spain97.0
Sri Lanka17.0
Sudan60.5
Sweden14.0
Tanzania34.0
Trinidad and Tobago7.5
Tunisia1.0
Turkey51.6
Uganda11.0
United Arab Emirates3.5
United Kingdom354.6
Uruguay7.0
Venezuela2.2
Western Samoa0.2
Yemen Arab Republic5.2
Yugoslavia313.3
Zaïre4.9
Zambia69.5
Total1,371.51,371.5

Transactions and Operations Between Participants and the General Resources Account

There are now several avenues by which SDRs flow into the Fund’s General Resources Account. Participants may use SDRs freely to make repurchases; they are required to use SDRs to pay charges on the use of the Fund’s resources and may be required to do so in making subscription payments in connection with initial quotas or quota increases. The Fund itself may use SDRs it receives to pay remuneration on creditor positions, to make repayments of Fund borrowings, subject to the lender’s agreement, or in transfers to members making purchases (see below).

The SDR holdings of the General Resources Account have tended to increase over the past five years because inflows, mainly from repurchases and charges, have exceeded outflows, even in those years when there were substantial sales to members needing to acquire SDRs for reconstitution. (See Table 28.) As of April 30, 1980 these holdings amounted to SDR 1,407 million, about 8 per cent of the total amount allocated. While it is necessary for the Fund to maintain adequate holdings of SDRs to be able to assist members to fulfill their obligations to the Fund and for certain other purposes, the need to hold SDRs for these purposes is not unlimited, and it has been considered preferable to channel SDRs back to participants rather than to retain them in the General Resources Account. Since March 1977, the Fund has transferred SDRs instead of currencies to members using the Fund’s resources, with the agreement of the transferees. Members receiving SDRs in this way may retain them if they wish, but in most cases purchasing members use the SDRs immediately to obtain foreign exchange in a transaction with designation.

Transfers of SDRs by the Fund in purchases have risen in recent financial years to SDR 1,283 million in the financial year just ended. (See Table 28.) The amount of SDRs included in the quarterly operational budgets for use in purchases by members has varied up to 100 per cent of the total. Following a review of the role of SDRs in the General Resources Account during the financial year, it was agreed that the Fund’s holdings of SDRs should be maintained, if possible, within the range of SDR 750-1,000 million during the period prior to the coming into effect of new quotas under the Seventh General Review.27 As 25 per cent of the increases in quota under the Seventh General Review of Quotas is payable in SDRs, about SDR 5 billion is expected to be received by the Fund when the quota increases become effective. At that time, the question of the use of SDRs by the General Resources Account will need to be re-examined.

Flows of SDRs through the General Resources Account during the financial year 1979/80 are discussed below.

Inflows

Transfers to the General Resources Account totaled SDR 1,630 million in 1979/80, against SDR 1,295 million in 1978/79. Repurchases, discharged at the member’s option with SDRs rather than currencies specified by the Fund, amounted to SDR 994 million, including SDR 400 million used by the United Kingdom. Other members using SDRs for repurchases included Peru (SDR 75 million), Mexico (SDR 71 million), Israel (SDR 69 million), Australia (SDR 62 million), and India (SDR 60 million). More than 70 per cent of the repurchases with SDRs were made during the last four months of the financial year after the allocation of SDRs on January 1, 1980.

Charges levied by the Fund on the use of its resources must be paid in SDRs, unless the member’s SDR holdings are insufficient. During 1979/80, all charges that were due the Fund were paid in SDRs, although in a number of cases members found it necessary to acquire SDRs for this purpose because of the low level of their holdings. The largest amounts of charges were paid by the United Kingdom (SDR 79 I million), Turkey (SDR 32 million), and Italy (SDR 27 million).

In other payments to the Fund, Cape Verde, Djibouti, and Dominica used a total of SDR 0.7 million to pay the reserve asset portion of their initial subscriptions as new members of the Fund. Interest received on the Fund’s holdings of SDRs in the General Resources Account amounted to SDR 82 million, which was sub-stantially more than in previous years because of a higher average rate of interest on SDR holdings. The assessment, by which participants reimburse the Fund’s General Resources Account for the expenses of conducting the Special Drawing Rights Department, was SDR 1 million.

Outflows

As in the previous two years, the main avenue for outflows of SDRs from the General Resources Account was in transfers to members making purchases. These transfers amounted to SDR 1,283 million and accounted for 52.7 per cent of total purchases during the year that were financed through the Fund’s operational budgets.

In May 1979, the Fund paid remuneration on members’ net creditor positions for the year 1978/79, including amounts in SDRs totaling SDR 140 million to 50 members. The largest payments in SDRs were to the Federal Republic of Germany (SDR 50 million), Japan (SDR 31 million), and the United States (SDR 23 million). Remuneration payments have been higher in the past three years because of greater net use of the Fund’s resources and higher rates of remuneration.

The Fund used a total of SDR 65 million to pay interest and transfer charges on, or to discharge, its indebtedness to lenders under the General Arrangements to Borrow, the oil facility, and the supplementary financing facility. These payments, which are made in SDRs subject to the lender’s agreement, have increased in recent years as lenders have shown greater readiness to accept SDRs, as repurchasing members have used more SDRs (following the allocations in 1979 and; 1980), and as the Fund has sought to match those receipts by asking lenders if they will accept repayment in SDRs.

Other Holders of SDRs

In April 1980, the Fund prescribed five institutions as “other holders” of SDRs authorizing them to acquire, hold, and use SDRs on uniform terms and conditions. The five new holders are as follows: the Andean Reserve Fund, Bogotá the East Caribbean Currency Authority, St. Kitts; the International Fund for Agricultural Development, Rome; the Nordic Investment Bank, Helsinki; and the Swiss National Bank, Zurich. The Bank for International Settlements, Basle, had earlier been prescribed as a holder.

The transactions and operations in which other holders may deal in SDRs are regulated by a decision of the Fund taken in April 1980.28 “Other holders” are not obligated to acquire or use SDRs, but the decision permits them to do so in bilateral transactions and operations by agreement with any participant or other prescribed holder, with the same degree of freedom as participants have in such dealings among themselves. No general provision has been made for other holders to deal in SDRs with the Fund’s General Resources Account, but the Swiss National Bank, which has borrowing agreements with the Fund, has been authorized to accept SDRs in payment of interest on, or repayment of, the Fund’s indebtedness to the Bank, in accordance with the terms of the borrowing agreements.

Other holders do not receive allocations of SDRs, as the Fund can make allocations only to particpants, and they are not required to assume those obligations of participants that are based on allocations, such as the reconstitution requirement. Assured use of SDRs through the designation process is also unavailable to other holders; by the same token, they are not required to provide currency to participants using SDRs in this way. During the year 1979/80, there were no transfers of SDRs involving other holders.

Income, Expenses, and Reserves

For the year ended April 30, 1980 the Fund recorded net income of SDR 3.1 million, compared with SDR 46.1 million in 1979. The income for the year was placed to the Special Reserve. On April 30, 1980 the total of the General and Special Reserves of the Fund was SDR 763.2 million.

The comparative details of the Fund’s operational income and expenses are presented in Appendix VII and administrative expenses in Appendix VI. A number of factors affect the Fund’s income position in any year, including the amounts and timing of purchases and repurchases, the availability to the Fund of resources that do not entail the payment of either interest or remuneration, the amounts of its currency holdings on which the Fund receives income from charges or pays interest and remuneration, and the relationship between the Fund’s average cost of funds and its average rate of charge actually received.

During the year, the Fund’s schedules of charges remained unchanged. The average rate of charges (including charges for use of the oil facility and the supplementary financing facility) rose slightly, from 6.24 per cent in the previous year to 6.34 per cent, mainly as a result of the progression in the rates of charges with the time during which the balances on which they are levied remained outstanding; it also partially reflected the charges for use of the supplementary financing facility, which are linked to market interest rates. The average rate of interest on the Fund’s indebtedness increased slightly in 1979/80 reflecting the higher cost of borrowing under the supplementary financing facility. (See Table 31.) In contrast, the average SDR rate of interest and the average rate of remuneration rose significantly in 1979/80, the former from 4.42 per cent to 7.92 per cent and the latter, which was equal to 90 per cent of the SDR interest rate, from 4.40 per cent to 7.06 per cent. These increases were a result of higher market rates of interest on which the SDR interest rate is based.

Table 31.Summary of Average Rates of Periodic Charges, Interest on SDR Holdings, Remuneration, and Interest on Borrowing, Financial Years Ended April 30, 1979 and 1980(Amounts in millions of SDRs)
1980197919801979
Including the oil facility and

supplementary financing facility
Excluding the oil facility and

supplementary financing facility
Income from periodic charges
Average daily balances8,19210,8684,8045,474
Total charges for the period519.4678.1252.0275.9
Average annual rate6.346.245.255.04
Interest on SDR holdings
Average daily balances1,0331,2931,0331,293
Total interest for the period81.857.181.857.1
Average annual rate7.924.427.924.42
Combined income
Average daily balances9,22512,1615,8376,161
Total income for the period601.2735.2333.8333.0
Average annual rate6.526.055.724.92
Remuneration expense
Average daily balances3,4143,9033,4143,903
Total interest for the period241.0171.7241.0171.7
Average annual rate7.064.407.064.40
Interest on borrowing
Average daily balances4,1636,953111−1,539
Total interest for the period284.0458.131.170.7
Average annual rate6.826.594.004.59
Combined expense
Average daily balances7,57710,8564,1915,442
Total expense for the period525.0629.8272.1242.4
Average annual rate6.935.806.494.45
Excess of average daily income-earning balances
over average daily interest-costing balances+1,648+1,305+1,646+1,325
Margin between the combined average annual rate of
income and the combined average rate of expense−0.41+0.25−0.77+0.47
Excess of periodic charges and interest on
SDR holdings over remuneration and interest+76.2+105.4+61.7+90.6

The relative movements in the rates of charges and in interest rates were a major factor affecting the financial outcome for the financial year ended April 30, 1980. The negative influence of the higher average rate of remuneration on the Fund’s income position was, however, moderated by a significantly larger reduction in the amount of the average daily balances on which the Fund calculated remuneration and interest than in the average daily balances of currency holdings and SDRs on which the Fund earned income. Another positive factor was the increased interest received on the Fund’s holdings of SDRs.

Consultations with Member Countries

Regular consultations with member countries have continued as a central part of the Fund’s work. As discussed in Chapter 2, regular Article IV consultations are required for all members and constitute, inter alia, the centerpiece of the Fund’s surveillance over the exchange rate policies of individual member countries. In addition, these consultations enable the Fund to deal promptly with requests for use of Fund resources and with proposed changes in exchange practices subject to Fund approval. There was no change, in the year under review, in the basic procedure followed for regular consultations. On the basis of the discussions with the representatives of the member country, the Fund staff prepares a report for consideration and discussion by the Executive Board. Not later than three months after the termination of discussions between the member and the staff, the Executive Board is to reach conclusions and thereby complete the consultation under Article IV. In addition to any formal decision rendered by the Board on any matters subject to Fund jurisdiction, an Article IV consultation concludes with an informal summation by the Managing Director expressing the sense of the meeting and indicating the conclusions reached. These views are transmitted promptly to the authorities of the member country by the Fund.

Article IV consultations are required, in principle, to take place annually. Similarly, members availing themselves of the transitional arrangements under Article XIV are required to consult the Fund annually. As in previous years, there was, in practice, some shortfall from the objective of annual consultations, owing partly to the constraints of staff resources and partly to the wish of some members to modify the scheduling of the consultation. Thus, in 1979/80, the Fund completed 94 regular Article IV consultations, of which 61 were with countries availing themselves of the transitional arrangements of Article XIV, and 33 with countries that had formally accepted the obligations of Article VIII. Of those consultations completed in 1979/80, 33 had been initiated in the previous financial year, whereas 25 of those initiated in 1979/80 remained outstanding at the end of the year. During the financial year, three member countries (Dominica, Finland, and Solomon Islands) formally accepted the obligations of Article VIII, Sections 2, 3, and 4. On April 30, 1980, the Fund had a total membership of 140 countries, of which 50 had Article VIII status as listed in Appendix I, Table I.14.

Regular consultations as described are supplemented by special consultations held in connection with the periodic review of the World Economic Outlook by the Executive Board. These special consultations are intended to provide up-to-date information on the economic situation of countries whose external policies are regarded as being of major importance to the world economy. In addition to regular consultations and special consultations, the Fund’s practices include ad hoc consultations that the Managing Director may initiate in the circumstances set forth in the decision on procedures relating to the Fund’s surveillance over members’ exchange rate policies.29

Training and Technical Assistance

The training and technical assistance provided by the Fund during 1979/80 again took the form of training at headquarters, staff missions, and the stationing of staff members and outside experts in member countries—all complementary to the assistance made available to members through the Fund’s regular consultation procedures under Article IV. In addition, the Fund’s area and functional departments have continued to provide, on request, technical assistance on a wide range of specific economic and financial problems confronting member countries. This assistance has continued to be made available to member countries mainly in the fields of fiscal, monetary, and balance of payments policies, banking, exchange and trade systems, government finance, and statistics.

During the financial year, the IMF Institute conducted eight training courses, which were attended by 233 officials of governments and central banks of member countries. Since its inception in 1964, Institute courses have been attended by 2,613 officials from 134 member countries.

The Institute’s main course, on Financial Analysis and Policy, was conducted twice in English and once each in French and Spanish. The course, which runs for 19 weeks in English and 21 weeks in French and Spanish, presents an exposition of the Fund’s procedures and policies, examines the modern tools of economic analysis and forecasting, and provides a thorough study of the instruments of monetary, fiscal, and balance of payments policies that are used to achieve economic objectives under changing national and international conditions.

The eight-week course on Balance of Payments Methodology was presented twice (in French and Spanish) in the financial year in collaboration with the Bureau of Statistics. It concentrates on the balance of payments concepts and definitions used in the Fund and serves as a medium for assisting member countries in their efforts to improve their balance of payments statistics. The ten-week course on Public Finance was offered twice (in English) in cooperation with the Fiscal Affairs Department. It covers the objectives, instruments, and procedures of public finance with special emphasis on the fiscal problems of developing countries.

The IMF Institute also participated in the organization of three area department seminars for senior officials from member countries, and continued to provide teaching assistance to national and regional training institutions.

The Central Banking Department continued to provide, in response to requests by appropriate authorities, technical assistance related to the establishment, organization, and operation of central banks and similar monetary institutions both in the field—through the assignment of resident experts and staff missions—and from headquarters through advisory studies and recommendations.

Experts, recruited mainly from outside the Fund, served in executive or advisory positions in 55 central monetary institutions and provided about 74 man-years of technical assistance during the year. As in earlier years, most of these assignments were in specialized fields—research and statistics, bank supervision, banking and exchange operations and controls—but a few were at the top management level. In addition to their specific duties, experts are generally required to give high priority to the training of their counterpart officers and local staff.

Advisory assistance in the central banking field was also provided from headquarters through correspondence and through staff missions to requesting institutions. In addition to carrying out 27 advisory missions during the year, departmental staff participated in missions by other Fund departments and other institutions, particularly the World Bank. Topics on which advice was given during the past year include central banking and financial system legislation (in cooperation with the Legal Department), the organization and functioning of central monetary institutions, foreign exchange policy and management, the structure of interest rates, and applications of computer technology to central banking operations.

The Fiscal Affairs Department has again provided technical assistance through staff missions, staff assignments in the field, and use of the services of members of the panel of fiscal experts. The principal fields in which assistance was given were tax policy, tax and customs administration, budget systems and procedures, accounting, auditing and financial reporting, and general financial management. The number of countries utilizing all forms of technical assistance was 40, compared with 35 in the previous financial year; 10 countries received assistance for the first time. Of the 58 individual field assignments carried out in the financial year, 34 were long-term assignments and 27 short-term assignments, while 292 man-months were spent in the field. Technical assistance work for the year was divided among 42 panel members and 21 staff members. As part of the ongoing review, members of the staff visited a number of countries to inspect progress and to advise on requests for further assistance. Another important element of technical assistance provided by the Fiscal Affairs Department is the work of staff members at headquarters in supporting and controlling the work of field experts.

Technical assistance in the statistical field has continued to be provided by staff members of the Bureau of Statistics. Such assistance has included the improvement of existing central bank statistical bulletins, with an emphasis on financial and general statistics, and the establishment of new bulletins, as well as assistance to members in the compilation of balance of payments and government finance statistics in accordance with the methodologies of Fund manuals. The program of assistance has taken the form of lectures, discussions, and work on data with national officials and technicians, using concepts and classification standards for the assembly of data relevant to the analysis of monetary and payments problems. The Bureau’s assistance in the fields of balance of payments and government finance statistics has focused on applying to national source materials the conceptual framework and classification standards given in the Fund’s Balance of Payments Manual and the Draft Manual on Government Finance Statistics. This assistance has been supported by courses in these areas of statistics given by the IMF Institute in Washington.

During the financial year, the Bureau’s overall technical assistance activities resulted in 40 visits to 34 countries. In addition to cooperating in the presentation of the IMF Institute courses on the balance of payments, the Bureau responded to requests from 14 national and multinational institutions for ad hoc training of officials of central banks, ministries of finance, and other government agencies

Relations with Other International Organizations

Cooperation with other international and regional organizations having related responsibilities or interests is an essential part of the Fund’s work. In addition to the World Bank, with which it has a special relationship, the Fund has close ties with the United Nations (UN) and its relevant organs, the Organization for Economic Cooperation and Development (OECD), the General, Agreement on Tariffs and Trade (GATT), the Commission of the European Communities (CEC), the Bank for International Settlements (BIS), the Organization of, American States (OAS), especially its Inter-American Economic and Social Council and its Permanent Executive Committee (CEPCIES), and regional financial institutions in Africa, Asia, Latin America and the Caribbean, and the Middle East.

Continuous liaison with these organizations is provided by exchange of information and pertinent documents, direct contact by headquarters staff including attendance at meetings, and the Fund’s offices in Paris and Geneva. Most of the organizations were represented at the Annual Meeting of the Fund’s Board of Governors, held jointly with that of the World Bank and its affiliates, in Belgrade, Yugoslavia, in October 1979. Several of them also were represented at meetings of the Interim Committee and of the Development Committee, held in Belgrade just prior to the Annual Meeting and in Hamburg, Germany, in April 1980.

The Managing Director made his annual address to the UN Economic and Social Council (ECOSOC) on July 6, 1979 in Geneva. He also addressed the Fifth Session of the UN Conference on Trade and Development (UNCTAD) held in Manila, Philippines. At the invitation of the Chairman of the Preparatory Committee of the UN General Assembly on the New International Development Strategy, the Managing Director delivered remarks to that body reviewing the status of the international economic environment and commenting on the dynamics of development relevant to the 1980s. In addition, he spoke at the UN Administrative Committee on Coordination (ACC) meeting on development strategy in the 1980s held in Vienna in April 1980, and took part in other ACC meetings. During the period under review the Managing Director also participated in the OECD Ministerial Meeting in Paris on June 14, 1979, attended the monthly meeting of the BIS in July 1979, and addressed a Symposium on Monetary Theory and Policy in the African Context organized by the African Centre for Monetary Studies on January 21, 1980. He attended meetings of the Ministers of the UNCTAD Intergovernmental Group of Twenty-Four on International Monetary Affairs and meetings of the Group of Ten ministers and governors of central banks occurring at the time of the Interim and Development Committee meetings, and was an observer at the meeting of the UNCTAD Group of 77 at the level of Ministers held in Belgrade on September 29, 1979.

The Fund’s standing arrangements for collaboration with the GATT with respect to its consultations with common members on trade restrictions imposed for balance of payments reasons involved staff participation in those consultations and the provision of pertinent documents. Fund representatives also attended the 35th session of the Contracting Parties and meetings of the Council of Representatives and subsidiary bodies.

Commodity problems are of particular interest to the Fund in connection with its compensatory financing and buffer stock facilities. Staff representatives participated in meetings of the UNCTAD’s Integrated Program for Commodities, including sessions of the Interim Committee of the UN Negotiating Conference on a Common Fund and an interagency meeting for an informal exchange of views on draft Articles of Agreement of the Common Fund; meetings of the Food and Agriculture Organization of the United Nations (FAO) Intergovernmental Groups on Meat and Grains, as well as a preparatory meeting for the Sixth Ministerial Meeting of the World Food Council; the UN Tin Conference to negotiate a Sixth International Tin Agreement; the Ninth (Special) Session of the Council of the International Sugar Organization; and an International Wheat Council meeting in preparation for the negotiating conference for a new Wheat Agreement.

At the regional level the Fund was called upon during the year to provide technical assistance to the South-East Asian Central Bank’s (SEACEN) Research and Training Centre in the organization of a Financial Analysis and Policy Course and in the formulation and implementation of a research project entitled “The Relationship of Money and Credit to Economic Activity.” In addition, the assignment of an expert to the Central American Monetary Council as Advisor to the Special Program on National Accounts was extended.

Aid coordination and debt renegotiation are of vital concern to the Fund, as reflected in its continuing participation in meetings of consortia and consultative and aid groups sponsored by the World Bank, the OECD, and others. Fund staff participated in World Bank-sponsored meetings of the India and Pakistan Consortia, the Bangladesh, Nepal, and Sri Lanka Aid Groups, and the Consultative Groups for Colombia, Egypt, Kenya, Korea, the Philippines, Sudan, and Uganda, as well as the OECD-sponsored Turkey Consortium and the Netherlands-sponsored Inter-Governmental Group on Indonesia. Representatives of the Fund also took part in meetings relating to the Caribbean Group for Cooperation in Economic Development, an aid group organized by the World Bank; the Fifth Meeting of the OAS Joint Commission for the Implementation of External Cooperation with Haiti; and meetings on debt rescheduling for Sierra Leone, Sudan, Togo, and Zaïre held under the aegis of the Paris Club.

Executive Directors and Staff

A list of Executive Directors and their voting power on April 30, 1980 is given in Appendix IV. The changes in membership of the Executive Board during 1979/80 are shown in Appendix V.

In the year ended April 30, 1980, there were 122 appointments to the Fund’s regular staff and 84 separations. At the end of the financial year, the staff numbered 1,416 and was drawn from 90 countries.

Publications

The list of publications issued by the Fund during 1979/80 is shown in Appendix I, Table I.19.

Executive Board Decision No. 6056-(79/38), adopted March 2, 1979. (See Annual Report, 1979, pages 136-38.)

Executive Board Decision No. 6339-(79/179), adopted December 3, 1979 and reproduced in Appendix II.

Executive Board Decision No. 6224-(79/135), adopted August 2, 1979 and reproduced in Appendix II.

The texts of the communiques issued by the Interim Committee and the Development Committee at the time of the 1979 Annual Meetings and in Hamburg in April 1980, as well as the Outline for a Program of Action, are reproduced in Appendix III.

Executive Board Decision No. 6224-(79/135), adopted August 2, 1979 and reproduced in Appendix II.

Executive Board Decision No. 5508-(77/127), Section 5(f), adopted August 29, 1977. See Annual Report, 1978, page 113.

Executive Board Decision No. 5597-(77/171), adopted December 16, 1977 (Annual Report, 1978, pages 128-29) and Executive Board Decision No. 5900-(78/138), adopted September 8, 1978.

See Executive Board Decisions No. 5704-(78/39), adopted March 22, 1978, and No. 6172-(79/101), adopted June 28, 1979. See Annual Report, 1978, pages 125-26, and Annual Re-port, 1979, pages 138-39.

Usable currencies are currencies of those members that are I considered by the Executive Board to be sufficiently strong, in the light of their balance of payments and gross reserve positions, to be subject to designation and for inclusion for net sales in the operational budget.

For all operational purposes, such as the designation plan, i the operational budget, and early repurchases, the Fund continues to value gold held in members’ reserves at SDR 35 per fine ounce. Members’ Fund positions for this purpose are defined as their reserve tranche positions plus loans to the Fund that provide it with usable resources on a continuing basis on terms comparable to those applicable to the use of its currency holdings.

Executive Board Decision No. 6273-(79/158) G/S, adopted September 14, 1979 and reproduced in Appendix II.

Executive Board Decision No. 6274-(79/158), adopted September 14, 1979 and reproduced in Appendix II.

Executive Board Decision No. 6241-(79/144), adopted August 24, 1979 and reproduced in Appendix II.

The lending of U.S. dollars by lenders other than the United States is subject to the concurrence of the United States, which has been given.

Board of Governors Resolution No. 34-2, adopted December 11, 1978. See Annual Report, 1979, pages 121-23.

See Annual Report, 1979, page 80.

Arrangements have not yet been completed with regard to the distribution to Democratic Kampuchea.

The establishment and operation of the Trust Fund were discussed in Annual Report, 1979, pages 86-87, Annual Report, 1978, pages 76-78, Annual Report, 1977, pages 66-67, and Annual Report, 1976, pages 60 and 111-17. The Trust Fund and Subsidy Account constitute arrangements that are separate from the Fund’s own resources and accounts. The report of the Audit Committee for the year ended April 30, 1980 is reproduced in Appendix VIII.

The seventh of these members—the Socialist People’s Libyan Arab Jamahiriya—has so far transferred about one fourth of its profit share. As to the eighth member—Iran—the Fund was advised in June 1980 that Iran wished instead to receive its profit share in full. As of July 31, 1980, Iran’s profit share was held by the Trust pending action by the Executive Board.

These 61 members were countries that were Fund members on August 31, 1975 and had per capita incomes of less than SDR 300 in 1973. For the Trust’s second period, the cutoff point was a per capita income of less than US$520 in 1975; a total of 59 members are eligible on that basis for Trust Fund loans in the second period.

Executive Board Decisions No. 6201-(79/121) TR and No. 6202-(79/121) TR, adopted July 3, 1979, and No. 6466-(80/68) TR, adopted April 9, 1980 and reproduced in Appendix II.

The Australian dollar, Austrian schilling, Belgian franc, Canadian dollar, deutsche mark, French franc, Iranian rial, Italian lira, Japanese yen, Netherlands guilder, Norwegian krone, pound sterling, Saudi Arabian riyal, Spanish peseta, Swedish krona, and U.S. dollar.

France, the Federal Republic of Germany, Japan, the United Kingdom, and the United States.

Board of Governors Resolution No. 34-3, adopted December 11, 1978. See Annual Report, 1979, pages 127-28.

Executive Board Decisions No. 6000-(79/l) S and No. 6001-(79/l) S, adopted December 28, 1978, and No. 6053-(79/34) S and No. 6054-(79/34) S, adopted February 26, 1979. See Annual Report, 1979, pages 130-34. Executive Board Decision No. 6336-(79/178) S and No. 6337-(79/178) S, adopted November 28, 1979, and No. 6437-(80/37) S, adopted March 5, 1980 and reproduced in Appendix II.

SDRs pledged or transferred as security for the performance of a financial obligation must be used to fulfill obligations in SDRs to the Fund, if the pledgor’s SDR holdings would otherwise be insufficient.

Executive Board Decision No. 6275-(79/158) G/S, adopted September 14, 1979 and reproduced in Appendix II.

Executive Board Decision No. 6467-(80/71) S, adopted April 14, 1980 and reproduced in Appendix II.

Executive Board Decision No. 6026-(79/13), adopted January 22, 1979. See Annual Report, 1979, page 136.

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