Chapter

Appendix II: Principal Policy Decisions of the Executive Board

Author(s):
International Monetary Fund
Published Date:
September 1981
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A. Special Drawing Rights: Valuation and Interest Rate Basket

(a) Method of Valuation of SDR

(1) Effective January 1, 1981, the value of one special drawing right shall be the sum of the values of specified amounts of the currencies listed in (2) below, the amounts of these currencies to be determined on December 31, 1980 in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of the currencies in the value of the special drawing right correspond to the weights specified for each currency in (2) below.

(2) On the basis of changes in members’ exports of goods and services and in official balances of members’ currencies held by other members since the previous review of the method of valuation of the SDR conducted in March 1978, that the currencies and weights referred to in (1) above shall be as follows:

CurrencyWeight (in per cent)
U.S. dollar42
Deutsche mark19
French franc13
Japanese yen13
Pound sterling13

(3) The list of the currencies that determine the value of the special drawing right, and the amounts of these currencies, shall be revised with effect on January 1, 1986 and on the first day of each subsequent period of five years in accordance with the following principles, unless the Fund decides otherwise in connection with a revision:

(a) The currencies determining the value of the special drawing right shall be the currencies of the five members whose exports of goods and services during the five-year period ending 12 months before the effective date of the revision had the largest value, provided that a currency shall not replace another currency included in the list at the time of the determination unless the value of the exports of goods and services of the issuer of the former currency during the relevant period exceeds that of the issuer of the latter currency by at least 1 per cent.

(b) The amounts of the five currencies referred to in (a) above shall be determined on the last working day preceding the effective date of the relevant revision in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of these currencies in the value of the special drawing right correspond to percentage weights for these currencies, which shall be established for each currency in accordance with (c) below. (c) The percentage weights shall reflect the value of the balances of that currency held at the end of each year by the monetary authorities of other members and the value of the exports of goods and services of the issuer of the currency over the relevant five-year period referred to in (a) above, in a manner that would maintain broadly the relative significance of the factors that underlie the percentage weights in paragraph (2) above. The percentage weights shall be rounded to the nearest 1 per cent or as may be convenient.

(4) The determination of the amounts of the currencies in accordance with (1) and (3) above shall be made in a manner that will ensure that the value of the special drawing right in terms of currencies on the last working day preceding the five-year period for which the determination is made will be the same under the valuation in effect before and after revision.

Decision No. 6631-(80/145) G/S

September 17,1980

(b) Change in Rule O-1 and in Rule T-1

Rule O-1 and Rule T-1, as set forth [below], are adopted to become effective January 1, 1981.

Decision No. 6632-(80/145) S

September 17,1980, as amended by

Decision No. 6708-(80/189) S

December 19,1980

Rule O-1. The value of the special drawing right shall be the sum of the values of the following amounts of the following currencies:

U.S. dollar0.54
Deutsche mark0.46
French franc0.74
Japanese yen34
Pound sterling0.071

Rule T-1

  • (a) Interest and charges in respect of special drawing rights shall accrue daily at the rate referred to in (b) below and shall be paid promptly as of the end of each financial year of the Fund. The accounts of participants shall be credited with the excess of interest due over charges or debited with the excess of charges over the interest due. The accounts of holders that are not participants shall be credited with the interest due.

  • (b) The rate of interest on holdings of special drawing rights for each calendar quarter shall be four fifths of the combined market interest rate as determined in (c) below, provided that the rate shall be rounded to the nearest ⅛ of 1 per cent.1

  • (c) The combined market interest rate shall be the sum of the average yield or rate on each of the respective instruments listed below for the fifteen business days preceding the last two business days of the last month before the calendar quarter for which interest is to be calculated, with each yield or rate multiplied by the number of units of the corresponding currency listed in Rule O-1 and the value in terms of the special drawing right of a unit of that currency as determined by the Fund under Rule O-2(a) and (b). The yields and rates for this calculation are:

    Market yields for three-month U.S. Treasury bills

    Three-month interbank deposits rate in Germany

    Three-month interbank money rate against private paper in France

    Discount rate on two-month (private) bills in Japan

    Market yields for three-month U.K. Treasury bills.2

  • (d) The Fund will review the rate of interest on holdings of special drawing rights at the conclusion of each financial year.

(c) Change in Rule 1-10(b)

Effective January 1, 1981, Rule I-10(b) is amended by replacing “quarterly” with “annual.” 3

Decision No. 6633-(80/145) G/S

September 17, 1980

(d) Collection of Exchange Rates for Calculation of Value of SDR

(1) For the purpose of determining the value of the United States dollar in terms of the special drawing right pursuant to Rule 0-2(a), the equivalents in United States dollars of the amounts of currencies specified in Rule O-1 shall be based on spot exchange rates against the United States dollar. For each currency the exchange rate shall be the middle rate between the buying and selling rates at noon in the London exchange market as determined by the Bank of England.

(2) If the exchange rate for any currency cannot be obtained from the London exchange market, the rate shall be the middle rate at noon in the New York exchange market determined by the Fund on the basis of the buying and selling rates communicated by the Federal Reserve Bank of New York or, if not available there, the middle rate determined by the Fund on the basis of the buying and selling rates at the fixing in the Frankfurt exchange market communicated by the Deutsche Bundesbank. If the rate for any currency against the United States dollar cannot be obtained directly in any of these markets, the rate shall be calculated indirectly by use of a cross rate against another currency specified in Rule O-1.

(3) If on any day the exchange rate for a currency cannot be obtained in accordance with (1) or (2) above, the rate for that day shall be the latest rate determined in accordance with (1) or (2) above, provided that after the second business day the Fund shall determine the rate.

Decision No. 6709-(80/189) S

December 19, 1980

B. Special Drawing Rights: Rate of Interest on SDR and Rate of Remuneration

With effect from May 1, 1981,

  • 1. Rule T-1 (b) shall be amended to read:

    The rate of interest on holdings of special drawing rights for each calendar quarter shall be equal to the combined market interest rate as determined in (c) below.

  • 2. Rule T-1 (c) shall be amended to read:

  • The combined market interest rate shall be the sum of the average yield or rate on each of the respective instruments listed below for the fifteen business days preceding the last two business days of the last month before the calendar quarter for which interest is to be calculated, with each yield or rate multiplied by the number of units of the corresponding currency listed in Rule O-1 and the value in terms of the special drawing right of a unit of that currency as determined by the Fund under Rule 0-2(a) and (b), provided that the combined market interest rate shall be rounded to the two nearest decimal places. The yields and rates for this calculation are:

Market yields for three-month U.S. Treasury bills

Three-month interbank deposits rate in Germany

Three-month interbank money rate against private paper in France

Discount rate on two-month (private) bills in Japan

Market yields for three-month U.K. Treasury bills.

  • 3. Rule I-10 shall be amended to read:

    • (a) The rate of remuneration shall be equal to 85 per cent of the rate of interest on the special drawing right under Rule T-1(b), rounded to the two nearest decimal places.

    • (b) The Fund shall review the rate of remuneration on the occasion of the annual review of the rate of interest on holdings of special drawing rights under Rule T-1(d).

Decision No. 6833-(81/65) S

April 22, 1981

C. Special Drawing Rights: Abrogation of Rules for Reconstitution

The Executive Board, having reviewed the rules for reconstitution in accordance with Article XIX, Section 6(b), decides to abrogate with effect from April 30, 1981:

1. The rules for reconstitution under Schedule G, paragraph 1(a); and

2. Rules R-1 through 6 of the Fund’s Rules and Regulations; Decision No. 5699-(78/38) G/S (March 22, 1978, effective April 1, 1978);4 Decision No. 5936-(78/168) S (October 25, 1978, effective December 11, 1978);5 and Decision No. 6063-(79/43) S (March 14, 1979).6

Decision No. 6832-(81/65) S

April 22, 1981

D. Special Drawing Rights: Sales of SDRs by the Fund for Quota Payments

1. Pursuant to Article V, Section 6(b) and (c), the Fund shall provide a member at its request with SDRs from the General Resources Account in exchange for an equivalent amount of the currencies of other members to enable the member to pay SDRs in order to increase its quota under Board of Governors Resolution No. 34-2 on the Seventh General Review of Quotas 7 or in accordance with the provisions of that Resolution.

2. The amount of SDRs a member may receive under this decision shall not exceed the difference between the amount of the member’s SDR holdings and the amount of its quota payment due in SDRs at the time of payment.

Decision No. 6663-(80/160) S

October 31, 1980

E. Special Drawing Rights: Allocation to New Participants

1. Kuwait and Zimbabwe have become participants in the Special Drawing Rights Department in 1980, and have informed the Fund that they are willing to receive the final allocation of special drawing rights during the third basic period.

2. Pursuant to Article XVIII, Section 2(d), Kuwait and Zimbabwe shall receive an allocation of special drawing rights as of January 1, 1981 in accordance with Board of Governors Resolution No. 34-3,8 adopted December 11, 1978.

Decision No. 6673-(80/166) S

November 14, 1980

F. Trust Fund: Inclusion of China and Guyana Among Eligible Members and Extension of Second Period

1. China and Guyana shall be added to the list of eligible countries for the second period set forth in Annex B to the Instrument Establishing the Trust Fund,9 as provided by Executive Board Decision No. 5563-(77/150) TR,10 adopted October 28, 1977, and the amount available to each would be such as not to reduce below 55.9 per cent of its quota the amount to be made available to any eligible member at present on the list in Annex B that has qualified for a loan by the time of the final disbursement.

2. (a) The date “February 28, 1981” shall be substituted for “December 31, 1980” in paragraph 2 of Executive Board Decision No. 5069-(76/72),11 as subsequently amended, and in Section II, paragraph 1 of the Instrument Establishing the Trust Fund, annexed to Executive Board Decision No. 5069-(76/72),12 as subsequently amended.

(b) The date “January 1, 1981” shall be substituted for the date “November 1, 1980” in Section II, paragraph 3 (c) (ii) of the Instrument referred to above, as subsequently amended.

3. The final loan disbursement in respect of the Trust Fund’s second period shall be made toward the end of March 1981, provided that an interim disbursement may be made to Guyana.

Decision No. 6676-(80/168) TR

November 19, 1980

G. Trust Fund: Termination, Repayments of Loans, and Use of the Fund’s Resources

1. Having conducted the review specified in Section II, Paragraph 4(d) of the Instrument to Establish the Trust Fund attached to Decision No. 5069-(76/72),13 of May 5, 1976 (hereinafter called the Trust Instrument), the Fund, as Trustee, decides, with effect from the date disbursements under loans from the Trust Fund are completed,14 that the repayment terms of such loans from the Trust Fund will not be changed, provided, however, that, if the Trustee finds that repayment of an installment on the due date would result in serious hardship for the borrower the Trustee may reschedule the repayment to a date not later than two years after the date such repayment was originally due.

2. (a) The Fund, as Trustee, decides that the Trust Fund shall be terminated as of April 30, 1981 or the date on which disbursements under Trust Fund loans are finally completed, whichever is the later. After that date, the activities of the Trust shall be confined to the completion of any unfinished business of the Trust Fund and the winding up of its affairs.

(b) The resources of the Trust Fund held on the termination date or subsequently received by the Trustee, except those resources still being held for distribution to members or required to satisfy the liabilities specified in Section V, Paragraph 2 of the Trust Instrument, shall be transferred, as expeditiously as possible, to the Special Disbursement Account in accordance with Section V, Paragraph 2 of the Trust Instrument.

(c) Nothing in this paragraph 2 shall limit the authority of the Trustee, either before or during the winding up of the Trust Fund, to reschedule loan repayments in cases of serious hardship as provided in paragraph 1 above.

3. (a) From the resources received in the Special Disbursement Account of the Fund pursuant to paragraph 2(b) above, the Fund shall make available an amount equivalent to SDR 750 million for use in the supplementary financing facility subsidy account (hereinafter called the subsidy account). Such amount shall be transferred to the subsidy account as provided in Section 4 of the Instrument establishing the subsidy account.

(b) Of the resources received in the Special Disbursement Account as a consequence of the termination of the Trust Fund which are not used for the subsidy account as provided in (a) above, SDR 1,500 million shall be used to provide balance of payments assistance on concessional terms, on a uniform basis, to low-income developing members in need of such assistance under arrangements similar to those set forth in the Trust Instrument. The remainder shall be used to provide assistance to low-income developing members in accordance with the second sentence of subsection 12(f)(ii) of Article V of the Articles of Agreement under a decision of the Fund to be taken not later than June 30, 1986. If no such decision is taken by that date, the remainder referred to in the preceding sentence shall be used on the same terms as the SDR 1,500 million referred to in the first sentence of this subparagraph.

Decision No. 6704-(80/185) TR

December 17, 1980

H. Supplementary Financing Facility: Subsidy Account

(a) Instrument

To help fulfill its purposes, the International Monetary Fund (hereinafter called the Fund) has adopted this Instrument establishing the supplementary financing facility subsidy account (hereinafter called the account), which shall be governed by and administered in accordance with the terms of this Instrument.

Section 1. Purpose

The purpose of the account shall be to reduce the cost to eligible developing members, in accordance with Section 8, of using the Fund’s resources under the policies of the Fund referred to in Section 7 of this Instrument.

Section 2. Resources

The resources of the account shall consist of

  • (a) amounts donated to the account;

  • (b) amounts transferred to the account from the Special Disbursement Account of the Fund;

  • (c) the proceeds of borrowing by the Fund for the account; and

  • (d) the income or net gains from investment of resources of the account.

Section 3. Donations

The Fund may accept donations of resources for the account in such amounts and under such arrangements as may be agreed between the Fund and the respective donors, consistent with the provisions of this Instrument.

Section 4. Amounts Transferred from Special Disbursement Account

(a) Subject to (b) below, a total equivalent to SDR 750 million shall be transferred to the account from the assets received by the Special Disbursement Account of the Fund on termination of the operation, in its present form, of the Trust Fund established by Executive Board Decision No. 5069-(76/72).15 These transfers to the account shall be made as the amounts are received in the Special Disbursement Account.

(b) If, on the basis of reasonable estimates, the Executive Board determines at any time that amounts already transferred to the account, together with the other assets available to the account, are sufficient to carry out the operations and to meet the liabilities of the account in full, it may authorize the suspension of further transfers from, and the retransfer of any surplus back to, the Special Disbursement Account, provided that transfers shall be resumed, up to the total amount specified in (a), if this proves necessary to complete the operations of the account and to discharge its liabilities in full.

Section 5. Borrowing

(a) The Fund may borrow resources for the account on such terms and conditions as may be agreed between the Fund and the respective lenders, consistent with the provisions of this Instrument. In undertaking such borrowing, the Fund shall make every effort to obtain loans on concessionary terms. The aggregate amount of such borrowing, including the interest payable on the borrowing, shall not exceed the SDR 750 million that could be transferred to the account from the Special Disbursement Account under Section 4.

(b) Payments of interest and repayments of the principal amount under each such loan shall be made exclusively from the resources of the account. All resources of the account shall be available for such payments, except that donations shall not be used for this purpose without the consent of the donor. Resources transferred to the account from the Special Disbursement Account pursuant to Section 4 shall be applied, as necessary, to make payments due under such loans, including the interest payable thereon, in priority to other uses of such resources.

Section 6. Investment

Any balances of currency held in the account and not immediately needed to carry out the operations or to meet the liabilities of the account shall be invested promptly in accordance with Section 14.

Section 7. Authorized Subsidy

The Fund shall draw upon the resources of the account, in such order as it may determine, to reduce the cost to eligible members of the periodic charges paid by them to the General Resources Account of the Fund on holdings of their currencies acquired by the Fund as a result of all purchases under the policies referred to below, in respect of the entire periods for which such charges were paid:

(a) under the supplementary financing facility of the Fund established by Executive Board Decision No. 5508-(77/127),16 and

(b) under the policy on exceptional use of the Fund’s resources incorporated in Executive Board Decision No. 5732-(78/65),17 as amended by Executive Board Decision No. 5998-(79/1).18

Section 8. Eligible Members

(a) Subject to (b) below, members eligible to receive a subsidy under Section 7 shall be those members that, according to the latest data provided by the World Bank before April 30, 1981, had per capita incomes in 1979 not in excess of that of the member with the highest per capita income in 1979 that was eligible to receive assistance from the Trust Fund.

(b) Also eligible to receive a subsidy under Section 7 shall be any other members that, according to the latest data provided by the World Bank before April 30, 1982, had per capita incomes in 1979 not in excess of that of the member with the highest per capita income in 1979 that was eligible to receive assistance from the Trust Fund, that member’s per capita income determined according to the same data.

Section 9. Calculation and Payment of the Subsidy

(a) The amount of the subsidy shall be calculated as a percentage per annum of the currency holdings referred to in Section 7 and, subject to Section 10, shall be determined by the Fund in the light of the resources available to the account. The determination and payment shall be made annually after the close of each financial year following the date of the Instrument. The Fund shall as far as practicable seek to ensure that, within the limits specified in Section 10, the percentage at which the subsidy is determined shall be equal over the entire period during which a subsidy is provided from the account.

(b) Eligible members that, in accordance with Section 8, had per capita incomes in 1979 not in excess of the per capita income used for determining eligibility for assistance from the International Development Association shall receive the full amount of the subsidy calculated pursuant to (a) above. All other eligible members shall receive a subsidy equal to one half of that amount.

(c) The amount of subsidy determined pursuant to (a) and (b) above shall be paid to each eligible member as soon as practicable after the determination is made.

Section 10. Amount of Subsidy

The subsidy provided to any member pursuant to Section 9 shall not exceed the equivalent of 3 per cent per annum of the currency holdings specified in Section 7, nor reduce the effective charges on such holdings,

(a) if the holdings were acquired under a stand-by arrangement, below the charges which would have been applicable had such holdings been acquired under the Fund’s policies on the regular use of its resources in the credit tranches; or

(b) if the holdings were acquired under an extended arrangement, below the charges which would have been applicable had such holdings been acquired under the extended Fund facility.

Section 11. Administration of the Account

The account shall be administered by the Fund as Trustee. Subject to the provisions of this Instrument, the Fund in administering the account shall apply the same rules and procedures as apply to operations and transactions in the General Resources Account of the Fund.

Section 12. Separation of Assets

(a) The resources of the account shall be held separately from the resources of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the account.

(b) Except to the extent contemplated in Section 4, property and assets of the Fund held or administered in its other accounts shall not be available or used to discharge liabilities or to meet losses arising from the operations of the account.

Section 13. Exchange of Resources

(a) Resources donated pursuant to Section 3 or loaned pursuant to Section 5 shall be paid in a freely usable currency, provided that a donor or lender which is a member or the fiscal agency of a member may, at its option, pay in the currency of the member. Amounts paid in a member’s currency shall, at the time of payment, be exchanged by the member for freely usable currency, if so requested by the Fund. Donations and loans may also be made available in special drawing rights in accordance with arrangements made by the Fund for the holding and use of such special drawing rights.

(b) The Fund may sell or exchange any of the resources of the account, provided that balances of currencies held in the account may be exchanged only with the concurrence of the issuers of such currencies.

Section 14. Authorized Investments

Investments pursuant to Section 6 may be made in any of the following: (a) marketable obligations issued by an international financial organization and denominated in special drawing rights or in the currency of a member of the Fund; (b) marketable obligations issued by a member or by a national official financial institution of a member and denominated in special drawing rights or in the currency of that member; and (c) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in special drawing rights or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used.

Section 15. Administrative Expenses

In order to compensate the Fund for the expenses of carrying out the business of the account, the account shall pay annually to the General Resources Account an amount equivalent to one thousandth per annum of the value of the resources in the account at the end of each financial year, other than resources attributable to donations made under Section 3, provided that this amount may be varied if the Fund, on the basis of a reasonable estimate of its expenses, considers such variation to be appropriate.

Section 16. Accounts, Audit, and Reports

(a) The Fund shall maintain separate financial records and prepare separate financial statements for the account.

(b) The audit committee selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the account. The audit shall relate to the financial year of the Fund.

(c) The Fund shall report on the resources and operations of the account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the audit committee on the account.

Section 17. Amendment

The Fund may amend the provisions of this Instrument, except this Section and Sections 1, 4, 5(b), 12, and 18, and the account and its resources shall thereafter be governed by the Instrument as amended.

Section 18. Termination Arrangements

Upon completion of the subsidy operations authorized by this Instrument the Fund shall wind up the affairs of the account. Any resources remaining in the account after all outstanding liabilities of the account have been discharged in full shall be applied first to reimburse the Special Disbursement Account up to the full amount transferred to the account under Section 4, net of any previous retransfers, and then to reimburse donors pro rata, up to the amounts of their donations. Any remaining balance in the account shall be transferred to the Special Disbursement Account.

Decision No. 6683-(80/185) G/TR

December 17, 1980

(b) Investment Policy

The Managing Director shall place in deposits, denominated in SDRs, with the Bank for International Settlements the currencies received by the SFF Subsidy Account, unless the Managing Director considers that the terms offered by the BIS on an intended deposit denominated in SDRs are not sufficiently attractive. In that event the Managing Director shall inform the Executive Board promptly and make other proposals to it for investment in SDR-denominated obligations.

Decision No. 6854-(81/78) SBS

May 8, 1981

I. Supplementary Financing Facility: Review and Extension

The Fund, having reviewed its decision on the establishment of a supplementary financing facility (Decision No. 5508-(77/127),19 August 29, 1977), extends until February 22, 1982 the period during which it may approve a stand-by or extended arrangement that provides for supplementary financing.

Decision No. 6725-(81/5)

January 9, 1981

J. Sales of Special Drawing Rights and Use of Currencies Through the Operational Budgets

Sales of SDRs

The Fund will sell the amount of SDRs expected to be received in each budget period; and the balance of purchases will be distributed between SDRs and currencies in such a manner as to aim at Fund holdings of special drawing rights of SDR 4.5 billion in early 1982, taking into account use and receipt of SDRs and currencies in transactions and operations outside the budgets. Modifications in this guideline will be proposed as necessary.

Use of Currencies

Currencies shall be selected for use on the transfer and receipt side of the operational budgets in amounts that will promote, over time, balanced “positions in the Fund” as follows:

(a) For the quarterly period March-May 1981 the method currently in use will be continued;

(b) For the subsequent quarterly periods the amounts on the transfer side of the budgets will be calculated on the basis of members’ holdings of gold and foreign exchange and the amounts on the receipt side will be calculated in proportion to their reserve tranche positions in the Fund. Modifications of this method will be proposed if circumstances so warrant. The Fund will seek to maintain adequate working balances of currencies.

(c) The U.S. dollar will be included in the operational budgets on the basis of ad hoc proposals.

(d) A member’s “position in the Fund” shall be defined as its reserve tranche position plus any outstanding loans to the Fund by the member, or an institution of a member, under credit arrangements that are judged by the Fund to provide it, on a continuing basis, with the ability to finance uses of its resources by members on terms comparable to those applicable to the Fund’s use of its currency holdings for this purpose.

Decision No. 6772-81/35) G/S

March 5, 1981

K. Selection of Currencies by the Fund

This decision sets forth guidelines for the selection of currencies in purchases under Article V, Section 3(d), in repurchases under Article V, Section 7(i), and in transfers of SDRs by the Fund under Article V, Section 6(b) pursuant to decisions adopted prior to the date of this decision.

1. Normally, the Fund will select a member’s currency for use in the operations and transactions of the General Resources Account in amounts that result in a net reduction of the Fund’s holdings of the currency only if the member’s balance of payments and gross reserve position is judged to be sufficiently strong. Accordingly this will not preclude the possibility that the Fund will make net reductions in its holdings of the currency of a member with a strong reserve position even though it has a moderate balance of payments deficit.

2. (a) Under procedures to be adopted, the currency of a member with outstanding purchases subject to the guidelines on early repurchase, whose balance of payments and gross reserve position is judged sufficiently strong for the purposes of operational budgets and designation plans, normally will be sold by the Fund under Article V, Section 3(d) only if the member and the Fund agree.

(b) If the outstanding purchases of a member judged sufficiently strong are not subject to the guidelines on early repurchase, and the member agrees with the Fund that its currency shall be sold, the amounts of its currency to be sold shall be calculated in accordance with the procedures set out in the Annex to this decision.

3. If the currency of a member whose balance of payments and gross reserve position is not judged sufficiently strong in accordance with paragraph 1 above can be accepted in repurchase under Article V, Section 7(i), the Fund, at the request of the member, will give special emphasis to the use of that currency for repurchases.

4. The guidelines in this decision will be applied in a manner that will allow the Fund to retain the flexibility necessary to ensure that (i) the use of currencies can be adapted to the needs and circumstances of members and of the Fund, and (ii) the transactions and operations of the Fund can be executed expeditiously and in a manner that pays due regard to the convenience of members. Considerations that are relevant under (i) may include the need for members to purchase certain currencies in order to stabilize exchange markets, the effects of the use or receipt of currencies on the Fund’s financial position, the Fund’s liquidity, and the fact that in respect of the issuer of a reserve currency the ratio of its Fund position to its gold and foreign exchange holdings may not provide an appropriate measure of the amounts of the currency that might be used by the Fund. Considerations under (ii) may include the need to avoid the use of an excessive number of currencies in single transactions and operations.

Decision No. 6774-(81/35)

March 5, 1981

Annex Sales of Currencies of Members Indebted to the Fund

(a) There are some members indebted to the Fund that are judged sufficiently strong but to whose outstanding purchases the guidelines on early repurchase do not apply. It was agreed that the Fund would not insist on its right to sell the currency of such a member and such sales would take place only if there was agreement between the member and the Fund. In such cases the Managing Director is authorized, under procedures agreed by the Executive Board, to approach any of these members in a particularly strong position with a view to the member reducing its indebtedness to the Fund in amounts calculated in accordance with the guidelines. In order to facilitate sales of such members’ currencies, the rule of attribution is changed to give a member with outstanding indebtedness under excluded facilities financed by borrowing (other than the GAB) the option to apply the consequent reduction in the Fund’s holdings of its currency to an enlargement of its reserve tranche position rather than to the discharge of its outstanding obligations to the Fund.

(b) The Fund will calculate the amounts of the currencies of the members referred to in (a) above, included for sales in an operational budget, in accordance with the guidelines on early repurchase. In addition, if any other debtor member whose outstanding purchases were neither under excluded facilities financed by borrowings nor subject to the guidelines on early repurchase agreed with the Fund on the sale of its currency, the Fund would calculate the amounts to be sold in the same manner. However, at the request of the member, the calculated amounts would be reduced for the first two successive budget periods. The calculation of the amount of sales of a debtor member’s currency for any quarterly period would no longer be made in accordance with the guidelines on early repurchase, or would be reduced from the calculated amount, when sales of the currency equal the outstanding indebtedness of the member to the Fund.

L. Policy on Enlarged Access to the Fund’s Resources

1. From the date on which the Fund determines that all available supplementary financing has been committed and additional borrowing arrangements have been concluded, the Fund will be prepared to provide balance of payments assistance to members facing serious payments imbalances that are large in relation to their quotas in accordance with this decision (hereinafter referred to as enlarged access). Access to the Fund’s resources under this decision will be provided under a stand-by or an extended arrangement, and purchases under the arrangement will be financed by resources that the Fund obtains for this purpose by replenishment under Article VII, Section l(i) (hereinafter referred to as borrowed resources), in conjunction with the use of the other resources of the Fund (hereinafter referred to as ordinary resources).

2. Access to the Fund’s resources under other policies of the Fund will remain available in accordance with the terms of those policies.

3. A member contemplating use of the Fund’s resources under this decision shall consult the Managing Director before making a request for such use. A request will be met only if the Fund is satisfied: (i) that the member needs financing from the Fund that exceeds the amount available to it in the four credit tranches or under the extended Fund facility and its problem requires a relatively long period of adjustment and a maximum period for repurchase longer than the three to five years under the credit tranche policies; and (ii) on the basis of a detailed statement of the economic and financial policies the member will follow and the measures it will apply during the period of the stand-by or extended arrangement, that the member’s program will be adequate for the solution of its problem and is compatible with the Fund’s policies on the use of its resources beyond the first credit tranche or under the extended Fund facility.

4. The Fund may approve a stand-by or extended arrangement that provides for enlarged access at any time until the Eighth General Review of Quotas becomes effective, provided that the Fund may extend this period.

5. A stand-by or extended arrangement approved under this decision will be in accordance with the Fund’s policies, including the policies on conditionality, phasing, and performance criteria.

6. The period of a stand-by arrangement approved under this decision will normally exceed one year, and may extend up to three years in exceptional cases. The period of an extended arrangement will be normally three years.

7. The amounts that will be made available under stand-by or extended arrangements approved under this decision will be determined according to guidelines adopted by the Fund from time to time.

8. The amounts available under a stand-by or extended arrangement approved under this decision will be apportioned between ordinary and borrowed resources as follows:

(a) Under a stand-by arrangement purchases will be made with ordinary and borrowed resources in the ratio of 2 to 1 in the first credit tranche, and 1 to 1.2 in the next three credit tranches. Thereafter, purchases will be made with borrowed resources only. In the event that a member has already an outstanding use of all or part of its credit tranches because of previous purchases in the credit tranches or under the extended Fund facility, purchases will be made first with borrowed resources until that use of borrowed resources, together with any outstanding use of supplementary financing and exceptional use of the Fund’s resources under Decision No. 5732-(78/65),20 adopted April 24, 1978, as amended on December 27, 1978, equals the amount of borrowed resources that would have been used if the previous purchases had been made under this decision.

(b) Under an extended arrangement purchases will be made with ordinary and borrowed resources in the ratio of 1 to 1 until the outstanding use of the upper credit tranches and the extended Fund facility equals 140 per cent of quota. Thereafter, purchases will be made with borrowed resources only. In the event that a member already has an outstanding use of all or part of its upper credit tranches or the extended Fund facility, purchases will be made with borrowed resources until that use of borrowed resources, together with any outstanding use of supplementary financing and exceptional use of the Fund’s resources under Decision No. 5732-(78/65),21 adopted April 24, 1978, as amended on December 27, 1978, equals the amount of borrowed resources that would have been-used if the outstanding use of the upper credit tranches and the extended Fund facility had been made under this decision.

(c) The apportionment in accordance with (a) and (b) above will be made on the basis of the outstanding use by the member of the Fund’s resources at the time the arrangement for the member is approved.

(d) From time to time the Fund will review the proportions of ordinary and borrowed resources specified in (a) and (b) above and may modify them, and the modified proportions shall apply uniformly to both arrangements approved after the modification and amounts that may be purchased under existing arrangements after the modification.

9. (a) A stand-by or extended arrangement approved under this decision may provide, in part, for supplementary financing in accordance with Decision No. 5508-(77/127),22 adopted August 29, 1977, if

  • (i) the arrangement replaces an arrangement approved under that decision, or

  • (ii) an amount of supplementary financing becomes available because of the cancellation of an arrangement or because it is reasonably certain that an arrangement will not be fully utilized, in which case the arrangement approved under this decision may provide for the utilization of a part or all of the available amount.

(b) When an arrangement under this decision provides for supplementary financing, the supplementary financing will be used before borrowed resources.

10. (a) Repurchases in respect of outstanding purchases under this decision will be made in accordance with the provisions of the Articles of Agreement and decisions of the Fund, including those relating to repurchase as the member’s balance of payments and reserve position improves, provided that repurchases in respect of outstanding purchases financed by borrowed resources shall be completed seven years after the purchase, and that the repurchases shall be made in equal semiannual installments during the period beginning three and one half years and ending seven years after the purchase.

(b) If a purchase is financed by ordinary and borrowed resources, a repurchase attributed to the purchase made with borrowed resources in advance of this schedule of installments must be accompanied by a repurchase in respect of the purchase made with ordinary resources at the same time if any part of the latter purchase is still outstanding. The amounts of the two repurchases will be in the same proportions in which ordinary and borrowed resources were used in the purchases, provided, however, that the repurchase in respect of the purchase financed with ordinary resources will not exceed the amount of the purchase still outstanding.

11. In order to carry out the purposes of this decision, the Fund will be prepared to grant a waiver of the limitation in Article V, Section 3(b)(iii) that is necessary to permit purchases under this decision or to permit purchases under other policies that would raise the Fund’s holdings of a member’s currency above the limits referred to in that provision because of purchases outstanding under this decision.

12. The Fund will apply its credit tranche policies as if the Fund’s holdings of a member’s currency did not include holdings resulting from purchases under this decision that have been made with borrowed resources. Purchases under this decision with borrowed resources and holdings resulting from these purchases will be excluded under Article XXX(c).

13. The Fund will state which purchases by a member are made under this decision and the amounts of ordinary and borrowed resources used in each purchase.

14. The Fund will determine the charges that it will levy on holdings of a member’s currency resulting from purchases outstanding under this decision to the extent that they are made with borrowed resources.

15. The Fund will review this decision not later than June 30, 1983, and annually thereafter as long as the decision remains in effect.

Decision No. 6783-(81/40)

March 11, 1981

M. Forms of Stand-By and Extended Arrangements Under Enlarged Access Policy

The Executive Board approves the forms of stand-by and extended arrangements contained in Attachments A and B [below] that will be used by the Fund to provide for enlarged access to the Fund’s resources under Decision No. 6783-(81/40),23 adopted March 11, 1981.

Decision No. 6838-(81/70)

April 29, 1981

Attachment A Form of Stand-By Arrangement Under Enlarged Access Policy

Attached hereto is a letter [, with annexed memorandum,] dated__________ from (Minister of Finance and/or Governor of Central Bank) requesting a stand-by arrangement and setting forth:

  • (a) the objectives and policies that the authorities of (member) intend to pursue for the period of this stand-by arrangement;

  • (b) the policies and measures that the authorities of (member) intend to pursue for the [first year] of this stand-by arrangement; and

  • (c) understandings of (member) with the Fund regarding [a] review[s] that will be made of progress in realizing the objectives of the program and of the policies and measures that the authorities of (member) will pursue for the remaining period of this stand-by arrangement.

To support these objectives and policies the International Monetary Fund grants this stand-by arrangement in accordance with the following provisions:

1. [For a period of ______ years from ___________] [For the period from ____________ to ___________] (member) will have the right to make purchases from the Fund in an amount equivalent to SDR ____________, subject to paragraphs 2, 3, 4, and 5 below, without further review by the Fund.24

2. (a) Until (end of first year) purchases under this stand-by arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR _________, provided that purchases shall not exceed the equivalent of SDR __________ until __________, the equivalent of SDR _________ until __________, and the equivalent of SDR __________ until __________.25

(b) The right of (member) to make purchases during the remaining period of this stand-by arrangement shall be subject to such phasing as shall be determined.

(c) None of the limits in (a) or (b) above shall apply to a purchase under this stand-by arrangement that would not increase the Fund’s holdings of (member’s) currency in the credit tranches beyond 25 per cent of quota or increase the Fund’s holdings of that currency resulting from purchases of supplementary financing or borrowed resources beyond 12.5 per cent of quota.

3. Purchases under this stand-by arrangement shall be made from …,26 provided that any modification by the Fund of the proportions of ordinary and borrowed resources shall apply to amounts that may be purchased after the date of modification.

4. (Member) will not make purchases under this stand-by arrangement that would increase the Fund’s holdings of (member’s) currency in the credit tranches beyond 25 per cent of quota or increase the Fund’s holdings of that currency resulting from purchases of supplementary financing or borrowed resources beyond 12.5 per cent of quota:

  • (a) during any period in the first year in which [the data at the end of the preceding period indicate that]27

    • (i) [the limit on domestic credit described in paragraph ____ of the attached letter], or

    • (ii) [the limit on credit to the public sector described in paragraph _____ of the attached letter], or

    • (iii) … [These provisions would incorporate other quantitative performance criteria of the program]

    • are not observed, or

  • (b) if (member) fails to observe the limits on authorizations of new public and publicly guaranteed foreign indebtedness described in paragraph of ____ the attached letter; or

  • (c) during the second or third year of this stand-by arrangement until suitable performance criteria have been established in consultation with the Fund as contemplated by paragraph _______ of the attached letter, or after such performance criteria have been established, while they are not being observed;28

  • (d) during the entire period of this stand-by arrangement, if (member)

    • (i) imposes [or intensifies] restrictions on payments and transfers for current international transactions, or

    • (ii) introduces [or modifies] multiple currency practices, or

    • (iii) concludes bilateral payments agreements which are inconsistent with Article VIII, or

    • (iv) imposes [or intensifies] import restrictions for balance of payments reasons.29

When (member) is prevented from purchasing under this stand-by arrangement because of this paragraph 4, purchases will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

5. (Member’s) right to engage in the transactions covered by this stand-by arrangement can be suspended only with respect to requests received by the Fund after (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit the eligibility of (member). When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 5, purchases under this arrangement will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

6. Purchases under this stand-by arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in SDRs if, on the request of (member), the Fund agrees to provide them at the time of the purchase.

7. The value date of a purchase under this stand-by arrangement involving borrowed resources will be normally either the fifteenth day or the last day of the month, or the next business day if the selected day is not a business day. (Member) will consult the Fund on the timing of purchases involving borrowed resources.

8. (Member) shall pay a charge for this stand-by arrangement in accordance with the decisions of the Fund.

9. (a) (Member) shall repurchase the outstanding amount of its currency that results from a purchase under this stand-by arrangement in accordance with the provisions of the Articles of Agreement and decisions of the Fund, including those relating to repurchase as (member’s) balance of payments and reserve position improves.

(b) Any reductions in (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

(c) The value date of a repurchase in respect of a purchase financed with borrowed resources under this stand-by arrangement will be normally either the sixth day or the twenty-second day of the month, or the next business day if the selected day is not a business day, provided that repurchase will be completed not later than seven years from the date of purchase.

10. During the period of the stand-by arrangement (member) shall remain in close consultation with the Fund. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member)to the Fund. (Member) shall provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the progress of (member) in achieving the objectives and policies set forth in the attached letter [and annexed memorandum].

11. In accordance with paragraph _____ of the attached letter (member) will consult the Fund on the adoption of any measures that may be appropriate at the initiative of the government or whenever the Managing Director requests consultation

Version A

[because any of the criteria in paragraph 4 above have not been observed or because he considers that consultation on the program is desirable. In addition, after the period of the arrangement and while (member) has outstanding purchases in the upper credit tranches, the government will consult with the Fund from time to time, at the initiative of the government or at the request of the Managing Director, concerning (member’s) balance of payments policies].

Version B

[because he considers that consultation on the program is desirable].

Attachment B Form of Extended Arrangement Under Enlarged Access Policy

Attached hereto is a letter [, with annexed memorandum,] dated _________ from (Minister of Finance and/or Governor of Central Bank) requesting an extended arrangement and setting forth:

  • (a) the objectives and policies that the authorities of (member) intend to pursue for the period of this extended arrangement;

  • (b) the policies and measures that the authorities of (member) intend to pursue for the first year of this extended arrangement; and

  • (c) understandings of (member) with the Fund regarding reviews that will be made of progress in realizing the objectives of the program and of the policies and measures that the authorities of (member) will pursue for the second and third years of this extended arrangement.

To support these objectives and policies the International Monetary Fund grants this extended arrangement in accordance with the following provisions:

1. For a period of [three years] from __________ (member) will have the right to make purchases from the Fund in an amount equivalent to SDR ______, subject to paragraphs 2, 3, 4, and 5 below, without further review by the Fund.

2. (a) Until (end of first year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ______, provided that purchases shall not exceed the equivalent of SDR ________ until, the equivalent of SDR ________ until ________, and the equivalent of SDR __________ until _________.

(b) Until (end of second year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ________.

(c) The right of (member) to make purchases during the second and third years shall be subject to such phasing as shall be determined.

3. Purchases under this extended arrangement shall be made from …30 provided that any modification by the Fund of the proportions of ordinary and borrowed resources shall apply to amounts that may be purchased after the date of modification.

4. (Member) will not make purchases under this extended arrangement:

  • (a) throughout the first year, during any period in which the data at the end of the preceding period indicate that31

    • (i) [the limit on domestic credit described in paragraph _____ of the attached letter], or

    • (ii) [the limit on credit to the public sector described in paragraph _____ of the attached letter], or

    • (iii) … [These provisions would incorporate other quantitative performance criteria of the program]

    • are not observed; or

  • (b) if (member) fails to observe the limits on authorizations of new public and publicly guaranteed foreign indebtedness described in paragraph ____ of the attached letter; or

  • (c) throughout the second and third years, if before the beginning of the second year and the beginning of the third year of the extended arrangement suitable performance clauses have not been established in consultation with the Fund as contemplated in paragraph ____ of the attached letter or such clauses, having been established, are not being observed; or

  • (d) throughout the duration of the extended arrangement, if (member)

    • (i) imposes [or intensifies] restrictions on payments and transfers for current international transactions, or

    • (ii) introduces [or modifies] multiple currency practices, or

    • (iii) concludes bilateral payments agreements which are inconsistent with Article VIII, or

    • (iv) imposes [or intensifies] import restrictions for balance of payments reasons.

When (member) is prevented from purchasing under this extended arrangement because of this paragraph 4, purchases will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

5. (Member’s) right to engage in the transactions covered by this extended arrangement can be suspended only with respect to requests received by the Fund after (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit the eligibility of (member). When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 5, purchases under this arrangement will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

6. Purchases under this extended arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in SDRs if, on the request of (member), the Fund agrees to provide them at the time of the purchase.

7. The value date of a purchase under this extended arrangement involving borrowed resources will be normally either the fifteenth day or the last day of the month, or the next business day if the selected day is not a business day. (Member) will consult the Fund on the timing of purchases involving borrowed resources.

8. (Member) shall pay a charge for this extended arrangement in accordance with the decisions of the Fund.

9. (a) (Member) shall repurchase the amount of its currency that results from a purchase under this extended arrangement in accordance with the provisions of the Articles of Agreement and decisions of the Fund, including those relating to repurchase as (member’s) balance of payments and reserve position improves.

(b) Any reductions in (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

(c) The value date of a repurchase in respect of a purchase financed with borrowed resources under this extended arrangement will be normally either the sixth day or the twenty-second day of the month, or the next business day if the selected day is not a business day, provided that repurchase will be completed not later than seven years from the date of purchase.

10. During the period of the extended arrangement (member) shall remain in close consultation with the Fund. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member) to the Fund. (Member) shall provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the progress of (member) in achieving the objectives and policies set forth in the attached letter [and annexed memorandum].

11. In accordance with paragraph ____ of the attached letter (member) will consult the Fund on the adoption of any measures that may be appropriate at the initiative of the government or whenever the Managing Director requests consultation because any of the criteria under paragraph 4 above have not been observed or because he considers that consultation on the program is desirable. In addition, after the period of the extended arrangement and while (member) has outstanding purchases under this extended arrangement, the government will consult with the Fund from time to time, at the initiative of the government or at the request of the Managing Director, concerning (member’s) balance of payments policies.

Appendix Illustrations for the Determination of Proportions of Ordinary and Borrowed Resources

Example 1

The Fund’s holdings of a member’s currency in the credit tranches are at 150 per cent of quota, and the Fund also holds an amount equivalent to 25 per cent of quota under the SFF. The stand-by arrangement is for 300 per cent of quota. The following text would be used in paragraph 3 of Attachment A:

from borrowed resources until purchases under this arrangement reach the equivalent of SDR _______ (17.5 per cent of member’s quota), then from ordinary and borrowed resources in the ratio of 1 to 1.2 until purchases under this arrangement reach the equivalent of SDR _________ (127.5 per cent of member’s quota), and then from borrowed resources.

These figures are derived as follows:

Borrowed
OrdinaryResourcesCumulative
Credit TranchesResourcesPurchasedAvailableTotal
First(25)(12.5)
Second(25)(12.5)17.517.5
Third253072.5
Fourth2530127.5

Example 2

The facts are the same as in example 1, but the member is being granted an extended arrangement for 450 per cent of quota. The following text would be used:

from ordinary and borrowed resources in the ratio of 1 to 1 until purchases under this arrangement reach the equivalent of SDR (230 per cent of member’s quote), and then from borrowed resources.

ExtendedBorrowed
FundOrdinaryResourcesCumulative
FacilityResourcesPurchasedAvailableTotal
125-150(25)(12.5)
150-265115115230

N. Policy on Multiple Currency Practices

The Executive Board has reviewed the Fund’s policy with respect to multiple currency practices. The Fund shall be guided by the approach outlined in the conclusions set forth below.

1. Official action should not cause exchange rate spreads and cross rate quotations to differ unreasonably from those that arise from the normal commercial costs and risks of exchange transactions.

(a) (i) Action by a member or its fiscal agencies that of itself gives rise to a spread of more than 2 per cent between buying and selling rates for spot exchange transactions between the member’s currency and any other member’s currency would be considered a multiple currency practice and would require the prior approval of the Fund.

(ii) An exchange spread that arises without official action would not give rise to a multiple currency practice.

(iii) Deviations between the buying and selling rates for spot transactions and for other transactions would not be considered multiple currency practices if they represent the additional costs and exchange risks for these other transactions.

(b) Action by a member or its fiscal agencies which results in midpoint spot exchange rates of other members’ currencies against its own currency in a relationship which differs by more than 1 per cent from the midpoint spot exchange rates for these currencies in their principal markets would give rise to a multiple currency practice. If the differentials of more than 1 per cent in these cross rates persist for more than one week, the resulting multiple currency practice would become subject to the approval of the Fund under Article VIII, Section 3.

When difficulties are encountered in the interpretation and application of these criteria in specific cases, particularly concerning the nature of official actions, the staff will present the relevant information to the Executive Board for its determination.

2. The policy of the Fund on the exercise of its approval jurisdiction over exchange measures subject to Article VIII, as set forth in paragraph 2 of Executive Board Decision No. 1034-(60/27),32 adopted June 1, 1960, remains broadly appropriate. In accordance with this policy, the Fund will be prepared to grant approval of multiple currency practices introduced or maintained for balance of payments reasons provided the member represents and the Fund is satisfied that the measures are temporary and are being applied while the member is endeavoring to eliminate its balance of payments problems, and provided they do not give the member an unfair competitive advantage over other members or discriminate among members. The Fund will continue to be very reluctant to grant approval for the maintenance of broken cross exchange rates.

3. In accordance with the Fund’s policy on complex multiple currency practices, as stated in Executive Board Decision No. 649-(57/33),33 adopted June 26, 1957, the Fund will not approve multiple currency practices under complex multiple rate systems unless the countries maintaining them are making reasonable progress toward simplification and ultimate elimination of such systems, or are taking measures or adopting programs which seem likely to result in such progress.

4. While urging members to apply alternative policies not connected with the exchange system, the Fund will be prepared to grant temporary approval of multiple currency practices introduced or maintained principally for nonbalance of payments reasons, provided that such practices do not materially impede the member’s balance of payments adjustment, do not harm the interests of other members, and do not discriminate among members.

5. To assist the Executive Board in reaching a decision concerning approval or nonapproval of a multiple currency practice subject to approval under Article VIII, Section 3, the reasons underlying the practice and its effects will be analyzed in reports on Article IV consultations or in other staff papers dealing with exchange systems. In all cases, consistent with the cycle of consultations under Article IV, approval will be granted for periods of approximately one year, in order to provide for a continual review by the Executive Board.

Decision No. 6790-(81/43)

March 20, 1981

O. Treatment of Reserve Tranche

(a) Exclusion of Credit Tranches and Extended Facility

1. Purchases in the credit tranches or under extended arrangements (Decision No. 4377-(74/114),34 September 13, 1974, as amended), and holdings resulting from such purchases, shall be excluded pursuant to Article XXX(c)(iii) for the purpose of the definition of “reserve tranche purchase.”

2. Paragraph 4(a) of the decision on the extended Fund facility (Decision No. 4377-(74/114),35 as amended) shall be amended to provide that

Purchases outstanding under this decision will not exceed 140 per cent of the member’s quota, or be allowed to increase the Fund’s holdings of the member’s currency resulting from purchases in the credit tranches and under this decision above 165 per cent of the member’s quota.

3. In paragraph 1 of the standard form of stand-by and extended arrangements the words “, after making full use of any reserve tranche that it may have at the time of making a request for a purchase under this arrangement,” shall be deleted.

4. The amendment of stand-by and extended arrangements pursuant to paragraph 3 above shall apply also to purchases made and holdings acquired after the date of this decision under arrangements approved prior to the date of this decision.

5. The Fund will review this decision before April 30, 1984.

Decision No. 6830-(81/65)

April 22, 1981, effective May 1, 1981

(b) Attribution of Reductions in Fund’s Holdings of Currencies

1. A member shall be free to attribute a reduction in the Fund’s holdings of its currency

  • (a) to any of its obligations to repurchase, or

  • (b) to enlarge its reserve tranche position if the reduction is the result of a sale of the currency by the Fund and the member’s obligations to repurchase do not include an obligation relating to a purchase financed through borrowing under the GAB.

2. A reduction attributed to a reserve tranche position will not discharge an expectation of repurchase under the guidelines for early repurchase.

3. If the member when asked does not make an attribution in accordance with 1 above, it will be deemed to be discharging the first maturing repurchase obligation.

4. The Fund will review this decision before April 30, 1984.

Decision No. 6831-(81/65)

April 22, 1981, effective May 1, 1981

P. Charges on Transactions and Holdings in the General Resources Account—Amendment of Rule I

1-1. The service charge payable by a member buying, in exchange for its own currency, the currency of another member or special drawing rights from the General Resources Account shall be 0.5 per cent, except that no service charge shall be payable in respect of any purchase to the extent that it is a reserve tranche purchase. The service charge shall be paid at the time the transaction is consummated. The service charge shall be reviewed in connection with any review of charges under Rule 1-6.

1-2. The Fund shall notify each member by cable, as soon as possible after July 31, October 31, January 31, and April 30, of the charges it owes to the Fund pursuant to Article V, Section 8(b) or (c) for the three calendar months ending on each such date, except that in respect of charges pursuant to Rule 1-6(3), (5), and (10), the notifications shall be sent as soon as possible after June 30 and December 31, and shall relate to the six calendar months ending on each such date. The charges shall be payable promptly after the receipt of the notification.

1-3. Charges payable by each member under Article V, Section 8(b) or (c) shall be computed in accordance with Rule 1-4 on the basis of the average daily balances of its currency held by the Fund that are subject to charges, calculated as follows:

  • (a) at the end of each calendar month there shall be averaged for each member the daily amounts of the Fund’s holdings of its currency on the Fund’s books at the close of each day during that month that are subject to charges;

  • (b) the Fund’s holdings of each member’s currency shall consist of all of its currency except amounts, not in excess of 0.1 per cent of the member’s quota, in a special account to meet administrative expenses and amounts in sundry cash accounts.

I-4. The calculations under Rule 1-3(a) shall be made separately in respect of the parts of the Fund’s holdings of a member’s currency that are subject to separate rates of charge.

I-5. Changes in any schedule of charges levied under Article V, Section 8(b) or (c) shall apply from the first day of the month following the month during which a change is made.

  • I-6 (1) The rate of charge on holdings acquired as the result of a purchase under the oil facility for 1974 (Executive Board Decision No. 4241-(74/67))36 shall be 6.875 per cent per annum for the first three years, and an additional 0.125 per cent per annum for each subsequent 12 months, provided that, subject to (8) below, the rate shall not increase above 7.125 per cent per annum.

  • (2) The rate of charge on holdings acquired as the result of a purchase under the oil facility for 1975 (Executive Board Decision No. 4634-(75/47))37 shall be 7.625 per cent per annum for the first three years and an additional 0.125 per cent per annum for each subsequent 12 months, provided that, subject to (8) below, the rate shall not increase above 7.875 per cent per annum.

    • (3) (a) The rate of charge on holdings acquired as the result of purchases made with supplementary financing pursuant to Executive Board Decision No. 5508-(77/127)38 shall be equal to the rate of interest paid by the Fund from time to time pursuant to paragraph 4(a) of the Annex to Executive Board Decision No. 5509-(77/127),39 plus

      • (i) 0.2 per cent per annum for the first three and one-half years after a purchase, and

      • (ii) an additional 0.125 per cent per annum thereafter.

    • (b) The charges under (a) above shall not exceed the rate of interest by more than 0.325 per cent per annum, provided that during any period in which there is a failure to repurchase in accordance with paragraph 7 of Executive Board Decision No. 5508-(77/ 127)40 or with a representation by the Fund that the member should repurchase because of an improvement in its balance of payments and reserve position, the charges to be levied shall be higher than they would otherwise have been by an additional 0.125 per cent per annum for each period of 12 months until the charges payable on any holdings have reached 0.7 per cent per annum above the interest rate payable by the Fund in accordance with (a) above, at which time the Fund will review the charges to be imposed.

  • (4) The rate of charge on holdings acquired as a result of a purchase (i) in the credit tranches, or (ii) under the extended Fund facility (Executive Board Decision No. 4377-(74/114),41 as amended), or (iii) under the facility for the compensatory financing of export fluctuations (Executive Board Decision No. 4912-(75/207),42 as amended), or (iv) under the facility for the problem of stabilization of prices of primary products (Executive Board Decision No. 2772-(69/47),43 as amended) shall be determined in accordance with (a), (b), and (c) below.

    • (a) The rate of charge shall be determined at the beginning of each financial year on the basis of the estimated income and expense of the Fund during the year and the target amount of net income for the year, which, for the financial year beginning May 1, 1981, shall be a balance between income and expense, and for each subsequent financial year shall be 3 per cent of the Fund’s reserves at the beginning of the year, or such other percentage as the Executive Board may determine.

    • (b) A midyear review of the Fund’s income position shall be held shortly after October 31 of each year. If actual net income for the first six months of the financial year, on an annual basis, is below the target amount for the year by an amount equal to, or greater than, 2 per cent of the Fund’s reserves at the beginning of the financial year, the Executive Board will consider how to deal with the situation. If on December 15 no agreement has been reached as a result of this consideration, the rate determined under (a) at the beginning of the year shall be increased as of November 1 to the level necessary to reach the target amount of net income for the year.

    • (c) A review of the Fund’s income position shall be held shortly after the end of each financial year. If the net income for the year just ended is in excess of the target amount for the year, the Executive Board will consider whether the whole or a part of the excess should be used to reduce the rate of charge, or increase the rate of remuneration to not more than the rate of interest on the SDR, retroactively for the year just ended, or both, or to place all or part of the excess to reserve.

  • (5) The charge on holdings of a member’s currency acquired as a result of the member’s purchases of borrowed currency under the policy on enlarged access to the Fund’s resources (Executive Board Decision No. 6783-(81/40))44 during a six-month period ending June 30 or December 31 shall be equal to the net cost of borrowing by the Fund under that policy for the period, calculated in accordance with (a), (b), and (c) below and expressed as a percentage per annum, plus 0.2 per cent per annum.

    • (a) The net cost of borrowing for a six-month period ending June 30 or December 31 shall consist of the actual gross cost of borrowing to finance purchases under the policy assignable to the period less net income during the period from the temporary employment of the borrowed funds.

    • (b) Actual gross costs of borrowing shall comprise:

      • (i) interest paid or accrued to lenders on the average daily amount of balances borrowed; and

      • (ii) fees, commissions, and any other primary costs directly payable to lenders or incurred in order to secure the borrowed funds, prorated for six-month periods ending June 30 and December 31 in proportion to the duration of the borrowing arrangements to which such costs relate, or to the period covered by these costs.

    • (c) Net income from temporary employment of borrowed funds pending disbursement shall be determined by taking into account:

      • (i) income received and income accrued from investments or other operations to secure a rate of return;

      • (ii) operational expenses (paid and accrued) incurred directly by the Fund in order to obtain this income, prorated over the period to maturity of the investment; and

      • (iii) any net gain or loss, calculated to the end of each six-month period ending June 30 or December 31, resulting from exchange valuation adjustments of currency balances and investments representing the undisbursed proceeds of borrowing in terms of the SDR.

  • (6) The charge on holdings that have been acquired as the result of a sale of gold to a member pursuant to paragraph 2 of Executive Board Decision No. 5293-(76/167) and that are in excess of quota after the exclusion of any holdings subject to (1), (2), (3), (4), or (5) above shall be the higher of 4 per cent per annum or the rate of charge under (4) above.

  • (7) The charge on holdings acquired otherwise than as the result of a purchase, that are not subject to (6) above, and that are in excess of quota after the exclusion of any holdings subject to (1), (2), (3), (4), or (5) above, shall be the rate of charge under (4) above.

  • (8) The Fund may review the rates of charge to be levied on its holdings of a member’s currency that have not been repurchased in accordance with the requirements of the Articles or decisions of the Fund, and, after consultation with the member on the reduction of the Fund’s holdings of such currency, may impose such charges as it deems appropriate.

  • (9) The initial rates of charge on balances held on the date of the Amendment that are subject to (1), (2), or (3) above shall be the rates for the first 12 months.

    • (10) (a) Effective April 21, 1978, holdings of a currency that would otherwise be subject to the schedule of charges in Rule 1-7(5) (b) in effect on that date [see Appendix] shall be subject to the following charges if they have been acquired by the Fund as a result of purchases under stand-by arrangements taking effect before the earlier of July 1, 1979 and the date on which the supplementary financing facility becomes effective and are in excess of 200 per cent of quota: the average yield to constant five-year maturity of U.S. Government securities in New York over the six months preceding the determination of the rate of charge, rounded upwards to the nearest 0.25 per cent, plus 0.25 per cent. The rate applicable under this paragraph (a) shall be calculated on July 1, 1978 and at intervals of six months thereafter. Each rate so calculated shall apply during the six months preceding the date of the calculation.

    • (b) Effective April 21, 1978, holdings of a currency that would otherwise be subject to Rule 1-7(6) in effect on that date [see Appendix] shall be subject to the rate in paragraph (a) above if they have been acquired by the Fund as a result of purchases under extended arrangements taking effect before the earlier of July 1, 1979 and the date on which the supplementary financing facility becomes effective, to the extent that the Fund’s holdings of the member’s currency resulting from purchases under that facility exceed 140 per cent of quota.

  • (11) Rule 1-7(5) (a) and (9) of the Rules and Regulations in effect on the day preceding May 1, 1981 [see Appendix] shall continue to apply to holdings of a member’s currency acquired by the Fund prior to July 1, 1974, on which charges are levied on the effective date of this Rule.

Decision No. 6834-(81/65)

April 22, 1981, effective May 1, 1981

Appendix

Rule I-7(5) The charge on a segment that is not subject to another schedule of charges and that is in excess of quota after the exclusion of any segments subject to (1), (2), (3), or (4) above, shall be,

  • (a) if the segment includes holdings acquired prior to July 1, 1974:

    • (i) to the extent that the segment is within the first bracket of 50 per cent in excess of quota, nil for the first 3 months, 2 per cent per annum for the next 15 months, and an additional ½ of 1 per cent per annum for each subsequent 6 months;

    • (ii) to the extent that the segment is within the second bracket of more than 50 per cent and not more than 100 per cent in excess of quota, nil for the first 3 months, 2 per cent per annum for the next 9 months, and an additional ½ of 1 per cent per annum for each subsequent 6 months;

    • (iii) to the extent that the segment is within the third bracket of more than 100 per cent in excess of quota, nil for the first 3 months, 2 per cent per annum for the next 3 months, and an additional ½ of 1 per cent per annum for each subsequent 6 months;

    • provided that, subject to (9) below, the rate shall not increase above 5 per cent per annum;

  • (b) if the segment includes holdings acquired on or after July 1, 1974:

    • (i) 4⅜ per cent per annum for the first 12 months, provided that if in any period of 6 successive months the Fund’s total expenses exceeded its income the Executive Board will promptly review all aspects of the Fund’s financial position, including the rate of remuneration pursuant to Rule I-10 and the rate of charge for the first 12 months, and take such action as it considers necessary to safeguard the financial position of the Fund, and provided further that the rate of charge for the first 12 months shall be ¼ of 1 per cent above the rate of remuneration, unless, as a result of this review, the Executive Board decides within one month after the end of any such 6-month period that a different rate of charge shall apply; and

    • (ii) an additional ½ of 1 per cent per annum for each additional 12 months, provided that, subject to (9) below, the rate shall not increase above 6⅜ per cent per annum.

    • This provision shall be reviewed if the Fund’s total annual income substantially exceeded its total annual expenses.

  • (6) The charge on a segment that has been acquired as the result of a purchase under the extended Fund facility (Decision No. 4377-(74/114),45 as amended), and that is in excess of quota after excluding any segments subject to (1), (2), (3), or (4) above, shall be,

    • (i) the rate of charge in (5) (b) (i) above for the first 12 months; and

    • (ii) an additional ½ of 1 per cent per annum for each additional 12 months, provided that, subject to (9) below, the rate shall not increase above the rate in (5) (b) (i) above plus 2½ per cent per annum.

* * *

Rule 1-7(9) The Fund may review the rates of charge to be levied on its holdings of a member’s currency that have not been repurchased in accordance with the requirements of the Articles or decisions of the Fund, and, after consultation with the member on the reduction of the Fund’s holdings of its currency, may impose such charges as it deems appropriate.

Q. Purchases Under Stand-By and Extended Arrangements—Amendment of Rule G-4

Effective May 1, 1981, Rule G-4 shall read as follows:

(a) When a duly authenticated request is received for a purchase in accordance with Article V, Section 3, other than a reserve tranche purchase or a purchase under a stand-by or extended arrangement, the Fund shall promptly consider the request. Instructions for a transfer of currency shall be given by the Fund on the day of its decision approving the purchase, except when the Executive Board decides otherwise. When a request is received for a reserve tranche purchase of currency, or subject to (b) below for a purchase of currency in accordance with a stand-by or extended arrangement, the Fund’s instructions to the appropriate depository to make the transfer shall be given not later than the close of the first business day following receipt of the request.

(b) The value date for purchases involving borrowed resources under stand-by and extended arrangements will normally be either the fifteenth day or the last day of the month, or the next business day thereafter if the day selected is not a business day. Instructions to the appropriate depository for requested purchases under these arrangements will be given two business days before a value date with respect to requests received on or before the third business day preceding the value date. Requests not received in time for instructions to be sent for a value date will be met at the next value date.

(c) Repurchases in respect of a purchase financed with borrowed resources should be made normally with a value date of either the sixth day or twenty-second day of the month, or the next business day if the day selected is not a business day, provided that repurchase will be completed not later than seven years from the date of purchase.

(d) Members should consult the Fund in a timely manner with respect to the time they expect to make a purchase or a repurchase and in order to ascertain the date by which a request to purchase must be made or instructions given by the member to depositories with respect to a repurchase in order for instructions to be given for a specific date.

Decision No. 6839-(81/70)

April 29, 1981

R. Borrowed Resources Suspense Accounts

(a) Establishment

1. The Managing Director is authorized (i) to establish Borrowed Resources Suspense Accounts within the General Department, (ii) to transfer to these Accounts balances of currencies borrowed before these can be used in transactions or received in repurchases made before repayment can be made, and (iii) to invest these balances until they can be transferred to the General Resources Account for immediate use in a transaction or an operation.

2. A Borrowed Resources Suspense Account for each currency shall be opened, as needed, with the depository designated pursuant to Article XIII, Section 2, by a member whose currency is to be borrowed, used for investment, or used in repayment or the payment of interest and shall be operated in accordance with the standard procedures for the operation of the Fund’s No. 1 and Securities Accounts with the depository.

Decision No. 6844-(81/75)

May 5, 1981

(b) Investment of Currencies Held in Borrowed Resources Suspense Accounts

1. The Managing Director is authorized to invest currencies held in the Borrowed Resources Suspense Accounts in one or more of the following ways: (a) deposits with a national official financial institution of a member, or an international financial institution, that are denominated in special drawing rights; (b) marketable obligations issued by a member or by a national official institution of a member and denominated in special drawing rights; and (c) marketable obligations issued by an international financial institution and denominated in special drawing rights.

2. The policy on the investment of the undisbursed amounts held in the Borrowed Resources Suspense Accounts shall take into account the operational needs of the General Resources Account, including the dates on which members are expected to make purchases from the Fund under its policy on enlarged access.

3. (a) The Managing Director, when making arrangements for the placement of investments in accordance with paragraphs 1 and 2 above, shall consider the terms offered by a national official financial institution of the member issuing the currency borrowed, or to which the borrowed funds may be transferred, that will accept investments denominated in special drawing rights, and the terms offered by the Bank for International Settlements, for all or part of the intended investment in SDR-denominated deposits.

(b) In the event the Managing Director considers that none of the offers made by the central banks and by the BIS is sufficiently attractive, he shall inform the Executive Board promptly and make other proposals to it for investment in SDR-denominated obligations.

4. The Managing Director is authorized to transfer borrowed funds at the time of the original receipt from the Borrowed Resources Suspense Account in the depository designated by the member whose currency was borrowed to the Borrowed Resources Suspense Account in the depository designated by the member whose currency is to be used in an investment when this transfer is necessary to effect an investment denominated in special drawing rights, and when this transfer has been concurred in by the two members whose currencies will be involved.

Decision No. 6845-(81/75)

May 5, 1981

S. Compensatory Financing of Fluctuations in the Cost of Cereal Imports

1. For an initial period of four years from May 13, 1981, the Fund will be prepared to extend financial assistance in accordance with the terms of this decision to members that encounter a balance of payments difficulty produced by an excess in the cost of their cereal imports. The amount of this financial assistance will be determined in accordance with this decision, which integrates this assistance with that available in accordance with the facility established by the decision on the compensatory financing of export fluctuations (Executive Board Decision No. 6224-(79/135)).46

2. For a period of three years from the date of a member’s first request for a purchase under this decision, any purchases by the member in respect of its export shortfalls shall be made under this decision instead of under Decision No. 6224.

3. A member with balance of payments difficulties may expect that its request for a purchase under this decision will be met if the Fund is satisfied that

  • (a) any shortfall in exports and any excess costs of cereal imports that result in a net shortfall in the member’s exports are of a short-term character and are largely attributable to circumstances beyond the control of the member; and

  • (b) the member will cooperate with the Fund in an effort to find, where required, appropriate solutions for its balance of payments difficulties.

  • 4. (a) Subject to the limits specified in paragraph 9, a member may request a purchase under this decision for an amount equal to the net shortfall in its exports calculated as the sum of its export shortfall and the excess in its cereal import costs.

    • (b) (i) For the calculation of the net shortfall in exports, an excess in exports shall be considered a negative shortfall in exports and a shortfall in cereal import costs shall be considered a negative excess in cereal import costs.

    • (ii) An export shortfall shall be determined in accordance with Decision No. 6224.

    • (iii) An excess in cereal import costs shall be determined in accordance with paragraphs 5 and 6.

5. The existence and amount of an excess in the cost of cereal imports shall be determined, for the purpose of purchases under this decision, with respect to the latest 12-month period preceding the request for which the Fund has sufficient statistical data, provided that the Fund may allow a member to make a purchase on the basis of estimated data in respect of a 12-month period ending not later than 12 months after the latest month for which the Fund has sufficient statistical data on the member’s cereal import costs. The estimates used for this purpose shall be made in consultation with the member. The calculation of a member’s shortfall or excess in exports and its excess or shortfall in the cost of its cereal imports shall be made for the same 12-month period.

6. In order to identify more clearly what are to be regarded as excess costs of cereal imports of a short-term character, the Fund, in consultation with the member concerned, will seek to establish reasonable estimates regarding the medium-term trend of the member’s cereal import costs. For the purposes of this decision, the excess in a member’s cereal imports for the 12-month period referred to in paragraph 5 shall be the amount by which the member’s cereal imports in that 12-month period are more than the arithmetic average of the member’s cereal imports for the five-year period centered on that 12-month period.

7. The amount of a purchase under this decision, as defined in paragraph 4, may be either in relation to an export shortfall or to an excess in cereal import costs, or the amount may consist of two components, one relating to an export shortfall and the other relating to an excess in cereal import costs. The total amount of the purchase and the amount of each component are subject to the limits specified in paragraph 9.

  • 8. (a) The part of the purchase relating to an export shortfall, subject to the limit in paragraph 9(b), shall not exceed the lesser of the export short-fall defined in paragraph 4(b) (ii) and the net shortfall in exports defined in paragraph 4(a).

  • (b) The amount of a purchase relating to an excess in cereal import costs, subject to the limit in paragraph 9(c), shall not exceed the lesser of the excess in cereal import costs defined in paragraph 4(b) (iii) and the net shortfall in exports defined in paragraph 4(a).

  • 9. (a) The total amount of a member’s purchases outstanding under this decision and Decision No. 6224 shall not exceed an amount equal to 125 per cent of quota, provided that a request for a purchase that would increase the total amount of the member’s purchases outstanding under this decision and Decision No. 6224 beyond 50 per cent of quota will be met only if the Fund is satisfied that the member has been cooperating with the Fund in an effort to find, where required, appropriate solutions for its balance of payments difficulties.

  • (b) The total amount of a member’s purchases outstanding under Decision No. 6224 and this decision that are related to export shortfalls shall not exceed 100 per cent of quota.

  • (c) The total amount of a member’s purchases outstanding under this decision that are related to the excess in cereal import costs shall not exceed 100 per cent of quota.

10. Where the sum of the export shortfall and cereal import components, as limited by paragraph 9(b) and paragraph 9(c), exceeds the limit specified in paragraph 9(a), the member shall allocate the amount of its purchase as between the two components.

11. Purchases under this decision and holdings resulting from such purchases shall be excluded pursuant to Article XXX (c) for the purpose of the definition of “reserve tranche purchase.” For the purpose of applying the Fund’s policies on the use of its resources, holdings resulting from the use of the Fund’s resources under the policy set forth in this decision shall be considered to be separate from the holdings resulting from the use of the Fund’s resources under any other policy, except the policy set forth in Decision No. 6224.

12. When a member requests a purchase on the basis of estimated statistical data the member will be expected to represent that, if the amount of the purchase exceeds the amount that could have been purchased on the basis of actual statistical data, the member will make a prompt repurchase in an amount equivalent to the over-compensation.

  • 13. (a) Subject to paragraph 12, when a reduction in the Fund’s holdings of a member’s currency is attributed to a purchase under this decision the member shall attribute that reduction between the outstanding cereal import component and export shortfall component of the purchase.

  • (b) When the Fund’s holdings of a member’s currency resulting from a purchase under this decision or Decision No. 6224 are reduced by the member’s repurchase or otherwise, the member’s access to the Fund’s resources under this decision will be restored pro tanto, subject to the limits in paragraph 9.

  • 14. (a) After the expiration of the period referred to in paragraph 2, the total amount of the export shortfall components of a member’s purchases outstanding under this decision shall be counted as having been purchased under Decision No. 6224, and the resulting total of the amounts outstanding under Decision No. 6224 and the cereal import components outstanding under this decision shall not exceed 125 per cent of quota.

  • (b) The provisions of Decision No. 6224 shall continue to apply to the export shortfall component of a purchase under this decision after the expiration of the period referred to in paragraph 2 or the expiration of this decision.

15. In order to implement the Fund’s policies in connection with the financing of members’ cereal import costs and the compensatory financing of export shortfalls, the Fund will be prepared to waive the limit on the Fund’s holdings of 200 per cent of quota, (i) when necessary to permit purchases to be made under this decision or (ii) to the extent that purchases are outstanding under this decision.

16. The Fund will indicate in an appropriate manner which purchases by a member are made pursuant to this decision, and the export shortfall component and the cereal import component of each.

17. The Executive Board will review this decision not later than June 30, 1983, and when quota increases under the Eighth General Review of Quotas become effective.

Decision No. 6860-(81/81)

May 13, 1981

Amendment of Rule 1-6(4)

The introductory paragraph of Rule 1-6(4) of the Fund’s Rules and Regulations shall be amended by the addition of “, or (v) under the facility for compensatory financing of fluctuations in the cost of cereal imports (Executive Board Decision No. 6860-(81/81))” to read as follows:

1-6(4) The rate of charge on holdings acquired as a result of a purchase (i) in the credit tranches, or (ii) under the extended Fund facility (Executive Board Decision No. 4377-(74/114),47 as amended), or (iii) under the facility for the compensatory financing of export fluctuations (Executive Board Decision No. 4912-(75/207),48 as amended), or (iv) under the facility for the problem of stabilization of prices of primary products (Executive Board Decision No. 2772-(69/47),49 as amended), or (v) under the facility for compensatory financing of fluctuations in the cost of cereal imports (Executive Board Decision No. 6860-(81/81),50 shall be determined in accordance with (a), (b), and (c) below.

Decision No. 6861-(81/81)

May 13, 1981

Amendment of Decision No. 5703-(78/39)51

Paragraph 1(a) of Decision No. 5703-(78/39) shall be amended by the addition of “or the decision on compensatory financing of fluctuations in the cost of cereal imports” to read as follows:

1. (a) Repurchases of the outstanding amount of a member’s currency that results from a purchase under the credit tranches and is subject to charges under Article V, Section 8(b), or under the decision on compensatory financing of export fluctuations (Decision No. 4912-(75/207),52 as amended) or the decision on the problem of stabilization of prices of primary products (Decision No. 2772-(69/47),53 as amended), or the decision on compensatory financing of fluctuations in the cost of cereal imports (Decision No. 6860-(81/81)),54 shall be completed, pursuant to Article V, Section 7(c), five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule.

Decision No. 6862-(81/81)

May 13, 1981

T. Borrowing Agreement with the Saudi Arabian Monetary Agency

1. The International Monetary Fund deems it appropriate, in accordance with Article VII of the Articles of Agreement, to replenish its holdings of currencies by borrowing in order to finance purchases made under the policy on enlarged access to the Fund’s resources established by Executive Board Decision No. 6783-(81/40),55 adopted March 11, 1981.

2. The Managing Director is authorized to send to the Governor of the Saudi Arabian Monetary Agency the letter, with Annexes A, B, C, and D, substantially in the terms set forth in the Attachment [below]. When a duly authenticated reply is received from the Governor, the letter, with the Annexes, and the Governor’s reply shall constitute an agreement between SAMA and the Fund (hereinafter called the Agreement) which shall enter into force on the date on which the Fund receives such reply.56

3. (a) The Managing Director is authorized to give notices for calls and to make calls from time to time under the Agreement for such amounts as he deems to be necessary in order for the Fund to be in a position to meet purchases under the policy on enlarged access to the Fund’s resources.

(b) The Executive Board shall be informed of the notices given and calls made under the Agreement and the disposition of the amounts borrowed, in the fortnightly reports to the Executive Board on operations and transactions of the Fund.

4. The Managing Director is authorized to arrange for the issue and delivery on behalf of the Fund of promissory notes in bearer form with coupons (hereinafter called Notes) when, in accordance with the terms and conditions set forth in the Agreement, the Saudi Arabian Monetary Agency requests the Fund to issue and deliver such Notes in exchange for all or part of any outstanding installment of any loan made under the Agreement. This authority shall extend to the issue and delivery of Notes in exchange for or replacement of Notes previously issued, as contemplated by the terms and conditions of such Notes. The Notes to be issued and delivered shall be substantially in the form set out in Annex B to the letter of the Managing Director referred to in paragraph 2 above, and shall contain the terms and conditions set forth in such Annex, as amended from time to time. Such Notes shall be signed in the name of the Fund either manually by or with the facsimile signature of the Managing Director and the Treasurer and, if facsimile signatures are used, shall be countersigned manually by an officer or other authorized representative of the Fund designated by the Managing Director. The coupons attached to the Notes shall bear the manual or facsimile signature of an officer or other authorized representative of the Fund designated by the Managing Director.

5. The Managing Director is authorized to designate financial institutions as paying agents under the Notes and to designate agents for service of process, as contemplated in the form of the Bearer Notes set out in Annex B to the letter of the Managing Director referred to in paragraph 2 above, and to agree with each such agent upon the terms of its services and any remuneration therefor.

Decision No. 6843-(81/75)

May 6, 1981

Attachment

May 7, 1981

Your Excellency:

I refer to the recent decision of the Executive Board of the International Monetary Fund (hereinafter called the Fund) providing for enlarged access by members to the resources of the Fund. Pursuant to Article VII of the Articles of Agreement of the Fund (hereinafter called the Articles) and Executive Board Decision No. 6843-(81/75), adopted May 6, 1981, I have been authorized to propose on behalf of the Fund that the Saudi Arabian Monetary Agency (hereinafter called SAMA) agree to assist in the financing of such enlarged access, by lending resources to the Fund in accordance with the arrangements set forth below.

1. (a) SAMA will stand committed to make loans to the Fund under this Agreement in a maximum aggregate amount which shall be limited to the equivalent of SDR 4 billion in the first year after the entry into force of this Agreement, and shall increase at the beginning of the second year by SDR 4 billion to a cumulative total equivalent to SDR 8 billion. The commitment shall be effective for a period of six years (hereinafter called the commitment period) from the entry into force of this Agreement.

(b) Before the end of the eighteenth month following the entry into force of this Agreement, SAMA and the Fund shall review the overall commitment of SAMA under this Agreement, but this review shall not affect the commitment of SDR 8 billion referred to in (a) above. In connection with the review, the Fund hopes that SAMA will agree at that time to increase its commitment by a further SDR 4 billion with effect from the beginning of the third year of the commitment period.

2. (a) Subject to the ceiling amounts provided in or under paragraph 1 and to (b) and (c) below, the Fund may call upon SAMA at any time during the commitment period to make loans under this Agreement, provided that the aggregate amount of loans made in any one of the six years of such period shall not exceed the equivalent of SDR 4 billion.

(b) During the first year of the commitment period the Fund shall call for loans in an aggregate amount equivalent to at least SDR 1 billion.

(c) Unless otherwise agreed between SAMA and the Fund, the Fund shall give SAMA at least 90 days’ notice of its intention to make a call hereunder and of the amount which it intends to call; provided that during the first 90 days following the date of this Agreement the Fund may make calls in an aggregate amount not exceeding SDR 500 million after giving SAMA as much advance notice of each call as is reasonably practicable in the circumstances.

(d) Prior to the beginning of each year of the commitment period the Fund shall provide SAMA with its best estimates of the minimum and maximum amounts which it expects to call during the year, and shall provide revised estimates periodically during the year.

3. (a) SAMA shall make each loan hereunder by transferring to the account of the Fund with SAMA the equivalent in Saudi riyals of the loan amount called for by the Fund, on the value date specified by the Fund in its call. In addition to Saudi Arabia’s obligations under the Articles regarding the exchange of its currency, SAMA agrees that, on request, it shall exchange riyals provided hereunder for U.S. dollars to the extent required for investment pending use of the borrowed funds in transactions of the Fund.

(b) Transfers and exchanges under (a) above shall be at equal value exchange rates determined pursuant to Article XIX, Section 7(a) and the Rules and Regulations of the Fund thereunder for the value dates specified pursuant to (a) above.

(c) No charge or commission shall be imposed by SAMA with respect to any transfer or exchange of currency made pursuant to this Agreement.

4. (a) Interest on each loan shall be computed on the basis of successive interest periods, with the first interest period commencing on the day following the date the loan is made and ending on the first interest payment date under the loan, and each subsequent period commencing on the day following an interest payment date and ending on the next such date. During each interest period, interest shall accrue daily on the outstanding amount of the loan at the combined market interest rate per annum computed by the Fund for that period in the manner set forth in Annex A to this Agreement. Following each computation the Fund shall promptly communicate the rate to SAMA.

(b) Interest accrued on the outstanding amount of each loan shall be payable by the Fund semiannually, on interest payment dates falling at successive intervals of six calendar months from the date the loan is made; except that (i) whenever a six-monthly date does not fall on a banking day, the interest payment date shall be the banking day immediately preceding that six-monthly date, and (ii) the final interest payment date for the loan shall be the date the loan is repaid in full as provided in this Agreement. For purposes of this Agreement, the term “banking day” means a day on which banks are open for business in the place where payment is to be made.

5. Except as otherwise provided in this Agreement, each loan shall be repaid by the Fund in four equal annual installments on the fourth, fifth, sixth, and seventh anniversaries respectively of the date the loan is made, except that when an anniversary does not fall on a banking day, payment shall fall due and be made on the banking day immediately preceding such anniversary.

6. (a) Payments of principal of and interest on each loan may be made in Saudi riyals, in any freely usable currency or in special drawing rights, or in any combination of these means of payment, as may be agreed between SAMA and the Fund; provided that, failing agreement, payments shall be made, at the option of the Fund, in Saudi riyals or U.S. dollars. For purposes of this Agreement, a freely usable currency means a currency which the Fund has determined to be freely usable pursuant to Article XXX(f) of the Articles.

(b) Payments in Saudi riyals shall be made by debiting the account of the Fund with SAMA. Payments in any other currency shall be made by transfer to an account in that currency designated by SAMA with a bank in the country issuing the currency selected for payment, or in such other manner as may be agreed between SAMA and the Fund. Payments in special drawing rights shall be made by crediting the holdings account of Saudi Arabia in the Special Drawing Rights Department of the Fund.

7. The Fund shall issue to SAMA at its request a nonnegotiable certificate in respect of each outstanding loan, evidencing the principal amount that the Fund is committed to repay under this Agreement. As soon as practicable after amounts of the loan are repaid, transferred or exchanged for Notes pursuant to this Agreement, SAMA shall surrender the certificate for cancellation and the Fund shall issue a new certificate evidencing the balance of the loan amount, if any, remaining outstanding.

8. (a) All amounts under this Agreement, including the principal amount of each loan, shall be expressed in terms of the special drawing right. For purposes of payments by the Fund of the principal of and interest on each loan in currency, the value of a special drawing right in terms of the currency of payment shall be that determined by the Fund pursuant to Article XIX, Section 7(a) of the Articles for a date three business days of the Fund before such payment is to be made, or, if no such value has been determined for that date prior to the time payment is to be made, the value as of the last preceding date for which a determination has been made by the Fund.

(b) If the Fund should decide to change the method of valuation of the special drawing right, SAMA may at its option require that the method of valuation in effect immediately prior to such change continue to apply to any or all loans made hereunder which are outstanding at the date the change becomes effective, other than loans outstanding at the date of a previous change in respect of which SAMA has already exercised its option under this subparagraph (b). The option of SAMA hereunder shall be exercised by notice to the Fund within 30 days after the adoption of the Fund’s decision, but not later than 14 days after the date the change becomes effective.

(c) If SAMA shall have exercised its option under (b) above, (i) the Fund shall be entitled, at any time thereafter, to repay any or all loans with respect to which the option has been exercised, upon giving at least 14 days’ notice to SAMA of its intention to make such repayment, and (ii) SAMA’s right to request Notes pursuant to paragraph 15 of this Agreement shall terminate with respect to all such loans.

9. (a) The Fund may, at its option, repay in advance of maturity any loan or installment thereof on any interest payment date applicable to such loan, provided that it has given SAMA at least 60 days’ notice of its intention to make such repayment.

(b) By agreement between SAMA and the Fund, any loan or installment thereof may be repaid by the Fund at any time in advance of maturity.

10. (a) SAMA may at any time represent to the Fund that in view of the balance of payments and reserve position of Saudi Arabia there is a need for repayment in advance of maturity of all or a specified part of the loan amounts outstanding under this Agreement, and may request the Fund to make such repayment. Whether or not such a request has been made, SAMA may at any time represent to the Fund that the balance of payments and reserve position of Saudi Arabia does not justify the making of further calls under paragraph 2 and may request the Fund to suspend such calls.

(b) If it determines that the balance of payments and reserve position of Saudi Arabia gives rise to a need for repayment as requested by SAMA or justifies the suspension of calls, as the case may be, the Fund shall repay or suspend further calls as requested. In making its determination, and in any subsequent determination of whether improvements in the position of Saudi Arabia justify the resumption of calls after a period of suspension, the Fund shall give the overwhelming benefit of any doubt to the representation of SAMA in the matter.

(c) Promptly after making a determination under (b) above that there is a need for repayment, the Fund shall repay to SAMA a portion of the total outstanding loans equivalent to SDR 4 billion or the full amount of such outstanding loans, whichever is less, with the repayment being applied to such loans in the reverse order of maturity. Within 12 months after such determination the Fund shall repay any balance of such loans still outstanding.

11. (a) If Saudi Arabia withdraws from the Fund, the right of the Fund to make further calls under paragraph 2 shall terminate. Loans outstanding at the date of such withdrawal shall be repaid by the Fund in quarterly installments each equivalent to SDR 2 billion or the full amount of outstanding loans, whichever is less, with the first payment being made within seven days after the withdrawal and with each installment being applied to outstanding loans in the reverse order of maturity. In all other respects the provisions of this Agreement shall continue in effect except paragraphs 10 and 14, which shall cease to apply.

(b) In the event of liquidation of the Fund, the right of the Fund to make further calls under paragraph 2 and the right of SAMA to transfer loan claims under paragraph 14 and to request Notes under paragraph 15 shall terminate. All loans outstanding at the date of liquidation shall become immediately due and payable as liabilities of the Fund under the provisions of the Articles pertaining to such liquidation, and shall be paid as provided in paragraph 6.

12. (a) The Fund covenants that, so long as any loan made hereunder shall be outstanding, the Fund will not cause or permit to be created on any of the property or assets held by the Fund on its own account any mortgage, pledge, lien or charge as security for any notes or bonds issued or other indebtedness heretofore or here-after incurred by the Fund through borrowing for its own account (other than mortgages, pledges, liens or charges on property, not including monetary assets, purchased by the Fund securing all or part of the purchase price thereof) unless the loans made hereunder shall be equally and ratably secured by such mortgage, pledge, lien or charge. In addition, the Fund agrees that loan claims under this Agreement shall rank pari passu in respect of priority of payment with the highest-ranking debt incurred by the Fund through borrowing for its own account.

(b) A default under any security arrangement agreed between the Fund and any lender after the date of this Agreement shall be deemed to constitute a default under this Agreement to the same extent as if the security arrangement were incorporated herein for the benefit of SAMA. For purposes of this subparagraph (b), the term “security arrangement” shall include affirmative and negative covenants, events of default or conditions of mandatory prepayment and all similar undertakings for the benefit of creditors, but shall not include financial terms such as interest rates, spreads or margins, commissions or fees or maturity schedules.

(c) If the Fund enters into a borrowing arrangement with any lender that is a member of the Fund or the central bank of a member which (i) is on financial terms that can reasonably be considered by either SAMA or the Fund to be more favorable to the lender than those provided herein and is entered into during the period of two years following the entry into force of this Agreement, or (ii) contains provisions under which the Fund waives its immunity from judicial process with respect to the settlement of disputes, SAMA and the Fund shall at the request of SAMA consult with a view to reaching agreement on an amendment to this Agreement under which comparable financial terms or a comparable waiver of immunity are applied to loans by SAMA hereunder, and, to the extent appropriate to any Notes that may subsequently be delivered to SAMA in exchange for such loans. In addition, if at any time while any loan made hereunder remains outstanding the Fund accords to any holder of its notes, bonds, or similar obligations a waiver of immunity more extensive in scope than the waiver contained in the form of Note attached as Annex B, SAMA and the Fund shall at the request of SAMA consult with a view to reach an agreement on an amendment to this Agreement that will accord a waiver of comparable scope in respect of any Notes that may subsequently be delivered to SAMA hereunder. If no such agreement on an amendment has been reached within 30 days from the date of SAMA’s request, the matter shall be settled by arbitration in accordance with paragraph 18.

13. If the Fund should default in payment of the principal of or interest on, or in the performance of any of its other obligations relating to, any loan made or any Note issued hereunder, or in the payment of the principal of or interest on any other indebtedness incurred by the Fund for its own account under arrangements entered into after March 31, 1981, and such default shall have continued for a period of 90 days, or if in any material respect the representation contained in Annex C is not carried out or the opinions and conclusions of the Director of the Legal Department of the Fund contained in Annex D prove to be incorrect, SAMA may by notice to the Fund terminate the Fund’s rights to make further calls hereunder and declare the principal amount of all outstanding loans due and payable, together with accrued interest thereon, and on the thirtieth day after such notice is delivered to the Fund such amounts shall become due and payable, unless prior to that time the default shall have been remedied.

14. (a) SAMA may at any time transfer its claims on the Fund under this Agreement with respect to any outstanding loan or installment thereof to any member of the Fund, or to any central bank or other agency of a member that has been designated as the member’s agency for dealing with the Fund for purposes of Article V, Section 1 of the Articles, or to any other entity prescribed by the Fund as a holder of special drawing rights pursuant to Article XVII, Section 3 of the Articles.

(b) A transfer shall become effective on the date agreed between SAMA and the transferee. SAMA shall promptly give notice to the Fund of the transfer, the name of the transferee, the loan or installment thereof which is the subject of the transfer and the date of the transfer. On receipt of such notice the Fund shall record the transfer in its books and all amounts of principal and interest subsequently payable by the Fund in respect of the loan or installment shall be paid to the transferee.

(c) On the effective date of the transfer the rights of SAMA provided in this Agreement with respect to the loan or installment which is the subject of the transfer, including without limitation the right of transfer provided in this paragraph, the right to request Notes pursuant to paragraph 15, and the right of arbitration provided in paragraph 18, shall for all purposes vest in the transferee; except that (i) if the transferee is a member of the Fund or the central bank or other agency of a member, references in this Agreement to Saudi riyals and to Saudi Arabia shall be deemed to refer to the currency of the transferee and to the relevant member respectively; (ii) if the transferee is not a member of the Fund or the central bank or other agency of a member, references to Saudi riyals shall be deemed to refer to any freely usable currency, and references to Saudi Arabia shall not apply; and (iii) the right to request repayment pursuant to paragraph 10 shall be exercisable by the transferee only if it is a member, or the central bank or other agency of a member, that at the time of the transfer is in a net creditor position in the Fund, and in the opinion of the Fund the member’s currency could be used in net sales in the Fund’s currency budgets for the foreseeable future.

(d) Notwithstanding the foregoing provisions of this paragraph, no transfer shall relate to any loan or installment in respect of which a request has already been made to the Fund pursuant to paragraph 15 for the issue of Notes.

15. (a) SAMA may at any time request the Fund to deliver promissory notes in bearer form (hereinafter called Notes) in exchange for all or part of any out-standing installment of any loan made hereunder, except a loan in respect of which SAMA has exercised the option specified in paragraph 8. Within 30 days after receiving such request the Fund shall deliver such Notes to SAMA, without charge. The Notes shall be in denominations of SDR 1 million, 5 million or any integral multiple of 5 million as specified by SAMA in its request, provided that in no circumstances shall the aggregate principal amount of such Notes exceed the outstanding amount of the loan installment in exchange for which they are issued.

(b) Unless otherwise agreed between SAMA and the Fund, Notes shall be in the form attached hereto as Annex B, as amended pursuant to paragraph 12(c) up to the date of delivery of such Notes, and shall contain the terms and conditions set forth in such Annex. Within 30 days after the entry into force of this Agreement, the Fund shall designate one or more financial institutions acceptable to SAMA as paying agents under the Notes, and shall designate agents for service as contemplated in the Notes.

(c) Each Note delivered to SAMA shall be dated as of the date the loan to which it relates was made or the date interest on such loan was last paid by the Fund, whichever is the later, and shall have a maturity date corresponding to that of the loan installment in exchange for which it is issued, such maturity date being fixed to fall on a banking day in New York. Interest coupons shall be attached for each interest payment date applicable to such installment after the date of the Note, up to and including the maturity date. Each Note shall be duly authorized by, and duly executed by or on behalf of, the Fund and shall constitute a valid obligation of the Fund in accordance with its terms.

(d) Delivery of each Note shall be effected in such manner as shall be agreed between SAMA and the Fund. Such delivery shall be deemed to discharge the obligations of the Fund under this Agreement with respect to an amount of the relevant loan installment corresponding to the principal amount of the Note and with respect to all interest accrued on such amount and not previously paid.

(e) If within 30 days after receipt of SAMA’s request the Fund has not complied with its obligation hereunder to deliver a Note duly requested by SAMA, in the principal amount requested, then with effect from the thirtieth day after such request the rights and obligations of SAMA and the Fund with respect to that amount shall be those set forth in the form of Note attached as Annex B (including paragraph 11 thereof) and not those set forth in this Agreement, except that the Fund shall not be relieved of its obligation under this Agreement to deliver the Note as requested.

(f) Notwithstanding the foregoing, the Fund shall not be obliged to deliver Notes hereunder during the period of ten days preceding any interest payment date under the loans in full or partial exchange for which such Notes are to be issued.

16. (a) With respect to any Notes delivered to SAMA hereunder that SAMA has not transferred to any other holder but has retained for its own account, and notwithstanding the terms and conditions contained in such Notes,

  • (i) if SAMA so requests at least 45 days before a payment of principal or interest falls due under any such Notes (the serial numbers and denominations of which shall be specified by SAMA in its request), the Fund shall arrange to make such payment to SAMA when it falls due in one of the currencies, other than U.S. dollars, used in valuing the special drawing right, that the Fund shall select. Payment shall be made, as provided in paragraph 6, against surrender of the Notes or coupons as the case may be at the principal office of the Fund; and

  • (ii) if the form of Note attached as Annex B is amended pursuant to paragraph 12(c) of this Agreement, the Fund shall at the request of SAMA made within 14 days after the amendment becomes effective exchange the Notes retained by SAMA for new Notes that shall incorporate the terms and conditions as so amended. The provisions of paragraph 15 of this Agreement shall apply mutatis mutandis to any such exchange.

(b) This paragraph shall continue in full force and effect, notwithstanding that all loans made under this Agreement have been repaid or exchanged for Notes, for as long as any Notes delivered pursuant to this Agreement shall remain outstanding.

17. The Fund confirms that, in entering into this Agreement and making loans hereunder, SAMA may rely on the representations contained in the document attached hereto as Annex C and on the opinions and conclusions contained in the document attached hereto as Annex D.

18. (a) Any question arising between SAMA and the Fund concerning their respective rights or obligations under this Agreement that does not relate to the interpretation of the provisions of the Articles and that cannot be settled by agreement shall be submitted to arbitration by a tribunal of three arbitrators. One arbitrator shall be appointed by SAMA, another by the Fund, and the third, who shall serve as umpire, by the President of the International Court of Justice, unless SAMA and the Fund otherwise agree. The umpire shall have full power to settle all questions of procedure in any case where the parties are in disagreement with respect thereto. The determination of the tribunal on the question shall be conclusive and binding on SAMA and the Fund and shall be promptly implemented in accordance with its terms. Any such determination that the Fund has defaulted in the performance of its obligations under this Agreement shall likewise be conclusive as to any termination or acceleration pursuant to paragraph 13 based on such default.

(b) SAMA and the Fund each undertakes to facilitate the expeditious commencement and conclusion of any arbitration proceedings requested by the other in accordance with this paragraph, and to use its best efforts to ensure that any such proceedings are concluded within six months, at the latest, from the date of such request.

If the foregoing proposal is acceptable to SAMA, this communication and your reply shall constitute an Agreement between SAMA and the Fund, which shall enter into force on the date on which the Fund receives your reply.

Very truly yours,

/s/

J. de Larosière

Managing Director

His Excellency

Sheikh Abdul Aziz Al-Quraishi

Governor, Saudi Arabian Monetary Agency

Riyadh, Saudi Arabia

Annex A Computation of Interest Rate

1. For purposes of computing interest payable on each loan made under the Agreement (i) “interest computation date”, in relation to the first interest period under a loan, means a date three business days of the Fund before the date the loan is made, and in relation to subsequent interest periods means a date three business days of the Fund before the interest payment date immediately preceding the commencement of such period, (ii) “reporting agency” means an agency which serves as the reporting agency for a currency used in making an interest computation, as provided in paragraph 3 below, and (iii) a “reported yield”, in relation to a currency, means the yield applicable to that currency as provided in paragraph 3 below for the interest computation date or, if no such yield is available for that date, the yield for the next preceding day for which such yield is available, as reported to the Fund by the relevant reporting agency.

2. Except as provided in paragraph 4 below, the combined market interest rate shall be computed on the basis of the component currencies and the number of units of each such currency used by the Fund on the interest computation date in valuing the special drawing right pursuant to Article XIX, Section 7(a) of the Articles. The computation shall be made by multiplying the reported yield for each component currency on that date by the number of units of that currency used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting products for all component currencies, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest 1/16 of 1 per cent, shall be the combined market interest rate to be applied during the ensuing interest period.

3. (a) The Fund, after consultation with SAMA, shall arrange for the central bank or other appropriate official agency in each country whose currency is a component currency in the valuation of the special drawing right to serve as the reporting agency hereunder and to report to the Fund the yield applicable to that currency as provided in (b) and (c) below, as needed for each interest computation. Initially the Fund has arranged for the following institutions to serve as reporting agencies for the currencies indicated.

French francCaisse des Dépôts et Consignations
deutsche markDeutsche Bundesbank
Japanese yenBank of Japan
pound sterlingBank of England
U.S. dollarDepartment of the Treasury

(b) The reported yield applicable to each currency shall be the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency on the basis set out below:

(i) for the French franc, the yield to maturity on a representative sample of securities of major French public sector enterprises with an average remaining life in the range of four and a half to five and a half years, based on market prices and weighted by the volume of transactions in the securities during the previous week, as calculated by the Caisse des Dépôts et Consignations using the same method as it uses for the yield it publishes weekly;

(ii) for the deutsche mark, the yield to maturity on notes and bonds of the Federal Republic, Railways and Post Office with a remaining period to maturity of five years as calculated by the Deutsche Bundesbank on the basis published in the Statistical Supplement (Series 2, Table 8D) to the Bundesbank’s Monthly Report;

(iii) for the Japanese yen, the yield to maturity of that ten-year Japanese Government bond with a remaining period to maturity closest to five years, based on the closing market price officially published by the Tokyo Stock Exchange;

(iv) for the pound sterling, the calculated redemption yield on British Government securities, determined for a constant maturity of five years, as calculated by the Bank of England on the basis published in its Quarterly Bulletin;

(v) for the U.S. dollar, the yield to maturity on actively traded U.S. Government securities, determined for a constant maturity of five years, as calculated by the U.S. Treasury and presently published each week by the Federal Reserve Board in Statistical Release H.15; and

(vi) for any other currency, the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency, on representative issues of government securities with an average remaining period to maturity of five years, or, if such securities are not available, then on the closest substitute thereto selected by such reporting agency after consultation with the Fund and SAMA.

(c) If a reporting agency notifies the Fund that the yield described in (b) applicable to its currency can no longer be reported to the Fund, or that some material change has occurred making that yield no longer appropriate for the purpose of interest computations hereunder, SAMA and the Fund in consultation with the reporting agency shall seek to reach agreement on a substitute yield. Failing such agreement the yield shall be that which the reporting agency determines to be the most appropriate substitute for the purpose, having regard to the criteria specified in subparagraph (b) (vi) above.

4. Notwithstanding the foregoing, if the Fund should decide to change the method of valuation of the special drawing right, a new combined market interest rate shall be computed as of a date three business days of the Fund before the change becomes effective, but on the basis of the currencies and the units of each currency used by the Fund under the new method of valuation, and interest shall accrue at the previous rate until the effective date of the change and at the new rate from and including such effective date until the commencement of the next interest period after such effective date; provided that if SAMA has exercised its option under paragraph 8 of the Agreement, all interest computations thereafter on loans in respect of which such option has been exercised shall be made on the basis of the currencies and the units of each currency used by the Fund in its valuation immediately prior to the effective date of the change leading to the exercise of the option.

Annex B Form of Bearer Note with Coupons

SDR________________

No. __________

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

Floating Rate Coupon Bearer Note, Due ________, 19___

International monetary fund (hereinafter called the Fund), for value received, hereby promises to pay to the bearer hereof, on presentation and surrender of this Note at any of the paying agencies of the Fund designated below, a principal sum in United States dollars equivalent to _____________________ SDR on ______________, 19__ or such earlier repayment date as may be established pursuant to the provisions hereof, and to pay interest on the said principal sum in United States dollars, but only upon presentation and surrender at a designated paying agency of the interest coupons hereto attached as they severally become due. Interest on the principal sum shall accrue during the interest periods and at the rate for each such period hereinafter described, and shall be payable on the interest payment dates specified below.

The first interest payment date shall be _________, 19__. Interest payment dates thereafter shall be each _______________ and ______________ in each year, except that (i) if any such date does not fall on a day on which banks are open for business in New York (hereinafter called a banking day) the interest payment date shall be the banking day immediately preceding such date, and (ii) the last interest payment date shall be the date payment of the principal sum is made or duly provided for.

The Fund has appointed as paying agents of the Fund [] at its principal office in Frankfurt, [] at its principal office in London, [] at its principal office in New York City, [] at its principal office in Paris, and [] at its principal office in Tokyo.57 The Fund reserves the right to appoint other paying agents and to terminate the appointment of any paying agent, provided that the Fund shall always maintain paying agencies in Frankfurt, London, New York City, Paris and Tokyo.

At the bearer’s option and subject to applicable laws and regulations, payment of the principal of and interest on this Note will be made at any of the paying agencies outside New York City by check drawn on a bank in New York City, or at the request of the bearer by transfer to a United States dollar account maintained by the payee with a bank in New York City.

This Note is one of a series of Bearer Notes of the Fund of several different issue dates and maturities duly authorized by Decision No. 6843-(81/75), adopted May 6, 1981, of the Executive Board of the Fund. All such Bearer Notes (hereinafter called Notes) shall rank pari passu in respect of priority of payment with the highest-ranking debt incurred by the Fund through borrowing on its own account. Notes are issuable in authorized denominations of SDR 1 million, 5 million, and integral multiples of 5 million. This Note is issued subject to the terms and conditions set forth below, without prejudice to the right of the Fund to issue other Notes containing different terms and conditions.

1. SDR means the special drawing right of the Fund. For purposes of any payment hereunder the value of a special drawing right in terms of United States dollars shall be that determined by the Fund pursuant to Article XIX, Section 7(a) of its Articles of Agreement for a date three business days of the Fund prior to the date such payment is to be made, or, if no such value has been determined for that date prior to the time payment is to be made, the value as of the last preceding date for which a determination has been made by the Fund.

2. (a) During each successive interest period until payment of the principal sum of this Note has been made or duly provided for, interest shall accrue daily on the principal sum at the combined market interest rate per annum computed by the Fund for that period. For purposes of computing interest, (i) the first interest period shall commence on the day following the date of this Note and shall end on the first interest payment date, and each subsequent interest period shall commence on the day following an interest payment date and shall end on the next succeeding interest payment date; (ii) “interest computation date”, in relation to the first interest period, means a date three business days of the Fund before the date of this Note, and in relation to subsequent interest periods means a date three business days of the Fund before the interest payment date immediately preceding the commencement of such period; (iii) “reporting agency” means an agency which serves as the reporting agency for a currency used in making an interest computation, as provided in (c) below; and (iv) a “reported yield”, in relation to a currency, means the yield applicable to that currency as provided in (c) below for the interest computation date or, if no such yield is available for that date, the yield for the next preceding day for which such yield is available, as reported to the Fund by the relevant reporting agency.

(b) Except as provided in (d) below, the combined market interest rate shall be computed on the basis of the component currencies and the number of units of each such currency used by the Fund on the interest computation date in valuing the special drawing right pursuant to Article XIX, Section 7(a) of the Articles of Agreement of the Fund. The computation shall be made by multiplying the reported yield for each component currency on that date by the number of units of that currency used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting products for all component currencies, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest 1/16 of 1 per cent, shall be the combined market interest rate to be applied during the ensuing interest period.

(c) (i) The Fund shall arrange for the central bank or other appropriate official agency in each country whose currency is a component currency in the valuation of the special drawing right to serve as the reporting agency hereunder and to report to the Fund the yield applicable to that currency as provided in (ii) and (iii) below, as needed for each interest computation. Initially the Fund has arranged for the following institutions to serve as reporting agencies for the currencies indicated:

French francCaisse des Dépôts et Consignations
deutsche markDeutsche Bundesbank
Japanese yenBank of Japan
pound sterlingBank of England
U.S. dollarDepartment of the Treasury

(ii) The reported yield applicable to each currency shall be the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency on the basis set out below: (A) for the French franc, the yield to maturity on a representative sample of securities of major French public sector enterprises with an average remaining life in the range of four and a half to five and a half years, based on market prices and weighted by the volume of transactions in the securities during the previous week, as calculated by the Caisse des Dépôts et Consignations using the same method as it uses for the yield it publishes weekly; (B) for the deutsche mark, the yield to maturity on notes and bonds of the Federal Republic, Railways and Post Office with a remaining period to maturity of five years as calculated by the Deutsche Bundesbank on the basis published in the Statistical Supplement (Series 2, Table 8D) to the Bundesbank’s Monthly Report; (C) for the Japanese yen, the yield to maturity of that ten-year Japanese Government bond with a remaining period to maturity closest to five years, based on the closing market price officially published by the Tokyo Stock Exchange; (D) for the pound sterling, the calculated redemption yield on British Government securities determined for a constant maturity of five years, as calculated by the Bank of England on the basis published in its Quarterly Bulletin; (E) for the U.S. dollar, the yield to maturity on actively traded U.S. Government securities, determined for a constant maturity of five years, as calculated by the U.S. Treasury and presently published each week by the Federal Reserve Board in Statistical Release H.15; and (F) for any other currency, the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency, on representative issues of government securities with an average remaining period to maturity of five years or, if such securities are not available, then on the closest substitute thereto selected by such reporting agency after consultation with the Fund.

(iii) If a reporting agency notifies the Fund that the yield described above in (ii) applicable to its currency can no longer be reported to the Fund, or that some material change has occurred making that reported yield no longer appropriate for the purpose of interest computations hereunder, the reporting agency, after consultation with the Fund, shall determine the most appropriate substitute yield for the purpose, having regard to the criteria specified in subparagraph (ii) (F) above.

(d) Notwithstanding the foregoing, if the Fund should decide to change the method of valuation of the special drawing right, a new combined market interest rate shall be computed as of a date three business days of the Fund before the change becomes effective, but on the basis of the currencies and the units of each currency used by the Fund under the new method of valuation, and interest shall accrue at the previous rate until the effective date of the change and at the new rate from and including such effective date until the commencement of the next interest period after such effective date.

(e) The Fund shall give notice of the name of any reporting agency designated pursuant to subparagraph (c)(i) above and not specifically named therein, and of each combined market interest rate computed hereunder. Each such notice shall be given by publication in the manner specified in paragraph 8, as soon as practicable following the designation or the interest computation as the case may be.

3. The Fund covenants that, so long as payment of the principal sum of any of the Notes has not been made or duly provided for, the Fund will not cause or permit to be created on any of the property or assets held by the Fund on its own account any mortgage, pledge, lien or charge as security for any notes or bonds issued, or other indebtedness heretofore or hereafter incurred, by the Fund through borrowing for its own account (other than mortgages, pledges, liens or charges on property, not including monetary assets, purchased by the Fund securing all or part of the purchase price thereof) unless the Notes shall be equally and ratably secured by such mortgage, pledge, lien or charge.

4. The Fund and any paying agent of the Fund may deem and treat the bearer of any Note and the bearer of any coupon for interest on any Note as the absolute owner thereof for all purposes whatsoever, notwithstanding any notice to the contrary; and all payments to such bearer shall discharge the obligations of the Fund under such Note or such coupon to the extent of such payment.

5. Without charge, Notes may be exchanged upon presentation and surrender thereof at the principal office of the Fund in Washington, D.C., U.S.A., for similar Notes of other authorized denominations bearing the same maturity date and in the same aggregate principal amount. If a Note or coupon is mutilated, destroyed, stolen or lost it may be replaced at the said principal office of the Fund upon payment by the claimant of such expenses and reasonable charges as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Fund may require. Mutilated Notes or coupons must be surrendered before replacements will be issued.

6. Notes which shall be presented or surrendered by the holders thereof, or delivered by or on behalf of the Fund pursuant to the provisions hereof, shall be accompanied by all coupons thereto appertaining which shall not have matured on or before the date of such presentation and surrender, or delivery, as the case may be.

7. The Fund may at its option redeem any or all Notes, on any interest payment date applicable to the Notes to be redeemed. If a redemption is to relate to part only of the total amount of outstanding Notes bearing the same maturity date and having the same terms and conditions, the particular Notes to be redeemed will be selected by lot by the paying agent of the Fund in New York City. Notice of the Fund’s intention to redeem Notes shall be published, in the manner hereinafter specified, at least once a week for three successive weeks, with the first such notice being published not more than 60 days and the last not less than 30 days prior to the date fixed for redemption. Such notice having been given, the Notes to be redeemed shall become due and payable on the designated redemption date and if payment is made or duly provided for on that date shall cease to bear interest thereafter.

8. Notices required for purposes of the Notes shall be published in at least two daily newspapers of general circulation, one in New York City and one in London. As far as practicable, the Fund shall arrange such publication in the Wall Street Journal and the Financial Times.

9. The Notes and the interest thereon will not be exempt from taxation generally. Under the Articles of Agreement of the Fund no taxation of any kind may be levied by a member of the Fund on the Notes and the interest thereon (a) which discriminates against the Notes solely because of their origin or (b) if the sole jurisdictional basis for such taxation is the place or currency in which the Notes are issued, made payable or paid, or the location of any office or place of business maintained by the Fund. Also, under its Articles the Fund is immune in member countries from liability for the collection of any tax or duty.

10. If the Fund shall have defaulted at any time after March 31, 1981 in the payment of the principal of or interest on the Notes or any indebtedness evidenced by the Notes, or in the performance of any covenant contained in any of the Notes, or in the payment of principal or interest on any other indebtedness incurred by the Fund for its own account under arrangements entered into after March 31, 1981, and such default shall have continued for a period of 90 days, then at any time thereafter during the continuance of such default the holder of any of the Notes may deliver to the Fund at its principal office in Washington, D.C. written notice that such holder elects to declare the principal of and interest on all Notes held by him (the serial numbers and denominations of which shall be set forth in the notice) to be due and payable, and on the thirtieth day after delivery of such notice the principal amount of such Notes shall become due and payable, unless prior to that time such default shall have been remedied.

11. (a) The Notes and coupons shall be governed by and construed in accordance with the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due under any Note or coupon may be brought in the Federal Courts (or if such Courts lack competence, in State Courts) in the State of New York, the Courts of England, or the ordinary Courts of Justice of the Canton of Geneva, Switzerland, with right of recourse in each of these jurisdictions to competent higher courts. The Fund irrevocably agrees to waive its immunity from judicial process and to submit to the jurisdiction of such Courts with respect to such action and with respect to the execution in any member country of the Fund and in Switzerland of a final judgment against the Fund rendered by any of such Courts, and hereby appoints []58 in New York City, []59 in London, and []60 in Geneva as its agent to receive on behalf of the Fund service of writs, copies of the summons and complaint, and any other process which may be served in any such action brought in New York, England, or Switzerland, respectively. Such waiver and submission shall not extend to any action or proceeding other than as specified in this paragraph or in any Courts except those specified in this paragraph.

(b) Notwithstanding any other provision of this Note, any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund shall be conclusively determined by the Fund.

(c) No recourse shall be had for the payment of the principal of or interest on this Note, or for any other claim in respect hereof, against any Governor or Executive Director or Alternate of either, or against any officer or employee, of the Fund.

In witness whereof, the Fund has caused this Note to be signed in its name with the facsimile signatures of its Managing Director and Treasurer and countersigned with the manual signature of an authorized representative of the Fund.

Dated ____________, 19__. INTERNATIONAL MONETARY FUND

By ___________________________

Managing Director

___________________

Treasurer

Countersigned: _______________________

Authorized Representative

No action has been taken by or on behalf of the Fund to register this Note or any prospectus relating thereto or otherwise to qualify it for offering or sale under the laws of any jurisdiction.

FORM OF COUPON

(To be attached to Bearer Notes)

[Coupon Number]

On ________________________ 19 __ or, if this is not a day on which banks are open for business in New York, then on the immediately preceding banking day, the

INTERNATIONAL MONETARY FUND

will pay to bearer an amount of interest then due under the Fund’s Floating Rate Coupon Bearer Note, bearing the serial number and maturity date and in the principal sum specified below, for the interest period of six months more or less ending on such day, unless the Note shall previously have been duly called for redemption, and payment of the principal together with unpaid interest accrued to the date fixed for redemption shall have been made or duly provided for. Payment of the interest will be made in United States dollars upon surrender of this coupon (a) at the principal office of the Fund’s paying agent in New York City; or (b) at the option of the bearer and subject to applicable laws and regulations, at the principal office of the Fund’s paying agent in Frankfurt, London, Paris or Tokyo or at any other paying agent outside New York City appointed by the Fund from time to time, by check drawn on a bank in New York City, or at the request of the bearer by transfer to a United States dollar account maintained by the payee with a bank in New York City.

INTERNATIONAL MONETARY FUND

_____________________________

Authorized Representative

Serial No.: ________________

Maturity Date: _______________

Principal Sum: SDR ______________

Annex C

May 6, 1981

His Excellency

Sheikh Abdul Aziz Al-Quraishi

Governor, Saudi Arabian Monetary Agency

Riyadh, Saudi Arabia

Dear Mr. Governor:

In connection with our current negotiations I shall propose to the Executive Board of the Fund in the next few months a policy laying down guidelines on the amounts of outstanding borrowings of the Fund in relation to its assets. This policy initiative would be designed to assure creditors that the Fund’s borrowings will be prudently managed by incorporating in the guidelines the principle of a limit on the Fund’s total indebtedness expressed as a ratio of its total quotas.

Yours sincerely,

/s/

J. de Larosière

Managing Director

Annex D Memorandum of the Director of the Legal Department of the International Monetary Fund

Borrowing Agreements Between IMF and Its Members

1. Like any other subject of international law, be it a state or an international organization, the Fund is legally bound to perform in good faith the obligations it has assumed under agreements that it has concluded in accordance with its constitutional requirements, and it may not invoke actions or omissions by any of its organs in order to avoid the performance of such obligations. This statement is elaborated below.

2. The Fund is an international, intergovernmental organization, which, in accordance with applicable principles of general international law and express provisions of its Articles of Agreement, possesses full juridical personality and the capacity to contract. With regard to borrowing, the Articles of Agreement specifically provide that the Fund may borrow, on such terms and conditions as may be agreed with the lender, the currencies of members, if it finds it appropriate to replenish its holdings of such currencies.

3. Under the provisions of the Fund’s Articles and decisions of its Board of Governors, the authority and responsibility to enter into borrowing agreements for the replenishment of the Fund’s holdings of currencies lies with the Executive Board. Therefore, a borrowing agreement concluded under or pursuant to the authority of the Executive Board is a legally binding agreement of the Fund.

4. It is a fundamental principle of international, as well as of domestic, law that an agreement in force is binding upon the parties to it and must be performed by them in good faith. All parties to the agreement are entitled to expect that the contractual undertakings under the agreement will be fully carried out in accordance with the terms of the agreement. It has been recognized that this basic rule of law applies with equal force to international organizations.61 Thus, the Fund, having duly concluded an agreement with another party, be it one of its members or another entity, is legally obliged to perform in good faith its undertakings under the agreement.

5. Another basic principle of domestic and international law that flows from the one already referred to is that, once the terms of an agreement have been fixed and the agreement has been brought into force, it is not open to either of the parties to amend, transform, or terminate the agreement unilaterally, i.e., without the consent of the other party. In the case of a party which is a state, this means that the party may not invoke its internal law or decisions of its national authorities or institutions in order to modify or abrogate its obligations under an agreement to which it is a party. In the case of a party which is an international organization, it means that a party to the agreement may not invoke its internal rules and procedures, or the actions or omissions of its organs, in order to change, nullify or evade its obligations under the agreement. This basic principle has been formulated as follows in the codification of the law on the subject of treaties among international organizations, or between them and states, that was prepared by the International Law Commission of the U.N.62

An international organization party to a treaty may not invoke the rules of the organization as justification for its failure to perform the treaty, unless performance of the treaty, according to the intention of the parties, is subject to the exercise of the functions and powers of the organization.

The Commission made it clear that “rules of the organization” means, in particular, “the constituent instruments, relevant decisions and resolutions, and established practice of the organization.” 63 Thus, the Fund would be prevented from varying its contractual commitments under an agreement to which it is a party by relying on decisions taken, or practices developed, after the conclusion of the agreement. Changes in the Fund’s law and practice would be taken into account in the interpretation and application of terms of an agreement to which the Fund is a party only to the extent that their applicability was expressly stated in, or implied from, the provisions of the agreement. It is clear therefore that neither the Board of Governors nor the Executive Board of the Fund may change, nullify or evade the obligations of the Fund under bilateral agreements.

6. Questions of interpretation of the provisions of an agreement between the Fund and another party must be resolved in accordance with the rules and procedures prescribed for this purpose by that agreement. The organs of the Fund have no authority to resolve any questions of interpretation of such an agreement even if the other party to the agreement is a member of the Fund. The Executive Board and the Board of Governors have the responsibility to resolve questions of interpretation of the provisions of the Fund’s Articles and the resolutions and decisions adopted under them, but that authority does not extend to questions of interpretation of the provisions of contractual arrangements of the Fund. As already explained, interpretations or other decisions adopted by the Board of Governors or the Executive Board would affect the interpretation or application of the provisions of an agreement between the Fund and another party only if this was expressly stated in, or implied by, the provisions of that agreement.

U. Borrowing Agreement with the Bank for International Settlements

The Managing Director is hereby authorized to send to the General Manager of the Bank for International Settlements (BIS) a telex communication informing him that, on behalf of the Fund, he accepts the proposal set forth in the Annex to this decision and that the proposal set forth in that Annex shall constitute an agreement between the Fund and the BIS which shall enter into force on the date of the Managing Director’s communication.64

Decision No. 6863-(81/81)

May 13, 1981, as amended by

Decision No. 6870-(81/83)

June 1, 1981, and by

Decision No. 6925-(81/112)

August 3, 1981

Annex Proposal Received from the Bank for International Settlements (BIS)

1. The Bank for International Settlements (BIS) is prepared to open a facility, free of commission, fee, or charge, in favour of the International Monetary Fund (Fund) for the equivalent of SDR 600 million for a period of two years commencing 1st June 1981 in accordance with the conditions set out in this telex.

With effect from 3rd August 1981, the amount of this facility is increased to SDR 675 million.

2. Drawings on the facility may be made by the Fund on giving seven business days’ notice (Washington, D.C.) by tested telex. Each drawing shall be for a period of six months and shall, subject to similar notice, be renewable at maturity at the request of the Fund for further successive periods of six months provided that no drawing matures any later than two years and six months after the first drawing made by the Fund under this facility. Nevertheless, should the first drawing be made for value later than 31st July 1982 no drawing may mature later than 31st January 1985.

3. Each drawing will be denominated in SDRs but the corresponding payment will be effected by the BIS by transfer of U.S. dollars (Federal funds) to the account of the Fund at the Federal Reserve Bank of New York, New York.

4. The amount of U.S. dollars to be transferred shall be determined by applying the SDR/U.S. dollar rate established and published by the Fund three business days before the value date.

5. Should the Fund request the BIS to make any payment under this facility in a currency other than the U.S. dollar, the BIS will use its best endeavors to meet the Fund’s wishes. In such cases the applicable exchange rate shall be that established by the Fund for that currency against the SDR three business days before the value date.

6. When a drawing is not renewed at maturity, the U.S. dollar countervalue will be credited by the Fund in U.S. dollars to the account “F” of the BIS at the Federal Reserve Bank of New York, New York. The relevant SDR/U.S. dollar conversion rate will be the rate established by the Fund three business days before the maturity date.

7. The interest rate applicable to each drawing or renewal shall be determined on the basis of the interest rates listed in paragraph 8 below as notified by the five central banks concerned for the third business day preceding the value date and on the basis of the weighting then given to the currencies concerned in the composition of the SDR. The exchange rates needed for this calculation shall be supplied by the Fund.

The calculation shall be made by multiplying the interest rate for each component currency by the number of units of that currency used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting products for all component currencies, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest 1/16 of 1 per cent, shall be the interest rate to be applied.

8. The rates to be used for interest calculation are those for the following:

  • – six-month U.S. Treasury bills,

  • – six-month interbank deposits in Germany,

  • – six-month interbank loans against private paper in France,

  • – average rate for newly issued bank CDs in Japan with a maturity of between 150 and 180 days,

  • – six-month interbank deposits in the United Kingdom.

9. Interest will be paid by the Fund in U.S. dollars at maturity of each six-monthly operation in the manner set out in paragraph 6 above.

10. If during the life of a six-monthly operation the composition of the SDR is changed by the Fund, any payments due three business days or more after the effective date of the change will be made on the basis of the new SDR/U.S. dollar rate. Nevertheless, if the BIS so requests within 30 days after the adoption of the relevant decision of the Fund but not later than 14 days after the date the change became effective, and in agreement also with the central banks whose currencies may be concerned, the former SDR/U.S. dollar exchange rate and the interest rate calculated on the basis of the valuation of the SDR before the change, shall be applied to the operation in question. In that case, however, the Fund will have the option of terminating the agreement and repaying all amounts due under the agreement upon giving 14 days’ notice.

11. The Fund agrees that any member central bank of the BIS which is either the central bank of a country belonging to the Fund or a prescribed holder of SDRs may at any time be wholly or partly substituted for the BIS in respect of its debtor and creditor relationships with the Fund under this facility, in particular in respect of any outstanding drawing and of any commitment for future drawings and renewals. The substitution shall become effective vis-à-vis the Fund upon receipt by the Fund of confirmation to the Fund by the transferee, such confirmation to be transmitted through the BIS, that the transferee accepts the substitution.

12. Please confirm that you are in agreement with the above. This telex and your confirmation will constitute a binding agreement between our two institutions.

V. Borrowing from Central Banks and Other Official Institutions

The Fund shall stand ready to enter into an agreement with any member, the central bank or other agency of any member, or any official entity that has been prescribed as a holder of special drawing rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement, under which such member, central bank or other entity will accord a credit line in favor of the Fund on terms and conditions that are substantially the same as those of the Agreement with the BIS (Executive Board Decision No. 6863-(81/81),65 except as those terms and conditions may be adjusted and supplemented by the following provisions.

1. The commitment of the lender under the credit line shall be for a period of not less than two years, provided that it can be for a shorter period if the lender represents that, for legal or other compelling reasons, it cannot accept a commitment period of at least two years and, in the Managing Director’s judgment, the shorter period is consistent with the prudent management of the Fund’s liquidity.

2. At the request of the lender, its commitment may be terminated before the end of the commitment period if (i) the lender is a member, the central bank, or another agency of a member; (ii) it represents that its balance of payments and reserve position, or that of the member if the lender is the central bank or other agency of that member, does not justify further drawings under the commitment; and (iii) the Fund, having given the representation the overwhelming benefit of any doubt, determines that no further drawing should be made.

3. The maturity of the drawings under the commitment may be six months, one year, or two years, provided that, if the maturity of such drawings is for six months or one year, the lender will normally be expected to undertake to extend the maturity of the drawings so that resources borrowed shall be available to the Fund for at least two years. Nevertheless, if, in the Managing Director’s judgment, shorter periods would be consistent with the prudent management of the Fund’s liquidity, the agreement may provide for shorter maturities that would be renewed automatically unless the lender or the Fund gave notice, at least 30 days before maturity, that renewal should not take place.

4. (a) The interest rate applicable to drawings with a maturity of one year shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that the instruments to be used for the calculation of that interest rate shall be, insofar as possible, government instruments of one-year maturity and that interest shall be payable at six months and at maturity.

(b) The interest rate applicable to drawings with a maturity of two years shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that, (i) the instruments to be used for the calculation of that interest rate shall be those used by the Fund for calculating the interest rate on the special drawing right, with the interest calculated at three-month intervals and payable semiannually; or (ii) if the Managing Director judges it appropriate in prevailing circumstances, the instruments shall be, insofar as possible, government instruments of two years’ maturity, with interest being calculated and payable semiannually.

5. The commitment of the lender shall be transferable only with the consent of the Fund.

6. Loans may be made in any currency, provided that (i) the concurrence of the issuer of that currency has been given, and (ii) arrangements are agreed under which balances of that currency borrowed by the Fund will be converted at equal value exchange rates into U.S. dollars to the extent required for investment pending use of the borrowed resources in transactions of the Fund. By agreement with the lender, the Fund may make repayment of principal or pay interest in any currency or in SDRs.

7. (a) The lender may obtain repayment of a claim on the Fund before maturity if: (i) the lender is a member, the central bank, or another agency of a member; (ii) the lender represents that its balance of payments and reserve position, or that of the member’s if the lender is a central bank or another agency of a member, justifies early repayment; and (iii) the Fund, having given the lender’s representation the overwhelming benefit of any doubt, determines that there is such a need for early repayment.

(b) At any other time the Fund may agree with the lender on repayment prior to maturity subject to an adjustment in the interest rate applicable for the period during which the drawing remained outstanding.

8. The lender shall have the right to transfer at any time all or part of its claim on the Fund, which results from drawings outstanding under its commitment that have not less than three months to maturity from the requested transfer, to any member, the central bank or another agency of any member, or any official entity that has been prescribed as a holder of special drawing rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement. A claim transferred shall be subject to the renewal undertakings of the transferor. The transferee shall have all the rights of the lender, except that (i) the right to obtain repayment before maturity pursuant to 7(a) above shall be exercisable by the transferee only if it is a member, or the central bank, or another agency of a member, that at the time of the transfer is in a net creditor position in the Fund and, in the opinion of the Fund, the member’s currency could be used in net sales in the Fund’s operational budgets for the foreseeable future, and (ii) the right of the Fund to use the currency of the transferor in payment of principal or interest shall, if the transferee is a member, or the central bank, or another agency of a member, be replaced by the right to use the transferee’s currency; or, if the transferee is not a member, or the central bank, or another agency of a member, this right shall no longer apply.

9. At the request of the lender, the Fund shall issue to such lender an instrument evidencing its claim on the Fund resulting from drawings outstanding under the lender’s commitment. Such an instrument shall not be issued if the lender has requested or has received bearer notes pursuant to 10 below.

10. At the request of the lender made within 10 days from the date of a drawing under the commitment, the Fund shall issue and deliver to such lender, without charge, promissory notes of the Fund in bearer form in exchange for all or part of the lender’s claim on the Fund resulting from that drawing, whereupon the claim shall be canceled pro tanto. The renewal of a drawing shall be deemed to be a new drawing. By agreement between the lender and the Fund, bearer notes may also be issued on an interest payment date in exchange for a claim for the balance of the period of the claim. The issuance of the bearer notes shall be governed by the provisions set forth in Annex A and, unless otherwise agreed between the lender and the Fund, shall be substantially in the form, and subject to the terms and conditions set forth in Annex B or C.

11. An agreement negotiated pursuant to this decision shall not become effective before it has been approved by the Executive Board.

Decision No. 6864-(81/81)

May 13, 1981

Annex A Provisions Governing Issuance of Bearer Notes

1. The Notes shall be in denominations of SDR 1 million, 5 million or any integral multiple of 5 million as specified by the lender in its request.

2. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of six months or one year shall be substantially in the form and subject to the terms and conditions set forth in Annex B. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of two years shall be substantially in the form and subject to the terms and conditions set forth in Annex C. Each Note shall have as its issue date the date of the drawing that gave rise to the claim in exchange for which the Note is issued, and shall carry the same interest rate as that claim. The renewal of a drawing shall be deemed to be a new drawing.

3. Each Note shall have as its maturity date the same maturity date as the claim in exchange for which it is issued, except that, if such date would not fall on a banking day in New York, the banking day in New York immediately preceding that date shall be the maturity date.

4. Each Note shall be executed in the name of the Fund by the manual or facsimile signatures of the Managing Director and the Treasurer and, if facsimile signatures are used, shall be countersigned manually by an officer or other authorized representative of the Fund designated by the Managing Director. Each such Note, when duly executed and delivered, shall constitute a valid and enforceable obligation of the Fund in accordance with its terms.

5. Notes shall be delivered to the lender at the principal office of the Fund, or at such other place as may be agreed between the Fund and the lender.

6. Delivery shall be made on a date specified by the Fund, which, unless otherwise agreed with the lender, shall be not more than 30 days after the date the request for Notes is received by the Fund.

7. For purposes of the Notes, the Fund shall appoint paying agents in Frankfurt, London, New York, Paris and Tokyo, and shall maintain a paying agent in each such city as long as any such Notes remain outstanding.

8. The Fund, by agreement with the holder of any Note, may redeem such Note prior to its maturity date at a mutually agreed price, against surrender of the Note.

Annex B Forms of a Six-Month or One-Year Bearer Note 66

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

No. __________

SDR __________

Issue Date: _____________

Maturity Date: _____________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to ______________________ Special Drawing Rights on the maturity date of this Note, together with interest on such principal amount at the rate of ____________ per annum from the issue date hereof until the maturity date. [Interest shall be paid in two installments; the first installment on (), and the second on (the maturity date).] For purposes of payment hereunder the value of the United States dollar in terms of the special drawing right shall be that determined by the Fund in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement for a date three business days of the Fund before the date payment falls due.

Payment of principal and interest shall be made, subject to applicable laws and regulations, on presentation and surrender [on presentation and, at maturity, surrender] of this Note at any of the paying agents specified below by check drawn on a bank in New York City or, in the case of paying agents outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List paying agents]

[A record of an interest payment endorsed below and initialed by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.]

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By __________________

Managing Director

Countersigned: _____________________

Authorized Representative

__________________

Treasurer

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

No action has been taken by or on behalf of the Fund to register this Note or any prospectus relating thereto or otherwise to qualify it for offering or sale under the laws of any jurisdiction.

RECORD OF INTEREST PAYMENT OF SDR (___________) due

(date) ___________________

SDR/US$ rate _______________________

US$ amount ____________________

Paid __________ (date) ___________

Signature ______________________________

(Authorized Officer)

Annex C Form of Two-Year Bearer Note

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

No. ___________

SDR ___________

Issue Date: _____________

Maturity Date: ______________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to ________________________ Special Drawing Rights on the maturity date of this Note, and to pay interest on such principal amount in United States dollars at the rate and on the dates specified on the reverse side hereof from the issue date of this Note until the maturity date. For purposes of each payment hereunder the value of the United States dollar in terms of the special drawing right shall be that determined by the Fund for a date three business days of the Fund before the date payment falls due in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement.

Payments of the principal amount and of interest shall be made, subject to applicable laws and regulations, on presentation (and, at maturity, surrender) of this Note at any of the paying agents specified below by check drawn on a bank in New York City, or, in the case of paying agencies outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List paying agents]

A record of an interest payment endorsed on the reverse hereof and initialed by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan, New York City, as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By ________________

Managing Director

Countersigned: _________________

Authorized Representative

_________________

Treasurer

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

For three months [six months] from the Issue Date of this Note interest shall accrue at ________ per cent per annum. Thereafter, for each successive three-month [six-month] period until the maturity date, interest shall accrue at the rate of interest determined as follows:

1. The central banks of the members whose currencies are used for the valuation of the special drawing right shall notify to the Fund the market interest rate or yield in their respective market for a date three business days of the Fund prior to the last day of the three-month period, or if that day is not a business day, for the preceding business day, on the instrument chosen by the Fund, in consultation with the central bank, as representative for a three-month maturity in that market for the purpose of determining the interest rate on the special drawing right.

[Alternative formulation using governmental instruments with two years to maturity]

2. Using these rates and yields as notified by these central banks the Fund will calculate the rate of interest for the next three-month period as follows:

The yield or rate for each instrument on that date will be multiplied by the number of units of that currency, used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting product for each such currency, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest 1/16 of 1 per cent, shall be the interest rate to be applied during the ensuing interest period.

Such interest shall be paid on interest payment dates falling at successive intervals of six months from the issue date of Note, as shown in the Interest Payment Schedule set forth below, with the last interest payment date being the maturity date of this Note. If an interest payment date should fall on a day that is not a banking day in New York City, the interest due on such interest payment date shall be paid on the banking day in New York City immediately preceding such interest payment date.

INTEREST PAYMENT SCHEDULE

(To be added)

Subsequently amended by Executive Board Decision No. 6833-(81/65) S, page 145.

Ibid.

Ibid.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), page 80.

Ibid., page 81.

See Annual Report, 1979, page 130.

See Annual Report, 1979, pages 121-23.

See Annual Report, 1979, pages 127-28.

See Annual Report, 1976, pages 111-17.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), page 84.

See Annual Report, 1976, pages 111-12.

Ibid.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 185-95.

The date of the last loan disbursement was March 31, 1981.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 185-95.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), pages 19-25.

See Annual Report, 1978, page 120.

Executive Board Decision No. 5998-(79/1), December 27, 1978, reads as follows:

“1. Pursuant to paragraph 1 of Decision No. 5732-(78/65), adopted April 24, 1978, the Fund has reviewed the schedule of charges set forth in that decision.

“2. Paragraphs 1 and 2 of Decision No. 5732 shall be amended by replacing ‘not later than June 30, 1979’ by ‘before the earlier of July 1, 1979 and the date on which the supplementary financing facility be-comes effective.’

“3. The last sentence of paragraph 1 of Decision No. 5732 shall be deleted.”

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), pages 19-25.

See Annual Report, 1978, page 120.

Ibid.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), pages 19-25.

See pages 153-55.

The text would be adapted for a stand-by arrangement for only one year.

The text would be adapted for a stand-by arrangement for only one year.

The text to be added will depend on the situation of the member at the time; a sample text is set forth in the Appendix.

The performance criteria enumerated here are indicative only.

These subparagraphs would be adapted in accordance with the period of the stand-by arrangement.

These subparagraphs would be adapted in accordance with the period of the stand-by arrangement.

The text to be added will depend on the situation of the member at the time; a sample text is set forth in the Appendix.

The performance criteria enumerated here are indicative only.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 139—41.

Ibid., pages 152-54.

Ibid., pages 50-54.

Ibid.

Ibid., pages 70-75.

Ibid., pages 76-78.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), pages 19-25.

Ibid., pages 70-77.

Ibid., pages 19-25.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 50-54.

Ibid., pages 62-66.

Ibid., pages 66-67.

See pages 153-55.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 50-54.

See Annual Report, 1980, pages 136-38.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 50-54.

Ibid., pages 62-66.

Ibid., pages 66-67.

See pages 169-71.

Selected Decisions of the International Monetary Fund and Selected Documents, Supplement to Eighth Issue (Washington, 1978), pages 43-45.

Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pages 62-66.

Ibid., pages 66-67.

See pages 169-71.

See pages 153-55.

The Agreement entered into force on May 7, 1981.

This sentence will be worded in its final form as soon as the arrangements with paying agents have been completed.

This blank will be filled in as soon as the arrangements with agents for the receipt of process are completed.

This blank will be filled in as soon as the arrangements with agents for the receipt of process are completed.

This blank will be filled in as soon as the arrangements with agents for the receipt of process are completed.

Yearbook of the International Law Commission of the U.N., Vol. II, Part 2 (1977), page 118.

Ibid.

Ibid.

The Agreement entered into force on June 1, 1981.

See page 189.

For the one-year Note, the text would include in the first paragraph the sentence in brackets, the alternative text in the bracket in the second paragraph, the third paragraph in brackets, and the Record of Interest Payment at the end.

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