Chapter

Appendix II Principal Decisions of the Executive Board and Report to the Board of Governors

Author(s):
International Monetary Fund
Published Date:
September 1983
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A. Increases in Quotas of Members—Eighth General Review

Report of the Executive Board to the Board of Governors

1. Article III, Section 2(a) of the Articles of Agreement provides that “The Board of Governors shall at intervals of not more than five years conduct a general review, and if it deems it appropriate, propose an adjustment of the quotas of the members. It may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned.” This report and the attached Resolution on increases in quotas under the current, i.e., Eighth, General Review are submitted to the Board of Governors in accordance with Article III, Section 2.

2. The Seventh General Review of Quotas was completed by Board of Governors Resolution No. 34-2, adopted December 11, 1978. To comply with the five-year interval prescribed by Article III, Section 2(a), the Eighth General Review has to be completed not later than December 11, 1983. In the Report of the Executive Board to the Board of Governors on Increases in Quotas of Fund Members—Seventh General Review, it was stated that:

The Executive Board will review the customary method of calculating quotas after the Seventh Review of Quotas has been completed. In the context of the next general review of quotas, the Executive Board will examine the quota shares of members in relation to their positions in the world economy with a view to adjusting those shares better to reflect members’ relative economic positions while having regard to the desirability of an appropriate balance in the composition of the Executive Board.

3. At its meeting in Helsinki, Finland, in May 1982, the Interim Committee urged the Executive Board to pursue its work on the Eighth General Review as a matter of high priority. At that meeting the Committee also “… noting that the present quotas of a significant number of members do not reflect their relative positions in the world economy, … reaffirmed its view that the occasion of an enlargement of the Fund under the Eighth General Review should be used to bring the quotas of these members more in line with their relative positions, taking account of the case for maintaining a proper balance between the different groups of countries.” At its meeting in Toronto, Canada, in September 1982, the Committee noted that “there was widespread support in the Committee on the urgent need for a substantial increase in quotas under the Eighth General Review” and “urged the Executive Board to pursue its work on the issues of the Review as a matter of high priority, so that the remaining issues on the size and distribution of the quota increase could be resolved by the time of the Committee’s next meeting in April 1983.”

4. In its discussions on the Eighth General Review, the Executive Board has considered, inter alia, (i) the method of calculating quotas; (ii) the size of the overall increase in quotas; (iii) the distribution of the overall increase; (iv) the position of countries with very small quotas in the Fund; and (v) the mode of payment for the increase in quotas.

5. As regards the Executive Board’s review of the method of calculating quotas, the Executive Board agreed to certain changes regarding the quota formulas used for calculating quotas in connection with the Eighth General Review. The Executive Board accepted the quota calculations based on the revised quota formulas as reasonable indicators of the relative positions of countries in the world economy, though some Directors felt that they do not provide a wholly satisfactory measure of relative economic positions. It is understood that the changes that have been made do not preclude further appropriate changes in connection with future reviews.

6. At the meeting of the Interim Committee held in Washington in February 1983, which had been advanced from April 1983, agreement was reached on all major issues of the Eighth Review, as reflected in the relevant passages from the Committee’s communiqué of February 11, 1983, as follows:

  • (a) The total of Fund quotas should be increased under the Eighth General Review from approximately SDR 61.03 billion to SDR 90 billion (equivalent to about US$98.5 billion).
  • (b) Forty per cent of the overall increase should be distributed to all members in proportion to their present individual quotas, and the balance of sixty per cent should be distributed in the form of selective adjustments in proportion to each member’s share in the total of the calculated quotas, i.e., the quotas that broadly reflect members’ relative positions in the world economy.
  • (c) Twenty-five per cent of the increase in each member’s quota should be paid in SDRs or in usable currencies of other members.

The Committee also considered the possibility of a special adjustment of very small quotas, i.e., those quotas that are currently less than SDR 10 million, and agreed to refer this matter to the Executive Board for urgent consideration in connection with the implementation of the main decision.

7. As requested by the Interim Committee at its meeting on February 11, 1983, the Executive Board has considered the position of the 17 members with very small quotas—i.e., those with quotas that at present are less than SDR 10 million. The Executive Board proposes that the quotas of these members should, after being increased in accordance with (b) quoted in paragraph 6 above, be further adjusted to the next higher multiple of SDR 0.5 million. The Executive Board proposes that all other quotas be rounded to the next higher multiple of SDR 0.1 million. The rounding to SDR 0.5 million would provide for larger quota increases relative to present quotas for most of the members with very small quotas.

8. In accordance with the agreement reached by the Interim Committee at its meeting on February 11, 1983, on items (a) and (b) quoted in paragraph 6 above and with rounding adjustments indicated in paragraph 7 above, the Executive Board proposes to the Board of Governors that the new quotas of members be as set out in the Annex to the proposed Resolution. These increases would raise Fund quotas from approximately SDR 61 billion to approximately SDR 90 billion.

9. Article III, Section 3(a) provides that 25 per cent of any increase shall be paid in special drawing rights, but permits the Board of Governors to prescribe, inter alia, that this payment may be made on the same basis for all members, in whole or in part in the currencies of other members specified by the Fund, subject to their concurrence. Paragraph 5 of the Resolution provides that 25 per cent of the increase in quotas proposed as a result of the current review should be paid in SDRs or in currencies of other members selected by the Fund, subject to their concurrence, or in any combination of SDRs and such currencies. The balance of the increase shall be paid in a member’s own currency. A reserve asset payment will help strengthen the liquidity of the Fund and will not impose an undue burden on members because under the existing decisions of the Fund a reserve asset payment will either enlarge or create a reserve tranche position of an equivalent amount. In addition, the Fund stands ready to assist members that do not hold sufficient reserves to make their reserve asset payments to the Fund to borrow SDRs from other members willing to cooperate; these loans would be made on the condition that such members would repay on the same day the loans from the SDR proceeds of drawings of reserve tranches which had been established by the payment of SDRs.

10. Under the proposed Resolution, a member will be able to consent only to the amount of quota proposed for it in the Annex. A member will be able to consent to the increase in its quota at any time before 6:00 p.m., Washington time, November 30, 1983. In order to meet this time, members will have until the end of November 1983 to complete whatever action may be necessary under their laws to enable them to give their consents.

11. A member’s quota cannot be increased until it has consented to the increase and paid the subscription. Under the proposed Resolution, the increase in a member’s quota will take effect only after the Fund has received the member’s consent to the increase in quota and a member has paid the increase in subscription, provided that the quota cannot become effective before the date on which the Fund determines that the participation requirement in paragraph 2 of the proposed Resolution has been satisfied. The Executive Board is authorized by paragraph 3 of the proposed Resolution to extend the period of consent.

12. The participation requirement in paragraph 2 will be reached when the Fund determines that members having not less than seventy per cent of the total of quotas on February 28, 1983 have consented to the increases in their respective quotas as set out in the Annex.

13. The proposed Resolution provides that a member must pay the increase in its subscription within 30 days after (a) the date on which the member notifies the Fund of its consent, or (b) the date on which the participation requirement is met, whichever is the later.

14. The Executive Board recommends that the Board of Governors adopt the attached Resolution that covers all the matters on which the Governors are requested to act. The adoption of the Resolution requires positive responses from Governors having an 85 per cent majority of the total voting power.

February 25, 1983

Proposed Resolution Submitted to the Board of Governors

Increases in Quotas of Members—Eighth General Review

Whereas the Executive Board has submitted to the Board of Governors a report entitled “Increases in Quotas of Fund Members—Eighth General Review” containing recommendations on increases in the quotas of individual members of the Fund; and

Whereas the Executive Board has recommended the adoption of the following Resolution of the Board of Governors, which Resolution proposes increases in the quotas of members of the Fund as a result of the Eighth General Review of Quotas and deals with certain related matters, by vote without meeting pursuant to Section 13 of the By-Laws of the Fund;

Now, Therefore, the Board of Governors hereby Resolves that:

1. The International Monetary Fund proposes that, subject to the provisions of this Resolution, the quotas of members of the Fund shall be increased to the amounts shown against their names in the Annex to this Resolution.

2. A member’s increase in quota as proposed by this Resolution shall not become effective unless the member has notified the Fund of its consent to the increase not later than the date prescribed by or under paragraph 3 below and has paid the increase in quota in full, provided that no increase in quota shall become effective before the date of the Fund’s determination that members having not less than 70 per cent of the total of quotas on February 28, 1983 have consented to the increases in their quotas.

3. Notices in accordance with paragraph 2 above shall be executed by a duly authorized official of the member and must be received in the Fund before 6:00 p.m., Washington time, November 30, 1983, provided that the Executive Board may extend this period as it may determine.

4. Each member shall pay to the Fund the increase in its quota within 30 days after the later of (a) the date on which it notifies the Fund of its consent, or (b) the date of the Fund’s determination under paragraph 2 above.

5. Each member shall pay twenty-five per cent of its increase either in special drawing rights or in the currencies of other members specified, with their concurrence, by the Fund, or in any combination of special drawing rights and such currencies. The balance of the increase shall be paid by the member in its own currency.

ANNEX

Proposed Quota
(In millions of SDRs)
1.Afghanistan86.7
2.Algeria623.1
3.Antigua and Barbuda5.0
4.Argentina1,113.0
5.Australia1,619.2
6.Austria775.6
7.Bahamas66.4
8.Bahrain48.9
9.Bangladesh287.5
10.Barbados34.1
11.Belgium2,080.4
12.Belize9.5
13.Benin31.3
14.Bhutan2.5
15.Bolivia90.7
16.Botswana22.1
17.Brazil1,461.3
18.Burma137.0
19.Burundi42.7
20.Cameroon92.7
21.Canada2,941.0
22.Cape Verde4.5
23.Central African Republic30.4
24.Chad30.6
25.Chile440.5
26.China2,390.9
27.Colombia394.2
28.Comoros4.5
29.Congo, People’s Republic37.3
30.Costa Rica84.1
31.Cyprus69.7
32.Denmark711.0
33.Djibouti8.0
34.Dominica4.0
35.Dominican Republic112.1
36.Ecuador150.7
37.Egypt463.4
38.El Salvador89.0
39.Equatorial Guinea18.4
40.Ethiopia70.6
41.Fiji36.5
42.Finland574.9
43.France4,482.8
44.Gabon73.1
45.Gambia, The17.1
46.Germany5,403.7
47.Ghana204.5
48.Greece399.9
49.Grenada6.0
50.Guatemala108.0
51.Guinea57.9
52.Guinea-Bissau7.5
53.Guyana49.2
54.Haiti44.1
55.Honduras67.8
56.Hungary530.7
57.Iceland59.6
58.India2,207.7
59.Indonesia1,009.7
60.Iran, Islamic Republic of1,117.4
61.Iraq504.0
62.Ireland343.4
63.Israel446.6
64.Italy2,909.1
65.Ivory Coast165.5
66.Jamaica145.5
67.Japan4,223.3
68.Jordan73.9
69.Kampuchea, Democratic25.0
70.Kenya142.0
71.Korea462.8
72.Kuwait635.3
73.Lao People’s Democratic Republic29.3
74.Lebanon78.7
75.Lesotho15.1
76.Liberia71.3
77.Libya515.7
78.Luxembourg77.0
79.Madagascar66.4
80.Malawi37.2
81.Malaysia550.6
82.Maldives2.0
83.Mali50.8
84.Malta45.1
85.Mauritania33.9
86.Mauritius53.6
87.Mexico1,165.5
88.Morocco306.6
89.Nepal37.3
90.Netherlands2,264.8
91.New Zealand461.6
92.Nicaragua68.2
93.Niger33.7
94.Nigeria849.5
95.Norway699.0
96.Oman63.1
97.Pakistan546.3
98.Panama102.2
99.Papua New Guinea65.9
100.Paraguay48.4
101.Peru330.9
102.Philippines440.4
103.Portugal376.6
104.Qatar114.9
105.Romania523.4
106.Rwanda43.8
107.St. Lucia7.5
108.St. Vincent4.0
109.São Tomé & Principe4.0
110.Saudi Arabia3,202.4
111.Senegal85.1
112.Seychelles3.0
113.Sierra Leone57.9
114.Singapore250.2
115.Solomon Islands5.0
116.Somalia44.2
117.South Africa915.7
118.Spain1,286.0
119.Sri Lanka223.1
120.Sudan169.7
121.Suriname49.3
122.Swaziland24.7
123.Sweden1,064.3
124.Syrian Arab Republic139.1
125.Tanzania107.0
126.Thailand386.6
127.Togo38.4
128.Trinidad and Tobago170.1
129.Tunisia138.2
130.Turkey429.1
131.Uganda99.6
132.United Arab Emirates385.9
133.United Kingdom6,194.0
134.United States17,918.3
135.Upper Volta31.6
136.Uruguay163.8
137.Vanuatu9.0
138.Venezuela1,371.5
139.Viet Nam176.8
140.Western Samoa6.0
141.Yemen Arab Republic43.3
142.Yemen, People’s Democratic Republic of77.2
143.Yugoslavia613.0
144.Zaïre291.0
145.Zambia270.3
146.Zimbabwe191.0

Board of Governors Resolution No. 38-1

Adopted March 31, 1983

B. Surveillance over Exchange Rate Policies

The Executive Board has reviewed the general implementation of the Fund’s surveillance over members’ exchange rate policies, as required by paragraph VI of Procedures for Surveillance attached to Decision No. 5392-(77/63), adopted April 29, 1977,1 including the procedures for the conduct of consultations under Article IV, which consultations shall comprehend the consultations under Article VIII and Article XIV, and approves the continuation of the procedures as described in SM/83/43, in the light of the Managing Director’s summing up, until the next annual review, which shall be conducted not later than April 1, 1984.

Decision No. 7374-(83/55)

March 28, 1983

Attachment to Decision No. 7374-(83/55) Managing Director’s Summing Up

General remarks

Directors considered that Article IV consultation reports should continue to deal with exchange rate questions in a forthright fashion while taking into account the sensitivities involved; several Directors felt that more attention should be paid to exchange rate issues outside the regular consultation process.

A number of Directors observed that Fund surveillance was not sufficiently symmetrical. They noted that precise prescriptions regarding exchange rate movements or changes are often given to small countries or countries making use of Fund resources; at the same time, quite large discrepancies between exchange rates and fundamental underlying conditions draw little attention from the Fund staff when they relate to major currencies, despite the fact that those currencies play a greater role in the working of the international monetary and financial system. In this context, several Directors stressed the importance of more frequent and more analytical Board discussions on exchange rate developments generally, and on the interrelationship and implication of policies and prospects in the major currency countries in particular. A number of Directors also called for a discussion in the Executive Board on the recent EMS realignment.

Important questions regarding the setting of financial policies and the relationship of exchange rates to underlying economic and financial conditions remain to be answered. Also to be considered is the need to develop a medium-term framework for the assessment of balance of payments developments. Directors welcomed the work in progress in the Fund in these areas, including the forthcoming paper on “Issues in the Assessment of Exchange Rates of the Industrial Countries in the Context of their Economic Policies.” Such studies are expected to provide useful background for the biennial review of the principles of surveillance, which is to take place by April 1, 1984.

Many Directors emphasized the need for the Fund clearly to address the dangers associated with the growth of protectionism, and they encouraged the staff to expand the coverage and analysis of trade policy matters in Article IV consultation reports, while avoiding overlap into the areas of responsibility of other institutions, particularly the GATT. In this regard, they said, the focus should be on the impact of trade measures on domestic adjustment and the exchange rate of the relevant country and on its trading partners.

It was noted that, during 1982, debt service difficulties had become a focal point for concern. Most Directors considered it to be extremely important for the staff to do its utmost to improve the coverage of external debt developments—particularly their short-term aspects—and policies related to external debt in Article IV consultation reports. More specific proposals on that matter would be discussed in the Board meeting on external debt issues, scheduled for April 6. Some Directors also indicated that the Fund should be in a position to provide better coverage of the “liability” side of the banking sectors in member countries and their reserve management policies.

Frequency of Article IV consultations

Directors agreed that the consultation process is at the heart of surveillance and that, in view of the problems experienced by members in 1982 and the speed with which these problems have spread, a very determined effort needs to be made to ensure more regular scheduling of Article IV consultations. There have been cases, Directors noted, where members have run into serious external and internal imbalances during periods in which the Executive Board has not had an opportunity to analyze the issues and to offer the member the benefit of its advice. Directors indicated that such cases were unfortunate and should not be repeated in the future.

There was general agreement among Directors that some procedural changes would help to guarantee a stricter approach to the scheduling of consultations. Most agreed that the approach of establishing, at the conclusion of each consultation, a final date for the discussion of the next consultation with the member would be helpful, although specification of the cycle in this fashion should not be so rigid as to detract from management’s prerogative, in consultation with the member country and the Executive Director concerned, to change the scheduling. To the extent that stricter scheduling was desirable, however, it could be enhanced by periodic reports to the Board on the status of members with respect to the observation of the consultation schedule and with an indication of any problems that might have been encountered in adhering to it. In that regard, there was no intention to lay blame on the country concerned; the purpose of the report would be to inform the Board of the causes for the delay, such as insufficient staff, a problem in local political conditions, and so on.

The criteria for determining the countries under a strict cycle was agreed, i.e., economies having a substantial impact on other countries, members with Fund-supported programs, and situations where there are substantial doubts about medium-term viability. For the large majority of members for which a stricter cycle should apply, most Directors considered that the objective should be to limit the interval between consultations to no more than 12 months, with a grace period of, say, three months beyond the specified date. For members not on a strict cycle, the permissible outer limit would be two years. Management was encouraged to experiment with six-month reviews or miniconsultations—as had been done recently in some cases—where the economic situation of the member was changing rapidly.

In considering the circumstances that might justify delays in consultations, Directors noted that military hostilities, for example, would warrant a delay; however, it was to be understood that, once the special circumstances had passed, the consultation should be held quickly. Delays for political reasons, such as elections, or delays because the member was engaged in a process of reformulating its economic policies were less clear cut. Most Directors judged that consultations should not be delayed because of the political timetable in member countries; indeed, they observed that it was precisely in such periods of uncertainty that financial problems could emerge or become more acute. Moreover, as pointed out in the staff paper, consultations would be particularly useful and timely when a member was in the process of developing new policies. Delays should, where possible, be fitted into the grace period of three months; if that meant that the policies envisaged by the authorities could not be fully specified in the staff report, however, it might be appropriate to hold follow-up discussions at an early date, when the policies had been formulated.

Directors agreed that a number of adaptations to existing procedures might be necessary to maintain the higher average frequency of consultations that was implied by adherence to strict annual consultation cycles for most members, at least in current circumstances. Given the large number of requests for use of Fund resources expected in the coming year, it was accepted that consultation missions might sometimes be combined with negotiations of the use of Fund resources. However, a number of Directors considered that, where an annual consultation was due, its discussion in the Board should precede the Board discussion of a program. Some believed that combining consultations with requests for use of Fund resources should be the exception rather than the rule, but a number of Directors considered that consultations could appropriately be combined with reviews of existing Fund programs.

Directors stressed the importance of REDs [reports on Recent Economic Developments], which they considered to be a valuable and often unique source of economic and financial information on member countries. Directors agreed that, if necessary for logistical reasons, REDs might be shortened on a selective basis and perhaps merely updated in each second year; however, they stressed that changes of substance in economic policies and institutional settings should always be incorporated in the yearly report. In practice, therefore, it was likely that most REDs would have to be prepared annually.

Methods of surveillance over exchange rate changes, and notification procedures

All Directors asked for an evenhanded approach to surveillance and indicated that the Fund needed to play a more active role with respect to exchange rate changes. Some stressed the importance of more detailed and forthright discussions on exchange rate issues in Article IV consultations and in discussions on the world economic outlook, particularly when a stricter consultation schedule was being observed. In those exceptional circumstances where additional discussions with members seemed warranted, the existing procedures for dealing with such questions could be invoked.

To give effect to a more active role for the Fund and to help to ensure uniformity of treatment, most Directors saw merit in the “threshold” approach described in the staff paper, and there was broad support for implementing the approach on an experimental basis. Directors made a number of interesting and penetrating observations about the approach in the course of the discussion, and some indicated that they would be providing further, more detailed observations later. On the technical issue of the size of the numerical threshold, some Directors felt that a 5 per cent threshold would result in too large a number of information notices for such notices to be meaningful. Others felt that any change as large as 5 per cent in real effective terms was important and should be subject to an information notice. On balance, particularly since the approach is to be adopted on an experimental basis, I would propose that we initially use a threshold of 10 per cent.

Another technical issue concerns the appropriate starting point for the measurement of cumulative changes. Most Directors, while noting that there were weaknesses in the recommended approach, indicated a willingness to experiment with a starting point that was the latest occasion on which the Board had had an opportunity to discuss the member’s exchange rate policy, which in most cases would be the most recent Article IV consultation.

On another matter, there was general agreement that, during the trial period, the staff should use its best judgment on the indicator of competitiveness to be employed and should incorporate a description of that indicator, with relevant data, in the Article IV consultation reports. The views of member countries on the measurement to be used would, of course, be taken into account.

On the content of information notices, Directors recommended a flexible approach and invited management to exercise discretion in deciding when to provide analysis and an appraisal. They agreed that the existing practice of notifying the Board of large discrete changes in nominal exchange rates should be continued, because it was important both for surveillance and for the general information of other members.

The management and staff will carefully examine and attempt to implement the proposal made by [Executive Director] for a periodic—perhaps quarterly—staff paper containing an indication of real effective exchange rates of members, flagging those cases where changes in the rate are particularly large. While it will be necessary to address a number of questions on the appropriate time perspective to be used, an effort will be made to provide a permanent flow of figures in a periodic brochure. Again, Directors indicated a willingness to rely on management’s judgment of whether or not comments on those indicators should be provided or whether particular cases should be discussed in the Board.

C. Special Drawing Rights: Level of Fund’s Holdings

In determining the amounts of SDRs to be transferred to members, the Fund will be guided by the aim of reducing the Fund’s SDR holdings to a level of approximately SDR 1.5 billion by the end of 1983. The level of the Fund’s SDR holdings shall be reviewed again in the light of the progress made in implementing the increases in quotas authorized under the Eighth General Review of Quotas but not later than the end of December 1983.

Decision No. 7397-(83/70) S

May 16, 1983

D. General Arrangements to Borrow: Revision

1. The Fund approves the amendments to Decision No. 1289-(62/1)2 on the General Arrangements to Borrow (GAB), as previously amended, and the increased amounts of participants’ credit arrangements, incorporated in the revised text attached to the present Decision (Attachment).

2. The amendments to the GAB Decision and the increases in participants’ credit arrangements under that Decision shall become effective when all ten participants have notified the Fund in writing, not later than December 31, 1983 or such later date as may be prescribed by the Executive Board, that they concur in these amendments and increases.

3. The Swiss National Bank may become a participant in accordance with the provisions of the GAB Decision when the amendments to that Decision have become effective in accordance with 2 above, provided that the Bank deposits its instrument of adherence not later than April 30, 1984 or such later date as may be prescribed by the Executive Board.

Decision No. 7337-(83/37)

February 24, 1983

Attachment

General Arrangements to Borrow: Revised Text

Preamble

In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system, the main industrial countries have agreed that they will, in a spirit of broad and willing cooperation, strengthen the Fund by general arrangements under which they will stand ready to make loans to the Fund up to specified amounts under Article VII, Section 1 of the Articles of Agreement when supplementary resources are needed to forestall or cope with an impairment of the international monetary system. In order to give effect to these intentions, the following terms and conditions are adopted under Article VII, Section 1 of the Articles of Agreement.

Paragraph 1. Definitions

As used in this Decision the term:

(i) “Articles” means the Articles of Agreement of the International Monetary Fund;

(ii) “credit arrangement” means an undertaking to lend to the Fund on the terms and conditions of this Decision;

(iii) “participant” means a participating member or a participating institution;

(iv) “participating institution” means an official institution of a member that has entered into a credit arrangement with the Fund with the consent of the member;

(v) “participating member” means a member of the Fund that has entered into a credit arrangement with the Fund;

(vi) “amount of a credit arrangement” means the maximum amount expressed in special drawing rights that a participant undertakes to lend to the Fund under a credit arrangement;

(vii) “call” means a notice by the Fund to a participant to make a transfer under its credit arrangement to the Fund’s account;

(viii) “borrowed currency” means currency transferred to the Fund’s account under a credit arrangement;

(ix) “drawer” means a member that purchases borrowed currency from the Fund in an exchange transaction or in an exchange transaction under a stand-by or extended arrangement;

(x) “indebtedness” of the Fund means the amount it is committed to repay under a credit arrangement.

Paragraph 2. Credit Arrangements

A member or institution that adheres to this Decision undertakes to lend its currency to the Fund on the terms and conditions of this Decision up to the amount in special drawing rights set forth in the Annex to this Decision or established in accordance with Paragraph 3(b).

Paragraph 3. Adherence

(a) Any member or institution specified in the Annex may adhere to this Decision in accordance with Paragraph 3(c).

(b) Any member or institution not specified in the Annex that wishes to become a participant may at any time, after consultation with the Fund, give notice of its willingness to adhere to this Decision, and, if the Fund shall so agree and no participant object, the member or institution may adhere in accordance with Paragraph 3(c). When giving notice of its willingness to adhere under this Paragraph 3(b) a member or institution shall specify the amount, expressed in terms of the special drawing right, of the credit arrangement which it is willing to enter into, provided that the amount shall not be less than the amount of the credit arrangement of the participant with the smallest credit arrangement.

(c) A member or institution shall adhere to this Decision by depositing with the Fund an instrument setting forth that it has adhered in accordance with its law and has taken all steps necessary to enable it to carry out the terms and conditions of this Decision. On the deposit of the instrument the member or institution shall be a participant as of the date of the deposit or of the effective date of this Decision, whichever shall be later.

Paragraph 4. Entry into Force

This Decision shall become effective when it has been adhered to by at least seven of the members or institutions included in the Annex with credit arrangements amounting in all to not less than the equivalent of five and one-half billion United States dollars of the weight and fineness in effect on July 1, 1944.

Paragraph 5. Changes in Amounts of Credit Arrangements

The amounts of participants’ credit arrangements may be reviewed from time to time in the light of developing circumstances and changed with the agreement of the Fund and all participants.

Paragraph 6. Initial Procedure

When a participating member or a member whose institution is a participant approaches the Fund on an exchange transaction or stand-by or extended arrangement and the Managing Director, after consultation, considers that the exchange transaction or stand-by or extended arrangement is necessary in order to forestall or cope with an impairment of the international monetary system, and that the Fund’s resources need to be supplemented for this purpose, he shall initiate the procedure for making calls under Paragraph 7.

Paragraph 7. Calls

(a) The Managing Director shall make a proposal for calls for an exchange transaction or for future calls for exchange transactions under a stand-by or extended arrangement only after consultation with Executive Directors and participants. A proposal shall become effective only if it is accepted by participants and the proposal is then approved by the Executive Board. Each participant shall notify the Fund of the acceptance of a proposal involving a call under its credit arrangement.

(b) The currencies and amounts to be called under one or more of the credit arrangements shall be based on the present and prospective balance of payments and reserve position of participating members or members whose institutions are participants and on the Fund’s holdings of currencies.

(c) Unless otherwise provided in a proposal for future calls approved under Paragraph 7(a), purchases of borrowed currency under a stand-by or extended arrangement shall be made in the currencies of participants in proportion to the amounts in the proposal.

(d) If a participant on which calls may be made pursuant to Paragraph 7(a) for a drawer’s purchases under a stand-by or extended arrangement gives notice to the Fund that in the participant’s opinion, based on the present and prospective balance of payments and reserve position, calls should no longer be made on the participant or that calls should be for a smaller amount, the Managing Director may propose to other participants that substitute amounts be made available under their credit arrangements, and this proposal shall be subject to the procedure of Paragraph 7(a). The proposal as originally approved under Paragraph 7(a) shall remain effective unless and until a proposal for substitute amounts is approved in accordance with Paragraph 7(a).

(e) When the Fund makes a call pursuant to this Paragraph 7, the participant shall promptly make the transfer in accordance with the call.

Paragraph8. Evidence of Indebtedness

(a) The Fund shall issue to a participant, on its request, nonnegotiable instruments evidencing the Fund’s indebtedness to the participant. The form of the instruments shall be agreed between the Fund and the participant.

(b) Upon repayment of the amount of any instrument issued under Paragraph 8(a) and all accrued interest, the instrument shall be returned to the Fund for cancellation. If less than the amount of any such instrument is repaid, the instrument shall be returned to the Fund and a new instrument for the remainder of the amount shall be substituted with the same maturity date as in the old instrument.

Paragraph 9. Interest

(a) The Fund shall pay interest on its indebtedness at a rate equal to the combined market interest rate computed by the Fund from time to time for the purpose of determining the rate at which it pays interest on holdings of special drawing rights. A change in the method of calculating the combined market interest rate shall apply only if the Fund and at least two thirds of the participants having three fifths of the total amount of the credit arrangements so agree; provided that if a participant so requests at the time this agreement is reached, the change shall not apply to the Fund’s indebtedness to that participant outstanding at the date the change becomes effective.

(b) Interest shall accrue daily and shall be paid as soon as possible after each July 31, October 31, January 31, and April 30.

(c) Interest due to a participant shall be paid, as determined by the Fund, in special drawing rights, or in the participant’s currency, or in other currencies that are actually convertible.

Paragraph 10. Use of Borrowed Currency

The Fund’s policies and practices under Article V, Sections 3 and 7 on the use of its general resources and stand-by and extended arrangements, including those relating to the period of use, shall apply to purchases of currency borrowed by the Fund. Nothing in this Decision shall affect the authority of the Fund with respect to requests for the use of its resources by individual members, and access to these resources by members shall be determined by the Fund’s policies and practices, and shall not depend on whether the Fund can borrow under this Decision.

Paragraph 11. Repayment by the Fund

(a) Subject to the other provisions of this Paragraph 11, the Fund, five years after a transfer by a participant, shall repay the participant an amount equivalent to the transfer calculated in accordance with Paragraph 12. If the drawer for whose purchase participants make transfers is committed to repurchase at a fixed date earlier than five years after its purchase, the Fund shall repay the participants at that date. Repayment under this Paragraph 11(a) or under Paragraph 11(c) shall be, as determined by the Fund, in the participant’s currency whenever feasible, or in special drawing rights, or, after consultation with the participant, in other currencies that are actually convertible. Repayments to a participant under Paragraph 11(b) and (e) shall be credited against transfers by the participant for a drawer’s purchases in the order in which repayment must be made under this Paragraph 11(a).

(b) Before the date prescribed in Paragraph 11 (a), the Fund, after consultation with a participant, may make repayment to the participant in part or in full. The Fund shall have the option to make repayment under this Paragraph 11(b) in the participant’s currency, or in special drawing rights in an amount that does not increase the participant’s holdings of special drawing rights above the limit under Article XIX, Section 4, of the Articles of Agreement unless the participant agrees to accept special drawing rights above that limit in such repayment, or, with the agreement of the participant, in other currencies that are actually convertible.

(c) Whenever a reduction in the Fund’s holdings of a drawer’s currency is attributed to a purchase of borrowed currency, the Fund shall promptly repay an equivalent amount. If the Fund is indebted to a participant as a result of transfers to finance a reserve tranche purchase by a drawer and the Fund’s holdings of the drawer’s currency that are not subject to repurchase are reduced as a result of net sales of that currency during a quarterly period covered by an operational budget, the Fund shall repay at the beginning of the next quarterly period an amount equivalent to that reduction, up to the amount of the indebtedness to the participant.

(d) Repayment under Paragraph 11(c) shall be made in proportion to the Fund’s indebtedness to the participants that made transfers in respect of which repayment is being made.

(e) Before the date prescribed in Paragraph 11(a) a participant may give notice representing that there is a balance of payments need for repayment of part or all of the Fund’s indebtedness and requesting such repayment. The Fund shall give the overwhelming benefit of any doubt to the participant’s representation. Repayment shall be made after consultation with the participant in the currencies of other members that are actually convertible, or made in special drawing rights, as determined by the Fund. If the Fund’s holdings of currencies in which repayment should be made are not wholly adequate, individual participants shall be requested, and will be expected, to provide the necessary balance under their credit arrangements. If, notwithstanding the expectation that the participants will provide the necessary balance, they fail to do so, repayment shall be made to the extent necessary in the currency of the drawer for whose purchases the participant requesting repayment made transfers. For all of the purposes of this Paragraph 11 transfers under this Paragraph 11(e) shall be deemed to have been made at the same time and for the same purchases as the transfers by the participant obtaining repayment under this Paragraph 11(e).

(f) All repayments to a participant in a currency other than its own shall be guided, to the maximum extent practicable, by the present and prospective balance of payments and reserve position of the members whose currencies are to be used in repayment.

(g) The Fund shall at no time reduce its holdings of a drawer’s currency below an amount equal to the Fund’s indebtedness to the participants resulting from transfers for the drawer’s purchases.

(h) When any repayment is made to a participant, the amount that can be called for under its credit arrangement in accordance with this Decision shall be restored pro tanto.

(i) The Fund shall be deemed to have discharged its obligations to a participating institution to make repayment in accordance with the provisions of this Paragraph or to pay interest in accordance with the provisions of Paragraph 9 if the Fund transfers an equivalent amount in special drawing rights to the member in which the institution is established.

Paragraph 12. Rates of Exchange

(a) The value of any transfer shall be calculated as of the date of the dispatch of the instructions for the transfer. The calculation shall be made in terms of the special drawing right in accordance with Article XIX, Section 7(a) of the Articles, and the Fund shall be obliged to repay an equivalent value.

(b) For all of the purposes of this Decision, the value of a currency in terms of the special drawing right shall be calculated by the Fund in accordance with Rule O-2 of the Fund’s Rules and Regulations.

Paragraph 13. Transferability

A participant may not transfer all or part of its claim to repayment under a credit arrangement except with the prior consent of the Fund and on such terms and conditions as the Fund may approve.

Paragraph 14. Notices

Notice to or by a participating member under this Decision shall be in writing or by rapid means of communication and shall be given to or by the fiscal agency of the participating member designated in accordance with Article V, Section 1 of the Articles and Rule G-l of the Rules and Regulations of the Fund. Notice to or by a participating institution shall be in writing or by rapid means of communication and shall be given to or by the participating institution.

Paragraph 15. Amendment

This Decision may be amended during the period prescribed in Paragraph 19(a) only by a decision of the Fund and with the concurrence of all participants. Such concurrence shall not be necessary for the modification of the Decision on its renewal pursuant to Paragraph 19 (b).

Paragraph 16. Withdrawal of Adherence

A participant may withdraw its adherence to this Decision in accordance with

Paragraph 19(b) but may not withdraw within the period prescribed in Paragraph 19(a) except with the agreement of the Fund and all participants.

Paragraph 17. Withdrawal from Membership

If a participating member or a member whose institution is a participant withdraws from membership in the Fund, the participant’s credit arrangement shall cease at the same time as the withdrawal takes effect. The Fund’s indebtedness under the credit arrangement shall be treated as an amount due from the Fund for the purpose of Article XXVI, Section 3, and Schedule J of the Articles.

Paragraph 18. Suspension of Exchange Transactions and Liquidation

(a) The right of the Fund to make calls under Paragraph 7 and the obligation to make repayments under Paragraph 11 shall be suspended during any suspension of exchange transactions under Article XXVII of the Articles.

(b) In the event of liquidation of the Fund, credit arrangements shall cease and the Fund’s indebtedness shall constitute liabilities under Schedule K of the Articles. For the purpose of Paragraph 1(a) of Schedule K, the currency in which the liability of the Fund shall be payable shall be first the participant’s currency and then the currency of the drawer for whose purchases transfers were made by the participants.

Paragraph 19. Period and Renewal

(a) This Decision shall continue in existence for four years from its effective date. A new period of five years shall begin on the effective date of Decision No. 7337-(83/37), adopted February 24, 1983. References in Paragraph 19(b) to the period prescribed in Paragraph 19(a) shall refer to this new period and to any subsequent renewal periods that may be decided pursuant to Paragraph 19(b). When considering a renewal of this Decision for the period following the five-year period referred to in this Paragraph 19(a), the Fund and the participants shall review the functioning of this Decision, including the provisions of Paragraph 21.

(b) This Decision may be renewed for such period or periods and with such modifications, subject to Paragraph 5, as the Fund may decide. The Fund shall adopt a decision on renewal and modification, if any, not later than twelve months before the end of the period prescribed in Paragraph 19(a). Any participant may advise the Fund not less than six months before the end of the period prescribed in Paragraph 19(a) that it will withdraw its adherence to the Decision as renewed. In the absence of such notice, a participant shall be deemed to continue to adhere to the Decision as renewed. Withdrawal of adherence in accordance with this Paragraph 19(b) by a participant, whether or not included in the Annex, shall not preclude its subsequent adherence in accordance with Paragraph 3(b).

(c) If this Decision is terminated or not renewed, Paragraphs 8 through 14, 17 and 18(b) shall nevertheless continue to apply in connection with any indebtedness of the Fund under credit arrangements in existence at the date of the termination or expiration of the Decision until repayment is completed. If a participant withdraws its adherence to this Decision in accordance with Paragraph 16 or Paragraph 19(b), it shall cease to be a participant under the Decision, but Paragraphs 8 through 14, 17 and 18(b) of the Decision as of the date of the withdrawal shall nevertheless continue to apply to any indebtedness of the Fund under the former credit arrangement until repayment has been completed.

Paragraph 20. Interpretation

Any question of interpretation raised in connection with this Decision which does not fall within the purview of Article XXIX of the Articles shall be settled to the mutual satisfaction of the Fund, the participant raising the question, and all other participants. For the purpose of this Paragraph 20 participants shall be deemed to include those former participants to which Paragraphs 8 through 14, 17 and 18(b) continue to apply pursuant to Paragraph 19(c) to the extent that any such former participant is affected by a question of interpretation that is raised.

Paragraph 21. Use of Credit Arrangements for Nonparticipants

(a) The Fund may make calls in accordance with Paragraphs 6 and 7 for exchange transactions requested by members that are not participants if the exchange transactions are (i) transactions in the upper credit tranches, (ii) transactions under stand-by arrangements extending beyond the first credit tranche, (iii) transactions under extended arrangements, or (iv) transactions in the first credit tranche in conjunction with a stand-by or an extended arrangement. All the provisions of this Decision relating to calls shall apply, except as otherwise provided in Paragraph 21(b).

(b) The Managing Director may initiate the procedure for making calls under Paragraph 7 in connection with requests referred to in Paragraph 21(a) if, after consultation, he considers that the Fund faces an inadequacy of resources to meet actual and expected requests for financing that reflect the existence of an exceptional situation associated with balance of payments problems of members of a character or aggregate size that could threaten the stability of the international monetary system. In making proposals for calls pursuant to Paragraph 21(a) and (b), the Managing Director shall pay due regard to potential calls pursuant to other provisions of this Decision.

Paragraph 22. Participation of the Swiss National Bank

(a) Notwithstanding any other provision of this Decision, the Swiss National Bank (hereinafter called the Bank) may become a participant by adhering to this Decision in accordance with Paragraph 3(c) and accepting, by its adherence, a credit arrangement in an amount equivalent to one thousand and twenty million special drawing rights. Upon adherence, the Bank shall be deemed to be a participating institution, and all the provisions of this Decision relating to participating institutions shall apply in respect of the Bank, subject to, and as supplemented by, Paragraph 22(b), (c), (d), (e), and (f).

(b) Under its credit arrangement, the Bank undertakes to lend any currency, specified by the Managing Director after consultation with the Bank at the time of a call, that the Fund has determined to be a freely usable currency pursuant to Article XXX(f) of the Articles.

(c) In relation to the Bank, the references to the balance of payments and reserve position in Paragraph 7(b) and (d), and Paragraph 11(e), shall be understood to refer to the position of the Swiss Confederation.

(d) In relation to the Bank, the references to a participant’s currency in Paragraph 9(c), Paragraph 11(a) and (b), and Paragraph 18(b) shall be understood to refer to any currency, specified by the Managing Director after consultation with the Bank at the time of payment by the Fund, that the Fund has determined to be a freely usable currency pursuant to Article XXX(/) of the Articles.

(e) Payment of special drawing rights to the Bank pursuant to Paragraph 9(c) and Paragraph 11 shall be made only while the Bank is a prescribed holder pursuant to Article XVII of the Articles.

(f) The Bank shall accept as binding a decision of the Fund on any question of interpretation raised in connection with this Decision which falls within the purview of Article XXIX of the Articles, to the same extent as that decision is binding on other participants.

Paragraph 23. Associated Borrowing Arrangements

(a) A borrowing arrangement between the Fund and a member that is not a participant, or an official institution of such a member, under which the member or the official institution undertakes to make loans to the Fund for the same purposes as, and on terms comparable to, those made by participants under this Decision, may, with the concurrence of all participants, authorize the Fund to make calls on participants in accordance with Paragraphs 6 and 7 for exchange transactions with that member, or to make requests under Paragraph 11(e) in connection with an early repayment of a claim under the borrowing arrangement, or both. For the purposes of this Decision such calls or requests shall be treated as if they were calls or requests in respect of a participant.

(b) Nothing in this Decision shall preclude the Fund from entering into any other types of borrowing arrangements, including an arrangement between the Fund and a lender, involving an association with participants, that does not contain the authorizations referred to in Paragraph 23(a).

ANNEX

Participants and Amounts of Credit Arrangements

I. Prior to the Effective Date of Decision No. 7337-(83/37)
Amount in Units of Participant’s Currency
1. United States of AmericaUS$2,000,000,000
2. Deutsche BundesbankDM4,000,000,000
3. United Kingdom£357,142,857
4. FranceF2,715,381,428
5. ItalyLit343,750,000,000
6. JapanYen340,000,000,000
7. CanadaCan$216,216,000
8. Netherlandsf.724,000,000
9. BelgiumBF7,500,000,000
10. Sveriges RiksbankSKr517,320,000
II. From the Effective Date of Decision No. 7337-(83/37)
Amount in Special Drawing Rights
1. United States of America4,250,000,000
2. Deutsche Bundesbank2,380,000,000
3. Japan2,125,000,000
4. France1,700,000,000
5. United Kingdom1,700,000,000
6. Italy1,105,000,000
7. Canada892,500,000
8. Netherlands850,000,000
9. Belgium595,000,000
10. Sveriges Riksbank382,500,000
11. Swiss National Bank *1,020,000,000
17,000,000,000

With effect from the date on which the Swiss National Bank adheres to this Decision in accordance with Paragraph 22.

With effect from the date on which the Swiss National Bank adheres to this Decision in accordance with Paragraph 22.

E. Borrowing Arrangement with Saudi Arabia in Association with the General Arrangements to Borrow

Pursuant to Article VII, Section 1 of the Articles of Agreement, the Managing Director is authorized to send to the Minister of Finance of Saudi Arabia a letter proposing a borrowing agreement with Saudi Arabia, as set forth in the attachment. When a reply is received from the Minister accepting the proposal, the Managing Director’s letter and the reply shall constitute an agreement between Saudi Arabia and the Fund, which shall enter into force on the date on which the revised and enlarged General Arrangements to Borrow authorized by Decision No. 7337-(83/37)3 become effective.

Decision No. 7403-(83/73)

May 20, 1983

Attachment

Your Excellency:

I refer to Decision No. 7337-(83/37) of the Executive Board of the International Monetary Fund (the Fund), providing for a revision and enlargement of the General Arrangements to Borrow (the GAB), and to the desire of Saudi Arabia to strength the Fund by providing supplementary resources, in association with and for the same purposes as the GAB. Accordingly, pursuant to Article VII of the Articles of Agreement of the Fund (the Articles) and Executive Board Decision No. 7403-(83/73), adopted May 20, 1983,1 have been authorized to propose on behalf of the Fund that Saudi Arabia enter into an Agreement with the Fund as set forth below:

Paragraph 1. The Credit Arrangement

During the period specified in Paragraph 2 and any renewal thereof, Saudi Arabia will stand ready to lend Saudi riyals to the Fund up to a maximum amount equivalent to one thousand five hundred million SDRs (SDR 1,500,000,000), on the terms and conditions set forth in this Agreement, to assist the Fund in the financing of purchases by members for the same purposes and in the same circumstances as are prescribed in the GAB. This amount may be changed by agreement between Saudi Arabia and the Fund.

Paragraph 2. Period of Credit Arrangement and Renewal

(a) Amounts of resources may be called by the Fund hereunder during a period of five years from the date this Agreement enters into force, unless the Fund’s right to make calls is terminated earlier in accordance with this Agreement.

(b) When a renewal of the GAB Decision is under consideration, the Fund and Saudi Arabia shall consult regarding the renewal of the credit arrangement under this Agreement or the conclusion of such other credit arrangement as may be found appropriate at that time.

(c) Notwithstanding the termination of the credit arrangement under this Agreement, the provisions of Paragraphs 4 through 13 shall continue to apply until all the obligations of the Fund under this Agreement have been discharged.

Paragraph 3. Calls

(a) Calls may be made only pursuant to a proposal of the Managing Director that has become effective in accordance with (d) below.

(b) The Managing Director may make a proposal for calls for purchases, including future calls for purchases under stand-by or extended arrangements, (i) if he considers that a proposal for calls or future calls for the same purchases could be made under the GAB and (ii) after consultation with Saudi Arabia at the same time and in the same manner as he consults GAB participants.

(c) In deciding whether to make a proposal and the amount to be called there-under, the Managing Director shall take into account the present and prospective balance of payments and reserve position of Saudi Arabia and the Fund’s holdings of Saudi riyals.

(d) A proposal for calls shall become effective only when Saudi Arabia has notified the Fund that it accepts the proposal and the proposal has been approved by the Executive Board of the Fund. Calls shall be made as and when amounts of Saudi riyals are needed by the Fund to finance purchases covered by the proposal.

(e) When the Fund makes a call, Saudi Arabia shall transfer to the account of the Fund, free of any charge or commission, an amount of Saudi riyals equivalent to the amount of the call. The transfer shall be made on the date specified in the call. Saudi Arabia shall exchange the riyals for a freely usable currency of its choice in accordance with Article V, Section 3 of the Articles.

(f) If Saudi Arabia represents to the Fund that, in view of the present and prospective balance of payments and reserve position of Saudi Arabia, future calls under a proposal that has become effective as provided in (d) above should no longer be made or be made for a smaller amount and the Fund, after giving the overwhelming benefit of any doubt to the representation, determines that it is justified, the Fund shall comply with Saudi Arabia’s representation.

Paragraph 4. Evidence of Indebtedness

The Fund shall issue to Saudi Arabia, at its request, a nonnegotiable instrument or instruments in a form to be agreed with Saudi Arabia, evidencing the Fund’s outstanding indebtedness to Saudi Arabia under this Agreement. Upon repayment of an amount of indebtedness evidenced by an instrument and all accrued interest thereon, the instrument shall be returned to the Fund for cancellation, and if any balance of the indebtedness remains outstanding, the Fund shall issue a new instrument for the remainder of the amount, with the same maturity date.

Paragraph 5. Interest

(a) The Fund shall pay interest on its outstanding indebtedness at a rate equal to the combined market interest rate computed by the Fund from time to time under its Rules and Regulations for the purpose of determining the rate at which it pays interest on holdings of SDRs. If the Fund changes the method of computing the combined market interest rate, the new method will apply to amounts borrowed hereunder only if it is applied to borrowing by the Fund under the GAB, and Saudi Arabia agrees.

(b) Interest shall accrue daily and shall be paid as soon as possible after each July 31, October 31, January 31, and April 30.

Paragraph 6. Repayment by the Fund

(a) Subject to the other provisions of this Agreement, the Fund shall repay an amount equal to each amount transferred by Saudi Arabia hereunder five years after the date the transfer was made. To the extent the member whose purchase the amount was used to finance is committed to repurchase by installments on fixed dates falling earlier than five years after that date, the Fund shall repay the amount in corresponding installments on those fixed dates.

(b) Whenever a reduction in the Fund’s holdings of currency of a purchasing member is attributed to a purchase financed with an amount transferred by Saudi Arabia hereunder, the Fund shall promptly make a corresponding repayment to Saudi Arabia. If the amount was used to finance a reserve tranche purchase, and the Fund’s holdings of the purchasing member’s currency not subject to repurchase are reduced as a result of net sales of the currency during a quarterly period covered by an operational budget, the Fund shall make a corresponding repayment to Saudi Arabia at the beginning of the next quarterly period. The amount repaid under this subparagraph (b) shall bear the same proportion to the amount of the reduction as the amount transferred under this Agreement bears to the amount of the purchase.

(c) Before the date repayment is due under (a) or (b) above, the Fund, after consultation with Saudi Arabia, may repay all or part of its outstanding indebtedness hereunder.

(d) If Saudi Arabia represents to the Fund that it has a balance of payments need for repayment before the due date of all or part of such outstanding indebtedness and requests such repayment, and the Fund after giving Saudi Arabia’s representation the overwhelming benefit of any doubt determines that there is such a need, the Fund shall make early repayment as requested by Saudi Arabia.

(e) Amounts repaid under (c) and (d) shall be credited against outstanding indebtedness in the order in which such indebtedness would fall due under (a) above.

(f) The Fund shall at no time reduce its holdings of the currency of a member whose purchases were financed by borrowing hereunder below an amount equal to the outstanding amount of such borrowing plus any outstanding amount borrowed under the GAB to finance purchases by the same member.

(g) When any repayment is made to Saudi Arabia, the amount that the Fund may call for under the credit arrangement shall be restored pro tanto.

Paragraph 7. Media of Payment

(a) Payments of interest and repayments of principal shall be made, as determined by the Fund after consultation with Saudi Arabia, in Saudi riyals, in SDRs, or in currencies that are actually convertible; provided that (i) unless Saudi Arabia agrees, SDRs shall not be used in early repayment under Paragraph 6(c) if the effect would be to increase Saudi Arabia’s holdings of SDRs above the limit specified in Article XIX, Section 4 of the Articles, and (ii) Saudi riyals shall not be used in early repayment on balance of payments grounds under Paragraph 6(d).

(b) Currencies other than Saudi riyals to be used in payment of interest and repayment of principal shall be selected by the Fund from those that can be used in net sales under the operational budget of the Fund in effect at the time the payment is made.

Paragraph 8. Rates of Exchange

All amounts under this Agreement shall be denominated in SDRs, as valued by the Fund from time to time. The value in terms of SDRs of Saudi riyals to be transferred by Saudi Arabia to the Fund and of payments to be made by the Fund to Saudi Arabia in currencies shall be determined in accordance with Rule 0–2 of the Rules and Regulations of the Fund.

Paragraph 9. Transferability

Saudi Arabia may transfer all or part of its claims under this Agreement only with the prior consent of the Fund and on such terms and conditions as the Fund may approve.

Paragraph 10. Withdrawal from Membership

If Saudi Arabia withdraws from membership in the Fund, no further calls shall be made hereunder. The Fund’s outstanding indebtedness hereunder shall be treated as an amount due from the Fund for the purpose of Article XXVI, Section 3, and Schedule J of the Articles.

Paragraph 11. Suspension of Exchange Transactions and Liquidation

(a) The right of the Fund to make calls and its obligation to make repayment hereunder shall be suspended during any suspension of exchange transactions under Article XXVII of the Articles.

(b) In the event of liquidation of the Fund, no further calls shall be made by the Fund hereunder. The Fund’s outstanding indebtedness shall constitute a liability under Schedule K of the Articles. For the purpose of Paragraph 1(a) of Schedule K, the currency in which each amount of the Fund’s indebtedness is payable shall be first Saudi riyals and then any currency that is actually convertible.

Paragraph 12. Amendments

(a) This Agreement may be amended at any time, by agreement between Saudi Arabia and the Fund.

(b) If the revised and enlarged GAB is modified while this Agreement is in effect, Saudi Arabia and the Fund will consult with each other with a view to determining whether consequential modifications should be made in the provisions of this Agreement.

(c) If, after consultation with the Fund and the GAB participants, Saudi Arabia proposes that the credit arrangement under this Agreement be converted into or replaced by an arrangement of the type referred to in Paragraph 23(a) or Paragraph 3(b) of the revised GAB Decision, as the case may be, the Fund will consider the steps to be taken, subject to the concurrence of the GAB participants as necessary, to effect such conversion or replacement.

Paragraph 13. Interpretation; Settlement of Disputes

Any question of interpretation arising in connection with this Agreement that does not fall within the purview of Article XXIX of the Articles, and any dispute arising hereunder, shall be settled to the mutual satisfaction of Saudi Arabia and the Fund.

If the foregoing proposal is acceptable to Saudi Arabia, this communication and your reply indicating Saudi Arabia’s acceptance shall constitute an Agreement between Saudi Arabia and the Fund, which shall enter into force on the date on which the revised and enlarged GAB authorized by Decision No. 7337-(83/37)4 of the Executive Board of the Fund becomes effective.

Very truly yours,

/s/

J. de Larosière

F. Buffer Stock Financing Facility: International Natural Rubber Agreement, 1979

1. The Fund, having considered the text of the International Natural Rubber Agreement as established by the United Nations Conference on Natural Rubber on October 6, 1979, finds that the terms of this Agreement relating to the international natural rubber buffer stock established under the Agreement are consistent with the principles referred to in Executive Board Decision No. 2772-(69/47), adopted June 25, 1969,5 as amended.

2. In view of paragraph 1 above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), as amended, a member’s request for a purchase in connection with the financing by the member of its direct compulsory contribution to the acquisition costs of the buffer stock established under the International Natural Rubber Agreement, if its request is received in the Fund not later than six months after the date of the contribution or, in respect of contributions made before the date of this decision, not later than 90 days after the date of this decision.

3. A member that has outstanding purchases under this decision

  • (a) shall make repurchases in respect of these purchases in accordance with paragraph 1(a) of Decision No. 5703-(78/39), adopted March 22, 1978,6 as amended, and
  • (b) will be expected to repurchase at an earlier date than would be required under (a) above,
    • (i) when, and to the extent that, the International Natural Rubber Council refunds net contributions in excess of those required to support buffer stock operations, and
    • (ii) if the current Agreement terminates without being replaced by a new Agreement providing for a buffer stock, when transfers in liquidation are made to the member. Any transfer of natural rubber from the buffer stock to the member will be treated as a distribution in currency, valued at the lowest current price for each type or grade so transferred during the 30 market days preceding the termination of the Agreement.

4. If the current Agreement is to be replaced by a new Agreement providing for a buffer stock,

  • (a) a transfer of all or part of a member’s share under the existing Agreement to the buffer stock account of the new Agreement will not be treated as a distribution in currency for the purpose of repurchase, if within 180 days of the termination of the current Agreement the Fund finds the terms of the new Agreement to be consistent with the principles referred to in Executive Board Decision No. 2772-(69/47), as amended;
  • (b) members that do not participate in the new Agreement will be expected to repurchase in accordance with paragraph 3(b) (ii) above.

5. The staff will keep the Executive Board informed on the operation of the buffer stock and other developments in connection with the International Natural Rubber Agreement by reports that will be made at least once a year, and the Fund may make such review of this decision as is appropriate in the light of these reports.

Decision No. 7246-(82/147)

November 12, 1982

G. Buffer Stock Financing Facility: Sixth International Tin Agreement

1. The Fund, having considered the text of the Sixth International Tin Agreement, as established by the United Nations Tin Conference on June 26, 1981, and applied provisionally among the members who have decided to do so, finds that the terms of this Agreement relating to the international buffer stock established under the Agreement are consistent with the principles referred to in Executive Board Decision No. 2772-(69/47), adopted June 25, 1969,7 as amended.

2. In view of paragraph (1) above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), as amended, a member’s requests for a purchase in connection with the financing by a member of its compulsory contributions to the normal buffer stock established under the Sixth International Tin Agreement, if its request is received in the Fund not later than six months after the date of the contribution or, in respect of contributions made before the date of this decision, not later than 90 days after the date of this decision.

3. A member that has outstanding purchases under this decision

  • (a) shall make repurchases in respect of these purchases in accordance with paragraph 1(a) of Decision No. 5703-(78/39), adopted March 22, 1978,8 as amended, and
  • (b) will be expected to repurchase at an earlier date than would be required under (a) above,
    • (i) when, and to the extent that, the International Tin Council makes refunds, and
    • (ii) if the Sixth International Tin Agreement terminates without being replaced by a new International Tin Agreement providing for a buffer stock, when transfers in liquidation are made to the member. Any transfer of tin metal from the buffer stock to the member will be treated as a distribution in currency, valued at the average price for tin prevailing on the appropriate market (London or Penang) on the day of distribution.

4. If the Sixth International Tin Agreement is to be replaced by a new International Tin Agreement providing for a buffer stock,

  • (a) a transfer of all or part of a member’s share under the existing Agreement to the buffer stock account of the new Agreement will not be treated as a distribution in currency for the purpose of repurchase, if within 180 days of the termination of the existing Agreement, the Fund finds the terms of the new Agreement to be consistent with the principles referred to in Executive Board Decision No. 2772-(69/47), as amended;
  • (b) members that do not participate in the new Agreement will be expected to repurchase in accordance with paragraph 3(b) (ii) above.

5. The staff will keep the Executive Board informed on the operation of the buffer stock and other developments in connection with the Sixth International Tin Agreement by reports that will be made at least once a year, and the Fund may make such review of this decision as is appropriate in the light of these reports.

Decision No. 7247-(82/147)

November 12, 1982

H. Borrowing Agreement with the Saudi Arabian Monetary Agency: Change in Conversion Arrangements

The Managing Director is authorized to communicate to the Saudi Arabian Monetary Agency the Fund’s willingness to accept deutsche mark, French francs, pounds sterling, U.S. dollars, and Japanese yen when an exchange is required of Saudi Arabian riyals borrowed under the agreement authorized in Decision No. 6843-(81/75),9 adopted May 6, 1981; provided that the members issuing those currencies concur to the use of their currencies held by the Fund for the purposes of investments resulting from such acceptance of their currencies, and provided further that the Fund’s depositories in their territories agree to open and maintain “Borrowed Resources Suspense Accounts—Cash Accounts” for these purposes.

Decision No. 7188-(82/114)

August 20, 1982

I. Fund Policies and External Debt-Servicing Problems

Chairman’s Summary of Executive Board Discussion

In view of the speed with which recent developments had unfolded, Directors felt that it was important that the Fund should be in a position to react quickly and flexibly in response to different types of situations. Directors generally believed that the initiatives that had been taken by the Fund to assist member countries in acute debt crisis situations had been appropriate in the circumstances. But the discussion had also indicated that there was a need to improve the Fund’s methods to try to avoid the repetition of recent crises or, more generally, to acquire the knowledge to prevent potentially dangerous situations from arising.

Comments could be made under three main headings:

1. Implementation of external surveillance

Directors observed that more timely, more comprehensive, and more accurate information on the external debt situation of members, and on changes therein, is required. There had been strong support for Fund actions to improve the availability of external debt information. A number of specific points were made. First, technical assistance could usefully be provided to member countries, especially by the Central Banking Department, to help them to improve their statistical and administrative capacity in assessing debt developments. That was a point to be borne in mind when discussing the resources at the disposal of the Central Banking Department.

Second, the Fund itself should be more active in compiling external debt statistics on a regular basis; at present they were scattered in many different places and were not always available either in a centralized form or in a timely manner. Many Directors warmly welcomed the work currently under way in the Bureau of Statistics. They were particularly heartened by [a Director’s] intervention, because it was important to have wide coverage and to receive the cooperation of the monetary authorities responsible for the statistical information on bank lending in their home countries. At the same time, the Fund should not overlap or duplicate the work of other institutions. Instead, it should improve its cooperation with other institutions like the World Bank and the BIS (Bank for International Settlements), and with them work out a procedure that would make data on external debt more comprehensive and more rapidly available. There was much to do in that field.

Third, the Fund should improve its ability to analyze external debt developments and problems on a worldwide basis. It was clear that the papers prepared in connection with the world economic outlook exercise, describing developments in international financial markets and in the debt situation, should continue to be prepared. Even outside the regular world economic outlook discussions management and staff should be able to provide the Board with interesting updating papers, although the Article IV consultations provided the best framework for improving the analysis of the external debt situations of individual countries. Speakers agreed that the Fund should pragmatically try to improve the external debt surveillance content of the Article IV consultation process.

Two points had been made on that topic during the discussion. First, consistent with what the Fund was trying to do on a general basis in the Bureau of Statistics, it should use Article IV consultations to try to improve the reporting of external debt developments in individual member countries, with particular reference to areas such as private debt, short-term debt, short-term liabilities, and the assets of the banking sector at large. But Article IV consultations should go further than merely describing a country’s existing external debt; they should seek to include a description of the medium-term external debt outlook for the country concerned. Such forward-looking analyses would not be easy, and the staff would have to rely heavily on assumptions regarding the external environment, including world trade, commodity prices, and many other factors that were difficult to anticipate. Naturally, such analyses ought not to be accorded more significance than the uncertainty of future events allowed. Nonetheless, it was the duty of the Fund, as an institution charged with the responsibility of surveillance in a very difficult world, to try to help member countries better to understand the medium-term implications of their external debt policies.

It was evident that, if the forward-looking analyses were to be meaningful, they should take into account debt service payments associated with new borrowings planned for the period ahead. Directors agreed that such forward-looking technical analyses should be prepared in close cooperation with the authorities in member countries. They too had views on the underlying medium-term assumptions. Also, in view of the uncertainties involved, it would not be right to include the forward-looking analyses in the reports on recent economic developments. Most speakers had said that the correct place for them would be in the staff reports for Article IV consultations, which would of course continue to be confidential. In a number of countries the staff had already included medium-term assumptions on debt service developments in its reports. It would continue to do so, bearing in mind the words of caution spoken by several Directors during the discussion. It was important also that forward-looking external debt analyses should not be limited to countries that were in difficult debt situations or engaged in rescheduling operations; rather, they should become a routine element in the Fund’s work. Such an arrangement would not only be consistent with the notion of uniformity of treatment; it would also serve to show that the forward-looking debt analyses were not in any sense a predictive exercise, but an analytical tool that should become part of the set of elements used in any assessment of the sustainability of a balance of payments situation or of borrowing policies.

Directors supported the continuation of the present policy of withholding reports for Article IV consultations and papers on the use of Fund resources from commercial bankers, for reasons of confidentiality. It was essential for the Fund to maintain the unique relationship involving confidence and mutual trust between the Fund and member countries, and to avoid any suspicion that information provided on a confidential basis might fall into the hands of the international banking community.

A number of Directors had commented on the relationship between the Fund and the Institute of International Finance. It was felt that the Fund should adopt a pragmatic attitude. Nevertheless, it was clear that the Institute should have no privileged access to confidential information from the Fund. Relations with the Institute would be conducted according to the principles of confidentiality and uniformity of treatment that the Fund applied in the conduct of all its work. However, on a pragmatic basis, the Institute might well prove to be a useful channel of communication with the commercial banks.

Many Directors had suggested that there was some scope for enhancing the informal contacts between the Fund and the national bank supervisory authorities. In that area the Fund would have to act very cautiously because it should not be seen as becoming an international agency for rating the creditworthiness of countries. Such a function did not fall within the Articles of Agreement. However, it might sometimes be useful for the Fund to inform the bank supervisory authorities of what the Fund and member countries were trying to achieve in the framework of programs supported by the use of Fund resources. The purpose would be, for example, to prevent the supervisory authorities adopting unduly rigid rules that might have adverse consequences for member countries.

2. Balance of payments assistance and implementation of adjustment efforts in the context of Fund-supported programs

Executive Directors commented on the relationship between balance of payments assistance from non-Fund sources and the implementation of Fund-supported adjustment efforts by members experiencing debt-servicing difficulties.

First, Directors considered the way in which the Fund collaborates with official institutions in multilateral debt renegotiations to be generally satisfactory. Some of them had said that the various official creditors should receive similar, evenhanded treatment, if only to ensure continued cooperation among official creditors. Directors felt that any special elements that might be involved in the relationship between Fund-supported programs and the debt relief envisaged by the Paris Club, or other groups concerned with official multilateral debt renegotiations, should continue to be handled on a case-by-case basis.

It was evident that in the case of some countries, only the provision of further concessional aid could make the rescheduling exercise successful. In those circumstances, it would be the duty of the Fund to put the matter squarely before the members of the international community able to provide aid. The straightforward rescheduling of official debt might occasionally be inadequate; more might be required even if the provision of extended assistance were to complicate the renegotiations.

Directors recognized that the procedures for rescheduling commercial bank debt were not as well developed as those for official debt negotiations. Nonetheless, the Fund could play, and had played, a useful role in bringing about a successful outcome to discussions between a debtor country and the commercial bank groups involved. Since the summer of 1982, certain “exceptional” circumstances had arisen, in which the difficulties encountered by major debtors have had broader implications for the orderly functioning of the international monetary system. The Fund management—in concert with major creditors, central banks, the BIS, and governments—had taken the initiative in ensuring that before Fund resources could be committed, sufficient additional financial flows from governments, official sources, and commercial sources were available to support the adjustment efforts of the member concerned. Directors had endorsed that approach, although some of them had cautioned against the Fund as a matter of general policy interjecting itself too closely or too systematically into traditional commercial bank/client relationships. They had encouraged the Fund to maintain a generally neutral role. The consensus was that the Fund should proceed on a case-by-case basis in full consultation with all the parties involved, bearing in mind the need for evenhanded treatment between cases.

Third, Executive Directors noted the inevitable degree of uncertainty regarding the amount and timing of external financing that could be made available during the period of an adjustment program supported by the Fund’s resources. Such uncertainties should not necessarily prevent a member country wishing to enter into an arrangement with the Fund from doing so. But the Executive Board would need sufficient safeguards to ensure that the Fund’s resources would be used to support a viable and financeable adjustment program. The best means of providing such safeguards—in the absence of any conclusion to the negotiations on non-Fund financing of a Fund-supported program—was considered to be the practice of introducing review clauses at an early stage of the program, linked, if necessary, to the satisfactory outcome of discussions on balance of payments financing from other sources. The staff would indicate in its reports what additional adjustment measures should be contemplated by the authorities if the amounts of external financing assumed by the staff did not materialize.

3. Guidelines on foreign borrowing in connection with upper credit tranche arrangements

In reviewing the 1979 guidelines, the Directors made a number of comments. First, many Directors felt that normally it would be better to impose ceilings on disbursed rather than on contracted debt; nonetheless, some flexibility should continue to be used.

Second, there were divergent views on the question of including loans with maturities of from 12 to 15 years within the ceiling on loans. It was understood that if loans of 12 to 15 years’ maturity were included, the concessional loans without that category should still be excluded.

Third, Directors generally encouraged the staff to include short-term debt of a maturity of less than one year in the performance criteria relating to foreign borrowing, while allowing some flexibility in light of the different institutional reporting procedures employed by members, and the statistical difficulties of recording that category of debt. In quite a number of cases, it might be necessary to formulate the limitation as a subceiling.

Fourth, normally performance criteria would exclude only concessional loans, together with restructuring and refinancing loans specifically associated with multilateral government or commercial bank loan reschedulings.

Fifth, Directors considered that, in describing adjustment programs submitted by members in connection with requests for upper credit tranche stand-by arrangements or extended arrangements, staff papers should contain a description of the proposed external borrowing limitations in the light of the prospective medium-term debt-servicing profile of the member that should of course be consistent with the medium-term analysis in the staff report for the Article IV consultation.

4. Concluding remarks

The Executive Board would return to the subject of Fund policies and external debt-servicing problems after the Development Committee had discussed the issues involved and Executive Directors have had time for further reflection in light of any changes in the international debt situation.

Some Directors had suggested that the Fund should concentrate more closely on analyzing the causes of the tight external debt positions being experienced by many countries, with a view to devising global policies for treating the fundamental causes of the present situation rather than simply tackling its surface manifestations. In my view, taking into account the fragile nature of international credit, this subject was one that ought perhaps to be discussed in an informal gathering of the Board.…

Finally, Directors agreed that the external debt situations of countries were extremely sensitive to the world environment. Whatever the Fund could do in the ambit of its more general surveillance activities to encourage member countries to adopt a mix of economic policies that would foster economic recovery, and to avoid recourse to restrictive commercial practices, would be helpful in improving the external debt situation of member countries.

April 6, 1983

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