Chapter

Chapter 3 Activities of the Fund

Author(s):
International Monetary Fund
Published Date:
September 1983
Share
  • ShareShare
Show Summary Details

Introduction

Developments in the world economy, as described in Chapters 1 and 2 of this Report, were reflected in the extensive use of the Fund’s resources by members in the financial year ended April 30, 1983. Both aggregate commitments under stand-by and extended arrangements and gross and net purchases rose to new peaks, with commitments rising by SDR 8.8 billion to SDR 25 billion and gross purchases by SDR 3.3 billion to SDR 10.3 billion (see Table 20). All of the commitments were made to, and virtually all the purchases were made by, non-oil developing countries. The amounts involved surpassed previous high points by very large proportions.

Table 20.Selected Financial Activities by Type and Country, 1976–83(In millions of SDRs)
Financial Year Ended April 30
197619771978197919801981198219831976–83
By Type
I. General Resources
Account
Gross purchases 15,267.44,749.72,367.31,239.22,210.84,385.96,960.210,258.237,438.7
Net purchases 2(4,866.6)(3,899.6)(-1,861.8)(-3,267.2)(–1,041.8)(1,924.2)(4,950.3)(8,703.1)(18,173.0)
II. Administered
Accounts
Trust Fund loans31.7268.2670.0961.71,059.92,991.5
Oil facility subsidy account payments (grants)13.827.525.019.127.850.19.32.5175.1
Supplementary financing facility subsidy account payments (grants)22.944.367.2
III. SDR allocations4,032.64,033.24,052.512,118.3
Total5,281.24,808.92,660.55,960.97,233.59,548.46,992.410,305.052,790.8
By Country (I + II + III)
Industrial countries2,391.32,198.11,438.82,593.72,617.62,543.954.013,837.5
United States874.1874.1857.32,605.5
United Kingdom1,000.01,700.01,250.0304.2304.2298.34,856.8
Italy780.290.0129.0128.9126.51,254.6
Others611.1498.198.81,286.41,310.41,261.854.05,120.6
Developing countries2,889.92,610.81,221.73,367.24,615.97,004.36,992.410,251.038,953.3
Oil exporting369.3369.3380.365.11,184.0
Non-oil developing2,889.92,610.81,221.72,997.94,246.66,624.06,992.410,185.037,769.3
Africa580.5635.3336.6861.71,262.61,472.91,999.92,072.19,221.6
Asia882.0603.8435.41,011.51,197.43,448.33,163.53,106.113,848.0
Europe611.5340.1271.6249.0765.8981.21,326.01,188.15,733.3
Middle East133.6199.5143.1289.7152.475.7.825.21,020.0
Western Hemisphere682.3832.135.0586.0868.4646.0502.23,794.47,946.4
All countries5,281.24,808.92,660.55,960.97,233.59,548.46,992.410,305.052,790.8
Memorandum:
Stand-by and extended arrangements as of April 30
Commitments1,472.25,197.65,759.31,600.43,049.79,475.116,206.325,025.5
As per cent of total quotas5.017.817.84.17.815.926.741.0
Undrawn balances1,085.83,581.13,638.81,377.52,718.08,076.411,154.616,405.1
As per cent of commitments73.868.963.286.189.185.268.865.6
Gold distribution 3209.7212.6220.4230.8873.5
Profits from gold sales distributed to developing countries 4222.670.6302.4400.2995.8

Excluding purchases in the reserve tranche.

Excluding purchases and repurchases in the reserve tranche; net repurchases (—).

Valued at SDR 35 per fine ounce.

Distribution in U.S. dollars. SDR amounts based on SDR/U.S. dollar rate in effect at time of distribution.

Excluding purchases in the reserve tranche.

Excluding purchases and repurchases in the reserve tranche; net repurchases (—).

Valued at SDR 35 per fine ounce.

Distribution in U.S. dollars. SDR amounts based on SDR/U.S. dollar rate in effect at time of distribution.

The bulk of the financial assistance made available by the Fund to its members since 1977 has been through purchases in amounts and under facilities that require high degrees of conditionally in accordance with the Fund’s policy of combining adjustment and financing (see Table 21). By the end of the financial year, 39 stabilization programs were in effect; of the total of SDR 25 billion committed by the Fund under these programs, about one third had been drawn by members. The largest among the new commitments during 1982/83 were the extended arrangements for Brazil (SDR 4.2 billion) and Mexico (SDR 3.4 billion).

Table 21.Low-Conditionality and High-Conditionality Purchases, 1976–83(In billions of SDRs)
Financial Year Ended April 30
19761977197819791980198119821983
I. Low-conditionality purchases5.092.970.410.641.051.561.654.12
First credit tranche0.290.780.090.130.160.780.020.03
Oil facility3.970.44
Compensatory financing facility0.831.750.320.460.860.781.633.74
Buffer stock facility10.050.030.35
II. High-conditionality purchases0.181.781.960.591.152.825.316.14
Credit tranche0.171.591.850.350.931.902.733.68
Extended Fund facility0.010.190.110.240.220.922.582.46
III. Total I + II5.274.752.371.242.214.396.9610.26

Less than SDR 5 million.

Less than SDR 5 million.

Notwithstanding the sharp increase in high-conditionality financing provided by the Fund, extensive use was also made by members of the Fund’s low-conditionality facilities, principally the compensatory financing facility. Resort to this facility, as well as to the buffer stock financing facility, reflects the severe impact of the international recession on primary exporting countries and the resultant shortfall in their export earnings. Purchases under the compensatory financing facility during 1982/83 rose to a record SDR 3.7 billion; similarly, but on a much smaller scale, purchases under the buffer stock financing facility reached a record level (SDR 352 million).

The sharp escalation in the use of the Fund’s resources in the past few years, together with the prospect of substantial payments imbalances among member countries continuing for some time, has placed the Fund’s financial resources under pressure. It is critical that at this juncture the Fund should maintain its resources at an adequate level, both to provide necessary balance of payments financing in support of the adjustment policies adopted by its members and to act as a catalyst in generating other flows of external finance—particularly from commercial sources—that are vital for a manageable and orderly resolution of current world payments problems. A strengthening of the Fund’s financial resources is thus being sought with some urgency, through both an increase in members’ quotas (from SDR 61 billion to SDR 90 billion) and an enlargement of the General Arrangements to Borrow (from SDR 6.4 billion to SDR 17 billion), along with an expansion in the scope of the Arrangements. Legislative or administrative action in member countries will be necessary before the new resources become available; it is hoped that these procedures will have been completed before the end of 1983.

Under its enlarged access policy, the Fund, since mid-1981, has provided conditional financing to members facing serious payments imbalances that are large in relation to their quotas. The Executive Board will be considering various aspects of this policy before the next meeting of the Interim Committee in September 1983. The policy on enlarged access is financed by Fund borrowing, and since May 1981 the Fund has arranged to borrow SDR 9.3 billion from its members and official institutions.

There were no allocations of SDRs during the year, the last allocation being in 1981, which was the last year of the third basic period. The question of further allocations of SDRs, and also possibilities for further improving the attractiveness of the SDR, are currently under review by the Executive Board.

A comprehensive review of the procedures for consultations between the Fund and its members under Article IV was conducted by the Executive Board in April 1983. As a result, a number of procedural changes were introduced to ensure greater regularity of consultations. Such consultations remain the principal means by which the Fund exercises surveillance over the exchange rate policies of individual member countries.

The Executive Board also discussed Fund policies and external debt-servicing problems of member countries and agreed that the Fund should try to improve the external debt surveillance content of Article IV consultations as well as those relating to stand-by and extended arrangements. It was also agreed that the Fund should improve its ability to compile and analyze timely and adequate information on external debt developments and problems on a worldwide basis in cooperation with other institutions like the World Bank and the Bank for International Settlements.

In May 1982 the Executive Board reviewed the technical assistance services offered by the Fund in the areas of central banking and fiscal affairs. It reaffirmed that the Fund would continue to adopt a flexible and pragmatic approach, taking into account the specific needs of member countries. During the year, in response to the developing international financial situation and the needs of some member countries, the Fund expanded its technical assistance in the area of external debt.

Membership and Quotas

Membership and Participation in the Special Drawing Rights Department

On May 6, 1982, Hungary became a member of the Fund with a quota of SDR 375 million, raising the total membership to 146 and the total of members’ quotas to SDR 61,059.8 million. Hungary elected to participate in the Special Drawing Rights Department and, as a result, all Fund members were participants in that Department at the end of the financial year. The application of the Polish People’s Republic for membership, which was received during the preceding year, is still pending.

Eighth General Review of Quotas

Under the Articles of Agreement, the Board of Governors is required to conduct general reviews of Fund quotas at intervals of not more than five years. In accordance with this requirement, the Eighth General Review of Quotas was completed on March 31, 1983, when the Board of Governors adopted a resolution1 authorizing an increase of 47.5 per cent in aggregate Fund quotas from the present level of SDR 61,059.8 million to SDR 90,034.8 million. The overall magnitude of the increase in Fund quotas under the Eighth General Review was agreed in the light of the financing and adjustment role envisaged for the Fund in the world economic conditions likely to prevail over the next several years.

The proposed new quotas for each member, before rounding, were arrived at as follows: 40 per cent of the overall increase was distributed to all members in proportion to their existing individual quotas; the remaining 60 per cent was distributed in the form of selective adjustment in proportion to each member’s share in the total of “calculated” quotas, which are derived from formulas considered to broadly reflect members’ relative positions in the world economy.

These formulas were reduced from ten to five by eliminating those which included merchandise trade as a proxy for the current account. The formulas were changed in some respects, but the economic criteria used in the past were retained. Some of the modifications broadened the definition of certain economic variables used to represent those criteria; for instance, the importance of a member’s reserves in the calculations was increased by introducing this variable in four of the five formulas that did not contain it and the weight of the variability of current receipts was reduced.

The Executive Board also considered the positions of 17 members with very small quotas (i.e., with existing quotas of less than SDR 10 million) and agreed that the proposed quotas resulting from the application of the distribution method be rounded to the next higher multiple of SDR 0.5 million for these members. The Executive Board also agreed that the proposed quotas for all other members be rounded to the next higher multiple of SDR 0.1 million.

The procedure for implementing the quota increase has been agreed as follows. Each member has until November 30, 1983 to consent to the proposed increase in its quota. The Executive Board may extend the period of consent if it deems it appropriate. Twenty-five per cent of the increase in each member’s quota is payable in reserve assets, either in SDRs or in currencies of other members prescribed by the Fund, subject to their concurrence, or in any combination of SDRs and such currencies. A reserve asset payment increases the usable resources of the Fund and thereby strengthens its liquidity. The balance of 75 per cent is payable by the member in its domestic currency.

The new quotas will become effective for members that have notified the Fund of their consent after the Fund determines that consents have been received from members having not less than 70 per cent of present total quotas and after the consenting members have paid their increased subscriptions in full. A member has 30 days to pay the increase in its subscription from the date it consents or the date the Fund determines that the participation requirement has been met, whichever is later. The new quotas are intended to become effective before the end of 1983, involving a considerable acceleration of the normal timetable for completion of a general review of quotas. The acceleration was considered necessary in view of the prevailing international economic and financial conditions and resultant strains on the Fund’s resources.

As of August 2, 1983, 19 members (Burma, Costa Rica, Cyprus, Denmark, Ethiopia, Gabon, The Gambia, Honduras, Kuwait, Malaysia, Malta, Nigeria, Norway, the Philippines, Seychelles, South Africa, Swaziland, Uganda, and the United Kingdom) accounting for 13.22 per cent of total quotas in the Fund as of February 28, 1983 had consented to increases in their quotas. (See Appendix I, Table I.15 for present quotas and the proposed quotas under the Eighth General Review.)

Transactions and Operations in the General Resources Account

The salient feature of activity in the General Resources Account in 1982/83 was the rise of nearly 50 per cent in total purchases (excluding those in the reserve tranche) from SDR 7.0 billion in 1981/82 to SDR 10.3 billion—the highest level of purchases in any one financial year. Increases occurred under almost all facilities, but the most substantial rise was in purchases under the compensatory financing facility which increased from SDR 1.64 billion to SDR 3.74 billion. Purchases under the extended Fund facility showed a slight fall from SDR 2.58 billion to SDR 2.46 billion. (See Chart 22 and Table 22.)

Chart 22.Use of Fund’s Resources as at April 30, 1972–83

Table 22.Flow of Transactions in the General Resources Account and Resulting Stocks, 1977–83(In millions of SDRs)
Financial Year Ended April 30
Type of Transaction1977197819791980198119821983
Total purchases4,9102,5033,7202,4334,8608,04111,392
Reserve tranche1611362,4802224741,0801,134
Credit tranches2,3701,9374851,1062,6822,7483,703
Buffer stock4826352
Compensatory financing1,75313224658637841,6353,740
Extended facility1901092422169202,5782,463
Oil facility437
Total repurchases8684,4854,8593,7762,8532,0101,555
Gold sales411452453419
Replenishment up to May 31, 1978201239
Competitive bids181187
Noncompetitive bids511
In distributions210213220231
Outstanding borrowings
In connection with oil facility6,7026,3294,2572,4741,52852618
Under General Arrangements to Borrow9111,576777777777777777
From Swiss National Bank89154
Supplementary financing facility5022,0184,1126,037
Under policy on enlarged access1,3584,120
Holdings of General Resources Account at end of year
Usable currencies 25,30011,2008,80010,60023,40017,40014,400
SDRs7711,3711,2901,4075,4455,4564,335
Gold34,9594,5074,0553,6363,6203,6203,620

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

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

Valued at SDR 35 per fine ounce.

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

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

Valued at SDR 35 per fine ounce.

Total repurchases during the year declined further to SDR 1.56 billion, the lowest level since financial year 1976/77. This decline reflects the relatively low level of purchases made three to five years ago. Most repurchases were in respect of purchases made under the oil facility and under the compensatory financing facility. The last outstanding purchases under the oil facility were fully repaid in May 1983. The first repurchase in respect of a purchase under the supplementary financing facility was made in November 1982. At the end of the financial year 1982/83, outstanding purchases amounted to SDR 23.6 billion—an all-time high—compared with SDR 14.9 billion at April 30, 1982.

Purchases

Reserve Tranche Purchases

Reserve tranche2 purchases represent a use of members’ own liquid reserves in the Fund, and do not constitute use of Fund credit. Members using the credit tranches or the extended Fund facility have the option, under a decision taken by the Fund in 1981,3 of either retaining or using their reserve tranche positions. Of the members with outstanding purchases under such arrangements, 33 retained their reserve tranche positions, totaling over SDR 459.5 million. During 1982/83, reserve tranche purchases by 28 members totaled SDR 1.1 billion, a slight increase from the SDR 1 billion in the previous financial year and the highest level since 1978/79. The largest such purchases were made by Brazil (SDR 259.8 million), Argentina (SDR 228.4 million), Indonesia (SDR 218.4 million), and Iraq (SDR 111.9 million). Also, some members drew on their reserve tranche positions to settle their financial obligations to the Fund.

Credit Tranche Purchases

Purchases in the credit tranches increased sharply in 1982/83, to a record SDR 3.7 billion from SDR 2.7 billion in the previous year. (See Table 22.) The largest amounts purchased were by Yugoslavia (SDR 590.5 million), Romania (SDR 402.0 million), Argentina (SDR 300.7 million), and Turkey (SDR 300 million). (See Appendix I, Table I.5.) Of the remaining amount, SDR 1,632.0 million was purchased by 29 members under stand-by arrangements, and SDR 477.5 million by 5 members making credit tranche purchases that were not under stand-by arrangements. Two of these members, Brazil and Mexico, purchased the amounts available to them in the first credit tranche (SDR 249.4 million and SDR 200.6 million, respectively) as part of a package of assistance approved in conjunction with arrangements under the extended Fund facility. Of the three other members, the Yemen Arab Republic purchased its first and second credit tranches (SDR 9.75 million) and the People’s Democratic Republic of Yemen its first credit tranche (SDR 15.38 million) under the Fund’s policy on emergency assistance relating to natural disasters. The use of ordinary resources under stand-by arrangements amounted to SDR 1,327.4 million. More than half of the financing under the stand-by arrangements was from borrowed resources under the supplementary financing facility (SDR 956.7 million) and the enlarged access policy (SDR 941.1 million).

Stand-by arrangements were approved for 27 members during the year under review, a number exceeded only in 1968 (32). (See Table 23 and Appendix I, Table I.4.) The amount approved under the arrangements totaled a record SDR 5.45 billion, an increase of SDR 2.34 billion over 1981/82. More than half of this total, SDR 2.9 billion, is to be financed with borrowed resources under the enlarged access policy. The commitment of ordinary resources for all the arrangements amounts to SDR 2.6 billion. The largest stand-by arrangement was approved for Argentina, for SDR 1.5 billion for a 15-month period. Two-year arrangements were approved for two members: SDR 500 million for Chile, and SDR 378 million for Uruguay. The other arrangements were for periods of 5 months to 20 months for amounts ranging from SDR 18 million for the Central African Republic to SDR 475 million for Hungary. All but 5 of the arrangements provided for use of borrowed resources under the enlarged access policy. One arrangement (Thailand) was canceled during the year and replaced by a new arrangement. As at April 30, 1983, undrawn balances under stand-by arrangements amounted to SDR 4.9 billion (see Table 23) and two arrangements were inoperative because of members’ failure to observe performance criteria.

Table 23.Status of Stand-By Arrangements and Extended Fund Facility Arrangements on April 30, 1983(In millions of SDRs)
MemberDate ofQuotaAmount AgreedAmount DrawnUndrawn Balance
InceptionExpiration
Stand-by arrangements
Argentina1/24/834/23/84802.501,500.00300.741,199.26
Bangladesh3/28/838/31/83228.0068.4022.8045.60
Barbados10/1/825/31/8425.5031.8812.3819.50
Central African Republic4/22/834/21/8424.0018.0018.00
Chile1/10/831/9/85325.50500.00122.00378.00
Costa Rica12/20/8212/19/8361.5092.2518.4573.80
El Salvador7/16/827/15/8364.5043.0027.5015.50
Guinea12/1/8211/30/8345.0025.0011.5013.50
Haiti8/9/829/30/8334.5034.5017.0017.50
Honduras11/5/8212/31/8351.0076.5030.6045.90
Hungary12/8/821/7/84375.00475.00225.60249.40
Kenya3/21/839/20/84103.50175.9545.20130.75
Liberia9/29/829/28/8355.5055.0035.0020.00
Madagascar7/9/827/8/8351.0051.0040.8010.20
Malawi8/6/828/5/8328.5022.0016.006.00
Mali5/21/825/20/8340.5030.3830.38
Philippines2/25/832/28/84315.00315.0050.00265.00
Romania6/15/816/14/84367.501,102.50542.00560.50
Senegal11/24/8211/23/8363.0047.255.9141.34
Somalia7/15/821/14/8434.5060.0033.7526.25
South Africa11/3/8212/31/83636.00364.00159.00205.00
Sudan2/23/832/22/84132.00170.0068.00102.00
Thailand11/17/8212/31/83271.50271.5094.80176.70
Togo3/4/834/3/8428.5021.372.0019.37
Turkey6/18/806/17/83300.001,250.001,160.0090.00
Uganda8/11/828/10/8375.00112.5075.0037.50
Uruguay4/22/834/21/85126.00378.00378.00
Yugoslavia1/30/8112/31/83415.501,662.001,283.00379.00
Zambia4/18/834/17/84211.50211.5031.50180.00
Zimbabwe3/23/839/22/84150.00300.0060.00240.00
Total9,464.484,520.914,943.57
Extended Fund facility arrangements
Brazil3/1/832/28/86997.504,239.38124.884,114.50
Dominica2/6/812/5/842.908.556.412.14
Dominican Republic1/21/831/20/8682.50371.2574.25297.00
India11/9/8111/8/841,717.505,000.002,400.002,600.00
Ivory Coast2/27/812/22/84114.00484.50330.60153.90
Jamaica4/13/814/12/84111.00477.70328.00149.70
Mexico1/1/8312/31/85802.503,410.63100.313,310.32
Pakistan12/2/8111/23/83427.50919.00635.00284.00
Peru6/7/826/6/85246.00650.00100.00550.00
Total15,561.014,099.4511,461.56
Total stand-by and extended Fund facility arrangements25,025.498,620.3616,405.13

Extended Fund Facility

The extended Fund facility 4 provides medium-term assistance to member countries for longer periods and in amounts larger in relation to quotas than under the tranche policies to overcome serious structural balance of payments maladjustments. The Executive Board, in its latest review in July 1982 of the decision on the facility, together with a review of the Fund’s stand-by arrangements, decided that the provisions of the facility were appropriate in present circumstances. It was decided to have a further review not later than the time when the Eighth General Review of Quotas became effective.

During 1982/83, four new arrangements, all for three-year periods, were approved for a total of SDR 8.7 billion, compared with five arrangements for a total of SDR 8.2 billion in 1981/82. Purchases under the arrangements are to be financed with borrowed resources under the enlarged access policy for SDR 5.7 billion and from the Fund’s ordinary resources for SDR 3 billion. The largest arrangements were for Brazil (SDR 4.2 billion) and Mexico (SDR 3.4 billion). The two other arrangements were for Peru (SDR 0.7 billion) and the Dominican Republic (SDR 0.4 billion). The arrangements for Zaïre and Zambia that took effect early in 1981/82 were canceled in June and July 1982, respectively.

Purchases under extended arrangements (SDR 2.5 billion) were close to the previous year’s level (SDR 2.6 billion). Of nine members making purchases, India purchased more than half the total amount, SDR 1.5 billion, and Pakistan purchased the second largest amount, SDR 0.3 billion. The other purchases were made by Brazil, Dominica, the Dominican Republic, Ivory Coast, Jamaica, Mexico, and Peru and ranged from SDR 2.9 million to SDR 153.9 million. SDR 1.2 billion, or about half of the total amount purchased, was financed from the Fund’s ordinary resources, while the remainder was financed through borrowed resources under the supplementary financing facility (SDR 1.0 billion) and under the enlarged access policy (SDR 0.2 billion). As of April 30, 1983, total undrawn commitments under the extended Fund facility amounted to SDR 11.5 billion, compared with SDR 6.5 billion a year earlier.

Supplementary Financing Facility

The supplementary financing facility 5 enabled the Fund to provide supplementary financing under standby and extended arrangements in conjunction with the use of the Fund’s ordinary resources. The facility was financed by 14 lenders, which agreed in 1979 to provide a total of SDR 7.8 billion. Under these agreements, funds could not be committed after February 22, 1982 nor be borrowed by the Fund after February 22, 1984.

Resources borrowed under the facility in 1982/83 and disbursed for purchases by members under stand-by and extended arrangements amounted to SDR 2.0 billion, compared with SDR 2.1 billion in 1981/82. This amount was used in conjunction with the Fund’s ordinary resources and in some cases along with resources borrowed under the subsequently established enlarged access policy. As of April 30, 1983 a total of SDR 6.1 billion had been disbursed under the facility.

Policy on Enlarged Access to Fund Resources

In March 1981 the Executive Board adopted a policy on enlarged access to the Fund’s resources until the Eighth General Review of Quotas becomes effective.6 Under this policy, following the full commitment of resources from the supplementary financing facility and the completion of new borrowing agreements, the Fund has been able to continue its assistance to members facing payments imbalances that are large in relation to their quotas and which need resources in larger amounts and for longer periods than are available under the regular tranches. Drawings on the Fund’s resources under this policy, as under the supplementary financing facility, are determined in specified proportions from ordinary and borrowed resources in accordance with existing policies on phasing and performance criteria.

The Managing Director is authorized to substitute, prior to February 22, 1984, supplementary financing resources for enlarged access resources if supplementary financing facility funds have become available from a canceled or expired arrangement. Thus, during the year a total of SDR 0.8 billion of supplementary financing funds was substituted for enlarged access resources in arrangements for four members (The Gambia, India, Liberia, and Mauritius). (See Appendix I, Table I.5.) A further amount of SDR 150 million was substituted in May 1983 in connection with a purchase by India under its extended arrangement.

The Executive Board reviewed the policy on enlarged access in May 1983 and will consider this further before the next meeting of the Interim Committee. The aspects to be considered include, inter alia, the limits in relation to quotas on conditional access to the Fund’s resources, which currently are 150 per cent of quota annually or 450 per cent over three years, with a cumulative limit of 600 per cent.7

Compensatory Financing Facility—Exports

The compensatory financing facility compensates members for temporary shortfalls in export earnings due largely to circumstances beyond their control. Use of the facility has continued to increase significantly in terms of the number of members making purchases as well as in absolute size and as a share of total Fund credit since the major liberalizations of the facility in December 1975 and August 1979.

In 1982/83, 29 members made use of the facility for a total of SDR 3.7 billion, of which Brazil purchased the largest amount, SDR 965 million (96.7 per cent of quota) and South Africa the second largest amount, SDR 636 million (100 per cent of quota). (See Appendix I, Table I.5.) Other large purchases were made by Argentina (SDR 520.1 million or 64.8 per cent of quota) and by Chile (SDR 295 million or 90.6 per cent of quota). The remaining amounts purchased under the facility ranged from SDR 1.6 million (or 50 per cent of quota) by the Solomon Islands to SDR 199.9 million (or 81.3 per cent of quota) by Peru. As of April 30, 1983, outstanding purchases amounted to SDR 6.8 billion (by 67 members), representing 29 per cent of total purchases outstanding. Thirty-two members had compensatory financing purchases outstanding in amounts exceeding 50 per cent of their quotas, of which eleven were at 100 per cent or more of their quota.

The facility was comprehensively reviewed by the Executive Board in July 1983.

Compensatory Financing of Fluctuations in the Cost of Cereal Imports

Assistance for fluctuations in the cost of cereal imports is integrated with the assistance available for export shortfalls. Outstanding purchases in respect of export shortfalls and cereal import costs combined may be up to 125 per cent of the member’s quota. This facility, which is operative for an initial period of four years from May 13, 1981, provides assistance to members to finance temporary increases in the costs of cereal imports that are caused by factors largely beyond the member’s control.8

During the year, three members—Bangladesh, Kenya, and Malawi—purchased the equivalent of SDR 71.2 million, SDR 60.4 million, and SDR 12.2 million, respectively. Since its inception, five members (Bangladesh, Kenya, Korea, Malawi, and Morocco) have made purchases under the facility, and the amount outstanding as of April 30, 1983 was SDR 0.5 billion. One member, Morocco, had an amount outstanding under the 1981 decision of 105.1 per cent of quota, while the others were all below 100 per cent.

Buffer Stock Financing Facility

The buffer stock financing facility, established in 1969,9 assists members in balance of payments need in financing their contributions to international buffer stocks which meet the criteria laid down in the decision establishing the facility. The Fund has, to date, authorrized the use of its resources to finance members’ contributions to cocoa, tin, sugar, and rubber buffer stocks. Purchases under the buffer stock financing facility reached a record SDR 352 million in 1982/83. Purchases were made by 10 members (see Appendix I, Table I.5) in 14 transactions for their contributions to buffer stocks established under the Fifth and Sixth International Tin Agreements, the 1977 International Sugar Agreement, and the 1980 International Natural Rubber Agreement.

Five members—Australia, the Dominican Republic, Malawi, Mauritius, and Swaziland—purchased a total of SDR 48.5 million for contributions under the International Sugar Agreement, and four members—Bolivia, Indonesia, Malaysia and Thailand—purchased SDR 172.9 million for contributions under the Fifth and Sixth International Tin Agreements. (Indonesia contributed under the Sixth Agreement and Malaysia contributed under both the Fifth and Sixth Agreements.) Indonesia, Malaysia, Sri Lanka, and Thailand purchased SDR 130.6 million for contributions under the International Natural Rubber Agreement.

On November 12, 1982 the Executive Board, after a review of the terms of the 1979 International Natural Rubber Agreement and the Sixth International Tin Agreement, adopted a decision 10 permitting the Fund’s buffer stock financing facility to be used to finance eligible members’ compulsory contributions to the buffer stocks of these two Agreements.

The International Natural Rubber Agreement, which entered into force provisionally in October 1980 and definitively in April 1982, provides for the joint operation of an international buffer stock of 550,000 tons of rubber to stabilize world rubber prices within an agreed intervention price range. The Agreement will be in operation through October 1985. The Sixth International Tin Agreement came into force on July 1, 1982 for five years with a possible extension for another two years. It currently provides for a total buffer stock of 39,666 tons of tin and for export controls as the principal operating mechanisms to stabilize the price of tin within an intervention range, which may be adjusted to conform with the medium-term price trend. The Fund has also approved assistance to members in connection with the First International Cocoa Agreement, but no drawings have been made to date under that Agreement.

Since the establishment of the buffer stock financing facility in 1969, Fund assistance in connection with the Fourth, Fifth, and Sixth International Tin Agreements, the International Sugar Agreement, and the International Natural Rubber Agreement has totaled SDR 455.7 million to 15 countries as of April 30, 1983. Purchases outstanding under the buffer stock financing facility at the end of the financial year totaled SDR 307 million.

Repurchases

Repurchases during 1982/83 totaled SDR 1,555 million, which was about 23 per cent below the total of SDR 2,010 million repurchased in 1981/82. About 35 per cent of the repurchases were related to purchases under the compensatory financing facility. Repurchases in respect of purchases made under the oil facilities of 1974 and 1975 amounted to about 34 per cent. As of May 11, 1983, all repurchases related to purchases under the 1974 and 1975 oil facilities were completed. Of the total repurchases, about 26 per cent was related to purchases in the credit tranches, including those made under extended arrangements and stand-by arrangements, and a small amount (5 per cent) represented buffer stock and gold tranche repurchases (the latter relating to purchases made prior to the Second Amendment, April 1, 1978). Repurchases by industrial countries (SDR 309 million), nearly 20 per cent of the total, included a large repurchase (SDR 155 million) by the United Kingdom in repayment of purchases under the 1975 oil facility. Seven members (Bangladesh, Barbados, Grenada, St. Lucia, Sri Lanka, Tanzania, and Uruguay) repurchased a total “overcompensation” of SDR 84.9 million, that is, the amount by which their purchases under the compensatory financing facility, based on partly estimated export data, had exceeded the actual shortfall.

No outstanding purchases were covered by the guidelines for early repurchase during the financial year.11 However, in May 1983 China made an early repurchase of SDR 334 million that was calculated in accordance with the guidelines for early repurchase.

Fund Liquidity

The Fund’s liquidity position 12 is regularly reviewed by the Executive Board. The latest of these reviews was carried out in April 1983. The Executive Board takes account of all relevant quantitative and qualitative factors, particularly the need to maintain the liquidity of creditors’ claims on the Fund and the Fund’s ability to meet its responsibilities in financing and adjustment. The Fund must always be in a position to meet possible demands for encashment of reserve tranche positions or creditor’s claims and to cover its commitments under stand-by and extended arrangements. Therefore, the Fund must have adequate ordinary and borrowed resources.

The Fund’s usable currencies are those of the members whose balance of payments and gross reserves position are considered by the Executive Board to be sufficiently strong in a particular quarter to be sold by the Fund through its operational budget to finance other members’ drawings. Consequently, the list of usable currencies varies with changes in the members’ external payments and reserve positions. At the end of the financial year 1983, five currencies accounted for over 80 per cent of the Fund’s holdings of usable currencies. The SDRs held in the General Resources Account are the most liquid asset of the Fund because they are always usable, whereas the usability of a currency in a particular quarter depends on whether the issuing member’s balance of payments and reserve position is sufficiently strong.

The Fund’s liquidity position came under increased pressure during the year under review as evidenced by the decline of SDR 4.2 billion in the Fund’s holdings of usable currencies and SDRs to SDR 18.7 billion 13 as of April 30, 1983. Concomitantly, there was an increase in undrawn commitments, which resulted in a decline of SDR 10.8 billion in uncommitted loanable funds to SDR 8.0 billion as of the end of April 1983. At the end of the financial year, the Fund’s usable resources consisted of SDR 18.7 billion (SDR 14.4 billion of usable currencies and SDR holdings of 4.3 billion in the General Resources Account) compared with claims of SDR 31.5 billion (SDR 10.9 billion of outstanding borrowing and reserve tranche positions of SDR 20.6 billion) and undrawn balances under stand-by and extended arrangements of SDR 5.7 billion.

The Fund’s SDR holdings (SDR 4.3 billion) at the end of April 1983 amounted to about 20 per cent of the cumulative allocation of SDR 21 billion, compared with 25 per cent a year ago. But the Fund’s SDR holdings could rise to over SDR 10 billion as a result of payments for quota increases under the Eighth General Review of Quotas and other possible inflows. Such a disproportionately large holding of SDRs by any single holder, including the Fund, is not regarded as conducive to a smooth working of the Special Drawing Rights Department. Therefore, the Executive Board decided 14 that the Fund in determining the amounts of SDRs to be transferred to members 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, prior to the expected large inflows resulting from the quota increases. The level of the Fund’s SDR holdings will be reviewed again in the light of the progress made in implementing the quota increases authorized under the Eighth General Review of Quotas but not later than the end of December 1983.

Borrowing

Borrowing provides an important temporary supplement to the Fund’s ordinary resources. To date the Fund has borrowed from official sources, which include its members, Switzerland, and central banks and other official institutions in these countries. These borrowing arrangements and agreements have been as follows: the General Arrangements to Borrow (GAB), initially established in 1962; the oil facility agreements entered into in 1974 and 1975, with drawings terminating in 1976; the supplementary financing facility, which took effect in 1979 with borrowings to terminate in 1984; and the bilateral borrowing arrangements with the Saudi Arabian Monetary Agency and with the central banks and official agencies of certain industrial countries to finance the Fund’s commitments under the policy on enlarged access.

The Fund’s guidelines for borrowing 15 provide that the Fund will not allow the total of outstanding borrowing, plus unused credit lines, to exceed the range of 50 to 60 per cent of the total of Fund quotas. Since at present all GAB lines of credit may not be called upon at the same time, the total of outstanding borrowing is defined to include either outstanding borrowing by the Fund under the GAB or one half of the total credit lines under the GAB, whichever is the greater. On April 30, 1983, the Fund’s total outstanding borrowing and unused lines of credit, calculated in accordance with these guidelines, amounted to SDR 20.21 billion, equivalent to 33.1 per cent of quotas (34.3 per cent on April 30, 1982). The guidelines for borrowing are to be reviewed in the coming months.

General Arrangements to Borrow

The General Arrangements to Borrow (GAB), originally concluded between the Fund and ten industrial member countries in 1962 for four years, have been periodically renewed, with some modifications, including an increase in the original amount of the credit line from Japan. Switzerland has been associated with the GAB through separate agreement with the Fund since June 11, 1964. The purpose of the GAB is to provide supplementary resources to the Fund if needed to forestall or cope with an impairment of the international monetary system. To date its use has been limited to financing Fund drawings by participants. The Arrangements have been activated a total of nine times; the last use was in connection with a reserve tranche purchase, equivalent to SDR 777 million, in November 1978 by the United States. This amount is due for repayment in November 1983.

The Arrangements were not due to be renewed until October 23, 1985. However, on January 18, 1983 the Ministers and Governors of the Group of Ten, noting the strains that had developed the international monetary system, announced, inter alia, their decision, subject to the necessary legislative approval, to increase the aggregate commitments available under the GAB from approximately SDR 6.4 billion to SDR 17 billion. The enlargement and revision (see below) of the GAB were approved by the Executive Board of the Fund on February 24, 1983,16 and will take effect when all ten original participants—Belgium, Canada, the Deutsche Bundesbank, France, Italy, Japan, the Netherlands, the Sveriges Riksbank, the United Kingdom, and the United States—have notified the Fund in writing by December 31, 1983 of their concurrence in the amendments and in the increased credit commitments. Until that time the existing GAB decision continues in force.

The Ministers and Governors of the Group of Ten also welcomed the intention of Switzerland to become a participant in the GAB and decided that the necessary amendments should be made to permit Switzerland’s participation. Subsequently, the Swiss Federal Council endorsed a proposal under which the Swiss National Bank would be the participating institution. It is expected that Swiss parliamentary procedures for approval will be completed by the end of 1983. Under the Executive Board’s decision approving the revised GAB, the final date for adherence by the Swiss National Bank is April 30, 1984.

The main revisions to the GAB, apart from the increased commitments (see Table 24) and the authorization for Swiss participation, are as follows:

Table 24.General Arrangements to Borrow: Participants and Amounts of Credit Arrangements
I. Prior to the Effective Date of Decision No. 7337-(83/37)
ParticipantAmount (In millions of participant’s currency)
United States of AmericaUS$2,000
Deutsche BundesbankDM4,000
United Kingdom£357
FranceF2,715
ItalyLit343,750
JapanYen340,000
CanadaCan$216
Netherlandsf.724
BelgiumBF7,500
Sveriges RiksbankSKr517
Total SDR equivalent as at January 31, 19836,429
II. From effective date of Decision No. 7337-(83/37)
ParticipantAmount (In millions of SDRs)
United States of America4,250
Deutsche Bundesbank2,380
Japan2,125
France1,700
United Kingdom1,700
Italy1,105
Canada893
Netherlands850
Belgium595
Sveriges Riksbank382
Swiss National Bank 11,020
17,000

With effect from the date on which the Swiss National Bank adheres to Executive Board Decision No. 7337-(83/37) (reproduced in Appendix II) in accordance with Paragraph 22 of that decision. See also Selected Decisions, Tenth Issue, pages 131–45.

With effect from the date on which the Swiss National Bank adheres to Executive Board Decision No. 7337-(83/37) (reproduced in Appendix II) in accordance with Paragraph 22 of that decision. See also Selected Decisions, Tenth Issue, pages 131–45.

(i) The Fund will be permitted to enter into borrowing arrangements associated with the GAB with lenders other than GAB participants.

(ii) The Fund will be permitted to borrow to finance transactions with members that are not GAB participants provided that it is established that the Fund’s resources are inadequate to meet requests for financing of exceptional balance of payments situations of members that could threaten the stability of the international monetary system. Furthermore, such financing must be under policies of the Fund requiring adjustment programs.

(iii) The interest rate, which was previously based on the Fund’s rate of charges, with a minimum of 4 per cent, is amended to equal the combined market interest rate computed by the Fund from time to time to determine the rate at which it pays interest on holdings of SDRs. A change in the method of calculating the combined market interest rate will 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. But 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. Interest will accrue daily but will be paid as soon as possible after each July 31, October 31, January 31, and April 30 in SDRs or in the participant’s currency or in other actually convertible currencies.

(iv) The credit arrangements of participants, which are now expressed in units of each individual participant’s currency in the existing GAB, will in the future be denominated in SDRs.

(v) Under the present GAB, when the Fund has borrowed to finance a reserve tranche purchase by a participant that is not subject to repurchase, repayment by the Fund of the borrowing is not due for five years. The revised Arrangements provide for the Fund to make a repayment following the quarter in which the purchaser is included in an operational budget. The amount of the repayment would be equal to the net amount of the purchaser’s currency sold during the quarterly budget period.

The GAB decision will continue in existence for four years from its effective date. The Fund and the participants in the GAB will review the functioning of the decision when considering its renewal for any subsequent periods.

Borrowing Arrangement with Saudi Arabia in Association with the GAB

The associated borrowing arrangement of the Fund with Saudi Arabia for a maximum amount equivalent to SDR 1.5 billion was approved by the Executive Board on May 20, 1983,17 and later ratified by the Government of Saudi Arabia. It will go into effect as soon as the revised GAB becomes effective. Its main features are as follows.

The arrangement is 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. The agreement, including the amount, may be amended at any time by agreement between Saudi Arabia and the Fund. The period of the arrangement will be five years from the date the agreement enters into force, unless the Fund’s right to make calls is terminated earlier in accordance with the agreement. The Fund and Saudi Arabia will consult regarding the renewal of the arrangement when a renewal of the GAB decision is under consideration or at the conclusion of such other arrangement as may be appropriate at that time. The basis of interest payment is the same as under the GAB, and the nature of payments of interest and repayment will be, as determined by the Fund after consultation with Saudi Arabia, in Saudi Arabian riyals, in SDRs, or in actually convertible currencies.

Oil Facility

The oil facilities of 1974 and 1975 were established to assist members that experienced balance of payments needs attributable to the rise in oil prices. Under the facilities, the Fund entered into borrowing agreements with 16 member countries and Switzerland in 1974 and 1975, for a total amount of SDR 6.9 billion. (See Appendix I, Table I.9.) By May 11, 1983 the Fund had repaid all the indebtedness incurred under the oil facility.

Supplementary Financing Facility

To finance the supplementary financing facility the Fund entered into borrowing agreements totaling SDR 7.8 billion with 13 member countries and Switzerland in 1979. (See Appendix I, Table I.10.)

During the financial year ended April 30, 1982, the Fund borrowed SDR 2.0 billion under the facility, compared with SDR 2.2 billion in the previous year. Of the total borrowed, SDR 0.8 billion was borrowed to finance purchases by four members under the policy of substitution of supplementary financing facility resources for enlarged access resources.18 On April 30, 1983, SDR 1.6 billion remained undrawn, but commitments under existing stand-by and extended arrangements are expected to utilize this amount fully.

The first scheduled repayment under the supplementary financing facility was made on November 24, 1982, and at April 30, 1983 a total of SDR 33.9 million had been repaid.

Borrowing to Finance Enlarged Access

Medium-Term Borrowing

The Fund’s policy on enlarged access became operative with the signing of a medium-term borrowing agreement with the Saudi Arabian Monetary Agency (SAMA) for SDR 8.0 billion. This became available in • two tranches of SDR 4.0 billion in each of the first and second years of the commitment period of six years.19 During 1982/83, calls totaling SDR 2.3 billion were made on SAMA, raising the total amount borrowed to SDR 3.56 billion and leaving a balance of SDR 4.40 billion as of April 30, 1983. The Fund may not borrow more than SDR 4.0 billion from SAMA in a single agreement year, which runs from May 7 of one year to May 6 of the following year. At the start of the third year of the commitment period SDR 4.0 billion remained undrawn.

Short-Term Borrowing

Under short-term agreements concluded in 1981, the central banks or official agencies of 18 countries agreed to make available to the Fund the equivalent of SDR 1.3 billion over a commitment period of two years. Of this amount, SDR 675 million is available to the Fund under a borrowing agreement with the Bank for International Settlements. The Fund has borrowed a total of SDR 560.1 million under these arrangements, leaving a balance of SDR 744.9 million available. The commitment periods under the agreements expire between May and August of 1983, but it is expected that all available commitments will be utilized.

Borrowed Resources Suspense Accounts

During the last financial year, the Fund established three suspense accounts, with the Bank for International Settlements, the Federal Reserve Bank of New York, and the Saudi Arabian Monetary Agency. Their purpose is to receive funds borrowed under the policy on enlarged access pending their use in purchase transactions, or amounts received in repurchases pending repayment to lenders.20 Additional suspense accounts were set up in November 1982 with the Bank of England, the Bank of France, the Deutsche Bundesbank, and the Bank of Japan. These accounts were opened in response to a request by SAMA for a change in conversion arrangements for the Saudi Arabian riyals borrowed by the Fund, allowing SAMA to convert the riyals not only for U.S. dollars, as previously, but also, at its option, for deutsche mark, French francs, pounds sterling, or Japanese yen.21 The borrowed resources held in the suspense account are invested in SDR-denominated assets at prevailing short-term SDR interest rates, in order to protect their capital value in terms of the SDR and to relieve the Fund of an exchange risk. These investments consist of SDR-denominated deposits, and/or marketable obligations with central banks, the Bank for International Settlements, or other international financial organizations. To date, SDR-denominated deposits have been placed with the Federal Reserve Bank of New York and with the Bank for International Settlements. The total investments of the Borrowed Resources Suspense Account as at April 30, 1983, amounted to SDR 1.7 billion, as against SDR 230 million at the end of 1981/82. This comparatively high level reflected the calls under the loan agreement with SAMA noted above.

Financial Position

Current decisions of the Executive Board, as noted in the Annual Report for 1982, aim at maintaining over time a positive income position for the Fund, while at the same time keeping the rate of remuneration for creditor members as high as possible relative to the SDR rate of interest and maintaining the concessionality in the rate of charge on the use of the Fund’s ordinary resources. The Rules and Regulations of the Fund provide for a review of the rate of interest on holdings of SDRs and of the rate of remuneration at the conclusion of each financial year. Since May 1, 1981, the SDR rate of interest has been maintained at 100 per cent of the combined market rate of interest and the rate of remuneration at 85 per cent of the SDR rate of interest.

Charges and Remuneration

Under the procedures introduced with effect from May 1, 1981, the Executive Board determines a single rate of charge, applicable to members’ use of the Fund’s ordinary resources, at the beginning of each financial year. The rate of charge is based on the estimated income and expense of the Fund for the year and takes into account a target amount of net income for the year. For the financial year 1982/83, the rate of charge to be applied to holdings arising from purchases financed from the Fund’s ordinary resources was set by the Executive Board at 6.60 per cent per annum. Following the May 1983 review of the Fund’s income position, the same rate will also apply for the financial year 1983/84.

The schedules of charges applicable to holdings arising from purchases by members financed with borrowed resources under the oil facility, the supplementary financing facility, and the policy on enlarged access were not changed. These charges reflect the costs incurred by the Fund in borrowing to finance these facilities. The rates of charges applicable to purchases under the oil facilities for 1974 and 1975 progressed to the maximum levels of 7.125 per cent and 7.875 per cent per annum, respectively, during the year under review. The rates of charges applied to the use by members of borrowed resources under the supplementary financing facility and the policy on enlarged access continue to be the same as in the previous financial year. The rate of charge under the supplementary financing facility is the rate of interest paid by the Fund plus 0.2 per cent in the first 3½ years and plus 0.325 per cent after 3½ years. Under the enlarged access policy, the rate of charge is the net cost of borrowing by the Fund plus 0.2 per cent per annum. The average rates of interest per annum on outstanding Fund borrowings for the year ended April 30, 1983 were 4 per cent (General Arrangements to Borrow), 7.25 per cent (oil facility), 11.56 per cent (supplementary financing facility), and 12.25 per cent (enlarged access to resources).

The Fund pays remuneration to those members that hold a remunerated reserve tranche position. Such a position exists whenever the Fund’s holdings of a member’s currency (after exclusion of currency holdings on which the member is obligated to pay charges to the Fund) are lower than the “norm” for remuneration. The norm for countries that were members of the Fund prior to the Second Amendment of the Articles of Agreement (April 1, 1978) is the sum of 75 per cent of their quotas at the date of the Second Amendment plus the increases in their quotas after that date. For members that joined the Fund after April 1, 1978, the norm is the weighted average of the norms applicable to all other members on the date the member joined the Fund plus any increases in their quotas after that date. At the end of April 1983, the average of the norms for all Fund members was 87.91 per cent of quota.

The SDR rates of interest and the rates of remuneration (Chart 23) applicable over the six quarters beginning April 1, 1982 were as follows:

Chart 23.SDR Interest Rate, Rate of Remuneration, and Short-Term Interest Rates, July 1974–June 1983 1

(In per cent per annum)

1 Up to December 1980, short-term domestic interest rates are the yield on three-month treasury bills for the United Kingdom and the United States, the rate on three-month interbank deposits for France and the Federal Republic of Germany, and the call money market rate (unconditional) for Japan. From January 1981, the yield on U.S. Treasury bills was converted to a coupon equivalent basis, and the discount rate on two-month (private) bills was used for Japan. From March 1981, the basis for the interbank rates for France and the Federal Republic of Germany was converted from a 360-day year to a 365-day year.

Calendar quarter beginningSDR interest rateRate of remuneration
April 1, 198212.1510.33
July 1, 198212.0110.21
October 1, 19828.907.57
January 1, 19838.477.20
April 1, 19838.527.24
July 1, 19838.657.35

Income, Expense, and Reserves

For the financial year ended April 30, 1983, the Fund’s net income was SDR 65 million, compared with SDR 92 million in 1981/82. The results reflect an increase in operational income from periodic charges and service charges, while interest on the Fund’s SDR holdings decreased because of the decline in the SDR interest rate from the 1981/82 levels. The Fund’s SDR holdings were also lower than in the previous year, in accordance with the policy of reducing the SDR holdings in the General Resources Account. The increase of SDR 256 million in the total operational income, to SDR 2,045 million for 1982/83, reflected the substantial increase in the financing provided by the Fund to its members. Net operational income for the financial year ended April 30, 1983 was SDR 257 million, compared with SDR 245 million in 1981/82. The total of members’ holdings subject to charges increased from SDR 14,801 million on April 30, 1982 to SDR 23,590 million on April 30, 1983.

The Fund’s operational expense, comprising remuneration payable by the Fund on the use of creditor currencies and interest expense on borrowing, also increased, to SDR 1,789 million, an increase of SDR 245 million over the previous year. This increase reflected primarily interest costs resulting from the expansion of outstanding borrowing by the Fund over the year, from SDR 6,773 million to SDR 10,952 million. Except for the borrowing of SDR 796 million outstanding under the General Arrangements to Borrow and the oil facility, the interest paid by the Fund has to reflect current market interest rates. Remuneration expense increased from SDR 909 million to SDR 981 million largely because of the expansion of members’ remunerated positions, even though the average rate of remuneration (8.42 per cent) was lower than that of the previous year (12.25 per cent). The increase in administrative and fixed property expense from SDR 153 million in 1981/82 to SDR 191 million in 1982/83 also reflects in part the cost of a change in the accounting practice of the Fund to recognize the value of accumulated annual leave and separation grants earned by the staff. This change, which is more fully described in the financial statements in Appendix VIII, brings that practice into greater accord with generally accepted accounting principles.

A comparative statement of the Fund’s operational income and expense is shown in Appendix VII, and comparative details of administrative expenses are shown in Appendix VI.

The Articles of Agreement and the Rules and Regulations of the Fund provide that the Fund shall determine at the end of each financial year the disposition of the Fund’s net income for that year. If the net income for the year exceeds 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. The Executive Board determined that the net income for the financial year ended April 30, 1983 shall be placed to special reserve, which can be used for all purposes except a general distribution to members. Total reserves of the Fund, taking into account the net income for 1982/83 amounted to SDR 1,001 million. But the total reserves of the Fund, even with the addition of net income since 1978, have declined steadily in relation to quotas, to members’ outstanding use of the Fund’s resources, to Fund borrowing, to other liquid claims on the Fund, and to the volume of the Fund’s gross income and expense.

Special Drawing Rights Department

Total transfers in the Special Drawing Rights Department during 1982/83 (SDR 11.0 billion) were more than SDR 2 billion higher than last year and only SDR 1.2 billion below the peak volume of 1980/81 which had reflected the extensive one-time use of SDRs to make payments for quota increases under the Seventh General Review. The high level of activity in 1982/83 was reflected both in transactions and operations by agreement and in transactions with designation. Transactions and operations by agreement among participants and other holders totaled SDR 1.68 billion, an increase of 20 per cent compared with 1981/82 (SDR 1.40 billion); transactions with designation amounted to SDR 2.71 billion, almost one and one-half times the level of the previous year (SDR 1.88 billion).

Prescribed Holders of SDRs

During the year ended April 30, 1983 the Fund prescribed one more institution (the Asian Development Bank) as a holder of SDRs, bringing the total number of “prescribed holders” to 13. The prescribed holders now comprise four central banks and currency authorities (the Swiss National Bank, Zurich; the Bank of Central African States, Yaounde; the Central Bank of West African States, Dakar; and the East Caribbean Currency Authority, St. Kitts); three intergovernmental monetary institutions (the Bank for International Settlements, Basle; the Andean Reserve Fund, Bogota; and the Arab Monetary Fund, Abu Dhabi); and six development institutions (the Asian Development Bank, Manila; the International Bank for Reconstruction and Development, Washington, D.C.; the International Development Association, Washington, D.C.; the Islamic Development Bank, Jeddah; the Nordic Investment Bank, Helsinki; and the International Fund for Agricultural Development, Rome).

Prescribed holders can acquire and use SDRs in transactions and operations by agreement with participants in the Special Drawing Rights Department and prescribed holders under the same terms and conditions as participants. They cannot receive allocations of SDRs nor use SDRs in transactions with designation. During the year transfers involving prescribed holders amounted to SDR 126.36 million, an increase of almost 90 per cent over the previous year (SDR 67.7 million), although their holdings at the end of April 1983 remained small (SDR 16.46 million by five prescribed holders, against SDR 4.3 million held by four prescribed holders at the end of April 1982).

Transactions and Operations in SDRs Among Participants and Prescribed Holders

Transactions by Agreement

SDRs transferred by participants and prescribed holders in transactions by agreement amounted to SDR 1,281 million during 1982/83, which was close to the amount of SDR 1,242 million in the previous year. (See Table 25.) The bulk of transactions by agreement resulted from purchases of SDRs by members that needed to pay charges in the Fund’s General Resources Account, net charges on the use of SDRs, and repurchases. The major suppliers of SDRs in these transactions during 1982/83 were Austria, Belgium, the Federal Republic of Germany, Indonesia, and the United Kingdom.

Table 25.Use and Receipt of SDRs in Transactions by Agreement, Financial Year Ended April 30, 1983(In thousands of SDRs)
HolderReceiptUseHolderReceiptUse
Austria89,505Malawi2,500
Bangladesh10,500Mauritania4,460
Belgium78,836Mauritius7,200
Belize1,318Mexico31,77040,000
Brazil32,91047,125Morocco38,150
Burma5,800Nepal4,500
Cameroon2,550New Zealand13,000
Canada24,000Nicaragua35037,000
Central African Republic2,200Oman3,500
Chad1,250Panama12,000
Chile5,500Papua New Guinea8,230
Costa Rica2,720Peru27,500
Cyprus2,700Philippines66,080
Dominican Republic1,000Portugal3,100
Ecuador1,840Romania23,970
Egypt17,100Senegal2,200
Ethiopia10,500Sierra Leone516
Finland20,000Somalia920
France8,540Sri Lanka23,500
Gabon4,915Sudan19,772
Germany, Federal Republic of355,124Tanzania1,000
Ghana290Thailand34,045
Greece10,380Turkey157,020
Guatemala6,590Uganda8,400
Guinea824United Kingdom37,000322,865
Guyana2,113Uruguay4,500
Hungary81,375Viet Nam7,536
Iceland2,500Yugoslavia132,478
India4,500Zambia17,890
Indonesia192,870Arab Monetary Fund 148,50048,931
Ireland9,000Bank of Central African States 16,0005,900
Israel57,000East Caribbean Currency Authority 185
Ivory Coast16,940Nordic Investment Bank 13,680
Jamaica36,836Total1,281,4281,281,428
Japan29,500
Kenya45,000
Korea129,000
Lao People’s Democratic Republic884
Liberia1,330
Madagascar3,940

Prescribed holder.

Prescribed holder.

Operations in SDRs

The Fund permits additional uses of SDRs among participants and prescribed holders, and during the financial year 1982/83 these uses amounted to SDR 395.32 million in 17 separate operations.22 Nine of the operations in SDRs were in settlement of financial obligations and eight were loans. Thus, the accumulated total SDRs transferred in such operations since they were first permitted in 1978 reached SDR 552.93 million.

The settlements of financial obligations in which SDRs were used (SDR 275.09 million) were of three types: repayment of loans originally made in SDRs; settlement of indebtedness incurred in exchange market intervention; and payment of a capital subscription to a regional international institution.

The use of SDRs in loans amounted to SDR 120.23 million, mostly in loans by international organizations to their member countries. Some member countries also made loans in SDRs to other participants in their region. One of the loan operations was a very short-term loan between a regional central bank to one of its members who needed SDRs to pay part of its quota subscription to the Fund, which was settled by the member by drawing on its reserve tranche in the Fund. The maturity periods of the loans ranged from three to seven years, with an average maturity of 4.43 years, and interest rates ranged from 5.2 per cent per annum to 12.15 per cent per annum.

Transactions with Designation

During 1982/83, 42 participants used SDR 2,713 million in 78 transactions with designation (in which the user must represent that it has a balance of payments need) to obtain currency from 25 participants designated by the Fund. (See Table 26.) Transactions increased by SDR 838 million compared with 1981/82. As in the previous year, the bulk of the users were non-oil developing countries; only one industrial country and one oil exporting country used SDRs in transactions with designation. Of total transactions, 61 (amounting to SDR 1.72 billion), by 38 countries, represented the immediate use of SDRs acquired from the Fund’s General Resources Account in purchases of Fund resources, while the remaining 17 transactions represented the use of participants’ existing SDR holdings. Of the 25 countries designated to receive SDRs, 9 were non-oil developing countries, 7 were oil exporting countries, and 9 were industrial countries. The largest amounts of currency in designated transactions, as in the preceding year, were provided by the United States, the United Kingdom, and the Federal Republic of Germany.

Table 26.Use and Receipt of SDRs in Transactions with Designation, Financial Year Ended April 30, 1983(In thousands of SDRs)
ParticipantUseReceiptParticipantUseReceipt
Algeria4,013Mali25,238
Argentina542,683Malta8,241
Australia89,560Mauritania3,250
Austria107,549Mauritius800
Bahrain9,300Mexico211,933
Bangladesh66,000Morocco47,196
Brazil449,31018,000Netherlands61,185
Burma24,600Norway50,597
Canada6,821Oman8,957
Central African Republic2,388Paraguay7,577
Colombia37,300Qatar6,196
Dominica704Romania126,159
Dominican Republic800Rwanda315
Ecuador30,098Saudi Arabia171,624
El Salvador27,658Senegal10,525
Equatorial Guinea255Sierra Leone200
Ethiopia3,000Somalia13,227
Gambia, The3,287South Africa80,000
Germany, Federal Republic of539,403Sri Lanka5,800
Guinea11,260Sudan8,612
Haiti4,013Suriname2,440
Honduras21,300Swaziland1,000
Hungary243,882Trinidad and Tobago28,118
Iceland28,000Uganda4,500
India350,000United Arab Emirates14,000
Indonesia65,10035,000United Kingdom658,908
Iraq70,000United States735,717
Ivory Coast25,863Uruguay35,000
Jamaica20,468Venezuela42,025
Japan39,400Zambia26,151
Kenya35,000Total2,713,4412,713,441
Kuwait31,195
Liberia21,500
Madagascar8,180
Malaysia58,500

Transactions Involving the General Resources Account

Inflows

The bulk of the inflows of SDRs in 1982/83 to the General Resources Account, amounting to SDR 2,150 million (SDR 2,440 million in 1981/82), represented, as in the previous year, payment of charges on the use of Fund resources. A majority of members with low holdings acquired SDRs for this purpose from other participants in transactions by agreement arranged by the Fund, or from the General Resources Account.

Repurchases that were discharged at the member’s option with SDRs rather than with a currency specified by the Fund amounted to SDR 566 million, compared with SDR 838 million in 1981/82. The proportion of repurchases made in SDRs has increased steadily from about 10 per cent in 1978/79 to 36 per cent during 1982/83. The main users of SDRs in repurchases during 1982/83 were the United Kingdom (SDR 154.64 million), Spain (SDR 93.51 million), Peru (SDR 55.50 million), and Israel (SDR 46.36 million).

Outflows

SDRs transferred from the General Resources Account to members amounted to SDR 3,700 million, compared with SDR 2,697 million during 1981/82. The major outflow, as in previous years, was the transfer of SDRs to members in purchases, which amounted to SDR 2,420 million. These transfers accounted for 29 per cent of total purchases financed from the Fund’s ordinary resources.

As more countries opt to receive remuneration in the form of SDRs, there has been a continued increase in the amount of remuneration paid in SDRs. Remuneration paid by the Fund to members (75) on their net creditor positions totaled SDR 908.63 million during 1982/83. Of these members, 70 received SDR 861 million in remuneration in SDRs.

The Fund used a total of SDR 240.99 million to pay interest and make repayments of principal to lenders to the Fund. The most important items were repayments to six countries under the oil facility and interest payments of SDR 99.2 million to four countries on Fund borrowing under the supplementary financing facility. The General Resources Account also sold SDR 162.46 million to countries needing to pay charges to the Fund and on the net use of SDRs.

SDR holdings in the General Resources Account declined to SDR 4.33 billion by the end of the financial year from SDR 5.46 billion at the close of 1981/82. Interest receipts on SDR holdings in the General Resources Account, at SDR 444.26 million, were also lower than in the previous year (SDR 657 million), reflecting both the lower average SDR holdings and the fall in interest rates in the latter part of the year.

SDR as a Unit of Account Outside the Fund and as a Currency Peg

In addition to its uses as a medium of exchange and settlement between participants in the Special Drawing Rights Department and between participants and prescribed holders, the SDR, which is the unit of account for Fund transactions and operations and for its Administered Accounts, is also used as a unit of account (or as the basis for a unit of account) outside the Fund and as a currency peg.

During 1982/83, the International Telecommunications Union adopted the SDR as its unit of account, thus bringing the number of international and regional organizations which use the SDR as a unit of account (or as the basis for a unit of account) to 15.23 A number of international conventions also use the SDR to express monetary magnitudes, notably in conventions expressing liability limits in the international transport of goods and services.

In recent years, the SDR has been playing an increasing role both as a denominator and a unit of contract, and in some cases as the basis for a privately issued currency composite. Considerable interest was shown in the private use of SDR-denominated assets in 1981, following the reduction from 16 to 5 in the number of currencies in the SDR valuation basket, effective January 1, 1981. In 1982, however, private recourse to the SDR as a unit of account appears to have slackened. The explanation for the diminished market interest would seem to lie in part in the continued strengthening of the U.S. dollar, which made the preferred portfolio mix diverge from the currency composition of the SDR. A decline in oil revenues during 1982 for a major holder of SDRs also led to a reduction in SDR-denominated deposits based on such revenues.

As of June 30, 1983, 14 countries had pegged their currencies to the SDR. (See Chapter 2, page 66.) When a member pegs its currency to the SDR, the value of its currency is fixed in terms of the SDR and is set in terms of currencies by reference to the SDR value of those currencies as calculated and published daily by the Fund.

Administered Accounts

The Fund administers as a Trustee, in addition to its Staff Retirement Plan, three accounts for member countries, namely, the Trust Fund, the oil facility subsidy account, and the supplementary financing facility subsidy account. These administered accounts are separate from the Fund’s General Department and the Special Drawing Rights Department.

The Trust Fund was terminated as of April 30, 1981,24 and the responsibilities of the Fund thereafter are confined to the receipt and disposition of interest and loan repayments and the completion of any unfinished business. Two installments of semiannual interest payments for a total amount of SDR 15.0 million were collected in June and December 1982. It was decided that SDR 1,500 million of the loan repayments would be used to provide concessional balance of payments assistance to low-income developing members in need of such assistance under arrangements similar to those set forth in the Trust Fund Instrument. The repayments of Trust Fund loans commenced in July 1982, and by April 1983 repayments of SDR 18.5 million had been made by 24 countries.

Oil Facility Subsidy Account

The oil facility subsidy account was established on August 1, 1975 to assist Fund members most seriously affected by oil price increases to meet part of the cost of using the resources of the 1975 oil facility. Subsidy payments were calculated as a percentage per annum of the average daily balances, subject to charges, of the Fund’s holdings of eligible members’ currency outstanding under the 1975 oil facility. For the final year of the account (including the first 11 days of May 1983 so as to include the final scheduled repurchases and therefore to conclude the business of the account) the Executive Board approved the subsidy payments at the usual rate of 5 per cent. For 1982/83 (inclusive of May 1983), subsidy payments totaling SDR 2.5 million were made in June 1983 to 16 of the 18 original beneficiaries and to 6 of the 7 additional beneficiaries. (See Table 27.)

Table 27.Oil Facility Subsidy Account: Total Use of 1975 Oil Facility by Beneficiaries, and Cumulative Subsidy Payments on Outstanding Balances Through May 11, 19831(In millions of SDRs)
Total Use of 1975 Oil FacilitySubsidy Payments
Cumulative 1976–821983/842Total
Original beneficiaries
Bangladesh40.4710.190.8411.03
Cameroon11.792.960.253.21
Central African Republic2.660.670.050.72
Egypt31.687.900.738.62
Haiti4.141.040.091.13
India201.3426.951.7128.66
Ivory Coast10.351.420.091.51
Kenya27.937.080.537.61
Mali3.990.990.091.08
Mauritania5.321.330.121.45
Pakistan111.0128.072.1530.22
Senegal9.912.520.182.70
Sierra Leone4.971.240.111.35
Sri Lanka34.138.580.719.29
Sudan18.304.670.365.04
Tanzania20.615.250.365.61
Western Samoa0.420.110.010.12
Yemen, People’s Democratic Republic of12.023.020.263.28
Subtotal551.03113.998.63122.62
Additional beneficiaries
Grenada0.490.120.010.13
Malawi3.730.940.081.02
Morocco18.004.470.444.91
Papua New Guinea14.802.750.172.92
Philippines152.0338.303.0941.39
Zaïre32.538.070.808.87
Zambia29.723.890.414.30
Subtotal251.3058.545.0063.54
Total802.33172.5313.63186.16

Purchases began in July 1975 and continued until May 1976. The subsidy amounts shown were calculated as a percentage per annum of the average daily balances, subject to charges, of the Fund’s holdings of each eligible member’s currency outstanding under the 1975 oil facility.

Includes a possible additional subsidy which could be paid retroactively from remaining resources.

Purchases began in July 1975 and continued until May 1976. The subsidy amounts shown were calculated as a percentage per annum of the average daily balances, subject to charges, of the Fund’s holdings of each eligible member’s currency outstanding under the 1975 oil facility.

Includes a possible additional subsidy which could be paid retroactively from remaining resources.

The subsidy account was financed by contributions amounting to SDR 160.3 million from 24 members of the Fund and Switzerland. (See Table 28.) The funds received were invested in U.S. Government obligations, which earned investment income, until disbursements were made to the beneficiaries.

Table 28.Oil Facility Subsidy Account: Contributions(In millions of SDRs)
ContributorsAnticipated Total ContributionsContributions Received as of April 30, 1983 1
Australia5.7005.700
Austria2.3002.300
Belgium5.6005.600
Brazil1.8501.850
Canada9.5009.500
Denmark2.2002.200
Finland1.6001.600
France12.90012.680
Germany, Federal Republic of13.70013.720
Greece0.6000.600
Iran, Islamic Rep. of6.0006.000
Italy8.6008.600
Japan10.30010.300
Luxembourg0.1100.110
Netherlands6.0006.000
New Zealand1.7001.700
Norway2.1002.100
Saudi Arabia40.00040.000
South Africa1.3501.350
Spain3.4003.400
Sweden2.8002.800
Switzerland3.2853.300
United Kingdom12.05012.000
Venezuela6.0006.000
Yugoslavia0.9000.900
Total160.545160.300

Where contributions were denominated in national currency and were made in installments, SDR amounts were subject to small adjustments because of exchange rate changes.

Where contributions were denominated in national currency and were made in installments, SDR amounts were subject to small adjustments because of exchange rate changes.

Supplementary Financing Facility Subsidy Account

The supplementary financing facility subsidy account was established in December 1980 to reduce the cost for low-income developing members of using the supplementary financing facility.25 Subsidy payments are calculated as a percentage per annum of the average daily balance of the Fund’s holdings of a member’s currency as a result of all purchases under the supplementary financing facility and under the Fund’s policy on exceptional use.

Subsidy payments, totaling SDR 44.3 million, were made on August 10, 1982 to 23 eligible members in respect of holdings over the period July 1, 1981 through June 30, 1982. (See Table 29.) Eligible countries are divided into two groups: those with per capita incomes in 1979 equal to or below the per capita income used to determine eligibility for assistance from the International Development Association (IDA) receive the full rate of subsidy, which does not exceed 3 per cent per annum; those with a per capita income in 1979 above the IDA level, but not more than that of the member that had the highest per capita income of those countries that were eligible to receive assistance from the Trust Fund, receive subsidies at one half the full rate. The payments in August 1982 were made at the maximum rates, that is, 3 per cent and 1.5 per cent.

Table 29.Supplementary Financing Facility Subsidy Account: Drawings Under Supplementary Financing Facility by Eligible Members, and Subsidy Payments(In millions of SDRs)
Total Drawings to June 30, 1982Subsidy Payment August 10, 1982Total Subsidy Payments to Date
Recipients of Subsidy at 3 per cent
Bangladesh110.03.304.57
Bolivia25.20.771.63
Dominica2.10.040.04
Guyana30.90.921.75
Kenya94.81.922.68
Liberia42.90.881.18
Madagascar22.20.670.89
Malawi28.10.831.21
Mauritania16.00.310.43
Pakistan394.67.578.97
Philippines333.08.9312.71
Senegal36.90.791.18
Sierra Leone17.20.520.62
Sri Lanka10.160.16
Sudan171.44.296.75
Tanzania16.20.490.85
Togo7.30.220.28
Zambia20.113.52
Subtotal32.6749.42
Recipients of Subsidy at 1.5 per cent
Ivory Coast107.61.091.19
Jamaica206.44.67 34.67
Mauritius56.00.831.52
Morocco137.52.062.96
Peru195.12.937.43
Subtotal11.5917.77
Total44.2767.19

Subsidy paid in respect of Fund holdings in excess of 140 per cent of quota under the Fund’s policy on exceptional use, which amounted to SDR 10.4 million on June 30, 1982.

Subsidy paid in respect of Fund holdings in excess of 200 per cent of quota under the Fund’s policy on exceptional use, all of which had been repurchased by June 30, 1982.

Includes SDR 2.3 million in respect of holdings from June 1979 to June 1981.

Subsidy paid in respect of Fund holdings in excess of 140 per cent of quota under the Fund’s policy on exceptional use, which amounted to SDR 10.4 million on June 30, 1982.

Subsidy paid in respect of Fund holdings in excess of 200 per cent of quota under the Fund’s policy on exceptional use, all of which had been repurchased by June 30, 1982.

Includes SDR 2.3 million in respect of holdings from June 1979 to June 1981.

On the basis of the latest data provided by the World Bank before April 30, 1982, a total of 88 developing members had per capita incomes that made them eligible to receive a subsidy. As of April 30, 1983, 23 of these eligible members had purchases outstanding under the supplementary financing facility for a total amount of SDR 2,999 million, and the undrawn supplementary financing facility commitments of three of these members under stand-by and extended arrangements amounted to SDR 330 million. In addition, one eligible member—Sri Lanka—had balances equivalent to SDR 10 million outstanding under the Fund’s policy on exceptional use.

The primary source of funds for the account will be SDR 750 million of repayment of, and interest on, Trust Fund loans, which are transferred to the account via the special disbursement account. By April 30, 1983, the account had received SDR 48.80 million from this source. In addition, the account is financed through voluntary contributions in the form of donations and loans and through income on the investment of resources held pending disbursement. Details of expected contributions and loan receipts, together with amounts received by April 30, 1983, are shown in Table 30. Pending a further payment of subsidy, the investments of the account are held in SDR-denominated time deposits with the Bank for International Settlements; on April 30, 1983, they amounted to SDR 31.3 million, with accrued interest of SDR 1.1 million.

Table 30.Supplementary Financing Facility Subsidy Account: Contributions(In millions of SDRs)
ContributorCommitmentReceived to April 30, 1983
Donations
Australia2.02.0
Austria1.21.2
Denmark1.50.8
Finland1.30.4
France9.39.3
Netherlands4.14.1
Norway1.41.4
Saudi Arabia48.1117.4
Sweden2.22.2
Switzerland2.42.4
Subtotal73.541.1
Loans
Belgium4.44.4
Gabon1.0
Luxembourg0.20.2
Subtotal5.64.6
Total79.145.7

US$52 million valued at the exchange rate of SDR 1 equals US$0.924527 as of April 29, 1983.

US$52 million valued at the exchange rate of SDR 1 equals US$0.924527 as of April 29, 1983.

Consultations with Member Countries

As noted in Chapter 2, regular Article IV consultations with members are the principal vehicle for the exercise of Fund surveillance over the exchange rate policies of individual member countries. Article IV consultations are required in principle to take place annually and to be completed not later than three months after the termination of discussions between the member and the staff. In practice, it has been impossible to attain the objective of annual consultations with all members, and, as noted in Chapter 2, some procedural changes have been introduced recently to ensure greater regularity of consultations.

In 1982/83, the Fund completed 98 regular Article IV consultations (up from 79 in 1981/82), of which 56 were with countries availing themselves of the transitional arrangements of Article XIV, and 42 with countries that had formally accepted the obligations of Article VIII. Of these consultations completed in the financial year, 32 had been initiated in the previous year, whereas 41 of those initiated in 1982/83 remained outstanding at the end of the year.

In addition to the regular Article IV consultations, special consultations were held with major industrial countries in connection with the World Economic Outlook review by the Executive Board, and the staff has informally visited some countries to keep informed of important developments and to ascertain the member’s reasons for particular policy actions. A special consultation was also held with Sweden in connection with the Swedish devaluation in October 1982.

During 1982/83, two countries, New Zealand (August 5, 1982) and Vanuatu (December 1, 1982) accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement, raising to 56 the number of members that have formally accepted these obligations. Eighty-nine members were availing themselves of the transitional arrangements under Article XIV, Section 2 at the end of the financial year. Since the end of the financial year, Belize, on June 14, 1983, has also accepted the obligations of Article VIII. One member, Antigua and Barbuda, has yet to complete formal procedures to establish Article VIII or Article XIV status.

Training and Technical Assistance

Technical assistance, always an important part of the Fund’s work, assumed greater significance in 1982/83 as the Fund became involved in helping to devise stabilization programs for an increasing number of countries and the need for the effective implementation of fiscal and monetary policies became more pressing. During the year, in the face of a growing problem of international indebtedness, the Fund expanded its technical assistance in the area of external debt management and in the collection of external debt statistics. Technical assistance again took the form of training at headquarters, staff missions, seminars at headquarters and in member countries, and the stationing of members of the Fund staff and outside experts in member countries, as well as the assistance customarily provided through the Fund’s consultation procedures under Article IV.

During 1982/83 the IMF Institute continued the high level of operations begun in the previous year. The seminar on Balance of Payments Management was held for a second time, and two new seminars—one on the role of the Fund in the international monetary system and the other (in conjunction with the Central Banking Department) on central banking—were introduced in response to perceived needs in member countries. The number of participants attending seminars increased from 22 in 1981/82 to 84 in 1982/83, while the number of participants in the regular training courses presented by the Institute declined by 59, to 284, making the total attendance at both courses and seminars similar to that in the previous year. Altogether, some 3,500 officials from 144 member countries have participated in the programs of the IMF Institute since its inception in 1964.

The 18-week course on Financial Analysis and Policy, conducted separately in English, French, and Spanish, explained the Fund’s procedures and policies, and examined the tools of economic analysis and forecasting. It devoted special attention to the instruments of monetary, fiscal, and balance of payments policies that are being employed under changing national and international conditions. Special facilities were provided to permit a few Arabic-speaking participants to follow the English course in their own language. The course on Techniques of Economic Analysis, conducted in English over an 8-week period, described the principal macro-economic accounts, the tools of economic analysis, and the Fund’s policies and procedures. Special arrangements for Arabic-speaking participants were also made for this course. The 10-week course on Public Finance, offered in Spanish and French, and in cooperation with the Fiscal Affairs Department, dealt with the objectives, instruments, and procedures of public finance, emphasizing the fiscal problems of developing countries. The 8-week course on Balance of Payments Methodology, offered in English and French in cooperation with the Bureau of Statistics, focused on the concepts and definitions that are used in the Fund’s Balance of Payments Manual. The 8-week course on Government Finance Statistics, offered in Spanish also in cooperation with the Bureau of Statistics, applied the concepts, definitions, and procedures in the Draft Manual on Government Finance Statistics to the compilation of statistics from accounts in the public sector.

The Institute’s external training activities, which began at the close of the previous financial year, were substantially expanded during 1982/83 and placed under the supervision of a newly created External Training Division. A seminar conducted in Zimbabwe focused on the economic problems and policy issues of that member country. Lecturing assistance was also provided to seven regional organizations and national training institutions.

Technical assistance continued to be provided by the Central Banking Department through the assignment of resident experts to member countries and through advisory services. During the financial year, experts and consultants served in assignments in executive or advisory positions with central monetary institutions and provided about 78 man-years of assistance, most of which was in the fields of research and statistics, accounting, bank supervision, and banking and foreign exchange operations. Departmental staff carried out nine advisory and assessment missions and participated in eight missions led by area departments or in conjunction with the World Bank. Advice was given on topics that include central banking and financial system legislation (in cooperation with the Legal Department), mobilization of savings, organization and operation of central banks, structure and development of financial systems, and the use of alternative policy instruments.

The emergence of serious external debt-servicing problems in many developing countries created an urgent need for the Fund to expand its technical assistance in the area of external debt. A program was instituted in the Central Banking Department to provide assistance in the establishment of a permanent national machinery for the reporting, control, and management of external debt operations on a continuing basis and in the collection of debt statistics. The first external debt expert was assigned to a member country in May 1983 and a further seven experts were in the process of being recruited to meet the needs of another six countries. Several additional requests are expected before the end of 1983.

A seminar on central banking—the first to be held in the Fund—attended by senior officials of central banks of member countries, was conducted jointly by the Central Banking Department and the IMF Institute in July 1982. During the year further progress was made in expanding the Department’s computerized data base of central banking legislation, which now contains information on 40 member countries.

Technical assistance in the areas of fiscal policy, tax and customs administration, budget systems and procedures, accounting, auditing, and financial reporting continued to be provided by the Fiscal Affairs Department in response to requests from member countries. This assistance is provided through staff missions, staff assignments in the field, and the services of the members of the panel of experts. In 1982/83 technical assistance was given to 45 countries, compared with 52 in 1981/82, 38 in 1980/81, and 40 in 1979/80. The number of countries receiving technical assistance reflects the Department’s continuing aim of trying to assist member countries in the design and implementation of appropriate fiscal policies. During 1982/83 there were 38 long-term and 26 short-term assignments in the field, totaling 64 individual assignments and 377 man-months; 50 panel members, and 16 staff members undertook technical assistance work; and 3 countries received assistance for the first time. Staff members continuously visit countries to review progress and to advise on requests for further assistance. Support and guidance to experts in the field is provided from headquarters.

Technical assistance in statistics continues to be an important part of the work of the Bureau of Statistics, which makes such assistance available through missions to member countries and visits by national technicians to Fund headquarters for training. The bulk of the assistance is provided through missions that are undertaken in response to requests from member countries and is concentrated on statistical assistance in money and banking, balance of payments, government finance, general economic data, and, more recently, international banking. In recent years, a number of countries have requested and received assistance in the development of computerized data bases—an expanding segment of the Fund’s technical assistance services that will now become the responsibility of the new Bureau of Computing Services. During 1982/83, the staff of the Bureau of Statistics participated in 72 technical assistance missions to 63 countries, assisted in a statistical seminar organized by the Arab Monetary Fund, and gave lectures on balance of payments methodology, government finance statistics, and other statistics. In addition, eight officials from countries or regional organizations visited the Bureau for training in the various fields of statistics.

Relations with Other International Organizations

The emerging strains in the international financial system and heightened difficulties in arriving at suitable agreements with respect to international trade policy lent added importance and value to the Fund’s relationships with other international and regional organizations with expertise in the areas of economics and trade. The Fund continued its close association with the World Bank through exchanges of information and the inclusion of its staff, on occasion, in each others’ missions to member countries. Close collaboration was also maintained with the United Nations (UN) and its relevant organs, the Organization for Economic Cooperation and Development (OECD), the General Agreement on Tariffs and Trade (GATT), the Commission of the European Communities (CEC), the Bank for International Settlements (BIS), the Organization of American States (OAS), especially the Inter-American Economic and Social Council and its Permanent Executive Committee, and with regional development and financial institutions in Africa, Asia and the Pacific area, Latin America and the Caribbean, and the Middle East.

Ongoing liaison responsibilities are centered in the Fund’s European Office in Paris, particularly with regard to the BIS, the CEC, and the OECD; the Geneva Office with regard to the UN Conference on Trade and Development (UNCTAD) and the GATT; and the Special Representative to the United Nations. In this regard staff attend meetings, participate in seminars, conduct informal exchanges of views, and exchange mutually relevant information and documentation with concerned organizations. Their efforts are supplemented by specific assignments of senior officials and technical specialists from headquarters, as well as resident representatives in the field, as required.

The Managing Director delivered his annual address to the UN Economic and Social Council in Geneva on 13, 1982, and addressed the ministerial meeting of the Thirty-Eighth Session of the Contracting Parties to the GATT, also in Geneva, on November 24. He attended official meetings of the BIS in Basle, Switzerland, on July 12, 1982, and spoke at meetings of the UN’s Administrative Coordination Committee in New York on November 1, 1982, and in Paris on March 30, 1983. He participated in the Group of Ten ministerial meetings in Helsinki and Toronto, held at the time of the meetings of the Interim and Development Committees, as well as similar sessions in Paris on January 18, 1983, and in Washington on February 10. He also attended the ministerial meetings of the UNCTAD Intergovernmental Group of Twenty-Four on International Monetary Affairs which took place in Helsinki and Toronto at the time of the Interim and Development Committee meetings, and also those held in Washington, D.C. on February 9 and April 27, 1983.

With a view to making the organization’s expertise more readily available, and to encourage the cross-fertilization of ideas, the Fund undertook a technical assistance assignment with the East Caribbean Currency Authority (ECCA). Staff attended two technical meetings, in July and December 1982, in preparation for a conference of Finance Ministers of the ECCA member countries to consider a proposed central banking agreement that would permit expansion of the ECCA’s central banking functions. The agreement was drafted with the assistance of Fund staff. The Fund also collaborated with the Inter-Agency Resident Mission in the East Caribbean headed by the World Bank. The Fund Resident Advisor to the five member countries in the ECCA region was attached to the mission for purposes of assisting in coordinating the macroeconomic policies with the development programs of the seven ECCA countries.

The recession in the world economy and the debt problems of a number of countries have emphasized recently the Fund’s role in debt renegotiation and rescheduling, as well as in the coordination of international aid. During the year, Fund representatives attended Paris Club meetings on the rescheduling of the external debt of Costa Rica, Madagascar, Malawi, Romania, Senegal, Sudan, Togo, and Uganda. At the invitation of the World Bank, staff members also participated in meetings of the Aid Groups for Bangladesh and Burma, and in the meetings of the India and Pakistan Consortia, all held in Paris. Other meetings concerning aid coordination which were attended by Fund staff included the Sri Lanka Aid Group meeting, held in Tokyo; the meetings of the World Bank Consultative Groups on Aid Coordination for Korea, Madagascar, Sudan, and Uganda, held in Paris; the Tokyo meeting of the World Bank Consultative Group for the Philippines; and the meeting on agriculture of the World Bank Consultative Group for Zaïre, held in Paris. As in previous years, a staff representative attended the Amsterdam meeting of the Inter-Governmental Group on Indonesia convened by the Government of the Netherlands, and relevant documentation was provided.

Notwithstanding the strong cooperative relationship the Fund has maintained with the GATT over the years, today’s trade and payments situation suggest that even closer ties be developed between the Fund and the GATT. To this end, closer contacts have been established between the secretariats of the two organizations over the past year in order to discuss the possible forms of increased cooperation. The Fund continues to provide information and background documentation for the consultations of the GATT with common member countries on trade restrictions imposed for balance of payments purposes. Fund staff were invited to participate in such consultations held in Geneva with Bangladesh, Ghana, Hungary, India, Israel, Pakistan, the Philippines, and Portugal. A Fund observer was present at the Thirty-Eighth Session of the Contracting Parties to the GATT, and, as noted above, the Managing Director addressed the ministerial meeting of that session. The meetings of the Council of Representatives were also attended by a Fund observer, and other GATT meetings on a wide variety of topics were attended by staff members of the Fund’s Geneva Office.

Executive Directors and Staff

In the year ended April 30, 1983, there were 131 appointments to the Fund’s regular staff and 78 separations. At the end of the financial year, the staff numbered 1,578 and was drawn from 96 countries.

Publications

The publications issued by the Fund during 1982/83 are listed in Appendix I, Table I.16.

    Other Resources Citing This Publication