Chapter 3: Activities of the Fund
- International Monetary Fund
- Published Date:
- September 1984
The extensive use of the Fund’s resources continued in the year ended April 30, 1984, with gross purchases (SDR 10.2 billion) close to the record level of the preceding year (see Table 17). At the end of the year, 35 adjustment programs were in effect, with a total commitment of SDR 18.6 billion, of which about one half had been drawn. The amount of total Fund credit outstanding increased from SDR 23.6 billion (85 countries) at the end of 1982/83 to SDR 31.7 billion (84 countries) at the end of 1983/84. The bulk of the Fund’s financial assistance has been through purchases under upper tranche conditionality, in keeping with the Fund’s policy of combining adjustment and financing (see Table 18).
|Financial Year Ended April 30|
|I. General Resources Account|
|II. Administered Accounts|
|Trust Fund loans||31.7||268.2||670.0||961.7||1,059.9||—||—||—||2,991.5|
|Oil facility subsidy account|
|facility subsidy account|
|III. SDR allocations||—||—||4,032.6||4,033.2||4,052.5||—||—||—||12,118.3|
|By Country (I+ II +III)|
|Stand-by and extended arrangements as of April 30|
|Number of arrangements||20||22||20||29||37||35||39||35|
|As percent of total|
|As percent of commitments||68.9||63.2||86.1||89.1||85.2||68.8||65.6||49.9|
|V. Outstanding Fund credit||13,655||12,066||8,873||8,306||9,545||14,802||23,590||31,742|
|Number of countries||71||72||73||74||78||79||85||84|
Excluding purchases in the reserve tranche.
Purchases minus repurchases; net repurchases (-).
|Financial Year Ended April 30|
|I. Purchases under tranche policies||2.56||2.05||0.72||1.31||3.60||5.33||6.17||8.88|
|First credit tranche||0.78||0.09||0.13||0.16||0.78||0.02||0.03||—|
|Upper credit tranches||1.59||1.85||0.35||0.93||1.90||2.73||3.68||4.16|
|Extended Fund facility||0.19||0.11||0.24||0.22||0.92||2.58||2.46||4.72|
|II. Purchases under special facilities||2.19||0.32||0.51||0.89||0.78||1.63||4.09||1.28|
|Compensatory financing facility||1.75||0.32||0.46||0.86||0.78||1.63||3.74||1.18|
|Buffer stock financing facility||—||—||0.05||0.03||—||—||0.35||0.10|
|III. Total I + II||4.75||2.37||1.23||2.20||4.38||6.96||10.26||10.16|
The Fund’s liquidity position was strengthened considerably during the year as a result of (i) the increase in quotas under the Eighth General Review (from SDR 61.1 billion to SDR 89.2 billion); (ii) the enlargement (from SDR 6.4 billion to SDR 17 billion) of the General Arrangements to Borrow (GAB); (iii) the completion of the associated arrangement of Saudi Arabia with the GAB (SDR 1.5 billion); and (iv) the putting into place of other borrowing arrangements (totaling SDR 6 billion) with the Saudi Arabian Monetary Agency (SAMA), the Bank for International Settlements (BIS), Japan, and the National Bank of Belgium. The prospective demand for Fund assistance, however, is expected to remain at a high level given the continued payments imbalances of a number of countries, some of which face structural difficulties that involve longer-run adjustment efforts. The Fund, therefore, needs to continue to manage its liquidity position carefully so as to avoid any gap between the demand and supply of usable resources.
The continuing need of members for Fund assistance required the Executive Board to take a new set of decisions that would enable the Fund to continue to provide appropriate financial assistance to members experiencing large payments imbalances in relation to their quotas. Under these decisions, the enlarged access policy will remain in effect until the end of 1984, and may be extended beyond that date, subject to a further decision by the Board. The Executive Board set guidelines to determine the extent of members’ access to Fund resources under the enlarged access policy, and reduced the maximum limits on access, in terms of percentage of quota. The Board also reduced the limits in terms of quota on drawings under the compensatory and buffer stock financing facilities. The limits on enlarged access as well as those governing drawings under the compensatory and buffer stock financing facilities will be reviewed not later than December 31, 1984 and annually thereafter in the light of all relevant factors, including the magnitude of members’ payments imbalances and developments in the Fund’s liquidity. While extending the enlarged access policy, the Fund has sought to maintain appropriate standards of conditionality in the use of its resources. The Executive Board formulated new guidelines specifying the criteria that the Fund will use in reviewing requests for use of the compensatory financing facility.
In addition to providing direct balance of payments financing in support of adjustment programs, the Fund continued to facilitate financing arrangements for debtor member countries in collaboration with governments, central banks, the Bank for International Settlements, the World Bank, and commercial banks. A key aspect of the Fund’s role has been to explain to all parties concerned the thrust of the adjustment policies being undertaken by the debtor countries involved.
The Fund is a cooperative intergovernmental institution which relies largely on its members to provide the finance to enable it to assist other members in balance of payments difficulties. To facilitate the re-constitution of Fund resources the Executive Board agreed on a formula to increase the attractiveness of creditor positions in the Fund relative to other international reserve assets. Under the formula, the rate of remuneration on creditor positions in the Fund was raised from 85 percent of the SDR interest rate to 88.33 percent on May 1, 1984 and will be further raised to 91.66 percent on May 1, 1985 and to 94.99 percent on May 1, 1986. The relationship between the rate of remuneration and the SDR interest rate may be further adjusted depending on interest rate developments and will be reviewed again before May 1, 1987.
In keeping with its objective of promoting the role of the SDR reserve asset in the international monetary system, the Fund took further decisions to improve the asset characteristics of the SDR. Effective July 29, 1983, the rate of SDR interest and charges is being calculated weekly instead of quarterly, and the payment of interest on SDR holdings is being made quarterly instead of annually. The greater frequency of calculations and payment of the SDR interest rate is intended to make the yield on SDR holdings competitive with alternative reserve assets.
No allocations of SDRs have been made since 1981, which was the last year of the third basic period. The question of an allocation of SDRs in the current—that is, the fourth—basic period, was considered again by the Interim Committee at its meeting on April 12, 1984. Most members of the Committee were convinced that there was increased evidence for an SDR allocation and that such an allocation would be in full conformity with the requirements of the Fund’s Articles and would strengthen the world economy and the international monetary system. Some other members of the Committee, however, continued to feel that long-term global need to supplement existing reserve assets had not been demonstrated. No conclusion regarding SDR allocation was reached at this meeting, but it was agreed that the Executive Board should continue its urgent examination of the issues involved and that the Managing Director should present a further report on the outcome of the Executive Board’s discussion at the next meeting of the Interim Committee, in Washington, D.C., on September 22, 1984.
In March 1984, the Executive Board concluded a comprehensive review of the procedures for surveillance and consultations with members under Article IV. It was agreed that the experience in the implementation of surveillance did not call for any revision of principles and procedures but for more active implementation and strong political support from the membership. The next annual review will be conducted not later than April 1, 1985.
During the year the Fund continued to offer training through the IMF Institute to officials of member governments and maintained its technical assistance services at a high level in the areas of central banking, fiscal affairs, and statistics.
Membership and Quotas
Membership and Participation in the SDR Department
As of April 30, 1984 the total membership of the Fund was 146, all of whom were participants in the SDR Department. Saint Christopher and Nevis applied for membership on August 2, 1983, and the Board of Governors approved the terms and conditions of its membership on April 4, 1984, establishing a quota for the new member of SDR 4.5 million. The People’s Republic of Mozambique applied for membership on May 3, 1984, and on July 18, 1984 the Republic of Kiribati applied for membership.
Eighth General Review of Quotas
An increase in the total of Fund quotas from SDR 61,059.8 million to SDR 90,034.8 million under the Eighth General Review of Quotas was authorized by the Board of Governors on March 31, 1983.1 Increases in quotas were proposed for all members except Democratic Kampuchea, which, as in the Seventh General Review, did not participate in the Eighth General Review of Quotas.
The resolution of the Board of Governors set forth that a member could consent to the increase in its quota at any time before November 30, 1983 and that no increase in quota could take effect until the Fund determined that members having not less than 70 percent of total quotas on February 28, 1983 had consented to the amount of increase proposed in the resolution for these members (consents for amounts less than those proposed were not permitted). The participation requirement was reached on November 30, 1983 and the Fund made that determination. To give the members that had not yet consented further opportunity to consent to the proposed increases in their quotas, the period of consent was extended twice, to January 31, 1984 and to March 15, 1984. By the latter date, all members except the Islamic Republic of Iran, Singapore, and the United Arab Emirates had consented to the proposed increases in their quotas. The proposed quota increases for these three members totaled SDR 798.5 million, representing 2.8 percent of the total of proposed increases. The increases came into effect when subscriptions were paid within 30 days following consent. All of the 142 members that had consented to increases in quotas had completed payment of their subscriptions by April 20, 1984, raising the total of Fund quotas to its present level of SDR 89,236.3 million.
Members were required to pay 25 percent of their quota increases in SDRs, or in the currencies of other countries specified by the Fund, with the concurrence of the issuers, or in any combination of SDRs and such currencies. The balance of the increase was to be paid by each member in its own currency. Under an arrangement set up by the Fund and some members with large SDR holdings, a number of members that did not have sufficient SDRs or foreign exchange holdings to pay the reserve asset portion of their quota increase were enabled to borrow SDRs; under this arrangement, 39 members borrowed SDR 540.2 million from 11 other members to pay for the reserve asset portion of their quota increases. Simultaneously, they purchased the reserve tranche positions created by this payment and used the proceeds to repay their SDR loans. No interest, fee, or commission was charged for the use of this facility by either the Fund or the lenders.
Payments of quota increases amounted to SDR 28,176.5 million, of which 25 percent (SDR 7,044.1 million) represented payments of the reserve asset portion of quota increases. Asset payments made in SDRs equaled SDR 6,194.7 million, and payments made in the currencies of other members specified by the Fund, with the concurrence of the issuers, totaled SDR 849.4 million. The reserve asset portion of the increase in quotas was paid in SDRs by 126 members, in foreign currencies by 11 members, and in combinations of SDRs and foreign currencies by 5 members. The currencies used in payments comprised the following: SDR 331.9 million in deutsche mark, SDR 331.9 million in Japanese yen, SDR 131.3 million in U.S. dollars, and SDR 54.3 million in pounds sterling. Most payments for quota increases (97.4 percent) were made in December 1983. Individual members’ quotas in the Fund at the end of April 1983 and April 1984, and the effective date of increase in the quota of each member, are shown in Appendix I, Table 1.2.
Transactions and Operations in the
General Resources Account
Total purchases in the General Resources Account (SDR 10.2 billion)2 during 1983/84 were close to the record level of SDR 10.3 billion of the previous year. Credit tranche purchases, at SDR 4.2 billion, were larger than in the previous year (SDR 3.7 billion), and purchases under the extended Fund facility nearly doubled, from SDR 2.5 billion to SDR 4.7 billion. However, purchases under the buffer stock and compensatory financing facilities, at SDR 102 million and SDR 1.2 billion, respectively, were both less than one third of their levels in the previous year. At the end of the financial year 1983/84, outstanding purchases amounted to SDR 31.7 billion, compared with SDR 23.6 billion in the previous year (see Chart 21).
Chart 21.Use of Fund’s Resources as at April 30, 1973-84
The bulk of the total repurchases in 1983/84, amounting to SDR 2.0 billion against SDR 1.6 billion in 1982/83, were in respect of purchases financed from ordinary resources. About half of the total repurchases were related to credit tranche purchases and a little over one third to purchases under the compensatory financing facility.
Reserve Tranche Purchases
Reserve tranche purchases were made by 75 members for a total of SDR 1.4 billion, which was somewhat larger than the purchases of SDR 1.1 billion in the previous year. The option provided to members under a decision of the Executive Board in April 198 3 to retain their reserve tranche positions when making use of credit tranches, or of the extended Fund facility, meant that asset payments for quota increases created reserve tranche positions for all members, including those that had outstanding purchases. This decision, together with the decision on attribution of reductions in the Fund’s holdings of currencies,4 was reviewed by the Executive Board in April 1984. It was agreed that the experience under the decision had been satisfactory; the decisions had enhanced the asset characteristics of reserve tranche positions and had also provided members with added flexibility in the management of their reserves and in their financial relations with the Fund. The Executive Board concluded, therefore, that the decisions should remain in effect without any change, on the understanding that they would be kept under review by the staff.
Credit Tranche Purchases
Purchases in the credit tranches rose to a new peak of SDR 4.2 billion in 1983/84 from the previous high level of SDR 3.7 billion in 1982/83 (see Table 19). All of these purchases were made under stand-by arrangements by 43 members. The largest amounts purchased were by Yugoslavia (SDR 379.0 million), Hungary (SDR 376.9 million), Argentina (SDR 299.8 million), Romania (SDR 275.5 million), Korea (SDR 256.0 million), and Turkey (SDR 202.5 million). (See Appendix I, Table 1.6.) About one third of the financing provided under stand-by arrangements (SDR 1.5 billion) was from the Fund’s ordinary resources, and the remaining SDR 2.7 billion was from borrowed resources under the supplementary financing facility (SDR 0.5 billion) and the enlarged access policy (SDR 2.2 billion). This pattern of financing compares with SDR 1.3 billion used from ordinary resources and SDR 1.9 billion from borrowed resources in 1982/83.
|Type of Transaction||Financial Year Ended April 30|
|Buffer stock financing facility||—||48||26||—||—||352||102|
|Compensatory financing facility||322||465||863||784||1,635||3,740||1,180|
|Extended Fund facility||109||242||216||920||2,578||2,463||4,718|
|Replenishment up to May 31, 1978||239||—||—||—||—||—||—|
|In connection with oil facility||6,329||4,257||2,474||1,528||526||18||—|
|Under General Arrangements to Borrow||1,576||777||777||777||777||777||—|
|From Swiss National Bank||154||—||—||—||—||—||—|
|Supplementary financing facility||—||—||502||2,018||4,112||6,037||6,915|
|Under policy on enlarged access||—||—||—||—||1,358||4,120||6,876|
|Holdings of the General Resources Account|
at end of year
|Reserve tranche positions of members|
at end of year
“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 a fine ounce.
“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 a fine ounce.
New commitments under stand-by arrangements for 25 members totaled SDR 4.3 billion, compared with SDR 5.4 billion for 27 members in 1982/83. (See Appendix I, Table 1.3.) Eleven arrangements were for a one-year period, in amounts ranging from SDR 2.4 million for the Solomon Islands to SDR 425.0 million for Hungary. The other fourteen arrangements were for periods of 10½ months to 2½ years in amounts between SDR 12.8 million for The Gambia and SDR 575.8 million for Korea. The arrangement for Korea for a period of 20 months was the largest standby arrangement approved during the year. The second largest arrangement was for Portugal (SDR 445 million) over a 17-month period. Of the SDR 4.3 billion committed under these stand-by arrangements during the financial year, more than half, SDR 2.4 billion, is to be financed under the enlarged access policy, leaving an amount of SDR 1.9 billion committed from the Fund’s ordinary resources.
One arrangement (for Turkey) approved during the year was canceled before the expiration date, with an unused balance of SDR 168.75 million, and was replaced by a new arrangement. Four other arrangements (Argentina, Liberia, Romania, and Senegal) approved in the two previous financial years were also canceled in 1983/84 priorto their dates of expiration. The amounts that had not been purchased under these arrangements totaled SDR 1.2 billion. As at April 30, 1984, undrawn balances under stand-by arrangements amounted to SDR 3.1 billion; one arrangement was inoperative because of the member’s failure to observe performance criteria.
Extended Fund Facility
The Executive Board reviewed in November 1983 the decision on the extended Fund facility, which was established in 19745 to provide medium-term assistance to members to overcome serious structural balance of payments maladjustments. It was decided that its provisions remained appropriate and that the decision should be reviewed again not later than December 31, 1984.
Purchases under extended arrangements in 1983/84 rose to a record SDR 4.7 billion, compared with purchases of SDR 2.6 billion and SDR 2.5 billion in 1981/82 and 1982/83, respectively. Of the purchases made by 11 members, those of India and Brazil (SDR 1.5 billion each) and by Mexico (SDR 1.2 billion) were the largest. The remaining SDR 0.5 billion was purchased by Dominica, the Dominican Republic, Grenada, Ivory Coast, Jamaica, Malawi, Pakistan, and Peru in amounts ranging from SDR 1.1 million by Grenada to SDR 165 million by Peru. Of total purchases under the facility, SDR 2.3 billion was financed from ordinary resources, SDR 1.8 billion from enlarged access resources, and SDR 0.6 billion from resources that became available under the supplementary financing facility. Four arrangements expired during the year, of which three had unused balances totaling SDR 302.4 million. Two arrangements were canceled, with balances undrawn totaling SDR 397.4 million.
New commitments were approved under three-year extended arrangements in 1983/84 for Grenada (SDR 13.5 million) and Malawi (SDR 100.0 million); financing of SDR 23.1 million was to be provided from ordinary resources and SDR 90.5 million from borrowed resources. As of April 30, 1984, extended arrangements were in effect for five members, with undrawn commitments amounting to SDR 6.2 billion, compared with undrawn commitments of SDR 11.5 billion under nine arrangements a year earlier.
Supplementary Financing Facility
The supplementary financing facility, established in August 19776 to provide additional financing under arrangements in conjunction with the use of the Fund’s ordinary resources, was financed by 14 lenders, which agreed to provide a total of SDR 7.8 billion under specified terms and conditions consistent with the strength of their external position. Under these agreements, funds could not be committed after February 22, 1982 nor be borrowed by the Fund after February 22, 1984. In order to be able to utilize resources that might become available during the two years after February 22, 1982 as a result of cancellation or expiration of arrangements that had not been fully drawn, the Executive Board adopted a decision on February 5, 1982 that made it possible for the Fund to substitute supplementary financing for enlarged access resources in arrangements that had been approved for members, provided the necessary amendment to the arrangement was requested by the member before February 22, 1982.7 As a result, the arrangements of 12 members were amended to provide for such substitution at the discretion of the Managing Director on the occasion of each purchase.
Disbursements of supplementary financing in purchases by members in 1983/84 amounted to SDR 1.1 billion, representing the major portion of the balance of SDR 1.6 billion that had not been disbursed as of April 30, 1983. Of this amount, SDR 0.5 billion represented substitution for enlarged access resources in connection with purchases under the extended arrangement with India. In the previous financial year, such substitutions totaled SDR 0.8 billion and involved the arrangements with The Gambia, India, Liberia, and Mauritius. In total, SDR 7.2 billion of the SDR 7.8 billion that had been available under the borrowing agreements was called upon and disbursed. Some of the undrawn balances at the time of expiration of the facility could not be utilized because the external positions of the lenders were not sufficiently strong.
Policy on Enlarged Access
The policy on enlarged access to Fund resources, adopted by the Executive Board on March 11, 19818, enabled the Fund—following the full commitment of resources from the supplementary financing facility—to continue to provide assistance to members whose balance of payments imbalances are large in relation to their quotas and which need resources in larger amounts and for longer periods than are available under the regular credit tranches.9
Without a decision by the Executive Board to extend the enlarged access policy, the Fund could not approve arrangements under the policy after the Eighth General Review of Quotas became effective on November 30, 1983. The Executive Board therefore decided10 to extend the policy on enlarged access up to the end of 1984, when the matter is to be reviewed again. In determining access to the Fund’s resources under the policy during 1984, the Executive Board agreed on guidelines that follow the recommendations of the Interim Committee. Access by members during 1984 will be subject to annual limits of 102 or 125 percent of quota, three-year limits of 306 or 375 percent of quota, and cumulative limits of 408 or 500 percent of quota, depending on the seriousness of the member’s balance of payments needs and the strength of its adjustment efforts. The access limits are not regarded as targets; within these limits, the amount of access in individual cases can vary according to the circumstances of the members and, in exceptional circumstances, can even exceed the limits. The access policy will be reviewed before December 31, 1984 and annually thereafter.
While reviewing the policy on enlarged access, the Executive Board simplified the provisions that determine the relative proportions of ordinary and borrowed resources to be used under stand-by and extended arrangements.11 The new proportions are as follows: (a) Under a stand-by arrangement, purchases will be made with ordinary and borrowed resources in the ratio of 2 to 1 in the first credit tranche and 1 to 1 in the next three credit tranches. Thereafter, purchases will be made with borrowed resources only, (b) Under an extended arrangement, purchases will be made with ordinary and borrowed resources in the ratio of 1 to 1 until the outstanding use of the upper credit tranches and the extended Fund facility equals 140 percent of quota. Thereafter purchases will be made with borrowed resources only. The new proportions are also applicable to amounts that had not been purchased under existing arrangements as of the effective date of the decision (i.e., January 6, 1984).
Compensatory Financing Facility
Under the compensatory financing facility the Fund provides financial assistance to members experiencing balance of payments difficulties arising from temporary export shortfalls and/or from increases in the cost of cereal imports caused by factors largely outside their control. Members have the option of including services—workers’ remittances and travel receipts—and cereal import costs, as well as merchandise exports, in the calculations.
In July 1983 the Executive Board undertook a comprehensive review of the facility, including the cereal decision and the buffer stock financing facility, and subsequently also reviewed various aspects of the facilities separately. It was decided to make no changes in the facilities, but, as the decision on cereals12 was established for an initial period of four years, this decision will be reviewed again prior to its expiration in mid-1985.
In September 1983, the Board adopted the guidelines on the requirement of cooperation in respect of purchases under the compensatory financing facility as a result of which the conditionality for purchases under this facility is brought more closely in line with that applying to purchases in the credit tranches.13 Following the review of the guidelines on members’ access to the Fund’s resources, the Executive Board reviewed the access limits under the compensatory financing facility and decided to reduce the quota limits (based on new quotas) applicable under the facility.14 The separate limits of 100 percent of quota on outstanding purchases relating to export shortfalls or cereal import excesses were reduced to 83 percent; the joint limit of 125 percent on outstanding purchases relating to both export shortfalls and cereal import excesses was reduced to 105 percent.
Purchases Relating to Export Fluctuations
In 1983/84, 13 members purchased a total of SDR 1.2 billion, about one third of the all-time high level of SDR 3.7 billion purchased by 29 members in 1982/83. The decline in purchases in 1983/84 represented a reversal of the sharp increase during the preceding two years that were associated with the 1981-82 world recession. The largest purchases were by Indonesia (SDR 360.0 million), Portugal (SDR 258.0 million), Ghana (SDR 120.5 million), and Zaïre (SDR 114.5 million). The remaining amounts ranged from SDR 1.2 million by Western Samoa to SDR 97.2 million by Zambia. Outstanding purchases under the facility as of April 30, 1984 amounted to SDR 6.8 billion by 72 members, or 22 percent of total outstanding use of Fund resources. Of these 72 members, 60 were also making use of Fund resources under standby and extended arrangements. Thirty members had compensatory financing purchases outstanding in excess of 50 percent of their quotas, but none was at 100 percent of quota.
Purchases Relating to Excesses in the Cost of Cereal Imports
For the first time since this decision became effective in May 1981, no purchases were made under it during the financial year. Since its inception, five members (Bangladesh, Kenya, Korea, Malawi, and Morocco) have made six purchases totaling SDR 498 million, of which SDR 469 million was outstanding as of April 30, 1984.
Buffer Stock Financing Facility
Assistance under the Fund’s buffer stock financing facility, established in 1969, is available to members in balance of payments need for financing their contributions to approved international buffer stocks of primary products. Purchases under this facility by five members in 1983/84 totaled SDR 102.0 million, compared with purchases by ten members amounting to SDR 352 million purchased in 1982/83. Three of the members, the Dominican Republic, Brazil, and Zimbabwe made purchases in connection with their obligations to constitute special stocks of sugar under the 1977 International Sugar Agreement. One member, Thailand, purchased SDR 21.8 million to make its compulsory contributions to the buffer stock of the Sixth International Tin Agreement, and another member, Ivory Coast, purchased SDR 1.0 million for its contributions to the buffer stock of the International Natural Rubber Agreement.
Since the establishment of the buffer stock financing facility in 1969,15 Fund assistance in connection with the Fourth, Fifth, and Sixth International Tin Agreements, the International Sugar Agreement, and the International Natural Rubber Agreement had, as of April 30, 1984, been extended to 18 members for a total of SDR 557.7 million. As of April 30, 1984 purchases outstanding under the facility (12 members) amounted to SDR 375.3 million.
The new access limit on outstanding purchases under this facility in January 1984, following the increase in quotas under the Eighth General Review, was reduced from 50 percent of quota to 45 percent of new quotas.16
During 1983/84 repurchases totaled SDR 2,018 million, compared with SDR 1,555 million in 1982/83. (See Appendix I, Table I.7.) The major portion (89 percent) of total repurchases was with respect to purchases financed from ordinary resources. About 49 percent of the total repurchases were related to credit tranche purchases, mostly under stand-by arrangements and a smaller amount under extended arrangements; 35 percent of repurchases were in respect of purchases under the compensatory financing facility. Most of the remainder was on account of purchases under the buffer stock and the supplementary financing facilities. A very small amount represented repurchases made early in May 1983 relating to purchases under the 1974 and 1975 oil facilities. As of May 11, 1983, all repurchases with respect to purchases under the 1974 and 1975 oil facilities were completed.
Two members, China (SDR 450 million) and Australia (SDR 32.5 million), made repurchases in accordance with the guidelines for early repurchases, under which members are expected to repurchase calculated amounts in advance of the normal schedule in the event of improvements in their balance of payments and reserve positions.17 One member, South Africa, repurchased on August 30, 1983, at its own initiative, SDR 50.0 million in advance of its scheduled commitment. Two countries, Tanzania (SDR 13.9 million) and the Central African Republic (SDR 0.2 million), repurchased SDR 14.1 million, reflecting purchases under the compensatory financing facility made on the basis of partly estimated export data that were later found to be in excess of the actual shortfalls.
The Fund’s liquidity position is reviewed regularly by the Executive Board. In looking at all the relevant factors, the Board particularly takes into account the need to maintain the liquidity of creditors’ claims on the Fund and the Fund’s ability to meet its responsibilities in helping to finance adjustment policies of its members. The latest of these reviews was carried out in April 1984. The Fund must have adequate ordinary and borrowed resources to meet possible demands for encashment of reserve tranche positions or creditors’ claims (all of which are generally encashable on representation of balance of payments need) and to cover existing and foreseeable demands for the use of its resources.
The Fund’s ordinary resources that are immediately available for use consist of usable currencies and the SDRs held in the General Resources Account.18 The usable currencies are those of the members whose balance of payments and gross reserve positions are considered by the Executive Board to be sufficiently strong to be sold by the Fund through its operational budget to finance other members’ purchases in a particular quarter. Decisions in this respect are taken each quarter and, consequently, the list of usable currencies varies with changes in members’ external payments and reserve positions. 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 external position is sufficiently strong. The Fund’s liquidity position improved substantially as a result of (i) payments for the quota increases under the Eighth General Review of Quotas, which added nearly SDR 20 billion to usable currencies and SDRs; (ii) the enlargement of the General Arrangements to Borrow, including the full participation by the Swiss National Bank and the conclusion of a borrowing arrangement with Saudi Arabia in association with the GAB; and (iii) the additional borrowing agreements for SDR 6 billion concluded in April 1984 to support the enlarged access policy. The number of usable currencies also increased during the financial year as a result of the improvement in the external positions of ten members and their consequent addition to the operational budgets.
As a result of these factors, the Fund’s total holdings of usable currencies and SDRs on April 30, 1984, at SDR 39.5 billion, were more than double their level a year earlier (SDR 18.7 billion). The uncommitted lines of credit on that date were close to SDR 3 billion, and the GAB and the associated arrangement, for a total of SDR 18.5 billion, had not been used. Liquid claims on the Fund as of April 30, 1984 amounted to SDR 41.2 billion, consisting of outstanding borrowing of SDR 13.8 billion and reserve tranche positions of SDR 27.4 billion. The bulk of these liquid claims were held by members in strong balance of payments and reserve positions with no immediate need to encash these claims on the Fund. In addition to these claims, undrawn balances under arrangements amounted to SDR 9.3 billion. The latter amount was reduced by SDR 1.1 billion on May 1, 1984 as a result of the cancellation of India’s extended arrangement. The total amount of resources released for other uses as a result of all the canceled arrangements equaled SDR 2.9 billion.
The Fund’s SDR holdings in the General Resources Account, amounting to SDR 6.4 billion as of April 30, 1984, accounted for 30 percent of the net cumulative allocation (SDR 21 billion), compared with 20 percent a year ago. This increase largely reflected the use of SDRs in asset payments for quota increases under the Eighth General Review of Quotas. The Executive Board decided19 that the Fund, in determining the relative use of currencies and SDRs in Fund transactions and operations, will be guided by the aim of reducing the Fund’s SDR holdings to a level of approximately SDR 4 billion by May 31, 1985. The Fund’s SDR holdings will be reviewed again by April 1985 to determine whether and to what extent they should be reduced further.
Borrowing provides an important temporary supplement to the Fund’s ordinary resources (mainly quota subscriptions). All borrowing by the Fund to date has been from official sources, which include its members, Switzerland, and central banks and other official institutions in these countries.
The Fund’s guidelines for borrowing were reviewed following completion of the Eighth General Review of Quotas.20 Under the guidelines, outstanding borrowings, plus unused lines of credit to the Fund, will not be allowed to exceed the range of 50 to 60 percent of the total of Fund quotas. In respect of the GAB and associated borrowing arrangements, the determination of the total of outstanding borrowing plus unused credit lines will be made on the basis of outstanding borrowings, or two thirds of the total under these arrangements, whichever is the greater. The proportion of the GAB that is to be included in the calculations was increased, as a result of the review, from one half to two thirds, primarily to reflect the fact that the resources derived from the GAB may now be used in certain circumstances to finance purchases by non-GAB participants. On April 30, 1984, the Fund’s total outstanding borrowing and unused lines of credit, calculated in accordance with these guidelines, amounted to SDR 34.4 billion, equivalent to 38.7 percent of quotas (33.1 percent of quotas on April 30, 1983). The guidelines will be reviewed again in case of major developments, including any significant change in the GAB or associated arrangements and, in any event, when the Board of Governors has completed the Ninth General Review of Quotas. The Fund’s current borrowing arrangements are described below.
General Arrangements to Borrow and Associated Arrangements
The purpose of the General Arrangements to Borrow is to provide supplementary resources to the Fund if needed to forestall or cope with an impairment of the international monetary system. Originally concluded between the Fund and ten individual member countries (the Group of Ten) in 1962 for four years, the Arrangements have been periodically reviewed and renewed with some modifications. Switzerland became associated with the GAB in 1964. The last borrowing under the GAB was in 1978 in connection with a reserve tranche purchase by the United States, and this amount was fully repaid in November 1983.
On January 18, 1983 the Ministers and Governors of the Group of Ten agreed on revisions and a major enlargement of the GAB from about SDR 6.4 billion to SDR 17.0 billion. The revision and enlargement of the GAB were approved by the Executive Board on February 24, 1983 and came into effect on December 26, 1983, when all ten of the original participants had notified the Fund of their concurrence.21 In accordance with provisions of the revised GAB decision, the Swiss National Bank became a participant on April 10,1984.
Under the revised GAB the Fund can enter into associated borrowing agreements. One such agreement has been concluded with Saudi Arabia, for SDR 1.5 billion, and came into effect at the same time as the revised GAB. (See Table 20.) The other principal revisions of the GAB are as follows:22
|Swiss National Bank||1,020,000,000|
|Credit arrangements associated with the General|
Arrangements to Borrow:
|Total General Arrangements to Borrow and|
associated lines of credit
(i) The Fund will be permitted to borrow under certain circumstances to finance transactions with members that are not GAB participants.
(ii) The interest rate is amended to equal the combined market interest rate computed by the Fund from time to time to determine the SDR rate.
(iii)The credit arrangements of participants are denominated in SDRs.
The revised GAB decision will be in effect for five years from its effective date, subject to further review and renewal. The Fund and the participants in the GAB will review the functioning of the decision when considering renewal of the arrangements.
Supplementary Financing Facility
Borrowing arrangements under the supplementary financing facility were concluded with 13 member countries and the Swiss National Bank.23 (See Appendix I, Table 1.9.) None of the funds were to be committed after February 22, 1982 or to be disbursed after February 22, 1984.
Borrowing under the supplementary financing facility during 1983/84 amounted to SDR 1.1 billion, bringing the total of such borrowings to SDR 7.2 billion over the period of five years since the facility was activated. An amount of SDR 0.6 billion remained undrawn at the expiration of the agreements, of which SDR 0.3 billion had not been called because the balance of payments and reserve positions of some lenders were not sufficiently strong.
Repayments under the supplementary financing facility, which began in November 1982, amounted to SDR 202 million during the financial year, bringing the total amount of repayments to SDR 317.4 million by April 30, 1984. The remaining repayments due by the final maturity date of April 30, 1991 amount to SDR 6.9 million.
Borrowing to Finance Enlarged Access
The Fund’s policy on enlarged access became operational with the signing of a medium-term borrowing agreement for SDR 8.0 billion with the Saudi Arabian Monetary Agency in May 1981. The Fund had borrowed SDR 3.6 billion under the agreement through April 30, 1983, and further borrowings amounted to SDR 2.1 billion in 1983/84. The commitment period under the agreement with SAMA expires on May 6, 1987.
Under 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 that amount, SDR 675 million was provided under a borrowing agreement with the Bank for International Settlements. At the end of the financial year 1983/84, the amount of SDR 1.3 billion had been fully utilized, except for a very small amount that was not drawn before an agreement expired. These short-term borrowings by the Fund, of which SDR 1.17 million was outstanding on April 30, 1984, are to be repaid in full in the period to end-January 1985.
At the end of April 1984, the Fund concluded four new short-term borrowing agreements for a total of SDR 6 billion with SAMA, the BIS, Japan, and the National Bank of Belgium. The agreement with SAMA takes the form of a supplement to its 1981 borrowing agreement with the Fund.
The four new borrowing agreements (all denominated in SDRs) are broadly parallel with respect to their principal terms and conditions, with variations reflecting the lenders’ preferences and the Fund’s projected requirements for utilizing the resources available under the agreements. The drawdown period under three of the agreements is for one year, beginning on April 30, 1984 in respect of the BIS and Japan and on June 30, 1984 in the case of Belgium. Drawings on the agreement with SAMA may be made by the Fund beginning in 1985 and through May 6, 1987. The final maturity of each drawing under the agreements will be two and one half years after the date of the drawing.
Borrowed Resources Suspense Accounts
The borrowed resources suspense accounts hold funds borrowed under the policy of enlarged access pending their use in purchases, or amounts received in repurchases pending repayments to lenders. The amounts 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, to generate income to offset the borrowing cost, and to relieve the Fund of exchange risk.24 During 1983/84 the assets in the account consisted entirely of deposits with the Bank for International Settlements, which totaled SDR 0.6 million on April 30, 1984, substantially less than one half of the SDR 1.7 million a year before.
The Fund, under the current decisions of the Executive Board, as noted in the Annual Report for 1982, aims at maintaining over time a positive income position for the Fund and concessionality in the rate of charge on the use of ordinary resources consistent with an appropriate rate of remuneration for creditors and a modest increase in the Fund’s reserves over time.
On January 6, 1984, a decision was taken by the Executive Board to narrow the differential between the rate of remuneration and the SDR interest rate by raising the remuneration coefficient (i.e., the ratio of the rate of remuneration to the SDR interest rate) in stages.25 Under this decision, the Executive Board agreed on a formula whereby the remuneration coefficient would be raised on May 1 of each of the years 1984, 1985, and 1986 to specified levels, with additional adjustments depending on interest rate developments. For the financial year beginning May 1, 1984, the rate of remuneration was increased to 88.33 percent of the SDR rate of interest and will be further increased to 91.66 percent and 94.99 percent of the SDR rate of interest on May 1, 1985 and May 1, 1986, respectively. A review of the rate of remuneration will be held between May 1, 1986 and May 1, 1987, taking into account all relevant factors, including the SDR interest rate and the rate of charge.
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 representing the counterpart of the member’s outstanding use of Fund credit) 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 percent 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 1984, the average of the norms for all Fund members was 91.71 percent of quota.
|April 1, 1983||8.52||7.24|
|July 1, 1983||8.65||7.35|
|August 1, 1983||8.81||7.49|
|August 8, 1983||8.96||7.62|
|August 15, 1983||9.03||7.68|
|August 22, 1983||8.89||7.56|
|August 29, 1983||8.84||7.51|
|September 5, 1983||8.93||7.59|
|September 12, 1983||8.84||7.51|
|September 19, 1983||8.79||7.47|
|September 26, 1983||8.64||7.34|
|October 3, 1983||8.56||7.28|
|October 10, 1983||8.53||7.25|
|October 17, 1983||8.63||7.34|
|October 24, 1983||8.50||7.23|
|October 31, 1983||8.47||7.20|
|November 7, 1983||8.59||7.30|
|November 14, 1983||8.56||7.28|
|November 21, 1983||8.63||7.34|
|November 28, 1983||8.60||7.31|
|December 5, 1983||8.67||7.37|
|December 12, 1983||8.72||7.41|
|December 19, 1983||8.80||7.48|
|December 26, 1983||8.70||7.40|
|January 2, 1984||8.69||7.39|
|January 9, 1984||8.57||7.28|
|January 16, 1984||8.51||7.23|
|January 23, 1984||8.63||7.34|
|January 30, 1984||8.60||7.31|
|February 6, 1984||8.62||7.33|
|February 13, 1984||8.68||7.38|
|February 20, 1984||8.73||7.42|
|February 27, 1984||8.74||7.43|
|March 5, 1984||8.68||7.38|
|March 12, 1984||8.75||7.44|
|March 19, 1984||8.82||7.50|
|March 26, 1984||9.00||7.65|
|April 2, 1984||8.95||7.61|
|April 9, 1984||8.92||7.58|
|April 16, 1984||8.94||7.60|
|April 23, 1984||8.94||7.60|
|April 30, 1984||8.91||7.57|
|May 1, 1984||8.91||7.87|
|May 7, 1984||9.03||7.98|Chart 22.SDR Interest Rate, Rate of Remuneration, and Short-Term Interest Rates, July 1974-June 19841
1 Data are monthly averages. 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.
Charges and Remuneration
Under the procedures in effect since May 1, 1981 the Executive Board determines at the beginning of each financial year a rate of charge applicable to members’ use of the Fund’s ordinary resources. The rate of charge is based on the estimated income and expense of the Fund for the year ahead and takes into account a target amount of net income for the year. For the financial year 1983/84, 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 6.6 percent per annum. Following the review of the Fund’s income position in May 1984, a rate of 7 percent will apply from May 1, 1984.
The 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 reflect the costs incurred by the Fund in borrowing to finance these facilities. The rates of charge applicable to purchases under the oil facility for 1975 had progressed to the maximum level of 7.875 percent per annum during the year under review. As the balances under the oil facility have all been repurchased, this schedule of charges no longer applied after May 1983. The rates of charges applied to the use of borrowed resources under the supplementary financing facility and the policy on enlarged access continued to be determined on the same basis as in the previous financial years. The rate of charge under the supplementary financing facility is the rate of interest paid by the Fund plus 0.2 percent in the first three and one half years and plus 0.325 percent after three and one half years. Under the enlarged access policy, the rate of charge is the net cost of borrowing by the Fund plus 0.2 percent per annum. The average rates of interest per annum on outstanding Fund borrowings for the year ended April 30, 1984 were 4 percent (General Arrangements to Borrow), 7.25 percent (oil facility), 11.49 percent (supplementary financing facility), and 10.32 percent (enlarged access to resources). All GAB and oil facility loans were repaid during 1983/84.
Income, Expense, and Reserves
For the financial year ended April 30, 1984, the Fund’s net income was SDR 73 million, compared with SDR 65 million in 1982/83. These results reflect an increase in operational income of SDR 747 million, primarily from periodic charges. The increase in income from periodic charges, SDR 819 million, reflected the increase in use of the Fund’s resources. Net operational income for the year ended April 30, 1984 was SDR 266 million, compared with SDR 257 million in 1982/83. The total Fund holdings of members’ currencies subject to charges (i.e., Fund credit extended to members) amounted to SDR 31,742 million on April 30, 1984, compared with SDR 23,590 million on April 30, 1983. The Fund’s average holdings of SDRs in 1983/84 were marginally lower than in the previous year, and the interest on these holdings was also lower than in 1982/83 as a result of lower interest rates (8.70 percent in 1983/84 and 10.20 percent in 1982/83).
The Fund’s operational expense, comprising remuneration payable by the Fund on the use of creditor currencies and interest on borrowing, increased by SDR 738 million over the previous year, to SDR 2,526 million. This reflected increases both in remuneration (SDR 305 million) and interest payments (SDR 433 million) over the previous year. Outstanding borrowing on April 30, 1984 amounted to SDR 13,791 million, compared with SDR 10,952 million at the end of 1982/83.
Although the average rate of remuneration in 1983/ 84 was lower than in the previous year (7.39 percent in 1983/84 and 8.42 percent in 1982/83), the Fund’s remuneration expense was greater owing mainly to the expansion of members’ remunerated positions resulting from the increase in the financing provided to members from the Fund’s ordinary resources. Remunerated positions of members at April 30, 1984 amounted to SDR 21,200 million, compared with SDR 14,997 million at the end of 1982/83. The remuneration paid in 1983/84 amounted to SDR 1,286.32 million (70 member countries), against SDR 981.12 million paid in 1982/83 (74 member countries). Administrative expenses of the Fund in 1983/84 were SDR 193 million, compared with SDR 191 million in the previous year.
The Articles of Agreement and the Rules and Regulations provide that the Fund shall determine at the end of each financial year the disposition of its 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 reserves. The Executive Board determined that the net income for the financial year ended April 30, 1984 shall be placed to the 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 1983/84, amounted to SDR 1,074 million as against SDR 1,000 million at the end of 1982/83. Over the past seven years, the Fund’s total reserves, even with the successive addition of net income since 1978, have declined steadily in relation to all relevant financial magnitudes, namely, quotas, credit to members, borrowings and liquid claims on the Fund, and the volume of the Fund’s gross income and expense.
The most notable feature of activity in the SDR Department26 during 1983/84 was the record level of total transfers, which amounted to SDR 22.6 billion, about double the amount for 1982/83 (SDR 11.0 billion) and well in excess of the previous peak in 1980/81 (SDR 12.2 billion). This exceptionally large volume of transfers reflected the use of SDRs by a large number of participants to pay the reserve asset component of their quota increase payments pursuant to the Eighth General Review of Quotas.
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 on members’ creditor positions in the Fund at the conclusion of each financial year. From May 1, 1981 until April 30, 1984, the SDR rate of interest was maintained at 100 percent of the combined market rate of interest and the rate of remuneration at 85 percent of the SDR rate of interest.
The Executive Board adopted a decision, effective August 1, 1983, on the SDR interest rate and related matters. The general purpose of the decision was to further enhance the role of the SDR as an international reserve asset by bringing its yield closer in line with yields on other reserve assets included in the SDR interest basket.27 This decision amended the Fund’s Rules relating to the determination and payment of interest and charges on SDRs (Rule T-l) and of remuneration (Rules I-9 and I-10). Commencing August 1, 1983, the SDR interest rate and charges, as well as the rate of remuneration on members’ creditor positions, have been calculated on a weekly instead of a quarterly basis. The combined market interest rate used to determine the SDR interest rate is calculated on Friday (using the interest rates of that day); the SDR interest rate becomes effective the following Monday and applies until the following Sunday. Consequent upon the weekly determination of the SDR interest rate, the 15-day reference period used heretofore to calculate the combined market interest rate was replaced with a single reference day. Effective August 1, 1983, the timing of payment of SDR interest and charges, as well as remuneration, was changed from an annual to a quarterly frequency.
Prescribed Holders of SDRs
During the year ended April 30, 1984, the Fund prescribed one more institution (the East African Development Bank) as a holder of SDRs, bringing to 14 the total number of “prescribed holders.” The Fund also prescribed the Eastern Caribbean Central Bank as a holder of SDRs. The Bank is the successor to the East Caribbean Currency Authority, which itself was a prescribed holder. The prescribed holders now comprise four central banks (the Bank of Central African States, Yaounde; the Central Bank of West African States, Dakar; the Eastern Caribbean Central Bank, Basseterre, St. Kitts; and the Swiss National Bank, Zurich); three intergovernmental monetary institutions (the Bank for International Settlements, Basle; the Andean Reserve Fund, Bogota; and the Arab Monetary Fund, Abu Dhabi); and seven development institutions (the Asian Development Bank, Manila; the East African Development Bank, Kampala; the International Bank for Reconstruction and Development, Washington, D.C.; the International Development Association, Washington, D.C.; the International Fund for Agricultural Development, Rome; the Islamic Development Bank, Jeddah; and the Nordic Investment Bank, Helsinki).
Prescribed holders can acquire and use SDRs in transactions and operations by agreement with participants in the SDR Department (Fund members) and other 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 206 million, compared with SDR 126 million in the preceding year. These transfers comprised SDR 103 million in transactions by agreement, SDR 83 million in loans, SDR 18 million in settlement of financial obligations, and SDR 2 million in interest receipts on their SDR holdings. At the end of April 1984, seven institutions held SDR 37 million, more than double the SDR 16 million held by five prescribed holders at the end of April 1983. Their highest level of holdings at a month-end was SDR 61 million in August 1983, and the lowest was SDR 29 million in December 1983.
Transactions and Operations in SDRs28
Transactions by Agreement
Transactions by agreement during 1983/84 amounted to SDR 3,175 million, the highest annual level to date.29 The volume of transactions by agreement exceeded the volume of transactions with designation (discussed below) for the first time since 1978/79. The bulk of the transactions by agreement represented acquisitions of SDRs by members that needed SDRs to pay the reserve asset portion of the quota increase, charges to the Fund’s General Resources Account, or net charges on the use of SDRs. The major sellers of SDRs in 1983/ 84 were the Federal Republic of Germany, the United Kingdom, Japan, Italy, and Colombia.
Transactions with Designation
The designation mechanism ensures that participants can obtain currency against SDRs if they have a balance of payments need. In 1983/84, 44 participants used SDR 2,402 million in transactions with designation to obtain currencies from 23 participants designated by the Fund. Of this total, SDR 2,313 million represented the immediate use of SDRs acquired from the Fund’s General Resources Account in purchases, and the remainder represented the use of participants’ own SDR holdings. About 60 percent of SDRs received in purchases were used in transactions with designation, compared with 71 percent in 1982/83 and an average of 76 percent over the preceding four years. Of the 23 countries designated to provide currency in exchange for SDRs, 14 industrial countries received SDR 2,137 million, 3 oil exporting countries received SDR 24 million, and 5 non-oil developing countries received SDR 241 million. The largest amounts of currency in designated transactions were provided by the United Kingdom, the Federal Republic of Germany, Italy, Canada, China, and the United States.
Additional Uses of SDRs
The Fund permits additional uses of SDRs among participants and prescribed holders.30 Such operations, which are in the nature of voluntary transfers other than transactions by agreement, amounted to SDR 1,194 million in 1983/84. Of this total, SDR 1,080 million represented loans and repayments of SDRs in connection with payments for quota increases. SDRs were used in ten loans (other than for quota payments) for a total of SDR 89 million, primarily for balance of payments support by an international financial organization to its member countries. Two Fund members also made loans, one to another member and one to a prescribed holder.
SDRs were used in the settlement of 14 financial obligations (other than in repayment of loans for quota payments) for a total of SDR 25 million. These transfers represented primarily debt service on loans. Two of the transfers represented the drawing down by a prescribed holder of a deposit denominated in currency with the central bank of a participant, and one of the transfers represented partial payment of a capital subscription. The cumulative total of SDRs transferred in all such operations since they were first permitted in 1978 was SDR 1,748 million at the end of April 1984.
Transactions Involving the General Resources Account
The General Resources Account’s holdings of SDRs on April 30, 1984 were SDR 6,437 million, compared with SDR 4,335 million on April 30, 1983. In May 1983, the Executive Board adopted a decision that aimed at reducing the Fund’s SDR holdings to approximately SDR 1.5 billion by the end of 1983, and this level was reached by the end of November 1983. After quota payments had increased the Fund’s holdings of SDRs to SDR 7,175 million by the end of January 1984, the Executive Board decided that the amount of SDRs the Fund would transfer in purchases would be guided by the aim of reducing those holdings to approximately SDR 4 billion by May 31, 1985.31 The use of SDRs in purchases is the principal instrument by which the Fund can influence the level of its SDR holdings in the General Resources Account.
The bulk of the inflows of SDRs to the General Resources Account, amounting to SDR 6,195 million, represented payment of quota increases, followed by payment of charges on the use of Fund resources.
Repurchases that were discharged at the member’s option in SDRs rather than in a currency specified by the Fund amounted to SDR 392 million, compared with SDR 566 million in 1982/83. Repurchases discharged in SDRs amounted to 18 percent of total repurchases in 1983/84, compared with the 36 percent of total repurchases made in SDRs in 1982/83. This tendency to use currencies rather than SDRs in repurchases resulted from the low level of SDR holdings of many countries, especially after the quota subscription payments were made.
SDRs transferred from the General Resources Account to members amounted to SDR 6,794 million, compared with SDR 3,714 million in 1982/83. The major outflow was the use of SDR 3,876 million in purchases, which accounted for 61 percent of total purchases financed from the Fund’s ordinary resources and was the largest volume of SDR purchases in any financial year to date. The substantial transfers of SDRs in purchases reflected the aim of reducing the General Resources Account’s SDR holdings to approximately SDR 4 billion by the end of May 1985. Payment of remuneration amounted to SDR 1,573 million to 79 countries, compared with SDR 861 million in 1982/83. This increase also reflected the fact that 1983/84 was a transitional year in which the payment of remuneration was changed from an annual to a quarterly basis. The payment in May 1983 represented accrued remuneration during the financial year 1982/83, while payments in November 1983 and February 1984 represented accruals over the previous quarter. The Fund used a total of SDR 989 million to pay interest and make repayments of principal to lenders to the Fund. The most important items were repayments of SDR 777 million to two countries (the Federal Republic of Germany and Japan) on Fund borrowing under the General Arrangements to Borrow. The General Resources Account also sold SDR 330 million to countries needing them to pay charges to the Fund or to settle charges on their net use of SDRs.
Pattern of Holdings by Participants
Despite the large volume of turnover of SDRs, there was little change in the pattern of SDR holdings among the main groups of countries in 1983/84. As at May 1, 1984 (after payment of interest and charges), industrial countries held 78 percent of total SDR holdings by participants, compared with 81 percent on April 30, 1983, while non-oil developing countries held 11 percent, against 8 percent in April 1983. The share in holdings of the oil exporting countries was unchanged at 11 percent. The shares of the three main groups of countries in cumulative allocations of SDRs are 67 percent for industrial countries, 26 percent for non-oil developing countries, and 7 percent for oil exporting countries.
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 among 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) by a number of international and regional organizations and in capital markets.32 A number of international conventions use the SDR to express monetary magnitudes, notably those 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 as 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. However, the diminished private market interest in SDR-denominated instruments observed during 1982 continued during 1983. No SDR-denominated bond issues took place during 1983, and the amount of SDR-denominated deposits and bank credits has remained modest. This lack of activity seems to reflect the continued strength of the U.S. dollar during the year.
As of June 30, 1984, 11 countries had currencies pegged to the SDR, against 14 countries as of June 30, 1983. 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.
The Fund administers as a Trustee, in addition to its Staff Retirement Plan, two accounts for member countries, namely, the Trust Fund and the supplementary financing facility subsidy account. Another administered account, the oil facility subsidy account, was terminated in August 1983 after completion of repayment of purchases under the facility. These administered accounts are separate from the Fund’s General Department and the SDR Department.
The Trust Fund, which used part of the proceeds of gold auctioned by the Fund to make loans on concessional terms to low-income member countries, was terminated as of April 30, 1981.33 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 14.7 million were collected in June 1983 and January 1984. Repayments of Trust Fund loans, which began in July 1982, were made by 38 countries in 1983/84 and amounted to SDR 114.1 million. As of April 30, 1984, Trust Fund loans outstanding amounted to SDR 2,861.9 million.
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, which was in operation from June 1975 through May 1976. It was the first trust arrangement established by the Fund for a particular group of Fund members. In that sense, the account was a forerunner of the Trust Fund and the supplementary financing facility subsidy account. The contributions to the account, amounting to SDR 160 million from 24 member countries and Switzerland, demonstrated a significant cooperative response to help meet the needs of the poorest members of the Fund during generally difficult international financial circumstances.34 In addition to the contributions, the account was also financed by the earnings, amounting to SDR 26.5 million, on the investments of the contributions, pending their disbursement.
The amount of subsidy for each eligible member was calculated as a percentage per annum on the average daily balances subject to charges of the member’s outstanding purchases under the 1975 oil facility. Following subsidy payments in June 1983 at 5 percent for the period May 1, 1982 through May 11, 1983 (the date of the last scheduled repurchases under the 1975 oil facility), a balance of SDR 11.7 million remained in the account. Subsequently, an additional payment was made to eligible beneficiaries at a rate of 0.33 percent per annum on average balances that were eligible for subsidy during the lifetime of the facility. This payment was made in early August 1983 to all the 25 recipients in proportion to their eligible average balances. This raised the rate of subsidy to all eligible members over the life of the account from 5 percent per annum to 5.33 percent. These payments fully utilized the remaining resources of the account, which was terminated on August 15,1983. The total payments under the account amounted to SDR 186.8 million. The recipients and the amounts disbursed are shown in Table 22.
on Use of 1975
|Central African Republic||2.66||1.04||0.73|
|Papua New Guinea||14.80||4.12||2.93|
|Yemen, People’s Democratic Republic of||12.02||4.70||3.29|
Subsidy payments from the account amounted to an equivalent of 68.6 percent of the total charges paid by eligible beneficiaries on their drawings under the oil facility and 10.8 percent of the total charges paid by eligible beneficiaries on their total indebtedness to the Fund over the financial years 1976-83. The subsidy payments amounted to 23.2 percent of total oil facility drawings and increased the grant element in drawings under the facility to 30 percent. Thus, the subsidy account fulfilled its objective of substantially reducing the net cost to those most seriously affected members that used the 1975 oil facility.
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. The primary sources of funds for the account are from repayments of, and interest on, Trust Fund loans (up to SDR 750 million), which are transferred to the account via the special disbursement account.35 By April 30, 1984 the account had received SDR 174.9 million from this source. In addition, the account is financed through donations and loans and through income on the investment of resources held pending disbursement. Details of contributions received by April 30, 1984 are shown in Table 23.
Subsidy payments are calculated as a percentage per annum of the average daily balance of the Fund’s holdings of a member’s currency that result from purchases under the supplementary financing facility and are consistent with the repurchase provisions of that facility. 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 percent 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. All payments to date have been made at the maximum rates, that is, 3 percent and 1.5 percent.
The payments under the account to eligible members totaled SDR 217.18 million. (See Table 24.) Four eligible members had not paid the charges due on the balances to which the subsidy was to be applied. Consequently the subsidy payments to those members have been withheld until those charges are paid. Pending further payments of subsidy, the investments of the account are held in SDR-denominated deposits with the Bank for International Settlements. As of April 30, 1984, these deposits amounted to SDR 98.4 million, with accrued interest of SDR 2.2 million.
June 30, 1983
|Recipients of subsidy at 3 percent|
|Recipients of subsidy at 1.5 percent|
Subsidy paid in respect of Fund holdings in excess of 140 percent of quota under the Fund’s policy on exceptional use.
Subsidy paid in respect of Fund holdings in excess of 200 percent of quota under the Fund’s policy on exceptional use.
Subsidy paid in respect of Fund holdings in excess of 140 percent of quota under the Fund’s policy on exceptional use.
Subsidy paid in respect of Fund holdings in excess of 200 percent of quota under the Fund’s policy on exceptional use.
Consultations with Member Countries
As noted in Chapter 2, 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. While in practice it has been impossible to attain the objective of annual consultations with all members, procedural changes that were introduced last year to ensure greater regularity of consultations are proving effective.
In 1983/84, the Fund completed 117 Article IV consultations (up from 98 in 1982/83 and from 79 in 1981/82), of which 65 were with countries availing themselves of the transitional arrangements under Article XIV and 52 with countries that had formally accepted the obligations of Article VIII. Membership coverage rose to 78 percent. The marked increase in consultations included virtually all members for which consultations were clearly overdue, except in a few cases involving security problems.
In addition to the regular Article IV consultations, special consultations were held with major industrial countries in connection with the world economic outlook reviews 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.
During 1983/84, three countries, Belize (June 14, 1983), Iceland (September 19, 1983), and Antigua and Barbuda (November 22, 1983) accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement, raising to 59 the number of members that have formally accepted these obligations. Eighty-seven members were availing themselves of the transitional arrangements under Article XIV, Section 2 at the end of the financial year.
Since mid-1982, Fund management and staff have frequently assisted member countries in the resolution of debt-servicing difficulties with international banks and in the arrangement of new medium-term financial lending packages. From January 1983 to April 1984, 17 Fund member countries—all within the group of developing countries—signed debt restructuring agreements with international banks. Amounts restructured and new financing arranged as part of the restructuring in conjunction with Fund-supported adjustment programs reached some $94 billion, or the equivalent of more than 20 percent of the bank debt of developing countries. In 1983, bank debt restructurings reduced the debt service of non-oil developing countries by an estimated $24 billion, or the equivalent of 5 percent of their exports of goods and services. Restructurings agreed to in the first four months of 1984 are projected to result in a further reduction of debt service payments by at least $10 billion. In late 1983 and early 1984, a narrowing of spreads and a lengthening of grace periods and final maturities occurred for countries that had previously undergone debt restructurings and made significant progress in implementing Fund-supported adjustment programs.
The extent of official multilateral debt reschedulings has risen sharply in recent years. During 1982, 6 Fund member countries rescheduled an estimated debt of $500 million owed to official creditors. However, in the 16-month period ended April 30, 1984, the number of official debt reschedulings with Fund members reached 18, involving an estimated total debt of $10.9 billion. Over the period since 1981, of the total number of reschedulings involved (24), the majority (16) covered debt owed by African countries.
With the exception of Mexico (where the rescheduling was concluded at a meeting of creditors held at the Organization for Economic Cooperation and Development—OECD), the official debt rescheduling negotiations were conducted under the auspices of the Paris Club. In all cases, the rescheduling agreement was concluded only after the Fund’s Executive Board had approved a stand-by or extended arrangement involving upper credit tranche conditionality with the debtor country concerned. Fund staff representatives participated as observers in all of the OECD and Paris Club meetings.
Technical Assistance and Training
During 1983/84, technical assistance continued to be an important part of the Fund’s work. Such assistance is provided at the request of members and includes training at headquarters, staff missions to member countries, and the stationing of staff members and outside experts in member countries, as well as the assistance customarily provided through the Fund’s consultation procedures under Article IV or in connection with adjustment programs.
During 1983/84, the IMF Institute continued the high level of operations of previous years. It conducted 13 courses, and for the second time held seminars on Central Banking and on Budgeting and Expenditure Control. The number of participants attending seminars totaled 63, a decline from 84 in 1982/83 when three seminars were held, while the number of participants in the regular Institute training courses increased by 142 to 426. Altogether, some 4,000 officials from 145 member countries have participated in the programs of the IMF Institute since its inception in 1964.
The 18-week Financial Analysis and Policy course in English presented an exposition of 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 Arabic-speaking participants to follow the course in their own language. The 12-week course on Financial Programming and Policy, conducted separately in English, French, and Spanish, is shorter and more intensive than the course on Financial Analysis and Policy. It reviewed techniques of financial programming, examined the Fund’s procedures and policies, and dealt with the problems of policy formulation and implementation related to the short-term and medium-term economic management. The course on Techniques of Economic Analysis was conducted in English and French over an 8-week period. It described the principal macroeconomic 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 was offered in English, in cooperation with the Fiscal Affairs Department. It 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 was presented in English, in collaboration with the Bureau of Statistics. It 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 was conducted in English and French, also in cooperation with the Bureau of Statistics. This course applied the concepts, definitions, and procedures in the Draft Manual on Government Finance Statistics for compiling statistics from accounts in the public sector.
The Institute’s External Training activities underwent considerable expansion during 1983/84. Country seminars were conducted in Egypt and Nepal and focused on the economic problems and policy issues facing these countries; a regional seminar on financial policy was held in Barbados, concentrating on issues of common interest to the Caribbean countries; and a course on banking and monetary policy was conducted in China. Lecturing assistance was also provided to five regional organizations and national training institutions.
The provision of technical assistance on fiscal matters to member countries continues to be a major activity of the Fiscal Affairs Department. Advice again covered a wide range of fiscal subjects on both policy and administration related to taxes, the budget system and procedures, accounting, auditing, and financial reporting. Such technical assistance contributed to successful adjustment in a number of countries by easing constraints on the effective implementation of fiscal adjustment measures. This assistance continued to be given through a mixture of staff missions and the use of members of the panel of fiscal experts, most often by field assignments. In 1983/84 technical assistance was given to 44 countries, compared with 45 in 1982/83, 52 in 1981/82, and 38 in 1980/81. During 1983/84 there were 42 long-term and 38 short-term assignments in the field, totaling 80 individual assignments and 379 man-months; 56 panel members and 19 staff members undertook technical assistance work. Support and guidance to experts in the field is provided from headquarters. In January-February 1984, the Fiscal Affairs Department held a French-language seminar on budget and expenditure control problems, attended by 32 senior officers from member countries.
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 on assignments in executive or advisory positions with central monetary institutions and provided about 91 staff-years of assistance, most of which was in the fields of research and statistics, bank supervision, and banking and foreign exchange operations. Departmental staff carried out 23 advisory and assessment missions and participated in 9 missions led by Area Departments. Advice was given on topics that included central banking and financial system legislation (in cooperation with the Legal Department), procedures to follow in organizing a monetary union, organization and operation of central banks, structure and development of the financial system, and the design of monetary policy instruments.
The program of technical assistance in the area of external debt, which was instituted in the Central Banking Department last year, underwent significant expansion during the financial year. Experts and consultants have been assigned to 14 member countries to assist in the establishment of a permanent national machinery for the reporting, control, and management of external debt operations, and in the collection of debt statistics.
A second seminar on central banking, attended by senior officials of central banks of member countries, was conducted jointly by the Central Banking Department and the IMF Institute in August 1983. The Department also collaborated with the Institute in conducting the course on banking and monetary policy in China in October 1983. During the year, further progress was made in expanding the Department’s computerized data base of central banking legislation and in instituting new research programs in support of the advisory work of the Department.
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, international banking, and general economic data. During 1983/84, the staff of the Bureau of Statistics participated in 72 technical assistance missions to 57 countries and 2 regional organizations (Central Bank of West African States and the Eastern Caribbean Central Bank). Bureau staff also gave lectures on balance of payments methodology, government finance statistics, and other statistics. In addition, 13 officials from countries or regional organizations visited the Bureau for training in the various fields of statistics.
In 1983/84, the Bureau of Computing Services provided technical assistance to two member countries— Pakistan and Ethiopia—to review the current computer applications, methodology, and procedures for processing financial and economic data, to assess the available computing technology and facilities, and to provide technical advice on the development of a comprehensive plan for the establishment of computerized data bases. These data bases will benefit the member country and will support the work of the Bureau of Statistics and the respective Area Departments by providing timely and convenient access to accurate financial and economic data.
Relations with Other International Organizations
Considerations relating to the problem of the unprecedented levels of external debt of a number of developing member countries heavily influenced the Fund’s relations with other international organizations in the economic and financial fields during the past year. As noted earlier, perhaps the most obvious and immediate manifestation of the Fund’s involvement in the areas of debt renegotiation and aid coordination was the attendance by its staff at the series of meetings on the rescheduling of external debt, which have come to be known as Paris Club meetings. During 1983/84, the Fund attended meetings on debt reschedulings for Brazil, the Central African Republic, Ecuador, Ivory Coast, Liberia, Madagascar, Malawi, Morocco, Peru, Romania, Senegal, Sierra Leone, Zaïre, and Zambia. The Fund was also represented at a meeting of principal aid donor countries with Morocco convened by the World Bank in Washington on September 28, 1983, and, pursuant to that meeting, convened a gathering at the Fund’s Paris Office on November 3, 1983 on the subject of coordination of balance of payments assistance to Morocco. At the invitation of the World Bank, the Fund participated in meetings of the Aid Groups for Bangladesh, Nepal, and Sri Lanka, in the Consultative Group meetings for Ghana, Kenya, Mauritius, the Philippines, Somalia, Sudan, Uganda, and Zaïre, and in the meetings of the Consortia for India and for Pakistan, all convened in Paris. A Fund staff member was also present at the twenty-sixth meeting of the Intergovernmental Group on Indonesia, held on June 13-14, 1983 in The Hague, under the sponsorship of the Government of the Netherlands.
The Fund strengthened its already close ties with other international and regional organizations sharing common interests, especially the World Bank, with which it has developed a unique relationship over the years. Information and expertise are regularly exchanged between the two institutions, and staff members of each organization participate, on occasion, in the missions and related activities of the other. Cooperation with the Organization of American States, especially with its Inter-American Economic and Social Council and the 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 has also been, and continues to be, of considerable importance to the Fund. Relations with the United Nations are maintained primarily by the Office of the Fund’s Special Representative to the United Nations in New York, as well as by frequent exchanges of views and by occasional exchanges of documents with the agency’s relevant organs, especially with the regional economic commissions. The Fund maintains a European office in Paris, among the responsibilities of which is the maintenance of continuous liaison with the Organization for Economic Cooperation and Development, the Commission of the European Communities, and the Bank for International Settlements. The Fund’s Office in Geneva is responsible for liaison with the United Nations Conference on Trade and Development (UNCTAD) and its various bodies, and with the General Agreement on Tariffs and Trade (GATT). These efforts are supplemented, as necessary, by the assignment of headquarters’ staff and resident representatives in the field. Activities include the exchange of pertinent documents with other organizations and the attendance by staff members at meetings and seminars, either as participants or as observers.
As part of the Fund’s effort to strengthen its relationship with the GATT, information and expertise, as well as copies of pertinent documents, were provided to that organization’s Committee on Balance of Payments Restrictions in connection with its consultations with common member countries on trade restrictions imposed for balance of payments purposes. A Fund observer was also present at certain meetings of the GATT Council of Representatives, and at the thirty-ninth session of the Contracting Parties. In response to a request received by the Managing Director from the Director-General of the GATT, Fund staff prepared a paper entitled “Exchange Rate Volatility and World Trade,” for use by both organizations and published by the Fund as Occasional Paper No. 28.
The Managing Director participated in the meeting of the ministers of seven major industrial countries held in Paris on May 11, 1983, to discuss trade and finance linkages, and attended the celebrations for the World Day of Peace held on May 25, 1983 at the United Nations Industrial Development Organization’s headquarters in Vienna. He addressed the meeting of UNCTAD VI in Belgrade on June 8, 1983 and the Second Regular Session of the United Nations Economic and Social Council in Geneva on July 8. He participated in meetings of the Bank for International Settlements, held in Basle, in July and November 1983, delivered an address to the United Nations Administrative Committee on Coordination in New York on October 27, 1983, and presented a statement to the London meeting of that body on April 16, 1984. The Managing Director also took part in the meetings of the ministers and central bank governors of the Group of Ten in Washington on September 24, 1983 and April 12, 1984, as well as a gathering of the ministers and governors of five major industrial countries on April 11, 1984. In addition, he attended a meeting of the Group of Ten governors in Basle on November 7, 1983. He attended the ministerial meetings of the Intergovernmental Group of Twenty-Four on International Monetary Affairs, which took place in Washington, D.C. on September 24, 1983 and April 11, 1984, at the time of the Interim and Development Committee meetings. He was also present at a meeting in New York convened by the Secretary-General of the United Nations on March 20, 1984 to discuss the economic problems of Africa.
The Fund often shares its technical expertise with regional organizations, through the participation of Fund staff in seminars and joint studies. In 1983/84, staff members participated in a seminar on exchange control policies and economic development for central bank officials of member states of the African Centre for Monetary Studies, held under the sponsorship of that institution in Bujumbura, Burundi, April 24-May 4, 1984. At the request of the Arab Monetary Fund (AMF), a training advisor was provided to organize a Banker’s Training Institute to provide courses and seminars in central and commercial banking, so as to upgrade skills and strengthen the financial structure of the organization’s 20 members. Also, the Fund provided an advisor to work with the AMF’s Treasury and Investments Department to assist in the management of the investment portfolio. The Fund advised the Commission of the European Communities Directorate-General of Economic and Financial Affairs on development of its work in forecasting and policy analysis and on the implementation of a previous study, prepared with Fund assistance, on the suitability of the Commission’s macroeconomic and international trade models. At the request of the Cooperation Council of the Arab States of the Gulf, the Fund provided technical assistance for a study on banking arrangements in the region, and is preparing another study on exchange arrangements in the six member countries of the organization.
Executive Directors and Staff
In the year ended April 30, 1984, there were 114 appointments to the Fund’s regular staff and 73 separations. At the end of the financial year, the staff numbered 1,619 and was drawn from 96 countries.
During the financial year the Fund continued its program of seminars for nonofficials. Begun in 1981, the seventh and eighth seminars in the program were conducted in German on October 11-14, 1983 in Baden, Austria, and in French on April 24-27 in Dakar, Senegal. These seminars are aimed at promoting understanding of what the Fund is doing to help members solve their balance of payments problems. Those participating in the seminars are scholars, journalists, and others interested in the work of the Fund. The proceedings of the seminars are usually published in the language in which they are conducted. The publications issued by the Fund in 1983/84 are listed in Appendix I, Table I.14.
See Board of Governors Resolution No. 38-1, adopted March 31, 1983, Summary Proceedings of the Thirty-Eighth Annual Meeting of the Board of Governors, September 27-30, 1983 (Washington: International Monetary Fund, 1983), pages 268-72.
This excludes purchases in the “reserve tranche.” A member has a reserve tranche position in the Fund by the extent to which the Fund’s holdings of a member’s currency in the General Resources Account, after deducting holdings of the member’s currency resulting from all purchases (i.e., in the credit tranches, under the extended Fund facility, and under the special facilities) are less than its quota. Reserve tranche purchases represent a use of members’ own reserves held in the form of reserve positions in the Fund and therefore do not constitute use of Fund credit.
Executive Board Decision No. 6830-(81/65), adopted April 22, 1981, effective May 1, 1981, Selected Decisions, Tenth Issue, page 299.
Executive Board Decision No. 6831-(81/65), adopted April 22, 1981, effective May 1, 1981, as amended by Decision No. 7059-(82/ 23), adopted February 22, 1982, Selected Decisions, Tenth Issue, pages 108-109.
Executive Board Decision No. 4377-(74/l 14), adopted September 13, 1974, as amended by Decisions Nos. 6339-(79/179), December 3, 1979, and 6830-(81/65), April 22, 1981, effective May 1, 1981, Selected Decisions, Tenth Issue, pages 27-31.
Executive Board Decision No. 5508-(77/127), adopted August 29, 1977, Selected Decisions, Tenth Issue, pages 33-38.
Executive Board Decision No. 7047-(82/13), adopted February 5, 1982, Selected Decisions, Tenth Issue, pages 58-60.
Executive Board Decision No. 6783-(81/40), adopted March 11, 1981, Selected Decisions, Tenth Issue, pages 40-45.
For details, see Annual Report, 1981, pages 85—88.
Executive Board Decision No. 7599-(84/3), adopted January 6, 1984 (reproduced in Appendix II).
Executive Board Decision No. 7601-(84/3), adopted January 6, 1984 (reproduced in Appendix II).
Executive Board Decision No. 6860-(81/81), adopted May 13, 1981, Selected Decisions, Tenth Issue, pages 65-70.
Executive Board Decision No. 7528-(83/140), adopted September 14, 1983 (reproduced in Appendix II).
Executive Board Decision No. 7602-(84/3), adopted January 6, 1984 (reproduced in Appendix II).
Executive Board Decision No. 2772-(69/47), adopted June 25, 1969, as amended by Decision No. 4913-(75/207), adopted December 24, 1975, Selected Decisions, Tenth Issue, pages 70-71.
Executive Board Decision No. 7602-(84/3), adopted January 6, 1984 (reproduced in Appendix II).
Executive Board Decisions Nos. 5704-(78/39), adopted March 22, 1978, effective April 1, 1978, and 6172-(79/101), adopted June 28, 1979, Selected Decisions, Tenth Issue, pages 101-105.
The Fund’s holdings of gold (103.440 million ounces valued at SDR 35 a fine ounce) are not included in the category of immediately usable resources. The sale of this gold for any purpose requires an 85 percent majority of the total voting power of the Fund.
Executive Board Decision No. 7626-(84/23)S, adopted February 13 1984, Selected Decisions, Supplement to Tenth Issue, page 19.
Executive Board Decision No. 7589-(83/181), adopted December 23, 1983 (reproduced in Appendix II).
Executive Board Decision No. 7337-(83/37), adopted February 24 1983, Selected Decisions, Tenth Issue, page 131-45.
For further details, see Annual Report, 1983, pages 94-95.
Executive Board Decision No. 5508-(77/127), adopted August 29, 1977, Selected Decisions, Tenth Issue, pages 33-38.
See Annual Report, 1983, page 96.
Executive Board Decision No. 7603-(84/3), adopted January 6, 1984 (reproduced in Appendix II).
Executive Board Decision No. 7481-(83/112), adopted July 26, 1983, effective August 1,1983 (reproduced in Appendix II) introduces a new Rule B-6 which adopts usage of the term “SDR” (or “SDRs” as appropriate) as standard procedure in Fund documents, correspondence, and publications, in place of the expression “special drawing rights.” The new rule allows for a different usage of the term if the text is in a language in which that usage has been established.
Executive Board Decision No. 7480-(83/112)G/S, adopted July 26, 1983, effective August 1, 1983 (reproduced in Appendix II). The SDR interest rate is the weighted average of the market yields on the following short-term money market instruments: three-month U.S. Treasury bills; three-month interbank deposits in the Federal Republic of Germany; three-month interbank money against private paper in France; three-month U.K. Treasury bills; and the discount on two-month (private) bills in Japan.
Under this category of transactions, participants and prescribed holders can use SDRs by mutual agreement with one another in exchange for any currency for which the Fund has established a representative rate, and without any requirement of a balance of payments need and without any further authorization by the Fund.
These are currently as follows: to use SDRs in the settlement of financial obligations; to buy and sell SDRs forward; to borrow, lend, or pledge SDRs; to use SDRs in swaps; to make donations (grants) of SDRs; and to use SDRs as security for performance of financial obligations. See Selected Decisions, Tenth Issue, pages 278-88.
Executive Board Decision No. 7626-(84/23)S, adopted February 13, 1984 (reproduced in Appendix II).
international and regional organizations using the SDR as a unit of account, or as the basis for a unit of account, were the African Development Bank, African Development Fund, Arab Monetary Fund, Asian Clearing Union, Asian Development Bank, Great Lakes States Development Bank, East African Development Bank, Economic Community of West African States, European Conference of Postal and Telecommunications Administrations, International Centre for Settlement of Investment Disputes, International Development Association, International Fund for Agricultural Development, International Telecommunication Union, Islamic Development Bank, Nordic Investment Bank, and the Universal Postal Union.
Executive Board Decision No. 6704-(80/185) TR, adopted December 17, 1980, Selected Decisions, Tenth Issue, pages 318-20.
The contributing members were Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, the Federal Republic of Germany, Greece, the Islamic Republic of Iran, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Saudi Arabia, South Africa, Spain, Sweden, the United Kingdom, Venezuela, and Yugoslavia.
This is an account in the General Department of the Fund which receives repayments and interest from Trust Fund loans and is used for purposes consistent with those of the Fund.