Chapter

Article V, Section 7

Author(s):
International Monetary Fund
Published Date:
March 2010
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Repurchases

Guidelines for Early Repurchase

Members that make purchases in the General Resources Account are expected normally to repurchase as their balance of payments and reserve position improves. The Fund affirms the continued need for this general policy on early repurchase under the first sentence of Article V, Section 7(b) following the introduction in November 2000 of time-based repurchase expectations for purchases in the credit tranches and under the Extended Fund Facility and the Compensatory Financing Facility. The Fund encourages members to make voluntary advance repurchases in lieu of or in addition to early repurchases under this general policy.

The following provisions set forth guidelines for members regarding early repurchase under the first sentence of Article V, Section 7(b) when the balance of payments and reserve position of members improves. The guidelines apply to the Fund’s holdings of currency that result from the purchases under Article V, Section 3 that are subject to repurchase under the provisions of the Articles and policies of the Fund.

1. A member’s balance of payments and reserve position will be deemed normally to have improved sufficiently for early repurchases to be expected in accordance with these guidelines if the member’s balance of payments and reserve position is judged sufficiently strong for the purposes of a quarterly designation plan and financial transactions plan as determined by the Fund from time to time in the light of the relevant factors. A member that makes a purchase in the credit tranches or under a special policy of the Fund will not be expected, however, to make early repurchases within six months of a purchase.

2. During the quarter following the decisions adopting the designation plan and financial transactions plan, it will be expected that a specified amount of the Fund’s holdings of the member’s currency will be repurchased.

3. Subject to paragraphs 4 and 5 below, the specified amount for the expected quarterly repurchase will be 1.5 percent of the member’s gross reserves plus (minus) 5 percent of the increase (decrease) in gross reserves over the latest six-month period for which data are available (“latest gross reserves”). The quarterly amount will be subject to a limit of 4 percent of the member’s latest gross reserves. A quarterly repurchase will be limited to an amount that will not (i) reduce the member’s latest gross reserves below 250 percent of the member’s quota, and (ii) exceed, together with the member’s early repurchases during the preceding three quarters, 10 percent of these reserves.

4. The specified amount in accordance with paragraph 3 above will represent the minimum reduction in the Fund’s holdings of the member’s currency expected during the quarter. Repurchases by the member during the quarter will be included in calculating the reductions for this purpose. If the member’s repurchases made during a quarter in advance of repurchase maturities exceed the minimum reduction expected during that quarter, the excess will give rise to a credit that will meet pro tanto the expectations of early repurchase for the next five quarters. At the end of a quarter the credit will be reduced by the larger of (i) the repurchase expectation for the quarter that is deemed to be satisfied by the credit, and (ii) the repurchase obligations that would have matured during the quarter but have been discharged by the advance repurchase.

5. If, during the two quarters prior to the date when a member is added to the list of members whose positions are considered sufficiently strong for the purposes of the quarterly designation plan and financial transactions plan, the member’s repurchases in advance of maturity exceed the minimum reduction expected during those two quarters, a credit will be given in accordance with paragraph 4 above. Any credit still available when a member’s balance of payments and reserve position is no longer considered sufficiently strong for the purposes of a quarterly designation plan and financial transactions plan will continue to apply in accordance with paragraph 4 above.

6. In each financial transactions plan the Managing Director will report on the observance by members of the guidelines for early repurchase.

7. This decision will be reviewed from time to time in light of experience.

Decision No. 6172-(79/101),

June 2, 1979

as amended by Decision No. 12425-(01/14),

February 9, 2001

Repurchase

1. Repurchases of the outstanding amount of a member’s currency that results from a purchase under the credit tranches and is subject to charges under Article V, Section 8(b), or under the decision on Compensatory Financing of Export Fluctuations (Decision No. 4912-(75/207), as amended) or the decision on the Problem of Stabilization of Prices of Primary Products (Decision No. 2772-(69/47), as amended), or the decision on Compensatory Financing of Fluctuations in the Cost of Cereal Imports (Decision No. 6860-(81/81), as amended), or the decision on the Compensatory Financing Facility (Decision No. 8955-(88/126), as amended), or the decision on Emergency Assistance (Decision No. 12341-(00/117)), shall be completed, pursuant to Article V, Section 7(c), five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule.

2. Decisions with respect to the timing of repurchases shall be understood to permit a member to combine all repurchases to be made within a calendar month and to complete them not later than the last business day of the month, provided however that the maximum period for use of the Fund’s resources according to the policy under which a repurchase is to be made shall not be exceeded.

3. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with special drawing rights in discharge of a commitment the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2.

4. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with currencies of other members in discharge of a commitment, the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2, provided that if the currencies paid are not acceptable in repurchase as of the date of the Second Amendment, the member shall substitute an equivalent amount of the currencies of other members specified by the Fund in accordance with Article V, Section 7(i).

5. If a member that has an outstanding obligation to pay gold in repurchase has not made an equivalent repurchase with special drawing rights or with the currencies of other members in discharge of a commitment, within two months after the date of the Second Amendment of the Articles of Agreement, the member shall make a repurchase equivalent to the outstanding obligation in gold with special drawing rights or, at its option, with the currencies of other members specified by the Fund in accordance with Article V, Section 7(i). The repurchase shall be regarded as a discharge of the member’s obligation in accordance with Schedule B, paragraph 2.

6. The dates for the payment of special drawing rights or currencies of other members in discharge of any obligation to pay gold to the Fund in repurchase, and for any substitution under paragraph 5 above, after the date of the Second Amendment of the Articles of Agreement shall be determined in accordance with Schedule B, paragraph 1.

7. Repurchase under Schedule B, paragraph 4 shall be completed four years after the date of the Second Amendment of the Articles of Agreement. If the Fund’s holdings of a member’s currency that are subject to paragraph 4(ii) are in excess of 10 percent of the member’s quota on the date of the Second Amendment, the member shall be requested to agree to make the repurchase in four equal installments beginning not later than one year after that date.

Decision No. 5703-(78/39),

March 22, 1978, effective April 1, 1978,

as amended by Decision Nos. 6862-(81/81), May 13, 1981,

8955-(88/126), August 23, 1988,

12342-(00/117), November 28, 2000, and

14287-(09/29),

March 24, 2009,

effective April 1, 2009

Attribution of Reductions in Fund’s Holdings of Currencies

1. (a) Subject to paragraphs (b), and (e) below a member shall be free to attribute a reduction in the Fund’s holdings of its currency (i) to any obligation to repurchase, and (ii) to enlarge its reserve tranche.

(b) If the reduction results from the sale of a member’s currency or from operational payments by the Fund, an attribution may not be made to an obligation to repurchase financed from borrowed resources unless the Fund is obligated or entitled immediately to repay the lender on the occasion of such attribution. A member would be able to combine an attribution under this decision to an obligation to repurchase financed with ordinary resources with a repurchase of an outstanding obligation financed with borrowed resources, provided this repurchase and the attribution would result in a joint reduction of repurchase obligations as required under Decision No. 5508-(77/127) and Decision No. 6783-(81/40).

(c) [Repealed]

(d) [Repealed]

(e) A reduction resulting from a repurchase made pursuant to a repurchase expectation under paragraph 10(a) of Decision No. 4377-(74/114) shall be attributed to the member’s repurchase obligation arising from the same purchase three years after the original date on which that repurchase expectation was to be met.

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

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

Decision No. 6831-(81/65),

April 22, 1981,

effective May 1, 1981,

as amended by Decision Nos. 7059-(82/23), February 22, 1982,

12345-(00/117), November 28, 2000, and

14287-(09/29),

March 24, 2009,

effective April 1, 2009

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