Chapter

Article V, Section 2(b): Financial and Technical Services

Author(s):
International Monetary Fund
Published Date:
April 1987
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Establishment of the Enhanced Structural Adjustment Facility Trust*

1. The Fund adopts the Instrument to Establish the Enhanced Structural Adjustment Facility Trust that is annexed to this Decision.

2. The Fund is committed, if it appeared that any delay in payment by the Trust to lenders would be protracted, to consider fully and in good faith all such initiatives as might be necessary to assure full and expeditious payment to lenders.

Decision No. 8759-(87/176) ESAF

December 18, 1987

Annex

Instrument to Establish the Enhanced Structural Adjustment Facility Trust

Introductory Section

To help fulfill its purposes, the International Monetary Fund (hereinafter called the “Fund”) has adopted this Instrument establishing the Enhanced Structural Adjustment Facility Trust (hereinafter called the “Trust”), which shall be administered by the Fund as Trustee (hereinafter called the “Trustee”). The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. General Provisions

Paragraph 1. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing loans on concessional terms (hereinafter called “Trust loans”) to low-income developing members that qualify for assistance under this Instrument, in order to support programs to strengthen substantially and in a sustainable manner their balance of payments position and to foster growth.

Paragraph 2. Accounts of the Trust

The operations and transactions of the Trust shall be conducted through a Loan Account, a Reserve Account, and a Subsidy Account. The resources of the Trust shall be held separately in each Account.

Paragraph 3. Unit of account

The SDR shall be the unit of account for commitments, loans, and all other operations and transactions of the Trust, provided that commitments of resources to the Subsidy Account may be made in currency.

Paragraph 4. Media of payment of contributions and exchange of resources

(a) Resources loaned or donated to the Trust shall be received in a freely usable currency, subject to the provisions of (c) below, and provided that resources may be received by the Subsidy Account in other currency.

(b) Payments by the Trust to lenders or donors shall be made in U.S. dollars or such other media as may be agreed between the Trustee and such lenders or donors.

(c) Loans or donations to the Trust may also be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust, provided that any balance of a currency held in the Trust may be exchanged only with the consent of the issuers of such currencies.

Section II. Trust Loans

Paragraph 1. Eligibility and conditions for assistance

(a) Any member eligible for assistance from the Structural Adjustment Facility shall be eligible for assistance from the Trust.

(b) This assistance shall be committed and provided under the same conditions and on the same terms as prescribed in paragraph 14 of the Regulations for the Administration of the Structural Adjustment Facility, subject to the provisions of this Section.

(c) Before approving a three-year arrangement, the Trustee shall be satisfied that the member is making an effort to strengthen substantially and in a sustainable manner its balance of payments position.

(d) Commitments under three-year arrangements may be made during the period from January 1, 1988 to November 30, 1989.

Paragraph 2. Amount of assistance

(a) An initial maximum limit on access to the resources of the Trust shall be established by the Trustee, as a proportion of members’ quotas in the Fund, and provision shall be made for a limit up to which that maximum limit may be exceeded in exceptional circumstances. The maximum access limit and the exceptional maximum limit shall be subject to review from time to time by the Trustee in the light of actual utilization of resources available to the Loan Account, and in any event not later than March 31, 1989.

(b) To the extent that a member has notified the Trustee that it does not intend to make use of the resources available from the Trust, the member shall not be included in the calculations of the access limits on Trust loans.

(c) The access for each member that qualifies for assistance from the Trust shall be determined on the basis of an assessment by the Trustee of the balance of payments need of the member and the strength of its adjustment program.

(d) The amount of resources committed to a qualifying member under a three-year arrangement and the amounts for the second-and third-year arrangements shall be reviewed at the time of consideration of each annual program. The amounts committed to a member shall not be reduced because of developments in its balance of payments, unless such developments are substantially more favorable than envisaged at the time of approval of the three-year arrangement and the improvement for the member derives in particular from improvements in the external environment.

(e) Any commitment shall be subject to the availability of resources to the Trust.

Paragraph 3. Disbursements

(a) Any disbursement shall be subject to the availability of resources to the Trust.

(b) Disbursements shall normally be made on the fifteenth and the last day of the month, provided that if these days are not business days of the Trustee, the disbursement shall be made on the preceding business day. Following a member’s qualification for a disbursement, the disbursement shall be made on the first of these value dates for which the necessary notifications and payment instructions can be issued by the Trustee.

(c) No disbursement under a three-year commitment to a member shall be made after the expiration of the period specified in Section III, paragraph 3.

Paragraph 4. Terms of loans

(a) Interest on the outstanding balance of a Trust loan shall be charged at the rate of one half of one percent per annum subject to the provisions of Section IV, paragraph 5, and provided that interest at a rate equal to the rate of interest on the SDR shall be charged on the amounts of any overdue interest on or overdue repayments of Trust loans.

(b) Trust loans shall be disbursed in a freely usable currency as decided by the Trustee. They shall be repaid, and interest paid, in U.S. dollars or other freely usable currency as decided by the Trustee. The Managing Director is authorized to make arrangements under which, at the request of a member, SDRs may be used for disbursements to the member or for payment of interest or repayments of loans by the member to the Trust.

(c) Paragraph 7(3) of the Regulations for the Administration of the Structural Adjustment Facility shall not apply to Trust loans.

Paragraph 5. Modifications

Any modification of these provisions will affect only loans made after the effective date of the modification, provided that a modification of the interest rate shall apply to interest accruing after the effective date of the modification.

Section III. Borrowing for the Loan Account

Paragraph 1. Resources

The resources held in the Loan Account shall consist of:

  • the proceeds of loans made to the Trust for that Account; and

  • payments of principal and interest on Trust loans, subject to the provisions of Section V, paragraph 3.

Paragraph 2. Borrowing authority

The Trustee may borrow resources for the Loan Account on such terms and conditions as may be agreed between the Trustee and the respective lenders subject to the provisions of this Instrument.

Paragraph 3. Commitments

Commitments of loans to the Trust for the Loan Account shall extend through June 30, 1992. The commitment period with respect to a loan to the Trust may be extended by mutual agreement between the Trustee and the lender.

Paragraph 4. Drawings on loan commitments

(a) Drawings on the commitments of individual lenders over time shall be made so as to maintain broad proportionality of these drawings relative to commitments.

(b) Calls on a lender’s commitment shall be suspended temporarily if, at any time prior to December 31, 1991, the lender represents to the Trustee that it has a liquidity need for such suspension and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees. The suspension shall not exceed three months, provided that it may be extended for further periods of three months by agreement between the lender and the Trustee. No extension shall be agreed which, in the judgment of the Trustee, would prevent drawing of the full amount of the lender’s commitment.

(c) Following any suspension of calls with respect to the commitment of a lender, calls will be made on that commitment thereafter so as to restore proportionality of calls on all lenders as soon as practicable.

Paragraph 5. Payments to lenders

(a) The Trust shall make payments of principal and interest on its borrowing for the Loan Account from the payments into that Account of principal and interest made by borrowers under Trust loans. Payments of the authorized subsidy shall be made from the Subsidy Account in accordance with Section IV of this Instrument, and, as required, payments shall be made from the Reserve Account in accordance with Section V of this Instrument.

(b) The Trust shall pay interest on outstanding borrowing for Trust loans promptly after June 30 and December 31 of each year, unless the particular modalities of a loan to the Trust make it necessary for the Trustee to agree with the lender on interest payments at other times.

Section IV. Subsidy Account

Paragraph 1. Resources

The resources held in the Subsidy Account shall consist of:

  • the proceeds of donations made to the Trust for that Account;

  • the proceeds of loans made to the Trust for that Account; and

  • net earnings from investment of donated or borrowed resources held in that Account.

Paragraph 2. Donations

The Trustee may accept donations of resources for the Subsidy Account on such terms and conditions as may be agreed between the Trustee and the respective donors, subject to the provisions of this Instrument. To the extent possible, annual contributions should be made before May 30 of each year.

Paragraph 3. Borrowing

The Trustee may, in exceptional circumstances, borrow resources for the Subsidy Account from official lenders on such terms and conditions as may be agreed between the Trustee and the lenders; in order

  • to prefinance an amount that is firmly committed to be donated to the Trust for the Subsidy Account; repayment of principal and any payments of interest on such borrowing shall be contingent upon the receipt by the Subsidy Account of the Trust of the donation that has been prefinanced;

  • that the Subsidy Account may benefit from net investment earnings on the proceeds of a loan extended at a concessional interest rate; repayment of principal and any payment of interest on such borrowing shall be made exclusively from the proceeds of liquidation of the investment and the earnings thereon.

Paragraph 4. Authorized subsidy

The Trustee shall draw upon the resources available in the Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for Trust loans.

Paragraph 5. Calculation of subsidy

(a) The amount of the subsidy shall be determined by the Trustee in the light of (i) the objective of ensuring that the Enhanced Structural Adjustment Facility is a highly concessional facility and, to the extent possible, of reducing the rate of interest charged on Trust loans to 0.5 percent, (ii) the rate of interest on resources available to the Loan Account, and (iii) the availability and prospective availability of resources to the Subsidy Account.

(b) The Trustee shall keep the operation of the Subsidy Account under review. If at any time it determines that resources available or committed are likely to be insufficient to reduce the rate of interest on Trust loans to 0.5 percent throughout the operation of the Trust, the Trustee shall seek such additional resources as may be necessary to achieve this objective.

(c) Should adequate additional resources not be forthcoming to reduce the rate on Trust loans to 0.5 percent, the Trustee shall recalculate the subsidy with a view to reducing that interest rate to the lowest feasible rate that could be applied throughout the remaining life of the Trust. The rate of interest charged on all outstanding loans by the Trust shall be adjusted accordingly in the succeeding interest periods. Borrowers shall be notified promptly of such adjustments. Further recalculations and adjustments shall be made in subsequent interest periods, as necessary in light of developments with respect to the rate of interest on resources available to the Loan Account and to the availability of resources to the Subsidy Account.

(d) If the interest due to lenders for an interest period has exceeded the interest due by borrowers together with the authorized subsidy under paragraph 4 of this Section for that period, and payment to lenders of that difference has been made from the Reserve Account in accordance with Section V, paragraph 2, an amount equivalent to that difference shall be added to the interest due by borrowers for the succeeding interest period. Payment of that amount shall be made to the Reserve Account in accordance with Section V, paragraph 3. The additional interest due shall not be taken into account in the calculation of the authorized subsidy for that same interest period.

Paragraph 6. Termination arrangements

Upon completion of the subsidy operations authorized by this Instrument, the Fund shall wind up the affairs of the Subsidy Account. Any resources remaining in the Subsidy Account shall be used first to reduce to the fullest extent possible, in accordance with this Instrument, to 0.5 percent the interest rate paid by borrowers, by means of payments to borrowers. Any resources remaining after that subsidization shall be distributed to donors and lenders that have contributed to the subsidy operation, in proportion to their contributions. For the purposes of this distribution, account will be taken of donations, the net earnings from investment of the proceeds of concessional loans extended to the Subsidy Account under paragraph 3(b) above, and the subsidy element of concessional loans extended to the Trust under Section III; the subsidy element associated with such loans shall be calculated as the difference, if positive, between the SDR rate of interest and the interest on such loans, applied to the amount of the loans during the period they were outstanding.

Section V. Reserve Account

Paragraph 1. Resources

The resources held in the Reserve Account shall consist of:

  • transfers by the Fund from the Special Disbursement Account in accordance with Decision No. 8760-(87/176), adopted December 18, 1987;

  • net earnings from investment of resources held in the Reserve Account;

  • net earnings from investment of any resources held in the Loan Account pending the use of these resources in operations; and

  • payments of overdue principal or interest or interest thereon under Trust loans, and payments of interest under Trust loans to the extent that payment has been made to a lender from the Reserve Account.

Paragraph 2. Use of resources

The resources held in the Reserve Account shall be used by the Trustee to make payments of principal and interest on its borrowing for Trust loans, to the extent that the amounts available from receipts of repayments and interest from borrowers under Trust loans, together with the authorized subsidy under Section IV, paragraph 4, are insufficient to cover the payments to lenders as they become due and payable.

Paragraph 3. Payments to the Reserve Account

Any payments of overdue principal or interest or interest thereon under Trust loans, and any payment of interest under Trust loans to the extent that payment has been made to a lender from the Reserve Account, shall be made to the Reserve Account.

Paragraph 4. Review of resources

If resources in the Reserve Account are, or are determined by the Trustee likely to become, insufficient to meet the obligations of the Trust that may be discharged from the Reserve Account as they become due and payable, the Trustee shall review the situation in a timely manner.

Paragraph 5. Reduction of resources and liquidation

(a) Whenever the Trustee determines that amounts in the Reserve Account of the Trust exceed the amount that may be needed to cover the total liabilities of the Trust to lenders that are authorized to be discharged by the Reserve Account, the Trustee shall retransfer such excess amounts to the Fund’s Special Disbursement Account.

(b) Upon liquidation of the Trust, all amounts in the Reserve Account remaining after discharge of liabilities authorized to be discharged by the Reserve Account shall be transferred to the Special Disbursement Account.

Section VI. Transfer of Claims

Paragraph 1. Transfers by lenders

(a) Any lender shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1 (“other fiscal agency”), or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

(b) The transferee shall, as a condition of the transfer, notify the Trustee prior to the transfer that it accepts all the obligations of the transferor relating to the transferred claim with respect to renewal and new drawings, and shall acquire all the rights of the transferor with respect to repayment of and interest on the transferred claim.

Paragraph 2. Transfers among electing lenders

(a) Any lender to the Loan Account (“electing lenders”) may inform the Trustee that it stands ready, upon request by the Trustee, to purchase claims on the Trust from any other electing lender, provided that the holdings of claims so acquired shall at no time exceed the amount communicated to the Trustee and subject to the other provisions of this Section. A list of electing lenders and the amounts communicated by them shall be established separately by the Trustee. This list may be extended and the amounts therein increased in accordance with communications received subsequently.

(b) An electing lender shall have the right to transfer temporarily to other electing lenders part or all of any claim arising from its loans to the Trust under Section III, if the electing lender represents to the Trustee that it has a liquidity need to make such transfer and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees.

(c) The Trustee shall allocate each transfer by an electing lender under this provision to all other electing lenders in proportion to the amounts by which the respective maximum holdings listed in the attachment exceed actual holdings of claims acquired under this provision; provided, however, that no allocation shall be made to an electing lender if it represents to the Trustee that it has a liquidity need for exclusion from an allocation and the Trustee agrees, in which case allocations to the remaining electing lenders shall be adjusted accordingly.

(d) The purchaser of any claim transferred under this provision shall assume, as a condition of the transfer, any obligation of the transferor, relating to the transferred claim, with respect to the renewal of drawings on loans to the Trust and to new drawings on loans in the event a renewal, having been requested, is not agreed by the transferor.

(e) Transfers of claims under this provision shall be made in exchange for freely usable currency and shall be reversed in the same media within three months, provided that such transfers may be renewed, by agreement between the transferor and the Trustee, for further periods of three months up to a total of one year. Notwithstanding the above, the transferor shall reverse a transfer under this provision not later than the date on which the transferred claim is due to be repaid by the Trust.

(f) Interest on claims transferred under this Section shall be paid by the Trust to the transferor in accordance with the provisions of the transferor’s lending agreement with the Trust. The transferor shall pay interest to the transferee(s) on the amount transferred, so long as the transfer remains outstanding, at a daily rate equal to that set out in Rule T-l of the Fund’s Rules and Regulations; such interest shall be payable three months after the date of a transfer or of its renewal, or on the date the transfer is reversed, whichever is earlier.

Section VII. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

  • to make all arrangements, including establishment of accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary; and

  • to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of assets and accounts, audit and reports

(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.

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

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

Paragraph 3. Investment of resources

(a) Any balances held by the Trust and not immediately needed in operations shall by invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by an international financial organization and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currencies is involved, with the consent of the issuers of such currencies.

Section VIII. Period of Operation and Liquidation

Paragraph 1. Period of operation

The Trust established by this Instrument shall remain in effect for as long as is necessary, in the judgment of the Fund, to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation of the Trust

(a) Termination and liquidation of the Subsidy Account shall be made in accordance with the provisions of Section IV, paragraph 6.

(b) All other resources, if any, shall be used to discharge any liabilities of the Trust, other than those incurred under Section IV, and any remainder shall be transferred to the Special Disbursement Account of the Fund.

Section IX. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except this Section and Section I, paragraphs 1 and 2; Section III, paragraphs 4 and 5; Section IV, paragraphs 4 and 6; Section V; Section VI; Section VII, paragraph 2(a) and (b); Section VIII, paragraph 2(b).

The Chairman’s Summing Up of the Discussion on the Enhancement of the Structural Adjustment Facility—Operational Arrangements Executive Board Meeting 87/171, December 15, 1987

Let me summarize the agreed position on a number of important points.

1. Establishment of the enhanced structural adjustment facility and review of the existing facility

Directors reviewed the existing structural adjustment facility and agreed that it should continue to operate as in the past. The existing facility will continue to be available to eligible members that already have arrangements under the facility as well as to those that have not yet requested use of the facility’s resources.

Directors agreed that a new lending facility—the enhanced structural adjustment facility—should be established and that it will operate concurrently with the existing structural adjustment facility. The enhanced facility will be financed from two Fund-related sources—the Special Disbursement Account and the Enhanced Structural Adjustment Facility Trust—and will also include the possibility that other lenders might support enhanced structural adjustment arrangements through loans to qualifying members in association with loans under the enhanced facility. For a member qualifying for an arrangement under the enhanced facility, resources will be provided from the Special Disbursement Account to the extent that the member has not exhausted its potential access under the existing facility; resources made available in excess of these amounts will be provided from the Trust and from associated sources.

Until the cutoff date for commitment of resources, eligible members that have not yet made use of the resources of the structural adjustment facility will have the option to request a full three-year arrangement under either the existing facility or the enhanced facility. Members currently making use of the resources of the existing facility may request a new three-year arrangement under the enhanced facility or continue their current arrangement to its conclusion. If a member currently using the resources of the structural adjustment facility chooses to request a new three-year arrangement under the enhanced facility, that request should normally be made at the time of expiration of an annual arrangement under the existing facility. However, earlier replacement of an existing arrangement by a three-year arrangement under the enhanced facility could also be permitted in exceptional cases.

2. Terms and conditions of loans under the enhanced structural adjustment facility

Commitments of resources under the enhanced facility will be made upon approval of a three-year arrangement. All commitments and disbursements will be subject to the availability of resources. Commitments may be made at any time until the cutoff date. Most Directors agreed, taking into account the limited period of time during which the resources would be made available by contributors, that the cutoff date should be November 30, 1989. At the same time, most Directors considered that the final date for disbursements should not now be extended beyond June 30, 1992, although it was recognized that maintenance of this date would imply that there would be little flexibility to accommodate delays under annual programs in arrangements that were agreed later in the commitment period. This matter will be kept under review as experience is gained with the facility.

Disbursements from the Special Disbursement Account in conjunction with enhanced structural adjustment arrangements will be provided under the financial terms applying to loans under the existing facility, as amended. To the extent possible, the financial terms applying to loans from the Enhanced Structural Adjustment Facility Trust will be the same as those under the existing facility. In particular, it was agreed that the maturities of loans will be five and a half to ten years. Most Directors also believed that it would be appropriate to set the initial interest rate charged on loans from the Trust at 0.5 percent per annum, even if the amount of firmly committed resources in the Subsidy Account was initially not fully sufficient for this purpose, but additional resources were confidently expected. These Directors indicated that if it appeared, because of inadequate contributions or future adverse developments in interest or exchange rates, that resources available or committed to the Subsidy Account were likely to be insufficient to maintain the rate of interest at 0.5 percent throughout the period of operation of the Trust, the Fund should seek the additional resources necessary to achieve this objective. This issue is to be kept under review, and the interest rate will be adjusted as necessary at the beginning of each six-month interest period whenever resources available to the Subsidy Account are judged insufficient to maintain a rate of 0.5 percent on loans under the enhanced facility.

The intended terms for the Trust’s lending, with which you have agreed, determine the essential features of the borrowing arrangements that will have to be concluded by the Fund as Trustee for the Enhanced Structural Adjustment Facility Trust and the lenders to it. These have been set out in a prototype circulated to potential lenders and annexed to EBS/87/245. While there will need to be comparability in substance among agreements, there will no doubt need to be alterations to the form and structure of this prototype to meet the particular legal and institutional requirements of individual lenders, and we will be flexible in meeting these requirements. There was further discussion of the security to be provided to the claims on the Trust. Directors accepted that the proposals that had been put forward to safeguard the resources lent to the Trust were adequate to provide the necessary assurance to potential creditors. Although noting the views of some Directors, I have repeated that the phrase “all such initiatives as might be necessary” had to be understood to include the possible use of gold.

I should also comment on a few specific financial issues raised in the papers. First, most Directors did not favor the inclusion of a provision on rescheduling because, inter alia, it was considered that this would create undue complications in light of the limited period for which resources were being committed by contributors and also because it was felt that such a provision could threaten the integrity of the Reserve that most contributors find to be an essential component of the facility. Second, most Directors did not find it appropriate to provide for temporary encashment of claims through use of the Reserve, given the relatively small amounts that will be available in the early years and the importance of the Reserve as security for claims. Third, it appeared generally acceptable to most Directors that the provision for temporary suspension of calls should apply to all lenders. I should note in this connection that we appreciate the position of several contributors who are providing support to the enhanced facility, despite a very difficult balance of payments situation of their own.

3. Framework for lending under the enhanced structural adjustment facility

Resources to be made available under the enhanced facility will be committed upon Board approval of a three-year arrangement and disbursements will be made semiannually in accordance with the provisions specified in annual arrangements. The preparation of policy framework papers will be an essential element of the enhanced facility, and the policy framework process will be strengthened to reflect the summing up of the June 1987 review of the structural adjustment facility (EBM/87/93, 6/19/87), as well as continuing discussions with eligible recipient countries, the World Bank, and the interested donors.

Directors were in broad agreement that the objectives of programs under the enhanced facility should be to promote, in a balanced manner, both balance of payments viability and growth through mobilization of domestic and external resources, improvements in resource allocation, and the removal of structural impediments. Such programs should involve a substantial effort to strengthen the external payments position in a sustainable manner, and in particular to assure substantial progress during the three-year program period toward an overall position and structure of the balance of payments that is consistent with orderly relations with creditors and a reduction in restrictions on trade and payments, while permitting the timely servicing of obligations to the Fund.

Directors agreed that monitoring of enhanced programs supported by arrangements under the enhanced facility will be conducted through benchmarks. Most Directors favored the establishment of quarterly quantitative benchmarks for the key financial variables, and the use of structural benchmarks to monitor implementation of the most important structural policy measures. Most Directors supported the establishment of some benchmarks, including, where appropriate, some structural benchmarks, as semiannual performance criteria in all cases. In addition, midyear reviews will also be required in most cases. I have carefully noted the reservations expressed by a number of Directors regarding the treatment of benchmarks as performance criteria, and I assure you that performance criteria will be limited in number and will generally involve only a subset of the benchmarks. Similarly, prior actions will be required sparingly, but when necessary to lay the basis for a long or difficult adjustment process, and particularly where arrangements involve a front-loading of disbursements. In the event of a substantial delay in completion of a midyear review or in agreeing on an annual program, the total amount of resources to be made available to a member could be reduced or rephased over the remaining period of the arrangement.

Most Directors agreed that access to the resources of the enhanced facility will be differentiated according to the strength of the member’s adjustment program and its financing need. The structure of the member’s external debt and its prospective debt service burden, along with the expected evolution of other macroeconomic aggregates, will be important elements in this assessment. Directors generally agreed that access under three-year enhanced structural adjustment arrangements will be subject to a maximum limit of 250 percent of quota. However, Directors stressed again that the access limits do not constitute entitlements, and they agreed that access should normally be below the maximum and that the guidelines should be applied so that the rate of access for all qualifying members would average about 150 percent of quota. It was also indicated that, in highly exceptional circumstances, the maximum could be exceeded, but it was not envisaged that access would exceed 350 percent of quota even in these cases. These access limits, along with the operation of both the enhanced facility and the existing facility, will be subject to review in light of experience and the utilization of the available resources.

Directors agreed that the amount of resources committed to an individual qualifying member under a three-year enhanced structural adjustment arrangement and the amounts for the second- and third-year arrangements will be reviewed at the time of consideration of each annual program. However, most Directors indicated that, subject to the availability of resources, the amounts committed to a member would not normally be reduced because of developments in its balance of payments. However, in the event that balance of payments developments were markedly more favorable than envisaged at the time of approval of the three-year arrangement, and particularly because of improvements in the external environment, it would be suggested that the member reduce voluntarily its use of enhanced resources, either by requesting lower access at the time of approval of an annual arrangement or by forgoing in whole or in part a midyear disbursement.

Directors agreed that disbursements of loans under enhanced structural adjustment arrangements will be made semiannually, upon approval of an annual arrangement, and subsequently, on the basis of observance of performance criteria and, in most cases, completion of a midyear review. A range of views was expressed regarding the possibility of a limited frontloading of disbursements in some cases. Nonetheless, there seems to be a consensus that, subject to the availability of resources, the guideline should be that a uniform distribution of disbursements would be preferable and that any front-loading should not result in first-year disbursements exceeding 40 percent of the total amount to be made available under the three-year enhanced structural adjustment arrangement. However, I take it that there may be scope for a higher first-year disbursement in some very exceptional cases. Existing policies regarding members with overdue obligations to the Fund will be retained; how best to deal with cases of large and protracted arrears is a question to which we will return soon, but in a different context.

4. Relationship with other Fund facilities

Directors noted that members qualifying for loans under the enhanced structural adjustment facility would retain eligibility for access to the Fund’s general resources. Access to those resources will have to be examined carefully on a case-by-case basis, taking into account a range of factors envisaged in the present guidelines, including past performance and use of Fund resources, terms, the possible availability of financing from the enhanced facility and other sources, and the speed and time profile of the anticipated balance of payments adjustment.

The Chairman’s Remarks at the Conclusion of the Discussion on the Enhancement of the Structural Adjustment Facility—Legal Documentation Executive Board Meeting 87/176, December 18, 1987

Two issues of substance raised during this meeting deserve special mention. First, it was reconfirmed that lending to the ESAF Trust could be considered as part of a member’s official reserves by the Fund. Second, it was explained that access to the Fund’s general resources could be provided for members that had extended loans to the Trust and that needed liquidity in an amount not exceeding their claim. Purchases under these circumstances would be allowed if the member represented that it had a need, becauses of developments in its reserves in the sense of Article V, Section 3(b)(ii), and the Fund agreed that the purchase was justified taking into account the amount of the requested purchase and the existence of a claim on the Trust. If the liquidity problem can be addressed on its own, there would be no need for an adjustment program to solve the balance of payments problem. Moreover, those purchases could be given certain characteristics by a decision to be taken when required. For instance, it could be decided, with respect to such purchases, to provide for special repurchase periods and for their exclusion from the definition of reserve tranche purchases. Those decisions would need to be adopted by an 85 percent majority. On the occasions on which this question was discussed, I heard no objections by an Executive Director to this approach, which had been suggested in the staff papers that have been discussed by the Board.

Enhanced Structural Adjustment Facility—Access Limits

The Fund as Trustee under the Instrument to Establish the Enhanced Structural Adjustment Facility Trust decides:

1. In accordance with Section II, Paragraph 2(a) of the Instrument to Establish the Enhanced Structural Adjustment Facility Trust, the initial maximum limit on access of each eligible member to the resources of the Trust shall be set at 250 percent of the member’s quota in the Fund, minus any remaining access of the member to the resources of the Structural Adjustment Facility, and minus resources committed to the member for loans in association with Trust loans.

2. The maximum limit in paragraph 1 may be increased in exceptional circumstances not to exceed 350 percent of the member’s quota in the Fund, subject to the same deductions as in paragraph 1.

Decision No. 8845-(88/61) ESAF

April 20, 1988

Enhanced Structural Adjustment Facility—Interest Rate on Trust Loans

The Fund as Trustee under the Instrument to Establish the Enhanced Structural Adjustment Facility Trust decides:

In accordance with Section II, Paragraph 4(a) and Section IV, Paragraph 5 of the Instrument to Establish the Enhanced Structural Adjustment Facility Trust, the interest rate on loans from the Trust shall be set at 0.5 percent effective April 20, 1988.

Decision No. 8846-(88/61) ESAF

April 20, 1988

Enhanced Structural Adjustment Facility—Borrowing Agreement

Caisse Centrale de Coopération Economique of France

Pursuant to Section III, Paragraph 2 of the Instrument to Establish the Enhanced Structural Adjustment Facility Trust, the International Monetary Fund, in its capacity as Trustee of that Trust, approves the agreement for borrowing from the Caisse Centrale de Coopération Economique in terms of the draft set out in the attachment to EBS/88/62, and authorizes the Managing Director to take such action as is necessary to conclude and implement the agreement.

Decision No. 8831-(88/56) ESAF

April 4, 1988

Attachment

EBS/88/62

Enhanced Structural Adjustment Facility: Proposed Borrowing Agreement with the Caisse Centrale de Coopération Economique

I have been authorized to propose on behalf of the International Monetary Fund (the “Fund”) as Trustee of the Enhanced Structural Adjustment Facility Trust (the “Trust”) that the Caisse Centrale de Coopération Economique (“CCCE”) agree to lend to the Fund as Trustee for the purposes of providing resources to the Loan Account of that Trust, in accordance with the Instrument establishing the Trust (the “Instrument”) adopted by the Executive Board of the Fund by Decision No. 8759-(87/176) ESAF, adopted December 18, 1987. The purpose of this agreement is to set forth the terms and conditions, as authorized by Section III, paragraph 2 of the Instrument attached hereto, for the loan by CCCE to the Fund as Trustee.

1. The amount of the loan shall be the equivalent of SDR 800 million.

a. Interest in respect of drawings up to SDR 700 million shall be determined in accordance with paragraph 5(a).

b. Interest in respect of drawings above SDR 700 million shall be determined in accordance with paragraph 5(b).

2. a. The Trustee may make drawings under this agreement at any time during the period from the effective date of this agreement through June 30, 1992, upon giving CCCE at least ten business days (Washington, D.C.) notice by tested telex, provided that the drawdown date is a date that is a business day in Frankfurt, London, New York, Paris, and Tokyo and that total drawings may not exceed SDR 266 million until January 1, 1989 and SDR 533 million until January 1, 1990. Under exceptional circumstances, a drawing may be canceled by the Trustee or CCCE within five business days (Washington, D.C.) after notice of the drawing is given.

b. If any installment of interest is not paid to CCCE within a period of ten days after its due date, the Trustee shall not make further drawings under this agreement pending consultations with CCCE on the matter. However, the Trustee may resume drawings under this agreement once arrears to CCCE have been discharged.

c. The Trustee shall seek normally to make drawings in amounts not less than SDR 20 million (unless otherwise agreed between CCCE and the Trustee) and shall endeavor not to make more than twelve drawings during any calendar year.

3. a. The amount of each drawing shall be denominated in SDRs. Unless otherwise agreed between CCCE and the Trustee, the amount of each drawing shall be disbursed by CCCE, on the drawdown date specified in the Trustee’s notice, by transfer of the equivalent amount of U.S. dollars, deutsche mark, Japanese yen, French francs, and pounds sterling, in proportion to the amounts of each currency unit in the SDR, to the accounts of the Trust as specified in the Trustee’s notice.

b. Upon request, the Trustee shall issue to CCCE a non-negotiable certificate evidencing its claim on the Trust resulting from a drawing outstanding under this agreement.

4. a. Each drawing shall be repaid in ten equal semiannual installments beginning five and one-half years and ending ten years after the date of the drawing.

b. Any drawing or part thereof may be repaid by the Trustee at any time in advance of maturity only by agreement between CCCE and the Trustee.

c. Unless otherwise agreed, if a drawing matures or a payment of interest is due on a date that is not a business day in Frankfurt, London, New York, Paris, and Tokyo, the payment date shall be the next business day that is a business day in Frankfurt, London, New York, Paris, and Tokyo.

5.a. The amount outstanding in respect of each drawing under paragraph 1(a) shall bear interest at a rate of 1/2 percent per annum; provided, however, that if the rate of interest on Trust loans may need to be adjusted to exceed the rate of 1/2 percent per annum in any interest period under Section IV, paragraph 5 of the Instrument, CCCE and the Trustee shall review the matter and shall give consideration to an increase in the rate of interest to apply to amounts outstanding under paragraph 1(a) during that interest period of the Trust. Such review shall include consideration of the possible implications of any such increase for borrowers from the Trust and for the operations of the Trust. The interest rate applied to amounts outstanding under paragraph 1(a) during any interest period of the Trust shall in no event exceed the rate of interest on Trust loans during that interest period.

b. The amount outstanding in respect of each drawing under paragraph 1(b) shall bear interest at an annual rate determined by the Trustee at the time each drawing is made and at intervals of six calendar months thereafter, from the product of:

(i) the interest rates on domestic instruments in each currency included in the SDR basket, as reported to the Trustee by each reporting agency, on the business day of the Fund referred to in paragraph 9, as follows:

  • —the bond equivalent yield for six-month U.S. Treasury bills,

  • —the six-month interbank rate in Germany,

  • —the six-month rate for interbank loans against private paper in France,

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

  • —the six-month interbank rate in the United Kingdom, and

(ii) the percentage weight of that currency in the valuation of the SDR on that business day, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar on that day.

The applicable interest rate shall be the sum of the products so calculated, rounded to two decimal places.

c. Interest in respect of each drawing shall be paid six calendar months after the drawdown date and every six calendar months thereafter. The amount of interest payable shall be calculated on an actual day basis and using a 360-day year, and shall be paid in respect of the period from and including the drawdown date to but excluding the first interest payment date and, for each successive period, from and including the previous interest payment date to but excluding the next interest payment date.

6. Unless otherwise agreed between CCCE and the Trustee, payments by the Trustee of principal and interest with respect to each drawing shall be made by crediting the equivalent amount of U.S. dollars, deutsche mark, Japanese yen, French francs, and pounds sterling, in proportion to the amounts of each currency unit in the SDR, to the accounts of CCCE as specified by CCCE in advance of such payments; the Trustee shall instruct its paying agent to confirm to the institution(s) to which payment is to be made the amounts of currency to be paid and the value date of the payment, such confirmation to be received not later than 11 a.m. in Paris on the value date of the payment.

7. a. CCCE shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

b. The transferee shall acquire all the rights of CCCE under this agreement with respect to repayment of and interest on the transferred claim.

8. At the request of CCCE, calls on its commitment to meet drawings may be suspended temporarily at any time prior to December 31, 1991, subject to the provisions of Section III, paragraphs 4(b) and (c) of the Instrument.

9. Unless otherwise agreed between the Trustee and CCCE, all transfers, exchanges, and payments of principal and interest shall be made at the exchange rates for the relevant currencies in terms of the SDR established by the Fund for the third business day of the Fund before the value date of the transfer, exchange, or payment.

10. If the Fund changes the composition of the SDR or the method of valuing the SDR, all transfers, exchanges, and payments of principal and interest made three or more business days of the Fund after the effective date of the change shall be made on the basis of the new composition or method of valuation; provided, however, that no such change shall affect any drawing for which notice has been given for drawdown subsequent to the change.

11. Any question arising hereunder shall be settled by mutual agreement between CCCE and the Trustee.

If the foregoing proposal is acceptable to CCCE, this communication and your duly authenticated reply accepting this proposal shall constitute an agreement between CCCE and the Trustee, which shall enter into effect on the date the Trustee acknowledges receipt of your reply.*

Enhanced Structural Adjustment Facility—Borrowing Agreement

Export-Import Bank of Japan

Pursuant to Section III, Paragraph 2 of the Instrument to Establish the Enhanced Structural Adjustment Facility Trust, the International Monetary Fund, in its capacity as Trustee of that Trust, approves the agreement for borrowing from the Export-Import Bank of Japan in terms of the draft set out in the attachment to EBS/88/69, and authorizes the Managing Director to take such action as is necessary to conclude and implement the agreement.

Decision No. 8832-(88/56) ESAF

April 4, 1988

Attachment

EBS/88/69

Enhanced Structural Adjustment Facility: Proposed Borrowing Agreement with the Export-Import Bank of Japan

I have been authorized to propose on behalf of the International Monetary Fund (the “Fund”) as Trustee of the Enhanced Structural Adjustment Facility Trust (the “Trust”) that the Export-Import Bank of Japan (the “Bank”) agree to lend to the Fund as Trustee (the “Trustee”) for the purpose of providing resources to the Loan Account of that Trust, in accordance with Decision No. 8759-(87/176)ESAF, adopted December 18, 1987 and the terms of the Instrument establishing the Trust (the “Instrument”) adopted by that Decision. The purpose of this agreement is to set forth the terms and conditions, as authorized by Section III, Paragraph 2 of the Instrument attached hereto, for the loan by the Bank to the Fund as Trustee.

1. The amount of the loan shall be up to SDR 2,200 million.

2. The Trustee may make drawings under this agreement at any time during the period from the effective date of this agreement through June 30, 1992.

a. Unless otherwise agreed between the Trustee and the Bank, the Trustee shall give notice to the Bank on the occasion of each drawing of the amount it intends to draw, the drawdown date, and the maturity as follows:

(i) An initial notice of each drawing, to be received by the Bank not later than six business days in Tokyo prior to the swap date; under exceptional circumstances, the Trustee may cancel this notice, and the Bank may similarly notify the Trustee that the drawing cannot be made on the intended drawdown date, within five business days in Tokyo after the initial notice is received by the Bank.

(ii) A final notice of each drawing, to be received by the Bank not later than one business day in Tokyo prior to the swap date. This notice shall constitute irrevocable and binding notice of call by the Trustee upon the Bank.

b. Unless otherwise agreed between the Trustee and the Bank, the Trustee shall seek normally to make drawings within the range of SDR 25 million to SDR 200 million and shall endeavor to make not more than twelve drawings during any calendar year.

c. If any amount of interest is not paid to the Bank within a period of ten days after the due date, the Trustee shall not make further drawings or give initial or final notice of a drawing under this agreement pending consultations with the Bank on the matter. However, the Trustee may resume drawings under this agreement once any arrears to the Bank have been discharged.

3. The Trustee shall make drawings on the commitment of the Bank so as to maintain over time broad proportionality of these drawings on the Bank relative to drawings on the commitments of all lenders to the Loan Account of the Trust.

4. The amount of each drawing shall be denominated in SDRs. Unless otherwise agreed between the Trustee and the Bank, the amount of each drawing shall be disbursed by the Bank, on the drawdown date specified in the Trustee’s final notice, by transfer of the equivalent amount of U.S. dollars, deutsche mark, Japanese yen, French francs, and pounds sterling, in proportion to the amounts of each currency unit in the SDR, to the accounts of the Trust as specified in the Trustee’s notice.

5. Drawings shall mature 7, 8, 9 or 10 years after the date of the drawing. The Trustee shall select the maturity of each drawing in light of the Trust’s funding requirements and shall notify the Bank of the maturity upon giving initial notice of the drawing. The Trustee shall repay the principal amount of each drawing to the Bank on the maturity date. No prepayment shall be made except by agreement between the Bank and the Trustee.

a. Amounts corresponding to principal payments due on Trust loans that were financed by a drawing under this agreement shall be deemed to be due and payable to the Bank, for purposes of Section V of the Instrument, on the due date for the Trust loan repayment, and shall be held in a suspense account within the Trust’s Loan Account for the repayment to the Bank of drawings hereunder. Such amounts shall not be used for any other payments from the Loan Account except as provided under this Paragraph 5. This suspense account shall be designated as “ESAF Suspense Account—Japan.”

b. To the extent any payment of principal referred to in Paragraph 5(a) is not received on its due date, an equivalent amount shall be transferred to the “ESAF Suspense Account—Japan” from the Trust’s Reserve Account and held for the repayment to the Bank of drawings hereunder.

c. At the maturity date of any drawing, the Trustee shall repay to the Bank the principal amount of the drawing, and the “ESAF Suspense Account—Japan” shall be debited with the amount of such payment.

d. Amounts held in the “ESAF Suspense Account—Japan” shall be invested by the Trustee. To the extent that amounts corresponding to a drawing are held in the “ESAF Suspense Account—Japan,” payments of interest by the Trustee on that drawing shall be made exclusively from the earnings on the amounts invested by the account. The Trustee shall make its best efforts to achieve yields on investments by the account in any interest period that are equivalent to the rate of interest as calculated pursuant to Paragraph 6. Notwithstanding the provisions of Paragraph 6(b), interest due to the Bank in respect of these amounts shall not exceed the earnings from the investment of these amounts. So long as any obligation of the Trust to the Bank remains outstanding, earnings in excess of the rate of interest calculated pursuant to Paragraph 6 for any interest period should be retained in the “ESAF Suspense Account—Japan” and shall be used, if needed, for interest payments in respect of any other interest period. Any net balance remaining in the “ESAF Suspense Account—Japan” shall be transferred to the Bank at the time the Trust completes payment of its obligations to the Bank under this agreement.

e. Upon reasonable notice by the Bank, amounts held in the “ESAF Suspense Account—Japan” shall be paid to the Bank, provided that such payments shall at no time exceed transfers of principal amounts to the “ESAF Suspense Account—Japan” pursuant to Paragraphs 5(a) and (b) and amounts sufficient to meet the Trustee’s obligations to pay interest pursuant to Paragraphs 5(d) and 6(b) in respect of balances arising from such transfers to the “ESAF Suspense Account—Japan.” Any such payment to the Bank shall discharge the Trustee’s obligations with respect to payment of principal and interest thereon to the extent of the payment.

f. At the request of either party, the Bank and the Trustee shall consult on the operations conducted under this Paragraph 5.

g. Alternative arrangements regarding the maturity of drawings may be established by agreement between the Bank and the Trustee, provided that such arrangements shall accommodate in full the Trust’s requirements with respect to the maturities of Trust loans financed by drawings under this agreement.

h. The Trustee shall report to the Bank on the status of balances held in the “ESAF Suspense Account—Japan” at the end of each calendar quarter or at such other times as may reasonably be requested by the Bank.

6. a. The Trustee shall pay interest in respect of each drawing to the Bank on the interest payment date. In case the Trustee fails to pay any amount of principal on the maturity date, interest shall continue to accrue on such overdue amount of principal at the rate of interest calculated as provided in Paragraph 6(b) with respect to the interest period ending immediately prior to the maturity date, applied from (and including) the maturity date to (but excluding) the date of actual payment. The amount of interest payable for each interest period shall be calculated on an actual day basis and using a 360-day year.

b. The amount outstanding in respect of each drawing shall bear interest at an annual rate calculated by the Trustee at the commencement of each interest period, from the product of:

(i) the interest rates on domestic instruments in each currency included in the SDR basket, as reported to the Trustee by each reporting agency, on the combined interest rate computation date, as follows:

  • —the bond equivalent yield for six-month U.S. Treasury bills,

  • —the six-month interbank rate in Germany,

  • —the six-month rate for interbank loans against private paper in France,

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

  • —the six-month interbank rate in the United Kingdom, and

(ii) the percentage weight of that currency in the valuation of the SDR on that combined interest rate computation date, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar on that day.

The applicable interest rate shall be the sum of the products so calculated, rounded to two decimal places of a percentage point.

7. Unless otherwise agreed between the Trustee and the Bank, payments by the Trustee of principal and interest with respect to each drawing shall be made with good value on the value date by crediting the equivalent amount of U.S. dollars, deutsche mark, Japanese yen, French francs, and pounds sterling, in proportion to the amounts of each currency unit in the SDR, to the accounts of the Bank in Tokyo as specified by the Bank in advance of such payments; the Trustee shall instruct its paying agent to confirm to the institutions to which payment is to be made the amounts of currency to be paid and the value date of the payment, such confirmation to be received not later than 12:00 noon in Tokyo on the value date of the payment. Such confirmation shall not constitute payment by the Trustee.

8. a. The Bank shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

b. The transferee shall acquire all the rights of the Bank under this agreement with respect to repayment of and interest on the transferred claim.

9. At the request of the Bank, calls on its commitment to meet drawings may be suspended temporarily at any time prior to December 31, 1991, subject to the provisions of Section III, Paragraphs 4(b) and (c) of the Instrument.

10. Unless otherwise agreed between the Trustee and the Bank, all transfers, exchanges, and payments of principal and interest shall be made at the exchange rates for the relevant currencies in terms of the SDR calculated by the Fund on the exchange rate computation date.

11. If the Fund changes the composition of the SDR or the method of valuing the SDR, all transfers, exchanges, and payments of principal and interest made three or more business days of the Fund after the effective date of the change shall be made on the basis of the new composition or method of valuation; provided, however, that no such change shall affect any drawing for which the Trust has given final notice to the Bank for drawdown subsequent to the change.

12. For the purposes of this agreement, the terms “business day,” “Libor business day,” “calendar month,” “calendar year,” “swap date,” “combined interest rate computation date,” “exchange rate computation date,” “drawdown date,” “six-month anniversary date,” “interest period,” “interest payment date,” and “maturity date” shall have the meanings as defined in the Annex to this agreement.

13. The Managing Director of the Trustee and the Bank shall establish such procedural and technical arrangements as are necessary for the implementation of this agreement.

14. This agreement and any operations under it may be reviewed upon request by the Bank or the Trustee.

15. Any question arising hereunder shall be settled by mutual agreement between the Bank and the Trustee.

If the foregoing proposal is acceptable to the Bank, this communication and your duly authenticated reply accepting this proposal shall constitute an agreement between the Bank and the Trustee, which shall enter into effect on the date the Trustee acknowledges receipt of your reply.*

Definitions

a. “Business day”: a day on which commercial banks are open for domestic and foreign exchange business in the relevant markets.

b. “Libor business day”: a day on which dealings in deposits are carried on in the London interbank Eurocurrency Market.

c. “Calendar month”: the period from a date in one month to the same date in the succeeding month, provided that if the first date is an end-month date, the date in the succeeding month shall also be an end-month date.

d. “Calendar year”: a period consisting of twelve calendar months.

e. “Swap date”: the date one business day in Tokyo prior to the initial combined interest rate computation date in respect of a drawdown, provided that if the date is not a business day in Tokyo, Frankfurt, Paris, and London, the swap date shall be the first preceding day that is a business day both in Tokyo and in the market(s) for which that date is not a business day.

f. “Combined interest rate computation date”: the date two Libor business days prior to the commencement of the interest period to which such computation applies.

g. “Exchange rate computation date”: the date three business days of the Fund prior to the value date of the transfer, exchange, or payment, which is also a business day in Tokyo and London. If the date three business days of the Fund prior to the value date of the transfer, exchange, or payment is not a business day in Tokyo and London, it shall be the first preceding business day of the Fund that is also a business day in Tokyo and London.

h. “Drawdown date”: a date that is a business day in Tokyo, New York, Frankfurt, Paris, and London.

i. “Six-month anniversary date”: the date six calendar months after the drawdown date, or after subsequent six-month anniversary dates.

j. “Interest period”: for each drawdown, the period from (and including) the drawdown date to (but excluding) the first interest payment date or the period from (and including) an interest payment date to (but excluding) the next succeeding interest payment date for each drawdown.

k. “Interest payment date”: the six-month anniversary date of the drawdown date for each drawing, provided that if that date is not a business day in Tokyo, it shall be the first succeeding business day in Tokyo. If on such interest payment date the domestic market for one or more currencies used in making an interest payment is closed, payment in that currency or currencies shall be made on the next succeeding business day in that market(s) which is also a business day in Tokyo.

1. “Maturity date”: a date seven, eight, nine, or ten calendar years from the drawdown date depending upon the maturity of each drawing, provided that if the date is not a business day in Tokyo, it shall be the first succeeding business day in Tokyo. If on such maturity date the domestic market for one or more currencies used in making a principal repayment is closed, payment in that currency or currencies shall be made on the next succeeding business day in that market(s) which is also a business day in Tokyo.

Enhanced Structural Adjustment Facility—Borrowing Agreement

Bank of Norway

Pursuant to Section III, Paragraph 2 of the Instrument to Establish the Enhanced Structural Adjustment Facility Trust, the International Monetary Fund, in its capacity as Trustee of that Trust, approves the agreement for borrowing from the Bank of Norway in terms of the draft set out in the attachment to EBS/88/72, and authorizes the Managing Director to take such action as is necessary to conclude and implement the agreement.

Decision No. 8833-(88/56) ESAF April 4, 1988

Attachment

EBS/88/72

Enhanced Structural Adjustment Facility: Proposed Borrowing Agreement with the Bank of Norway

I have been authorized to propose on behalf of the International Monetary Fund (the “Fund”) as Trustee of the Enhanced Structural Adjustment Facility Trust (the “Trust”) that the Bank of Norway (the “Bank”) agree to lend to the Fund as Trustee for the purposes of providing resources to the Loan Account of that Trust, in accordance with the Instrument establishing the Trust (the “Instrument”) adopted by the Executive Board of the Fund by Decision No. 8759-(87/176) ESAF, adopted December 18, 1987. The amount of the loan is to be the equivalent of SDR 90 million and the terms and conditions of this loan shall be as follows:

1. a. The Trustee may make drawings under this agreement at any time during the period from the effective date of this agreement through June 30, 1992, upon giving the Bank at least five business days (Washington, D.C.) notice by tested telex, provided that total drawings may not exceed SDR 30 million until January 1, 1989 and SDR 60 million until January 1, 1990.

b. If any installment of interest is not paid to the Bank within a period of ten days after its due date, the Trustee shall not make further drawings under this agreement pending consultations with the Bank on the matter. However, the Trustee may resume drawings under this agreement once the arrears to the Bank have been discharged.

2. The amount of each drawing shall be denominated in SDRs. Unless otherwise agreed between the Trustee and the Bank, the amount shall be paid by the Bank, on the value date specified in the Trustee’s notice, by transfer of the equivalent amount of U.S. dollars to the account of the Trust at the Federal Reserve Bank of New York, New York.

3. a. Each drawing shall be repaid in ten equal semiannual installments beginning five and one-half years and ending ten years after the date of the drawing. Repayments by the Trust shall be made on or promptly after the relevant maturity date.

b. By agreement between the Bank and the Trustee, any drawing or part thereof may be repaid by the Trustee at any time in advance of maturity.

c. If a drawing matures on a date that is not a business day of the Fund, the maturity date shall be on the preceding business day.

4. a. The rate of interest applicable to each drawing shall be calculated at the time of the drawing and at intervals of six calendar months thereafter. The amount outstanding in respect of each drawing shall bear interest at an annual rate determined by the Trustee at the time of the calculation from the product of:

(i) the interest rates on domestic instruments in each currency included in the SDR basket, as reported to the Trustee by each reporting agency, on the business day of the Fund three business days prior to the interest calculation dates referred to in subparagraph (a) above, as follows:

  • —the bond equivalent yield for six-month U.S. Treasury bills,

  • —the six-month interbank rate in Germany,

  • —the six-month rate for interbank loans against private paper in France,

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

  • —the six-month interbank rate in the United Kingdom, and

(ii) the percentage weight of that currency in the valuation of the SDR on that business day, calculated by using the same amounts and exchange rates for currencies as are employed by the Fund for calculating the value of the SDR in terms of the U.S. dollar on that day.

The applicable interest rate shall be the sum of the products so calculated, rounded to two decimal places.

b. The amount of interest payable in respect of each drawing shall be calculated on an actual day basis and shall be paid on all outstanding drawings under this agreement promptly after June 30 and December 31 of each year.

5. a. Payments of principal and interest shall be made in U.S. dollars or in other media as may be agreed between the Trustee and the Bank.

b. Payments in U.S. dollars shall be made by crediting the amount due to the account of the Bank at the Federal Reserve Bank of New York, New York. Payments in SDRs shall be made by crediting Norway’s holdings account in the Special Drawing Rights Department. Payments in other currencies shall be made to an account specified by the Bank.

6. a. The Bank shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

b. The transferee shall acquire all the rights of the Bank under this agreement with respect to repayment of and interest on the transferred claim.

7. At the request of the Bank, calls on its commitment to meet drawings may be suspended temporarily at any time prior to December 31, 1991, subject to the provisions of Section III, paragraph 4(b) and (c) of the Instrument.

8. Unless otherwise agreed between the Trustee and the Bank, all transfers, exchanges, and payments of principal and interest shall be made at the exchange rates for the relevant currencies in terms of the SDR established by the Fund for the third business day of the Fund before the value date of the transfer, exchange, or payment.

9. If the Fund changes the method of valuing the SDR, all transfers, exchanges, and payments of principal and interest made three or more business days of the Fund after the effective date of the change shall be made on the basis of the new method of valuation.

10. Any question arising hereunder shall be settled by mutual agreement between the Bank and the Trustee.

If the foregoing proposal is acceptable to the Bank, this communication and your duly authenticated reply accepting this proposal shall constitute an agreement between the Bank and the Trustee, which shall enter into effect on the date the Trustee acknowledges receipt of your reply.*

On the transfer of resources from the Special Disbursement Account to the Enhanced Structural Adjustment Facility Trust and retransfer to the Special Disbursement Account, see Decision No. 8760-(87/176) on page 59. On the establishment of the Enhanced Structural Adjustment Facility, see Decision No. 8757-(87/176) SAF/ESAF on page 65.

Entered into effect on April 5, 1988.

Entered into effect on April 12, 1988.

Entered into effect on April 14, 1988.

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