Selected Decisions, 15th Edition
Chapter

Article VII: Borrowing

Author(s):
International Monetary Fund
Published Date:
April 1990
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General Arrangements to Borrow

Preamble

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

Paragraph 1. Definitions

As used in this decision the term:

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

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

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

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

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

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

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

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

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

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

Paragraph 2. Credit Arrangements

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

Paragraph 3. Adherence

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

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

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

Paragraph 4. Entry into Force

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

Paragraph 5. Changes in Amounts of Credit Arrangements

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

Paragraph 6. Initial Procedure

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

Paragraph 7. Calls

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

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

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

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

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

Paragraph 8. Evidence of Indebtedness

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

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

Paragraph 9. Interest

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

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

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

Paragraph 10. Use of Borrowed Currency

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

Paragraph 11. Repayment by the Fund

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

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

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

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

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

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

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

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

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

Paragraph 12. Rates of Exchange

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

(b) For all of the purposes of this decision, the value of a currency in terms of the special drawing right shall be calculated by the Fund in accordance with Rule 0–2 of the Fund’s Rules and Regulations.

Paragraph 13. Transferability

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

Paragraph 14. Notices

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

Paragraph 15. Amendment

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

Paragraph 16. Withdrawal of Adherence

A participant may withdraw its adherence to this decision in accordance with paragraph 19(b) but may not withdraw within the period prescribed in paragraph 19(a) except with the agreement of the Fund and all participants.

Paragraph 17. Withdrawal from Membership

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

Paragraph 18. Suspension of Exchange Transactions and Liquidation

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

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

Paragraph 19. Period and Renewal

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

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

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

Paragraph 20. Interpretation

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

Paragraph 21. Use of Credit Arrangements for Nonparticipants

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

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

Paragraph 22. Participation of the Swiss National Bank

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

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

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

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

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

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

Paragraph 23. Associated Borrowing Arrangements

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

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

Annex

Participants and Amounts of Credit Arrangements

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

Decision No. 1289-(62/1)

January 5, 1962, as amended by

Decisions Nos. 1362-(62/32), July 9, 1962,

effective October 12, 1962,

1415-(62/47), September 19, 1962,

4421-(74/132), October 23, 1974,

5792-(78/79), June 2, 1978,

624l-(79/144), August 24, 1979, and

**7337-(83/37), February 24, 1983

The revised text of the GAB Decision, which incorporates amendments in a number of provisions and provides for the increases in participants’ credit arrangements, was approved by the Executive Board on February 24, 1983 (Decision No. 7337-(83/37)). It became effective on December 26, 1983 when all ten participants notified the Fund that they concurred in these amendments and increases.

Letter from Mr. Baumgartner, Minister of Finance, France, to Mr. Dilbn, Secretary of the Treasury, United States

December 15, 1961

Dear Mr. Secretary:

The purpose of this letter is to set forth the understandings reached during the recent discussions in Paris with respect to the procedure to be followed by the Participating Countries and Institutions (hereinafter referred to as “the participants”) in connection with borrowings by the International Monetary Fund of Supplementary Resources under credit arrangements which we expect will be established pursuant to a decision of the Executive Directors of the Fund.

This procedure, which would apply after the entry into force of that decision with respect to the participants which adhere to it in accordance with their laws, and which would remain in effect during the period of the decision, is as follows:

A. A participating country which has need to draw currencies from the International Monetary Fund or to seek a stand-by agreement with the Fund in circumstances indicating that the Supplementary Resources might be used, shall consult with the Managing Director of the Fund first and then with the other participants.

B. If the Managing Director makes a proposal for Supplementary Resources to be lent to the Fund, the participants shall consult on this proposal and inform the Managing Director of the amounts of their currencies which they consider appropriate to lend to the Fund, taking into account the recommendations of the Managing Director and their present and prospective balance of payments and reserve positions. The participants shall aim at reaching unanimous agreement.

C. If it is not possible to reach unanimous agreement, the question whether the participants are prepared to facilitate, by lending their currencies, an exchange transaction or stand-by arrangement of the kind covered by the special borrowing arrangements and requiring the Fund’s resources to be supplemented in the general order of magnitude proposed by the Managing Director, will be decided by a poll of the participants.

The prospective drawer will not be entitled to vote. A favorable decision shall require the following majorities of the participants which take part in the vote, it being understood that abstentions may be justified only for balance of payments reasons as stated in paragraph D:

  • (1) a two-thirds majority of the number of participants voting; and

  • (2) a three-fifths majority of the weighted votes of the participants voting, weighted on the basis of the commitments to the Supplementary Resources.

D. If the decision in paragraph C is favorable, there shall be further consultations among the participants, and with the Managing Director, concerning the amounts of the currencies of the respective participants which will be loaned to the Fund in order to attain a total in the general order of magnitude agreed under paragraph C. If during the consultations a participant gives notice that in its opinion, based on its present and prospective balance of payments and reserve position, calls should not be made on it, or that calls should be for a smaller amount than that proposed, the participants shall consult among themselves and with the Managing Director as to the additional amounts of their currencies which they could provide so as to reach the general order of magnitude agreed under paragraph C.

E. When agreement is reached under paragraph D, each participant shall inform the Managing Director of the calls which it is prepared to meet under its credit arrangement with the Fund.

F. If a participant which has loaned its currency to the Fund under its credit arrangement with the Fund subsequently requests a reversal of its loan which leads to further loans to the Fund by other participants, the participant seeking such reversal shall consult with the Managing Director and with the other participants.

For the purpose of the consultative procedures described above, participants will designate representatives who shall be empowered to act with respect to proposals for use of the Supplementary Resources.

It is understood that in the event of any proposals for calls under the credit arrangements or if other matters should arise under the Fund decision requiring consultations among the participants, a consultative meeting will be held among all the participants. The representative of France shall be responsible for calling the first meeting, and at that time the participants will determine who shall be the Chairman. The Managing Director of the Fund or his representative shall be invited to participate in these consultative meetings.

It is understood that in order to further the consultations envisaged, participants should, to the fullest extent practicable, use the facilities of the international organizations to which they belong in keeping each other informed of the developments in their balances of payments that could give rise to the use of the Supplementary Resources.

These consultative arrangements, undertaken in a spirit of international cooperation, are designed to insure the stability of the international payments system.

I shall appreciate a reply confirming that the aforegoing represents the understandings which have been reached with respect to the procedure to be followed in connection with borrowings by the International Monetary Fund under the credit arrangements to which I have referred.

I am sending identical letters to the other participants—that is, Belgium, Canada, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom. Attached is a verbatim text of this letter in English. The French and English texts and the replies of the participants in both languages shall be equally authentic. I shall notify all of the participants of the confirmations received in response to this letter.

General Arrangements to Borrow: Transferability of Claims

Pursuant to paragraph 13 of the revised General Arrangements to Borrow (GAB) which became effective on December 26, 1983, the Fund consents in advance to the transfer of outstanding claims to repayment under the GAB on the terms and conditions set out below:

1. All or part of any claim under the GAB may be transferred at any time to a participant in the GAB.

2. As from the value date of the transfer, the transferred claim shall be held by the transferee on the same terms and conditions as claims originating under its credit arrangement, except that the transferee shall acquire the right to request early repayment of the transferred claim on balance of payments grounds pursuant to paragraph 11(e) of the GAB only if, at the time of the transfer, (i) the transferee is a member, or the institution of a member, whose balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget; or (ii) the transferee is the Swiss National Bank,* and the balance of payments and reserve position of the Swiss Confederation is, in the opinion of the Fund, sufficiently strong to justify such acquisition.

3. The price for the claim transferred shall be as agreed between the transferee and the transferor.

4. The transferor of a claim shall inform the Fund promptly of the claim that is being transferred, the name of the transferee, the amount of the claim that is being transferred, the agreed price for transfer of the claim, and the value date of the transfer.

5. The transfer shall be registered by the Fund if it is in accordance with the terms and conditions of this decision. The transfer shall be effective as of the value date agreed between the transferee and the transferor.

6. If all or part of a claim is transferred during a quarterly period as described in paragraph 9(b) of the GAB, the Fund shall pay interest to the transferee on the amount of the claim transferred for the whole of that period.

7. If requested, the Fund shall assist in seeking to arrange transfers.

Decision No. 7628-(84/25)

February 15, 1984, effective April 10, 1984

General Arrangements to Bsorrow. Transferability of Claims Under Saudi Arabia’s Borrowing Agreement

Pursuant to paragraph 9 of the Borrowing Agreement with Saudi Arabia under which Saudi Arabia has agreed to provide supplementary resources in association with the GAB, and which became effective on December 26, 1983 (the Agreement),* the Fund consents in advance to the transfer of outstanding claims to repayment under the Agreement on the terms and conditions set out below:

1. All or part of any claim may be transferred at any time to any member of the Fund, the central bank or other agency of any member, or any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Articles of Agreement.

2. On the value date of the transfer, all the rights and obligations of Saudi Arabia provided in the Agreement with respect to the claim that is the subject of the transfer shall vest in the transferee, except that

  • (a) the transferee shall acquire the right to request early repayment on balance of payments grounds provided in paragraph 6(d) of the Agreement only if, at the time of the transfer, (i) the transferee is a member, or the agency of a member, whose balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget, or (ii) the transferee is the Swiss National Bank,** and the balance of payments and reserve position of the Swiss Confederation is, in the opinion of the Fund, sufficiently strong to justify such acquisition;

  • (b) if the transferee is a member or the agency of a member, references in the Agreement to payment in Saudi riyals shall be deemed to be references to payment in the member’s currency, and if the transferee is not a member or the agency of a member such references shall not apply; and

  • (c) the right to repayment on withdrawal provided in paragraph 10 of the Agreement shall apply only if the transferee is a member or the agency of a member, and that member withdraws from the Fund.

3. The price for the claim transferred shall be as agreed between the transferor and the transferee.

4. The transferor shall inform the Fund promptly of the claim that is being transferred, the name of the transferee, the amount of the claim that is being transferred, the agreed price for the transfer of the claim, and the value date of the transfer.

5. The transfer shall be registered by the Fund if it is in accordance with the terms and conditions of this decision. The transfer shall be effective as of the value date agreed between the transferor and the transferee.

6. If all or part of a claim is transferred during the quarterly period ending on a date specified in paragraph 5(b) of the Agreement, the Fund shall pay interest to the transferee on the amount of the claim transferred for the whole of that period.

7. If requested by the holder of a claim under the Agreement, the Fund shall assist in seeking to arrange a transfer pursuant to this decision.

Decision No. 7629-(84/25)

February 15, 1984, effective April 10, 1984

General Arrangements to Borrow: Association of Switzerland*

The understandings set forth in the letter which the Swiss Ambassador to the United States proposes to send to the Managing Director (EBD/64/73, Attachment I) are acceptable to the Fund and the Managing Director is authorized to send the letter [below].

Decision No. 1712-(64/29)

June 8, 1964

Exchange of letters between the Ambassador of Switzerland to the United States and the Managing Director of the Fund

June 11, 1964

The Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C. 20431

Sir:

I have the honor to refer to Mr. Jacobsson’s letter of December 14, 1961 to the President of the Swiss Confederation and to conversations between representatives of the Swiss Confederation and the International Monetary Fund (hereinafter referred to as “the Fund”) concerning the way in which the Swiss Confederation could be associated with the Fund’s General Arrangements to Borrow, and thus contribute to the objectives of those Arrangements. The General Arrangements to Borrow (hereinafter referred to as “the General Arrangements”) are those set forth in Decision No. 1289-(62/1) of January 5, 1962, of the Fund’s Executive Directors, as amended by Decision No. 1362-(62/32) of July 9, 1962 and Decision No. 1415-(62/47) adopted on September 19, 1962.

In the light of the views that have been exchanged, the Swiss Federal Council, on behalf of the Swiss Confederation, is prepared to be associated with the General Arrangements as follows:

(1) The Swiss Confederation is prepared to make resources available to participants in the General Arrangements in accordance with this letter and in amounts not exceeding an outstanding total equivalent to 865,000,000 Swiss francs.

(2) The Swiss Confederation will be prepared to consider the conclusion of agreements (hereinafter referred to as “implementing agreements”) with any of the participants in the General Arrangements if requested by such participants. The implementing agreements will prescribe the terms and conditions in accordance with which the Swiss Confederation will make resources available to the participant or the Swiss Confederation and the participant will make resources available to each other, which shall be on the basis of reciprocal terms if required. Immediately on the conclusion of an implementing agreement, or of any amendment of an implementing agreement, the Swiss Confederation will provide the Managing Director with a copy thereof.

(3) Whenever the Managing Director of the Fund initiates the procedure and makes a proposal for calls pursuant to paragraphs 6 and 7 of the General Arrangements for the benefit of a participant that has entered into or enters into an implementing agreement, he may propose to the Swiss Confederation, after consultation with the Swiss Confederation, that it shall make a specified amount of resources available to the participant, which amount shall be in accordance with the implementing agreement with that participant. If the proposal for calls becomes effective under paragraph 7 of the General Arrangements, the Swiss Confederation will make the specified amount of resources available to the said participant in accordance with this letter and with the terms and conditions of the implementing agreement. If, however, the Swiss Confederation gives notice to the Managing Director that in its opinion, based on its present and prospective balance of payments and reserve position, it should not make resources available in accordance with this proposal, or should make available a smaller amount than that proposed, the Swiss Confederation will not be obliged to make any such resources available or more resources than it represents to the Managing Director that it should make available.

(4) If the Swiss Confederation makes resources available to a participant otherwise than in accordance with the procedure of paragraph (3), the Swiss Confederation, after consultation with the Managing Director, may deem such resources to be or to have been made available pursuant to this letter, provided that at the date of such deeming Switzerland has entered into an implementing agreement with that participant, that at the date of such deeming a proposal for calls for the benefit of that participant is in effect under paragraph 7 of the General Arrangements and provided that the terms and conditions for repayment to Switzerland accord or are made to accord with paragraph (5).

(5) The effect of the terms and conditions for the timing of repayment of resources made available by Switzerland pursuant to this letter will correspond, to the maximum extent practicable, with the repayment provisions of paragraph 11 of the General Arrangements.

(6) The Fund may, at the request of a party to an implementing agreement, make any determination, or use its good offices, to facilitate the operation of an implementing agreement, subject, however, to paragraph (9).

(7) Whenever the Swiss Confederation makes resources available pursuant to paragraph (3) or deems resources to be or to have been made available pursuant to paragraph (4), the Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs thus made available. The Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs of the repayment of any resources made available pursuant to paragraph (3) or (4).

(8) The Swiss Confederation and the Fund will provide each other with the general information necessary to facilitate the operation of this letter and implementing agreements.

(9) The Fund does not accept any responsibility or liability, whether as guarantor or otherwise, in connection with this letter or with respect to the performance of the terms and conditions of an implementing agreement.

(10) This letter will remain effective for four years from October 24, 1962, provided that the Swiss Confederation may rescind this letter, with immediate effect, within one month after an amendment of the General Arrangements becomes effective pursuant to paragraph 15 of the General Arrangements. This letter may be amended or rescinded at any time if the Swiss Confederation and the Fund shall so agree.

(11) Any question of interpretation or application of these understandings will be settled to the mutual satisfaction of the Swiss Confederation and the Fund.

(12) For the purposes of this letter, references to participants shall be deemed to include the official institution of a participant with which an implementing agreement is made, even though such institution is not a “participating institution” under the General Arrangements.

(13) All communications by or to the Swiss Confederation pursuant to this letter shall be made by or to the Swiss Bank.

I propose that, if this letter is approved by the International Monetary Fund, this letter and your reply constitute an agreement between the Swiss Federal Council and the International Monetary Fund, which shall enter into force on the date of your reply. I hereby declare that the Swiss Confederation has taken all steps necessary to implement the exchange of letters.

Accept, Sir, the assurances of my highest consideration.

/s/

A. Zehnder

Ambassador of Switzerland

June 11, 1964

Sir:

I am pleased to acknowledge receipt of your letter of June 11, 1964.

I have been authorized to inform you that the understandings set forth in your letter are accepted by the International Monetary Fund. Accordingly, your letter and this reply constitute an agreement between the International Monetary Fund and the Swiss Federal Council, which will enter into force on the date of this reply.

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

/s/

Pierre-Paul Schweitzer

Managing Director

His Excellency

Alfred Zehnder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

Borrowing Agreement with Swiss National Bank, 1976

The Executive Directors approve the letter [below] from the Managing Director to Dr. Fritz Leutwiler, President of the Directorate of the Swiss National Bank, which proposes the terms and conditions on which the Fund would borrow from the Swiss National Bank.

Decision No. 5288-(76/167)

December 22, 1976

Letter from the Managing Director of the Fund to the President of the Directorate of the Swiss National Bank

December 22, 1976

Sir:

In accordance with the Articles of Agreement of the International Monetary Fund, hereinafter referred to as “the Articles,” and pursuant to Executive Board Decision No. 5288-(76/167), adopted December 22, 1976,1 have been authorized to propose on behalf of the International Monetary Fund, hereinafter referred to as “the Fund,” that the Swiss National Bank, hereinafter referred to as “the Bank,” agree to lend to the Fund at call during the period of the stand-by arrangement for the United Kingdom United States dollars in amounts that in total do not exceed the equivalent of three hundred million special drawing rights (SDR 300,000,000), provided that if the total amount of a proposal for future calls approved by the Executive Directors pursuant to paragraph 7(a) of the General Arrangements to Borrow to finance the stand-by arrangement for the United Kingdom is reduced below the equivalent of two billion five hundred sixty million special drawing rights (SDR 2,560,000,000), the Swiss National Bank shall have the option to reduce the amount of three hundred million special drawing rights (SDR 300,000,000) by the same proportion, on the following terms and conditions:

1. (a) All amounts under this agreement shall be expressed in terms of the special drawing right. For all the purposes of this agreement, the value of a currency in terms of the special drawing right shall be calculated at the rate of the currency as determined by the Fund in accordance with Rule 0–3 of the Fund’s Rules and Regulations in effect when the calculation is made, subject to paragraph 1(b). A copy of the present Rule 0–3 is attached.* The Fund will inform the Bank immediately of all its decisions relating to the valuation of the special drawing right.

(b) If the Fund decides to make a change in the way in which the value of the unit of special drawing rights is determined, (i) the Bank shall have the option to have the unit of value of the special drawing right in effect under Rule 0–3 before the change continue to apply for the purposes of this agreement; (ii) the Fund shall have the option to repay any amounts it is committed to repay, and to make repayment on the basis of the unit of value of the special drawing right in effect under Rule 0–3 before the change.

2. (a) Calls under this agreement shall be made only for exchange transactions under the stand-by arrangement for the United Kingdom referred to above, and shall be such proportion of SDR 300,000,000 as the purchase under the stand-by arrangement bears to the total of the stand-by arrangement.

(b) With the concurrence of the Bank, the Fund may make a call, under the terms of this agreement, in an amount larger than the proportion stipulated in paragraph 2(a).

(c) When a call is made, the Bank shall transfer to the Fund’s account with the Federal Reserve Bank of New York within three business days after the call an amount of United States dollars equivalent to the amount of the call.

3. The Fund shall issue to the Bank, on its request, non-negotiable instruments expressed in special drawing rights evidencing the Fund’s indebtedness to the Bank. Upon repayment of the amount of any instrument and all accrued interest, the instrument shall be returned to the Fund for cancellation. If less than the amount of any such instrument is repaid, the instrument shall be returned to the Fund and a new instrument for the remainder of the amount shall be substituted with the same maturity date as in the old instrument.

4. (a) The Fund shall pay a charge of one half of one percent on transfers under paragraph 2.

(b) The Fund shall pay interest on its indebtedness under this agreement in accordance with the provisions of paragraph 9(b)* of the General Arrangements to Borrow in effect at the time payment is made, subject to paragraph 4(c). A copy of the present paragraph 9(b)* is attached. The Fund will inform the Bank of any amendment of paragraph 9(b).*

(c) If amendments of paragraph 9(b) of the General Arrangements to Borrow are adopted, the Bank shall have the option to have the provision prescribing the rate or rates of interest, including any minimum rate, in effect before the amendment continue to apply for the purpose of the payment of interest under this agreement.

(d) If the Fund has to repay pursuant to a request by the Bank under paragraph 5(d) part or all of the Fund’s indebtedness under this agreement,

  • (i) the annual rate of interest over the period from the date of the transfer to the date of repayment on the amount to be repaid shall be reduced by one half of one percent; and

  • (ii) the rate of the charge paid under paragraph 4(a) on the amount to be repaid shall be reduced to such proportion of one half of one percent as the period from the date of the transfer to the date of repayment bears to five years.

The amount of interest and charge to be returned to the Fund shall be withheld from the amount to be repaid under paragraph 5.

5. (a) Subject to the other provisions of this paragraph 5, the Fund, five years after a transfer by the Bank pursuant to a call under paragraph 2, shall repay the Bank an amount equivalent to the transfer. Repayment to the Bank under the subsequent provisions of this paragraph 5 shall be credited against transfers by the Bank in the order in which repayment is to be made under this paragraph 5(a).

(b) If the United Kingdom makes a repurchase in respect of all or part of a purchase for which a transfer was made under paragraph 2, the Fund shall repay the Bank an amount equivalent to the same proportion of the repurchase as the transfer under paragraph 2 bore to the purchase except when the repurchase augments the right of the United Kingdom to make purchases under the stand-by arrangement. If the United Kingdom does not exercise its augmented rights in full, the Fund shall promptly repay on the expiration of the stand-by arrangement such proportion of the amount not repaid to the Bank in accordance with the preceding sentence as the augmented rights not utilized by the United Kingdom bear to the total augmented rights.

(c) The Fund may repay the Bank in advance of the repayments required by paragraph 5(a) or (b).

(d) If at any time the Bank requests the Fund to repay all or part of the Fund’s indebtedness because in the opinion of the Bank the balance of payments and reserve position of Switzerland requires such repayment, then the Fund will repay the Bank not later than thirty days after the Bank requests repayment.

6. The Fund shall consult the Bank in order to agree the means in which payment of interest and repayment will be made, but, if agreement is not reached, the Fund shall make payment or repayment in United States dollars.

7. The Bank may transfer all or part of its claim to repayment under this agreement with the prior consent of the Fund and on terms and conditions acceptable to the Fund.

8. In the event of liquidation of the Fund the amounts the Fund is committed to repay to the Bank shall be immediately due and payable as liabilities of the Fund under paragraph 1 of Schedule E* of the Articles. For the purpose of paragraph 1(a) of Schedule E* the currency in which the liability is payable shall be, at the option of the Fund, United States dollars or any other currency agreed with the Bank.

9. Any question of interpretation of this agreement shall be settled to the mutual satisfaction of the Bank and the Fund.

If the foregoing proposal is acceptable to the Bank, this communication and your reply shall constitute an agreement between the Bank and the Fund, which shall enter into force on the date on which the Fund receives your reply.

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Börsenstrasse 15

8022 Zurich

Switzerland

Note: The reply by the Swiss National Bank was received by the Fund on December 30, 1976.

Borrowing Agreement with Swiss National Bank, 1977

The Executive Board approves the letter [below] from the Managing Director to Dr. Fritz Leutwiler, President of the Directorate of the Swiss National Bank, which proposes the terms and conditions on which the Fund would borrow from the Swiss National Bank.

Decision No. 5387-(77/61)

April 25, 1977

Letter from the Managing Director of the Fund to the President of the Directorate of the Swiss National Bank

April 25, 1977

Sir:

In accordance with the Articles of Agreement of the International Monetary Fund, hereinafter referred to as “the Articles,” and pursuant to Executive Board Decision No. 5387-(77/61), adopted April 25, 1977, I have been authorized to propose on behalf of the International Monetary Fund, hereinafter referred to as “the Fund,” that the Swiss National Bank, hereinafter referred to as “the Bank,” agree to lend to the Fund at call during the period of the stand-by arrangement for Italy United States dollars in amounts that in total do not exceed the equivalent of thirty-seven million five hundred thousand special drawing rights (SDR 37,500,000), provided that if the total amount of a proposal for future calls approved by the Executive Directors pursuant to paragraph 7(a) of the General Arrangements to Borrow to finance the stand-by arrangement for Italy is reduced below the equivalent of three hundred and thirty-seven million five hundred thousand special drawing rights (SDR 337,500,000), the Swiss National Bank shall have the option to reduce the amount of thirty-seven million five hundred thousand special drawing rights (SDR 37,500,000) by the same proportion, on the following terms and conditions:

1. (a) All amounts under this agreement shall be expressed in terms of the special drawing right. For all the purposes of this agreement, the value of a currency in terms of the special drawing right shall be calculated at the rate for the currency as determined by the Fund in accordance with Rule 0–3* of the Fund’s Rules and Regulations in effect when the calculation is made, subject to paragraph 1(b). A copy of the present Rule 0–3* is attached. The Fund will inform the Bank immediately of all its decisions relating to the valuation of the special drawing right.

(b) If the Fund decides to make a change in the way in which the value of the unit of special drawing rights is determined, (i) the Bank shall have the option to have the unit of value of the special drawing right in effect under Rule 0–3* before the change continue to apply for the purposes of this agreement; (ii) the Fund shall have the option to repay any amounts it is committed to repay, and to make repayment on the basis of the unit of value of the special drawing right in effect under Rule 0–3* before the change.

2. (a) Calls under this agreement shall be made only for exchange transactions under the stand-by arrangement for Italy referred to above, and shall be such proportion of SDR 37,500,000 as the purchase under the stand-by arrangement bears to the total of the stand-by arrangement.

(b) With the concurrence of the Bank, the Fund may make a call, under the terms of this agreement, in an amount larger than the proportion stipulated in paragraph 2(a).

(c) When a call is made, the Bank shall transfer to the Fund’s account with the Federal Reserve Bank of New York within three business days after the call an amount of United States dollars equivalent to the amount of the call.

3. The Fund shall issue to the Bank, on its request, non-negotiable instruments expressed in special drawing rights evidencing the Fund’s indebtedness to the Bank. Upon repayment of the amount of any instrument and all accrued interest, the instrument shall be returned to the Fund for cancellation. If less than the amount of any such instrument is repaid, the instrument shall be returned to the Fund and a new instrument for the remainder of the amount shall be substituted with the same maturity date as in the old instrument.

4. (a) The Fund shall pay a charge of one half of one percent on transfers under paragraph 2.

(b) The Fund shall pay interest on its indebtedness under this agreement in accordance with the provisions of paragraph 9(b) of the General Arrangements to Borrow in effect at the time payment is made, subject to paragraph 4(c). A copy of the present paragraph 9(b)* is attached. The Fund will inform the Bank of any amendment of paragraph 9(b).*

(c) If amendments of paragraph 9(b) of the General Arrangements to Borrow are adopted, the Bank shall have the option to have the provision prescribing the rate or rates of interest, including any minimum rate, in effect before the amendment continue to apply for the purpose of the payment of interest under this agreement.

(d) If the Fund has to repay pursuant to a request by the Bank under paragraph 5(d) part or all of the Fund’s indebtedness under this agreement,

  • (i) the annual rate of interest over the period from the date of the transfer to the date of the repayment on the amount to be repaid shall be reduced by one half of one percent; and

  • (ii) the rate of the charge paid under paragraph 4(a) on the amount to be repaid shall be reduced to such proportion of one half of one percent as the period from the date of the transfer to the date of repayment bears to five years.

The amount of interest and charge to be returned to the Fund shall be withheld from the amount to be repaid under paragraph 5.

5. (a) Subject to the other provisions of this paragraph 5, the Fund, five years after a transfer by the Bank pursuant to a call under paragraph 2, shall repay the Bank an amount equivalent to the transfer. Repayment to the Bank under the subsequent provisions of this paragraph 5 shall be credited against transfers by the Bank in the order in which repayment is to be made under this paragraph 5(a).

(b) If Italy makes a repurchase in respect of all or part of a purchase for which a transfer was made under paragraph 2, the Fund shall repay the Bank an amount equivalent to the same proportion of the repurchase as the transfer under paragraph 2 bore to the purchase except when the repurchase augments the right of Italy to make purchases under the stand-by arrangement. If Italy does not exercise its augmented rights in full, the Fund shall promptly repay on the expiration of the stand-by arrangement such proportion of the amount not repaid to the Bank in accordance with the preceding sentence as the augmented rights not utilized by Italy bear to the total augmented rights.

(c) The Fund may repay the Bank in advance of the repayments required by paragraph 5(a) or (b).

(d) If at any time the Bank requests the Fund to repay all or part of the Fund’s indebtedness because in the opinion of the Bank the balance of payments and reserve position of Switzerland requires such repayment, then the Fund will repay the Bank not later than thirty days after the Bank requests repayment.

6. The Fund shall consult the Bank in order to agree the means in which payment of interest, payment of the charge under paragraph 4(a), and repayment will be made, but, if agreement is not reached, the Fund shall make payment or repayment in United States dollars.

7. The Bank may transfer all or part of its claim to repayment under this agreement with the prior consent of the Fund and on terms and conditions acceptable to the Fund.

8. In the event of liquidation of the Fund the amounts the Fund is committed to repay to the Bank shall be immediately due and payable as liabilities of the Fund under paragraph 1 of Schedule E* of the Articles. For the purpose of paragraph 1(a) of Schedule E* the currency in which the liability is payable shall be, at the option of the Fund, United States dollars or any other currency agreed with the Bank.

9. Any question of interpretation of this agreement shall be settled to the mutual satisfaction of the Bank and the Fund.

If the foregoing proposal is acceptable to the Bank, this communication and your reply shall constitute an agreement between the Bank and the Fund, which shall enter into force on the date on which the Fund receives your reply.

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Börsenstrasse 15

8022 Zurich

Switzerland

Note: The reply by the Swiss National Bank was received by the Fund on May 11, 1977.

Borrowing Agreement with Swiss National Bank: Media of Payment of Interest

Under paragraph 6 of the borrowing agreement with the Swiss National Bank, the Managing Director is authorized to offer to the Swiss National Bank in settlement of interest payable by the Fund under paragraph 4 of that agreement either a currency, or currencies, selected for payment of interest in the currency budget, or United States dollars.

Decision No. 5331-(77/15)

January 31, 1977

Borrowing Agreement with Swiss National Bank: Medium of Payment of Transfer Charges

The Managing Director is authorized to offer U.S. dollars to the Swiss National Bank in settlement of transfer charges payable by the Fund under paragraph 4(a) of the borrowing agreement with the Swiss National Bank provided the U.S. dollar is usable in purchases under the currency budget.

Decision No. 5306-(77/2)

January 3, 1977

Borrowing Agreement with Swiss National Bank: Media of Payment of Transfer Charges and Interest

1. The Managing Director is authorized to offer U.S. dollars to the Swiss National Bank in settlement of transfer charges payable by the Fund under paragraph 4(e) of the borrowing agreement with the Swiss National Bank, provided the U.S. dollar is usable in purchases under the currency budget.

2. Under paragraph 6 of the above-mentioned borrowing agreement the Managing Director is authorized to offer to the Swiss National Bank in settlement of interest payable by the Fund either a currency, or currencies, selected for the payment of interest in the currency budget, or United States dollars.

Decision No. 5488-(77/116)

August 1, 1977

General Arrangements to Borrow: Borrowing Agreement with Saudi Arabia*

Pursuant to Article VII, Section 1 of the Articles of Agreement, the Managing Director is authorized to send to the Minister of Finance of Saudi Arabia a letter proposing a borrowing agreement with Saudi Arabia, as set forth in the attachment to EBS/83/89.

When a reply is received from the Minister accepting the proposal, the Managing Director’s letter and the reply shall constitute an agreement between Saudi Arabia and the Fund, which shall enter into force on the date on which the revised and enlarged General Arrangements to Borrow authorized by Decision No. 7337-(83/37) become effective.

Decision No. 7403-(83/73)

May 20, 1983

Attachment: Letter Proposing an Agreement Between Saudi Arabia and the Fund

Your Excellency:

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

Paragraph 1. The Credit Arrangement

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

Paragraph 2. Period of Credit Arrangement and Renewal

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

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

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

Paragraph 3. Calls

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

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

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

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

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

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

Paragraph 4. Evidence of Indebtedness

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

Paragraph 5. Interest

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

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

Paragraph 6. Repayment by the Fund

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

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

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

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

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

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

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

Paragraph 7. Media of Payment

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

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

Paragraph 8. Rates of Exchange

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

Paragraph 9. Transferability

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

Paragraph 10. Withdrawal from Membership

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

Paragraph 11. Suspension of Exchange Transactions and Liquidation

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

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

Paragraph 12. Amendment

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

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

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

Paragraph 13. Interpretation; Settlement of Disputes

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

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

Very truly yours,

/s/

J. DE LAROSIÉRE

Note: The reply indicating Saudi Arabia’s acceptance was received by the Fund on July 18, 1983.

General Arrangements to Borrow. Borrowing Agreement with Saudi Arabia—Renewal

Pursuant to Article VII, Section 1 of the Articles of Agreement, the Managing Director is authorized to send to the Minister of Finance of Saudi Arabia a letter as set forth in the attachment to EBS/88/109, proposing a renewal, for a period of five years from December 26, 1988, of the 1983 borrowing agreement with Saudi Arabia in association with the General Arrangements to Borrow. When a reply is received from the Minister accepting the proposal, the Managing Director’s letter and the reply shall constitute an agreement on the renewal of the 1983 borrowing agreement between Saudi Arabia and the Fund, which shall enter into force on December 26, 1988.

Decision No. 8897-(88/93)

June 15, 1988, effective

December 26, 1988

Attachment: Letter as set forth in EBS/88/109

Your Excellency:

I refer to the borrowing agreement between the International Monetary Fund (the Fund) and Saudi Arabia in association with the General Arrangements to Borrow (GAB), which entered into force on December 26, 1983 (henceforth referred to as the 1983 Borrowing Agreement). Pursuant to Executive Board Decision No. 8897-(88/93), adopted June 15, 1988,1 have been authorized to propose on behalf of the Fund that Saudi Arabia agree to a renewal of the 1983 Borrowing Agreement on the same terms and conditions as set forth therein, for a period of five years from December 26, 1988.

If the foregoing proposal is acceptable to Saudi Arabia, this communication and your reply indicating Saudi Arabia’s acceptance shall constitute an agreement between Saudi Arabia and the Fund on the renewal of the 1983 borrowing agreement, which shall enter into force on December 26, 1988.*

With kind regards,

Yours sincerely,

Michel Camdessus

H.E. Mohammed Abalkhail

Minister of Finance and National Economy

Minister’s Office

Riyadh 11177

Kingdom of Saudi Arabia

Replenishment in Connection with Supplementary Financing Facility

1. The International Monetary Fund deems it appropriate in accordance with Article VII of the Articles of Agreement to replenish its holdings of currencies to the extent that purchases are to be made with supplementary financing under Executive Board Decision No. 5508-(77/127), adopted August 29, 1977.

2. A number of members and institutions have expressed their intention to make resources available to the Fund for the purpose stated in paragraph 1 above. In order to enable the Fund to replenish its resources in accordance with these intentions, the draft letter set out in the Annex to this decision is adopted as the basis for terms and conditions to be incorporated in the agreement with each contracting party under Article VII of the Articles of Agreement. The terms and conditions will be uniform to the maximum extent possible. Each letter setting forth the terms and conditions to be proposed will be submitted to the Executive Directors for their approval.

3. At any time within the period in which the Fund can replenish its resources in order to provide supplementary financing, it may enter into agreements for this purpose with the contracting parties referred to in paragraph 2 above and with any other member or with its national official financial institutions, provided that the member is in a sufficiently strong balance of payments and reserve position, or with any institution that performs functions of a central bank for more than one member. The Fund will consider a member to be in the position referred to above if it is in a net creditor position in the Fund and if its currency could be used in net sales in the Fund’s currency budgets for the foreseeable future, but the Fund may take other circumstances into account in deciding whether to enter into an agreement with a member or with its national official financial institutions.

4. The amounts to be called by the Fund will be in broad proportion to the unutilized balance under each agreement to the total of unutilized balances under all agreements, subject to such operational flexibility as the Fund may find necessary.

5. The Fund will use its best efforts to ensure that the currencies it receives in accordance with this decision will be transferred on the same day to purchasers under Executive Board Decision No. 5508-(77/127), adopted August 29, 1977, and that amounts corresponding to repurchases attributed in accordance with paragraph 5(b)(i) of the draft letter set out in the Annex to this decision will be repaid to contracting parties on the same day as the repurchase is completed, provided, however, that the Fund will not make such repayment, unless it decides otherwise, if the repurchase entitles the purchaser to augmented rights under its stand-by or extended arrangement.* If such repayment has not been made, the Fund will repay promptly on the expiration of the arrangement an amount equivalent to the amount of the augmented rights that have not been exercised.

Decision No. 5509-(77/127)

August 29, 1977

Annex

[your Excellency] [Dear Sir]:

In accordance with Article VII of the Articles of Agreement of the International Monetary Fund, hereinafter referred to as “the Articles,” and pursuant to Executive Board Decision No. 5509-(77/127), adopted August 29, 1977, and Executive Board Decision No. _[authorizing agreement with individual contracting party, X] adopted _____, I have been authorized to propose on behalf of the International Monetary Fund, hereinafter referred to as “the Fund,” that [X] agree to make available to the Fund at call during the period of five years from the effective date of Executive Board Decision No. 5508-(77/127), adopted August 29,1977, [currency of X] [specified currency or currencies deemed by the Fund to be freely usable] in amounts that in total do not exceed the equivalent of _____ million special drawing rights (SDR _____) in exchange for readily repayable claims on the following terms and conditions:

1. All amounts under this agreement shall be expressed in terms of the special drawing right. For all purposes of this agreement, the value of a currency in terms of the special drawing right shall be calculated at the rate for the currency as determined by the Fund in accordance with the Fund’s Rules and Regulations in effect when the calculation is made, subject to Paragraph 7(a).

2. (a) Calls under this agreement shall be made only (i) in respect of purchases to be made with supplementary financing under the facility established by Executive Board Decision No. 5508-(77/127), adopted August 29, 1977, which is hereinafter referred to as “the facility,” or (ii) by agreement with [X], in order to enable the Fund to repay a claim under another agreement connected with the facility when repayment is made under that agreement because of a balance of payments need.

(b) The Fund shall give [X] as much advance notice as possible of the Fund’s intention to make calls.

(c) [X] may represent that its balance of payments and reserve position does not justify calls or further calls under this agreement. The Fund, in considering the representation, shall give [X] the overwhelming benefit of any doubt. After consultation with [X], in which the Fund shall give [X] the overwhelming benefit of any doubt, the Fund may make calls or further calls at a later date when in the opinion of the Fund the balance of payments and reserve position of [X] improves sufficiently to justify calls or further calls.

(d) When a call is made, [X] shall deposit to the Fund’s account with [X] [the Fund’s depository for the currency of [X]] [the Fund’s depository for the currency of______] within three business days after the call an amount of [its currency] [the currency or currencies specified in the preamble] equivalent to the amount of the call at the rate for the currency as determined by the Fund in accordance with the Fund’s Rules and Regulations. On request, [X] shall exchange its currency [if not deemed by the Fund to be freely usable] when sold by the Fund for a freely usable currency at the rates for the two currencies as determined by the Fund in accordance with its Rules and Regulations.

3. The Fund shall issue to [X] on its request an instrument evidencing the amount, expressed in special drawing rights, that the Fund is committed to repay under this agreement. Upon repayment of the amount of any instrument and all accrued interest, the instrument shall be cancelled. If less than the amount of any such instrument is repaid, the instrument shall be cancelled and a new instrument for the remainder of the amount shall be substituted with the same maturity dates as in the old instrument. If all or part of the amount of a claim is transferred under 8 below, a new instrument or instruments shall be substituted on request for the old instrument with the same maturity dates as in that instrument.

4. (a) The Fund shall pay interest on the amount that the Fund is committed to repay under this agreement in accordance with the following provisions:

  • (i) The initial rate of interest on all outstanding claims shall be seven percent per annum. This rate shall apply until June 30, 1978.

  • (ii) Six months after June 30, 1978, and at intervals of six months thereafter, the Fund shall calculate, in the manner set forth in (iii) below, the rate of interest to be paid on outstanding claims for the period of six months prior to the calculation.

  • (iii) The interest rate on outstanding claims for a period of six months shall be the average of the daily yields during that period on actively traded U.S. Government securities, determined on the basis of a constant maturity of five years, as published each week by the Federal Reserve Board, Washington, D.C. in statistical release H-15 or any substitute publication, or if such publication shall cease as certified by the U.S. Treasury, provided that this average shall be rounded up to the nearest one eighth of one percent.

  • (iv) Interest shall be paid promptly after June 30 and December 31 of each year on the average daily balances outstanding during the preceding six months of the amounts the Fund is committed to repay under this agreement.

(b) No other fee, charge, or commission shall be imposed by [X] with respect to a deposit or an exchange pursuant to a call under paragraph 2(d) or with respect to any other aspect of a call.

5. (a) Subject to the other provisions of this paragraph 5, the Fund shall repay [X] an amount equivalent to any deposit pursuant to a call under paragraph 2 in eight equal semiannual installments to commence three and one half years, and to be completed not later than seven years, after the date of the deposit.

(b) The Fund may repay [X] in advance of the repayments required by paragraph 5(a) to the extent that: (i) a repurchase is attributed, in accordance with the Fund’s practice, to a purchase under the facility for which the Fund has received resources from [X] under this agreement, or (ii) [X] agrees to receive repayment.

(c) If at any time [X] represents that there is a balance of payments need for repayment of part or all of the amount the Fund is committed to repay under this agreement and requests such repayment, the Fund, in considering the representation and deciding whether to make repayment, shall give [X] the overwhelming benefit of any doubt.

(d) Repayments under paragraph 5(b) and (c) shall discharge the installments prescribed by paragraph 5(a) in the order in which they become due.

6. The Fund shall consult [X] in order to agree with it on the means in which payments of interest and repayment shall be made, but, if agreement is not reached, the Fund shall [have the option to] make payment or repayment in [the currency of [X], or] the currency received by the Fund from [X], [or] [special drawing rights] [or any currency deemed by the Fund to be freely usable or any currency that can be exchanged at the time of the payment or repayment for a freely usable currency at a rate of exchange that would yield value equal in terms of the special drawing right to payment or repayment in a freely usable currency,] [or any combination of these means of payment or repayment].

7. (a) If the Fund decides to make a change in the method of valuation of the special drawing right, [X] shall have the option to require immediate repayment of all outstanding claims on the basis of the method of valuation in effect before the change.

(b) If [X] exercises its option under paragraph 7(a), it shall have the further option to cancel this agreement.

8. (a) For value agreed between transferor and transferee, transfers may be made at any time of all or part of a claim to repayment under this agreement in accordance with the following provisions:

  • (i) Transfers may be made to any contracting party, any member, a member’s national official financial institution (hereinafter referred to as a member’s “institution”), or any institution that performs functions of a central bank for more than one member.

  • (ii) Transfers may be made to transferees other than those referred to in (i) above with the prior consent of the Fund and on such terms and conditions as it may prescribe.

(b) The transferor of a claim shall inform the Fund promptly of the claim that is being transferred, the transferee, the amount of the transfer, the agreed value for the transfer, and the value date. The transfer will be registered by the Fund if it is in accordance with this agreement. The transfer shall be effective for the purposes of this agreement as of the value date agreed between the transferor and transferee.

(c) If all or part of a claim is transferred during a period of six months as described in paragraph 4, the Fund shall pay interest on the amount of the claim transferred for the whole of that period to the transferee.

(d) Subject to (c) and to any terms and conditions prescribed under (a)(ii), the claim of a transferee shall be the same in all respects as the claim of the transferor, except that paragraph 5(c) shall apply only if, at the time of the transfer, the transferee is a member, or the institution of a member, that is in a net creditor position in the Fund and in the opinion of the Fund the member’s currency could be used in net sales in the Fund’s currency budgets for the foreseeable future.

(e) If requested, the Fund shall assist in arranging transfers.

9. [If [X] withdraws from the Fund, this agreement shall terminate and the amount that the Fund is committed to repay under this agreement shall be repaid in accordance with the terms of this agreement, provided that repayment shall be made, at the option of the Fund, in the currency of [X] [or in a currency deemed by the Fund to be freely usable], or in such other currency as may be agreed with [X].] [If the member country of which [X] is an institution withdraws from the Fund, [X’s] agreement shall terminate, and the amount that the Fund is committed to repay under this agreement shall be repaid in accordance with the terms of this agreement, provided that repayment shall be made, at the option of the Fund, in the currency of that member [or in a currency deemed by the Fund to be freely usable], or in such other currency as may be agreed with [X].]

10. In the event of liquidation of the Fund the amounts the Fund is committed to repay to [X] shall be immediately due and payable as liabilities of the Fund under the provisions of the Articles on liquidation of the Fund. For the purposes of these provisions the currency in which the liability is payable shall be, at the option of the Fund, [the currency received by the Fund under this agreement] [the currency of [X] if it differs from that currency], [a currency deemed by the Fund to be freely usable], or any other currency agreed with [X].

11. Any question of interpretation that arises under this agreement that does not fall within the purview of the provisions of the Articles on interpretation shall be settled to the mutual satisfaction of [X] and the Fund.

If the foregoing proposal is acceptable to [X], this communication and your duly authenticated reply shall constitute an agreement between [X] and the Fund, which shall enter into force on the date on which the Fund receives your reply.

Very truly yours,

/s/

H. JOHANNES WITTEVEEN

Managing Director

Borrowing in Connection with Supplementary Financing Facility: Authorization to Make Calls

1. The Managing Director is authorized to make calls under the agreements to borrow entered into pursuant to Executive Board Decision No. 5509-(77/127), adopted August 29, 1977, in accordance with paragraph 4 of that decision to replenish the Fund’s holdings of currencies in respect of purchases that are to be made with supplementary financing under Executive Board Decision No. 5508-(77/127), adopted August 29, 1977.

2. In implementing paragraph 4 of Decision No. 5509-(77/127), the amounts to be called under each borrowing agreement on which calls can be made, the Managing Director shall take into account, as described in EBS/79/1, the size of the purchase to be financed by borrowing, and the balance of payments and reserve position of the lenders or the members whose financial institutions are the lenders.

3. The Managing Director shall inform the Executive Board promptly of calls that he has made.

Decision No. 6006-(79/3)

January 5, 1979

Transferability of Claims on Fund Under Oil Facility and Supplementary Financing Facility: Meaning of “Net Creditor Position in Fund”

For the purposes of paragraph 3 of Executive Board Decision No. 5509-(77/127) of August 29, 1977, paragraph 8(d) of the letter annexed to that decision, and paragraph 2(a) (iv)a of Executive Board Decision No. 5974-(78/190) of December 4, 1978, a member shall be considered to have a “net creditor position in the Fund” if the member has a reserve tranche position on which it receives remuneration and the Fund’s holdings of the member’s currency do not include any balances subject to repurchase under Schedule B or any balances subject to charges under Article V, Section 8(b) of the Articles of Agreement.

Decision No. 6008-(79/3)

January 5, 1979

Borrowing Arrangements in Connection With Supplementary Financing Facility: Payment of Interest

The Managing Director shall make arrangements for consultations with lenders in order to agree with them on the means of payment of interest under the borrowing agreements concluded in accordance with Executive Board Decision No. 5509-(77/127), adopted August 29, 1977. Payments of interest shall be made in accordance with the procedure set forth [below]. Executive Directors shall be informed promptly of the interest paid and the assets used.

Decision No. 6163-(79/96)

June 21, 1979

Procedure

Paragraph 6 of each of the borrowing agreements in connection with the supplementary financing facility provides that the Fund shall consult the lender in order to agree on the means with which interest will be paid. If agreement is not reached the Fund has the option to pay with the means indicated in the individual borrowing agreements. Interest payments shall be made promptly after June 30 and December 31 of each year on the average daily balances which were outstanding during the preceding six months and which the Fund is obliged to repay; the first payments will be made at the beginning of July 1979.

This paper deals with the procedure that is to be followed when consulting with lenders regarding the means that would be offered by the Fund for the payment of interest.

The rate of interest on amounts of outstanding claims under the supplementary financing facility for a period of six months is the average of the daily yields during these six months on actively traded U.S. Government securities, determined on the basis of a constant maturity of five years, as published by the Federal Reserve Board, Washington, D.C. This average rate is rounded up to the nearest one eighth of one percent.

In accordance with the policy guiding the selection of means for the payment of interest on borrowing for the financing of transactions under the oil facility, which was approved by the Executive Board, the lender has been offered its own currency, if the Fund’s holdings of this currency were sufficient for this purpose, one or more currencies from the operational budget or SDRs, or a combination of these means …. the means most generally used in the payment of interest on borrowing by the Fund has been the U.S. dollar. Although U.S. dollars were not included for use in payments by the Fund in the last three operational budgets, the Executive Directors agreed, for the convenience of lenders, to the use of this currency in the payment of interest on borrowings. It seems reasonable to follow the same procedures regarding the payment of interest under the supplementary financing facility.

It is proposed that the Managing Director be instructed to make arrangements, as necessary, for consultations with lenders in order to agree on the means for the payment of interest and to effect these payments in accordance with this procedure. Executive Directors would be informed promptly of the interest payments made and the means used.

Policy on Enlarged Access: Establishment of the Borrowed Resources Suspense Accounts

1. The Managing Director is authorized (i) to establish Borrowed Resources Suspense Accounts within the General Department, (ii) to transfer to these Accounts balances of currencies borrowed before these can be used in transactions or received in repurchases made before repayment can be made, and (iii) to invest these balances until they can be transferred to the General Resources Account for immediate use in a transaction or an operation.

2. A Borrowed Resources Suspense Account for each currency shall be opened, as needed, with the depository designated pursuant to Article XIII, Section 2, by a member whose currency is to be borrowed, used for investment, or used in repayment or the payment of interest and shall be operated in accordance with the standard procedures for the operation of the Fund’s No. 1 and Securities Accounts with the depository.

Decision No. 6844-(81/75)

May 5, 1981

Policy on Enlarged Access: Investment by the Fund of the Currencies Held in the Borrowed Resources Suspense Accounts

1. The Managing Director is authorized to invest currencies held in the Borrowed Resources Suspense Accounts in one or more of the following ways: (a) deposits with a national official financial institution of a member, or an international financial institution, that are denominated in special drawing rights; (b) marketable obligations issued by a member or by a national official institution of a member and denominated in special drawing rights; and (c) marketable obligations issued by an international financial institution and denominated in special drawing rights.

2. The policy on the investment of the undisbursed amounts held in the Borrowed Resources Suspense Accounts shall take into account the operational needs of the General Resources Account, including the dates on which members are expected to make purchases from the Fund under its Policy on Enlarged Access.

3. (a) The Managing Director, when making arrangements for the placement of investments in accordance with paragraphs 1 and 2 above, shall consider the terms offered by a national official financial institution of the member issuing the currency borrowed, or to which the borrowed funds may be transferred, that will accept investments denominated in special drawing rights, and the terms offered by the Bank for International Settlements, for all or part of the intended investment in SDR-denominated deposits.

(b) In the event the Managing Director considers that none of the offers made by the central banks and by the BIS is sufficiently attractive, he shall inform the Executive Board promptly and make other proposals to it for investment in SDR-denominated obligations.

4. The Managing Director is authorized to transfer borrowed funds at the time of the original receipt from the Borrowed Resources Suspense Account in the depository designated by the member whose currency was borrowed to the Borrowed Resources Suspense Account in the depository designated by the member whose currency is to be used in an investment when this transfer is necessary to effect an investment denominated in special drawing rights, and when this transfer has been concurred in by the two members whose currencies will be involved.

Decision No. 6845-(81/75)

May 5, 1981

Guidelines for Borrowing by the Fund

Quota subscriptions are and should remain the basic source of the Fund’s financing. However, borrowing by the Fund provides an important temporary supplement to its resources. In present circumstances, it facilitates the provision of balance of payments assistance to its members under the Fund’s policies of supplementary financing and enlarged access.

The confidence of present and potential creditors in the Fund will depend not only on the prudence and soundness of its financial policies but also on the effective performance of its various responsibilities, including, in particular, its success in promoting adjustment.

Against this background the Executive Board approves the following guidelines on borrowing by the Fund.

1. Fund borrowing shall remain subject to a process of continuous monitoring by the Executive Board in the light of the above considerations. For this purpose, the Executive Board will regularly review the Fund’s liquidity and financial position, taking into account all relevant factors of a quantitative and qualitative nature.

2. Subject to paragraph 4 below, the Fund will not allow the total of outstanding borrowing plus unused credit lines to exceed the range of 50–60 percent of the total of Fund quotas. If the total of outstanding borrowing plus unused credit lines reaches the level of 50 percent of quotas, the Executive Board shall assess the various technical factors that determine, at that time, the availability of balances of unused lines of credit. While this assessment is being made, the total of outstanding borrowing plus unused credit lines may rise, if necessary, beyond 50 percent, but shall not exceed 60 percent of total quotas.

3. The total of outstanding borrowing plus unused credit lines under paragraph 2 above shall include, in respect of the GAB and borrowing arrangements associated with the GAB, either outstanding borrowing by the Fund under these arrangements, or two thirds of the total of credit lines under these arrangements, whichever is the greater.

4. In the case of major developments, the Executive Board shall promptly review, and may adjust, the guidelines. In any event, the guidelines shall be reviewed when the Board of Governors has completed the Ninth General Review of Quotas, or when there is a significant change in the GAB or associated arrangements, and may be adjusted as a result of such reviews.

5. The percentage limits specified in paragraph 2 above, or any other limits that may be adopted as a result of a review pursuant to paragraph 4 above, are not to be understood, at any time, as targets for borrowing by the Fund.

Decision No. 7040-(82/7)

January 13, 1982,

as amended by

Decision No. 7589-(83/181)

December 23, 1983

The Swiss National Bank became a participant in the GAB with effect from April 10, 1984.

Renewed for a period of five years from December 26, 1988 (Decision No. 8733-(87/159), effective December 26, 1988).

Became a participant in the GAB with effect from April 10, 1984.

See Decision No. 7403-(83/73) on page 294.

Became a participant in the GAB with effect from April 10, 1984.

The association of Switzerland has been extended until July 15, 1985 (Decision No. 6524-(80/88), June 9, 1980).

Rule 0–3 is not included in this volume; it corresponds to Rules 0–1 and 0–2 in the Fund’s ByLaws, Rules and Regulatiom, Forty-Sixth Issue, August 22, 1990.

No longer in effect. For the amended paragraph 9(b), see page 263.

Corresponds to Schedule K of the Attkles of Agreement after the Second Amendment.

Corresponds to Rules 0–1 and 0–2 of the Rules and Regulations in By-Laws, Rules and ReglilaJions, Forty-Sixth Issue, August 22,,1990.

Corresponds to Rule 0–1 of the Rules and Regulations in By-Laws, Rules and Regulaliom, Forty-Sixth Issue, August 22, 1990.

No looger in effect. For the amended paragraph 9(b), see page 263

Corresponds to schedule K of the Articles of Agreement after the Second Amendment.

The Agreement with Saudi Arabia entered into force on December 26, 1983.

The reply was received from the Minister accepting the proposed renewal for a period of five years from December 26, 1988.

See Decision No. 5706-(78/39), reproduced on page 110.

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