Selected Decisions Annex (14th Ed)
Chapter

Enhanced Structural Adjustment Facility—Borrowing Agreement

Author(s):
International Monetary Fund
Published Date:
April 1989
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Export-Import Bank of Japan

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

Decision No. 8832-(88/56) ESAF

April 4, 1988

Attachment to EBS/88/69

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

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

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

2. The Trustee may make drawings under this agreement at any time during the period from the effective date of this agreement through June 30, 1993.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • —the six-month interbank rate in Germany,

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

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

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

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

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

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

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

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

9. At the request of the Bank, calls on its commitment to meet drawings may be suspended temporarily at any time prior to December 31, 1992, subject to the provisions of Section III, paragraphs 4(b) and (c) of the Instrument.

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

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

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

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

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

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

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

Definitions

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

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

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

d. “Calendar year”: a period consisting of 12 calendar months.

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

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

g. “Exchange rate computation date”: the date three business days of the Fund prior to the value date of the transfer, exchange, or Article V, Section 1, or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

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

9. At the request of the Bank, calls on its commitment to meet drawings may be suspended temporarily at any time prior to December 31, 1992, subject to the provisions of Section III, paragraphs 4(b) and (c) of the Instrument.

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

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

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

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

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

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

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

Definitions

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

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

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

d. “Calendar year”: a period consisting of 12 calendar months.

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

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

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

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

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

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

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

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

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