Selected Decisions Annex (14th Ed)
Chapter

Enhanced Structural Adjustment Facility—Associated Lending

Author(s):
International Monetary Fund
Published Date:
April 1989
Share
  • ShareShare
Show Summary Details

Saudi Fund for Development

1. Pursuant to paragraph 3 of Decision No. 8757-(87/176) SAF/ESAF, adopted December 18, 1987, the Executive Board authorizes the Managing Director to sign the Memorandum of Understanding as set forth in Attachment I to EBS/88/266.

2. Pursuant to Article V, Section 2(b), at the request of the Saudi Fund for Development as set forth in Attachment III to EBS/88/266, the Executive Board adopts the Instrument to Establish a Special Account—Saudi Fund for Development as set forth in Attachment II to EBS/88/266. The provisions of the Instrument may be amended only by a decision of the International Monetary Fund with the concurrence of the Saudi Fund for Development.

Decision No. 9060-(89/5) ESAF January 18, 1989

Attachment I to EBS/88/266

Memorandum of Understanding Between the Saudi Fund for Development and the International Monetary Fund Concerning Financing in Association with the Enhanced Structural Adjustment Facility

The International Monetary Fund (hereinafter called the IMF) and the Saudi Fund for Development (hereinafter called the SFD) agree in accordance with paragraph 3 of Decision No. 8757-(87/176) SAF/ESAF, adopted by the Executive Board of the IMF on December 18, 1987, that resources will be provided by the SFD to support arrangements under the Enhanced Structural Adjustment Facility (hereinafter called the ESAF) through loans to qualifying members in association with loans under the ESAF (hereinafter called associated loans). Resources up to the equivalent of SDR 200 million will be available for making associated loans.

1. The SFD is prepared to extend associated loans to countries entering into arrangements with the IMF under the ESAF to the extent that they qualify for assistance from the SFD.

2. Commitments for associated loans may be made by the SFD until November 30, 1990, unless such period is extended by mutual agreement between the SFD and the IMF.

3. An associated loan shall be provided on the basis of an agreement between the SFD and the recipient country. Terms and conditions of associated loans shall include the following:

(a) associated loans shall be repayable in ten equal semiannual payments beginning five and one half years and ending ten years from the date of disbursement from the SFD Special Account to the recipient country;

(b) associated loans shall bear a loan charge at a rate of one half (0.5) percent per annum, calculated on an actual day basis, provided that loan charges equal to the rate of interest on the SDR shall be charged on the amounts of any overdue loan charges or on overdue repayments of associated loans. In the event of an increase in the rate of 0.5 percent per annum on ESAF Trust loans, the SFD and the IMF will review the rate of the loan charge to be applied under associated loan agreements that would be signed thereafter.

Loan charges shall be payable by the recipient country on June 30 and December 31 of each year, or the next business day if the day when payment is due is not a business day.

(c) associated loans shall be denominated in SDRs.

4. Associated loans shall be used to finance eligible imports of the recipient countries which will normally include capital goods, industrial, agricultural or other inputs, essential commodities, and other types of goods acceptable to the SFD. Associated loans will not be used to meet taxes, fees, import or custom duties imposed directly or indirectly by the recipient countries in connection with the importation of the goods. Normally, only imports contracted after the signature of the associated loan agreement shall be eligible for financing.

5. The IMF shall inform the SFD periodically of those countries with which the IMF is likely to enter into negotiations regarding an ESAF arrangement in the following six-month period. The IMF will, early in its discussions with a potential recipient country regarding an ESAF arrangement, and after consultation with the SFD, reach an understanding with the potential recipient country on the SFD participation in such an ESAF arrangement. On that basis, the staff of the IMF, in consultation with the recipient country, and the staff of the SFD will, as soon as practicable, formulate a proposal for the total amount and the expected timing of disbursements under an associated loan for that recipient country.

6. Recognizing the need for close coordination and cooperation between the SFD and the IMF in order to achieve the objectives of ESAF, the SFD will, however, be responsible for the preparation, negotiation, and signature of its bilateral agreements with the recipient countries. The pertinent Loan Agreement will specify the goods for which financing is available, the method of their procurement, and the requisites and procedures of disbursement.

7. Disbursements under the associated loan to a recipient country shall be made through the SFD Special Account, in accordance with the Instrument establishing the SFD Special Account, simultaneously with disbursements under the corresponding ESAF arrangement at any time until June 30, 1993. The objective is to start the association of such disbursements with disbursements under an ESAF arrangement as early as possible.

8. Payments of loan charges and repayments under associated loans shall be made by the recipient country upon instructions by the IMF together with any payments under SAF and ESAF Trust loans and payments shall be attributed and transferred in accordance with the provisions of the Instrument establishing the SFD Special Account.

9. From time to time at the request of either party, the IMF and SFD shall consult with each other on matters arising under this Memorandum of Understanding. The SFD and the IMF have agreed to a meeting between staff representatives every six months as necessary to review all matters arising under this Memorandum of Understanding. Any question arising under this Memorandum of Understanding shall be settled by mutual agreement between the SFD and the IMF.

10. The terms of this Memorandum of Understanding will come into effect upon signature of this Memorandum of Understanding by the SFD and the IMF. These arrangements may be modified from time to time by further mutual agreements in writing between the two parties.

In witness whereof, the SFD and the IMF, acting through their representatives thereunto duly authorized, have caused this Memorandum of Understanding to be signed in their respective names, in Riyadh, this day, February 19, 1989, and in Washington, D.C., this day, February 27, 1989, in two counterparts each of which shall be an original.*

THE SAUDI FUND FOR DEVELOPMENTTHE INTERNATIONAL MONETARY FUND
By...........By...........

Attachment II to EBS/88/266

Proposed Instrument for a Special AccountSaudi Fund for Development

To help fulfill its purposes, the International Monetary Fund (hereinafter called the IMF) has, at the request of the Saudi Fund for Development (hereinafter called the SFD), adopted this Instrument to establish a Special Account in accordance with Article V, Section 2(b) (hereinafter called the SFD Special Account) which shall be governed by, and administered in accordance with, the terms and conditions of this Instrument:

1. The Managing Director is hereby authorized to establish with the IMF a SFD Special Account through which disbursements to recipient countries of loans made by the SFD in association with loans under the ESAF (hereinafter called associated loans) and payments of loan charges and repayments of principal to the SFD under associated loans shall be made.

2. The IMF shall act as agent of the SFD in respect of disbursements of associated loans to recipient countries and in respect of payments of loan charges and repayments of principal due by recipient countries to the SFD under associated loans.

3. The Managing Director is authorized (i) to make all arrangements, including establishment of accounts in the name of the IMF with such depositories of the IMF as may be necessary to carry out the operations of the SFD Special Account; and (ii) to take all measures necessary to implement the provisions of this Instrument.

4. (a) Amounts in SDRs to be disbursed to a recipient country under an associated loan, as determined pursuant to paragraph 5 of the Memorandum of Understanding between the IMF and the SFD, shall be placed by the SFD to the SFD Special Account in U.S. dollars for disbursement by the IMF, simultaneous with disbursements under an ESAF arrangement, to the recipient country.

(b) Funds shall become available for disbursement under an associated loan after the bilateral agreement for an associated loan between the SFD and the recipient country has entered into effect and as the recipient country satisfies the requisites and procedures for disbursement of part or all of the loan amount. The SFD shall inform the IMF, on request, of the amounts available for disbursement to a recipient country.

(c) The IMF shall notify the SFD, at least 20 days in advance of an expected disbursement under an ESAF arrangement with a recipient country, of the expected value date of the disbursement and the amount that is to be financed from the associated loan. The IMF shall confirm this notice five business days in advance of the value date of the disbursement. Final payment instructions shall be issued by the IMF to the SFD three business days before the value date of the corresponding ESAF disbursement.

(d) The SFD shall ensure that the amount to be disbursed under the associated loan is placed to the SFD Special Account by 11:00 a.m. (New York) on the value date notified by the IMF, and shall confirm to the IMF when the transfer has been made.

(e) The IMF shall confirm to the SFD receipt of the transfer and disbursement to the recipient country.

5. (a) The IMF shall issue instructions to the recipient country prior to the due date of a payment by the recipient country of the aggregate amount due under SAF (if applicable) and ESAF Trust loans and the associated loan. The instructions shall specify the components of the payment due. The SDR amount of payments of principal and loan charges due from the recipient country to the SFD shall be made in U.S. dollars.

(b) The IMF shall be notified by the SFD of the amount of loan charges and principal repayments due in respect of an associated loan at least five business days in advance of the due date, for inclusion in the instructions referred to in 5(a) above. Such notifications shall include, to the extent practicable, the amount of loan charges due in respect of any overdue obligation under the associated loan.

(c) Upon receipt of the total payment due from the recipient country, the IMF shall (i) attribute any amounts due under SAF and ESAF Trust loans and (ii) place the amount due to the SFD to the SFD Special Account and transfer that amount, as received, no later than the next business day after payment is received, to an account specified by the SFD.

(d) If partial payment of the total amount due on a payment date is received, it shall be attributed first to any obligations due under the SAF and the ESAF Trust loans, unless specified otherwise by the recipient country. Any amount remaining after this attribution has been made shall be placed to the SFD Special Account and shall be transferred, as received, no later than the next business day after payment is received, to an account specified by the SFD.

(e) The procedures for attribution, placement, and transfer described in (d) above shall also apply to subsequent payments made by the recipient country in discharge of any overdue obligations under the SAF and ESAF Trust loans and the corresponding associated loan. Payments received in respect of such overdue obligations shall be applied in the order in which the obligations fell due, including those to the SFD. Instructions for payment shall continue to be issued periodically by the IMF in the event of overdue payments under an associated loan.

(f) The SFD shall confirm receipt of all transfers to it from the SFD Special Account.

6. (a) All payments and transfers under this Instrument shall be denominated in SDRs and shall be valued in the same manner as for SAF and ESAF Trust loans, provided that transfers from the SFD Special Account to the SFD under paragraph 5 shall be made as received from the recipient country.

(b) The term “business days” under this Instrument means business days of the IMF and to the extent applicable business days of the institutions at which payments or transfers are to be made.

(c) No charge shall be levied on the SFD for the services rendered by the IMF in the administration, operation, and termination of the SFD Special Account.

(d) Any balance that may be held in the SFD Special Account may be invested at the discretion of the IMF. Net earnings on any such investment shall be transferred to the SFD upon liquidation of that investment.

(e) The IMF and SFD staff shall consult as needed regarding the operations of the SFD Special Account. Any question arising under this Instrument shall be settled by mutual agreement between the IMF and the SFD.

7. (a) Assets held in the SFD Special Account shall be kept separate from the assets and property of all other accounts of, or administered by, the IMF. The assets and property held in such other accounts shall not be used to discharge or meet any liabilities, obligations, or losses of the IMF incurred in the administration of the SFD Special Account; nor shall the assets of the SFD Special Account be used to discharge or meet any liabilities, obligations, or losses incurred by the IMF in the administration of such other accounts.

(b) The IMF shall maintain separate financial records and prepare separate financial statements for the SFD Special Account.

(c) The Audit Committee selected under Section 20 of the IMF’s By-Laws shall audit the operations and transactions conducted through the SFD Special Account. The audit shall relate to the financial year of the IMF.

(d) The IMF shall report on the operations of the SFD Special Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the Audit Committee on the SFD Special Account.

8. Subject to the provisions of this Instrument, the IMF, in administering the SFD Special Account, shall apply mutatis mutandis the same rules and procedures as apply to operations of the General Resources Account of the IMF.

9. The SFD Special Account shall be terminated when its purpose has been completed. Any balance that may remain in the account at that time shall be transferred promptly to the SFD.

Attachment III to EBS/88/266

Riyadh, December 27, 1988

The Managing Director

International Monetary Fund

Washington, D.C. 20431

U.S.A.

Dear Mr. Camdessus:

The Saudi Fund for Development (SFD) hereby requests the international Monetary Fund (IMF) to establish an account, called the SFD Special Account, through which disbursements to recipient countries of loans made by the SFD in association with loans under the Enhanced Structural Adjustment Facility and payments of loan charges and repayments to the SFD under associated loans shall be made.

(c) The Audit Committee selected under Section 20 of the IMF’s By-Laws shall audit the operations and transactions conducted through the SFD Special Account. The audit shall relate to the financial year of the IMF.

(d) The IMF shall report on the operations of the SFD Special Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the Audit Committee on the SFD Special Account.

8. Subject to the provisions of this Instrument, the IMF, in administering the SFD Special Account, shall apply mutatis mutandis the same rules and procedures as apply to operations of the General Resources Account of the IMF.

9. The SFD Special Account shall be terminated when its purpose has been completed. Any balance that may remain in the account at that time shall be transferred promptly to the SFD.

Attachment III to EBS/88/266

Riyadh, December 27, 1988

The Managing Director

International Monetary Fund

Washington, D.C. 20431

U.S.A.

Dear Mr. Camdessus:

The Saudi Fund for Development (SFD) hereby requests the international Monetary Fund (IMF) to establish an account, called the SFD Special Account, through which disbursements to recipient countries of loans made by the SFD in association with loans under the Enhanced Structural Adjustment Facility and payments of loan charges and repayments to the SFD under associated loans shall be made.

The Administration of the SFD Special Account shall be governed by the provisions of the attached Instrument, which is subject to the approval of the Executive Board of the IMF.

Sincerely,

/s/ Mohammad A. Al-Sugair

Vice Chairman and Managing Director

    Other Resources Citing This Publication