Selected Decisions Annex (14th Ed)
Chapter

Policy on Enlarged Access: Borrowing Agreement with the Saudi Arabian Monetary Agency

Author(s):
International Monetary Fund
Published Date:
April 1989
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1. The International Monetary Fund deems it appropriate, in accordance with Article VII of the Articles of Agreement, to replenish its holdings of currencies by borrowing in order to finance purchases made under the Policy on Enlarged Access to the Fund’s Resources established by Executive Board Decision No. 6783-(81/40), adopted March 11, 1981.

2. The Managing Director is authorized to send to the Governor of the Saudi Arabian Monetary Agency the letter, with Annexes A, B, C, and D, substantially in the terms set forth in the Attachment to EBS/81/95. When a duly authenticated reply is received from the Governor, the letter, with the Annexes, and the Governor’s reply shall constitute an agreement between SAMA and the Fund (hereinafter called the Agreement) which shall enter into force on the date on which the Fund receives such reply.

3. (a) The Managing Director is authorized to give notices for calls and to make calls from time to time under the Agreement for such amounts as he deems to be necessary in order for the Fund to be in a position to meet purchases under the Policy on Enlarged Access to the Fund’s Resources.

(b) The Executive Board shall be informed of the notices given and calls made under the Agreement and the disposition of the amounts borrowed, in the fortnightly reports to the Executive Board on operations and transactions of the Fund.

4. The Managing Director is authorized to arrange for the issue and delivery on behalf of the Fund of promissory notes in bearer form with coupons (hereinafter called Notes) when, in accordance with the terms and conditions set forth in the Agreement, the Saudi Arabian Monetary Agency requests the Fund to issue and deliver such Notes in exchange for all or part of any outstanding installment of any loan made under the Agreement. This authority shall extend to the issue and delivery of Notes in exchange for or replacement of Notes previously issued, as contemplated by the terms and conditions of such Notes. The Notes to be issued and delivered shall be substantially in the form set out in Annex B to the letter of the Managing Director referred to in paragraph 2 above, and shall contain the terms and conditions set forth in such Annex, as amended from time to time. Such Notes shall be signed in the name of the Fund either manually by or with the facsimile signature of the Managing Director and the Treasurer and, if facsimile signatures are used, shall be countersigned manually by an officer or other authorized representative of the Fund designated by the Managing Director. The coupons attached to the Notes shall bear the manual or facsimile signature of an officer or other authorized representative of the Fund designated by the Managing Director.

5. The Managing Director is authorized to designate financial institutions as paying agents under the Notes and to designate agents for service of process, as contemplated in the form of the Bearer Notes set out in Annex B to the letter of the Managing Director referred to in paragraph 2 above, and to agree with each such agent upon the terms of its services and any remuneration therefor.

Decision No. 6843-(81/75) May 6, 1981

Letter from the Managing Director of the Fund to the Governor of the Saudi Arabian Monetary Agency

May 7, 1981

Your Excellency:

I refer to the recent decision of the Executive Board of the International Monetary Fund (hereinafter called the Fund) providing for enlarged access by members to the resources of the Fund. Pursuant to Article VII of the Articles of Agreement of the Fund (hereinafter called the Articles) and Executive Board Decision No. 6843-(81/75), adopted May 6, 1981, I have been authorized to propose on behalf of the Fund that the Saudi Arabian Monetary Agency (hereinafter called SAMA) agree to assist in the financing of such enlarged access, by lending resources to the Fund in accordance with the arrangements set forth below.

1. (a) SAMA will stand committed to make loans to the Fund under this Agreement in a maximum aggregate amount which shall be limited to the equivalent of SDR 4 billion in the first year after the entry into force of this Agreement, and shall increase at the beginning of the second year by SDR 4 billion to a cumulative total equivalent to SDR 8 billion. The commitment shall be effective for a period of six years (hereinafter called the commitment period) from the entry into force of this Agreement.

(b) Before the end of the eighteenth month following the entry into force of this Agreement, SAMA and the Fund shall review the overall commitment of SAMA under this Agreement, but this review shall not affect the commitment of SDR 8 billion referred to in (a) above. In connection with the review, the Fund hopes that SAMA will agree at that time to increase its commitment by a further SDR 4 billion with effect from the beginning of the third year of the commitment period.

2. (a) Subject to the ceiling amounts provided in or under paragraph 1 and to (b) and (c) below, the Fund may call upon SAMA at any time during the commitment period to make loans under this Agreement, provided that the aggregate amount of loans made in any one of the six years of such period shall not exceed the equivalent of SDR 4 billion.

(b) During the first year of the commitment period the Fund shall call for loans in an aggregate amount equivalent to at least SDR 1 billion.

(c) Unless otherwise agreed between SAMA and the Fund, the Fund shall give SAMA at least 90 days’ notice of its intention to make a call hereunder and of the amount which it intends to call; provided that during the first 90 days following the date of this Agreement the Fund may make calls in an aggregate amount not exceeding SDR 5 million after giving SAMA as much advance. notice of each call as is reasonably practicable in the circumstances.

(d) Prior to the beginning of each year of the commitment period the Fund shall provide SAMA with its best estimates of the minimum and maximum amounts which it expects to call during the year, and shall provide revised estimates periodically during the year.

3. (a) SAMA shall make each loan hereunder by transferring to the account of the Fund with SAMA the equivalent in Saudi riyals of the loan amount called for by the Fund, on the value date specified by the Fund in its call. In addition to Saudi Arabia’s obligations under the Articles regarding the exchange of its currency, SAMA agrees that, on request, it shall exchange riyals provided hereunder for U.S. dollars to the extent required for investment pending use of the borrowed funds in transactions of the Fund.

(b) Transfers and exchanges under (a) above shall be at equal value exchange rates determined pursuant to Article XIX, Section 7(a) and the Rules and Regulations of the Fund thereunder for the value dates specified pursuant to (a) above.

(c) No charge or commission shall be imposed by SAMA with respect to any transfer or exchange of currency made pursuant to this Agreement.

4. (a) Interest on each loan shall be computed on the basis of successive interest periods, with the first interest period commencing on the day following the date the loan is made and ending on the first interest payment date under the loan, and each subsequent period commencing on the day following an interest payment date and ending on the next such date. During each interest period, interest shall accrue daily on the outstanding amount of the loan at the Combined Market Interest Rate per annum computed by the Fund for that period in the manner set forth in Annex A to this Agreement. Following each computation the Fund shall promptly communicate the rate to SAMA.

(b) Interest accrued on the outstanding amount of each loan shall be payable by the Fund semi-annually, on interest payment dates falling at successive intervals of six calendar months from the date the loan is made; except that (i) whenever a six-monthly date does not fall on a banking day, the interest payment date shall be the banking day immediately preceding that six-monthly date, and (ii) the final interest payment date for the loan shall be the date the loan is repaid in full as provided in this Agreement. For purposes of this Agreement, the term “banking day” means a day on which banks are open for business in the place where payment is to be made.

5. Except as otherwise provided in this Agreement, each loan shall be repaid by the Fund in four equal annual installments on the fourth, fifth, sixth, and seventh anniversaries respectively of the date the loan is made, except that when an anniversary does not fall on a banking day, payment shall fall due and be made on the banking day immediately preceding such anniversary.

6. (a) Payments of principal of and interest on each loan may be made in Saudi riyals, in any freely usable currency or in special drawing rights, or in any combination of these means of payment, as may be agreed between SAMA and the Fund; provided that, failing agreement, payments shall be made, at the option of the Fund, in Saudi riyals or U.S. dollars. For purposes of this Agreement, a freely usable currency means a currency which the Fund has determined to be freely usable pursuant to Article XXX (f) of the Articles.

(b) Payments in Saudi riyals shall be made by debiting the account of the Fund with SAMA. Payments in any other currency shall be made by transfer to an account in that currency designated by SAMA with a bank in the country issuing the currency selected for payment, or in such other manner as may be agreed between SAMA and the Fund. Payments in special drawing rights shall be made by crediting the holdings account of Saudi Arabia in the Special Drawing Rights Department of the Fund.

7. The Fund shall issue to SAMA at its request a non-negotiable certificate in respect of each outstanding loan, evidencing the principal amount that the Fund is committed to repay under this Agreement. As soon as practicable after amounts of the loan are repaid, transferred or exchanged for Notes pursuant to this Agreement, SAMA shall surrender the certificate for cancellation and the Fund shall issue a new certificate evidencing the balance of the loan amount, if any, remaining outstanding.

8. (a) All amounts under this Agreement, including the principal amount of each loan, shall be expressed in terms of the special drawing right. For purposes of payments by the Fund of the principal of and interest on each loan in currency, the value of a special drawing right in terms of the currency of payment shall be that determined by the Fund pursuant to Article XIX, Section 7 (a) of the Articles for a date three business days of the Fund before such payment is to be made, or, if no such value has been determined for that date prior to the time payment is to be made, the value as of the last preceding date for which a determination has been made by the Fund.

(b) if the Fund should decide to change the method of valuation of the special drawing right, SAMA may at its option require that the method of valuation in effect immediately prior to such change continue to apply to any or all loans made hereunder which are outstanding at the date the change becomes effective, other than loans outstanding at the date of a previous change in respect of which SAMA has already exercised its option under this subparagraph (b). The option of SAMA hereunder shall be exercised by notice to the Fund within 30 days after the adoption of the Fund’s decision, but not later than 14 days after the date the change becomes effective.

(c) If SAMA shall have exercised its option under (b) above, (i) the Fund shall be entitled, at any time thereafter, to repay any or all loans with respect to which the option has been exercised, upon giving at least 14 days’ notice to SAMA of its intention to make such repayment, and (ii) SAMA’s right to request Notes pursuant to paragraph 15 of this Agreement shall terminate with respect to all such loans.

9. (a) The Fund may, at its option, repay in advance of maturity any loan or installment there of on any interest payment date applicable to such loan, provided that it has given SAMA at least 60 days’ notice of its intention to make such repayment.

(b) By agreement between SAMA and the Fund, any loan or installment thereof may be repaid by the Fund at any time in advance of maturity.

10. (a) SAMA may at any time represent to the Fund that in view of the balance of payments and reserve position of Saudi Arabia there is a need for repayment in advance of maturity of all or a specified part of the loan amounts outstanding under this Agreement, and may request the Fund to make such repayment. Whether or not such a request has been made, SAMA may at any time represent to the Fund that the balance of payments and reserve position of Saudi Arabia does not justify the making of further calls under paragraph 2 and may request the Fund to suspend such calls.

(b) If it determines that the balance of payments and reserve position of Saudi Arabia gives rise to a need for repayment as requested by SAMA or justifies the suspension of calls, as the case may be, the Fund shall repay or suspend further calls as requested. In making its determination, and in any subsequent determination of whether improvements in the position of Saudi Arabia justify the resumption of calls after a period of suspension, the Fund shall give the overwhelming benefit of any doubt to the representation of SAMA in the matter.

(c) Promptly after making a determination under (b) above that there is a need for repayment, the Fund shall repay to SAMA a portion of the total outstanding loans equivalent to SDR 4 billion or the full amount of such outstanding loans, whichever is less, with the repayment being applied to such loans in the reverse order of maturity. Within 12 months after such determination the Fund shall repay any balance of such loans still outstanding.

11. (a) If Saudi Arabia withdraws from the Fund, the right of the Fund to make further calls under paragraph 2 shall terminate. Loans outstanding at the date of such withdrawal shall be repaid by the Fund in quarterly installments each equivalent to SDR 2 billion or the full amount of outstanding loans, whichever is less, with the first payment being made within seven days after the withdrawal and with each installment being applied to outstanding loans in the reverse order of maturity. In all other respects the provisions of this Agreement shall continue in effect except paragraphs 10 and 14, which shall cease to apply.

(b) In the event of liquidation of the Fund, the right of the Fund to make further calls under paragraph 2 and the right of SAMA to transfer loan claims under paragraph 14 and to request Notes under paragraph 15 shall terminate. All loans outstanding at the date of liquidation shall become immediately due and payable as liabilities of the Fund under the provisions of the Articles pertaining to such liquidation, and shall be paid as provided in paragraph 6.

12. (a) The Fund covenants that, so long as any loan made hereunder shall be outstanding, the Fund will not cause or permit to be created on any of the property or assets held by the Fund on its own account any mortgage, pledge, lien, or charge as security for any notes or bonds issued or other indebtedness heretofore or hereafter incurred by the Fund through borrowing for its own account (other than mortgages, pledges, liens or charges on property, not including monetary assets, purchased by the Fund securing all or part of the purchase price thereof) unless the loans made hereunder shall be equally and ratably secured by such mortgage, pledge, lien, or charge. In addition, the Fund agrees that loan claims under this Agreement shall rank pari passu in respect of priority of payment with the highest ranking debt incurred by the Fund through borrowing for its own account.

(b) A default under any security arrangement agreed between the Fund and any lender after the date of this Agreement shall be deemed to constitute a default under this Agreement to the same extent as if the security arrangement were incorporated herein for the benefit of SAMA. For purposes of this subparagraph (b), the term “security arrangement” shall include affirmative and negative covenants, events of default or conditions of mandatory prepayment and all similar undertakings for the benefit of creditors, but shall not include financial terms such as interest rates, spreads or margins, commissions or fees or maturity schedules.

(c) If the Fund enters into a borrowing arrangement with any lender that is a Member of the Fund or the central bank of a Member which (i) is on financial terms that can reasonably be considered by either SAMA or the Fund to be more favorable to the lender than those provided herein and is entered into during the period of two years following the entry into force of this Agreement, or (ii) contains provisions under which the Fund waives its immunity from judicial process with respect to the settlement of disputes, SAMA and the Fund shall at the request of SAMA consult with a view to reaching agreement on an amendment to this Agreement under which comparable financial terms or a comparable waiver of immunity are applied to loans by SAMA hereunder, and, to the extent appropriate to any Notes that may subsequently be delivered to SAMA in exchange for such loans. In addition, if at any time while any loan made hereunder remains outstanding the Fund accords to any holder of its notes, bonds, or similar obligations a waiver of immunity more extensive in scope than the waiver contained in the form of Note attached as Annex B, SAMA and the Fund shall at the request of SAMA consult with a view to reach an agreement on an amendment to this Agreement that will accord a waiver of comparable scope in respect of any Notes that may. subsequently be delivered to SAMA hereunder. If no such agreement on an amendment has been reached within 30 days from the date of SAMA’s request, the matter shall be settled by arbitration in accordance with paragraph 18.

13. If the Fund should default in payment of the principal of or interest on, or in the performance of any of its other obligations relating to, any loan made or any Note issued hereunder, or in the payment of the principal of or interest on any other indebtedness incurred by the Fund for its own account under arrangements entered into after March 31, 1981, and such default shall have continued for a period of 90 days, or if in any material respect the representation contained in Annex C is not carried out or the opinions and conclusions of the Director of the Legal Department of the Fund contained in Annex D prove to be incorrect, SAMA may by notice to the Fund terminate the Fund’s rights to make further calls hereunder and declare the principal amount of all outstanding loans due and payable, together with accrued interest thereon, and on the thirtieth day after such notice is delivered to the Fund such amounts shall become due and payable, unless prior to that time the default shall have been remedied.

14. (a) SAMA may at any time transfer its claims on the Fund under this Agreement with respect to any outstanding loan or installment thereof to any Member of the Fund, or to any central bank or other agency of a Member that has been designated as the Member’s agency for dealing with the Fund for purposes of Article V, Section 1 of the Articles, or to any other entity prescribed by the Fund as a holder of special drawing rights pursuant to Article XVII, Section 3 of the Articles.

(b) A transfer shall become effective on the date agreed between SAMA and the transferee. SAMA shall promptly give notice to the Fund of the transfer, the name of the transferee, the loan or installment thereof which is the subject of the transfer and the date of the transfer. On receipt of such notice the Fund shall record the transfer in its books and all amounts of principal and interest subsequently payable by the Fund in respect of the loan or installment shall be paid to the transferee.

(c) On the effective date of the transfer the rights of SAMA provided in this Agreement with respect to the loan or installment which is the subject of the transfer, including without limitation the right of transfer provided in this paragraph, the right to request Notes pursuant to paragraph 15, and the right of arbitration provided in paragraph 18, shall for all purposes vest in the transferee; except that (i) if the transferee is a Member of the Fund or the central bank or other agency of a Member, references in this Agreement to Saudi riyals and to Saudi Arabia shall be deemed to refer to the currency of the transferee and to the relevant Member respectively; (ii) if the transferee is not a Member of the Fund or the central bank or other agency of a Member, references to Saudi riyals shall be deemed to refer to any freely usable currency, and references to Saudi Arabia shall not apply; and (iii) the right to request repayment pursuant to paragraph 10 shall be exercisable by the transferee only if it is a Member, or the central bank or other agency of a Member, that at the time of the transfer 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.

(d) Notwithstanding the foregoing provisions of this paragraph, no transfer shall relate to any loan or installment in respect of which a request has already been made to the Fund pursuant to paragraph 15 for the issue of Notes.

15. (a) SAMA may at any time request the Fund to deliver promissory notes in bearer form (hereinafter called Notes) in exchange for all or part of any outstanding installment of any loan made hereunder, except a loan in respect of which SAMA has exercised the option specified in paragraph 8. Within 30 days after receiving such request the Fund shall deliver such Notes to SAMA, without charge. The Notes shall be in denominations of SDR 1 million, 5 million or any integral multiple of 5 million as specified by SAMA in its request, provided that in no circumstances shall the aggregate principal amount of such Notes exceed the outstanding amount of the installment in exchange for which they are issued.

(b) Unless otherwise agreed between SAMA and the Fund, Notes shall be in the form attached hereto as Annex B, as amended pursuant to paragraph 12(c) up to the date of delivery of such Notes, and shall contain the terms and conditions set forth in such Annex. Within 30 days after the entry into force of this Agreement, the Fund shall designate one or more financial institutions acceptable to SAMA as paying agents under the Notes, and shall designate agents for service as contemplated in the Notes.

(c) Each Note delivered to SAMA shall be dated as of the date the loan to which it relates was made or the date interest on such loan was last paid by the Fund, whichever is the later, and shall have a maturity date corresponding to that of the loan installment in exchange for which it is issued, such maturity date being fixed to fall on a banking day in New York. Interest coupons shall be attached for each interest payment date applicable to such installment after the date of the Note, up to and including the maturity date. Each Note shall be duly authorized by, and duly executed by or on behalf of, the Fund and shall constitute a valid obligation of the Fund in accordance with its terms.

(d) Delivery of each Note shall be effected in such manner as shall be agreed between SAMA and the Fund. Such delivery shall be deemed to discharge the obligations of the Fund under this Agreement with respect to an amount of the relevant loan installment corresponding to the principal amount of the Note and with respect to all interest accrued on such amount and not previously paid.

(e) If within 30 days after receipt of SAMA’s request the Fund has not complied with its obligation hereunder to deliver a Note duly requested by SAMA, in the principal amount requested, then with effect from the thirtieth day after such request the rights and obligations of SAMA and the Fund with respect to that amount shall be those set forth in the form of Note attached as Annex B (including paragraph 11 thereof) and not those set forth in this Agreement, except that the Fund shall not be relieved of its obligation under this Agreement to deliver the Note as requested.

(f) Notwithstanding the foregoing, the Fund shall not be obliged to deliver Notes hereunder during the period of ten days preceding any interest payment date under the loans in full or partial exchange for which such Notes are to be issued.

16. (a) With respect to any Notes delivered to SAMA here under that SAMA has not transferred to any other holder but has retained for its own account, and notwithstanding the terms and conditions contained in such Notes,

  • (i) if SAMA so requests at least 45 days before payment of principal or interest falls due under any such Notes (the serial numbers and denominations of which shall be specified by SAMA in its request), the Fund shall arrange to make such payment to SAMA when it falls due in one of the currencies, other than U.S. dollars, used in valuing the special drawing right, that the Fund shall select. Payment shall be made, as provided in paragraph 6, against surrender of the Notes or coupons as the case may be at the principal office of the Fund; and

  • (ii) if the form of Note attached as Annex B is amended pursuant to paragraph 12(c) of this Agreement, the Fund shall at the request of SAMA made within 14 days after the amendment becomes effective exchange the Notes retained by SAMA for new Notes that shall incorporate the terms and conditions as so amended. The provisions of paragraph 15 of this Agreement shall apply mutatis mutandis to any such exchange.

(b) This paragraph shall continue in full force and effect, notwithstanding that all loans made under this Agreement have been repaid or exchanged for Notes, for as long as any Notes delivered pursuant to this Agreement shall remain outstanding.

17. The Fund confirms that, in entering into this Agreement and making loans hereunder, SAMA may rely on the representations contained in the document attached hereto as Annex C and on the opinions and conclusions contained in the document attached hereto as Annex D.

18. (a) Any question arising between SAMA and the Fund concerning their respective rights or obligations under this Agreement that does not relate to the interpretation of the provisions of the Articles and that cannot be settled by agreement shall be submitted to arbitration by a tribunal of three arbitrators. One arbitrator shall be appointed by SAMA, another by the Fund, and the third, who shall serve as umpire, by the President of the International Court of Justice, unless SAMA and the Fund otherwise agree. The umpire shall have full power to settle all questions of procedure in any case where the parties are in disagreement with respect thereto. The determination of the tribunal on the question shall be conclusive and binding on SAMA and the Fund and shall be promptly implemented in accordance with its terms. Any such determination that the Fund has defaulted in the performance of its obligations under this Agreement shall likewise be conclusive as to any termination or acceleration pursuant to paragraph 13 based on such default.

(b) SAMA and the Fund each undertakes to facilitate the expeditious commencement and conclusion of any arbitration proceedings requested by the other in accordance with this paragraph, and to use its best efforts to ensure that any such proceedings are concluded within six months, at the latest, from the date of such request.

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

Very truly yours,

/s/

J. DE LAROSIÉRE

Managing Director

His Excellency

Sheikh Abdul Aziz Al-Quraishi

Governor, Saudi Arabian Monetary Agency

Riyadh, Saudi Arabia

Annex A: Computation of Interest Rate

1. For purposes of computing interest payable on each loan made under the Agreement (i) “interest computation date,” in relation to the first interest period under a loan, means a date three business days of the Fund before the date the loan is made, and in relation to subsequent interest periods means a date three business days of the Fund before the interest payment date immediately preceding the commencement of such period, (ii) “reporting agency” means an agency which serves as the reporting agency for a currency used in making an interest computation, as provided in paragraph 3 below, and (iii) a “reported yield,” in relation to a currency, means the yield applicable to that currency as provided in paragraph 3 below for the interest computation date or, if no such yield is available for that date, the yield for the next preceding day for which such yield is available, as reported to the Fund by the relevant reporting agency.

2. Except as provided in paragraph 4 below, the Combined Market Interest Rate shall be computed on the basis of the component currencies and the number of units of each such currency used by the Fund on the interest computation date in valuing the special drawing right pursuant to Article XIX, Section 7(a) of the Articles. The computation shall be made by multiplying the reported yield for each component currency on that date by the number of units of that currency used by the Fund in its valuation of the special drawing right, and by then multiplying the product by the value of such currency unit in terms of the special drawing right on that date. The resulting products for all component currencies, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest one sixteenth of one percent, shall be the Combined Market Interest Rate to be applied during the ensuing interest period.

3. (a) The Fund, after consultation with SAMA, shall arrange for the central bank or other appropriate official agency in each country whose currency is a component currency in the valuation of the special drawing right to serve as the reporting agency here-under and to report to the Fund the yield applicable to that currency as provided in (b) and (c) below, as needed for each contemplated by paragraph ______of the attached letter, or after such performance criteria have been established, while they are not being observed; or

  • (d)* during the entire period of this stand-by arrangement, if (member)

    • (i) imposes [or intensifies] restrictions on payments and transfers for current international transactions, or

    • (ii) introduces [or modifies] multiple currency practices,** or

    • (iii) concludes bilateral payments agreements which are inconsistent with Article VIII, or

    • (iv) imposes [or intensifies] import restrictions for balance of payments reasons.

When (member) is prevented from purchasing under this standby arrangement because of this paragraph 4, purchases will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

5. (Member) will not make purchases under this stand-by arrangement during any period of the arrangement in which (member) has an overdue financial obligation to the Fund or is failing to meet a repurchase expectation pursuant to the Guidelines on Corrective Action in respect of a noncomplying purchase.

6. (Member’s) right to engage in the transactions covered by this stand-by arrangement can be suspended only with respect to requests received by the Fund after (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit the eligibility of (member). When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 6, purchases under this arrangement will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

7. Purchases under this stand-by arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in SDRs if, on the request of (member), the Fund agrees to provide them at the time of the purchase.

8. The value date for purchases under this stand-by arrangement involving borrowed resources will be determined in accordance with Rule G-4(b) of the Fund’s rules and regulations. (Member) will consult the Fund on the timing of purchases involving borrowed resources in accordance with Rule G-4(d).

9. (Member) shall pay a charge for this stand-by arrangement in accordance with the decisions of the Fund.

10. (a) (Member) shall repurchase the outstanding amount of its currency that results from a purchase under this stand-by arrangement in accordance with the provisions of the Articles of Agreement and decisions of the Fund, including those relating to repurchase as (member’s) balance of payments and reserve position improves.

(b) Any reductions in (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

(c) The value date of a repurchase in respect of a purchase financed with borrowed resources under this stand-by arrangement effective date; provided that if SAMA has exercised its option under paragraph 8 of the Agreement, all interest computations thereafter on loans in respect of which such option has been exercised shall be made on the basis of the currencies and the units of each currency used by the Fund in its valuation immediately prior to the effective date of the change leading to the exercise of the option.

Annex B: Form of Bearer Note with Coupons

SDR ___________No. ___________

INTERNATIONAL MONETARY FUND

700 19th Street, N.W., Washington, D.C. 20431

Floating Rate Coupon Bearer Note, Due ___________, 19__________

INTERNATIONAL MONETARY FUND (hereinafter called the Fund), for value received, hereby promises to pay to the bearer hereof, on presentation and surrender of this Note at any of the paying agencies of the Fund designated below, a principal sum in United States dollars equivalent to

______________SDR

on _____________, 19__________or such earlier repayment date as may be established pursuant to the provisions hereof, and to pay interest on the said principal sum in United States dollars, but only upon presentation and surrender at a designated paying agency of the interest coupons hereto attached as they severally become due. Interest on the principal sum shall accrue during the interest periods and at the rate for each such period hereinafter described, and shall be payable on the interest payment dates specified below.

The first interest payment date shall be_________, 19____Interest payment dates thereafter shall be each__________and__________in each year, except that (i) if any such date does not fall on a day on which banks are open for business in New York (hereinafter called a banking day) the interest payment date shall be the banking day immediately preceding such date, and (ii) the last interest payment date shall be the date payment of the principal sum is made or duly provided for.

The Fund has appointed as paying agents of the Fund

[ ] at its principal office in Frankfurt, [ ] at its principal office in London, [ ] at its principal office in New York City, [ ] at its principal office in Paris, and [ ] at its principal office in Tokyo.* The Fund reserves the right to appoint other paying agents and to terminate the appointment of any paying agent, provided that the Fund shall always maintain paying agencies in Frankfurt, London, New York City, Paris, and Tokyo.

At the bearer’s option and subject to applicable laws and regulations, payment of the principal of and interest on this Note will be made at any of the paying agencies outside New York City by check drawn on a bank in New York City, or at the request of the bearer by transfer to a United States dollar account maintained by the payee with a bank in New York City.

This Note is one of a series of Bearer Notes of the Fund of several different issue dates and maturities duly authorized by Decision No. 6843-(81/75), adopted May 6, 1981, of the Executive Board of the Fund. All such Bearer Notes (hereinafter called Notes) shall rank pari passu in respect of priority of payment with the highest ranking debt incurred by the Fund through borrowing on its own account. Notes are issuable in authorized denominations of SDR 1 million, 5 million, and integral multiples of 5 million. This Note is issued subject to the terms and conditions set forth below, without prejudice to the right of the Fund to issue other Notes containing different terms and conditions.

1. SDR means the Special Drawing Right of the Fund. For purposes of any payment hereunder the value of a Special Drawing Right in terms of United States dollars shall be that determined by the Fund pursuant to Article XIX, Section 1(a) of its Articles of Agreement for a date three business days of the Fund prior to the date such payment is to be made, or, if no such value has been determined for that date prior to the time payment is to be made, the value as of the last preceding date for which a determination has been made by the Fund.

2. (a) During each successive interest period until payment of the principal sum of this Note has been made or duly provided for, interest shall accrue daily on the principal sum at the Combined Market Interest Rate per annum computed by the Fund for that period. For purposes of computing interest, (i) the first interest period shall commence on the day following the date of this Note and shall end on the first interest payment date, and each subsequent interest period shall commence on the day following an interest payment date and shall end on the next succeeding interest payment date; (ii) “interest computation date,” in relation to the first interest period, means a date three business days of the Fund before the date of this Note, and in relation to subsequent interest periods means a date three business days of the Fund before the interest payment date immediately preceding the commencement of such period; (iii) “reporting agency” means an agency which serves as the reporting agency for a currency used in making an interest computation, as provided in (c) below; and (iv) a “reported yield,” in relation to a currency, means the yield applicable to that currency as provided in (c) below for the interest computation date or, if no such yield is available for that date, the yield for the next preceding day for which such yield is available, as reported to the Fund by the relevant reporting agency.

(b) Except as provided in (d) below, the Combined Market Interest Rate shall be computed on the basis of the component currencies and the number of units of each such currency used by the Fund on the interest computation date in valuing the Special Drawing Right pursuant to Article XIX, Section 7(a) of the Articles of Agreement of the Fund. The computation shall be made by multiplying the reported yield for each component currency on that date by the number of units of that currency used by the Fund in its valuation of the Special Drawing Right, and by then multiplying the product by the value of such currency unit in terms of the Special Drawing Right on that date. The resulting products for all component currencies, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest one sixteenth of one percent, shall be the Combined Market Interest Rate to be applied during the ensuing interest period.

(c) (i) The Fund shall arrange for the central bank or other appropriate official agency in each country whose currency is a component currency in the valuation of the Special Drawing Right to serve as the reporting agency hereunder and to report to the Fund the yield applicable to that currency as provided in (ii) and (iii) below, as needed for each interest computation. Initially the Fund has arranged for the following institutions to serve as reporting agencies for the currencies indicated:

French francCaisse des Dépôts et Consignations
deutsche markDeutsche Bundesbank
Japanese yenBank of Japan
pound sterlingBank of England
U.S. dollarDepartment of the Treasury

(ii) The reported yield applicable to each currency shall be the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency on the basis set out below: (A) for the French franc, the yield to maturity on a representative sample of securities of major French public sector enterprises with an average remaining life in the range of four and a half to five and a half years, based on market prices and weighted by the volume of transactions in the securities during the previous week, as calculated by the Caisse des Dépôts et Consignations using the same method as it uses for the yield it publishes weekly; (B) for the deutsche mark, the yield to maturity on notes and bonds of the Federal Republic, Railways and Post Office with a remaining period to maturity of five years as calculated by the Deutsche Bundesbank on the basis published in the Statistical Supplement (Series 2, Table 8D) to the Bundesbank’s Monthly Report;(C) for the Japanese yen, the yield to maturity of that ten-year Japanese Government bond with a remaining period to maturity closest to five years, based on the closing market price officially published by the Tokyo Stock Exchange; (D) for the pound sterling, the calculated redemption yield on British Government securities determined for a constant maturity of five years, as calculated by the Bank of England on the basis published in its Quarterly Bulletin; (E) for the U.S. dollar, the yield to maturity on actively traded U.S. Government securities, determined for a constant maturity of five years, as calculated by the U.S. Treasury and presently published each week by the Federal Reserve Board in Statistical Release H.15; and (F) for any other currency, the gross yield to maturity, computed by the relevant reporting agency according to established practice in the domestic market of the country of such currency, on representative issues of government securities with an average remaining period to maturity of five years or, if such securities are not available, then on the closest substitute thereto selected by such reporting agency after consultation with the Fund.

(iii) If a reporting agency notifies the Fund that the yield described above in (ii) applicable to its currency can no longer be reported to the Fund, or that some material change has occurred making that reported yield no longer appropriate for the purpose of interest computations hereunder, the reporting agency, after consultation with the Fund, shall determine the most appropriate substitute yield for the purpose, having regard to the criteria specified in subparagraph (ii) (F) above.

(d) Notwithstanding the foregoing, if the Fund should decide to change the method of valuation of the Special Drawing Right, a new Combined Market Interest Rate shall be computed as of a date three business days of the Fund before the change becomes effective, but on the basis of the currencies and the units of each currency used by the Fund under the new method of valuation, and interest shall accrue at the previous Rate until the effective date of the change and at the new Rate from and including such effective date until the commencement of the next interest period after such effective date.

(e) The Fund shall give notice of the name of any reporting agency designated pursuant to subparagraph (c) (i) above and not specifically named therein, and of each Combined Market Interest Rate computed hereunder. Each such notice shall be given by publication in the manner specified in paragraph 8, as soon as practicable following the designation or the interest computation as the case may be.

3. The Fund covenants that, so long as payment of the principal sum of any of the Notes has not been made or duly provided for, the Fund will not cause or permit to be created on any of the property or assets held by the Fund on its own account any mortgage, pledge, lien or charge as security for any notes or bonds issued, or other indebtedness heretofore or hereafter incurred, by the Fund through borrowing for its own account (other than mortgages, pledges, liens or charges on property, not including monetary assets, purchased by the Fund securing all or part of the purchase price thereof) unless the Notes shall be equally and ratably secured by such mortgage, pledge, lien or charge.

4. The Fund and any paying agent of the Fund may deem and treat the bearer of any Note and the bearer of any coupon for interest on any Note as the absolute owner thereof for all purposes whatsoever, notwithstanding any notice to the contrary; and all payments to such bearer shall discharge the obligations of the Fund under such Note or such coupon to the extent of such payment.

5. Without charge, Notes may be exchanged upon presentation and surrender thereof at the principal office of the Fund in Washington, D.C., U.S.A., for similar Notes of other authorized denominations bearing the same maturity date and in the same aggregate principal amount. If a Note or coupon is mutilated, destroyed, stolen or lost it may be replaced at the said principal office of the Fund upon payment by the claimant of such expenses and reasonable charges as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Fund may require. Mutilated Notes or coupons must be surrendered before replacements will be issued.

6. Notes which shall be presented or surrendered by the holders thereof, or delivered by or on behalf of the Fund pursuant to the provisions hereof, shall be accompanied by all coupons thereto appertaining which shall not have matured on or before the date of such presentation and surrender, or delivery, as the case may be.

7. The Fund may at its option redeem any or all Notes, on any interest payment date applicable to the Notes to be redeemed. If a redemption is to relate to part only of the total amount of outstanding Notes bearing the same maturity date and having the same terms and conditions, the particular Notes to be redeemed will be selected by lot by the paying agent of the Fund in New York City. Notice of the Fund’s intention to redeem Notes shall be published, in the manner hereinafter specified, at least once a week for three successive weeks, with the first such notice being published not more than 60 days and the last not less than 30 days prior to the date fixed for redemption. Such notice having been given, the Notes to be redeemed shall become due and payable on the designated redemption date and if payment is made or duly provided for on that date shall cease to bear interest thereafter.

8. Notices required for purposes of the Notes shall be published in at least two daily newspapers of general circulation, one in New York City and one in London. As far as practicable, the Fund shall arrange such publication in the Wall Street Journal and the Financial Times.

9. The Notes and the interest thereon will not be exempt from taxation generally. Under the Articles of Agreement of the Fund no taxation of any kind may be levied by a member of the Fund on the Notes and the interest thereon (a) which discriminates against the Notes solely because of their origin or (b) if the sole jurisdictional basis for such taxation is the place or currency in which the Notes are issued, made payable or paid, or the location of any office or place of business maintained by the Fund. Also, under its Articles the Fund is immune in member countries from liability for the collection of any tax or duty.

10. If the Fund shall have defaulted at any time after March 31, 1981 in the payment of the principal of or interest on the Notes or any indebtedness evidenced by the Notes, or in the performance of any covenant contained in any of the Notes, or in the payment of principal or interest on any other indebtedness incurred by the Fund for its own account under arrangements entered into after March 31, 1981, and such default shall have continued for a period of 90 days, then at any time thereafter during the continuance of such default the holder of any of the Notes may deliver to the Fund at its principal office in Washington, D.C. written notice that such holder elects to declare the principal of and interest on all Notes held by him (the serial numbers and denominations of which shall be set forth in the notice) to be due and payable, and on the thirtieth day after delivery of such notice the principal amount of such Notes shall become due and payable, unless prior to that time such default shall have been remedied.

11. (a) The Notes and coupons shall be governed by and construed in accordance with the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due under any Note or coupon may be brought in the Federal Courts (or if such Courts lack competence, in State Courts) in the State of New York, the Courts of England, or the ordinary Courts of Justice of the Canton of Geneva, Switzerland, with right of recourse in each of these jurisdictions to competent higher courts. The Fund irrevocably agrees to waive its immunity from judicial process and to submit to the jurisdiction of such Courts with respect to such action and with respect to the execution in any member country of the Fund and in Switzerland of a final judgment against the Fund rendered by any of such Courts, and hereby appoints [ ]* in New York City, [ ]* in London, and [ ]* in Geneva as its agent to receive on behalf of the Fund service of writs, copies of the summons and complaint and any other process which may be served in any such action brought in New York, England or Switzerland respectively. Such waiver and submission shall not extend to any action or proceeding other than as specified in this paragraph or in any Courts except those specified in this paragraph.

(b) Notwithstanding any other provision of this Note, any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund shall be conclusively determined by the Fund.

(c) No recourse shall be had for the payment of the principal of or interest on this Note, or for any other claim in respect hereof, against any Governor or Executive Director or Alternate of either, or against any officer or employee, of the Fund.

IN WITNESS WHEREOF, the Fund has caused this Note to be signed in its name with the facsimile signatures of its Managing Director and Treasurer and countersigned with the manual signature of an authorized representative of the Fund.

Dated __________________, 19 ________.

INTERNATIONAL MONETARY FUND

By ____________________

Managing Director

___________ ___________

Treasurer

Countersigned: _____________________

Authorized Representative

No action has been taken by or on behalf of the Fund to register this Note or any prospectus relating thereto or otherwise to qualify it for offering or sale under the laws of any jurisdiction.

FORM OF COUPON

(To be attached to Bearer Notes)

[Coupon Number]

On _______________ 19 _______ or, if this is not a day on which banks are open for business in New York, then on the immediately preceding banking day, the

INTERNATIONAL MONETARY FUND

will pay to bearer an amount of interest then due under the Fund’s Floating Rate Coupon Bearer Note, bearing the serial number and maturity date and in the principal sum specified below, for the interest period of six months more or less ending on such day, unless the Note shall previously have been duly called for redemption, and payment of the principal together with unpaid interest accrued to the date fixed for redemption shall have been made or duly provided for. Payment of the interest will be made in United States dollars upon surrender of this coupon (a) at the principal office of the Fund’s paying agent in New York City; or (b) at the option of the bearer and subject to applicable laws and regulations, at the principal office of the Fund’s paying agent in Frankfurt, London, Paris, or Tokyo or at any other paying agent outside New York City appointed by the Fund from time to time, by check drawn on a bank in New York City, or at the request of the bearer by transfer to a United States dollar account maintained by the payee with a bank in New York City.

INTERNATIONAL MONETARY FUND

___________ ________________

Authorized Representative

Serial No.: _____________________

Maturity Date: __________________

Principal Sum: SDR ______________

Annex C

Letter from the Managing Director of the Fund to the Governor of the Saudi Arabian Monetary Agency

May 6, 1981

His Excellency

Sheikh Abdul Aziz Al-Quraishi

Governor, Saudi Arabian Monetary Agency

Riyadh, Saudi Arabia

Dear Mr. Governor:

In connection with our current negotiations I shall propose to the Executive Board of the Fund in the next few months a policy laying down guidelines on the amounts of outstanding borrowings of the Fund in relation to its assets. This policy initiative would be designed to assure creditors that the Fund’s borrowings will be prudently managed by incorporating in the guidelines the principle of a limit on the Fund’s total indebtedness expressed as a ratio of its total quotas.

Yours sincerely,

/s/

J. DE LAROSIÈRE

Managing Director

Annex D: Memorandum of the Director of the Legal Department of the International Monetary Fund

Borrowing Agreements Between IMF and its Members

1. Like any other subject of international law, be it a state or an international organization, the Fund is legally bound to perform in good faith the obligations it has assumed under agreements that it has concluded in accordance with its constitutional requirements, and it may not invoke actions or omissions by any of its organs in order to avoid the performance of such obligations. This statement is elaborated below.

2. The Fund is an international, intergovernmental organization, which, in accordance with applicable principles of general international law and express provisions of its Articles of Agreement, possesses full juridical personality and the capacity to contract. With regard to borrowing, the Articles of Agreement specifically provide that the Fund may borrow, on such terms and conditions as may be agreed with the lender, the currencies of members, if it finds it appropriate to replenish its holdings of such currencies.

3. Under the provisions of the Fund’s Articles and decisions of its Board of Governors, the authority and responsibility to enter into borrowing agreements for the replenishment of the Fund’s holdings of currencies lies with the Executive Board. Therefore, a borrowing agreement concluded under or pursuant to the authority of the Executive Board is a legally binding agreement of the Fund.

4. It is a fundamental principle of international, as well as of domestic, law that an agreement in force is binding upon the parties to it and must be performed by them in good faith. All parties to the agreement are entitled to expect that the contractual undertakings under the agreement will be fully carried out in accordance with the terms of the agreement. It has been recognized that this basic rule of law applies, with equal force to international organizations.1 Thus, the Fund, having duly concluded an agreement with another party, be it one of its members or another entity, is legally obliged to perform in good faith its undertakings under the agreement.

5. Another basic principle of domestic and international law that flows from the one already referred to is that, once the terms of an agreement have been fixed and the agreement has been brought into force, it is not open to either of the parties to amend, transform, or terminate the agreement unilaterally, i.e., without the consent of the other party. In the case of a party which is a state, this means that the party may not invoke its internal law or decisions of its national authorities or institutions in order to modify or abrogate its obligations under an agreement to which it is a party. In the case of a party which is an international organization, it means that a party to the agreement may not invoke its internal rules and procedures, or the actions or omissions of its organs, in order to change, nullify, or evade its obligations under the agreement. This basic principle has been formulated as follows in the codification of the law on the subject of treaties among international organizations, or between them and states, that was prepared by the International Law Commission of the U.N.2

“An international organization party to a treaty may not invoke the rules of the organization as justification for its failure to perform the treaty, unless performance of the treaty, according to the intention of the parties, is subject to the exercise of the functions and powers of the organization.”

The Commission made it clear that “rules of the organization” means, in particular, “the constituent instruments, relevant decisions and resolutions, and established practice of the organization.”3 Thus, the Fund would be prevented from varying its contractual commitments under an agreement to which it is a party by relying on decisions taken, or practices developed, after the conclusion of the agreement. Changes in the Fund’s law and practice would be taken into account in the interpretation and application of terms of an agreement to which the Fund is a party only to the extent that their applicability was expressly stated in, or implied from, the provisions of the agreement. It is clear therefore that neither the Board of Governors nor the Executive Board of the Fund may change, nullify, or evade the obligations of the Fund under bilateral agreements.

6. Questions of interpretation of the provisions of an agreement between the Fund and another party must be resolved in accordance with the rules and procedures prescribed for this purpose by that agreement. The organs of the Fund have no authority to resolve any questions of interpretation of such an agreement even if the other party to the agreement is a member of the Fund. The Executive Board and the Board of Governors have the responsibility to resolve questions of interpretation of the provisions of the Fund’s Articles and the resolutions and decisions adopted under them, but that authority does not extend to questions of interpretation of the provisions of contractual arrangements of the Fund. As already explained, interpretations or other decisions adopted by the Board of Governors or the Executive Board would affect the interpretation or application of the provisions of an agreement between the Fund and another party only if this was expressly stated in, or implied by, the provisions of that agreement.

Letters from the Governor of the Saudi Arabian Monetary Agency to the Managing Director of the Fund

May 7, 1981

Mr. J. de Larosière

Managing Director

International Monetary Fund

Washington, D.C. 20431

Sir:

Reference is made to your communication dated May 7, 1981. On behalf of the Saudi Arabian Monetary Agency (SAMA), I wish to state that SAMA hereby agrees to lend to the International Monetary Fund in the amounts and on the terms and conditions stated in your communication.

SAMA further agrees that your communication dated May 7, 1981 and this reply constitute an agreement between SAMA and the Fund, such agreement to take effect on the date you receive this reply.

Very truly yours,

/s/

ABDUL AZIZ AL-QURAISHI

Governor

Saudi Arabian Monetary Agency

May 7, 1981

Mr. J. de Larosière

Managing Director

International Monetary Fund

Washington, D.C. 20431

Sir:

In connection with the proposed agreement between the International Monetary Fund and the Saudi Arabian Monetary Agency for borrowing by the Fund of Saudi Arabian riyals from SAMA in accordance with Executive Board Decision No. 6843-(81/75) adopted May 6, 1981, I wish to notify you that, in accordance with Article VII, Section 1 (i) of the Articles of Agreement of the Fund, SAMA, as the fiscal agency of Saudi Arabia, concurs in the borrowing by the Fund of Saudi Arabian riyals from SAMA up to the total amount that may be borrowed under the terms of the proposed agreement.

Very truly yours,

/s/

ABDUL AZIZ AL-QURAISHI

Governor

Saudi Arabian Monetary Agency

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