Selected Decisions (9th Ed)
Chapter

Article VII: Borrowing

Author(s):
International Monetary Fund
Published Date:
June 1981
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General Arrangements to Borrow

Preamble

In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system in the new conditions of widespread convertibility, including greater freedom for short-term capital movements, the main industrial countries have agreed that they will, in a spirit of broad and willing cooperation, strengthen the Fund by general arrangements under which they will stand ready to lend their currencies to the Fund up to specified amounts under Article VII, Section 1 of the Articles of Agreement when supplementary resources are needed to forestall or cope with an impairment of the international monetary system in the aforesaid conditions. In order to give effect to these intentions, the following terms and conditions are adopted under Article VII, Section 1 of the Articles of Agreement.

Paragraph 1. Definitions

As used in this Decision the term:

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

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

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

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

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

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

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

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

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

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

Paragraph 2. Credit Arrangements

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

Paragraph 3. Adherence

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

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

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

Paragraph 4. Entry into Force

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

Paragraph 5. Changes in Amounts of Credit Arrangements

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

Paragraph 6. Initial Procedure

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

Paragraph 7. Calls

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

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

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

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

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

Paragraph 8. Evidence of Indebtedness

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

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

Paragraph 9. Interest and Charges

  • (a) The Fund shall pay a charge of one-half of one per cent on transfers made in accordance with Paragraph 7 (e).

  • (b) The Fund shall pay interest on its indebtedness at the rates at which it levies charges on segments of its holdings of currency resulting from purchases for which it borrowed and incurred the indebtedness, provided that the rate of interest shall be not less than four per cent per annum on any part of the Fund’s indebtedness. Interest shall be paid as soon as possible after July 31, October 31, January 31, and April 30.

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

Paragraph 10. Use of Borrowed Currency

The Fund’s policies and practices under Article V, Sections 3 and 7 on the use of its general resources and stand-by arrangements, including those relating to the period of use, shall apply to purchases of currency borrowed by the Fund.

Paragraph 11. Repayment by the Fund

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

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

  • (c) Whenever a reduction in the Fund’s holdings of a drawer’s currency is attributed to a purchase of borrowed currency, the Fund shall promptly repay an equivalent amount.

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

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

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

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

  • (h) When any repayment is made to a participant, the amount that can be called for under its credit arrangement in accordance with this Decision shall be restored pro tanto but not beyond the amount of the credit arrangement.

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

Paragraph 12. Rates of Exchange

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

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

Paragraph 13. Transferability

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

Paragraph 14. Notices

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

Paragraph 15. Amendment

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

Paragraph 16. Withdrawal of Adherence

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

Paragraph 17. Withdrawal from Membership

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

Paragraph 18. Suspension of Exchange Transactions and Liquidation

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

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

Paragraph 19. Period and Renewal

  • (a) This Decision shall continue in existence for four years from its effective date.

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

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

Paragraph 20. Interpretation

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

Annex

Participants and Amounts of Credit Arrangements

Units of

Participant’s

Currency
1. United States of AmericaUS$2,000,000,000
2. Deutsche BundesbankDM4,000,000,000
3. United Kingdom£357,142,857
4. FranceF2,715,381,428
5. ItalyLit343,750,000,000
6. JapanYen340,000,000,000
7. CanadaCan$216,216,000
8. Netherlandsf.724,000,000
9. BelgiumBF7,500,000,000
10. Sveriges RiksbankSKr517,320,000

Decision No. 1289-(62/1),

January 5, 1962, as amended by

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

effective October 12, 1962;

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

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

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

6241-79/144), August 24, 1979

The General Arrangements to Borrow entered into force on October 24, 1962. They were subsequently renewed several times and, under the latest renewal, the period of effectiveness has been extended until October 24, 1985.

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

December 15, 1961

Dear Mr. Secretary:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

General Arrangements to Borrow: Association of Switzerland*

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

Decision No. 1712-(64/29)

June 8, 1964

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

June 11, 1964

The Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C 20431

Sir:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Accept, Sir, the assurances of my highest consideration.

/s/

A. Zehnder

Ambassador of Switzerland

June 11, 1964

Sir:

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

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

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

/s/

Pierre-Paul Schweitzer

Managing Director

His Excellency

Alfred Zehnder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

Borrowing Agreement with Swiss National Bank, 1976

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

Decision No. 5288-(76/167)

December 22, 1976

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

December 22, 1976

Sir:

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

1.

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

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

2.

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

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

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

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

4.

  • (a) The Fund shall pay a charge of one-half of one per cent on transfers under Paragraph 2.

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

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

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

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

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

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

5.

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Börsenstrasse 15

8022 Zurich

Switzerland

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

Borrowing Agreement with Swiss National Bank, 1977

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

Decision No. 5387-(77/61)

April 25, 1977

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

April 25, 1977

Sir:

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

1.

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

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

2.

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

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

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

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

4.

  • (a) The Fund shall pay a charge of one-half of one per cent on transfers under Paragraph 2.

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

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

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

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

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

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

5.

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Borsenstrasse 15

8022 Zurich

Switzerland

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

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

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

Decision No. 5331-(77/15)

January 31, 1977

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

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

Decision No. 5306-(77/2)

January 3, 1977

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

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

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

Decision No. 5488-(77/116)

August 1, 1977

Replenishment in Connection with Supplementary Financing Facility

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

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

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

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

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

Decision No. 5509-(77/127)

August 29, 1977

Annex

[Your Excellency] [Dear Sir]:

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

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

2.

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

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

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

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

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

4.

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

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

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

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

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

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

5.

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

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

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

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

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

7.

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

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

8.

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

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

For the purposes of Paragraph 3 of Executive Board Decision No. 5509-(77/127) of August 29, 1977, Paragraph 8 (d) of the letter annexed to that Decision, and Paragraph 2 (a) (iv) a pf Executive Board Decision No. 5 974-(7 8/190) of December 4, 1978, a member shall be considered to have a “net creditor position in the Fund” if the member has a reserve tranche position on which it receives remuneration and the Fund’s holdings of the member’s currency do not include any balances subject to repurchase under Schedule B or any balances subject to charges under Article V, Section 8(b) of the Articles of Agreement.

Decision No. 6008-(79/3)

January 5, 1979

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

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

Decision No. 6163-(79/96)

June 21, 1979

Procedure

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

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

The rate of interest on amounts of outstanding claims under the supplementary financing facility for a period of six months is the average of the daily yields during these six months on actively traded U.S. Government securities, determined on the basis of a constant maturity of five years, as published by the Federal Reserve Board, Washington, D.C. This average rate is rounded up to the nearest ⅛ of 1 per cent.

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

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

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

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, 1 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 500 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 thereof 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 hereunder 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 Larosière

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 3 business days of the Fund before the date the loan is made, and in relation to subsequent interest periods means a date 3 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 per cent, 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 hereunder and to report to the Fund the yield applicable to that currency as provided in (b) and (c) 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
  • (b) 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:

    • (i) 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;

    • (ii) 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;

    • (iii) 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;

    • (iv) 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;

    • (v) 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

    • (vi) 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 and SAMA.

  • (c) If a reporting agency notifies the Fund that the yield described in (b) applicable to its currency can no longer be reported to the Fund, or that some material change has occurred making that yield no longer appropriate for the purpose of interest computations hereunder, SAMA and the Fund in consultation with the reporting agency shall seek to reach agreement on a substitute yield. Failing such agreement the yield shall be that which the reporting agency determines to be the most appropriate substitute for the purpose, having regard to the criteria specified in subparagraph (b) (vi) above.

    4. 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 3 business days of the Fund before the change becomes effective, but on the basis of the curerncies 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; 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 7 (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 1/16th 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

Policy on Enlarged Access: Borrowing Agreement with the Bank for International Settlements (BIS)

The Managing Director is hereby authorized to send to the General Manager of the Bank for International Settlements (BIS) a telex communication informing him that, on behalf of the Fund, he accepts the proposal set forth in the Annex to this decision and that the proposal set forth in that Annex shall constitute an agreement between the Fund and the BIS which shall enter into force on the date of the Managing Director’s communication.*

Decision No. 6863-(81/81),

May 13, 1981, as amended by

Decision No. 6870-(81/83),

June 1, 1981

Annex

Proposal Received from the Bank for International Settlements (BIS)

1. The Bank for International Settlements (BIS) is prepared to open a facility, free of commission, fee, or charge, in favour of the International Monetary Fund (Fund) for the equivalent of SDR 600 million for a period of two years commencing 1st June 1981 in accordance with the conditions set out in this telex.

2. Drawings on the facility may be made by the Fund on giving seven business days’ notice (Washington, D.C.) by tested telex. Each drawing shall be for a period of six months and shall, subject to similar notice, be renewable at maturity at the request of the Fund for further successive periods of six months provided that no drawing matures any later than two years and six months after the first drawing made by the Fund under this facility. Nevertheless, should the first drawing be made for value later than 31st July 1982 no drawing may mature later than 31st January 1985.

3. Each drawing will be denominated in SDRs but the corresponding payment will be effected by the BIS by transfer of U.S. dollars (Federal Funds) to an account of the Fund at the Federal Reserve Bank of New York, New York.

4. The amount of U.S. dollars to be transferred shall be determined by applying the SDR/U.S. dollar rate established and published by the Fund three business days before the value date.

5. Should the Fund request the BIS to make any payment under this facility in a currency other than the U.S. dollar, the BIS will use its best endeavors to meet the Fund’s wishes. In such cases the applicable exchange rate shall be that established by the Fund for that currency against the SDR three business days before the value date.

6. When a drawing is not renewed at maturity, the U.S. dollar counter-value will be credited by the Fund in U.S. dollars to the account “F” of the BIS at the Federal Reserve Bank of New York, New York. The relevant SDR/U.S. dollar conversion rate will be the rate established by the Fund three business days before the maturity date.

7. The interest rate applicable to each drawing or renewal shall be determined on the basis of the interest rates listed in paragraph 8 below as notified by the five central banks concerned for the third business day preceding the value date and on the basis of the weighting then given to the currencies concerned in the composition of the SDR. The exchange rates needed for this calculation shall be supplied by the Fund.

The calculation shall be made by multiplying the interest rate for each component currency 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 per cent, shall be the interest rate to be applied.

8. The rates to be used for interest calculation are those for the following:

—six-month U.S. Treasury Bills,

—six-month interbank deposits in Germany,

—six-month interbank loans against private paper in France,

—average rate for newly issued bank CD’s in Japan with a maturity of between 150 and 180 days,

—six-month interbank deposits in the United Kingdom.

9. Interest will be paid by the Fund in U.S. dollars at maturity of each six-monthly operation in the manner set out in paragraph 6 above.

10. If during the life of a six-monthly operation the composition of the SDR is changed by the Fund, any payments due three business days or more after the effective date of the change will be made on the basis of the new SDR/U.S. dollar rate. Neverthe less, if the BIS so requests within 30 days after the adoption of the relevant decision of the Fund but not later than 14 days after the date the change became effective, and in agreement also with the central banks whose currencies may be concerned, the former SDR/U.S. dollar exchange rate and the interest rate calculated on the basis of the valuation of the SDR before the change, shall be applied to the operation in question. In that case, however, the Fund will have the option of terminating the agreement and repaying all amounts due under the agreement upon giving 14 days’ notice.

11. The Fund agrees that any member central bank of the BIS which is either the central bank of a country belonging to the Fund or a prescribed holder of SDRs may at any time be wholly or partly substituted for the BIS in respect of its debtor and creditor relationships with the Fund under this facility, in particular in respect of any outstanding drawing and of any commitment for future drawings and renewals. The substitution shall become effective vis-à-vis the Fund upon receipt by the Fund of confirmation to the Fund by the transferee, such confirmation to be transmitted by the BIS, that the transferee accepts the substitution.

12. Please confirm that you are in agreement with the above. This telex and your confirmation will constitute a binding agreement between our two institutions.

Policy on Enlarged Access: Borrowing from Central Banks and Other Official Institutions on Terms Similar to Those of the Agreement with the Bank for International Settlements (BIS)

The Fund shall stand ready to enter into an agreement with any member, the central bank or other agency of any member, or any official entity that has been prescribed as a holder of Special Drawing Rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement, under which such member, central bank or other entity will accord a credit line in favor of the Fund on terms and conditions that are substantially the same as those of the Agreement with the BIS (Executive Board Decision No. 6863-(81/81), except as those terms and conditions may be adjusted and supplemented by the following provisions.

1. The commitment of the lender under the credit line shall be for a period of not less than two years, provided that it can be for a shorter period if the lender represents that, for legal or other compelling reasons, it cannot accept a commitment period of at least two years and, in the Managing Director’s judgment, the shorter period is consistent with the prudent management of the Fund’s liquidity.

2. At the request of the lender, its commitment may be terminated before the end of the commitment period if (i) the lender is a member, the central bank, or another agency of a member; (ii) it represents that its balance of payments and reserve position, or that of the member if the lender is the central bank or other agency of that member, does not justify further drawings under the commitment; and (iii) the Fund, having given the representation the overwhelming benefit of any doubt, determines that no further drawing should be made.

3. The maturity of the drawings under the commitment may be six months, one year, or two years, provided that, if the maturity of such drawings is for six months or one year, the lender will normally be expected to undertake to extend the maturity of the drawings so that resources borrowed shall be available to the Fund for at least two years. Nevertheless, if, in the Managing Director’s judgment, shorter periods would be consistent with the prudent management of the Fund’s liquidity, the agreement may provide for shorter maturities that would be renewed automatically unless the lender or the Fund gave notice, at least 30 days before maturity, that renewal should not take place.

4.

  • (a) The interest rate applicable to drawings with a maturity of one year shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that the instruments to be used for the calculation of that interest rate shall be, insofar as possible, government instruments of one-year maturity and that interest shall be payable at six months and at maturity.

  • (b) The interest rate applicable to drawings with a maturity of two years shall be determined in accordance with the same rules and procedures as the interest rate for drawings under the Agreement with the BIS, except that, (i) the instruments to be used for the calculation of that interest rate shall be those used by the Fund for calculating the interest rate on the Special Drawing Right, with the interest calculated at three-month intervals and payable semi-annually; or (ii) if the Managing Director judges it appropriate in prevailing circumstances, the instruments shall be, insofar as possible, government instruments of two years’ maturity, with interest being calculated and payable semiannually.

5. The commitment of the lender shall be transferable only with the consent of the Fund.

6. Loans may be made in any currency, provided that (i) the concurrence of the issuer of that currency has been given, and (ii) arrangements are agreed under which balances of that currency borrowed by the Fund will be converted at equal value exchange rates into U.S. dollars to the extent required for investment pending use of the borrowed resources in transactions of the Fund. By agreement with the lender, the Fund may make repayment of principal or pay interest in any currency or in SDRs.

7.

  • (a) The lender may obtain repayment of a claim on the Fund before maturity if: (i) the lender is a member, the central bank, or another agency of a member; (ii) the lender represents that its balance of payments and reserve position, or that of the member’s if the lender is a central bank or another agency of a member, justifies early repayment; and (iii) the Fund, having given the lender’s representation the overwhelming benefit of any doubt, determines that there is such a need for early repayment.

  • (b) At any other time the Fund may agree with the lender on repayment prior to maturity subject to an adjustment in the interest rate applicable for the period during which the drawing remained outstanding.

8. The lender shall have the right to transfer at any time all or part of its claim on the Fund, which results from drawings outstanding under its commitment that have not less than three months to maturity from the requested transfer, to any member, the central bank or another agency of any member, or any official entity that has been prescribed as a holder of Special Drawing Rights pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement. A claim transferred shall be subject to the renewal undertakings of the transferor. The transferee shall have all the rights of the lender, except that (i) the right to obtain repayment before maturity pursuant to 7(a) above shall be exercisable by the transferee only if it is a member, or the central bank, or another 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 operational budgets for the foreseeable future, and (ii) the right of the Fund to use the currency of the transferor in payment of principal or interest shall, if the transferee is a member, or the central bank, or another agency of a member, be replaced by the right to use the transferee’s currency; or, if the transferee is not a member, or the central bank, or another agency of a member, this right shall no longer apply.

9. At the request of the lender, the Fund shall issue to such lender an instrument evidencing its claim on the Fund resulting from drawings outstanding under the lender’s commitment. Such an instrument shall not be issued if the lender has requested or has received bearer notes pursuant to 10 below.

10. At the request of the lender made within 10 days from the date of a drawing under the commitment, the Fund shall issue and deliver to such lender, without charge, promissory notes of the Fund in bearer form in exchange for all or part of the lender’s claim on the Fund resulting from that drawing, whereupon the claim shall be cancelled pro tanto. The renewal of a drawing shall be deemed to be a new drawing. By agreement between the lender and the Fund, bearer notes may also be issued on an interest payment date in exchange for a claim for the balance of the period of the claim. The issuance of the bearer notes shall be governed by the provisions set forth in Annex A and, unless otherwise agreed between the lender and the Fund, shall be substantially in the form, and subject to the terms and conditions set forth in Annex B or C.

11. An agreement negotiated pursuant to this Decision shall not become effective before it has been approved by the Executive Board.

Decision No. 6864-(81/81)

May 13, 1981

Annex A

Provisions Governing Issuance of Bearer Notes

1. The Notes shall be in denominations of SDR 1 million, 5 million or any integral multiple of 5 million as specified by the lender in its request.

2. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of six months or one year shall be substantially in the form and subject to the terms and conditions set forth in Annex B. Notes issued in exchange for all or part of a claim resulting from a drawing with a maturity of two years shall be substantially in the form and subject to the terms and conditions set forth in Annex C. Each Note shall have as its issue date the date of the drawing that gave rise to the claim in exchange for which the Note is issued, and shall carry the same interest rate as that claim. The renewal of a drawing shall be deemed to be a new drawing.

3. Each Note shall have as its maturity date the same maturity date as the claim in exchange for which it is issued, except that, if such date would not fall on a banking day in New York, the banking day in New York immediately preceding that date shall be the maturity date.

4. Each Note shall be executed in the name of the Fund by the manual or facsimile signatures 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. Each such Note, when duly executed and delivered, shall constitute a valid and enforceable obligation of the Fund in accordance with its terms.

5. Notes shall be delivered to the lender at the principal office of the Fund, or at such other place as may be agreed between the Fund and the lender.

6. Delivery shall be made on a date specified by the Fund, which, unless otherwise agreed with a lender, shall be not more than 30 days after the date the request for Notes is received by the Fund.

7. For purposes of the Notes, the Fund shall appoint paying agents in Frankfurt, London, New York, Paris and Tokyo, and shall maintain a paying agent in each such city as long as any such Notes remain outstanding.

8. The Fund, by agreement with the holder of any Note, may redeem such note prior to its maturity date at a mutually agreed price, against surrender of the Note.

Annex B

FORMS OF A SIX-MONTH OR ONE-YEAR BEARER NOTE1

INTERNATIONAL MONETARY FUND

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

No. ________

Issue Date: __________

SDR _________

Maturity Date: _________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to ______ Special Drawing Rights on the maturity date of this Note, together with interest on such principal amount at the rate of _________ per annum from the issue date hereof until the maturity date. [Interest shall be paid in two installments; the first installment on (date), and the second on (the maturity date).] For purposes of payment hereunder the value of the United States dollar in terms of the special drawing right shall be that determined by the Fund in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement for a date three business days of the Fund before the date payment falls due.

Payment of principal and interest shall be made, subject to applicable laws and regulations, on presentation and surrender [on presentation and, at maturity, surrender] of this Note at any of the paying agents specified below by check drawn on a bank in New York City or, in the case of paying agents outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List paying agents]

[A record of an interest payment endorsed below and initialled by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.]

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By ____________

Managing Director

Treasurer

Countersigned: _________

Authorized Representative

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

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.

RECORD OF INTEREST PAYMENT OF SDR (______) due

(date) ________

SDR/US$ rate __________

US$ amount _________

Paid ___________(date) ____________

Signature ______________

(Authorized Officer)

Annex C

[Face]

FORM OF TWO-YEAR BEARER NOTE

INTERNATIONAL MONETARY FUND

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

No. ________

Issue Date: __________

SDR ___________

Maturity Date: _____________

The International Monetary Fund (“the Fund”), for value received, hereby promises to pay to bearer in United States dollars a principal amount equivalent to ______ Special Drawing Rights on the maturity date of this Note, and to pay interest on such principal amount in United States dollars at the rate and on the dates specified on the reverse side hereof from the issue date of this Note until the maturity date. For purposes of each payment hereunder the value of the United States dollar in terms of the Special Drawing Right shall be that determined by the Fund for a date three business days of the Fund before the date payment falls due in accordance with the Rules and Regulations of the Fund adopted pursuant to its Articles of Agreement.

Payments of the principal amount and of interest shall be made, subject to applicable laws and regulations, on presentation (and, at maturity, surrender) of this Note at any of the paying agents specified below by check drawn on a bank in New York City, or, in the case of paying agencies outside the United States, by transfer to a United States dollar account maintained by the payee with a bank in New York City:

[List Paying Agents]

A record of an interest payment endorsed on the reverse hereof and initialled by an authorized officer of one of the above paying agents shall be conclusive evidence of the discharge of the obligations of the Fund in respect of the interest payment in question.

This Note is governed by the laws of the State of New York, U.S.A. An action against the Fund for failure to pay any amount due hereunder may be brought in the Federal Courts (or if such courts lack competence, in State Courts) in the State of New York, with right of recourse to competent higher Courts. The Fund hereby irrevocably waives its immunity from judicial process and submits to the jurisdiction of such Courts with respect to such action and to the execution, in any member country of the Fund, of a final judgment of such Courts, and appoints the Federal Reserve Bank of New York at its principal office in the Borough of Manhattan, New York City, as agent of the Fund to receive on behalf of the Fund service of copies of the summons and complaint and any other process that may be served in any such action. Such waiver and submission shall not extend to any question relating to the interpretation of the provisions of the Articles of Agreement of the Fund, nor shall it extend to any action or proceedings other than as specified in this paragraph.

INTERNATIONAL MONETARY FUND

By ___________

Managing Director

__________

Treasurer

Countersigned: __________

Authorized Representative

This Note is not valid unless manually countersigned by an Authorized Representative of the Fund.

[Reverse]

For three months [six months] from the Issue Date of this Note interest shall accrue at __________ per cent per annum. Thereafter, for each successive three-month [six-month] period until the maturity date, interest shall accrue at the rate of interest determined as follows:

1. The central banks of the members whose currencies are used for the valuation of the special drawing right shall notify to the Fund the market interest rate or yield in their respective market for a date three business days of the Fund prior to the last day of the three-month period, or if that day is not a business day, for the preceding business day, on the instrument chosen by the Fund, in consultation with the central bank, as representative for a three-month maturity in that market for the purpose of determining the interest rate on the special drawing right.

[Alternative formulation using governmental instruments with two years to maturity]

2. Using these rates and yields as notified by these central banks the Fund will calculate the rate of interest for the next three-month period as follows:

  • The yield or rate for each instrument on that date will be multiplied 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 product for each such currency, rounded to the nearest four decimal places, shall be added together, and the total, rounded up to the nearest 1/16th of one per cent, shall be the interest rate to be applied during the ensuing interest period.

Such interest shall be paid on interest payment dates falling at successive intervals of six months from the issue date of Note, as shown in the Interest Payment Schedule set forth below, with the last interest payment date being the maturity date of this Note. If an interest payment date should fall on a day that is not a banking day in New York City, the interest due on such interest payment date shall be paid on the banking day in New York City immediately preceding such interest payment date.

INTEREST PAYMENT SCHEDULE

(To be added)

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

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

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

Decision No. 6844-(81/75)

May 5, 1981

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

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

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

3.

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

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

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

Decision No. 6845-(81/75)

May 5, 1981

Borrowing in Connection with Oil Facility

1. The International Monetary Fund deems it appropriate in accordance with Article VII, Section 2(i)* to replenish its holdings of currencies by borrowing to the extent that resources are needed in respect of purchases under the facility established by Executive Board Decision No. 4241-(74/67), adopted June 13, 1974.

2. A number of members, or institutions within their territories, have indicated their intention to lend to the Fund for the purposes of the facility. In order to enable the Fund to borrow in accordance with these intentions, the draft letter set out in the Annex to this Decision is adopted as the basis for terms and conditions to be incorporated in the agreement with each lender under Article VII, Section 2(i)* of the Articles of Agreement. The terms and conditions may be adapted for good reason, such as domestic legal requirements or the character of the lending institution. Each letter setting forth the terms and conditions to be proposed shall be submitted to the Executive Directors for their approval.

3. In determining the amounts to be called, the Fund will take into account the proportion of the unutilized balance of each lender’s commitment to the total of unutilized balances under the agreements and the balance of payments and reserve position and prospects of a lender or of the member country in which it is situated.

4. If the Fund decides to make repayments in accordance with Paragraph 5(b) (i) (B) of the draft letter set out in the Annex to this Decision, repayments will be made to lenders in proportion to the amounts the Fund is committed to repay to each lender.

5. The Fund shall use its best efforts to ensure that currencies borrowed in accordance with this Decision will be transferred on the same day to purchasers under the facility referred to in Paragraph 1 above and that amounts corresponding to repurchases identified in accordance with Paragraph 5(b) (i) (A) of the draft letter set out in the Annex to this Decision will be repaid to lenders on the same day as the repurchase.

Decision No. 4242-(74/67)

June 13, 1974

Annex

[Your Excellency] [Dear Sir]

In accordance with Article VII, Section 2(i)* of the Articles of Agreement of the International Monetary Fund, hereinafter referred to as “the Articles,” and pursuant to Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, Executive Board Decision No. 4242-(74/67), adopted June 13, 1974, and Executive Board Decision No. [borrowing-individual lender], adopted _______________, I have been authorized to propose on behalf of the International Monetary Fund, hereinafter referred to as “the Fund,” that [the lender] agree to lend to the Fund at call during the period ending December 31, 1975 [currency of the lender] [United States dollars] in amounts that in total do not exceed the equivalent of ____________ million special drawing rights (SDR ______________) on the following terms and conditions:

1. All amounts under this agreement shall be expressed in terms of special drawing rights. For all the purposes of this agreement, the value of a currency in terms of special drawing rights shall be calculated at the rate for the currency as determined by the Fund in accordance with Rule O-3* of the Fund’s Rules and Regulations in effect when the calculation is made, unless Paragraph 7 applies.

2.

  • (a) Calls under this agreement shall be made only (i) in respect of purchases under the facility established by Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, hereinafter referred to as “the facility,” or (ii) in order to repay a borrowing by the Fund from another lender in connection with the facility when repayment is requested by that lender because of a balance of payments need.

  • (b) When a call is made, [the lender] shall transfer to the Fund’s account with [the lender] [the depository for the currency of the lender] [the Federal Reserve Bank of New York] within two business days after the call an amount of [its currency] [United States dollars] equivalent to the amount of the call at the rate for the currency as determined by the Fund in accordance with Rule O-3* of the Fund’s Rules and Regulations. [On request,[the lender] shall convert its currency when sold by the Fund into United States dollars at the rates for the two currencies as determined by the Fund in accordance with Rule O-3* of the Fund’s Rules and Regulations.]

3. The Fund shall issue to [the lender] on its request a non-negotiable instrument evidencing the amount, expressed in special drawing rights, that the Fund is committed to repay under this agreement. Upon repayment of the amount of any instrument and all accrued interest, the instrument shall be returned to the Fund for cancellation. If less than the amount of any such instrument is repaid, the instrument shall be returned to the Fund and a new instrument for the remainder of the amount shall be substituted with the same maturity date as in the old instrument.

4. The Fund shall pay interest quarterly at an annual rate of seven per cent on the amount it is committed to repay under this agreement.

5.

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

  • (b) The Fund may repay [the lender] in advance of the repayments required by Paragraph 5 (a): (i) to the extent that (A) a repurchase is identified as made in respect of a purchase under the facility for which the Fund has borrowed from [the lender], or (B) repayment is necessary in the opinion of the Fund in order to enable repurchases to be made by members with currency, or (C) [the lender] agrees to receive repayment; or (ii) before a decision to make uniform proportionate changes in the par values of the currencies of all members becomes effective.

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

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

6. The Fund shall consult [the lender] in order to agree the means in which payment of interest and repayment will be made, but, if agreement is not reached, the Fund shall have the option to make payment or repayment in the currency of the lender, the currency borrowed, or [special drawing rights or United States dollars, or both].

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

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

9. [If [the lender] withdraws from the Fund, [the lender’s] agreement to lend shall terminate and the amount that the Fund is committed to repay under this agreement shall be repaid in accordance with the terms of this agreement, provided that repayment shall be made, at the option of the Fund, in the currency of [the lender] or in United States dollars, or in such other currency as may be agreed with [the lender].] [If the member country in which [the lender] is situated withdraws from the Fund, [the lender’s] agreement to lend shall terminate, and the amount that the Fund is committed to repay under this agreement shall be repaid in accordance with the terms of this agreement, provided that repayment shall be made, at the option of the Fund, in the currency of that member or in United States dollars, or in such other currency as may be agreed with [the lender].]

10. In the event of liquidation of the Fund the amounts the Fund is committed to repay to [the lender] shall be immediately due and payable as liabilities of the Fund under Paragraph 1 of Schedule E* of the Articles. For the purpose of Paragraph 1(a) of Schedule E* the currency in which the liability is payable shall be, at the option of the Fund, [the currency borrowed] [the currency of the lender if it differs from that currency] or United States dollars or any other currency agreed with [the lender].

11. Any question of interpretation of this agreement that does not fall within the purview of Article XVIII** of the Articles shall be settled to the mutual satisfaction of [the lender] and the Fund.

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

Very truly yours,

H. Johannes Witteveen

Managing Director

Borrowing in Connection with Oil Facility for 1975

1. The International Monetary Fund deems it appropriate in accordance with Article VII, Section 2(i) to replenish its holdings of currency by borrowing, in addition to the amounts committed during 1974 and still unused, amounts not in excess of the equivalent of SDR 5 billion to the extent that purchases are made under the facility established by Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, as extended by Executive Board Decision No. 4634-(75/47), adopted April 4, 1975.

2. The provisions of Paragraphs 2, 3, 4, and 5 of Executive Board Decision No. 4242-(74/67) shall continue to apply except as modified by Paragraphs 3 and 4 below.

3. The following changes shall be made in the draft standard letter set out in the Annex to Decision No. 4242-(74/67):

  • (a) In the preambular paragraph,

    • (i) reference shall be made to the 1975 decisions on the oil facility and borrowing for 1975;

    • (ii) the words “during the period ending December 31, 1975” shall be replaced by “during the period ending March 31, 1976”.

  • (b) In the first sentence of Paragraph 2(b) the words “two business days” shall be replaced by “three business days”.

  • (c) In Paragraph 4,

    • (i) the annual rate of interest of “seven per cent” shall be replaced by “seven and one-quarter per cent”;

    • (ii) the following sentence shall be added: “No other fee, charge, or commission shall be paid to, or imposed by, [the lender] with respect to any aspect of a call under this agreement including a transfer or a conversion pursuant to a call under Para-graph 2(b)”.

4. All unutilized balances under commitments agreed during 1974 shall be called before any calls are made under agreements made during 1975.

Decision No. 4635-(75/47)

April 4, 1975

Amendments of Agreements with Lenders for the Oil Facility

a. Borrowing

The following change shall be made in the draft standard letter set out in the Annex to Decision No. 4242-(74/67), as amended by Decision No. 4635-(75/47), adopted April 4, 1975. In the preambular paragraph the words “during the period ending March 31, 1976” shall be replaced by “during the period ending May 31, 1976”.

Decision No. 4916-(75/208)

December 24, 1975

b. Authorization to Make Calls

The Managing Director is authorized to make calls under agreements to borrow entered into pursuant to Executive Board Decision No. 4635-(75/47), adopted April 4, 1975, in accordance with paragraph 3 of Executive Board Decision No. 4242-(74/67), adopted June 13, 1974, to meet requests to purchase that are authorized by the Executive Directors under the facility established by Executive Board Decision No. 4241-(74/67), adopted June 13, 1974. The Managing Director shall inform the Executive Directors promptly of any calls that he has made.

Decision No. 4741-(75/120)

July 11, 1975

Executive Board Decision No. 4741-(75/120), adopted July 11, 1975 is amended by including after the words “Executive Board Decision No. 4635-(75/47), adopted April 4, 1975” the words “and Executive Board Decision No. 4916-(75/208), adopted December 24, 1975”.

Decision No. 4917-(75/208)

December 24, 1975

c. Order of Use

Calls shall continue to be made under outstanding agreements in accordance with paragraph 3 of Executive Board Decision No. 4242-(74/67) of June 13, 1974, except that calls shall be made first on amounts available only through March 31, 1976 if necessary in order to utilize all these amounts before that date.

Decision No. 4918-(75/208)

December 24, 1975

d. Payment of Interest

The Managing Director shall make arrangements for consultations to agree the means in which payment of interest will be made under the agreements to borrow entered into pursuant to Executive Board Decision No. 4242-(74/67), adopted June 13, 1974. Payment of interest shall be made in accordance with the policy and procedure set forth in EBS/74/394. The Executive Directors shall be informed promptly of the interest paid and the assets used.

Decision No. 4490-(74/140)

November 6, 1974

Executive Board Decision No. 4490-(74/140), adopted November 6, 1974 shall be amended by including after the words “Executive Board Decision No. 4242-(74/67), adopted June 13, 1974” the words “and Executive Board Decision No. 4635-(75/47), adopted April 4, 1975/”

Decision No. 4636-(75/47)

April 4, 1975

Executive Board Decision No. 4490-(74/140), adopted November 6, 1974, as amended, shall be further amended by including after the words “and Executive Board Decision No. 4635-(75/47), adopted April 4, 1975” the words “and as amended by Executive Board Decision No. 4918-(75/208), adopted December 24, 1975”.

Decision No. 4919-(75/208)

December 24, 1975

Oil Facility: Media of Repayments of Borrowing

The Managing Director shall make arrangements for (i) consultation with the lenders to agree the means of repayment under the borrowing agreements concluded in accordance with Executive Board Decision No. 4242-(74/67) adopted June 13, 1974 in those cases where repurchases are identified as being in respect of purchases under the oil facility, and (ii) consultations in accordance with paragraph 5 (d) of Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, with members making the repurchases. Repayment shall be made in accordance with the policy and procedure set forth in EBS/77/187. Executive Directors shall be advised promptly of the repayments and the assets used.

Decision No. 5441-(77/84)

June 10, 1977

Oil Facility: Transferability of Claims

1. The Executive Board has reviewed paragraph 8 of the form letter in the Annex to Executive Board Decision No. 4242-(74/67), adopted June 13, 1974, as amended.

2. The holders of claims to repayment by the Fund arising under agreements to borrow entered into by the Fund pursuant to Executive Board Decision No. 4242-(74/67) and Executive Board Decisions No. 4635-(75/47) and No. 4916-(75/208) for the purpose of financing the 1974 and 1975 Oil Facilities are authorized to transfer all or part of the claims to repayment on the terms and conditions set forth below:

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

    • (i) Transfers may be made to any member, a members national official financial institution (hereinafter referred to as an “institution of the member”), or any institution that performs functions of a central bank for more than one member, or to any lender to the Fund under the decisions cited in the preamble to this paragraph 2.

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

    • (iii) If all or part of a claim is transferred during a quarterly period as described in the standard paragraph 4 of the agreement as set forth in the Annex to Executive Board Decision No. 4242-(74/67), the Fund shall pay interest on the amount of the claim transferred for the whole of that period to the transferee.

    • (iv) The claim of a transferee shall be the same in all respects as the claim of the transferor and subject to the same provisions, except that:

    • a. The provision for encashment by the Fund set forth in paragraph 5(c) of the Annex to Executive Board Decision No. 4242-(74/67) shall apply only if, at the time of the transfer, the transferee is a member, or the institution of a member, that is in a net creditor position in the Fund and in the opinion of the Fund the member’s currency could be used in net sales in the Fund’s operational budgets for the foreseeable future;

    • b. In place of paragraph 6 of the original agreement on the means of repayment and payment of interest, the following text shall apply:

    • “6. The Fund shall consult the transferee in order to agree on the means in which payment of interest and repayment will be made, but, if agreement is not reached, the Fund shall have the option to make payment or repayment in the currency of the transferee or any freely usable currency or currencies, or some combination of these currencies. In addition, if the transferee is a participant in the Special Drawing Rights Department, or a prescribed holder of special drawing rights, the Fund may make payment or repayment, in whole or in part, in SDRs”.

3. In accordance with paragraph 8 of the form letter in the Annex to Executive Board Decision No. 4242-(74/67) adopted June 13, 1974, as amended, transfers other than those subject to paragraph 2 above may be made on such terms and conditions and to such transferees as the Fund may prescribe.

4. On request, the Fund shall assist in seeking to arrange transfers.

Decision No. 5974-(78/190)

December 4, 1978

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