Selected Decisions (9th Ed)
Chapter

General: Trust Fund

Author(s):
International Monetary Fund
Published Date:
June 1981
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1. The Executive Directors of the International Monetary Fund (the “Fund”) adopt the Instrument to Establish the Trust Fund (the “Instrument”) that is annexed to this Decision.

2. The objective of the Trust Fund (the “Trust”) will be to provide balance of payments assistance on concessional terms to the members listed in Annex A* to the Instrument that qualify for assistance in either or both of the periods July 1, 1976 through June 30, 1978 and July 1, 1978 through June 30, 1980.

3. The Fund will review the Instrument, and in particular the list, and the criteria of eligibility for inclusion, in Annex A, before January 1, 1978. The following provisions of the Instrument may not be modified: Section I, Paragraphs 1 and 2(c); Section II, Paragraphs 4(d) and 5(a); Section III, Paragraphs 1, 2, and 3; Section IV, Paragraph 1; and Section V, Paragraph 2. Any modification will affect only loans made after the effective date of the modification, provided that the Fund may decide that any modification that is favorable to eligible members will apply to the future performance of obligations under loans already made.

4. The amounts in excess of the capital value that are available from the sales of gold made after the second amendment pursuant to paragraph 7(b) of Schedule B of the Articles, as amended, will continue to be used to provide balance of payments assistance in accordance with the Instrument for the benefit of the members listed in Annex A.

5. The audit committee selected under Section 20 of the Fund’s By-Laws will audit the financial records and transactions of the Trust. The audit will relate to the period representing the fiscal year of the Fund.

6. The expenses of conducting the business of the Trust will be paid by the Fund from the General Account, which will be reimbursed annually by the Trust on the basis of a reasonable estimate of these expenses by the Fund.

7. The Fund may decide that the Trustee will undertake other activities in connection with the distribution of the profits from the sale of gold for the benefit of developing countries in accordance with paragraph 6(3) of the Communiqué of the Interim Committee of the Board of Governors of the Fund on the International Monetary System dated August 31, 1975 that can appropriately be carried out through the Trust, provided that the activities are consistent with the purposes of the Fund and are not inconsistent with any provision of the Instrument.

Decision No. 5069-(76/72)

May 5, 1976

Instrument to Establish the Trust Fund

Introductory Section

In order to help fulfill the purposes of the International Monetary Fund (the “Fund”) as stated in Article I of the Articles of Agreement, including the promotion of cooperation on international monetary matters between its members and the Fund and among the members of the Fund, there shall be established a Trust Fund (the “Trust”), which shall be administered by the Fund as Trustee. The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. Purposes and Resources of the Trust

Paragraph 1. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing additional balance of payments assistance on concessional terms to support the efforts of eligible members that qualify for assistance to carry out programs of balance of payments adjustment.

Paragraph 2. Resources

  • (a) The resources of the Trust shall consist of gold and currencies sold, donated, or lent to the Trust, income from investments and loans, and the proceeds of repayment of loans or of disinvestment.

  • (b) A transferor may make a single transfer of resources to the Trust or transfers of resources from time to time during the period in which the Trust is providing balance of payments assistance. The Trustee shall invite transferors of resources to inform it of the form in which, and the procedures by which, they will make transfers.

  • (c) A transferor of resources that makes a transfer associated with the sale of gold by the Fund shall be understood to have agreed that the transfer is an irrevocable transfer within the meaning of Section IV, Paragraph 1 and Section V, Paragraph 2.

Section II. Operations of the Trust

Paragraph 1. Form of balance of payments assistance

Balance of payments assistance shall be provided to eligible members that qualify for assistance for the first period July 1, 1976 through June 30, 1978 or for the second period July 1, 1978 through June 30, 1980, or for both periods, in the form of loans on terms consistent with this Instrument.

Paragraph 2. Eligible members

Eligible members shall be those members of the Fund that are listed in Annex A. An eligible member shall qualify for assistance if it satisfies the conditions of Paragraph 3 of this Section.

Paragraph 3. Conditions for assistance

  • (a) An eligible member shall consult the Managing Director of the Trustee before making a request for assistance.

  • (b) Before approving a request, the Trustee shall be satisfied that the member has a need for balance of payments assistance (“need”) and is making a reasonable effort to strengthen its balance of payments position. The need of a member shall be assessed on the basis of the member’s balance of payments position, its reserve position, and developments in its reserves.

  • (c) A member shall be deemed to be making a reasonable effort within the meaning of subparagraph (b) of this Paragraph if the member has presented to the Fund, in connection with a stand-by arrangement or extended arrangement granted by the Fund or in connection with a purchase from the Fund in the credit tranches, a program for twelve months that,

    • (i) for the first period in Paragraph 1 of this Section, falls predominantly within that period, i.e., begins not earlier than January 1, 1976 or not later than December 1, 1977; and

    • (ii) for the second period in Paragraph 1 of this Section, falls predominantly within that period, i.e., begins not earlier than January 1, 1978 or not later than November 30, 1979.

A program for one period in Paragraph 1 of this Section shall not include any months included in a program submitted in connection with a request for the other period.

  • (d) The Fund, in considering a member’s program as described in subparagraph (c) of this Paragraph, shall assess, in accordance with subparagraph (b) of this Paragraph, the need of the member during the twelve months of the program. This assessment shall be deemed to determine the need of the member for assistance from the Trust during the period in Paragraph 1 of this Section within which the program falls, provided that the extent of the need assessed’in connection with one program may be increased on the basis of an assessment made in connection with another program during the same period.

  • (e) If a member that wishes to qualify for assistance does not come within subparagraph (c) of this Paragraph, it shall present to the Trustee, when requesting assistance, a program for twelve months as required by subparagraph (c), and shall satisfy the Trustee that the program is in accordance with subparagraph (b) of this Paragraph. In making its determination under subparagraph (b) of this Paragraph, the Trustee shall apply the criteria applied by the Fund to a request for a purchase in the first credit tranche. The Trustee shall assess the member’s need when the program is presented.

  • (f) The assessment of a member’s need and the finding that the member is making a reasonable effort to strengthen its balance of payments position shall not be re-examined during the twelve months of the program for which the assessment and finding were made. There shall be no re-examination in connection with disbursements made after the twelve months with respect to the period in Paragraph 1 of this Section for which the assessment and finding were made unless the Trustee determines that the member’s circumstances have changed substantially in that period. In any re-examination, the Trustee shall give the member the benefit of any reasonable doubt in arriving at a new assessment of the member’s need or a new finding with respect to its effort to strengthen its balance of payments position during that period. Repurchases in respect of the use of the Fund’s resources will be taken into account in determining the extent of a member’s need.

  • (g) In considering a program in support of a request for assistance in the second period in Paragraph 1 of this Section, and in determining whether the member is making a reasonable effort within the meaning of subparagraph (b) of this Paragraph, the Trustee shall take into account the progress made by the member toward strengthening its balance of payments position under a program in the first period.

Paragraph 4. Terms and conditions of loans from the Trust

  • (a) The terms and conditions of a loan to a member shall prescribe that it shall repay each disbursement under the loan in ten equal semiannual installments, which shall begin not later than the end of the first six months of the sixth year, and be completed at the end of the tenth year, after the date of the disbursement.

  • (b) Interest shall be charged at the rate of one-half of one per cent per annum on the outstanding balance of a loan and shall be paid in semiannual installments.

  • (c) Loans shall be expressed in special drawing rights, and the value of a currency in terms of the special drawing right shall be determined in accordance with the regulations of the Fund in effect on the date which the calculation is made.

  • (d) Toward the end of the period of five years after the first disbursement under the first loan made under this Instrument, the Trustee shall review, in the light of circumstances and on the basis of uniform criteria, the repayment terms of outstanding loans.

  • (e) On the request of a member when repayment of an installment is due under a loan, the Trustee may reschedule the repayment if the Trustee finds that repayment on the due date would result in serious hardship for the member, provided that the rescheduling would not impair the ability of the Trust to meet its liabilities.

Paragraph 5. Amounts available for disbursement

  • (a) The amounts available for disbursement in respect of a period in Paragraph 1 of this Section shall be (i) the amounts realized by the Trust from the sales of one-half of the gold to be made available to the Trust, whether or not sold during the period, and any income from the investment of the proceeds of these sales, and (ii) the amounts of other transfers of resources to the Trust and other income of the Trust received during the period. The amount available for disbursement in respect of a period shall be expressed for all eligible members that qualify for assistance during that period as the same percentage of their quotas in effect on December 31, 1975 or to which they had consented before that date. No member shall receive disbursements in excess of its need.

  • (b) Interim disbursements may be made from time to time in respect of a period in Paragraph 1 of this Section. The last installment in respect of a period shall be made as soon as practicable after the end of the period.

Section III. Administration of the Trust

Paragraph 1. Trustee

  • (a) The Trust shall be administered by the Fund as Trustee. Except as otherwise required by the provisions of this Instrument or as determined by the Trustee, the Trust shall be administered in accordance with the same rules and procedures, including administrative rules and procedures, that apply to operations and transactions on the account of the Fund.

  • (b) The Trustee, acting through its Managing Director, is authorized (i) to make arrangements to establish special accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary or expedient, and (ii) to take all other administrative measures that the Trustee deems necessary or expedient in order to carry out the purposes of this Instrument.

  • (c) Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

Paragraph 2. Separation of assets and accounts

  • (a) The resources and records of the Trust shall be kept separate from the assets and records of all other Accounts of the Fund.

  • (b) The Trustee may postpone disbursement of an amount of the proceeds of the sale of gold that it deems necessary for use as working capital in the administration of the Trust.

  • (c) The resources of the Trust shall be used only in accordance with this Instrument and shall not be used to discharge liabilities or to meet losses incurred by the Fund in the administration of its other Accounts. The property and assets of the Fund held in its other Accounts shall not be used to discharge liabilities or to meet losses arising out of administration of the Trust.

  • (d) The audit committee selected under Section 20 of the Fund’s By-Laws shall audit the financial records and transactions of the Trust. The audit shall relate to the fiscal year of the Fund.

Paragraph 3. Reimbursement of expenses

The General Account of the Fund shall be reimbursed annually by the Trust in respect of the expenses of conducting the business of the Trust that are paid from the General Account. Reimbursement shall be made on the basis of a reasonable estimate of these expenses by the Fund.

Paragraph 4. Investment and other operations and transactions

  • (a) The Trustee may invest balances of currency held by the Trust in marketable obligations of international financial organizations or in marketable obligations issued by, and denominated in the currency of, the country whose currency is used to make the investment, provided that the concurrence is obtained of the country whose currency is used for investment.

  • (b) The Trustee may sell or exchange any of the resources of the Trust or use any of the resources, other than gold, as security for any loans to the Trust, provided that the concurrence is obtained of the members whose currencies are exchanged.

  • (c) The Trustee may establish such reserves for the purposes of the Trust as it deems appropriate.

  • (d) The Trustee shall discharge any obligations undertaken in connection with transfers that were not irrevocable within the meaning of Section I, Paragraph 2(c), and subject thereto may transfer to the Special Disbursement Account of the Fund any amounts received in the repayment of loans.

Section IV. Annual Report and Modifications

Paragraph 1. Modifications

If Paragraph 1 of Section II or the list of eligible members in Annex A is modified, a transferor may declare that it will make no further transfers to the Trust, and shall be entitled to request and obtain the return of an amount equivalent to that part of its transfer that has not been used. The unused part to which it shall be entitled shall be that proportion of the total of all unused amounts represented by its transfers in relation to all other transfers. No part of this Paragraph 1 shall apply to transfers that are irrevocable transfers under Section I, Paragraph 2(c).

Paragraph 2. Report

The Trustee shall report on the operation of the Trust in the annual report of the Executive Directors of the Fund to the Board of Governors of the Fund and shall include in that annual report the report of the audit committee on the Trust.

Section V. Period of Operation and Liquidation

Paragraph 1. Period of operation

The Trust established by this Instrument shall remain in effect for as long as is necessary to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation

When a decision is taken to liquidate the Trust, the resources of the Trust shall be used first to pay administrative expenses, and then to discharge the terms of transfers other than irrevocable transfers. The remainder of the resources, if any, shall be transferred to the Fund before, and to the Special Disbursement Account of the Fund after, the second amendment of the Articles of the Fund.

Section VI. Other Activities of the Trust

The Trustee may undertake other activities in connection with the distribution of the profits from the sale of gold for the benefit of developing countries in accordance with paragraph 6(3) of the Communiqué of the Interim Committee of the Board of Governors of the Fund on the International Monetary System dated August 31, 1975 that can appropriately be carried out through the Trust, provided that the activities are consistent with the purposes of the Fund and are not inconsistent with any provision of the Instrument.

Review of Instrument to Establish the Trust Fund and List of Eligible Members

1. Section II, Paragraph 2 shall read:

  • “(a) Eligible members for the first period in Paragraph 1 of this Section shall be those members of the Fund that are listed in Annex A.*

  • (b) Eligible members for the second period in Paragraph 1 of this Section shall be those members of the Fund that are listed in Annex B.**

  • (c) An eligible member shall qualify for assistance if it satisfies the condition of Paragraph 3 of this Section”.

2. In Section II, Paragraph 3 (c) (i) the word “predominantly” is changed to “partly” and “… December 1, 1977” is changed to “… June 1, 1978”.

3. “Annex B” attached to Executive Board Decision No. 5563-(77/150) TR, adopted October 28, 1977, shall be attached to the Instrument as “Annex B”.

Decision No. 5563-(77/150) TR

October 28, 1977

Trust Fund: Diversification of Investments

(a) Amendment of Section III, Paragraph 4(a) of the Trust Instrument

Section III, Paragraph 4(a) of the Instrument to Establish the Trust Fund annexed to Decision No. 5069-(76/72), adopted May 5, 1976, is modified to read as follows:

The Trustee may invest balances of currency held by the Trust with the concurrence of the member whose currency is to be used. The Trustee may invest in (i) marketable obligations of international financial organizations, (ii) marketable obligations denominated in special drawing rights issued by members or national official financial institutions of members, (iii) marketable obligations issued by, and denominated in the currency of, the member, or its national official financial institutions, whose currency is used to make an investment, and (iv) deposits denominated in special drawing rights with commercial banks.

Decision No. 5972-(78/189)

December 4, 1978

(b) Diversification of Trust Fund Investments

1. The Fund, recognizing that the SDR is the unit of account in which the assets of the Trust established by Decision No. 5069-(76/72), adopted May 5, 1976, are valued, concludes that it would be desirable to continue to maintain, in a manner compatible with the operational needs of the Trust, the currency assets of the Trust, other than those that need to be distributed directly to developing countries in proportion to their quotas on August 31, 1975, in assets denominated in SDRs or in a combination of currencies that would, to the maximum extent practicable, correspond to the composition of the SDR basket.

2. The Managing Director shall place in deposits, denominated in SDRs, with the Bank for International Settlements (BIS) the profits from the gold sales realized in the remainder of the auctions to be held under Paragraph 7, Schedule B, with the exception of the portion of these profits that is to be distributed directly to developing countries in proportion to their quotas on August 31, 1975, unless the Managing Director considers that the terms offered by the BIS on an intended deposit denominated in SDRs are not sufficiently attractive. In that event the Managing Director shall inform the Executive Board and make other proposals to it for investment in SDR-denominated obligations, which may include obligations of international financial organizations or members or national official financial institutions of members or commercial banks. If it is not possible to make investments in SDR-denominated obligations on terms that are sufficiently attractive, the Managing Director shall make other proposals for investment.

Decision No. 5973-(78/189) TR

December 4, 1978

Distribution to Developing Countries of Profits From Gold Sales: Authority to Distribute Profits Through Trust Fund

The Trustee is authorized to distribute through the Trust the profits from the sale of gold for the benefit of developing countries as referred to in paragraph 7 of the Executive Board Decision No. 5069-(76/72), adopted May 5, 1976 and Section VI of the Instrument to Establish the Trust Fund.

Decision No. 5709-(78/41) TR

March 23, 1978

Trust Fund: Procedures for Final Payments of Profits and Loans for the Period July 1, 1976 to June 30, 1978

  • I. The Trust will make final disbursements of loans for its first period of two years, in accordance with the procedures and conclusions set out in TR/78/24 (5/19/78) and Supplement 1 (6/21/78).*

  • II. The Trustee will distribute through the Trust Fund the profits from sales of gold for the benefit of developing members for the total amounts shown in the Attachment to TR/78/24 and in accordance with the procedures outlined in that paper and its supplement.

Decision No. 5832-(78/95) TR

June 26, 1978

Trust Fund: Second Period

(a) Timing of Loan Disbursements

The timing of the loan disbursements in the remainder of the Trust’s second two-year period (July 1, 1978-June 30, 1980) shall be in accordance with the schedule [below].

Decision No. 6201-(79/121) TR

July 23, 1979

[… the interim disbursements be made hereafter at quarterly intervals instead of half-yearly … The more frequent disbursements would add to the existing half-yearly schedule two other interim disbursements, one at the end of October 1979 and the other at the end of April 1980.]

(b) Extension of Period for Qualification

In Section II, Paragraph 3(c) (ii), of the Trust Fund Instrument, the word “predominantly” is changed to “partly” and “… November 30, 1979” is changed to “… May 1, 1980”.

Decision No. 6202-(79/121) TR

July 23, 1979

(c) Extension of Second Period

1. The date “December 31, 1980” shall be substituted for the date “June 30, 1980” in

  • (i) Decision No. 5069-(76/72), paragraph 2, May 5, 1976, and

  • (ii) the Instrument to Establish the Trust Fund, annexed to Decision No. 5069-(76/72), Section II, paragraph 1.

2. The date “November 1, 1980” shall be substituted for the date “May 1, 1980” in paragraph 3(c) (ii) of the Instrument referred to in l(ii) above, as amended by Decision No. 6202-(79/121) TR, July 23, 1979.

3. Loan disbursements in the remainder of the Trust’s second period shall be made as follows: interim disbursements at end-April and end-July 1980, and the final disbursement in January 1981.

Decision No. 6466-(80/68) TR

April 9, 1980

Trust Fund: Extension of Second Period

1.* ……………………………………………………………………….

2.

  • (a) The date “February 28, 1981” shall be substituted for “December 31, 1980” in paragraph 2 of Executive Board Decision No. 5069-(76/72), as subsequently amended, and in Section II, paragraph 1 of the Instrument Establishing the Trust Fund, annexed to Executive Board Decision No. 5069-(76/72), as subsequently amended.

  • (b) The date “January 1, 1981” shall be substituted for the date “November 1, 1980” in Section II, paragraph 3 (c) (ii) of the Instrument referred to above, as subsequently amended.

3. The final loan disbursement in respect of the Trust Fund’s second period shall be made toward the end of March 1981, provided that an interim disbursement may be made to ….

Decision No. 6676-(80/168) TR

November 19, 1980

Trust Fund: Means of Payment of Interest by Members on Their Indebtedness Under Loan Agreements

Payments of interest on members’ indebtedness under their loan agreements with the Fund as Trustee of the Trust Fund shall be made with U.S. dollars.

Decision No. 6358-(79/188) TR**

December 19, 1979

Trust Fund: Final Direct Distribution of Profits

The Trustee will make the direct distribution of profits from sales of gold for the benefit of developing members through the Trust Fund in accordance with the procedures and in the amounts set out in TR/80/17 (6/10/80)* and Correction 1 (6/11/80).*

Decision No. 6540-(80/98) TR

June 25, 1980

Trust Fund: Termination and Transfer of Resources to Special Disbursement Account

1. Having conducted the review specified in Section II, Paragraph 4(d) of the Instrument to Establish the Trust Fund attached to Decision No. 5069-(76/72), of May 5, 1976 (hereinafter called the Trust Instrument), the Fund, as Trustee, decides, with effect from the date disbursements under loans from the Trust Fund are completed, that the repayment terms of such loans from the Trust Fund will not be changed, provided, however, that, if the Trustee finds that repayment of an installment on the due date would result in serious hardship for the borrower the Trustee may reschedule the repayment to a date not later than two years after the date such repayment was originally due.

2.

  • (a) The Fund, as Trustee, decides that the Trust Fund shall be terminated as of April 30, 1981 or the date on which disbursements under Trust Fund loans are finally completed, whichever is the later. After that date, the activities of the Trust shall be confined to the completion of any unfinished business of the Trust Fund and the winding up of its affairs.

  • (b) The resources of the Trust Fund held on the termination date or subsequently received by the Trustee, except those resources still being held for distribution to members or required to satisfy the liabilities specified in Section V, Paragraph 2 of the Trust Instrument, shall be transferred, as expeditiously as possible, to the Special Disbursement Account in accordance with Section V, Paragraph 2 of the Trust Instrument.

  • (c) Nothing in this paragraph 2 shall limit the authority of the Trustee, either before or during the winding up of the Trust Fund, to reschedule loan repayments in cases of serious hardship as provided in paragraph 1 above.

3.

  • (a) From the resources received in the Special Disbursement Account of the Fund pursuant to paragraph 2(b) above, the Fund shall make available an amount equivalent to SDR 750 million for use in the Supplementary Financing Facility Subsidy Account (hereinafter called the Subsidy Account). Such amount shall be transferred to the Subsidy Account as provided in Section 4 of the Instrument establishing the Subsidy Account.

  • (b) Of the resources received in the Special Disbursement Account as a consequence of the termination of the Trust Fund which are not used for the Subsidy Account as provided in (a) above, SDR 1,500 million shall be used to provide balance of payments assistance on concessional terms, on a uniform basis, to low-income developing members in need of such assistance under arrangements similar to those set forth in the Trust Instrument. The remainder shall be used to provide assistance to low-income developing members in accordance with the second sentence of subsection 12(f)(ii) of Article V of the Articles of Agreement under a decision of the Fund to be taken not later than June 30, 1986. If no such decision is taken by that date, the remainder referred to in the preceding sentence shall be used on the same terms as the SDR 1,500 million referred to in the first sentence of this subparagraph.

Decision No. 6704-(80/185) TR

December 17, 1980

Terms of Repayment of Final Loan Disbursement and Amendment of Trust Instrument

The terms of repayment for the final disbursement of loans to be made to those members on the list in Attachment II to TR/81/3 (3/10/81)* and Correction 1 (3/11/81)* that will receive as a final disbursement about 0.4 per cent of quota shall be one installment equal to the amount of the disbursement to be repaid not later than the end of the tenth year from the date of disbursement, and Section II, paragraph 4(a) of the Trust Instrument annexed to Executive Board Decision No. 5069-(76/72) shall be considered amended accordingly.

Decision No. 6793-(81/45)

March 25, 1981

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