Chapter

CHAPTER II. Transactions and Operations in SDRs Between Participants and Other Holders

Author(s):
International Monetary Fund
Published Date:
June 1995
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The Fund's Articles of Agreement establish three categories of SDR holders. These are (a) members electing to participate in the scheme (participants), (b) the Fund itself through its GRA, and (c) “…non-members, members that are non-participants, institutions that perform functions of a central bank for more than one member, and other official entities” (Article XVII, Section 3(i)) prescribed by the Fund as “other holders.” Currently all members are participants, and the Fund has prescribed 15 institutions as other holders of SDRs.9

Under the Fund's Articles, “transactions” in SDRs mean spot exchanges of SDRs for other monetary assets.10 There are two categories of transactions: transactions with designation and transactions by agreement. Under the first category, a participant (but not prescribed holders) that has a balance of payments need may use its SDRs to acquire a freely usable currency wherein currency is provided by another participant designated to do so by the Fund because its balance of payments and reserve position is considered sufficiently strong to accept the change in the composition of its reserves. Transactions with designation are discussed in subsection 1 below. Under the second category, participants and prescribed holders can use SDRs by mutual agreement with one another in exchange for any currency for which the Fund has established a representative exchange rate. In transactions by agreement, SDRs may be used without any requirement of a balance of payments need and without the necessity of further authorizations by the Fund. Transactions by agreement are discussed in subsection 2 below.

“Operations” in SDRs mean other uses of SDRs and do not necessarily involve an exchange of currency. The Fund has authorized virtually every type of operation in SDRs between participants and other holders. These operations are discussed in subsections 3 and 4 below.

1. Transactions with Designation

To ensure that potential users of SDRs can obtain currency when the need arises, the Fund establishes in advance a list of participants whose balance of payments and reserve positions are sufficiently strong for them to be called upon (i.e., “designated”) to provide a freely usable currency in these exchanges. This list and the amounts for which participants are included are known as the “designation plan,” which is established each quarter by the Executive Board on the basis of recommendations by the Fund staff.11 However, as noted earlier, since September 1987, no use of designation has been made, because all requests for sales of SDRs have been accommodated under the standing two-way arrangements to buy and sell SDRs in transactions by agreement. Consequently, the quarterly designation plans have been of a precautionary nature. In the event that a need may, in the future, arise to use designation, the procedures for the use and receipt of SDRs in transactions with designation, and the preparation and execution of the plan are described in detail in Appendix II.

2. Transactions by Agreement

(a) By Participants

A participant may use SDRs freely, without the requirement of need, to obtain an equivalent amount of currency in a transaction by agreement with another participant. Participants either may arrange transactions by agreement by themselves or may request the assistance of the Fund if they wish to use or acquire SDRs in this way.

(b) By Prescribed Holders

All prescribed holders have the same freedom to deal in SDRs as is available to participants in transactions and operations by agreement with other participants. Thus, prescribed holders are able to enter into spot operations in SDRs or into any of the operations in SDRs that have been prescribed by the Fund, as described below, on the basis of mutual agreement between themselves or with participants.12

The only limitation placed on transactions by agreement (as well as certain operations) concerns the establishment of the exchange rate at which transactions can take place. The principle of equal value set out in Article XIX, Section 7(a) requires that exchange rates be such that participants using SDRs shall receive the same value whatever currencies may be provided and whichever participants provide those currencies.13 The Fund has made this provision operational through its Rules and Regulations.14 In accordance with Rule P-6(a), as amended, a transaction by agreement is conducted using an exchange rate determined under Rule O-2 as of the date of the agreement.15 Under Rule O-2, procedures are established for the determination by the Fund of the equal-value rate for the currencies of its member countries. Users of SDRs are required to notify the Fund immediately, giving details of the transaction, including the amount of currency received and the value date.16 The same principle applies in some respects to operations in SDRs, as described in the next section.

(c) Procedures for Use of SDRs in Transactions by Agreement

The Treasurer's Department of the Fund is ready to assist in arranging transactions by agreement if requested by either party. A number of participants have standing arrangements with the Fund according to which they are prepared to buy or sell SDRs in transactions by agreement in exchange for certain freely usable currencies, up to predetermined amounts, within a certain period of time.17

If participants or prescribed holders wish to buy or sell SDRs in transactions by agreement to be arranged by the Fund, they should inform the Fund by cable indicating the SDR amount and the proposed value date. To allow enough time to arrange these transfers, the incoming cable, bearing the test number of the fiscal agency, should generally be received by the Fund at least four business days before the proposed value date.18

3. Prescribed Operations

In addition to spot exchanges with currencies, SDRs can also now be used for virtually any recognized financial operation with other official holders (other than the Fund's GRA) by mutual agreement, subject only to the equal-value limitation already described and a restriction on the use of gold. Specifically, the Fund has taken decisions that permit participants and prescribed holders, by agreement with other participants or prescribed holders, to use SDRs in the following operations:19

  • settlements of financial obligations;

  • loans in which the interest rate and the maturity may be agreed upon by the parties and repayment of the loans and payment of interest may be made in SDRs;

  • as security for the performance of financial obligations, in either of two ways: (i) as a pledge, with the SDRs being earmarked for the duration of the pledge in a special register kept by the Fund, or (ii) as a transfer-retransfer agreement, under which SDRs would be transferred as security for the performance of an obligation and would be returned to the original transferor when its obligation under the agreement had been fulfilled;

  • swap arrangements, in which SDRs are exchanged at the equal-value rate for a currency or another monetary asset, other than gold, with an agreement to reverse the exchange at a specified future date at an exchange rate agreed upon by the parties;

  • forward operations, in which SDRs may be bought or sold for delivery at a future date, against currency or another monetary asset, other than gold, at an exchange rate agreed upon by the parties; and

  • donations.

The amounts of SDRs used in any of the permitted operations above are left for the parties to decide. The exchange rate to be used for a loan or the settlement of a financial obligation not denominated in SDRs must be in accordance with the principle of equal value as determined by the Fund.

The above operations and the procedures involved are described in more detail below.

(a) Settlement of Financial Obligations

Official holders may freely transfer SDRs to other official holders in order to settle financial obligations. The SDRs, therefore, could be used directly to settle obligations rather than the user's first having to acquire currency for the SDRs it wishes to use. Examples of the settlement of obligations would be the repayment of a loan, the payment of interest, and the payment for the receipt of, or the commitment to deliver, goods or services, and in the same-day loan/repayment operations between members in connection with quota payments by members. Settlement of financial obligations could also include the payment of aid commitments (grants). The ability to use SDRs directly in this way is similar to the freedom to use SDRs in transactions by agreement. When the amount of the obligations being settled is expressed in a currency, the equal-value exchange rate would apply.

(b) Loans of SDRs

There may be circumstances in which an official holder wishes to borrow SDRs rather than to buy them outright: it may, for example, have insufficient SDRs to make a payment that needs to be settled in SDRs but may expect to receive the SDRs at some future date. On the lending side, the lender of SDRs may want to obtain a rate of interest higher than the going rate on the SDR or may prefer to lend SDRs in arrangements of a cooperative or multilateral nature, even at a lower rate of interest.

Because a loan would involve the transfer of the ownership of the SDRs lent, the SDR holdings of the borrower and the lender would be affected by the loan for those purposes of the Fund's Articles of Agreement and, under certain decisions of the Fund, where the member's SDR holdings play a role. Examples of this are designation, and net interest and charges.

The Fund has established two categories of loans of SDRs to other participants: (1) loans that are expressed in SDRs and are to be repaid in SDRs and on which interest is also to be paid in SDRs, and (2) loans of SDRs that involve currencies because either the loan is expressed in currency or currency is used to repay the loan or to pay interest on it. For the second category of SDR loans, the Fund requires that the exchange value of the currency against the SDR be calculated consistent with the spot exchange value of the currency in terms of the SDR at the time payments are made, that is, at equal value. Under either of these two categories, official holders are free to agree on the interest rate and on the maturity of the loan, but they are required to inform the Fund of its terms.

(c) Use of SDRs as Security for Performance of Financial Obligations

The use of SDRs as security for financial obligations could take the form of either a pledge or a transfer-retransfer agreement. The two techniques have significant operational differences.

(i) Pledges of SDRs

Participants and prescribed holders are permitted to use SDRs to secure loans by pledging SDRs as collateral.20 Under this technique, the SDRs would remain part of the SDR holdings of the pledgor for all purposes, including the discharge of obligations payable in the SDR Department or in SDRs in the GRA.

The Fund does not assume any responsibility in the event that a pledgor for any reason reduces its SDR holdings below the amount registered as pledged. However, the Fund would accept an instruction by both parties to such an agreement requesting that the Fund, until further notice by either party, should not execute, without the agreement of the lender, an instruction by the pledgor to transfer SDRs that would reduce the holdings below the amount pledged or set aside, except in order to discharge an obligation to the Fund. It is necessary for the Fund to be informed of the loan and the settlement and default provisions. Most of the specific terms of the loan arrangement covered by an SDR pledge are left to the discretion of the parties. However, the Fund must determine the value of the security to be acquired by the lender in case of a default by the borrower, and for this purpose the Fund prescribes that the equal-value exchange rate for the SDR apply on the date the currency is transferred.

(ii) Transfer-retransfer agreement

The technique of a transfer-retransfer agreement would clearly be superior as a means of providing security for a financial obligation if there were elements that created uncertainty about the agreement between two participants.21 SDRs would be transferred by the borrower to the lender as security for the loan, with an agreement that the SDRs would be retransferred to the debtor when the loan was repaid. Thus, the beneficial ownership of the SDRs used for security would pass to the creditor until the loan was repaid.

In comparison with a pledge of SDRs, one of the disadvantages of a transfer-retransfer agreement from the viewpoint of the transferor would be the loss of interest income on the SDRs transferred. It is possible, however, to adjust the transfer-retransfer technique to make its effects closer to those of a pledge. Thus, while all the rights of ownership would be with the transferee, the prescription allows the parties to agree that the transferee would return the interest received on the SDRs to the transferor as and when it is paid by the Fund. The rationale is that the transfer of SDRs simply provides collateral and does not also pass on the benefits of interest income on the SDRs held as security. Nevertheless, the rights attached to the SDRs transferred would be those of the transferee until such time as the SDRs are retransferred to the debtor; that is, the SDRs would reduce the transferee's obligation to receive SDRs in designation if it is a participant, and the Fund would pay it interest.

(d) Use of SDRs in Swaps

A swap arrangement is a convenient technique by which credit can be extended between central banks, without making loans that may not be permitted under domestic laws and that can be activated at short notice. When a swap arrangement is activated, the two central banks involved swap balances of their own currencies at the prevailing exchange rate in spot transactions, with an agreement to reverse the swap, most commonly at the same exchange rate, at an agreed future date, usually three months ahead. The party activating the arrangement may use the foreign exchange acquired by drawing against the balance available to it for any purpose, such as to bolster its reserves or, more usually, to finance intervention in the exchange markets. The balances of currencies created on the activation of a swap earn interest at agreed rates; however, to the extent that a balance is drawn against, there is an additional interest cost to the party making the drawing.

The party activating the swap arrangement carries an exchange risk to the extent that it uses the amount available under the swap and must subsequently acquire, at a different exchange rate, the amount of the other party's currency needed to repay the amount of currency drawn under the swap arrangement. The party making its currency available at the request of the other party acquires a short-dated, nonmarketable, interest-bearing asset and normally carries no exchange risk in terms of its own currency during the period the swap is outstanding. The swap arrangement may provide, however, that if a balance is drawn upon, any profits or losses would be shared between the parties to the arrangement.

The purpose of permitting the use of SDRs in swaps is to enhance the usefulness of the SDR as a reserve asset in circumstances where participants wish to use SDRs to obtain currency without permanent loss of ownership of the SDRs. The tendency for the SDR exchange rate to be more stable than the rates of many other individual currencies gives it the advantage in swaps of reduced exchange risk compared with other currencies that might be used for that purpose. This is an important consideration where currency is needed on a short-term basis, for example, for intervention in the exchange markets.22

The initiative for entering a swap arrangement in SDRs could also come from a participant wishing to acquire SDRs. For example, a participant that needs SDRs to settle an obligation, either to the Fund or to another participant, may prefer to acquire SDRs through a swap rather than through a purchase if it expected to receive SDRs soon after it had settled the obligation. The main features of the use of SDRs in swaps are as follows:

(i) Exchange rate

The initial transfer of SDRs under a swap arrangement is exactly like a transaction by agreement under Article XIX, Section 2(b). Therefore, the equal-value exchange rate for spot transactions applies in all cases to the initial transfer of SDRs in a swap. In order to permit the kind of swap that is normally arranged between central banks, the decision on swaps allows participants to set, by agreement among themselves, the exchange rate for the reversal of the initial transfer of SDRs.

(ii) Currencies and other monetary assets to be exchanged for SDRs

Participants entering into swap arrangements are permitted to exchange SDRs for any currency or other monetary asset (including other units of account, such as the European Currency Unit (ECU)) except gold. Participants' choices in this regard are not limited other than by the requirement that the currency or monetary asset be one for which the Fund can determine an equal-value exchange rate in terms of the SDR. The exclusion of gold is consistent with the objective in the Second Amendment of the Fund's Articles of Agreement that the role of gold in the international monetary system should be gradually reduced.

The usual practice in both the central bank and the commercial forms of swaps is for the same currency to be used at both stages of the operation. Thus, if deutsche mark were initially exchanged for U.S. dollars, the exchange would be reversed by the return of one of those currencies against the other. However, in swaps involving SDRs, there is no requirement that the currency received must be returned. Accordingly, if participants so agreed they would be free to reverse a swap involving SDRs with a currency different from that used in the initial exchange.

(iii) Interest rates

The Fund does not regulate the interest rates that might be agreed between participants in connection with the use of SDRs in swap operations. Participants are therefore free to agree among themselves on the rate of interest for these operations.

Under the Fund's Articles of Agreement, interest on SDR holdings accrues to the holder of SDRs. If SDRs were transferred in a swap, the recipient would be the holder of the SDRs for the period of the swap and would be credited with the interest on the SDRs at a rate determined in accordance with Rule T-1. Interest earned by the other party to the swap, to the extent that it retained the balances of the currency (or of another monetary asset) acquired under the swap, could be set at the same rate as the SDR rate of interest or at a different rate. Because the parties to the swap may regard the SDR interest rate as either too low or too high for their purposes, they may adjust the interest to be earned by the party that holds the SDRs during the period that a swap is outstanding. This could be done through a payment from one party to the other, either in a currency or in SDRs, under the decision permitting the use of SDRs in the settlement of financial obligations.23

(iv) Period of swap

While standing arrangements or swap lines frequently remain in existence for extended periods, a particular drawing under such an arrangement would normally be reversed in a short time, often three months. However, swap arrangements usually provide for extensions so that a particular drawing may remain outstanding for 12 months or longer. Similarly, the period of the swap operation in SDRs is to be agreed upon by the parties concerned.

This approach allows for flexibility for the date on which the swap would be reversed. Participants would be able to arrange for the reversal of a swap after a period that did not correspond to full calendar months, or they could agree that one of the parties would subsequently decide on the precise date of reversal within a range of dates established under the agreement.

There is, however, the possibility that the Fund may make changes in the prescription for swaps in SDRs while an operation is outstanding. In these circumstances, the changes would not affect the use or acceptance of SDRs under the swap operations that were already in effect. Any such swap operation that would be incompatible with an amended prescription must be unwound within 12 months from the date the decision is changed.24

(v) Amounts of SDRs to be used

There is no limit on the amounts of SDRs that may be transferred in swap operations.

The Fund does not assume responsibility for the performance of a swap arrangement, but certain steps can be taken to give additional assurance that the recipient will hold sufficient SDRs to reverse the swap at maturity. If the SDR holdings are insufficient at the time of reversal, the Fund is always prepared to assist in arranging for the spot purchases of the needed amount of SDRs in a transaction by agreement with another participant, although the Fund cannot guarantee that a willing seller will be found. A further possibility would be for the parties to the swap to make contingency arrangements that would apply in the event that the full amount of SDRs could not be returned to the initial transferor.

(e) Forward Operations in SDRs

An important feature of the principal currencies traded in the exchange markets is that they can be bought and sold on a forward basis. A similar facility is available for dealings in SDRs in forward operations among official holders.

Participants and other holders may wish to buy or sell SDRs on a forward basis for a variety of reasons. They may want to acquire SDRs on a forward basis because they plan to use SDRs to repay loans or to discharge other future financial obligations, denominated in SDRs, either to the Fund (e.g., repurchases) or to other official holders. In this case, they would wish to protect themselves against the risk of depreciation of the currencies in which they hold their external reserves in terms of the SDR and to ensure that they would have the SDRs when needed. There may also be sellers of SDRs in forward operations among participants and other holders that wish to use their SDRs to cover a future obligation to be settled in currency.

There are other ways of avoiding or mitigating the risk of changes in the value of currencies in terms of the SDR without buying or selling SDRs on a forward basis. For example, a participant or prescribed holder with a commitment to use SDRs in the future could make forward purchases of the currencies in the SDR valuation basket in appropriate proportions, or acquire those currencies in spot transactions and place them in deposit with a maturity to match the SDR commitment. Another possibility would be to make a currency deposit denominated in SDRs. Compared with a forward operation in SDRs, however, each of these alternatives would involve additional steps, including the subsequent acquisition of SDRs in a spot transaction. In contrast, a forward operation in SDRs would protect the transactors against exchange risk in terms of the SDR and would ensure that the buyer would have the SDRs when needed.

(i) Exchange rates

Forward exchange rates for currencies traded in the major exchange markets generally reflect the spot exchange rates among the currencies concerned and the differences in interest rates paid on deposits in those currencies—typically Euromarket deposits—so that interest parity is broadly maintained. Interest parity is not always attained, however, because of the effects of expectations about future exchange rates. If the SDR were freely traded in private markets, its value for spot and forward transactions and its interest rate would be determined by market forces, and the relationship between the spot and forward exchange rates for the SDR would basically reflect prevailing interest rate differentials. In fact, both the value of the SDR for spot transactions and the SDR interest rate are regulated by the Fund. The spot value of the SDR is based on a basket of market exchange rates in accordance with Rules O-1 and O-2. The interest rate on the SDR is determined under Rule T-1 on the basis of a combined market rate using the currencies in the valuation basket. In view of these arrangements regarding the spot exchange rate and the interest rate for the SDR, forward operations in SDRs need to be individually negotiated. The Fund permits the parties to forward operations to determine the forward exchange rate by agreement among themselves.

A forward exchange rate for the SDR can be calculated by using a weighted average of forward exchange values for the currencies in the valuation basket.25 Generally, the SDR interest rate implied by this calculation would be lower than the rate determined under Rule T-1, and, for participants engaging in a forward operation, the actual interest rate under Rule T-1 may be an important factor in their judgment about the appropriate exchange rate for the operation. The transacting parties may wish to take this factor into account in determining the forward exchange rate.

Official holders entering into forward operations in SDRs are required to notify the Fund of the exchange rate at the time they agree on the operation.

(ii) Currencies and other monetary assets to be exchanged for SDRs

Official holders entering into forward operations are permitted to exchange SDRs for any currency, including the currency of one of the parties, or a third currency, such as a reserve currency. They are also permitted to deal in SDRs forward against other monetary assets (e.g., the ECU), except gold, for the reasons mentioned earlier in the discussion of swaps involving SDRs.

(iii) Period of forward operation

Official holders are free to determine the maturity for forward operations in SDRs by agreement among themselves.

As for swaps involving SDRs, if there were a change in the decision permitting the use of SDRs in forward operations, any outstanding operations that were incompatible with the new decision would need to be completed within 12 months of the date the decision was changed.

(iv) Amount of SDRs to be used

The Fund does not limit the amount of SDRs to be used in forward operations.

(f) Use of SDRs in Donations

SDRs may be freely given or received by agreement. As with all other SDR transactions or operations, such transfers of SDRs have no effect on participants' net cumulative allocations.

(g) Procedures for Use of SDRs in Prescribed Operations

  • Both parties to an operation need to inform the Fund of the amount of SDRs, the value date, the amount of currency received (if applicable), and the provisions of the agreement entered into.

  • The exchange rate of SDRs against currency would have to reflect the SDR exchange rate in accordance with the requirements under Article XIX, Section 7(a) and Rule O-2.

  • The notification by both parties should include an instruction to the Fund to debit or credit the SDR holdings of each party.

  • In accordance with Rule P-7, both parties should declare in their notifications that their intended use of SDRs is in accordance with the relevant prescribed operation.

  • If the operation entered into provides for the payment of interest to a party in SDRs, then the parties should give the Fund appropriate standing instructions to debit and credit their SDR holdings.

  • The Fund would, if requested, notify the parties of the amount of SDRs and the exchange rate before the value date of the operation.

  • In accordance with Rule P-9, the Fund would make the necessary debit and credit entries in the SDR Department as of the notified value date and inform both parties by cable or telex.

The forms of cable communications in relation to prescribed operations in SDRs are set out in Section V.2.

4. Fund-Related Operations

Operations in SDRs between members and the Fund that are conducted through the intermediary of a prescribed holder are referred to as “Fund-related operations.” The Fund has adopted a number of decisions to prescribe SDR operations under the Trust Fund, the SFF Subsidy Account, the SAF, and the ESAF. The use of an intermediary in these operations is needed because, under the Articles of Agreement, the Fund can hold official SDRs in the GRA but cannot hold official SDRs in the Special Disbursement Account or in other accounts administered by the Fund (such as the ESAF Trust Account or the Trust Fund) in its capacity as trustee for the benefit of members.

In addition to payments to the SDR Department or the GRA, which must be settled in SDRs (net SDR charges, periodic charges on the use of Fund resources, and annual assessments on participants), and payments that may be made in SDRs at the discretion of the member (such as repurchases or the payment of the reserve asset portion of a member's quota increases), members have been able to make interest payments and loan repayments to the Fund under the Trust Fund, the SAF, or the ESAF with SDRs, which are credited to the SDR account of a prescribed holder acting on behalf of the Fund. The prescribed holder records these SDRs and any interest on them, as its assets against which it issues SDR-denominated deposit liabilities to the Fund. Moreover, contributions by members to the ESAF could also be received in SDRs in this way. By the same decisions, the Fund, through the intermediary of the prescribed holder, could also transfer SDRs to members in making loan disbursements under the SAF or the ESAF, or in making interest payments or loan repayments to the contributors to the ESAF Trust.26

Thus, as far as members are concerned, they may use SDRs in discharging all of their financial obligations to the Fund whether they are received in the GRA or in the SDR account of the intermediary acting on behalf of the Fund. An increasing number of members have provided the Fund with a standing authorization to debit their SDR accounts with the amounts of all their financial obligations as they fall due to the Fund.27 These authorizations have been helpful and operationally convenient for both members and the Fund.

The institutions are the African Development Bank (Abidjan); the African Development Fund (Abidjan); the Andean Reserve Fund (Bogotá); the Arab Monetary Fund (Abu Dhabi); the Asian Development Bank (Manila); the Bank of Central African States—BEAC (Yaounde); the Bank for International Settlements—BIS (Basle); the Central Bank of West African States—BCEAO (Dakar); the East African Development Bank (Kampala); the Eastern Caribbean Central Bank (St. Kitts); the International Bank for Reconstruction and Development—IBRD and its affiliate the International Development Association—IDA (Washington, D.C.); the International Fund for Agricultural Development (Rome); the Islamic Development Bank (Jeddah); and the Nordic Investment Bank (Helsinki). Following Switzerland's membership in the Fund, the status of the Swiss National Bank as a prescribed holder was terminated in late 1992.

Article XXX(i).

Under the Articles, a participant's obligation to provide currency shall not, absent agreement between the participant and the Fund, extend beyond the point at which its holdings of SDRs in excess of its net cumulative allocation are equal to twice its net cumulative allocation.

See Executive Board Decision No. 6467-(80/71) S, p. 83.

See p. 63.

International Monetary Fund, By-Laws, Rules and Regulations, Fiftieth Issue (Washington, D.C., 1994).

See Rule P-6, p. 71 and Rule O-2, p. 68.

See Rule P-8, p. 71.

As of September 1, 1995, 13 participants had SDR selling arrangements with the Fund, 12 of which also had SDR buying arrangements. For more details, see Appendix I.D, p. 38.

The main forms of cable communications in connection with transactions by agreement are set out in Section V.1, p. 22.

See Appendix III for relevant decisions.

See p. 29.

See pp. 29-30.

A similar objective can be achieved by a transfer-retransfer agreement, under which SDRs are transferred to provide security for a loan. However, this technique would not correspond precisely to the terms of a swap operation involving SDRs, as described below.

If the parties wished, the amount of interest paid by the Fund on the SDRs could be returned to the participant that used SDRs in the swap.

A swap operation initiated after a change in the prescription for swaps involving SDRs would have to conform to the requirements of the amended prescription, even if it were made under a standing arrangement in effect before the prescription was changed.

See p. 36.

Financial obligations under the SAF, the ESAF, and the Trust Fund consist of principal, interest, and special charges. In addition, donations and loans to the SFF Subsidy Account and to the ESAF Trust may also be made in or exchanged for SDRs. The Fund has also taken decisions that permit the use of SDRs in these operations (see Decision No. 8186-(86/9) SBS/S, adopted January 15, 1986; Decision No. 8642-(87/101) S/TR, adopted July 9, 1987; Decision No. 8239-(86/56) SAF, adopted March 26, 1986; and Decision No. 8937-(88/118) ESAF/S, adopted July 28, 1988). All operations under the SFF Subsidy Account and the Trust Fund have been terminated except for relatively small amounts arising from overdue obligations.

See Section V. 3(d), “Standing Authorization for All Fund Obligations,” p. 34.

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