Chapter

CHAPTER III. Transactions and Operations Through General Resources Account

Author(s):
International Monetary Fund
Published Date:
June 1995
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1. Transfers from Participants to General Resources Account

(a) Charges

Members are required to pay all charges in SDRs, other than in exceptional circumstances (see below). These are (i) periodic charges on balances of the Fund's holdings of their currency subject to charges, such as would result from purchases under a stand-by or extended arrangement, or under a special facility, such as the compensatory and contingency financing facility; (ii) the stand-by or extended arrangement charges for the relevant period of the arrangement; (iii) service charges relating to the use of the Fund's resources; and (iv) special charges that may arise from overdue repurchases and overdue charges.

Participants are informed by the Fund of the amounts and due dates of charges. When a participant has not given a standing authorization to debit its SDR account, the Fund requests authorization to debit its SDR holdings that the participant sends bearing the test number of the fiscal agency. If a participant's holdings of SDRs are insufficient, the Fund suggests acquisition of SDRs from another SDR holder or from the GRA. A suggested text for an ad hoc authorization to the Fund to debit the SDR account for charges is shown in Section V.3(a).

In connection with the settlement of periodic and other charges, the Fund has obtained a standing authorization from most participants subject to these charges to debit their SDR accounts on the due date. This has proved a convenient procedure for both members and the Fund. The text of such an authorization is shown in Section V.3(b).

However, in exceptional circumstances the Fund may permit a member to pay charges in currencies of other members specified by the Fund, after consultation with them, or in its own currency.28

One example of exceptional circumstances referred to above is the inability of a member to pay in SDRs because it is neither a participant in the SDR Department nor a prescribed holder. In these cases the member would be permitted by the Fund to pay all its charges in the currency of another member specified by the Fund.29

If a member holds an amount of SDRs insufficient to meet upcoming charges by the Fund, the member should acquire SDRs from another SDR holder in a transaction by agreement or, within 30 days before charges fall due, the member can purchase from the GRA the estimated amount of SDRs required with a currency determined by the Fund.30

(b) Repurchases

Participants may use SDRs to make repurchases of the Fund's holdings of their currency. Members wishing to acquire SDRs to discharge forthcoming repurchases may seek Fund assistance in arranging such acquisitions in transactions by agreement (see Section II.2). Except when a participant has given a standing authorization to debit its SDR account for repurchases or has indicated a preference for using SDRs in making repurchases, the Fund periodically asks participants if they wish to use SDRs or currency to discharge repurchases in the forthcoming quarterly period. In such consultations with members, the Fund takes into consideration the overall supply of SDRs available for transactions by agreement and the volume of SDRs required by members to discharge their repurchase obligations. A number of participants have given standing authorizations to the Fund to debit their SDR accounts with repurchases. Suggested texts of an authorization to debit the SDR account for repurchases are shown in Section V.3(c).

(c) Use of SDRs in Quota Subscriptions and in Quota Increases

Under the Eighth General Review of Quotas, participants were given the option of paying 25 percent of their quota increases in SDRs or in a currency specified by the Fund. The same option was provided for in the Ninth General Review. New members were also authorized to use SDRs for payment of quota subscriptions. In this connection, a facility for aiding members with insufficient SDR holdings or a weak reserve position or both situations was available whereby these members, with the Fund's assistance in finding counterparties, borrowed SDRs from other members on the day of the former's quota subscription payments. This facility is described in (e) below.

(d) Other Transfers

An annual assessment on members that serves to reimburse the Fund for the operating expenses of the SDR Department and the interest on GRA holdings comprises other transfers to the GRA.31

(e) Arrangements for Same-Day Loans and Repayments in SDRs

Fund members that participate in the SDR Department must pay the reserve asset portion of the initial quota subscription and any subsequent increase in quotas in SDRs, currencies of other members specified by the Fund, or a combination of these assets. The balance of the quota increase or initial quota subscription, expressed in SDRs, is payable in the member's own currency.

To assist members with insufficient reserves to make the reserve asset payments for their initial quota subscriptions and for their quota increases under the Eighth and Ninth General Reviews, the Fund established arrangements for a same-day loan and repayment of SDRs. Under these arrangements, members that held sufficient SDRs agreed with the Fund to lend SDRs without interest, fee, or commission to other members who needed them for these purposes. A member with insufficient reserves borrowed SDRs and used them to make the reserve asset payment to the Fund. On the same day it drew in SDRs its newly established reserve tranche position in the Fund, it used them to repay the borrowed SDRs. The SDR loan, the quota payment, the drawing of the reserve tranche position, and the repayment of the loan were all completed and recorded on the same value date, thus allowing members with insufficient reserves to complete their quota payments without cost or exchange risk while leaving the SDR position of lenders unaffected.

An illustrative cable for a participant to establish an arrangement for a same-day loan and repayment in SDRs in connection with quota increases under the Ninth General Review reads as follows:

SAMPLE

SDR NO.

TEST NO.

IN ORDER TO ASSIST FUND MEMBERS WHOSE FOREIGN EXCHANGE AND SDR HOLDINGS ARE LESS THAN THE RESERVE ASSET PORTION OF THEIR QUOTA INCREASES AUTHORIZED UNDER THE NINTH GENERAL REVIEW OF QUOTAS, (LENDER) HEREBY NOTIFIES THE FUND THAT IT STANDS READY TO LEND SDRS FROM ITS HOLDINGS TO SUCH MEMBERS AND AUTHORIZES THE FUND TO ARRANGE SUCH LOANS ON ITS BEHALF ON THE FOLLOWING TERMS AND CONDITIONS:

1. LOANS OF SDRS MAY BE MADE TO SUCH MEMBERS FOR THIS PURPOSE ONLY ON SUCH DATE AND IN SUCH INDIVIDUAL AMOUNTS AS THE FUND MAY DETERMINE, PROVIDED THAT THE AGGREGATE AMOUNT OF SUCH LOANS SHALL NOT EXCEED SDR (AMOUNT).

2. THE BORROWER SHALL REPAY THE SAME AMOUNT OF SDRS ON THE SAME DATE AS THE LOAN AMOUNT IS TRANSFERRED.

3. THE FUND IS HEREBY INSTRUCTED TO EFFECT PAYMENT OF EACH LOAN BY DEBITING THE SDR ACCOUNT OF (LENDER) WITH ITS LOAN AMOUNT AND CREDITING THE AMOUNT TO THE ACCOUNT OF THE BORROWER AND TO EFFECT REPAYMENT OF THE LOAN ON THE SAME DATE BY DEBITING THE SDR ACCOUNT OF THE BORROWER WITH THE SAME AMOUNT AND CREDITING THE ACCOUNT OF (LENDER).

4. THE LOAN IS MADE WITH NO INTEREST OR OTHER COST.

5. EACH LOAN AND ITS REPAYMENT SHALL CONSTITUTE OPERATIONS IN SDRS UNDER ARTICLE XIX, SECTION 2(C) IN ACCORDANCE WITH THE APPLICABLE RULES AND PRESCRIPTIONS OF THE FUND. NO FURTHER NOTICE, DECLARATION, OR INSTRUCTION WILL BE NEEDED FROM (LENDER) WITH RESPECT TO THESE OPERATIONS.

6. BY NOTIFYING THE FUND, (LENDER) MAY TERMINATE THE FUND'S AUTHORITY TO MAKE LOAN ARRANGEMENTS HEREUNDER IF (LENDER) CONSIDERS TERMINATION APPROPRIATE IN VIEW OF THE ACTUAL OR ANTICIPATED REDUCTION IN THE LEVEL OF ITS SDR HOLDINGS.

FISCAL AGENCY

2. Transfers from the General Resources Account

(a) In Purchases

Since March 1977, the Fund has sold SDRs to participants making use of the Fund's resources with the agreement of those participants.32 A participant making a purchase under a stand-by arrangement or making another type of purchase would normally, with its agreement, receive some SDRs. There is no operational inconvenience for the purchasing participant in receiving SDRs, which can be used simultaneously in a transaction with designation or in a transaction by agreement to obtain the freely usable currency of the participant's choice. In fact, it can often be more useful to receive SDRs because the purchasing participant can hold all or part of the SDRs as a desired component of its reserves with which it is to pay charges in SDRs at a later date or discharge some of its financial obligations to the Fund in SDRs. Availability of SDRs in purchases depends, of course, on the SDR holdings of the GRA and on the policy on sales of SDRs at the time of purchase.33 The Treasurer's Department advises participants at the time of the purchase whether the Fund will provide SDRs, subject to the purchasing participant's agreement, instead of currencies.

(b) Acquisition of SDRs Against Currency Specified by the Fund

Participants who hold insufficient SDRs to pay charges to the Fund in the GRA and assessments and charges in the SDR Department may acquire the needed amount of SDRs from the GRA against payment of a currency specified by the Fund within 30 days of the due dates of these obligations.34

(c) Other Transfers

SDRs may also be transferred from the GRA for the (i) payment of remuneration by the Fund at the beginning of each financial quarter to members on their net creditor positions (however, either the Fund or the member may decide that the payment to the member shall be made in its own currency), (ii) payment of interest and principal on Fund borrowing from participants and prescribed holders, (iii) refund of charges or remuneration that arise out of burden sharing35 and those related to purchases under Fund arrangements and their cancellations, and (iv) purchase of any member's currency that is deemed to be scarce by the Fund and therefore needs to be replenished (see p. 58). Any such transfers other than refunds of charges are subject to the agreement, either ad hoc or in a general way, of the recipient of SDRs.

See Article V, Section 8(e), p. 58. A decision to permit the use of a member's own currency in payment of charges has not yet been taken by the Fund.

See Executive Board Decision No. 5702-(78/39) G/S, p. 74.

Ibid.

See Section IV for details.

Executive Board Decision No. 5355-(77/36) G/S, p. 74.

Executive Board Decision No. 6275-(79/158) G/S, p. 88.

Executive Board Decision No. 5702-(78/39) G/S, p. 74.

For a discussion of the principles underlying the sharing of costs (arising out of overdue financial obligations to the Fund) between creditor and debtor members of the Fund, see International Monetary Fund, Financial Organization and Operations of the IMF, IMF Pamphlet Series No. 45 (Washington, 1993, 3rd ed.).

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