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IMF History (1966-1971) Volume 2
Chapter

Selected Decisions of the Executive Board (January 1, 1966–December 31, 1971)

Author(s):
International Monetary Fund
Published Date:
February 1996
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Article IV, Section 1 Transactions and Computations Involving Fluctuating Currencies

Transactions and Computations Involving Fluctuating Currencies

The Fund has examined certain problems relating to the adjustment of its holdings of fluctuating currencies and to transactions and computations involving such currencies and has come to the following conclusions:

I. The Fund does not intend to apply the rules set forth in II below to its holdings of members’ currencies having fluctuating rates when there is no practical interest for the Fund or members to do so. To avoid misunderstanding, it may be useful to point out that these rules do not constitute a formula for dealing with the currencies of countries in which current transactions are conducted at multiple rates.

II. Subject to I above, the following rules are adopted:

Where the foreign exchange value of a currency fluctuates so that exchange transactions in that currency are not based on parity in accordance with Article IV, Section 3, and the Fund decides to apply Article IV, Section 8, computations by the Fund relating to that currency (hereinafter referred to as “fluctuating currency”) for the purpose of applying the provisions of the Articles of Agreement of the Fund will be made as follows:

1. (i) Computations will be based on the mid-point between the highest rate and the lowest rate for the United States dollar quoted, for cable transfers for spot delivery, in the main financial center of the country of the fluctuating currency on the day specified in sub-paragraph (ii) below; provided, however, that when prescribed by sub-paragraph (iii) below computations will be based on the mid-point between the highest rate and the lowest rate for the fluctuating currency quoted in New York for cable transfers for spot delivery. Arrangements will be made with the Fund’s depository in the country of the appropriate exchange market as determined hereunder to communicate to the Fund the rates referred to in this sub-paragraph (i).

(ii) For the purpose of sub-paragraph (i) the specified day will be:

(a) For the sale or purchase by the Fund of a fluctuating currency in exchange for another currency, or the purchase of gold by the Fund under Article V, Section 6 (a), or the sale of gold by the Fund under Article VII, Section 2, or repurchases other than repurchases under Article V, Section 7 (b), or borrowing or the repayment of borrowing under Article VII, Section 2, the last business day in the main financial center of the country of the fluctuating currency, before the Fund instructs its depository to transfer or receive the fluctuating currency.

(b) For computations for the purpose of Article V, Section 7 (b) or Article V, Section 8 (f), the day as of which the computation is made, provided that for computations involving currency substituted pursuant to Schedule B, Paragraph 1 (d) and paragraph 1 of Executive Board Decision No. 3049-(70/44), adopted May 20, 1970, the specified day will be the last business day before the Fund instructs its depository to receive the payment in that currency.

(iii) If a mid-point cannot be determined in the main financial center of the country of the fluctuating currency in accordance with sub-paragraph (i) for the day specified in sub-paragraph (ii), there will be substituted therefor the mid-point for the fluctuating currency in New York determined in accordance with sub-paragraph (i) for the same calendar day. If no such mid-point can be determined for that day, there will then be substituted, to the extent necessary, first the previous business day in the main financial center of the country of the fluctuating currency, and secondly the same calendar day in New York. This procedure will be followed to the extent necessary, until a mid-point is determined in accordance with sub-paragraph (i), except where the Fund decides to make a special determination under paragraph 6 below.

2. Where as the result of the application of paragraph 1 the amount of currency which the Fund has agreed to sell would exceed the amount that the purchasing member is entitled to purchase under Article V, Section 3 (a) (iii), the amount of currency to be sold will be reduced to the amount the purchasing member is entitled to purchase under that provision unless the Fund makes a waiver under Article V, Section 4.

3. The Fund will revalue all of its holdings of a fluctuating currency on the basis of the mid-point employed for a computation under paragraph 1, and such revaluation will take effect as of the day specified for the computation in sub-paragraph (ii) of paragraph 1. As a minimum, revaluation will be made as of each July 31, October 31, January 31, and April 30.

4. Whenever the Fund revalues its holdings of a fluctuating currency under paragraph 3, it will establish an account receivable or an account payable, as the case may be, in respect of the amount of the currency payable by or to the member under Article IV, Section 8. For the purpose of applying the provisions of the Articles as of any date, the Fund’s holdings of the fluctuating currency will be deemed to be its actual holdings plus the balance in any such account receivable or minus the balance in any such account payable as of that date.

5. Any account receivable or payable established under paragraph 4 above will be settled promptly after each July 31, October 31, January 31, and April 30, provided, however, that settlement will not be necessary for any July 31, October 31, or January 31 on which the mid-point as determined under paragraph 1 above does not differ by more than five per cent from the rate for the last settlement. Settlement of any account receivable or payable established under paragraph 4 above will always be made when requested by either the Fund or the member.

6. In any case in which it appears to the Fund that any of the provisions of paragraphs 1 to 5 above are not adequate or satisfactory, the Fund will make a special determination for the treatment of such case.

III. Sections I and II above of this decision shall be communicated to members together with SM/54/25 as amended by SM/54/25, Supplement 1 as an explanatory memorandum.

Decision No. 321-(54/32),

June 15, 1954, as amended by

Decisions Nos. 1245-(61/45), August 4, 1961;

1283-(61/56), December 20, 1961;

3272-(71/14), February 23, 1971;

and 3325-(71/37), May 4, 1971

Article IV, Section 4 Par Values and Margins

Central Rates and Wider Margins: A Temporary Regime

Preamble

This decision is adopted by the Executive Directors in order to indicate practices that members may wish to follow in present circumstances consistently with Article IV, Section 4 (a) and Board of Governors Resolution No. 26-9, which called on all members to collaborate with the Fund and with each other in order to maintain a satisfactory structure of exchange rates within appropriate margins. The decision is intended to enable members to observe the purposes of the Fund to the maximum extent possible during the temporary period preceding the resumption of effective par values with appropriate margins in accordance with the Articles.

Paragraph 1. Par Values and Wider Margins

(a) A member will be deemed to be acting in accordance with Article IV, Section 4 (a) and Resolution No. 26-9 if it takes appropriate measures, consistent with the Articles, to permit spot exchange transactions between its currency and the currencies of other members taking place within its territories only at rates within 2¼ per cent from the effective parity relationship among currencies as determined by the Fund, provided that these margins may be within 4¼ per cent from the said relationship if they result from the maintenance by the member of rates within margins of 2¼ per cent from the said relationship for spot exchange transactions between its currency and its intervention currency.

(b) A member that avails itself of wider margins under (a) above shall notify the Fund. Paragraphs 5 and 6 of this decision shall then apply to the member.

(c) A member’s intervention currency means a currency which the member represents to the Fund that it stands ready to buy and sell in order to perform its obligations regarding exchange stability.

Paragraph 2. Central Rates

(a) A member which temporarily does not maintain rates based on a par value for its currency in accordance with Article IV, Section 3 and Decision No. 904-(59/32) but, by means of appropriate measures consistent with the Articles, maintains a stable rate as the basis for exchange transactions in its territories may communicate to the Fund a rate for its currency for the purposes of this decision. This rate or a rate subsequently communicated in accordance with this paragraph shall take effect as the central rate for the purposes of this decision unless the Fund finds it unsatisfactory.

(b) A central rate for a member’s currency may be communicated in gold, units of special drawing rights, or another member’s currency.

Paragraph 3. Central Rates with Wider Margins

A member that communicates a central rate under paragraph 2 (a) and avails itself of the wider margins of paragraph 1 (a) on the basis of its central rate shall notify the Fund, and if the Fund has not found the central rate unsatisfactory the member will be deemed to be acting in accordance with Article IV, Section 4 (a) and Resolution No. 26-9 if it takes appropriate measures, consistent with the Articles, to permit spot exchange transactions between its currency and the currencies of other members taking place within its territories only at rates within 2¼ per cent from the central rate, provided that these margins may be within 4½ per cent from the central rate if they result from the maintenance by the member of rates within margins of 2¼ per cent from the central rate for spot exchange transactions between its currency and its intervention currency. In addition, paragraphs 5 and 6 shall apply.

Paragraph 4. Central Rates Without Wider Margins

If a member that communicates a central rate under paragraph 2 (a) does not notify the Fund under paragraph 3 that it avails itself of the wider margins of that paragraph, the member shall take appropriate measures to ensure that the margins on either side of the central rate for exchange transactions between its currency and the currencies of other members taking place within its territories shall be no wider than the equivalent of the margins of Article IV, Section 3 and Decision No. 904-(59/32).

Paragraph 5. Multiple Currency Practices and Discriminatory Currency Arrangements

Notwithstanding paragraphs 1 and 3 above, no member shall permit, except as approved or authorized under Article VIII, Section 3 or Article XIV, Section 2,

  • (i) a spread between the buying and selling rates for spot exchange transactions between its currency and the currencies of other members in excess of 2 per cent, or

  • (ii) (1) a difference between buying or between selling rates for spot exchange transactions between its currency and the currency of another member, or

    (2) a relationship among the buying rates, or among the selling rates, for the currencies of other members,

    that the Fund regards as inconsistent with promotion of exchange stability, the maintenance of orderly exchange arrangements with other members, and the avoidance of competitive exchange alterations.

Paragraph 6. Intervention

Appropriate measures for the purposes of paragraphs 1 (a), 2 (a), and 3 above shall include intervention by a member’s authorities in the exchange markets within the member’s territories in order to maintain rates for spot exchange transactions in accordance with this decision. In their intervention in exchange markets members shall refrain from actions incompatible with the purposes of the Fund.

Paragraph 7. Members Maintaining Narrow Margins Against an Intervention Currency

(a) A member will be deemed to be acting in accordance with Article IV, Section 4 (a) and Board of Governors Resolution No. 26-9, if (a) the rate for its currency is maintained consistently with the Articles or the member’s Membership Resolution, (b) the member permits transactions between its currency and its intervention currency only within margins of 1 per cent of the said rate in terms of the intervention currency, and (c) the intervention currency is the currency of a member which maintains rates within margins consistent with this decision.

(b) Subparagraph (a) shall apply to a member in respect of the separate currency of a territory under Article XX, Section 2 (g) for which margins of 1 per cent are maintained for transactions between the separate currency and the metropolitan currency.

Decision No. 3463-(71/126)

December 18, 1971

Article V, Sections 3, 4, and 5 Use of Fund’s Resources and Stand-By Arrangements

Use of Fund’s Resources and Stand-By Arrangements

The Executive Board has reviewed the Fund’s policy with respect to the use of its resources under stand-by arrangements (SM/68/128 and Supplements 1–4, SM/68/141) and agrees that the Fund shall be guided by the approach in the conclusions set forth in SM/68/128, Supplement 4 as revised.

Decision No. 2603-(68/132)

September 20, 1968

Conclusions

In the light of experience over the past years and taking into consideration the necessity of adequate safeguards for the Fund and the need for flexibility while ensuring uniform and equitable treatment of all members, it is proposed that Fund policies and practices on the use of its resources, including tranche policies, shall continue to apply subject to the following:

1. Appropriate consultation clauses will be incorporated in all stand-by arrangements.

2. Provision will be made for consultation, from time to time, with a member during the whole period in which the member is making use of the Fund’s resources beyond the first credit tranche whether or not the use results from a stand-by arrangement.

3. Phasing and performance clauses will be omitted in stand-by arrangements that do not go beyond the first credit tranche.

4. Appropriate phasing and performance clauses will be used in all stand-by arrangements other than those referred to in paragraph 3, but these clauses will be applicable only to purchases beyond the first credit tranche.

5. Notwithstanding paragraph 4, in exceptional cases phasing need not be used in stand-by arrangements that go beyond the first credit tranche when the Fund considers it essential that the full amount of the stand-by arrangement be promptly available. In these stand-by arrangements, the performance clauses will be so drafted as to require the member to consult the Fund in order to reach understandings, if needed, on new or amended performance criteria even if there is no amount that could still be purchased under the stand-by arrangements. This consultation will include a discussion by the Executive Directors which could culminate in a communication of their views to the member under Article XII, Section 8.

6. Performance clauses will cover those performance criteria necessary to evaluate implementation of the program with a view to ensuring the achievement of its objectives, but no others. No general rule as to the number and content of performance criteria can be adopted in view of the diversity of problems and institutional arrangements of members.

7. In view of the character of stand-by arrangements, language having a contractual flavor will be avoided in the stand-by documents.

Stand-By Arrangements: Refund of Charges

(a) Refunds pursuant to Paragraph II.6 of Executive Board Decision No. 270-(53/95), as amended, of charges paid for stand-by arrangements entered into before the date of this decision will be calculated as of the date of each repurchase, drawing of the member’s currency by other members, or increase of the member’s quota, and will be based on the Fund’s total holdings of the member’s currency as of the date of each such calculation. If no such repurchase, drawing or increase of quota has taken place before the expiration of the stand-by arrangement the calculation will be based on the Fund’s holdings at the end of the quarters of the Fund’s financial year and at the date of expiration.

(b) In determining the Fund’s holdings of a member’s currency for the purposes of all calculations involving charges payable for stand-by arrangements entered into after the date of this decision, no account will be taken of amounts, not in excess of Mo of 1 per cent of the member’s quota, in a special account to meet administrative expenses or amounts in sundry cash accounts.

Decision No. 1345-(62/23),

May 23, 1962, as amended by

Decision No. 2620-(68/141),

November 1, 1968

Procedure for Purchases Under Stand-By Arrangements

Upon receipt of a valid request for a purchase under a stand-by arrangement, the Executive Directors will be notified promptly, and, not later than the close of the first business day after the receipt of the request, the Fund will instruct the appropriate depository to make the transfer.

Decision No. 3006-(70/24)

March 20, 1970

Compensatory Financing of Export Fluctuations

I. The report entitled “Compensatory Financing of Export Fluctuations” is approved for transmittal to the United Nations.

II. The following shall be recorded as the decision of the Executive Board on the compensatory financing of fluctuations in exports of primary exporting countries:

(1) The financing of deficits arising out of export shortfalls, notably those of primary exporting member countries, has always been regarded as a legitimate reason for the use of Fund resources, which have been drawn on frequently for this purpose. The Fund believes that such financing helps these members to continue their efforts to adopt adequate measures toward the solution of their financial problems and to avoid the use of trade and exchange restrictions to deal with balance of payments problems, and that this enables these members to pursue their programs of economic development with greater effectiveness.

(2) The Fund noted in its 1962 Annual Report that trends in prices of basic commodities in the past few years have adversely affected the export earnings of many Fund members, which has increased the strain on their reserves. In view of this and in order to ensure the maximum effectiveness for its support to members—in particular, primary exporting members—that are faced with fluctuations in export proceeds, the Fund is taking the action set forth below.

A. Quotas

(3) The quotas of many primary exporting countries, taken in conjunction with a reasonable use of their own reserves, are at present adequate for dealing with export fluctuations such as have occurred during the past decade. In those instances, however, where adjustment of the quotas of certain primary exporting countries, and in particular of countries with relatively small quotas, would be appropriate to make them more adequate in the light of fluctuations in export proceeds and other relevant criteria, the Fund is willing to give sympathetic consideration to requests for such adjustment.

B. Drawing policies

(4) Under the present policies and practices on the use of Fund resources, any member is given the overwhelming benefit of the doubt in relation to requests for transactions within the gold tranche, and the Fund’s attitude to requests for transactions within the first credit tranche is a liberal one provided the member itself is making reasonable efforts to solve its problems. In the higher credit tranches too, where a member’s policies are consistent with Fund policies and practices on the use of Fund resources in these tranches, the Fund gives assistance, on a substantial scale, toward meeting temporary payments deficits, including deficits arising out of export shortfalls. The policies and practices of the Fund on drawings and stand-by arrangements have been developed in order to help members to meet more effectively their temporary balance of payments difficulties and to enable them, where necessary, to pursue policies aimed at restoring external and internal equilibrium. Fund assistance in accordance with these policies and practices has made an effective contribution to the solution of the difficulties of these members and the achievement of equilibrium. It has often led, moreover, to the provision of further resources from public and private sources for meeting immediate and longer-term needs. In the application of its policies and practices governing the use of its resources, the Fund’s attitude has been a flexible one, and account has been taken of special difficulties facing members.

(5) The Fund has reviewed its policies to determine how it could more readily assist members, particularly primary exporters, encountering payments difficulties produced by temporary export shortfalls, and has decided that such members can expect that their request for drawings will be met where the Fund is satisfied that

  • (a) the shortfall is of a short-term character and is largely attributable to circumstances beyond the control of the member; and

  • (b) the member will cooperate with the Fund in an effort to find, where required, appropriate solutions for its balance of payments difficulties.

Drawings outstanding under this paragraph (5) may amount to 50 per cent of the member’s quota provided that (i) except in the case of shortfalls resulting from disasters or major emergencies, such drawings will not be increased by a net amount of more than 25 per cent of the member’s quota in any 12-month period, and (ii) requests for drawings which would increase the drawings outstanding under this paragraph (5) beyond 25 per cent of the member’s quota will be met only if the Fund is satisfied that the member has been cooperating with the Fund in an effort to find, where required, appropriate solutions for its balance of payments difficulties.

The existence and amount of an export shortfall for the purpose of any drawing under this paragraph (5) shall be determined with respect to the latest 12-month period preceding the drawing request for which the Fund has sufficient statistical data, and any excess of a shortfall over the drawing made under this paragraph (5) in respect to that shortfall cannot be carried forward and covered by a later drawing under this paragraph (5).

(6) In order to identify more clearly what are to be regarded as export shortfalls of a short-term character, the Fund, in conjunction with the member concerned, will seek to establish reasonable estimates regarding the medium-term trend of the member’s exports based partly on statistical calculation and partly on appraisal of export prospects.

(7) A member requesting a drawing under paragraph (5) will be expected to represent that it will make a repurchase corresponding to the drawing in accordance with the principles of E.B. Decision No. 102-(52/11) of February 13, 1952, as renewed by E.B. Decision No. 270-(53/95) of December 23, 1953. With a view to an application of these principles appropriate to drawings under paragraph (5), the Fund recommends that, as soon as possible after the end of each of the four years following a drawing under paragraph (5), the member repurchase an amount of the Fund’s holdings of the member’s currency approximately equal to one half of the amount by which the member’s exports exceed the medium-term trend of its exports. Calculations of export excesses for this purpose will be made with respect to successive 12-month periods following the period of the shortfall with respect to which the drawing was made and on the basis of statistical information only.

(8) Whenever the Fund’s holdings of a member’s currency resulting from an outstanding compensatory drawing under paragraph (5) are reduced, by the member’s repurchase or otherwise, this will restore pro tanto the member’s facility to make a further compensatory drawing under that paragraph, should the need arise.

(9) When drawings are made under paragraph (5), the Fund will so indicate in an appropriate manner. Within six months from the date of any drawing which is not under paragraph (5) and to the extent that it is still outstanding, a member may request that all or part of the drawing be reclassified and treated, for all purposes of this decision, as a drawing made under paragraph (5). The Fund will agree to such a request if at the time of the request the member meets the requirements for a drawing of an equal amount under paragraph (5).

(10) In order to implement the Fund’s policies in connection with compensatory financing of export shortfalls, the Fund will be prepared to waive the limit on Fund holdings of 200 percent of quota, where appropriate. In particular, the Fund will be prepared to waive this limit (i) where a waiver is necessary to permit compensatory drawings to be made under paragraphs (4) and (5) above, or (iii) to the extent that drawings in accordance with paragraph (5) are still outstanding.

Moreover, the Fund will apply its tranche policies to drawing requests by a member as if the Fund’s holdings of the member’s currency were less than its actual holdings of that currency by the amount of any drawings outstanding under paragraph (5).

(11) The provision of credit to deal with the balance of payments effects of export fluctuations provides immediate relief for a country’s short-term difficulties. In many cases, however, it will also be necessary to introduce measures of a policy character in order to attain a satisfactory and lasting solution to a country’s balance of payments problems. Members generally have actively cooperated with the Fund to find and adopt the measures necessary to this end. Beyond immediate balance of payments difficulties, the primary exporting countries are, in many instances, facing unfavorable long-term export trends, and all are trying to meet the challenge of achieving more rapid and sustained development through a strengthening and broadening of their economies. The last-mentioned problem will require action in many fields and over many years by both the primary exporting countries and the industrial countries, separately and in concert, including readier access to the markets of the developed countries for the products of the developing countries and an appropriate and sustained flow of technical and financial assistance to the developing countries. The Fund considers that its activities can provide valuable assistance in helping to establish a climate within which longer-term measures can be more effectively pursued.

(12) The Fund will review this decision in the light of experience and developing circumstances.

Decision No. 1477-(63/8),

February 27, 1963, as amended by

Decision No. 2192-(66/81),

September 20, 1966

The Problem of Stabilization of Prices of Primary Products

1. The Executive Board, having considered the staff study on “The Problem of Stabilization of Prices of Primary Products,” decides that the Fund will be prepared to extend assistance to members in connection with the financing of international buffer stocks of primary products in accordance with the principles and subject to the quantitative limits set forth in Chapter III, Section 2, and Annex A of Part II of the study.

2. In accordance with paragraph 1 above, the total of purchases outstanding pursuant to paragraph (5) of Executive Board Decision No. 1477-(63/8) of February 27, 1963, on Compensatory Financing of Export Fluctuations, as amended by Executive Board Decision No. 2192-(66/81) of September 20, 1966, and pursuant to paragraph 1 of this decision shall not exceed 75 per cent of quota; provided that under neither of these two paragraphs shall outstanding purchases exceed 50 per cent of quota.

3. In order to carry out the purposes of this decision, the Fund will be prepared to waive the limit on purchases that raise the Fund’s holdings above 200 per cent of quota, where appropriate.

4. When purchases are made pursuant to paragraph 1 of this decision, the Fund will so indicate in an appropriate manner.

5. A member requesting a purchase pursuant to paragraph 1 of this decision will be expected to represent that it will make a repurchase corresponding to the purchase (i) in accordance with the principles of Executive Board Decision No. 102-(52/11) of February 13, 1952, as renewed by Executive Board Decision No. 270-(53/95) of December 23, 1953, or (ii) if the international buffer stock for the financing of which the purchase was made makes distributions in currency to the member at an earlier date, when these distributions are made and to the extent thereof.

6. In view of the Fund’s purposes, which include the facilitation of “the expansion and balanced growth of international trade,” the Fund, in its consultations with members, will pay increased attention to their policies in the commodity field.

Decision No. 2772-(69/47)

June 25, 1969

Fourth International Tin Agreement: Buffer Stock Financing Facility

(i) The Fund, having considered the text of the Fourth International Tin Agreement, as adopted by the UN Tin Conference on May 15, 1970, finds that the terms of this Agreement relating to the international tin buffer stock to be established under the Agreement are consistent with the principles referred to in Executive Board Decision No. 2772-(69/47) of June 25, 1969. The Fund expects that an amount equal to not less than one third of the compulsory contributions due on entry into force of the Agreement under Article 21 (a) (ii) of the Agreement will be met from financing other than the use of the Fund’s resources under Executive Board Decision No. 2772-(69/47).

(ii) In view of (i) above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), a member’s requests for purchases in connection with the financing by the member of that part of its compulsory contribution to the buffer stock established under the Fourth International Tin Agreement which the member has been called upon to make under Article 21 of the Agreement and which is in excess of one third of the member’s compulsory contribution due under Article 21 (a) (ii) of the Agreement.

(iii) The staff will keep the Executive Directors informed on the operation of the buffer stock and other developments in connection with the Fourth International Tin Agreement by reports that will be made at least once a year, and the Fund may make such review of this Decision as is appropriate in the light of these reports.

Decision No. 3179-(70/102)

November 25, 1970

In applying the provisions of E.B. Decision No. 3179-(70/102), dated November 25, 1970, the Fund decides that, for the purpose of determining the appropriate use of Fund resources under the Decision, any initial contribution made in the form of tin metal under Article 21 (a) (ii) of the Fourth International Tin Agreement shall be regarded as equivalent to contributions in cash, valued at the floor price ruling on entry into force of the Agreement.

Decision No. 3351-(71/51)

June 21, 1971

Gold Tranche Purchases Under Article V, Section 3 (d)

I. The procedure for gold tranche purchases under the Articles of Agreement as amended will be as follows:

  • (a) Upon receipt of a request, the Executive Directors will be notified as soon as possible but not later than on the first business day after the receipt of the request. The notification will include a statement that a decision along the following lines will be recorded in the minutes of the next Executive Board meeting:

    [Member] is making a gold tranche purchase in an amount equivalent to ——— in [currencies], pursuant to its request dated ———. The Fund notes [member’s] request, including its representation in accordance with Article V, Section 3 (a) (i), and its statement that it will comply with the principles set forth in Executive Board Decision No. 102-(52/11), adopted February 13, 1952.

  • (b) Not later than the close of the first business day after the receipt of the request, the Fund will instruct the appropriate depository to make the transfer.

  • (c) If a request is made for a purchase in both the gold tranche and credit tranches, the procedure for purchases in the credit tranches will be followed unless the member requests that the gold tranche procedure be followed for the gold tranche portion of the request.

II. Pursuant to Article XIX (j) the Fund decides that purchases and holdings under policies on the use of the Fund’s resources for compensatory financing of export fluctuations shall be excluded for the purposes of the definition of gold tranche purchases in that provision.

III. In stand-by arrangements the amount made available shall be expressed as follows:

For a period of one year from———, [member] will have the right, after making full use of any gold tranche that it may have, to make purchases from the Fund in the currencies of other members in exchange for its own currency in an amount equivalent to———million, etc.

IV. No service charge shall be payable in respect of any purchases made after July 27, 1969, to the extent that it is a gold tranche purchase.

Decision No. 2836-(69/87)

September 15, 1969

Gold Tranche Purchases and Buffer Stock Financing Facility

The Executive Directors will not challenge a member’s representation under Article V, Section 3 (a) (i) made in connection with a request for a purchase under paragraph 1 of Executive Board Decision No. 2772-(69/47), adopted June 25, 1969, if the purchase is a gold tranche purchase.

Decision No. 3386-(71/83)

August 6, 1971

Article V, Section 6 Sales of Gold to the Fund

Policy on Sales of Gold to The Fund: South Africa

1. The Fund notes the letter from the Minister of Finance of the Republic of South Africa set forth in EBS/69/342, Sup. 2.

2. In this letter, South Africa has stated its intention to offer to sell gold to the Fund only in the following circumstances:

  • (a) (i) when the price for gold in the market is $35 per ounce or below, up to an amount to meet South Africa’s current foreign exchange needs for that period and

    (ii) regardless of the market price, up to the extent that South Africa has a need for foreign exchange over a semiannual period beyond the need that can be satisfied by the sale of all of its current production of newly-mined gold on the market or by sales to the Fund under (i) above;

  • (b) when South Africa has been designated under Article XXV, Section 5, up to the amount for which South Africa has been designated; and

  • (c) from the stock held by South Africa on March 17, 1968 up to $35 million in each quarter, beginning January 1, 1970.

3. As a matter of policy, with the understanding that members generally do not intend to initiate official gold purchases directly from South Africa and without prejudice to the determination of the legal position under the Articles of Agreement, the Fund decides that it will purchase gold from South Africa when South Africa states that it is offering gold in accordance with the terms of its letter. When South Africa offers to sell gold to the Fund under this policy, the Fund will follow a procedure similar to the procedure for gold tranche purchases.

4. In addition, the Fund will accept gold from South Africa in accordance with the Fund’s normal policies and practices under Paragraph 3 of Decision No. 7-(648) or under provisions of the Articles other than Article V, Section 6.

5. A charge of one-quarter of one per cent shall be levied on sales of gold to the Fund under Sections 2 (a) and (c) of this decision pursuant to Rule G-7 and Rule 1-8.

6. This decision shall be subject to review whenever this is requested because of a major change in circumstances and in any event after five years.

Decision No. 2914-(691’127)

December 30, 1969

Letters to the Managing Director of the Fund from the Minister of Finance of the Republic of South Africa and the Acting Secretary of the United States Treasury.

23rd December, 1969

Dear Mr. Schweitzer,

As you know, for some time the Republic of South Africa has been discussing with the United States, with other members, and with you procedures for the orderly sale of newly-mined gold in the market and the sale of gold to the International Monetary Fund. I wish to inform you that as a result of these discussions, the South African authorities have adopted a policy with respect to gold sales and I would like to request that the Fund confirm that it will be prepared in the light of this statement of policy to buy gold from South Africa in the circumstances and under the conditions set forth below.

The following are the intentions of the South African authorities as to the handling of newly-mined gold and reserves.

  • (1) Without prejudice to the determination of the legal position under the Articles of Agreement of the Fund, the South African authorities may offer to sell gold to the Fund for the currencies of other members at the price of 35 Dollars per ounce, less a handling charge, as follows:

    • (a) During periods when the market price of gold falls to 35 dollars per ounce or below, at which times offers to sell gold to the Fund under this paragraph (a) would be limited to amounts required to meet current foreign exchange needs, and

    • (b) Regardless of the price in the private market, up to the extent that South Africa experiences needs for foreign exchange over semi-annual periods beyond those which can be satisfied by the sale of all current new gold production on the private market or by sales to the Fund under paragraph (1) (a) above.

  • (2) (a) The South African authorities intend to sell current production of newly-mined gold in an orderly manner on the private market to the full extent of current payments needs. It is anticipated that new production in excess of those needs during a semi-annual period may be added to reserves.

    (b) When selling gold other than in the private market, the South African authorities intend in practice normally to offer such gold to the Fund.

    (c) The South African authorities may use gold in normal Fund transactions, e.g., in repurchase of appropriate drawings from the Fund, and to cover the gold portion of any South African quota increase, and to obtain currency convertible in fact to exchange against special drawing rights for which South Africa is designated by the Fund. Rand drawn from the Fund by other members would generally be converted into gold when Rand are included in drawings under normal Fund procedures. These Fund-related transactions, which may take place without regard to the market price of gold, will be reflected by changes in the composition of South Africa’s reserves but will not affect the volume of sales of newly-mined gold in the market.

  • (3) Notwithstanding paragraphs (1) (b) and (2) (a) above, the amount of gold held by South Africa on March 17, 1968, reduced by sales by South Africa to monetary authorities (including Fund-related transactions) after that date and further reduced by such future sales to monetary authorities as may be made to finance deficits or as a result of Fund-related transactions, will be available for such additional monetary sales as the South African authorities may determine, up to 35 million Dollars quarterly beginning January 1, 1970. It is also contemplated that as an implementation of this understanding, the Fund would agree to purchase the amount of gold offered to it by South Africa in May 1968.

In order to determine whether South Africa has balance of payments surpluses or deficits as well as to indicate other operational and procedural points with respect to this policy, I enclose a memorandum which clarifies these particular matters.

It would be appreciated if, in the light of these policy intentions, the Fund were able to decide that it would purchase gold from South Africa in the circumstances outlined above. I would expect that the Fund would review the situation at any time if there were a major change in circumstances and in any event after five years.

The South African authorities will work out with the Managing Director consultation procedures on the currencies to be purchased from the Fund with gold.

I hope that this announced policy, the implementation of which I believe will be a contribution to the stability of the International Monetary System, and my suggestion meet with the concurrence of the Fund. A copy of this letter has been sent to the Secretary of the Treasury of the United States.

Yours sincerely,

/s/

N. Diederichs

Minister of Finance

Republic of South Africa

The Managing Director,

International Monetary Fund,

19th and H Street, N.W.,

Washington, D.C. 20431,

United States of America.

Operational and Procedural Points

  • For the present purposes, balance of payments deficits and surpluses will be equal to the change during the accounting period in the total of South African official gold and foreign exchange reserves, the net IMF position and changes in SDR holdings, and any foreign assets held by other South African banking institutions and public agencies under swap arrangements with the Reserve Bank. It is understood that changes in gold holdings outside the monetary reserves and in monetary banks’ positions not covered by Reserve Bank swaps are normally not significant. If they should at any time become significant, further consideration will be given to their inclusion in the calculation. SDR allocations will not be considered as reducing a deficit or increasing a surplus as above defined. South Africa does not envisage unusual or non-traditional foreign borrowings or other special transactions that would affect the elements listed in this paragraph.

  • Addition of newly mined gold to South African reserves under paragraph 2 (a) will take place when there is a surplus for an accounting period. It is envisaged that all new gold production, less domestic consumption, during the accounting period will be treated as a balance of payments credit item and that it will, in fact, be sold currently under paragraph 1 (a) and paragraph 2 (a) to the full extent necessary to meet payments needs, except for the sales available under paragraph 3, apart from the Fund transaction initiated in May 1968.

  • Sales of gold by South Africa to monetary authorities under paragraph 1 (a) may be made for any day when both London fixing prices are $35.00 p.f.o. or below, in an amount reasonably commensurate with one-fifth of weekly sales from new production required to be marketed to meet balance of payments needs.

  • Subject to paragraph 2 (a):

    1. Should sales to monetary authorities under paragraph 1 (b), plus sales of SDRs and drawings from the IMF by South Africa, exceed the deficit defined under paragraph A of this memorandum, such excess will be deducted from the amount allowable for the first succeeding accounting period wherein a deficit is again encountered.

    2. Should sales to monetary authorities under paragraph 1 (b), plus sales of SDRs and drawings from the IMF, fall short of the amount allowable for an accounting period in which South Africa aims to finance its entire deficit by these means, such shortfall will be added to the amount allowable for the next succeeding accounting period.

    3. It is expected that any discrepancies under 1 and 2 above will be minimal.

    4. Should sales to monetary authorities under paragraph 1 (b), plus sales of SDRs and drawings from the IMF, fall short of the amount allowable for an accounting period in which South Africa does not aim to finance its entire deficit by these means but chooses to sell more on the free market than it undertakes to do in paragraph 2 (a), no correction will be made for any succeeding accounting period.

  • When the price criterion is operative, sales of gold to the IMF shall be attributed to the total deficit, if any, during the accounting period. The balance of such sales, if any, will be attributed to newly mined gold to the extent of gold production during the accounting period.

  • Sales or payments under paragraph 2 (c) in connection with IMF-related transactions are expected to take place only within the criteria normally envisaged for IMF drawings by members, for use of members’ currencies in drawings by other members and for SDR transactions.

  • Fundamentally, it is expected that the composition of South African reserves will not be greatly changed. In particular, it is understood that the ratio of gold to total reserves will remain relatively stable. If South Africa should desire to make additional sales of gold or otherwise exchange assets for the purpose of achieving a basic change in the composition of its reserve holdings, further discussion would be held with a view to clarifying intentions.

December 24, 1969

Dear Mr. Schweitzer:

I have received a copy of the letter dated December 23, 1969, sent to you by Mr. Diederichs in which he sets forth the intentions which South Africa proposes to follow with respect to the handling of its newly-mined gold and reserves. This matters bears importantly on the continued effective functioning of the two-tier gold market which was initiated at a meeting on March 16–17, 1968, which you attended.

In view of the intentions of South Africa, and in view of discussions we have had with other Fund members, I should like to inform you that I have instructed the U.S. Executive Director to take the following position. The United States is prepared to support decisions of the International Monetary Fund to purchase gold offered for sale by South Africa in the circumstances and under the conditions described in that letter, assuming that there is an understanding among Fund members generally that they do not intend to initiate official gold purchases directly from South Africa. With this understanding, I believe that the policies to be followed will be consistent with the stability and proper functioning of the international monetary system.

Sincerely yours,

/s/

Paul A. Volcker

Acting Secretary

Mr. Pierre-Paul Schweitzer

Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D. C. 20431

Sale of Gold to the Fund by Participant Designated Under Article XXV, Section 5

If a participant wishes to obtain currency by the sale of gold to the Fund in order to discharge the participant’s obligation under Article XXV, Sections 4 and 5 of the Articles of Agreement, the Fund will not levy a handling charge under Rule 1-8 of the Rules and Regulations or collect the costs referred to in Rule G-7.

Decision No. 2916-(69/127)

December 30, 1969

Article V, Section 7 Repurchase Obligations

Repurchase Obligations: Article V, Section 7 (c) (iii) and (iv) and Schedule B, Paragraph 1 (d) and (e)

1. If the repurchase which a member is required to make under Article V, Section 7 (b), would exceed the limit specified in Article V, Section 7 (c) (iii), the member may use any convertible currency in making the repurchase pursuant to Schedule B, Paragraph 1 (d), provided that at the time of discharge the repurchase will not increase the Fund’s holdings of any member’s currency beyond 75 per cent of that member’s quota, and provided further that the member making the repurchase has consulted the Managing Director on the currencies, and the amount of each, to be used in the repurchase. The consultations by the Managing Director and the currency composition of repurchases shall be based on the statement entitled “Currencies to be Drawn and to be Used in Repurchases” (approved by Executive Board Decision No. 1371-(63/36), adopted July 20, 1962).

2. If a repurchase required under Article V, Section 7 (b), would exceed the limit specified in Article V, Section 7 (c) (iv), the portion of the repurchase obligation which is to be paid forthwith and the portion which is to be repurchased at the end of the subsequent financial year or years in accordance with Paragraph 1 (e) of Schedule B, shall be determined as follows:

  • (a) If the member’s monetary reserves have not increased (i) the excess amount shall be distributed proportionately among the types of monetary reserve (gold, special drawing rights, and convertible currencies taken as a whole) in which the repurchase obligation has been calculated, and (ii) the currencies and amount of each to be paid forthwith shall be determined by the Fund in the light of the principles of Section II of the statement entitled “Currencies to be Drawn and to be Used in Repurchases” (approved by Executive Board Decision No. 1371-(63/36), adopted July 20, 1962), taking into account also the operational convenience of the member and of the Fund;

  • (b) If the member’s monetary reserves have increased the member may, at its option, elect to pay the amount payable forthwith either in accordance with the principles set forth in (a) above or in accordance with (c) below;

  • (c) If the member’s monetary reserves have increased during the year (i) the amount to be paid forthwith shall be distributed proportionately among the media which have increased, up to one half of the increase in monetary reserves, (ii) any remainder of the amount to be paid forthwith shall be distributed among the member’s remaining holdings of monetary reserves, and (iii) the balance of the repurchase obligation shall be discharged at the end of the subsequent financial year or years in the types of monetary reserve determined in accordance with the provisions of Schedule B.

3. In the calculations of monetary reserves and repurchase obligations under Article V, Section 7 (b), and Schedule B, Article V, Section 7 (c) (iv), and Schedule B, Paragraph 1 (e), shall be applied before Article V, Section 7 (c) (iii), and Schedule B, Paragraph 1 (d).

Decision No. 3049-(70/44)

May 20, 1970

Repurchases: Small Amounts Included in Article V, Section 7 (b), Obligations

A. 1. If a provisional or final repurchase obligation includes an amount of gold or currency equivalent to $500 or less, such amount shall not be collected. No adjustments of repurchase obligations shall be made if they involve an amount of gold or currency equivalent to $500 or less.

2. This decision supersedes Executive Board Decision No. 705-(57/55).

B. Paragraph 1 of Executive Board Decision No. 1813-(65/4) is amended to read as follows:

1. Where on any April 30 the Fund holds a member’s currency in an amount that is in excess of 75 per cent of the member’s quota by more than $500, the member shall make a provisional monetary reserves report to the Fund not later than May 31, preferably by cable.

Decision No. 2499-(68/77)

April 19, 1968

Monetary Reserves: Abolition of Provisional Reporting, Speeding Up of Final Reporting, and Simplification of Report Forms and Calculations

a. Calculation of Repurchase Obligations

(1) Rule 1-6 of the Fund’s Rules and Regulations is amended to read as follows:

  • (a) Each member shall furnish the data necessary for the calculation of its monetary reserves and its repurchase obligation, if any, within two months after the end of each financial year of the Fund, subject to (h) below. All data shall be supplied to the Fund in the monetary reserve report forms sent to members by the Fund.

  • (h) Notwithstanding (a) above, a member which is unable to report within two months after the end of a financial year of the Fund the necessary data with respect-to holdings of its other official institutions and the other banks within its territories and the amounts of currency due to official institutions and banks in the territories of members or nonmembers specified by the Fund shall furnish these data not later than six months after the end of the financial year of the Fund. On the basis of these data and Article XIX (c) the Fund may decide to recalculate the member’s monetary reserves and repurchase obligation calculated in accordance with (b) above. Paragraphs (c) through (g) above shall apply to the recalculated repurchase obligation.

(2) This Decision supersedes Executive Board Decision No. 1510-(63/23), adopted May 3, 1963, as amended by Executive Board Decision No. 1813-(65/4), adopted January 18, 1965, and Executive Board Decision No. 3049-(70/44), adopted May 20, 1970.

Decision No. 3314-(71/33)

April 21, 1971

Article VII, Section 2 Borrowing

General Arrangements to Borrow: Second Renewal

Executive Board Decision No. 1289-(62/l), as amended, on the General Arrangements to Borrow, is hereby renewed for a period of five years from October 24, 1970, and references therein to “the period prescribed in Paragraph 19 (a)” shall be understood to include the period of this renewal.

Decision No. 2858-(69/96)

October 17, 1969

General Arrangements to Borrow: First Extension of Association of Switzerland *

The Fund agrees to the extension until October 23, 1970 of the Agreement of June 11, 1964 between the Swiss Confederation and the International Monetary Fund and authorizes the Managing Director to exchange with the Ambassador of Switzerland to the United States letters in the form attached to EBD/67/160 (Attachments I and II).

Decision No. 2377-(67/85)

November 17, 1967

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

November 22, 1967

Sir:

I have the honor to refer to the letters exchanged between the Ambassador of Switzerland to the United States and the Managing Director of the International Monetary Fund on June 11, 1964 constituting the agreement for the association of the Swiss Confederation with the Fund’s General Arrangements to Borrow.

It is my understanding that, in view of the renewal for four years of the General Arrangements to Borrow until October 23, 1970, the Swiss authorities are prepared to extend the period of the agreement between Switzerland and the Fund until the same date. Accordingly, I have been authorized to propose, on behalf of the Fund, that the agreement be extended until October 23, 1970.

If such an extension is acceptable to the Swiss Federal Council, I propose that this letter and your reply indicating the concurrence of the Swiss Federal Council should constitute an agreement between the Swiss Federal Council and the International Monetary Fund.

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

/s/

P.-P. Schweitzer

Managing Director

His Excellency

Felix Schnyder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

November 26, 1967

Sir,

I am pleased to acknowledge receipt of your letter of Wednesday, November 22, 1967.

I have been authorized by the Swiss Federal Council to inform you that the Swiss Federal Council, on behalf of the Swiss Confederation, agrees to the extension until October 23, 1970 of the agreement for the association of the Swiss Confederation with the International Monetary Fund’s General Arrangements to Borrow under the exchange of letters of June 11, 1964, as proposed in your letter. Accordingly, your letter and this reply constitute an agreement between the International Monetary Fund and the Swiss Federal Council.

Accept, Sir, the assurances of my highest consideration.

The Ambassador of Switzerland:

/s/

Felix Schnyder

The Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C. 20431

General Arrangements to Borrow: Second Extension of Association of Switzerland *

The Fund agrees to the extension until April 30, 1974 of the Agreement of June 11, 1964 between the Swiss Federal Council and the International Monetary Fund and authorizes the Acting Managing Director to exchange with the Ambassador of Switzerland to the United States letters in the form attached to EBD/71/163 (Attachments I and II).

Decision No. 3363-(71/60)

July 7, 1971

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

July 7, 1971

Sir:

I have the honor to refer to the agreement for the association of the Swiss Confederation with the Fund’s General Arrangements to Borrow under the exchange of letters of June 11, 1964, which was subsequently extended until October 23, 1970.

It is my understanding that, in view of the second renewal of the General Arrangements to Borrow, the Swiss authorities are prepared to extend the period of the agreement between the Swiss Federal Council and the Fund until April 30, 1974, which is the date of expiration of the Federal Decree of October 4, 1963 authorizing the association of the Swiss Confederation with the General Arrangements to Borrow. Accordingly, I have been authorized to propose, on behalf of the Fund, that the agreement be extended until April 30, 1974.

If such an extension is acceptable to the Swiss Federal Council, I propose that this letter and your reply indicating the concurrence of the Swiss Federal Council should constitute an agreement between the Swiss Federal Council and the International Monetary Fund.

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

/s/

Frank A. Southard, Jr.

Acting Managing Director

His Excellency

Felix Schnyder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

Executive Board Decisions

July 7, 1971

The Acting Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C. 20431

Sir:

I am pleased to acknowledge receipt of your letter of July 7, 1971.

I have been authorized by the Swiss Federal Council to inform you that the Swiss Federal Council, on behalf of the Swiss Confederation, agrees to the extension until April 30, 1974 of the agreement for the association of the Swiss Confederation with the International Monetary Fund’s General Arrangements to Borrow under the exchange of letters of June 11, 1964, as proposed in your letter. Accordingly, your letter and this reply constitute an agreement between the International Monetary Fund and the Swiss Federal Council.

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

The Ambassador of Switzerland:

/s/

Felix Schnyder

Bilateral Borrowing *

The proposed text of an agreement between the Fund and Italy under Article VII, Section 2 (i) as set forth in EBS/66/167 (7/25/66) is approved and the Managing Director is authorized to send the letter attached to EBS/66/167 (Attachment I).

Decision No. 2151-(66/66)

August 3, 1966

*Exchange of letters between the Acting Managing Director of the Fund and the Minister of the Treasury of Italy

August 3, 1966

Your Excellency:

In accordance with Article VII, Section 2 of the Articles of Agreement of the International Monetary Fund (hereinafter referred to as “the Article” and “the Fund”), and pursuant to Decision No. 2151-(66/66) of its Executive Directors, I hereby propose on behalf of the Fund that Italy agree to lend to the Fund by depositing lire to the Fund’s account with the Bank of Italy on the following terms and conditions:

1. The amount of the loan shall be equivalent to 7,142,857.143 fine ounces of gold, which amount shall be deposited to the Fund’s account with the Bank of Italy on the request of the Fund, provided that the request is made not later than August 22, 1966.

2. (a) Subject to the other provisions of this paragraph 2, five years after the date on which lire are deposited to the Fund’s account, the Fund shall repay Italy an amount equivalent to the gold value of the amount lent. Repayment shall be, as determined by the Fund, in lire whenever feasible, or in gold, or, after consultation with Italy, in other currencies that are convertible in fact.

(b) Before the date prescribed in paragraph 2 (a), the Fund, after consultation with Italy, may make repayment to Italy, in part or in full, with any increases in the Fund’s holdings of lire that exceed the Fund’s working requirements, and Italy shall accept such repayment.

(c) Before the date prescribed in paragraph 2 (a), Italy may give notice to the Fund representing that it has a balance of payments need for repayment of part or all of the amount lent to the Fund and requesting such repayment. The Fund shall give the overwhelming benefit of any doubt to Italy’s representation. Repayment shall be made after consultation with Italy in the currencies of other members of the Fund that are convertible in fact, or made in gold, as determined by the Fund.

3. (a) The Fund shall pay to Italy a charge of one-half of one per cent on the amount lent to the Fund.

(b) The Fund shall pay to Italy interest on its indebtedness at the rate of 1V2 per cent per annum. In the event that this becomes different from a basic rate determined as follows:

the charge levied by the Fund pursuant to Article V, Section 8 (a) plus the charge levied by the Fund pursuant to Article V, Section 8 (c) (i), as changed from time to time under Article V, Section 8 (e), during the first year after a purchase of exchange from the Fund, minus one-half of one per cent,

the interest payable by the Fund shall be changed by the same amount as from the date when the difference in the basic rate takes effect. Interest shall be paid as soon as possible after July 31, October 31, January 31, and April 30.

(c) Interest shall be paid in gold to the extent that this can be effected in bars. Any balance not so paid shall be paid in United States dollars.

(d) Gold payable to Italy in accordance with this agreement shall be delivered at any gold depository of the Fund chosen by Italy at which the Fund has sufficient gold for making the payment. Such delivery shall be free of any charges or costs for Italy.

4. (a) The Fund shall isuue to Italy, on its request, non-negotiable instruments evidencing the Fund’s indebtedness to Italy. The form of the instrument shall be agreed between the Fund and Italy.

(b) Upon repayment of the amount of any instrument issued under paragraph 4 (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.

5. Italy may not transfer all or part of its claim to repayment except with the prior consent of the Fund and on such terms and conditions as the Fund may approve.

6. For all of the purposes of this agreement, the equivalent in currency of any number of fine ounces of gold, or vice versa, shall be calculated at the rate of exchange at which the Fund holds such currency at the date as of which the calculation is made; provided however that the provisions of Decision No. 321-(54/32) of the Executive Directors on Transactions and Computations Involving Fluctuating Currencies, as amended by Decision No. 1245-(61/45) and Decision No. 1283-(61/56), shall determine the rate of exchange for any currency to which that decision, as amended, has been applied.

7. The Fund’s indebtedness to Italy shall be treated as an amount due from the Fund for the purpose of Article XV, Section 3, and Schedule D of the Articles.

8. (a) The obligation of the Fund to make repayments in accordance with this agreement shall be suspended during any suspension of exchange transactions under Article XVI of the Articles.

(b) In the event of liquidation of the Fund, the Fund’s indebtedness to Italy shall constitute a liability under Schedule E of the Articles. For the purpose of paragraph 1 (a) of Schedule E, the currency in which the liability of the Fund shall be payable shall be the lira.

9. Any question of interpretation of this agreement which does not fall within the purview of Article XVIII of the Articles shall be settled to the mutual satisfaction of Italy and the Fund.

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

Very truly yours,

/s/

Frank A. Southard, Jr.

Acting Managing Director

His Excellency

Emilio Colombo

Minister of the Treasury

Rome, Italy

6 August 1966

Mr. Frank A. Southard

Acting Managing Director

International Monetary Fund

19th & H Street, N.W.

Washington, D.C. 20431

Sir:

Reference is made to your communication dated August 3, 1966. On behalf of Italy, the Italian Government hereby agrees to lend to the International Monetary Fund by depositing to the Fund’s account with the Bank of Italy lire in an amount equivalent to 7.142.857,143 fine ounces of gold on the terms and conditions stated in your communication.

The Italian Government further agrees that your communication dated August 3, 1966, and this reply constitute an agreement between Italy and the Fund, such agreement to take effect on the date indicated in your communication.

In accordance with paragraph 4 (a) of your communication, I hereby request that the non-negotiable instruments evidencing the Fund’s indebtedness to Italy be issued to the Ufficio Italiano dei Cambi, an agency of the Italian Government.

Very truly yours,

/s/

Emilio Colombo

Article VII, Section 2 Replenishment of Currencies

Sales of Gold by the Fund Under Article VII, Section 2 (ii), in Accordance with Board of Governors Resolution: Increases in Quotas of Members—Fifth General Review

1. Pursuant to paragraph 7 of Board of Governors Resolution No. 25-3, the Managing Director shall arrange for sales of gold not exceeding the equivalent of US$700 million pursuant to Article VII, Section 2 (ii), for the replenishment of the Fund’s holdings of the currencies of members which sell gold to other members in connection with the payment of increases in their quotas under Resolution No. 25-3, provided that the amount of gold sold by the Fund to a member shall not exceed the amount of gold sold by the member to other members for that purpose, and provided further that a replenishment shall not increase the Fund’s holdings of the currency being replenished above 75 per cent of that member’s quota. The arrangements shall be in accordance with paragraphs 17 and 18 of the Report of the Executive Directors to the Board of Governors entitled Increases in Quotas of Members—Fifth General Review.

2. These sales of gold to members and any purchases of excess amounts of gold paid by members up to one standard gold bar shall be made without payment of charges and shall be at the parity price as determined by the par value of the member’s currency or the applicable rate of exchange pursuant to Article IV, Section 8.

3. In connection with sales of gold by the Fund, under paragraph 1 of this decision, there shall be transferred to the Fund’s gold bar holdings from the general deposits of gold with the Bank of England and the Federal Reserve Bank of New York an amount of gold calculated on each occasion of sales of gold by the Fund on the basis of the proportions which each of those deposits bear to the Fund’s total gold holdings. The transfer of gold from the general deposits to the Fund’s gold bar holdings shall take place either on the occasion of the sale of gold or shortly after the sales of gold have taken place or when the amount of gold sold by the Fund in replenishment reaches an amount equivalent to $100 million.

Decision No. 3150-(70/93)

October 23, 1970

Article VIII and Article XIV Payments Arrears

The Executive Board has reviewed the Fund’s policy with respect to payments arrears. The Fund shall be guided by the approach in the conclusions set forth in SM/70/139.

Decision No. 3153-(70/95)

October 26, 1970

Conclusions

1. Undue delays in the availability or use of exchange for current international transactions that result from a governmental limitation give rise to payments arrears and are payments restrictions under Article VIII, Section 2 (a), and Article XIV, Section 2. The limitation may be formalized, as for instance compulsory waiting periods for exchange, or informal or ad hoc.

2. The need for the Fund to define its policy on payments arrears is emphasized by the fact that restrictions resulting in payments arrears arising from informal or ad hoc measures do particular harm to a country’s international financial relationships because of the uncertainty they generate. This uncertainty is particularly harmful to the smooth functioning of the international payments system and has pronounced adverse effects on the creditworthiness of the debtor country which may extend beyond the period of the existence of the restrictions.

3. In the light of these considerations it is believed that the Fund should aim in consultation reports at a more systematic treatment of restrictions on payments and transfers for current international transactions that produce payments arrears. In all cases where payments arrears arise from a governmental limitation on, or interference with, the availability of foreign exchange at the time a payment for a current international transaction falls due, or with the timely transfer of the proceeds of such transactions, the payments arrears should be treated in the consultation papers as evidence of a payments restriction requiring approval in Article VIII or Article XIV consultation decisions. The staff, in the consultation discussions, will have to establish whether payments arrears exist by ascertaining whether there has been a substantial delay beyond that usually required for ascertaining the bona fides of exchange applications or the time that can be regarded as normally required for the administrative processing of applications for exchange. If payments arrears exist and approval of the restriction giving rise to them is requested by the member, the member should be expected to submit a satisfactory program for their elimination. Approval if given should be only for a temporary period and generally with a fixed terminal date. Because of the difficulty in surveillance, approval should be wherever feasible in terms of the level of arrears outstanding. The program for the elimination of the payments arrears should provide for a maximum permissible delay to which a payment or transfer could be subjected, together with a phased reduction in the outstanding level.

4. Fund financial assistance to members having payments arrears should be granted on the basis of performance criteria or policies with respect to the treatment of arrears similar to the criteria or policies described in the preceding paragraph for the approval of the payments restrictions. In general, the understandings should provide for the elimination of the payments arrears within the period of the stand-by arrangement. Such understandings should be based on the concept of a given level of payments arrears and should be reflected in the performance criteria included in stand-by arrangements in the higher credit tranches. To support the policies designed to deal with arrears the letter of intent should include a statement that there would be no imposition of new restrictions or increase in the level of delayed payments. Where Fund financial assistance is being provided, but only through the first credit tranche, the adoption of a viable program directed toward the elimination of the payments arrears should be an important factor in considering whether the country was making reasonable efforts to redress its international financial situation.

Article VIII and Article XIV Multiple Currency Practices

Multiple Currency Practices and Exchange Rates: Fund Approval

1. If a rate for a member’s currency is maintained consistently with the member’s Membership Resolution as a fixed number of units per U.S. dollar, any change in the gold equivalent of that rate resulting solely from maintenance of the same number of units per U.S. dollar shall be deemed to be agreed in accordance with the Membership Resolution.

2. If a rate for a member’s currency has been maintained, approved, or authorized under the Articles as a fixed number of units per U.S. dollar, any change in the gold equivalent of that rate resulting solely from maintenance of the same number of units per U.S. dollar shall be deemed to be approved for the remaining period of any approval of the original practice already granted.

Decision No. 3504-(71/134)

December 23, 1971

Article XII, Section 3 Executive Directors

Executive Directors: Article XII, Section 3 (c)

Art. XII, Sec. 3 (c), should be understood as providing that the two members entitled to appoint additional directors are determined by the largest absolute amounts by which 75% of members’ quotas exceed the average holdings by the Fund of their currencies during the two years preceding an election of directors, provided, of course, that they are not already entitled to appoint directors under Art. XII, Sec. 3 (b) (i).

In the calculation of average holdings under the provision, the Fund’s special accounts for administrative purposes should not be included unless they exceed 1/10 of one per cent of the member’s quota nor will sundry cash accounts be included. A member should not be entitled to the benefit of Art. XII, Sec. 3 (c) where the average holdings of its currency by the Fund have been reduced below 75% of its quota solely because of expenditures by the Fund for administrative purposes or because of the exclusion of the special accounts for administrative purposes from the calculation of average holdings.

Decision No. 574-2,

May 18, 1950, as amended by

Decision No. 2620-(68/141),

November 1, 1968

Article XVII Amendment of the Articles of Agreement

Board of Governors Resolution No. 22-8: Report of Executive Directors and Proposed Amendment to the Articles of Agreement

I. Pursuant to Resolution No. 22-8 of the Twenty-Second Annual Meeting, the Executive Directors:

  • (a) Adopt the Report entitled Establishment of a Facility Based on Special Drawing Rights in the International Monetary Fund and Modifications in the Rules and Practices of the Fund;

  • (b) Propose the introduction in the Articles of Agreement of the modifications set forth in the Proposed Amendment attached to the Resolution in Annex A to the Report; and

  • (c) Recommend the adoption by the Board of Governors of the Resolution in Annex A to the Report.

Decision No. 2493-(68/74)

April 16, 1968

Article XXV, Section 6 (a) Principles and Procedures for Reconstitution

1. For the purposes of Rule P-2 and without prejudice to any future decisions on allocations or cancellations of special drawing rights, it shall be assumed that an allocation of special drawing rights will be made on January 1, 1972, in accordance with Board of Governors Resolution No. 24-12, and that no allocations or cancellations will be made thereafter. This assumption shall be subject to review at any time and shall be reviewed not later than December 31, 1972.

2. Pursuant to Article XXV, Section 2 (b) (ii), the Fund prescribes that a participant may obtain special drawing rights from another participant in a transaction with that other participant that would promote reconstitution under Article XXV, Section 6 (a), and Schedule G, paragraph 1 (a). The maximum amount that may be obtained in this way in any calendar quarter shall be the single sum based on calculations by the Fund under Rule P-2 at the end of the previous month which will meet the participant’s entire need to reconstitute for any reconstitution period covered by those calculations.

3. Pursuant to Article XXV, Section 7 (f), a participant that makes a purchase from the Fund under Article V, Section 3, may obtain special drawing rights from the Fund through the General Account in that purchase to the extent of any need it has to acquire special drawing rights in order to promote reconstitution under Article XXV, Section 6 (a) and Schedule G, paragraph 1 (a).

Decision No. 3457-(71/121)

G/S December 3, 1971

Article XXV, Section 7 Use of Special Drawing Rights in Repurchases and Payment of Charges

Exclusion of Special Drawing Rights: Financial Year Ending April 30, 1970

1. For the first allocation of special drawing rights, increases in monetary reserves resulting from allocations of special drawing rights during the financial year ending April 30, 1970, shall not be taken into account in calculating monetary reserves and increases in them during that year.

Decision No. 2901-(69/122) G/S

December 18, 1969

Exclusion of Special Drawing Rights: Financial Year Ending April 30, 1970

Paragraph 1 of Executive Board Decision No. 2901-(69/122) G/S, adopted December 18, 1969 shall be applied in accordance with the following Rule:

In calculating monetary reserves and increases in them for the purposes of Article V, Section 7 (b) and Schedule B for the Fund’s financial year ending April 30, 1970, the lowest amount of special drawing rights held by a participant in the period January 1 to April 30, 1970 shall be excluded from the calculation.

Decision No. 3032-(70/38) G/S

April 29, 1970

Exclusion of Special Drawing Rights: Financial Years Ending April 30, 1971 and 1972

Increases in monetary reserves resulting from allocations of special drawing rights during the financial years ending April 30, 1971 and 1972 shall not be taken into account in calculating monetary reserves and increases in them during those years.

Decision No. 3034-(70/38)

April 29, 1970

Exclusion of Special Drawing Rights: Financial Years Ending April 30, 1971 and 1972

Executive Board Decision No. 3034-(70/38) adopted April 29, 1970 shall be applied in accordance with the following rule:

In calculating monetary reserves and increases in them for the purposes of Article V, Section 7 (b), and Schedule B for each of the Fund’s financial years ending April 30, 1971 and 1972, (1) a use of special drawing rights by a participant in the period January 1 to April 30 shall be considered first to constitute a use pro tanto of the special drawing rights held by the participant immediately before the latest allocation, and (2) if the participant’s use exceeds the amount of special drawing rights held at the time of the allocation, the lowest amount of special drawing rights held by the participant in the period January 1 to April 30 shall be excluded from the calculation.

Decision No. 3320-(71/34) G/S

April 21, 1971

Use of Special Drawing Rights in Repurchases Outside Article V, Section 7 (b)

2. Members are authorized to discharge with special drawing rights any repurchases outside Article V, Section 7 (b).

3. Members are authorized to use, at their option, special drawing rights to settle all charges payable to the General Account.

4. Paragraphs 2 and 3 of this decision, including the amounts and proportions permitted thereunder, shall be subject to review in 1970 as soon as experience warrants.

Decision No. 2901-(69/122) G/S

December 18, 1969

Paragraphs 2 and 3 of Executive Board Decision No. 2901-(69/122) G/S adopted December 18, 1969, including the amounts and proportions permitted thereunder, shall be subject to review before December 31, 1971, if experience should so warrant, or, in any event, before the end of the first basic period.

Decision No. 3188-(70/106) G/S

December 2, 1970

Stand-By Arrangements—Repurchases with Special Drawing Rights

The text of the last sentence of the standard repurchase clause in future stand-by arrangements shall be as follows:

Repurchases shall be made in gold, or in convertible currencies acceptable to the Fund, or in special drawing rights, in accordance with the Fund’s policies and practices at the time of the repurchase.

Decision No. 2944-(70/3) G/S

January 14, 1970

Use of Special Drawing Rights in Payment of Remuneration

Pursuant to Article XXV, Section 7 (f), the Fund shall offer to pay participants, at their option, in special drawing rights for any amount of gold or currency payable as remuneration, provided that the General Account’s holdings of special drawing rights at the end of a financial year exceed the amount of remuneration payable for that year.

Decision No. 3033-(70/38)

April 29, 1970

Use of Special Drawing Rights in Distribution of Net Income

Pursuant to Article XXV, Section 7 (f), the Fund shall pay, at the option of a participant, an equivalent amount of special drawing rights in substitution for the amount of currency payable to it as a distribution of net income for the financial year ended April 30, 1970, provided that the General Account’s holdings of special drawing rights at the time of payment exceed the amount of distribution to which all such participants may be entitled.

Decision No. 3130-(70/87)

September 11, 1970

Use of Special Drawing Rights in Distribution of Net Income, Fiscal Year 1970/71

Pursuant to Article XXV, Section 7 (f) the Fund shall pay, at the option of a participant, an equivalent amount of special drawing rights in substitution for the amount of currency payable to it as a distribution of net income for the fiscal year ended April 30, 1971, provided that the Fund’s holdings of special drawing rights in the General Account at the time of payment exceed the amount of distribution to which all such participants may be entitled.

Decision No. 3383-(71/81) G/S

August 2, 1971

Article XXV, Section 7 Transfer of Special Drawing Rights Held in the General Account to Participants Making Purchases from the Fund

When a member which is a participant in the Special Drawing Account consults in accordance with Executive Board Decision No. 1371-(62/36), adopted July 20, 1962, on Currencies to Be Drawn and to Be Used in Repurchases, the Managing Director may propose that the participant request the purchase of special drawing rights not in excess of the amount which he shall indicate, for immediate use by the participant in a transaction under Article XXV, Section 2 (a).

Decision No. 3414-(71/98) G/S

September 10, 1971

Article XXVI, Section 5 Special Drawing Account: Payment of Interest, Charges, and Assessments

Participants in the Special Drawing Account that are obligated and entitled in accordance with Article XXVI, Section 5, to obtain special drawing rights in a transaction with the Fund conducted through the General Account in order to pay any charge or assessment, and do not wish to use gold, may use any convertible currency acceptable to the Fund in repurchases, provided that the participant has consulted the Managing Director on the currencies and the amounts of each to be used to acquire the special drawing rights.

Decision No. 3010-(70/25) G/S

March 25, 1970

Article XXXII (b) (1) Special Drawing Account: Currency Convertible in Fact

Currency Convertible in Fact: U.S. Dollar

The Fund takes note of the letter dated December 30, 1969, from the Secretary of the United States Treasury and decides that the U.S. dollar is a currency convertible in fact in accordance with Article XXXII (b) (1).

Decision No. 2918-(69/128) S

December 31, 1969

Representative Exchange Rate: Sterling

The Fund finds, after consultation with the United Kingdom authorities, that the representative exchange rate for sterling under Rule O-3 (ii) is the middle rate between the spot buying and selling rates for transactions quoted by dealers and brokers at noon in the London market. The Bank of England will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2956-(70/8) S

February 2, 1970

Currency Convertible in Fact: Sterling

The Fund notes the letter dated January 15, 1970 from the Governor of the Bank of England, and Executive Board Decision No. 2956-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for sterling under Article XXV, Section 8, and decides that sterling is a currency convertible in fact in accordance with Article XXXII (b) (1).

Decision No. 2955-(70/8) S

February 2, 1970

Representative Exchange Rate: French Franc

The Fund finds, after consultation with the French authorities, that the representative rate for the French franc under Rule O-3 (ii) is the average of the highest and lowest spot rates quoted during the official session of the Paris market. The Banque de France will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2958-(70/8) S

February 2, 1970

Currency Convertible in Fact: French Franc

The Fund notes the letter dated January 2, 1970 from the Director of Treasury, Ministry of Economy and Finance of France, and Executive Board Decision No. 2958-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for the French franc under Article XXV, Section 8, and decides that the French franc is a currency convertible in fact in accordance with Article XXXII (b) (1).

Decision No. 2957-(70/8) S

February 2, 1970

Article XXXII (b) (2) Special Drawing Account: Currency Convertible in Fact

Representative Exchange Rate: Belgian Franc

The Fund finds, after consultation with the Belgian authorities, that the representative exchange rate for Belgian francs under Rule O-3 (ii) is the official quotation established in the Brussels exchange market. The Banque Nationale de Belgique will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2960-(70/8) S

February 2, 1970

Currency Convertible in Fact: Belgian Franc

The Fund notes the letter dated January 30, 1970 from the Banque Nationale de Belgique and Executive Board Decision No. 2960-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for the Belgian franc under Article XXV, Section 8, and decides that the Belgian franc is a currency convertible in fact in accordance with Article XXXII (b) (2).

Decision No. 2959-(70/8) S

February 2, 1970

Representative Exchange Rate: Deutsche Mark

The Fund finds, after consultation with the German authorities, that the representative rate for the deutsche mark under Rule O-3 (ii) is the middle rate determined officially during the official session of the Frankfurt market. The Deutsche Bundesbank will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2962-(70/8) S

February 2, 1970

Currency Convertible in Fact: Deutsche Mark

The Fund notes the letter dated January 12, 1970 from the German Minister of Economics and Executive Board Decision No. 2962-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for the deutsche mark under Article XXV, Section 8, and decides that the deutsche mark is a currency convertible in fact in accordance with Article XXXII (b) (2).

Decision No. 2961-(70/8) S

February 2, 1970

Representative Exchange Rate: Italian Lira

The Fund finds, after consultation with the Italian authorities, that the representative exchange rate for Italian lire under Rule O-3 (ii) is the quotation at the closing of the Milan and Rome markets if the quotation in each market is identical, or the middle rate of the two quotations when they differ. The Ufficio Italiano dei Cambi will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2964-(70/8) S

February 2, 1970

Currency Convertible in Fact: Italian Lira

The Fund notes the letter dated January 21, 1970 from the Minister of the Treasury and Governor for Italy in the Fund and Executive Board Decision No. 2964-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for the Italian lira under Article XXV, Section 8, and decides that the Italian lira is a currency convertible in fact in accordance with Article XXXII (b) (2).

Decision No. 2963-(70/8) S

February 2, 1970

Representative Exchange Rate: Mexican Peso

The Fund finds, after consultation with the Mexican authorities, that the representative rate for the Mexican peso under Rule O-3 (ii) is the middle rate between the average buying and selling rates reported by the main commercial banks to the Banco de Mexico, S.A., in Mexico City at the close of each business day. The Banco de Mexico, S.A., will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate shall be the rate ascertained for the preceding business day.

Decision No. 2966-(70/8) S

February 2, 1970

Currency Convertible in Fact: Mexican Peso

The Fund notes the letter dated January 16, 1970 from the Director General, Banco de Mexico, S.A., and Executive Board Decision No. 2966-(70/8) S, adopted February 2, 1970 with respect to the exchange rate for the Mexican peso under Article XXV, Section 8, and decides that the Mexican peso is a currency convertible in fact in accordance with Article XXXII (b) (2).

Decision No. 2965-(70/8) S

February 2, 1970

Representative Exchange Rate: Netherlands Guilder

The Fund finds, after consultation with the Netherlands authorities, that the representative exchange rate for Netherlands guilders under Rule O-3 (ii) is the middle rate between the spot buying and selling rates for U.S. dollars in the Amsterdam market at 1:45 p.m. De Nederlandsche Bank N.V. will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 2989-(70/19) S

March 5, 1970

Currency Convertible in Fact: Netherlands Guilder

The Fund notes the letter dated February 10, 1970 from the President, De Nederlandsche Bank N.V., and Executive Board Decision No. 2989-(70/19) S, adopted March 5, 1970 with respect to the exchange rate for the Netherlands guilder under Article XXV, Section 8, and decides that the Netherlands guilder is a currency convertible in fact in accordance with Article XXXII (h) (2).

Decision No. 2988-(70/19) S

March 5, 1970

Representative Exchange Rate: Netherlands Guilder

The Fund finds, after consultation with the Netherlands authorities, that the representative exchange rate for Netherlands guilders under Rule O-3 (ii) is the middle rate between the spot buying and selling rates for U.S. dollars in the Amsterdam market at 1:30 p.m. De Nederlandsche Bank N.V. will ascertain this rate each business day. If the exchange rate cannot be ascertained for a date required by Rule O-4, the exchange rate for that date shall be the rate ascertained for the preceding business day.

Decision No. 3338-(71/44) S

May 19, 1971

General Investment of Fund’s Assets

Investment of Fund’s Assets

The Executive Board, observing that the Fund has had and may continue to have an excess of expenditure over income and that the greater part of the Fund’s administrative expenditures has been and will continue to be in United States dollars, considers that in the interest of good administration and conservation of the Fund’s resources it would be appropriate to raise income towards meeting the deficit by the investment of a portion of the Fund’s gold in a manner which will enable the Fund to reacquire gold at any time and will maintain the gold value of the investment.

In view of the foregoing and noting the willingness of the United States to consent to investment by the Fund in United States Treasury bills, the Executive Board takes the following decisions:

I. The Executive Board, acting pursuant to Article XVIII (a) of the Articles of Agreement, interprets the Articles of Agreement to permit the investment described in the present decisions, namely, sale of a portion of the Fund’s gold to the United States for the purpose of investment of the proceeds in United States Treasury bills having not more than ninety-three days to run, subject to the following conditions:

(1) The amount of gold to be sold for investment:

(a) will not be such as to limit the ability of the Fund to make its resources available to members in accordance with the Articles of Agreement; and

(b) will be such as to produce an amount of income reasonably related to the deficit of the Fund;

(2) Whenever the Fund decides to reacquire gold after the sale or maturity of any United States Treasury bills invested in, it will be able to reacquire the same amount of gold as was sold for investment in such bills; and the United States, at the request of the Fund, will sell the said amount of gold to the Fund for U.S. dollars at the United States selling price at the time of the sale to the Fund;

(3) In any computations for the purpose of applying the provisions of the Articles of Agreement the Fund will treat the following assets as representing gold and not as holdings of United States currency:

(a) the dollar proceeds of the sale of gold before investment in United States Treasury bills; and

(b) the United States Treasury bills invested in; and

(c) the dollar proceeds resulting from the sale or maturity of any such bills before the purchase of gold therewith.

II. (1) The Executive Board, acting pursuant to Article XVIII (a) of the Articles of Agreement, interprets Article IV, Section 8 (a) to require the United States to maintain the gold value of the assets set forth in paragraph I (3) (a), (b) and (c) above, notwithstanding changes in the par or foreign exchange value of the currency of the United States. This obligation of the United States shall be fully discharged by its maintaining the gold value of the dollar proceeds resulting from the sale of the gold or from the sale or maturity of the U.S. Treasury bills purchased therewith.

(2) For the purposes of paragraphs I and II of these decisions the dollar proceeds resulting from the sale or maturity of the U.S. Treasury bills invested in shall not include the income of the investment.

III. Subject to the receipt of an assurance from the United States in accordance with paragraph I (2) above satisfactory to the Fund, the Executive Board decides that an amount of the Fund’s gold sufficient to realize approximately but not more than two hundred million United States dollars shall be sold to the United States and the proceeds invested and reinvested in United States Treasury bills having not more than ninety-three days to run. The Executive Board will review the amount and operation of the investment at annual intervals and at such other times as may be appropriate.

Decision No. 488-(56/5),

January 25, 1956, as amended by

Decision No. 2844-(69/90),

September 19, 1969

Fund’s Investment Program: Disinvestment

The Managing Director shall arrange to reacquire gold in an amount equivalent to not more than US$400 million from the United States on or before September 30, 1970, pursuant to Executive Board Decision No. 488-(56/5), adopted January 25, 1956 (as amended by Executive Board Decision No. 2844-(69/90), adopted September 19, 1969), Executive Board Decision No. 708-(57/57), adopted November 27, 1957, Executive Board Decision No. 905-(59/32), adopted July 24, 1959, and Executive Board Decision No. 1107-(60/50), adopted November 30, 1960. The gold shall be reacquired with the U.S. dollar proceeds, excluding those proceeds credited to the Special Reserve as income, received on the maturity or by the sale of U.S. Government securities held for investment.

Decision No. 3132-(70/87)

September 11, 1970

See also paragraph 4 of Decision No. 3153-(70/95), below, p. 215.

See pp. 204–206 below.

Following the change in the par value of the U.S. dollar on May 8, 1972, references in this Decision to $35 per ounce were understood by the Fund as being references to $38 per ounce.

This decision was abrogated by E. B. Decision No. 3315-(71/33), April 21, 1971.

For the report and the proposed amendment, see pp. 52–74 and 75–94 above. The text of Resolution No. 22-8 is on pp. 54–55 above.

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