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IMF History (1972-1978) Volume 3
Chapter

Executive Board Decisions

Author(s):
International Monetary Fund
Published Date:
February 1996
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The decisions of the Executive Board reproduced here comprise those of a general nature, that is, those not relating to an individual member, that have been cited in Volumes I and II above. They are grouped according to broad subjects comparable to those covered in the Articles of Agreement after the Second Amendment and are presented in the order in which these subjects are treated in those Articles.

The decisions are listed below in numerical order with the page numbers on which they can be found.

Selected Decisions of the Executive Board

(January 1, 1972–December 31, 1978)

CONTENTS

Decision No.Page
1289-(62/1), as last amended by 5792-(78/79)527
2772-(69/47), as amended by 4913-(75/207)509
3577-(72/16)555
3933-(73/42)509
4076-(73/101)484
4083-(73/104)485
4087-(73/105)523
4134-(74/4)554
4232-(74/67)487
4241-(74/67)496
4242-(74/67)536
4254-(74/75)554
4337-(74/102)498
4377-(74/114)503
4393-(74/121)498
4421-(74/132)533
4490-(74/140)540
4529-(74/153)498
4634-(75/47), as amended by 4769-(75/133) and 4954-(76/16)499
4635-(75/47)539
4636-(75/47)542
4638-(75/47)500
4741-(75/120)539
4773-(75/136)500
4858-(75/172)534
4912-(75/207)506
4916-(75/208)539
4917-(75/208)540
4918-(75/208)540
4919-(75/208)542
4934-(76/5)506
4986-(76/47)500
5049-(76/51)559
5069-(76/72)563
5088-(76/77)508
5127-(76/91)510
5144-(76/102) SA502
5220-(76/144)506
5249-(76/154)536
5273-(76/163) TR560
5274-(76/163)561
5288-(76/167)543
5306-(77/2)546
5314-(77/6)562
5331-(77/15)546
5348-(77/33)508
5371-(77/51)560
5387-(77/61)547
5392-(77/63)491
5425-(77/79) SA502
5441-(77/84)542
5488-(77/116)549
5508-(77/127)512
5509-(77/127)550
5546-(77/138)515
5563-(77/150) TR569
5585-(77/161)518
5590-(77/163)526
5591-(77/163)560
5597-(77/171)510
5694-(78/35)503
5702-(78/39) G/S526
5703-(78/39)523
5704-(78/39)525
5705-(78/39)526
5712-(78/41)494
5718-(78/46) G/S556
5719-(78/46)560
5726-(78/59) SA503
5779-(78/74) TR562
5809-(78/88)526
5812-(78/90) TR570
5936-(78/168) S557
5972-(78/189)571
5973-(78/189) TR571
5974-(78/190)542
6000-(79/1) S558
6001-(79/1) S558

Exchange Arrangements

Procedures for Reviews of External Policy

The Executive Directors concur in the statement of the Managing Director on procedures for reviews of external policies.

Decision No. 4076-(73/101)

October 31, 1973

Managing Director’s Statement

On August 29, 1973 the Executive Directors considered a staff memorandum reviewing procedures for special consultations on exchange rate policies. At that meeting there was general agreement on the importance of Fund reviews of exchange rate policies and the need to develop appropriate procedures for such reviews. The staff had proposed that special consultations be held, in between the annual consultations, with members whose exchange rate policies have a major impact on the international monetary system. This proposal was supported by a number of Directors. Others preferred a more informal approach with ad hoc arrangements to be made by the Managing Director. An alternative suggested by one Executive Director envisaged “multicountry” consultations based on a staff report reviewing current exchange market and exchange policy matters in a number of countries. In concluding the meeting, the Acting Chairman had said that the staff would follow up suggestions made by Executive Directors and the subject would be brought back to the Board as soon as practicable after the Annual Meeting.

I have carefully considered the views expressed by the Executive Directors at the above meeting and in subsequent private discussions. I am mindful of the degree of consensus arrived at in the Committee of Twenty on the subject of special procedures in connection with adjustment in the reformed system. I strongly believe that we need to develop new procedures in the interim to ensure that exchange policies in general and exchange rate developments in particular are consistent with the general objectives of the Fund. I also believe that there are advantages at this time in following an approach that allows a measure of flexibility but that also is sufficiently broad-based to lead to a general review of exchange rate developments.

In the light of these considerations I propose, as a preliminary step, to ask senior staff members to hold, under my direction, informal discussions for two or three days with high officials of each of a number of countries that have a major impact on international currency relationships. There would not be a fixed list but in the first round of discussions I would consider including Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, and the United States. The discussions would be centered on balance of payments developments and policies having an important impact on exchange markets. Immediately upon their return to headquarters the staff would advise me of the results of these discussions and I would then consider what further action might be useful at that stage. In any event, with due care to safeguard the confidentiality of information and views on matters of a particularly sensitive nature, I would arrange for the Executive Directors to receive as soon as possible a unified account of developments and policies.

I believe that discussion of this subject by the Executive Directors should take place in the context of the review of general developments and prospects of the world economy deriving from the periodic exercise on the world economic outlook which should henceforth be undertaken three times each year, though not always on as elaborate a scale as in the past.

As a conclusion of the discussion by the Executive Directors, I envisage a statement by the Chairman summing up the views of the Directors on overall foreign exchange developments and policies.

If the Executive Directors agree with this procedure, I would propose that informal staff visits be arranged to begin in mid-November. This would allow Board discussion of the report to be scheduled before the meeting of the Deputies of the Committee of Twenty in January.

Central Rates and Wider Margins: A Temporary Regime—Revised Decision

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 an intervention currency, the issuer of which operates on the basis of a par value or a central rate, only at rates within 2¼ per cent from the parity between the two currencies. If a central rate is in effect for the intervention currency, parity for the purpose of this paragraph shall be deemed to refer to the relationship between the par value of a member’s currency and such central rate.

(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 in terms of an intervention currency 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 an intervention currency only with margins of 2¼ per cent of the central rate in terms of the 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 spot exchange transactions within its territories between its currency and an intervention currency shall take place only within margins of 1 per cent of the central rate in terms of the intervention currency.

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:

  • a difference in excess of 2 per cent between any two buying or any two selling rates for spot exchange transactions between its currency and the currencies of other members; or

  • a spread in excess of 2 per cent between a buying and a selling rate for spot exchange transactions between its currency and the currency of another member.

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 and (b) the member permits transactions between its currency and an intervention currency only within margins of 1 per cent of the said rate in terms of the intervention currency.

(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.

Paragraph 8. Review

This decision shall be reviewed from time to time as necessary.

Decision No. 4083-(73/104)

November 7, 1973

Guidelines for the Management of Floating Exchange Rates

The Executive Directors have discussed the attached memorandum entitled “Guidelines for the Management of Floating Exchange Rates.” They recommend, pursuant to Article IV, Section 4(a), that, in present circumstances, members should use their best endeavors to observe the guidelines set forth and explained in the memorandum. Consultations with members with floating currencies will be based on the memorandum. These guidelines will be reviewed from time to time in order to make any adjustments that may be appropriate.

Decision No. 4232-(74/67)

June 13, 1974

Guidelines for the Management of Floating Exchange Rates

Introduction

There is widespread agreement that the behavior of governments with respect to exchange rates is a matter of international concern and a matter for consultation and surveillance in the Fund. This is no less true when rates are floating than when they are contained within fixed margins and are changed by par value and central rate adjustments.

The Fund cannot legally authorize floating but it can exercise surveillance over the manner in which members fulfill their undertaking, under Article IV, Section 4(a), “to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.” The following guidelines, though not exhausting the possibilities of action by the Fund under this Article, are intended to provide criteria that members would observe in performing their undertaking and that the Fund would observe in exercising surveillance in present circumstances.

These guidelines are based on the assumption that in any situation of floating it may be desirable (a) to smooth out very short-run fluctuations in market rates and (b) to offer a measure of resistance to market tendencies in the slightly longer run, particularly when they are leading to unduly rapid movements in the rate, and (c) to the extent that it is possible to form a reasonable estimate of the medium-term norm for a country’s exchange rate, to resist movements in market rates that appear to be deviating substantially from that norm. Guidelines of this kind are necessary, inter alia, in order to arrive at a clear conception of what competitive exchange alteration is, and to provide safeguards against it.

The guidelines also take into account:

(a) that national policies, including those relating to domestic stabilization, should not be subjected to greater constraints than are clearly necessary in the international interest;

(b) that a degree of uncertainty necessarily attaches to any estimate of a medium-term normal exchange rate, that this uncertainty is particularly great in present circumstances, and that on occasion the market view may be more realistic than any official view whether of the country primarily concerned or of an international body; and

(c) that in view of the strength of short-term market forces it may at times be unavoidable to forego or curtail official intervention that would be desirable from the standpoint of exchange stability if such intervention should involve an excessive drain on reserves or an impact on the money supply which it is difficult to neutralize.

The guidelines are intended to provide the basis for a meaningful dialogue between the Fund and member countries with a view to promoting international consistency during a period of widespread floating. They are termed guidelines rather than rules to indicate their tentative and experimental character. They should be adaptable to changing circumstances. No attempt is here made to indicate the precise procedures through which they would be implemented. These will be considered later, but they must essentially rest on an intensification of the confidential interchange between the member and the Fund.

In the application of the guidelines it is to be expected that, in view of the emphasis laid by the Committee of Twenty at their fifth (Rome) meeting on the importance in present circumstances of avoiding competitive depreciation, particular attention would be attached to departures from the guidelines in the direction of depreciation. Special consideration will also be given to the manner in which the guidelines should be applied by developing countries, taking account of the stage of evolution of their exchange markets and intervention practices.

The guidelines should be understood in the light of the commentary which follows.

The Guidelines

(1) A member with a floating exchange rate should intervene on the foreign exchange market as necessary to prevent or moderate sharp and disruptive fluctuations from day to day and from week to week in the exchange value of its currency.

(2) Subject to (3)(b), a member with a floating rate may act, through intervention or otherwise, to moderate movements in the exchange value of its currency from month to month and quarter to quarter, and is encouraged to do so, if necessary, where factors recognized to be temporary are at work. Subject to (1) and (3)(a), the member should not normally act aggressively with respect to the exchange value of its currency (i.e., should not so act as to depress that value when it is falling, or to enhance that value when it is rising).

(3) (a) If a member with a floating rate should desire to act otherwise than in accordance with (1) and (2) above in order to bring its exchange rate within, or closer to, some target zone of rates, it should consult with the Fund about this target and its adaptation to changing circumstances. If the Fund considers the target to be within the range of reasonable estimates of the medium-term norm for the exchange rate in question, the member would be free, subject to (5), to act aggressively to move its rate towards the target zone, though within that zone (2) would continue to apply.

(b) If the exchange rate of a member with a floating rate has moved outside what the Fund considers to be the range of reasonable estimates of the medium-term norm for that exchange rate to an extent the Fund considers likely to be harmful to the interests of members, the Fund will consult with the member, and in the light of such consultation may encourage the member, despite 2 above, (i) not to act to moderate movements toward this range, or (ii) to take action to moderate further divergence from the range. A member would not be asked to hold any particular rate against strong market pressure.

(4) A member with a floating exchange rate would be encouraged to indicate to the Fund its broad objective for the development of its reserves over a period ahead and to discuss this objective with the Fund. If the Fund, taking account of the world reserve situation, considered this objective to be reasonable and if the member’s reserves were relatively low by this standard, the member would be encouraged to intervene more strongly under Guideline (2) to moderate a movement in its rate when the rate was rising than when it was falling. If the member’s reserves were relatively high by this standard it would be encouraged to intervene more strongly to moderate a movement in its rate when the rate was falling than when it was rising. In considering target exchange rate zones under (3), also, the Fund would pay due regard to the desirability of avoiding an increase over the medium term of reserves that were recognized by this standard to be relatively high, and the reduction of reserves that were recognized to be relatively low.

(5) A member with a floating rate, like other members, should refrain from introducing restrictions for balance of payments purposes on current account transactions or payments and should endeavor progressively to remove such restrictions of this kind as may exist.

(6) Members with a floating rate will bear in mind, in intervention, the interests of other members including those of the issuing countries in whose currencies they intervene. Mutually satisfactory arrangements might usefully be agreed between the issuers and users of intervention currencies, with respect to the use of such currencies in intervention. Any such arrangements should be compatible with the purposes of the foregoing guidelines. The Fund will stand ready to assist members in dealing with any problems that may arise in connection with them.

Commentary

General

Certain of the terms used in the guidelines may be defined as follows:

(i) “A member with a floating exchange rate” means a member whose currency is floating independently in the sense that it is not pegged, within relatively narrow margins, to any other currency or composite of currencies. Members whose currencies are pegged to particular floating currencies, or to composites of such currencies, within these margins would be exempt from these guidelines, though not from any general principles relating to adjustment. Members which, though their currencies are pegged to another currency, change the peg frequently in the light of some formula relating, e.g., to price indices, would be expected to discuss this formula and any changes therein with the Fund. Members whose currencies are pegged to a composite of other currencies (e.g., members whose effective rates are fixed) would likewise be expected to discuss with the Fund the composite in question and any changes therein. Members whose currencies are floating jointly under mutual intervention arrangements with relatively narrow margins would be exempted from the intervention guidelines so far as intervention in each other’s currencies is concerned, but would be held responsible to the Fund for their exchange market intervention vis-à-vis the rest of the world. As regards capital controls, official financing, and other measures to influence capital flows, each member belonging to such a group would be responsible for its measures judged in relation to its overall balance of payments situation.

(ii) “Exchange market intervention” would normally be measured by the movement of reserves, adjusted as appropriate for compensatory official borrowing. Consideration might also be given to including in the concept of intervention changes in official foreign exchange positions other than reserves.

(iii) “Action to influence an exchange rate” includes, besides exchange market intervention, other policies that exercise a temporary effect on the balance of payments and hence on exchange rates, and that have been adopted for that purpose. Such policies may take the form of official forward exchange market intervention, official foreign borrowing or lending, capital restrictions, separate capital exchange markets, various types of fiscal intervention, and also monetary or interest rate policies. Monetary or interest rate policies adopted for demand management purposes or other policies adopted for purposes other than balance of payments purposes would not be regarded as action to influence the exchange rate.

(iv) Where the terms “exchange rate” or “exchange value” are employed with respect to any currency it is assumed that these would normally be expressed in terms of effective rates, i.e., the value of the currency would be measured relative to a representative set of currencies rather than relative to its intervention currency alone. The set chosen for this purpose should, in principle, vary from country to country, and the currencies in the set should be weighted according to their importance to the country in question. The composition of the set might be based on trade and financial relationships or on trade relationships alone. If trade-weighted, it might be derived from the Multilateral Exchange Rate Model, or based on bilateral trade relationships. In some cases the basket used for the valuation of the SDR might be satisfactory for this purpose also. In some cases, finally, the rate vis-à-vis a single currency might provide a satisfactory approximation to an effective rate.

On Guideline (1)

Known large once-for-all or reversible transactions would be largely offset and their effects spread over time. In addition, intervention would be undertaken to moderate large day-to-day or week-to-week movements in rates due to speculative or other factors. Such intervention, if properly conducted, should tend to net out over time.

It is unlikely to be necessary for the issuer of the principal intervention currency itself to intervene from day to day in the manner described in this guideline.

On Guideline (3)

(i) The concept of a medium-term norm for an exchange rate is employed explicitly in (a) and implicitly in (b) of Guideline (3). By this is meant a rate that would tend to bring about equilibrium in the “underlying” balance of payments, i.e., in the overall balance in the absence of cyclical and other short-term factors affecting the balance of payments, including government policies which are, or, on internationally accepted principles, ought to be temporary. If the member concerned so proposes and the Fund agrees, “equilibrium” could allow for an internationally appropriate rate of increase or decrease in the member’s reserves. The “medium-term” might be considered to refer to a period of about four years. Seasonal, speculative, and cyclical factors whose effects were reversible over such a period would be ignored.

(ii) An advantage of conceiving medium-term norms or target zones in terms of effective rates is that so long as the effective rate remains constant the balance of trade or current payments of the floating country would not be greatly affected by changes in the relative exchange rates of the currencies of other countries. This should reduce the frequency with which it would be necessary to change zone boundaries, or the magnitude of the changes involved. It would be open to a member if it so desired to express its target rate or zone not as one that is constant over time but as one that is rising or falling at a certain rate or at a rate dependent, for example, on an index of relative price or cost levels.

(iii) Under Guideline (3)(b) the Fund would be authorized to take the initiative in situations where it considered that a member’s rate was likely to become harmful to the interests of members whether as a result of market forces or of action by the member. Recommendations to a member under this provision would be made by the Executive Directors, on a proposal by the Managing Director, but the Managing Director would not make such a proposal except after consultation with the member.

(iv) The greater the degree of uncertainty regarding the balance of payments situation and prospects of a country the wider would be the range of reasonable estimates of the medium-term norm for its exchange rate, and the wider would be the deviation beyond this range which would occur before the Fund would make any suggestions under Guideline (3)(b). The Fund’s right to make suggestions under this guideline will, in any case, be exercised with restraint.

(v) In any suggestions the Fund might make under Guideline (3)(b), it would give a preference to liberalizing as opposed to restricting ways of exercising a given effect on exchange rates, but would bear in mind the distinction between capital controls applied for temporary balance of payments reasons and those applied for other economic and social reasons.

On Guideline (6)

This guideline would imply that in their use of their customary reserve currencies members with a floating rate, while recognizing the need of issuing countries for reasonable freedom of exchange rate movement, should not be precluded from intervening in a manner conformable with the guidelines. Among the problems that might arise regarding the use of intervention currencies, in the resolution of which the Fund might be of service, are those regarding the circumstances in which a member might intervene in a currency other than its customary reserve currency, the problem of interventions that move the value of the currency of intervention in an undesirable direction, and the problem of mutually offsetting interventions.

Surveillance over Exchange Rate Policies

1. The Executive Board has discussed the implementation of Article IV of the proposed Second Amendment of the Articles of Agreement and has approved the attached document entitled “Surveillance over Exchange Rate Policies.” The Fund shall act in accordance with this document when the Second Amendment becomes effective. In the period before that date the Fund shall continue to conduct consultations in accordance with present procedures and decisions.

2. The Fund shall review the document entitled “Surveillance over Exchange Rate Policies” at intervals of two years and at such other times as consideration of it is placed on the agenda of the Executive Board.

Decision No. 5392-(77/63)

April 29, 1977

Surveillance over Exchange Rate Policies

General Principles

Article IV, Section 3(a) provides that ‘The Fund shall oversee the international monetary system in order to ensure its effective operation, and shall oversee the compliance of each member with its obligations under Section 1 of this Article.” Article IV, Section 3(b) provides that in order to fulfill its functions under 3(a), “the Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies.” Article IV, Section 3(b) also provides that “The principles adopted by the Fund shall be consistent with cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, as well as with other exchange arrangements of a member’s choice consistent with the purposes of the Fund and Section 1 of this Article. These principles shall respect the domestic social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members.” In addition. Article IV, Section 3(b) requires that “Each member shall provide the Fund with the information necessary for such surveillance, and, when requested by the Fund, shall consult with it on the member’s exchange rate policies.”

The principles and procedures set out below, which apply to all members whatever their exchange arrangements and whatever their balance of payments position, are adopted by the Fund in order to perform its functions under Section 3(b). They are not necessarily comprehensive and are subject to reconsideration in the light of experience. They do not deal directly with the Fund’s responsibilities referred to in Section 3(a), although it is recognized that there is a close relationship between domestic and international economic policies. This relationship is emphasized in Article IV which includes the following provision: “Recognizing … that a principal objective [of the international monetary system] is the continuing development of the orderly underlying conditions that are necessary for financial and economic stability, each member undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates.”

Principles for the Guidance of Members’ Exchange Rate Policies

A. A member shall avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members.

B. A member should intervene in the exchange market if necessary to counter disorderly conditions which may be characterized inter alia by disruptive short-term movements in the exchange value of its currency.

C. Members should take into account in their intervention policies the interests of other members, including those of the countries in whose currencies they intervene.

Principles of Fund Surveillance over Exchange Rate Policies

1. The surveillance of exchange rate policies shall be adapted to the needs of international adjustment as they develop. The functioning of the international adjustment process shall be kept under review by the Executive Board and Interim Committee and the assessment of its operation shall be taken into account in the implementation of the principles set forth below.

2. In its surveillance of the observance by members of the principles set forth above, the Fund shall consider the following developments as among those which might indicate the need for discussion with a member:

  • (i) protracted large-scale intervention in one direction in the exchange market;

  • (ii) an unsustainable level of official or quasi-official borrowing, or excessive and prolonged short-term official or quasi-official lending, for balance of payments purposes;

  • (iii) (a) the introduction, substantial intensification, or prolonged maintenance, for balance of payments purposes, of restrictions on, or incentives for, current transactions or payments, or

    • (b) the introduction or substantial modification for balance of payments purposes of restrictions on, or incentives for, the inflow or outflow of capital;

  • (iv) the pursuit, for balance of payments purposes, of monetary and other domestic financial policies that provide abnormal encouragement or discouragement to capital flows; and

  • (v) behavior of the exchange rate that appears to be unrelated to underlying economic and financial conditions including factors affecting competitiveness and long-term capital movements.

3. The Fund’s appraisal of a member’s exchange rate policies shall be based on an evaluation of the developments in the member’s balance of payments against the background of its reserve position and its external indebtedness. This appraisal shall be made within the framework of a comprehensive analysis of the general economic situation and economic policy strategy of the member, and shall recognize that domestic as well as external policies can contribute to timely adjustment of the balance of payments. The appraisal shall take into account the extent to which the policies of the member, including its exchange rate policies, serve the objectives of the continuing development of the orderly underlying conditions that are necessary for financial stability, the promotion of sustained sound economic growth, and reasonable levels of employment.

Procedures for Surveillance

I. Each member shall notify the Fund in appropriate detail within thirty days after the Second Amendment becomes effective of the exchange arrangements it intends to apply in fulfillment of its obligations under Article IV, Section 1. Each member shall also notify the Fund promptly of any changes in its exchange arrangements.

II. Members shall consult with the Fund regularly under Article IV. The consultations under Article IV shall comprehend the regular consultations under Articles VIII and XIV. In principle such consultations shall take place annually, and shall include consideration of the observance by members of the principles set forth above as well as of a member’s obligations under Article IV, Section 1. Not later than three months after the termination of discussions between the member and the staff, the Executive Board shall reach conclusions and thereby complete the consultation under Article IV.

III. Broad developments in exchange rates will be reviewed periodically by the Executive Board, inter alia in discussions of the international adjustment process within the framework of the World Economic Outlook. The Fund will continue to conduct special consultations in preparing for these discussions.

IV. The Managing Director shall maintain close contact with members in connection with their exchange arrangements and exchange policies, and will be prepared to discuss on the initiative of a member important changes that it contemplates in its exchange arrangements or its exchange rate policies.

V. If, in the interval between Article IV consultations, the Managing Director, taking into account any views that may have been expressed by other members, considers that a member’s exchange rate policies may not be in accord with the exchange rate principles, he shall raise the matter informally and confidentially with the member, and shall conclude promptly whether there is a question of the observance of the principles. If he concludes that there is such a question, he shall initiate and conduct on a confidential basis a discussion with the member under Article IV, Section 3(b). As soon as possible after the completion of such a discussion, and in any event not later than four months after its initiation, the Managing Director shall report to the Executive Board on the results of the discussion. If, however, the Managing Director is satisfied that the principles are being observed, he shall informally advise all Executive Directors, and the staff shall report on the discussion in the context of the next Article IV consultation; but the Managing Director shall not place the matter on the agenda of the Executive Board unless the member requests that this procedure be followed.

VI. The Executive Directors shall review annually the general implementation of the Fund’s surveillance over members’ exchange rate policies.

Notification of Exchange Arrangements Under Article IV, Section 2

1. The procedure set forth in Section 2 of SM/78/81 [attached] for the initial notification within 30 days after the date of the Second Amendment by each member of the exchange arrangements it intends to apply is approved.

2. The procedures set forth in Section IV of SM/77/277 [attached] are approved, and members shall be guided by the considerations in Section IV with respect to the prompt notification of any changes in their exchange arrangements.

3. This decision shall be subject to review not later than one year after its adoption.

Decision No. 5712-(78/41)

March 23, 1978

Attachments Section 2 of SM/78/81

2. In accordance with these instructions a description of the exchange arrangements, as understood by the Fund staff, of each member country and nonmetropolitan territory, has been forwarded to the authorities of the respective member countries for comment and review. Copies of these descriptions and the covering letters were forwarded to the Executive Directors. Replies now being received from members indicate, in general, that the descriptions of exchange arrangements provided by the staff seem to have been of assistance in regard to their obligations under Section 2 of the amended Article IV. In light of this experience, it is proposed that the procedure, described as the “third approach” in SM/77/277, for the initial notification of exchange arrangements required by Article IV, Section 2(a) of the Second Amendment should be adopted. In implementing this procedure at the time of the Second Amendment, the Fund would communicate with members along the lines of the attachment to SM/77/277, which for convenience is attached to the Supplement.

Section IV of SM/77/277 IV. Issues Connected with Subsequent Notification

Once the procedures for initial notifications have been clarified, only a few issues remain to be dealt with in respect of subsequent notifications. One of these is the question of what would constitute a change in an exchange arrangement requiring notification. Clearly, any official action involving the adoption of a different type of arrangement would require notification. Furthermore, in cases where a member pegs its currency, it would be appropriate to notify the Fund of all changes in the peg; this would include not only every change in the central point around which a member was maintaining margins, but also those involving a change in the composition of a composite, other than one occurring from a redistribution of currency weights on the basis of newly available trade or payments data.

For members with flexible exchange arrangements, it is more difficult to specify changes which will require notification to the Fund. For members classified as fixing the rate according to a set of indicators, it would seem an appropriate rule that they communicate to the Fund details of any discrete exchange rate changes that are not consistent with the changes produced by the set of indicators. It would also be expected, if the suggested approach outlined earlier in this paper is accepted, that all members maintaining flexible exchange arrangements be asked to notify the Fund whenever the authorities have taken a significant decision affecting such arrangements. This would involve, as a minimum, notification of such decisions whenever public policy statements have been issued. In addition, in any instance in which the Managing Director considered that a significant change had occurred in a member’s exchange policy (including intervention arrangements), and no notification has been received from that member, he would consult with the member to request information on the background to such developments. If considered appropriate, a formal notification of the change would be sought from the member.

Members would be expected to inform the Fund of all actions involving exchange taxes and subsidies. Indeed, under Article VIII, Section 3, members will continue to be required to request prior Fund approval of any multiple currency practices that may be involved in such actions.

Upon receipt of notification of a change in exchange arrangements from a member the staff would circulate it to the Executive Board. If the Board wishes, it could continue to be the normal practice that whenever a change is significant, its communication to the Board would be followed promptly by a staff paper describing the context of the change in policy and giving the staff’s assessment.

Use of the Fund’s Resources

Increase in Credit Tranches Under the Fund’s Tranche Policies

Until the effective date of the second amendment of the Articles:

  • (i) for the purpose of the Fund’s credit tranche policies, each tranche shall be equal to 36.25 per cent of quota;

  • (ii) references to the “first credit tranche” in existing stand-by arrangements and letters of intent shall be understood to mean a tranche equal to 36.25 per cent of quota; and

  • (iii) ........................................................................

Decision No. 4934-(76/5)

January 19, 1976

Facility to Assist Members in Payments Difficulties Resulting from Initial Impact of Increased Costs of Imports of Petroleum and Petroleum Products

1. For a period ending on December 31, 1975, the Fund will be prepared to make resources available to members in accordance with this decision in order to assist them to meet the impact on their balances of payments of increases in the prices of petroleum and petroleum products. Resources made available under this decision will be supplementary to any assistance that members may obtain under other policies on the use of the Fund’s resources.

2. (a) Requests for purchases under this decision by a member will be met by the Fund, subject to the limits in (b) and (c) below, if the Fund is satisfied (i) that the member needs assistance because of increases in the cost of its imports of petroleum and petroleum products in 1974 and because it has a balance of payments need, and (ii) that the member is following policies not inconsistent with the understandings set forth in Paragraph 2 of the Rome Communiqué of the ad hoc Committee of the Board of Governors on Reform of the International Monetary System and Related Issues and in Executive Board Decision No. 4134-(74/4). The Fund shall assess each request in order to determine whether, and the extent to which, the member has such a balance of payments need. In making this assessment the Fund shall take into account the ability of the member to reduce this need, particularly through an inflow of capital, including an increase in aid on concessionary terms, or by increased exports to oil exporting countries, or to meet this need by some use of its reserves. For the purposes of this decision, any assistance made available to a member other than under this decision shall be deemed to finance first the part of the member’s deficit that is not attributable to the increased cost of imports of petroleum and petroleum products.

(b) The total of a member’s purchases outstanding under Paragraph 2 of this decision shall not exceed the smaller of (i) the increase in the cost of the member’s net imports of petroleum and petroleum products over the cost of its imports of these commodities in 1972, calculated in accordance with Paragraph 1 of the Attachment to this decision, minus an amount equivalent to 10 per cent of the member’s reserves at the end of 1973, adjusted for variability of exports in accordance with Paragraph 2 of the Attachment to this decision, and (ii) 75 per cent of the member’s quota.

(c) The total of a member’s purchases outstanding under Paragraph 2 of this decision shall not exceed 35 per cent of the amount referred to in (b) above prior to any decision that the Fund may take under Paragraph 8.

3. On the request of a member, the Fund may make an appropriate adjustment in the total amount of outstanding purchases that a member may make under Paragraph 2(b) above if the Fund is satisfied that this amount should be higher because the member’s imports of petroleum and petroleum products in 1972 were abnormally low because of exceptional circumstances.

4. In order to carry out the purposes of this decision, the Fund will be prepared to grant any waiver of the conditions of Article V, Section 3(a)(iii) when necessary to permit purchases under this decision or to permit purchases under other policies that would raise the Fund’s holdings of a member’s currency above the limits referred to in that provision because of purchases outstanding under this decision. In addition, the Fund will apply its tranche policies to requests by a member for purchases other than gold tranche purchases as if the Fund’s holdings of the member’s currency did not include holdings resulting from any purchases outstanding under this decision.

5. (a) A member that has made a purchase under this decision will be expected to cooperate with the Fund in order to find appropriate solutions for its balance of payments problem. For this purpose the member will consult with the Fund during the year and subsequently during the period in which it has purchases outstanding under this decision, thereby affording the Fund an opportunity to ascertain whether the member’s policies are conducive to balance of payments adjustment and to repurchase in accordance with (d) below.

(b) Before submitting a request for a purchase under this decision for 1975, a member will be expected to consult the Fund on its balance of payments prospects and policies, including the effect on the balance of payments of the policies it has adopted or intends to adopt in relation to the oil problem.

(c) A member requesting a purchase under this decision will be expected to represent that it is following policies consistent with the understandings set forth in Paragraph 2 of the Rome Communiqué of the ad hoc Committee of the Board of Governors on Reform of the International Monetary System and Related Issues and that, while the purchase is outstanding, it will refrain (i) from imposing new, and from intensifying existing, restrictions on current international payments inconsistently with its obligations under the Fund’s Articles of Agreement and (ii) from imposing new, or intensifying existing, restrictions on current international transactions without prior consultation with the Fund.

(d) A member requesting a purchase under this decision will be expected to represent that it will make a repurchase corresponding to the purchase, to the extent that it is still outstanding, as soon as the balance of payments problem for which the purchase was made has been overcome and, in any event, in sixteen equal quarterly installments to be completed not later than seven years after the purchase, and that it will make repurchases under this decision, other than those accruing under Article V, Section 7(b), in the media specified by the Fund at the time of the repurchase. The Fund will specify the media of repurchase consistently with the Articles and after consultation with members. The Fund will pay due regard to these consultations and will be guided by a policy of specifying for repurchase the media in which it will make repayments in accordance with the terms of borrowing agreements.

6. The Fund will indicate in an appropriate manner which purchases by a member are made pursuant to this decision.

7. The Fund will levy charges on holdings of a member’s currency resulting from purchases outstanding under this decision in accordance with Executive Board Decision No. 4238-(74/67) of June 13, 1974.

8. Not later than September 15, 1974, the Executive Directors will review developments since the adoption of this decision in order to decide, in the light of the Fund’s existing and prospective liquidity, (i) whether purchases under the decision in excess of the limit specified in 2(c) above shall be permitted and (ii) on any adaptations that should be made in the provisions of this decision, including changes in the period that is taken as the basis for calculating the amount of imports of petroleum and petroleum products and in the amount representing the increase in the cost of these products. A further review will be conducted not later than December 31, 1974 in order to decide whether and on what terms to permit purchases with respect to the impact on the balance of payments of the increased cost of imports of petroleum and petroleum products in 1975. The Executive Directors will review this decision at any other time if they consider it appropriate to do so.

Decision No. 4241-(74/67)

June 13, 1974

Attachment

1. The increase in the cost of a member’s net imports of petroleum and petroleum products referred to in Paragraph 2(b)(i) of the decision will be taken to be equal to the SDR equivalent of US$5.50 (at 1 SDR equals US$1.20635) multiplied by the volume in barrels of the member’s net imports (i.e., imports less exports) of these commodities in 1972.

2. The adjustment for variability of exports referred to in Paragraph 2(b)(i) of the decision will be made by deducting from the member’s reserves at the end of 1973 an amount equal to twice the root mean squared proportional deviation of export values from a centered five-year moving average (using export series generally covering the period 1955–71), multiplied by the SDR value of exports in 1972. If the deduction results in a negative figure, the maximum amount that the member could purchase under Paragraph 2(b)(i) of the decision would equal the increase in the cost of its imports of petroleum and petroleum products, calculated in accordance with paragraph 1 of this attachment.

Gold Tranche and Purchases Under the Oil Facility

Purchases may be made by a member under Executive Board Decision No. 4241-(74/67) only after the member has used any gold tranche that it may have.

Decision No. 4337-(74/102)

August 14, 1974

1. The Executive Directors have reviewed Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, in accordance with Paragraph 8 of that Decision.

2. The total of a member’s purchases under Paragraph 2 of Executive Board Decision No. 4241-(74/67) shall not exceed, prior to any decision that the Fund may take under Paragraph 8 of that Decision pursuant to the review to be conducted not later than December 31, 1974, 90 per cent of the amount shown under Option D in Table 5 of SM/74/220, of September 11, 1974.

3. The Executive Directors shall review this Decision by December 2, 1974 and, taking account of the amounts then available under loan agreements, decide on the extent to which total purchases by a member under Paragraph 2 of Executive Board Decision No. 4241-(74/67) may be increased beyond the amount referred to in Paragraph 2 of this Decision, up to the amount shown under Option D in Table 4 of SM/74/220, of September 11, 1974.

Decision No. 4393-(74/121)

September 20, 1974

1. The Executive Directors have reviewed Executive Board Decision No. 4393-(74/121), adopted September 20, 1974, in accordance with paragraph 3 of that Decision.

2. The Fund will be prepared to make resources available to members in accordance with Decision No. 4241-(74/67), with respect to their balance of payments deficits in 1974, in amounts that do not exceed the amount shown under Option D in Table 4 of SM/74/220 of September 11, 1974, provided the Fund has received from a member before February 28, 1975 a statement of its intention to request a purchase.

Decision No. 4529-(74/153)

December 6, 1974

Oil Facility for 1975

1. (a) The Executive Directors have reviewed Executive Board Decision No. 4241-(74/67), adopted June 13, 1974, in accordance with Paragraph 8 of that decision, considered SM/75/72 Revision 1, and decided that the Fund will be prepared to make resources available to assist members to meet the impact of the balance of payments in 1975 of the increases in costs of imports of petroleum and petroleum products that occurred in recent years. Requests for purchases under this decision will be met, if they are in accordance with the terms of this decision and with paragraphs 2(a), 4, 5, and 6 of Decision No. 4241-(74/67).

(b) A member wishing to make a request under this decision shall submit, not later than the close of business on March 12, 1976, a statement of its intention to make the request.

2. (a) The total of a member’s outstanding purchases with respect to the increased cost of petroleum and petroleum products in 1975 shall not exceed the amount shown in the table in Attachment II, or the amount as recomputed with revised data on the basis of the formula set out in Attachment II.

(b) The total of a member’s purchases outstanding under this decision shall not exceed 30 per cent of the amount referred to in paragraph 2(a) above as shown in the table in Attachment II prior to any increase that the Fund may adopt under paragraph 7.

3. On the request of a member, the Fund may make an appropriate adjustment in the amount referred to in paragraph 2(a) above if the Fund is satisfied that this amount should be higher because the member’s imports of petroleum and petroleum products in 1972 or 1973 were abnormally low as the result of exceptional circumstances.

4. A member, when indicating its intention to request a purchase under the facility, shall describe its policies to achieve medium-term solutions to its balance of payments problems. Access to the facility will be subject to an assessment by the Fund of the adequacy of these policies. In addition, the member shall describe any measures to conserve oil or to develop alternative sources of energy that it has taken or proposes to take in the light of its economic situation.

5. Not earlier than April 1, 1976 the Fund, after consultation with a member, may recommend that the member make a repurchase with respect to purchases under this decision because its gross reserves at the end of 1975 exceed the level at the end of 1973 or 1974, whichever is lower, but for a member that did not make a purchase under the facility with respect to 1974, the level of gross reserves at the end of 1975 will be compared to the level at the end of 1974.

6. The Fund will levy charges on holdings of a member’s currency resulting from purchases outstanding under this decision in accordance with Executive Board Decision No. 4637-(75/47), adopted April 4, 1975.

7. The Executive Directors intend to review this decision during July 1975 and at such other times as they may determine in order to decide whether changes should be made in this decision, including what further proportion of the amount referred to in paragraph 2(a) of this decision may be made available to members from time to time in light of the Fund’s existing and prospective liquidity.

Decision No. 4634-(75/47),

April 4, 1975, as amended by

Decisions Nos. 4769-(75/133), July 28, 1975 and

4954-(76/16), February 11, 1976

Final Review

1. The Executive Directors have made the final review of Executive Board Decision No. 4634-(75/47), adopted April 4, 1975 in accordance with Executive Board Decision No. 4954-(76/16), adopted February 11, 1976.

2. In accordance with Decision No. 4954-(76/16) and taking account of the statements by members received before the close of business on March 12, 1976 of their intentions to request purchases, the Fund determines that for each such member the amount of the final purchase under Decision No. 4634-(75/47) shall not exceed the amount shown in column 6 of the table in the Attachment to this Decision.

Decision No. 4986-(76/47)

March 18, 1976

Purchases Under the Oil Facility for 1975: Prior Use of Gold Tranche

Executive Board Decision No. 4337-(74/102), adopted August 14, 1974 shall be amended by including after the words “Executive Board Decision No. 4241-(74/67)” the words “and Executive Board Decision No. 4634-(75/47).”

Decision No. 4638-(75/47)

April 4, 1975

Subsidy Account

In order to help fulfill the purposes of the Fund as stated in Article I of the Articles of Agreement, including the promotion of cooperation between members and the Fund and among members on international monetary problems, the Fund will establish a Subsidy Account in cooperation with members to assist those members that are most seriously affected by the current situation to meet the cost of using resources made available through the Fund’s oil facility for 1975. The Subsidy Account will be subject to the following provisions.

1. The Managing Director is authorized (i) to make arrangements to establish a Subsidy Account in the name of the International Monetary Fund with such depositories of the Fund as may be necessary, to be operated in accordance with the same administrative procedures as those that the Fund applies in operating its other accounts; and (ii) to take all measures necessary to implement this Decision.

2. The Subsidy Account will consist of currency deposited by donors on the basis of this Decision, securities in which currency in the Account is invested, currency representing the income of investment, and the proceeds of disinvestment. In contributing to the Subsidy Account, a donor may make a single deposit or may inform the Fund of its intention to make periodic deposits. The donor will specify the procedure that it intends to follow in making deposits and will consult the Fund on any subsequent changes.

3. (a) Payments will be made from the Subsidy Account to each of the members listed in Annex A that have made purchases under Executive Board Decision No. 4634-(75/47) (hereinafter referred to as the recipients).

(b) Payments, after meeting any expenses, will be made as soon as is practicable after the end of each financial year of the Fund and will be calculated as a percentage per annum of the average daily balances of the Fund’s holdings of the currency of each recipient in excess of its quota outstanding under Executive Board Decision No. 4634-(75/47) during the year. The percentage applicable will be the same for all recipients during a given financial year. To the extent that it proves financially possible, the Fund will equalize the percentages payable to all recipients during the period of payments under this Decision.

4. Currency held in the Subsidy Account may be invested in government securities issued by members, subject to the approval of the government in whose securities the investment is made.

5. The assets and records of the Subsidy Account will be kept separate from the assets and records of all other Accounts of the Fund and will be audited at the time of the annual audit of the Fund by the committee selected under Section 20 of the Fund’s By-Laws. The property and assets of the Fund held in other Accounts will not be used to discharge liabilities or meet losses arising out of administration of the Subsidy Account; nor will the assets in the Subsidy Account be used to discharge liabilities or meet losses incurred in the administration of other Accounts.

6. (a) If the Executive Directors find that the Subsidy Account is no longer necessary or that its purpose cannot be carried out, the Account will be terminated.

(b) If any assets remain in the Subsidy Account on the date of its termination, the amount will be divided among the donors that have made deposits in it in proportion to their contributions.

7. If the Fund amends paragraph 3 or Annex A of this Decision, a donor (i) will be entitled to request and obtain the return of an amount equivalent to that part of its contribution that has not been used, to the same extent that it could obtain repayment under paragraph 6(b) of this Decision in the event that the Subsidy Account were terminated; and (ii) may cancel any notice of intention to make further deposits that it has given in accordance with paragraph 2 of this Decision. Calculations under this paragraph will be made as of the date of receipt by the Fund of the request or cancellation.

8. The Executive Directors will review this Decision annually.

Decision No. 4773-(75/136)

August 1, 1975

Annex A

Afghanistan

Bangladesh

Burma

Burundi

Cameroon

Central African Republic

Chad

Dahomey

Egypt

El Salvador

Ethiopia

Ghana

Guinea

Guyana

Haiti

Honduras

India

Ivory Coast

Kenya

Khmer Republic

Laos

Lesotho

Malagasy Republic

Mali

Mauritania

Niger

Pakistan

Rwanda

Senegal

Sierra Leone

Somalia

Sri Lanka

Sudan

Tanzania

Uganda

Upper Volta

Western Samoa

Yemen Arab Republic

Yemen, People’s Democratic Republic of

Together with such other countries on the list of May 1, 1975 of most seriously affected developing countries compiled by the Secretary-General of the United Nations that become members of the International Monetary Fund not later than February 27, 1976.

Subsidy Account

a. Annual Review and Payment of Subsidy for Fiscal Year 1976

1. For the fiscal year ended April 30, 1976, a subsidy shall be paid to each member listed in Table 1 of EBS/76/271 at the rate of 5 per cent per annum of the average daily balances of the currency of the member held by the Fund in excess of quota outstanding under Executive Board Decision No. 4634-(75/47) during the year.

2. The payments shall be made in U.S. dollars based on the U.S. dollar/SDR exchange rate on July 19, 1976.

3. The payments shall be deemed to be made first from income earned from the investment of the contributions to the Subsidy Account and thereafter from the contributions.

4. No charge shall be levied for the services rendered by the Fund in the operation of the Subsidy Account for the fiscal year ended April 30, 1976.

5. The next review of Executive Board Decision No. 4773-(75/136) shall be conducted in May 1977.

Decision No. 5144-(76/102) SA

July 12, 1976

b. Annual Review and Payment of Subsidy for Fiscal Year 1977

In concluding their second review of Executive Board Decision No. 4773-(75/136) August 1, 1975, the Executive Directors adopt the following decision:

1. For the fiscal year ended April 30, 1977, a subsidy shall be paid to each member listed in Table 1 of EBS/77/164 at the rate of 5 per cent per annum on the average daily balances of the currency of the member held by the Fund in excess of quota outstanding under Executive Board Decision No. 4634-(75/47) during the year.

2. The payment shall be made in U.S. dollars on June 16, 1977 based on the U.S. dollar/SDR exchange rate determined three working days prior to payment.

3. No charge shall be levied for the services rendered by the Fund in the administration and operation of the Subsidy Account for the fiscal year ended April 30, 1977.

4. The next review of Executive Board Decision No. 4773-(75/136) shall be conducted in May 1978.

Decision No. 5425-(77/79) SA

May 27, 1977

c. Annual Review and Rate of Payment of Subsidy for Financial Year 1978

1. For the financial year ended April 30, 1978, a subsidy shall be paid to each member listed in Table 1 of EBS/77/164 at the rate of 5 per cent per annum on the average daily balances of the currency of the member held by the Fund that are outstanding under Executive Board Decision No. 4634-(75/47) during the year and subject to charges. The precise amounts to be disbursed will be advised to the Executive Board when they are calculated in early May 1978.

2. The payment shall be made in U.S. dollars on May 31, 1978 based on the U.S. dollar/SDR exchange rate determined three working days prior to payment.

3. No charge shall be levied for the services rendered by the Fund in the administration and operation of the Subsidy Account for the financial year ended April 30, 1978.

4. The Managing Director is authorized to send the attached letter to donors requesting their views on the addition to the members listed in Table 1 of EBS/77/164 of Grenada, Malawi, Morocco, Papua New Guinea, the Philippines, Zaïre and Zambia and on the proposed distribution of any surplus in the Subsidy Account to these countries after the present beneficiaries have received a subsidy of 5 per cent per annum on all balances subject to charges.

5. After the supplementary review provided for in paragraph 4 above, the next review of Executive Board Decision No. 4773-(75/136) shall be conducted in May 1979.

Decision No. 5726-(78/59) SA

April 17, 1978

d. Subsidy Account: Amendment of Decision

With effect from the date of the Second Amendment of the Articles of Agreement, paragraph 3(b) of Executive Board Decision No. 4773-(75/136), adopted August 1, 1975, shall be amended by deleting the phrase “in excess of its quota” and replacing it with the phrase “subject to charges.”

Decision No. 5694-(78/35)

March 17, 1978

Extended Fund Facility

I.

(i) The Executive Directors have been considering the establishment of an extended facility for members that would enable the Fund to give medium-term assistance in the special circumstances of balance of payments difficulty that are indicated in this decision. The facility, in its formulation and administration, is likely to be beneficial for developing countries in particular.

(ii) The Executive Directors have noted the studies prepared by the staff, including SM/74/58 (“Extended Fund Facility,” March 8, 1974), and especially paragraphs 12 to 16 of that memorandum, in which certain situations to which an extended facility could apply are described as follows:

  • “(a) an economy suffering serious payments imbalance relating to structural maladjustments in production and trade and where prices and cost distortions have been widespread;

  • (b) an economy characterized by slow growth and an inherently weak balance of payments position which prevents pursuit of an active development policy.”

(iii) The Executive Directors have noted the support for an extended facility by the Committee of the Board of Governors on the Reform of the International Monetary System and Related Issues.

(iv) Taking into account the considerations set forth above, and in particular the exceptional problems faced by some members, the Executive Directors have decided to establish a facility in accordance with the terms set forth in Section II of this decision for the purpose of giving such members medium-term assistance, consistently with Article I(v) and the other purposes of the Fund, under extended arrangements.

II.

1. The Fund will be prepared to give special assistance to members to meet balance of payments deficits for longer periods and in amounts larger in relation to quotas than has been the practice under existing tranche policies. Such assistance will be given in the form of extended arrangements in support of comprehensive programs that include policies of the scope and character required to correct structural imbalances in production, trade, and prices when it is expected that the needed improvement in the member’s balance of payments can be achieved without policies inconsistent with the purposes of the Fund only over an extended period. The Fund will pay particular attention to the policy measures that the member intends to implement in order to mobilize resources and improve the utilization of them and to reduce reliance on external restrictions, the time required for these measures to have the intended effect on the balance of payments, and such other factors as the Fund considers relevant to the member’s circumstances.

2. A member that contemplates making a request for an extended arrangement should consult the Managing Director before making a request under this decision. A request by a member for an extended arrangement in order to deal with a problem of the kind referred to in this decision will be met, subject to paragraphs 3 and 4 below, if the Fund is satisfied that:

  • (a) the solution of the member’s balance of payments problem will require a longer period than the period for which the resources of the Fund are available under existing tranche policies, and

  • (b) the member has presented:

    • (i) a program, setting forth the objectives and policies for the whole period of the extended arrangement, and adequate for the solution of the member’s problem; and

    • (ii) a detailed statement of the policies and measures for the first twelve months constituting an initiation of the program referred to in (i) considered substantial in the member’s circumstances.

with the understanding that, for each subsequent twelve-month period, the member will present to the Fund a detailed statement of the progress made, and the policies and measures as in (ii) that will be followed, to further the realization of the objectives of the program referred to in (i) with such modifications in the member’s policies as might reasonably be considered necessary to assist it to achieve its objectives in changing circumstances.

3. Extended arrangements under this decision will be limited to periods of not more than three years. Each arrangement will prescribe the total amount, and the annual installments within the total, available in accordance with the original or any modified terms of the arrangement. Purchases in respect of each installment will be phased over the period in which it is available and will be subject to suitable performance clauses related to the implementation of those policies that are necessary for achieving the objectives of the program that the member has adopted as the basis for an extended arrangement.

4. (a) Purchases outstanding under this decision will not exceed 140 per cent of the member’s quota, or be allowed to raise the Fund’s holdings of the member’s currency above 265 per cent of the member’s quota (excluding holdings obtained by the Fund as a result of purchases under its decisions on the facilities relating to compensatory financing, buffer stock financing, and the impact of the increased cost of imports of petroleum and petroleum products).

(b) In order to carry out the purposes of this decision, the Fund will be prepared to grant any waiver of the conditions of Article V, Section 3(a)(iii) when necessary to permit purchases under this decision or to permit purchases under other policies that would raise the Fund’s holdings of a member’s currency above the limits referred to in that provision because of purchases outstanding under this decision. In addition, subject to (a), the Fund will apply its tranche policies to requests by a member for purchases other than gold tranche purchases as if the Fund’s holdings of the member’s currency did not include holdings resulting from any purchases outstanding under this decision.

5. A member that has obtained an extended arrangement under this decision will make repurchases corresponding to purchases under the extended arrangement, to the extent that such purchases are still outstanding, as soon as its balance of payments problems have been overcome and, in any event, within an outside range of four to eight years after each purchase. Not later than four years after the first purchase under the extended arrangement the member will propose to the Fund a schedule of repurchases for all purchases outstanding under the extended arrangement. Normally, schedules under this paragraph will provide for repurchases in respect of each purchase in sixteen equal quarterly installments.

6. When purchases are made under extended arrangements granted pursuant to this decision, the Fund will so indicate in an appropriate manner.

7. The Fund will levy charges on holdings of a member’s currency resulting from purchases outstanding under this decision in accordance with Executive Board Decision No. 4378-(74/114), adopted September 13, 1974.

8. Except as otherwise provided in this or in any subsequent related decisions, extended arrangements shall be subject to the Fund’s decisions and policies on stand-by arrangements.

9. The Fund will review this decision in the light of experience and developing circumstances when the total amount of purchases that could be made under extended arrangements is equivalent to two billion special drawing rights and in any event not later than July 31, 1976.

Decision No. 4377-(74/114)

September 13, 1974

Until the effective date of the second amendment of the Articles:

  • (i) ........................................................................

  • (ii) ........................................................................

  • (iii) the reference to 265 per cent of the member’s quota in paragraph 4(a) of Decision No. 4377-(74/114), adopted September 13, 1974, shall be replaced by “276.25 per cent of the member’s quota.”

Decision No. 4934-(76/5)

January 19, 1976

Extended Fund Facility: Review of Decision

1. The Executive Directors have reviewed Decision No. 4377-(74/114), adopted September 13, 1974, relating to the extended Fund facility, in accordance with paragraph 9 of that decision.

2. The Executive Directors have decided not to modify the decision at this time but they will review the adequacy of its provisions further at an appropriate time and in any event when the total amount of the purchases that could be made under extended arrangements is equivalent to SDR 2 billion.

Decision No. 5220-(76/144)

September 20, 1976

Compensatory Financing of Export Fluctuations

Executive Board Decision No. 1477-(63/8), adopted February 27, 1963, as amended by Executive Board Decision No. 2192-(66/81), adopted September 20, 1966, is amended to read as follows:

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 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 continue to expect that their requests 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.

3. Drawings outstanding under this decision may amount to 75 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 50 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 decision beyond 50 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.

4. The existence and amount of an export shortfall for the purpose of any drawing under this decision shall be determined with respect to the latest 12-month period preceding the drawing request for which the Fund has sufficient statistical data, provided that the Fund may allow a member to draw in respect of a shortfall for a 12-month period ending not later than six months after the latest month for which the Fund has sufficient statistical data.

5. 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.

6. The shortfall for the purposes of this Decision shall be the amount by which the member’s export earnings in the shortfall year are less than the average of the member’s export earnings for the five-year period centered on the shortfall year. In computing the five-year average, earnings in the two post-shortfall years will be deemed to be equal to earnings in the two pre-shortfall years multiplied by the ratio of the sum of earnings in the most recent three years to that in the three preceding years. If the Fund considers that the result of the computations under the previous sentence is not reasonable, the Fund, in conjunction with the member, will use an estimate based on a judgmental forecast. When the Fund allows a member to draw under the proviso in paragraph 4 above, the Fund may use such methods of estimating exports during the period for which sufficient statistical data are not available as it considers reasonable.

7. Any member requesting a drawing under this decision will be expected to represent that it will make a repurchase corresponding to the drawing in accordance with the principles of Executive Board Decision No. 102-(52/ll), adopted February 13, 1952, as renewed by Executive Board Decision No. 270-(53/95), adopted December 23, 1953. Approximately one year and two years after a drawing by a member under this decision, the Fund, after consultation with the member, may recommend to the member that, in view of an improvement in its balance of payments and reserve position, it should make a repurchase in respect of a part or all of the outstanding drawing. The Fund will expect the member to repurchase in accordance with the recommendation.

8. A member requesting a drawing under the proviso in paragraph 4 above will also be expected to represent that, if the amount drawn on the basis of partially estimated data exceeds the amount that could have been drawn for the full 12-month period under paragraph 6 above, the member will make a prompt repurchase in respect of the outstanding drawing, in an amount equivalent to the excess.

9. Whenever the Fund’s holdings of a member’s currency resulting from a drawing under this decision are reduced by the member’s repurchase or otherwise, the member’s access to this facility, in accordance with its terms, will be restored pro tanto.

10. When drawings are made under this decision, the Fund will so indicate in an appropriate manner. Within 18 months from the date of any drawing made under the Fund’s tranche policies or under the extended Fund facility, a member may request that all or part of the amount outstanding be reclassified and treated, for all purposes of this decision, as a drawing made under this decision. The Fund will agree to such a request if at the time of the drawing under the tranche policies or the extended Fund facility the member could have met the requirements for a drawing of an equal amount under this decision.

11. 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 the Fund’s holdings of 200 per cent 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 this decision or (ii) to the extent that drawings in accordance with this decision 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 this decision.

12. The Fund will review the formula in paragraph 6 not later than March 31, 1977, and will review this decision as a whole when experience and developing circumstances make this desirable. The Fund will review this decision in any event whenever (i) drawings under this decision in any 12-month period exceed SDR 1.5 billion or (ii) outstanding drawings under this decision exceed SDR 3.0 billion.

Decision No. 4912-(75/207)

December 24, 1975

1975 Decision on Compensatory Financing: Review

In view of the expectation that in the near future drawings under Executive Board Decision No. 4912-(75/207), adopted December 24, 1975, may exceed SDR 1.5 billion, the Fund has conducted the review required by paragraph 12 of the decision when drawings under the decision in any 12-month period exceed SDR 1.5 billion. Having concluded the review, it has decided to make no change in the decision.

Decision No. 5088-(76/77)

May 21, 1976

Compensatory Financing Facility: Review of Decision

The Fund has reviewed the formula in paragraph 6 of Executive Board Decision No. 4912-(75/207), adopted December 24, 1975 and the decision as a whole, and has decided to revise paragraph 12 of the decision as follows:

The Fund will review this decision when experience and developing circumstances make this desirable and in any event not later than May 31, 1979, or whenever

  • (i) drawings under this decision in any 12-month period exceed SDR 1.5 billion or

  • (ii) outstanding drawings under this decision exceed SDR 4.0 billion.

Decision No. 5348-(77/33)

March 11, 1977

Buffer Stock Financing Facility: 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 1 of this decision shall not 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, as amended by

Decision No. 4913-(75/207),

December 24, 1975

Buffer Stock Financing Facility: International Cocoa Agreement

1. The Fund, having considered the text of the International Cocoa Agreement as adopted at the U.N. Cocoa Conference on October 20, 1972, finds that the terms of this Agreement relating to the international cocoa buffer stock to be established thereunder are consistent with Executive Board Decision No. 2772-(69/47), adopted June 25, 1969. For this purpose, that Decision and the principles referred to in it are understood as permitting the use of the Fund’s resources in connection with loans to the International Cocoa Council under Article 37(5) of the Agreement by members participating in the Agreement in order to finance the operations of the cocoa buffer stock.

2. The Fund notes that under the arrangements pursuant to Articles 37, 38 and 39 of the Agreement, a part of the financial burden of the buffer stock operations would be assumed by members themselves by acceptance of phased payments for stocks delivered by them to the buffer stock and by any contributions that may be charged on cocoa under the Agreement. The Fund expects that, in order to maintain an adequate degree of self-financing throughout the period of the Agreement, provision would be made for the generation of resources from sources other than the Fund.

3. In view of paragraphs 1 and 2 above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), a member’s requests for purchases for financing the member’s loan to the International Cocoa Council under Article 37(5) of the Agreement solely for the purpose of the buffer stock’s acquisition of cocoa stocks from members other than stocks involved in diversion to nontraditional uses.

4. Repayment of the loan for the financing of which the member made purchases from the Fund shall be treated as “distributions in currency to the member” for the purpose of repurchases under paragraph 5 of Executive Board Decision No. 2772-(69/47). Moreover, the Fund expects that a member’s loan to the Council financed by purchases from the Fund will be repaid by the Council pari passu with reductions in the buffer stock.

5. The staff will keep the Executive Directors informed on the operation of the buffer stock and other developments in connection with the International Cocoa 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. 3933-(73/42)

April 23, 1973

Buffer Stock Financing Facility: Fifth International Tin Agreement

1. The Fund, having considered the text of the Fifth International Tin Agreement, as adopted by the United Nations Tin Conference on June 21, 1975, 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.

2. In view of (1) above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47) as amended by Executive Board Decision No. 4913-(75/207), a member’s requests for purchases in connection with the financing by the member of its compulsory contributions to the buffer stock established under the Fifth International Tin Agreement.

3. The Fund decides that any contribution made in the form of tin metal under Article 21 of the Agreement shall be regarded as equivalent to a contribution in cash, valued at the floor price prevailing when the contribution is called up. Any transfer of metal from the buffer stock to a member will be treated as a distribution in currency, valued at the floor price prevailing when the transfer is made.

4. The staff will keep the Executive Directors informed on the operation of the buffer stock and other developments in connection with the Fifth 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. 5127-(76/91)

June 23, 1976

Buffer Stock Financing Facility: 1977 International Sugar Agreement

1. It is decided that, for the purposes of Decision No. 2772-(69/47) as amended, a sugar buffer stock consisting of buffer stocks nationally owned but internationally controlled pursuant to the 1977 International Sugar Agreement, as established by the 1977 United Nations Sugar Conference, shall be deemed to be an international buffer stock if it otherwise meets all the criteria referred to in Decision No. 2772-(69/47) as amended.

2. The Fund, having considered the text of the International Sugar Agreement, 1977, as adopted by the United Nations Sugar Conference on October 7, 1977, recognizing the economically sound attributes of the Agreement and the price stabilization objective, finds that the terms of this Agreement relating to the special stocks of sugar to be established under the Agreement are consistent with the principles referred to in Executive Board Decision No. 2772-(69/47), as amended, including the amendment in paragraph 1 above.

3. In view of paragraph 2 above, the Fund will meet, subject to the provisions of Executive Board Decision No. 2772-(69/47), as amended, and the limits specified in paragraphs 4 and 5 below, a member’s requests for purchases in connection with the financing by the member of the special stocks established in accordance with Article 46 of the International Sugar Agreement, 1977. For the purposes of this decision, any special stock in sugar established in accordance with Article 46 of the International Sugar Agreement, 1977, shall cover an amount of sugar not exceeding the quantities for which certificates of existence issued by the Government of the member have been supplied to the International Sugar Organization and in respect of which agreement has been reached between the member and the International Sugar Organization regarding on-site verifications, as provided for in Article 47 of the 1977 International Sugar Agreement. A member may make a purchase under this decision if its request is received in the Fund not later than six months after (i) the end of the period in which the member has to fulfill its obligation to establish a special stock in accordance with Article 46.5 of the International Sugar Agreement or (ii) the date on which the export quotas are lifted, if this date is earlier.

4. A request for a purchase under this decision will be met if it will not cause the total of purchases outstanding under this decision to exceed the sum of the values of the quantities of sugar placed in the special stock, with each quantity valued on the basis of the lesser of (i) the floor price and (ii) the average market price during the month in which the quantity was acquired.

5. A request for a purchase under this decision by a member that has outstanding any loans in foreign exchange for which a special stock has been used as collateral will be met if, in addition to being consistent with the limit specified in paragraph 4 above, it does not cause the total of purchases outstanding under this decision to exceed the higher of (i) the sum referred to in paragraph 4 above minus the amount of any outstanding loans in foreign exchange for which the special stock has been used as collateral and (ii) the total value of the special stock on the basis of the average price during the latest calendar month before the request for a purchase under this decision minus the amount of any such loans. When requesting a purchase and while it has purchases outstanding under this decision, a member shall inform the Fund of any loans for which the special stock has been used as collateral.

6. A member that has outstanding purchases under this decision will be expected to repurchase in accordance with paragraph 1 of Decision No. 5703-(78/39) and shall complete repurchase in respect of these purchases in accordance with paragraph 1 of the same decision. The member will be expected to make a repurchase at an earlier date

  • (i) when, and to the extent that, stocks are released from the control of the International Sugar Organization, and

  • (ii) when the member obtains a loan in foreign exchange for which the special stock is used as collateral, to the extent that the amount of this loan, together with the amount of purchases outstanding exceeds the amount that the member may purchase in accordance with paragraphs 4 and 5 above.

7. The staff will keep the Executive Directors informed on the operation of the buffer stocks and other developments in connection with the International Sugar Agreement, 1977, 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. 5597-(77/171)

December 16, 1977

Establishment of a Supplementary Financing Facility

1. (a) The Fund will be prepared to provide, in accordance with this decision, supplementary financing in conjunction with use of the other resources of the Fund (hereinafter referred to as “ordinary resources”) to members facing serious payments imbalances that are large in relation to their quotas. Supplementary financing for the purpose of this decision means financing that the Fund will provide under a stand-by or extended arrangement with resources the Fund obtains by replenishment under Article VII, Section 2 and Decision No. 5509-(77/127), adopted August 29, 1977.

(b) Resources available to members under other policies of the Fund will remain available in accordance with the terms of those policies.

2. A member contemplating use of the Fund’s resources in the three credit tranches beyond the first credit tranche (hereinafter referred to as the “upper credit tranches”) that would include supplementary financing shall consult the Managing Director before making a request under this decision. A request by a member will be met under this decision only if the Fund is satisfied: (i) that the member needs financing from the Fund that exceeds the amount available to it in the four credit tranches and its problem requires a relatively long period of adjustment and a maximum period for repurchase longer than the three to five years under the credit tranche policies; and (ii), on the basis of a detailed statement of the economic and financial policies the member will follow and the measures it will apply during the period of the stand-by or extended arrangement, that the member’s program will be adequate for the solution of its problem and is compatible with the Fund’s policies on the use of its resources in the upper credit tranches or under the Extended Fund Facility.

3. The Fund may approve a stand-by or extended arrangement that provides for supplementary financing at any time within two years from the effective date of this decision. The Fund will review this period when conducting a review under 12 below. Any extension of the period shall not exceed one year.

4. (a) Supplementary financing will be available only if the program referred to in 2(ii) above is one in support of which the Fund approves a stand-by arrangement in the upper credit tranches or beyond or an extended arrangement. The stand-by or extended arrangement will be in accordance with the Fund’s policies, including inter alia its policies on conditionality, phasing, and performance criteria, provided however that any right of augmentation exercised by a member in connection with a repurchase in respect of a purchase made with supplementary financing shall be subject to the same period of repurchase that applied to the purchase in respect of which the repurchase was made.

(b) The period of a stand-by arrangement approved under this decision will normally exceed one year, and may extend up to three years in appropriate cases. The period of an extended arrangement will be in accordance with Decision No. 4377-(74/114), adopted September 13, 1974.

(c) A request for a purchase in accordance with a stand-by or extended arrangement approved under this decision will be met from ordinary resources and supplementary financing in the proportions determined under 5 and 6 below when the arrangement is approved.

5. The amounts available to a member under a stand-by arrangement approved under this decision will be apportioned between ordinary resources and supplementary financing as follows:

(a) While each credit tranche is 36.25 per cent of quota under the Fund’s policies, supplementary financing will be equivalent to 34 per cent of quota in respect of each of the upper credit tranches.

(b) After each credit tranche becomes 25 per cent of quota under the Fund’s policies, supplementary financing will be equivalent to 12.5 per cent of quota in respect of the first credit tranche and 30 per cent of quota in respect of the upper credit tranches.

(c) If a member has used all or part of its credit tranches before a stand-by arrangement is approved under this decision, the arrangement approved under this decision will provide that the amount of supplementary financing that would have been used under (a) and (b) above if all earlier purchases in the credit tranches had been made in conjunction with supplementary financing will be used, subject to 4(a) above, before purchases are made under (a) or (b) above.

(d) If a purchase in a credit tranche is less than the amount of a full credit tranche, the supplementary financing to be used in conjunction with the purchase will be in the same proportion of the amount of supplementary financing referred to in (a) and (b) above as the purchase in the credit tranche bears to the amount available in that tranche when the arrangement was approved.

(e) From time to time, the Fund will review the proportions of supplementary financing to be used in conjunction with the upper credit tranches, and may substitute modified proportions for those in effect pursuant to this decision. The modified proportions shall apply only to stand-by arrangements approved after the date of the decision to modify the proportions, provided that a member that has an existing stand-by arrangement may request that, subject to 4(a) and 5(c) above, any increased proportions be made available to it under a new or revised arrangement.

(f) In special circumstances, a stand-by arrangement may be approved under this decision that provides for purchases beyond the credit tranches and supplementary financing available under (a), (b), and (c) above. The arrangement will provide that all purchases under it will be made with supplementary financing. The Fund, taking into account the criteria in 2 above, will prescribe in each arrangement the amount of supplementary financing that will be available.

6. (a) Supplementary financing will be available, in combination with ordinary resources, for purchases under an extended arrangement approved under this decision in an amount not exceeding the equivalent of 140 per cent of quota. Purchases under an extended arrangement will be made with ordinary resources and with supplementary financing in the ratio of one to one.

(b) Supplementary financing available to a member in accordance with the ratio in (a) above will be increased by an amount determined by the ratio of one to one in respect of that part of the upper credit tranches that is no longer available to the member as the result of earlier uses of the Fund’s resources. Purchases will be made with supplementary financing, subject to 4(a) above, to the extent of the amount of this increase before purchases are made in accordance with (a) above.

(c) The principles of 5(e) and (f) shall apply to extended arrangements approved under this decision.

7. (a) Repurchases in respect of outstanding purchases under this decision will be made in accordance with the terms of the stand-by or extended arrangement under which the purchases were made.

(b) The terms will include a provision that the member will be expected to repurchase in respect of purchases, whether made with ordinary resources or with supplementary financing, as its balance of payments and reserve position improves, and will make such repurchases if, after consultation with the member, the Fund represents that repurchase should be made because of an improvement.

(c) The terms will also provide that with respect to purchases financed with ordinary resources repurchase will be made in accordance with the Fund’s policies on the credit tranches or under the Extended Fund Facility; and that with respect to purchases made with supplementary financing repurchase will be made in equal semiannual installments that begin not later than three and one-half years and are completed not later than seven years after the purchase.

(d) A repurchase attributed to a purchase made with supplementary financing in advance of this schedule of equal semiannual installments must be accompanied by a repurchase in respect of the purchase financed with ordinary resources made at the same time if any part of the latter purchase is still outstanding. The amounts of the two repurchases will be in the same proportions in which ordinary resources and supplementary financing were used in the purchases, provided, however, that the repurchase in respect of the purchase financed with ordinary resources will not exceed the amount of the purchase still outstanding.

(e) Repurchases will be made in the media prescribed by the Articles of Agreement and specified by the Fund at the time of the repurchase after consultation with members. The Fund will be guided by a policy of specifying for repurchase the media in which it will make repayments as a result of the repurchases, and will take this policy into account in preparing its currency budgets.

8. In order to carry out the purposes of this decision, the Fund will be prepared to grant a waiver of the conditions of Article V, Section 3(a)(iii) (or Article V, Section 3(b)(iii) after the Second Amendment of the Articles) that is necessary to permit purchases under this decision or to permit purchases under other policies that would raise the Fund’s holdings of a member’s currency above the limits referred to in that provision because of purchases outstanding under this decision.

9. The Fund will apply its credit tranche policies as if the Fund’s holdings of a member’s currency did not include holdings resulting from purchases outstanding under this decision that have been made with supplementary financing. After the effective date of the Second Amendment of the Articles of Agreement purchases under this decision and holdings resulting from purchases outstanding under this decision will be excluded under Article XXX(c).

10. The Fund will state which purchases by a member are made under this decision and the amounts of ordinary resources and supplementary financing used in each purchase.

11. The Fund will levy charges in accordance with the decision of the Executive Board on holdings of a member’s currency resulting from purchases outstanding under this decision to the extent that they are made with supplementary financing.

12. The Fund will review this decision not later than two years after its effective date or when the Seventh General Review of Quotas becomes effective, if that occurs within the two years. One year after the effective date of this decision the Fund will report on the use of the supplementary financing facility. The report will deal also with other important aspects of the facility.

13. The effective date of this decision will be the date on which agreements are completed under Decision No. 5509-(77/127), adopted August 29, 1977, for a total amount not less than SDR 7.75 billion, including at least six agreements each of which provides for an amount not less than SDR 500 million.

Decision No. 5508-(77/127)

August 29, 1977

Text of Stand-By and Extended Arrangements: Before and After Second Amendment

The following decision, with attachments, is approved.

1. The form of the stand-by arrangement in Attachment A and the form of the extended arrangement in Attachment B shall be used by the Fund for arrangements granted after the date of the Second Amendment.

2. Stand-by and extended arrangements outstanding at the date of the Second Amendment shall be applied from that date subject to the following understandings:

  • (a) the reference to the “gold tranche” shall be understood as a reference to the “reserve tranche”;

  • (b) purchases under the arrangements may be made in special drawing rights if, on the request of the member, the Fund agrees to provide them at the time of the purchase;

  • (c) repurchases under the arrangements may be made in special drawing rights; and

  • (d) the citation in the arrangements of provisions of the Articles of Agreement shall be understood as including the citation of the provisions as renumbered in the amended Articles of Agreement.

3. After the date of the Second Amendment, outstanding amounts of a member’s currency that are subject to charges under the amended Article V, Section 8(b) and that result from purchases made under an arrangement granted after October 1, 1977 shall be subject to repurchase in accordance with the provisions of the amended Articles of Agreement and the policies of the Fund that apply at the time of the repurchase.

Decision No. 5546-(77/138)

September 14, 1977

Attachment A Stand-By Arrangement

1. Annexed hereto is a letter dated _____ from (Minister of Finance and/or President of Central Bank) setting forth the objectives and policies which the (government) (authorities) of (member) will pursue.

2. The International Monetary Fund grants this stand-by arrangement to support these objectives and policies.

3. (Member) will remain in close consultation with the Fund during the period of the stand-by arrangement and, in particular, will consult with the Fund in accordance with paragraph(s) ____ of the annexed letter. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member) to the Fund. For the purposes of these consultations, (member) will provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the (member’s) objectives and policies set forth in the annexed letter.

4. For a period of [one year] from ____, (member) will have the right, after making full use of any reserve tranche that it may have at the time of making a request for a purchase under the stand-by arrangement, to make purchases from the Fund in an amount equivalent to SDR ____ [provided that

  • (i) purchases under the stand-by arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____ until ____ and the equivalent of SDR ____ until ____; and

  • (ii) the right of (member) to make purchases under this stand-by arrangement shall be subject to paragraph ____ of the annexed letter to the extent that such purchases would increase the Fund’s holdings of (member’s) currency beyond the first credit tranche.

If at any time any limit in (i) above would prevent a purchase under the stand-by arrangement that would not increase the Fund’s holdings of (member’s) currency beyond the first credit tranche, the limit will not apply to that purchase.]

5. Purchases under the stand-by arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in special drawing rights if, on the request of (member), the Fund agrees to provide them at the time of the purchase. Purchases shall be made in exchange for the currency of (member).

6. (Member) will pay a charge for this stand-by arrangement in accordance with the decisions of the Fund.

7. [Subject to paragraph 4 above,] (member) will have the right to engage in the transactions covered by this stand-by arrangement without further review by the Fund. This right can be suspended only with respect to requests received by the Fund after (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit the eligibility of (member). When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 7, purchases under this stand-by arrangement will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

8. (a) Repurchase of the outstanding amount of (member’s) currency that results from a purchase under this arrangement and is subject to charges under Article V, Section 8(b)

  • (i) may be made at any time;

  • (ii) will be expected normally as the balance of payments and reserve position of (member) improves;

  • (iii) shall be made in accordance with the representation of the Fund if, after consultation with (member), the Fund represents that under its policies at the time of the repurchase (member) should repurchase because of an improvement in its balance of payments and reserve position; and

  • (iv) shall be completed five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule.

(b) Any reductions in the (member’s) currency held by the Fund shall reduce the amounts subject to repurchases under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

(c) Repurchase shall be made with special drawing rights, or with the currencies specified by the Fund at the time of the repurchase in accordance with the policies and procedures of the Fund at the time of the repurchase.

Attachment B Extended Arrangement

1. Annexed hereto is a letter dated ____ from the (Minister of Finance and/or the President of Central Bank) setting forth:

  • (a) The objectives and policies that the authorities of (member) will pursue for the period of the extended arrangement;

  • (b) The policies and measures that the authorities of (member) will pursue for the first year of the extended arrangement; and

  • (c) Understandings of (member) with the Fund regarding reviews that will be made of progress in realizing the objectives of the program and of the policies and measures that the authorities of (member) will pursue for the second and third years of the extended arrangement.

2. The International Monetary Fund grants this extended arrangement to support these objectives, policies, and understandings.

3. (Member) will remain in close consultation with the Fund during the period of the extended arrangement and, in particular, will consult the Fund in accordance with paragraph(s) ____ of the annexed letter. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member) to the Fund. For the purposes of these consultations, (member) will provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the (member’s) objectives and policies set forth in the annexed letter.

4. For a period of three years from ____, (member) will have the right, after making full use of any reserve tranche that it may have at the time of making a request for a purchase under the extended arrangement, to make purchases from the Fund in an amount equivalent to SDR ____ as follows:

  • (a) Until (end of first year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____, provided that:

    • (i) Purchases shall not exceed the equivalent of SDR ____ until ____, and the equivalent of SDR ____ until ____; and

    • (ii) The right of (member) to make purchases during the first year under this arrangement shall be subject to paragraph ____ of the annexed letter.

  • (b) Until (end of second year) and (end of third year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____ and SDR ____, respectively, and the right of (member) to make purchases shall be subject to:

    • (i) Such phasing during each of these years as shall be determined; and

    • (ii) Suitable performance clauses to be established in consultation with the Fund before the beginning of the second year and the beginning of the third year of the extended arrangement, respectively, as contemplated in paragraph ____of the annexed letter.

5. Purchases under the extended arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in special drawing rights if, on the request of (member), the Fund agrees to provide them at the time of the purchase. Purchases shall be made in exchange for the currency of (member).

6. (Member) will pay a charge for this extended arrangement in accordance with the decisions of the Fund.

7. Subject to paragraph 4 above, (member) will have the right to engage in transactions covered by this extended arrangement. This right can be suspended only with respect to requests received by the Fund after (a) formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or limit the eligibility of (member). When notice of a decision to consider a proposal is given pursuant to this paragraph 7, purchases under the extended arrangement will be resumed only after consultation has taken place between (member) and the Fund and understandings have been reached regarding the circumstances in which such purchases can be resumed.

8. (a) Repurchase of the outstanding amount of (member’s) currency that results from a purchase under this arrangement and is subject to charges under Article V, Section 8(b)

  • (i) may be made at any time;

    (ii) will be expected normally as the balance of payments and reserve position of (member) improves;

    (iii) shall be made in accordance with the representation of the Fund if, after consultation with (member), the Fund represents that under its policies at the time of the repurchase (member) should repurchase because of an improvement in its balance of payments and reserve position; and

    (iv) shall be completed eight years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning four years and ending eight years after the date of the purchase unless the Fund approves a different schedule.

(b) Any reductions in the (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

(c) Repurchase shall be made with special drawing rights, or with the currencies specified by the Fund at the time of the repurchase in accordance with the policies and procedures of the Fund at the time of the repurchase.

Implementation of the Supplementary Financing Facility: Text of Stand-By and Extended Arrangements

The form of the stand-by arrangement in Attachment A, and the form of the extended arrangement in Attachment B, shall be used by the Fund for arrangements that provide for supplementary financing.

Decision No. 5585-(77/161)

November 30, 1977

Attachment A Stand-By Arrangement

1. Alternative A

Annexed hereto is a letter dated _____ from (Minister of Finance and/or President of Central Bank) setting forth the objectives and policies which the (government) (authorities) of (member) will pursue.

Alternative B

Annexed hereto is a letter dated ____ from (Minister of Finance and/or President of Central Bank) setting forth

(a) The objectives and policies that the (government) (authorities) of (member) will pursue for the period of the stand-by arrangement;

(b) The policies and measures that the (government) (authorities) of (member) will pursue for [the first year] of the stand-by arrangement; and

(c) Understandings of (member) with the Fund regarding reviews that will be made of progress in realizing the objectives of the program and of the policies and measures that the (government) (authorities) of (member) will pursue for the period of the stand-by arrangement after the first year.

2. Alternative A

The International Monetary Fund grants this stand-by arrangement to support these objectives and policies.

Alternative B

The International Monetary Fund grants this stand-by arrangement to support these objectives, policies, and understandings.

3. (Member) will remain in close consultation with the Fund during the period of the stand-by arrangement and, in particular, will consult with the Fund in accordance with paragraph(s) ____ of the annexed letter. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member) to the Fund. For the purposes of these consultations, (member) will provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the (member’s) objectives and policies set forth in the annexed letter.

4. Alternative A

For a period of [__years] from ____, (member) will have the right, after making full use of any reserve tranche that it may have at the time of making a request for purchase under the stand-by arrangement, to make purchases from the Fund in an amount equivalent to SDR ____, provided that

  • (a) (i) purchases under the stand-by arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____ until ____, and the equivalent of SDR ____ until ____; and

    • (ii) the right of (member) to make purchases under this stand-by arrangement shall be subject to paragraph ____ of the annexed letter to the extent that such purchases would increase the Fund’s holdings of (member’s) currency beyond the first credit tranche plus 12.5 per cent of quota.

Alternative B

For a period of [ ____ years] from ____, (member) will have the right, after making full use of any reserve tranche that it may have at the time of making a request for purchase under the stand-by arrangement, to make purchases from the Fund in an amount equivalent to SDR ____as follows:

  • (a) (i) Until (end of first year) purchases under the stand-by arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____, provided that purchases shall not exceed the equivalent of SDR _____ until ____, and the equivalent of SDR ____ until ____;

    • (ii) After (end of first year) the Fund shall determine the phasing of purchases for the remaining period of the stand-by arrangement, and suitable performance clauses for such periods shall be established in consultation with the Fund before (end of first year), as contemplated in paragraph ____ of the annexed letter; and

    • (iii) The right of (member) to make purchases under this stand-by arrangement shall be subject to paragraph ____ of the annexed letter to the extent that such purchases would increase the Fund’s holdings of (member’s) currency beyond the first credit tranche plus 12.5 per cent of quota.

  • (b) Alternative A

If at any time any limit in (a)(i) above would prevent a purchase under the stand-by arrangement that would not increase the Fund’s holdings of (member’s) currency beyond the first credit tranche plus 12.5 per cent of quota, the limit will not apply to that purchase.

Alternative B

If at any time any limit in (a)(i) above, or pursuant to (a)(ii) above, would prevent a purchase under the stand-by arrangement that would not increase the Fund’s holdings of (member’s) currency beyond the first credit tranche plus 12.5 per cent of quota, the limit will not apply to that purchase.

(c) Purchases under the stand-by arrangement shall be made [text to be added].

5. Purchases under the stand-by arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in special drawing rights if, on the request of (member), the Fund agrees to provide them at the time of the purchase. Purchases shall be made in exchange for the currency of (member).

6. (Member) will pay a charge for this stand-by arrangement in accordance with the decisions of the Fund.

7. Subject to paragraph 4 above, (member) will have the right to engage in the transactions covered by this stand-by arrangement without further review by the Fund. This right can be suspended only with respect to requests received by the Fund after (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit the eligibility of (member). When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 7, purchases under this stand-by arrangement will be resumed only after consultation has taken place between the Fund and (member) and understandings have been reached regarding the circumstances in which such purchases can be resumed.

8. (a) Repurchase of the outstanding amount of (member’s) currency that results from a purchase under this arrangement and is subject to charges under Article V, Section 8(b)

  • (i) may be made at any time;

  • (ii) will be expected normally as the balance of payments and reserve position of (member) improves;

  • (iii) shall be made in accordance with the representation of the Fund if, after consultation with (member), the Fund represents that under its policies at the time of the repurchase (member) should repurchase because of an improvement in its balance of payments and reserve position; [and]

  • (iv) [with respect to purchases from ordinary resources, shall be completed five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule; and

  • (v) with respect to purchases with supplementary financing,] shall be completed seven years after the purchase, provided that the repurchase shall be made in equal semiannual installments during the period beginning three and one-half years and ending seven years after the purchase.

(b) Any reductions in the (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction [, provided, however, that a repurchase attributed to a purchase with supplementary financing in advance of the schedule in (a)(v) above shall be accompanied by a repurchase in respect of the purchase from ordinary resources made at the same time if any part of the latter purchase is still outstanding. The amounts of the two repurchases shall be in the same proportions in which ordinary resources and supplementary financing were used in the purchases, provided, however, that the repurchase in respect of the purchase from ordinary resources shall not exceed the amount of the purchase still outstanding].

(c) Repurchase shall be made with special drawing rights, or with the currencies specified by the Fund at the time of the repurchase in accordance with the policies and procedures of the Fund at the time of the repurchase.

Attachment B Extended Arrangement

1. Annexed hereto is a letter dated ____ from the (Minister of Finance and/or the President of Central Bank) setting forth:

(a) The objectives and policies that the authorities of (member) will pursue for the period of the extended arrangement;

(b) The policies and measures that the authorities of (member) will pursue for the first year of the extended arrangement; and

(c) Understandings of (member) with the Fund regarding reviews that will be made of progress in realizing the objectives of the program and of the policies and measures that the authorities of (member) will pursue for the second and third years of the extended arrangement.

2. The International Monetary Fund grants this extended arrangement to support these objectives, policies, and understandings.

3. (Member) will remain in close consultation with the Fund during the period of the extended arrangement and, in particular, will consult the Fund in accordance with paragraph(s) _____ of the annexed letter. These consultations may include correspondence and visits of officials of the Fund to (member) or of representatives of (member) to the Fund. For the purposes of these consultations, (member) will provide the Fund, through reports at intervals or dates requested by the Fund, with such information as the Fund requests in connection with the (member’s) objectives and policies set forth in the annexed letter.

4. For a period of three years from ____, (member) will have the right, after making full use of any reserve tranche that it may have at the time of making a request for a purchase under the extended arrangement, to make purchases from the Fund in an amount equivalent to SDR _____as follows:

(a) Until (end of first year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____, provided that:

  • (i) Purchases shall not exceed the equivalent of SDR ____ until ____, and the equivalent of SDR ____ until ____; and

  • (ii) The right of (member) to make purchases during the first year under this arrangement shall be subject to paragraph ____ of the annexed letter.

(b) Until (end of second year) and (end of third year) purchases under this extended arrangement shall not, without the consent of the Fund, exceed the equivalent of SDR ____ and SDR ____, respectively, and the right of (member) to make purchases shall be subject to:

  • (i) Such phasing during each of these years as shall be determined; and

  • (ii) Suitable performance clauses to be established in consultation with the Fund before the beginning of the second year and the beginning of the third year of the extended arrangement, respectively, as contemplated in paragraph ____ of the annexed letter.

(c) Purchases under this extended arrangement shall be made [text to be added].

5. Purchases under the extended arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, and may be made in special drawing rights if, on the request of (member), the Fund agrees to provide them at the time of the purchase. Purchases shall be made in exchange for the currency of (member).

6. (Member) will pay a charge for this extended arrangement in accordance with the decisions of the Fund.

7. Subject to paragraph 4 above, (member) will have the right to engage in transactions covered by this extended arrangement. This right can be suspended only with respect to requests received by the Fund after (a) formal ineligibility, or (b) a decision of the Executive Board to suspend transactions, either generally or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or limit the eligibility of (member). When notice of a decision to consider a proposal is given pursuant to this paragraph 7, purchases under the extended arrangement will be resumed only after consultation has taken place between (member) and the Fund and understandings have been reached regarding the circumstances in which such purchases can be resumed.

8. (a) Repurchase of the outstanding amount of (member’s) currency that results from a purchase under this arrangement and is subject to charges under Article V, Section 8(b)

  • (i) may be made at any time;

  • (ii) will be expected normally as the balance of payments and reserve position of (member) improves;

  • (iii) shall be made in accordance with the representation of the Fund if, after consultation with (member), the Fund represents that under its policies at the time of the repurchase (member) should repurchase because of an improvement in its balance of payments and reserve position; [and]

  • (iv) [with respect to purchases from ordinary resources, shall be completed eight years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning four years and ending eight years after the date of the purchase unless the Fund approves a different schedule; and

  • (v) with respect to purchases with supplementary financing, ] shall be completed seven years after the purchase, provided that the repurchase shall be made in equal semiannual installments during the period beginning three and one-half years and ending seven years after the purchase.

(b) Any reductions in the (member’s) currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction [, provided, however, that a repurchase attributed to a purchase with supplementary financing in advance of the schedule in (a)(v) above shall be accompanied by a repurchase in respect of the purchase from ordinary resources made at the same time if any part of the latter purchase is still outstanding. The amounts of the two repurchases shall be in the same proportions in which ordinary resources and supplementary financing were used in the purchases, provided, however, that the repurchase in respect of the purchase from ordinary resources shall not exceed the amount of the purchase still outstanding].

(c) Repurchase shall be made with special drawing rights, or with the currencies specified by the Fund at the time of the repurchase in accordance with the policies and procedures of the Fund at the time of the repurchase.

Repurchases

Gold Payments Under Article V, Section 7(b) Amounting to Less Than One Bar

If a payment due under Article V, Section 7(b) includes an amount of gold equal to less than one standard bar, such amount shall not be collected.

Decision No. 4087-(73/105)

November 9, 1973

Repurchase

1. (a) Repurchases of the outstanding amount of a member’s currency that results from a purchase under the credit tranches and is subject to charges under Article V, Section 8(b), or under the decision on Compensatory Financing of Export Fluctuations (Decision No. 4912-(75/207), as amended) or the decision on The Problem of Stabilization of Prices of Primary Products (Decision No. 2772-(69/47), as amended), shall be completed, pursuant to Article V, Section 7(c), five years after the date of the purchase, provided that the repurchase shall be made in equal quarterly installments during the period beginning three years and ending five years after the date of the purchase unless the Fund approves a different schedule.

(b) A member that has outstanding purchases under the decision on The Problem of Stabilization of Prices of Primary Products (Decision No. 2772-(69/47), as amended) will be expected to make a repurchase at an earlier date than would be required under (a) above when, and to the extent that, the international buffer stock for the financing of which the purchase was made makes distributions in currency to the member.

2. Decisions with respect to the timing of repurchases shall be understood to permit a member to combine all repurchases to be made within a calendar month and to complete them not later than the last business day of the month, provided however that the maximum period for use of the Fund’s resources according to the policy under which a repurchase is to be made shall not be exceeded.

3. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with special drawing rights in discharge of a commitment the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2.

4. If a member that has an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with currencies of other members in discharge of a commitment, the member shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2, provided that if the currencies paid are not acceptable in repurchase as of the date of the Second Amendment, the member shall substitute an equivalent amount of the currencies of other members specified by the Fund in accordance with Article V, Section 7(i).

5. If a member that has an outstanding obligation to pay gold in repurchase has not made an equivalent repurchase with special drawing rights or with the currencies of other members in discharge of a commitment, within two months after the date of the Second Amendment of the Articles of Agreement the member shall make a repurchase equivalent to the outstanding obligation in gold with special drawing rights or, at its option, with the currencies of other members specified by the Fund in accordance with Article V, Section 7(i). The repurchase shall be regarded as a discharge of the member’s obligation in accordance with Schedule B, paragraph 2.

6. The dates for the payment of special drawing rights or currencies of other members in discharge of any obligation to pay gold to the Fund in repurchase, and for any substitution under paragraph 5 above, after the date of the Second Amendment of the Articles of Agreement shall be determined in accordance with Schedule B, paragraph 1.

7. Repurchase under Schedule B, paragraph 4 shall be completed four years after the date of the Second Amendment of the Articles of Agreement. If the Fund’s holdings of a member’s currency that are subject to paragraph 4(ii) are in excess of 10 per cent of the member’s quota on the date of the Second Amendment, the member shall be requested to agree to make the repurchase in four equal installments beginning not later than one year after that date.

Decision No. 5703-(78/39)

March 22, 1978, effective April 1, 1978

Early Repurchases

1. In applying the first sentence of Article V, Section 7(b) of the Second Amendment the Fund will be guided by the Summary of Guidelines attached to this decision.

2. This decision will be reviewed after one year from the date of its adoption.

Summary of Guidelines

The following paragraphs are intended to provide members with the assurance that if they repurchase the amount indicated by the agreed guidelines they will be meeting the expectation of Article V, Section 7(b). These guidelines would need to be reviewed from time to time in the light of experience.

a. A member’s balance of payments and reserve position would normally be deemed to have improved sufficiently for repurchases to be expected under Article V, Section 7(b), if the member’s position is judged sufficiently strong in the context of a quarterly designation plan and currency budget. However, a member that makes a purchase in the credit tranches or under a special facility would not be expected to make repurchases under Article V, Section 7(b) until the quarter following the second full quarter after its purchase, provided that at that time its balance of payments and reserve position was judged sufficiently strong.

b. During the quarter following the decisions on the designation plan and currency budget, it would be expected that the member’s outstanding purchases would be reduced by a specified amount, either by repurchases or by sales of the member’s currency, or by some combination of the two. The method employed would be at the option of the member.

c. Subject to paragraphs (d) and (e) below, the specified amount for the expected quarterly repurchase would be 1.5 per cent of the member’s latest gross reserves plus (minus) 5 per cent of the increase (decrease) in gross reserves over the latest six-month period for which data are available. The quarterly amount would be subject to a limit of 4 per cent of a member’s latest gross reserves, and the amount of a quarterly repurchase would be limited to an amount that would not reduce the member’s latest gross reserves below 250 per cent of the member’s quota.

d. The specified amount would represent the minimum reduction in the Fund’s holdings of the member’s currency expected during the quarter. Repurchases under Article V, Section 7(c) and (d), and Schedule B, and sales of the member’s currency, would count toward meeting that minimum. If the minimum is exceeded in one quarter, the excess amount shall be deducted from expected repurchases in the subsequent quarter or quarters.

e. If, during the six months prior to the date when a member is added to the list of those members whose positions are considered sufficiently strong, a member makes repurchases in amounts in excess of amounts it was obliged or expected to make during those six months, these excess amounts shall be deducted from expected repurchases in the subsequent quarter or quarters.

f. If a member opted to have its currency sold, the specified amount (less any other expected reductions in the Fund’s holdings) would also serve as the amount of the currency the Fund might sell in the quarter under Article V, Section 3(d). If the Fund did not sell the currency in the specified amount before the end of the second month of the quarter, the member would be expected to repurchase any balance remaining before the end of the quarter.

Decision No. 5704-(78/39)

March 22, 1978, effective April 1, 1978

A member shall discharge any repurchase obligation that accrued in gold before the date of the Second Amendment with special drawing rights or, at its option, with the currencies of other members specified by the Fund in accordance with Article V, Section 7(i).

Decision No. 5809-(78/88)

June 12, 1978

Attribution of Reductions in Fund’s Holdings of Currencies

A member shall be free to attribute a reduction in the Fund’s holdings of its currency to any of its obligations to repurchase.

Decision No. 5705-(78/39)

March 22, 1978

Charges

Charges: Media of Payment in General Resources Account

1. A member that is unable to pay charges in SDRs because it is not a participant in the Special Drawing Rights Department and has not been prescribed as an other holder may pay all charges payable under Article V, Section 8 in the currencies of other members. Such currencies shall be selected by the Managing Director from those currencies that the Fund would receive in accordance with the operational budget in effect at the time of payment.

2. A member whose holdings of SDRs are insufficient for the payment of the total of charges due and payable by it may (a) obtain SDRs from the General Resources Account up to the amount of the balance of SDRs needed for the payment, or (b) pay the balance of the charges in the currencies of other members. The currencies for which the SDRs would be sold under (a) or that would be paid under (b) shall be selected by the Managing Director from those currencies that the Fund would receive in accordance with the operational budget in effect at the time of payment.

Decision No. 5702-(78/39) G/S

March 22, 1978, effective April 1, 1978

Rates for Computations and Maintenance of Value

1. The exchange rate for computations by the Fund relating to the currency of a member in the General Resources Account

  • (a) on the occasion of the use of that currency in an operation or transaction between the Fund and another member shall be the rate as of three business days before the value date of the operation or transaction, and, if this rate cannot be used, the rate of the preceding day closest thereto that is practicable;

  • (b) on all other occasions shall be the rate at which the currency is held by the Fund.

2. The Fund shall adjust its holdings of the currency of a member in the General Resources Account

  • (a) whenever a computation relating to the currency is made in accordance with paragraph 1(a) above,

  • (b) at the end of the Fund’s financial year,

  • (c) when the member requests the Fund to adjust the Fund’s holdings of its currency,

  • (d) with respect to the U.S. dollar, on the last business day of each month, and

  • (e) on such other occasions as the Fund may decide.

3. Adjustments under paragraph 2 shall be made on the basis of the exchange rate of the currency under Rule O-2 for the day of the adjustment and shall take effect on that day, provided that if an exchange rate under Rule O-2 is not communicated for the currency with respect to paragraph 2(b) above, the rate of the preceding day closest thereto for which a rate is communicated shall be used.

4. Whenever the Fund adjusts its holdings of a member’s currency in accordance with paragraph 3 above, the Fund shall 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 V, Section 11.

5. For the purpose of adjustments, the Fund’s holdings of a member’s currency in the General Resources Account shall consist of the total of the balances of the member’s currency in the General Resources Account, plus the balance in any account receivable, or minus the balance in any account payable, in the currency, as of the date of the adjustment. The total of the balances of the member’s currency in the General Resources Account shall be as recorded on the Fund’s books if the member agrees with this procedure.

6. For the purpose of applying the provisions of the Articles as of any date, the Fund’s holdings of a currency shall consist of its actual holdings plus the balance in any account receivable or minus the balance in any account payable on that date.

7. Settlements of accounts receivable or payable by or to a member shall be made promptly after the end of a financial year of the Fund and at other times when requested by the Fund or the member.

Decision No. 5590-(77/163)

December 5, 1977, effective April 1, 1978

Borrowing

General Arrangements to Borrow: Amendment to Conform with Second Amendment of Articles

Preamble

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

Paragraph 1. Definitions

As used in this Decision the term:

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

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

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

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

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

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

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

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

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

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

Paragraph 2. Credit Arrangements

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

Paragraph 3. Adherence

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

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

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

Paragraph 4. Entry into Force

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

Paragraph 5. Changes in Amounts of Credit Arrangements

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

Paragraph 6. Initial Procedure

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

Paragraph 7. Calls

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

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

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

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

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

Paragraph 8. Evidence of Indebtedness

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

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

Paragraph 9. Interest and Charges

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

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

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

Paragraph 10. Use of Borrowed Currency

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

Paragraph 11. Repayment by the Fund

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

(b) Before the date prescribed in Paragraph 11(a), the Fund, after consultation with a participant, may make repayment to the participant, in part or in full, with any increases in the Fund’s holdings of the participant’s currency that exceed the Fund’s working requirements, and participants shall accept such repayment.

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

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

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

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

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

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

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

Paragraph 12. Rates of Exchange

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

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

Paragraph 13. Transferability

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

Paragraph 14. Notices

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

Paragraph 15. Amendment

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

Paragraph 16. Withdrawal of Adherence

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

Paragraph 17. Withdrawal from Membership

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

Paragraph 18. Suspension of Exchange Transactions and Liquidation

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

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

Paragraph 19. Period and Renewal

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

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

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

Paragraph 20. Interpretation

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

ANNEX Participants and Amounts of Credit Arrangements

Units of

Participant’s

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

Decision No. 1289-(62/1)

January 5, 1962, last amended by

Decision No. 5792-(78/79)

June 2, 1978

The amendment to the General Arrangements to Borrow entered into force on August 11, 1978.

_____________

Third Renewal

A. Executive Board Decision No. 1289-(62/1), as amended, on the General Arrangements to Borrow, is hereby renewed for a period of five years from October 24, 1975 subject to the following modifications:

1. Paragraph 9(b) shall be made to read as follows:

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

2. Paragraph 9(c) shall be made to read as follows:

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

3. The third sentence of Paragraph 11(a) shall be made to read as follows:

Repayment under this Paragraph 11(a) or under Paragraph 11(c) shall be, as determined by the Fund, in the participant’s currency whenever feasible, or in gold, or special drawing rights, or, after consultation with the participant, in other currencies that are actually convertible.

4. The third sentence of Paragraph 11(f) shall be made to read as follows:

Repayment shall be made after consultation with the participant in the currencies of other members that are actually convertible, or made in gold, or special drawing rights, as determined by the Fund.

5. The following shall be inserted in the Decision as Paragraph 11(j):

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

B. Reference in Executive Board Decision No. 1289-(62/1), as amended, to “the period prescribed in Paragraph 19(a)” shall be understood to include the period of the renewal under this Decision.

C. The modifications of Executive Board Decision No. 1289-(62/1), as amended, that are set forth in section A above shall become effective prior to October 24, 1975 as amendments pursuant to Paragraph 15 of the Decision upon receipt of the concurrence of all participants in these modifications in accordance with that Paragraph.

Decision No. 4421-(74/132)

October 23, 1974

___________

Third Extension of Association of Switzerland

The Fund agrees to the extension until October 23, 1980 of the Agreement of June 11, 1964 between the Swiss Federal Council 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 [below].

Decision No. 4858-(75/172)

November 5, 1975

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

November 5, 1975

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 and April 30, 1974.

It is my understanding that, in view of the third renewal of the General Arrangements to Borrow for a period of five years from October 24, 1975 and the Federal Decree of March 20, 1975 authorizing the continuation of the association of the Swiss Confederation, the Swiss authorities are prepared to extend the period of the agreement between the Federal Council and the Fund concerning 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 October 23, 1980.

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/

H. Johannes Witteveen

Managing Director

His Excellency

Felix Schnyder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

Washington, D.C.

November 5, 1975

Sir:

I am pleased to acknowledge receipt of your letter of November 5, 1975.

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, 1980 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,

/s/

Felix Schnyder

The Ambassador of Switzerland

The Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C. 20431

General Arrangements to Borrow: Increase in Amount of Credit Arrangement for Japan

1. Japan has indicated its willingness to increase from 90 billion yen to 340 billion yen the amount of its credit arrangement under the General Arrangements to Borrow (Executive Board Decision No. 1289-(62/1) of January 5, 1962, as amended). The Fund agrees to this increase in the amount of Japan’s credit arrangement under Paragraph 5 of the General Arrangements.

2. The increase will become effective when the Fund has received the agreement of the participants in the General Arrangements to the proposed increase.1

Decision No. 5249-(76/154)

November 5, 1976

Borrowing in Connection with Oil Facility

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

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

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

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

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

Decision No. 4242-(74/67)

June 13, 1974

ANNEX

[Your Excellency] [Dear Sir]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,

H. Johannes Witteveen

Managing Director

Borrowing in Connection with Oil Facility for 1975

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

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

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

  • (a) In the preambular paragraph,

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

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

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

  • (c) In Paragraph 4,

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

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

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

Decision No. 4635-(75/47)

April 4, 1975

Amendments of Agreements with Lenders for the Oil Facility

a. Borrowing

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

Decision No. 4916-(75/208)

December 24, 1975

b. Authorization to Make Calls

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

Decision No. 4741-(75/120)

July 11, 1975

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

Decision No. 4917-(75/208)

December 24, 1975

c. Order of Use

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

Decision No. 4918-(75/208)

December 24, 1975

d. Payment of Interest

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

Decision No. 4490-(74/140)

November 6, 1974

Policy and Procedure

1. This memorandum deals with (i) the timing of interest payments on the amounts of currency borrowed by the Fund in connection with financing transactions under the oil facility; (ii) the establishment of a policy on what assets would be offered by the Fund when it consults with the lenders to agree the means of payment of interest; and (iii) the determination of the necessary authority to consult with the lenders and to make the offer and to agree on the means by which interest shall be paid. Paragraph 6 of the borrowing agreements also deals with repayment of the loans, but it is not necessary to deal with this topic in the present memorandum.

2. Interest payments on the amounts of currency borrowed by the Fund in connection with financing transactions under the oil facility are to be paid quarterly at an annual rate of seven per cent. It is suggested that such quarterly interest payments be made as of the dates at the end of the Fund’s fiscal quarters—namely, July 31, October 31, January 31, and April 30—and that interest be paid as soon as possible after these dates.

The amount of interest to be paid to the lenders with respect to the quarter ending October 31 amounts to the equivalent of about SDR 4.7 million. Full use of the existing commitments to lend (about SDR 2.8 billion) would involve annual interest payments of about SDR 200 million over the first three years of the loans, with declining payments thereafter as repayments of the loans are effected. Total interest payments over the full seven years can be estimated to be about SDR 1 billion. It may be assumed that users of the oil facility will pay charges largely with SDRs while the Fund may not be able to use SDRs for payments under the borrowing arrangements and might thus have to pay currency, in particular U.S. dollars, in substantial amounts.

3. Each of the borrowing agreements provides that the Fund shall consult the lender in order to agree the means in which payment of interest will be made. If agreement is not reached between the Fund and the lender, the Fund has an option to pay in the assets specified in the borrowing agreements. In the discussions of the Executive Directors on the terms and conditions of the borrowing agreements, it was understood that the Fund would try to reach agreement with the lenders on the means of payment of interest. The options given the Fund in each of the borrowing agreements include the means of payment of interest that the lender would be willing to accept if agreement were not reached on something else.

It is proposed that the policy to guide the selection of the means of payment to be offered should be as follows:

(a) The lender would be offered its own currency, one or more currencies selected from the currency budget, and SDRs. The lender could choose to receive payment in any one or more of these assets, but SDRs, of course, could not be offered to a nonparticipant in the Special Drawing Account. The Fund normally would express a preference that the lender choose its own currency first, then the currency selected from the currency budget, and lastly SDRs. If the Fund’s holdings of the currency of a lender should fall to a relatively low level, the extent to which it would be offered would be examined in connection with the quarterly consultations with Executive Directors on the currency budgets.

(b) If the lender has been offered under (a) above the means of payment specified in Paragraph 6 of its borrowing agreement, it is assumed that it will choose one of these means of payments. If the lender would not be willing to accept any of the assets mentioned in (a) above, then the matter will be submitted to the Executive Directors for decision except in those cases in which there is only one means of payment mentioned in Paragraph 6 of that lender’s borrowing agreement. Such a decision is necessary because the Fund might wish to use at its discretion an asset which had been offered under (a) above and refused or a currency that it would not otherwise be using in accordance with the currency policy of the Fund.

The procedure and policy outlined above is designed to permit the Fund to offer a selection of assets for the payment of interest that may be broader than those listed in the respective Paragraph 6 of the borrowing agreements. The lender, however, retains its right to receive the assets of its choice in payment of interest. The policy on the means of payment to be offered is broadly consistent with the considerations underlying the currency budgets of the Fund, in particular the considerations of Fund liquidity and the relative strength of currencies to be used in making payments. On these grounds it would be preferable for lenders to choose the means of payment suggested by the Fund in order to avoid the need to pay U.S. dollars at times when this would not otherwise be consistent with the Fund’s policy on currencies to be used.

4. Under the currency budget proposed for the quarter ending January 31, 1975, U.S. dollars would be suggested as the currency selected from the budget to be offered as one of the means for the payment of interest. Future currency budgets would indicate which of the currencies in the budget would be offered in payment, and also the order of preference, if any, in which the various assets would be offered.

5. In executing the policy described above, it is proposed that the Managing Director be instructed to make arrangements for the necessary consultations with the lenders in order to agree the means to pay interest and to make these payments in accordance with the policy and procedure outlined above. The Executive Directors would be informed promptly of the interest payments made and the assets used in making the payments.

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

Decision No. 4636-(75/47)

April 4, 1975

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

Decision No. 4919-(75/208)

December 24, 1975

Oil Facility: Media of Repayments of Borrowing

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

Decision No. 5441-(77/84)

June 10, 1977

Oil Facility: Transferability of Claims

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

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

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

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

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

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

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

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

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

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

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

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

Decision No. 5974-(78/190)

December 4, 1978

Borrowing Agreement with Swiss National Bank, 1976

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

Decision No. 5288-(76/167)

December 22, 1976

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

December 22, 1976

Sir:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Börsenstrasse 15

8022 Zurich

Switzerland

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

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

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

Decision No. 5306-(77/2)

January 3, 1977

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

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

Decision No. 5331-(77/15)

January 31, 1977

Borrowing Agreement with Swiss National Bank, 1977

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

Decision No. 5387-(77/61)

April 25, 1977

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

April 25, 1977

Sir:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Dr. Fritz Leutwiler

President of the Directorate

Swiss National Bank

Börsenstrasse 15

8022 Zurich

Switzerland

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

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

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

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

Decision No. 5488-(77/116)

August 1, 1977

Replenishment in Connection with Supplementary Financing Facility

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

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

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

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

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

Decision No. 5509-(77/127)

August 29, 1977

ANNEX

[Your Excellency] [Dear Sir]:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Very truly yours,

/s/

H. Johannes Witteveen

Managing Director

Restrictions on Trade and Payments

Consultations on Members’ Policies in Present Circumstances

1. The Committee on Reform of the International Monetary System and Related Issues on January 18, 1974 reviewed important recent developments and agreed that, in the present difficult circumstances, all members, in managing their international payments, must avoid the adoption of policies which would merely aggravate the problems of other members. Accordingly, the Committee stressed the importance of avoiding competitive depreciation and the escalation of restrictions on trade and payments; and emphasized the importance of pursuing policies that would sustain appropriate levels of economic activity and employment, while minimizing inflation. It was also recognized that recent developments would create serious payments difficulties for many developing countries. The Committee agreed that there should be the closest international cooperation and consultation in pursuit of these objectives.

2. The Executive Directors call on all members to collaborate with the Fund in accordance with Article IV, Section 4(a), with a view to attaining these objectives. The consultations of the Fund on the policies that members are following in present circumstances will be conducted with a view to the attainment of these objectives.

Decision No. 4134-(74/4)

January 23, 1974

Voluntary Declaration on Trade and Other Current Account Measures

1. The ad hoc Committee of the Board of Governors on Reform of the International Monetary System and Related Issues, in the detailed statement issued at the end of its sixth and final meeting in Washington on June 12–13, 1974, stressed the importance of avoiding the escalation of restrictions on trade and payments for balance of payments purposes and invited members to subscribe on a voluntary basis to the Declaration concerning trade and other current account measures for balance of payments purposes annexed to its statement. The Executive Directors associate themselves with this invitation.

2. The letter from the Managing Director to members requesting them to inform the Fund whether they subscribe to the Declaration concerning trade and other current account measures for balance of payments purposes, as set forth [below] shall be sent without delay to all members.

Decision No. 4254-(74/75)

June 26, 1974

Letter to Members

Sir:

The ad hoc Committee of the Board of Governors of the International Monetary Fund on Reform of the International Monetary System and Related Issues, in a statement issued at the end of its sixth and final meeting in Washington on June 12–13, 1974, has stressed the importance of avoiding the escalation of restrictions on trade and payments for balance of payments purposes and has invited members of the Fund “to subscribe on a voluntary basis to the Declaration concerning trade and other current account measures for balance of payments purposes” annexed to the Committee’s statement.

The Executive Directors of the Fund associate themselves with the invitation of the ad hoc Committee and have asked that I send the text of the Declaration for consideration by the authorities of all members.

The text of the Declaration is enclosed with this letter.

I shall be grateful if members will consider subscribing to this Declaration and will inform me whether they do subscribe to it.

Very truly yours,

H. Johannes Witteveen

Managing Director

Declaration

A. A member of the Fund that subscribes to this Declaration represents thereby that, in addition to observing its obligations with respect to payments restrictions under the Articles of Agreement of the Fund, it will not on its own discretionary authority introduce or intensify trade or other current account measures for balance of payments purposes that are subject to the jurisdiction of the GATT, or recommend them to its legislature, without a prior finding by the Fund that there is balance of payments justification for trade or other current account measures.

B. A member that subscribes to this Declaration will notify the Fund as far in advance as possible of its intention to impose such measures. If circumstances preclude the Fund from making the finding referred to in A above promptly after such notification, the member may nevertheless impose such measures, but will withdraw the measures, within such a period as may be fixed by the Fund in consultation with the member concerned, if the Fund finds that there is no balance of payments justification for trade or other current account measures.

C. In arriving at the findings referred to above, the Executive Directors are requested to take into account the special circumstances of developing countries.

D. In connection with this Declaration arrangements will be made for continuing close coordination between the Fund and the GATT.

E. This Declaration shall become effective among subscribing members when members having 65 per cent of the total voting power of members of the Fund have accepted it, and shall expire two years from the date on which it becomes effective unless it is renewed.

Special Drawing Rights

General Account: Accounting in Special Drawing Rights

a. Amendment of Section 20(b) of the By-Laws

1. Following the realignment of the exchange rates of members’ currencies the Fund has reviewed its accounting practices. In view of the fixed gold value of special drawing rights, their international character, and their role as an international reserve asset, the Executive Directors have concluded that it would be appropriate for the accounts of the General Account to be summarized in special drawing rights.

2. Accordingly, the Executive Directors of the Fund have approved the submission of the following draft Resolution to the Board of Governors of the Fund for a vote without meeting pursuant to Section 13 of the By-Laws….

DRAFT RESOLUTION Amendment of Section 20(b) of the By-Laws of the Fund

Resolved:

That the first sentence of the fifth paragraph of Section 20(b) of the By-Laws shall be amended, effective March 20, 1972, to read as follows:

“All accounts of the General Account shall be summarized in special drawing rights of the value prescribed in Article XXI, Section 2. The currencies of members shall be converted at their par values, or in accordance with decisions of the Fund.”

Decision No. 3577-(72/16)

February 25, 1972

Method of Valuation

1. Effective July 1, 1978, the value of one special drawing right shall be the sum of the values of specified amounts of the currencies listed in 2 below, the amounts of these currencies to be determined on June 30, 1978 in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of the currencies in the value of the special drawing right correspond to the weights specified for each currency in 2 below.

2. The currencies and the weights referred to in 1 above shall be as follows:

U.S. dollar33
Deutsche mark12½
Japanese yen
French franc
Pound sterling
Italian lira5
Netherlands guilder5
Canadian dollar5
Belgian franc4
Saudi Arabian riyal3
Swedish krona2
Iranian rial2
Australian dollar
Spanish peseta
Norwegian krone
Austrian schilling

3. The list of the currencies that determine the value of the special drawing right, and the amounts of these currencies, shall be revised with effect on July 1, 1983 and on the first day of each subsequent period of five years in accordance with the following formula, unless the Fund decides otherwise in connection with a revision:

  • (a) The currencies determining the value of the special drawing rights shall be the currencies of the sixteen members whose exports of goods and services during the five-year period ending eighteen months before the effective date of the revision had the largest value, provided that a currency shall not replace another currency included in the list at the time of the determination unless the value of the exports of goods and services of the issuer of the former currency during the relevant period exceeds that of the issuer of the latter currency by at least one per cent.

  • (b) The amounts of the sixteen currencies referred to in (a) above shall be determined on the last working day preceding the effective date of the relevant revision in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of these currencies in the value of the special drawing right correspond to percentage weights for these currencies, which shall be established for each currency in the proportion that the sum of the value of the balances of that currency held by the monetary authorities of other members and the value of the exports of goods and services of the issuer of the currency bears to the total sum of the same values for all sixteen currencies during the relevant period, rounded to the nearest one-half of one per cent.

4. The determination of the amounts of the currencies in accordance with 1 and 3 above shall be made in a manner that will ensure that the value of the special drawing right in terms of currencies on the last working day preceding the five-year period for which the determination is made will be the same under the valuation in effect before and after revision.

Decision No. 5718-(78/46) G/S

March 31, 1978

Reconstitution: Reduction in the Minimum Average Holdings of SDRs

I. The Executive Board, having reviewed the rules for reconstitution in accordance with Article XIX, Section 6(b), decides as follows with respect to the five-year periods ending after the date of the first allocation of special drawing rights in the third basic period:

1. The requirement under Schedule G, Paragraph 1(a)(i) regarding the maintenance of a minimum average of total daily holdings of special drawing rights shall be 15 per cent instead of 30 per cent.

2. For the purposes of calculations under Schedule G, Paragraph 1(a)(ii) that are made after the resolution on allocations becomes effective but before the date of the first allocation of special drawing rights in the third basic period, the minimum average daily holdings of special drawing rights required under Schedule G, Paragraph 1(a)(i) shall be 15 per cent.

3. For the purposes of calculations under Schedule G, Paragraph 1(a)(ii) it shall be assumed that no allocations or cancellations of special drawing rights will be made after the third basic period.

II. The Executive Board will consider further in the light of experience the requirement under Schedule G, Paragraph 1(a)(i), as amended by this decision.

Decision No. 5936-(78/168) S

October 25, 1978, effective December 11, 1978

Use of SDRs in Settlement of Financial Obligations

A. In accordance with Article XIX, Section 2(c), the Fund prescribes that:

1. A participant, by agreement with another participant, may use SDRs to settle a financial obligation to the other participant, other than an obligation to make a donation, if

  • (a) the obligation is denominated in

    • (i) SDRs, or

    • (ii) the currency of a member, or

    • (iii) the currency of a nonmember or another unit of account that is composed of currencies and is applied under an intergovernmental agreement, in respect of which arrangements have been completed for determination by the Fund of equal value in terms of the SDR on the basis of Article XIX, Section 7(a) and Rule O-2; and

  • (b) the amount of SDRs to be used in the settlement of an obligation referred to in (a)(ii) or (a)(iii) above is equal in value, in terms of the SDR, at the time of settlement, to the amount of the obligation.

2. The calculations under 1(b) above shall be made at the exchange rate of the third business day preceding the value date or of the second business day preceding the value date if agreed between the parties.

3. Participants intending to use or aquire SDRs under 1(a) above shall inform the Fund of the denomination and amount of the obligation and the intended value date of the operation. As required by Rule P-7 the lender and the borrower shall declare that the intended use of SDRs will be in accordance with this prescription.

4. Transfers of SDRs under this prescription shall be made only upon the receipt by the Fund of instructions from the transferor and the transferee.

B. The Fund shall record operations under this prescription in accordance with Rule P-9.

C. The Fund shall review this decision prior to June 30 of each year.

Decision No. 6000-(79/1) S

December 28, 1978

Use of SDRs in Loans

A. In accordance with Article XIX, Section 2(c), the Fund prescribes that:

1. A participant, by agreement with another participant, may make a loan of SDRs to the other participant if

  • (a) the principal amount of the loan is denominated in

    • (i) SDRs, or

    • (ii) the currency of a member, or

    • (iii) the currency of a nonmember or another unit of account that is composed of currencies and is applied under an intergovernmental agreement, in respect of which arrangements have been completed for determination by the Fund of equal value in terms of the SDR on the basis of Article XIX, Section 7(a) and Rule O-2; and

  • (b) the amount of SDRs used in a loan referred to in (a)(ii) or (a)(iii) above is equal in value, in terms of the SDR, at the time of the use, to the amount of the loan; and

  • (c) the borrower has undertaken the following obligations under the loan agreement:

    • (i) if the loan is denominated in SDRs, to repay with the same amount of SDRs, or the equivalent, at the time of repayment, in the currency of a member on the basis of Article XIX, Section 7(a) and Rule O-2, or in the currency of a nonmember or another unit of account under (a)(iii) above in accordance with the arrangements for valuation referred to therein;

    • (ii) if the loan is denominated in the Currency of a member and is to be repaid in SDRs, to repay with the equivalent in SDRs, at the time of repayment, on the basis of Article XIX, Section 7(a) and Rule O-2;

    • (iii) if the loan is under (a)(iii) above and is to be repaid in SDRs, to repay with the equivalent in SDRs, at the time of repayment, in accordance with the arrangements for valuation referred to in (a)(iii) above.

2. The calculations under 1(b) and (c) above shall be made at the exchange rate of the third business day preceding the value date or of the second business day preceding the value date if agreed between the parties.

3. Repayment and the payment of interest with SDRs shall be made in accordance with the prescription of the use of SDRs in the settlement of financial obligations.

4. Participants intending to lend or borrow SDRs under this prescription shall inform the Fund of the amount and value date of the loan, the denomination, rate of interest, maturity, and means of repayment agreed between the parties. As required by Rule P-7 the lender and the borrower shall declare that the intended use of SDRs will be in accordance with this prescription.

5. Transfers of SDRs under this prescription shall be made only upon the receipt by the Fund of instructions from the transferor and the transferee.

B. The Fund shall record operations under this prescription in accordance with Rule P-9.

C. The Fund shall review this decision prior to June 30 of each year.

Decision No. 6001-(79/1) S

December 28, 1978

Amendment of the Articles of Agreement

Board of Governors Resolution No. 29-10: Report of Executive Directors and Proposed Second Amendment to the Articles of Agreement

I. Pursuant to Resolution No. 29-10 of the Board of Governors at the 1974 Annual Meeting the Executive Directors:

  • (a) adopt the Report of the Executive Directors to the Board of Governors on the Proposed Second Amendment of the Articles of Agreement of the International Monetary Fund;

  • (b) propose the introduction in the Articles of Agreement of the modifications included in the Proposed Second Amendment attached to the Resolution in Part IV of the Report; and

  • (c) recommend the adoption by the Board of Governors of the Resolution in Part IV of the Report.

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Decision No. 5049-(76/51)

March 24, 1976

Exclusion of Purchases and Holdings

Exclusion of Purchases Under Oil Facility for Purpose of Definition of “Reserve Tranche Purchase

With effect on the date of the Second Amendment of the Articles of Agreement, the Fund’s holdings of currencies acquired in purchases under Executive Board Decision No. 4241-(74/67), June 13, 1974 and Executive Board Decision No. 4634-(75/47), April 4, 1975, shall be excluded pursuant to Article XXX(c)(iii) for the purpose of the definition of “reserve tranche purchase.”

Decision No. 5371-(77/51)

April 8, 1977, effective April 1, 1977

Exclusion of Purchases and Holdings Under Buffer Stock Facility

With effect from the date of the Second Amendment of the Fund’s Articles, purchases after that date under the Buffer Stock Facility (Decision No. 2772-(69/47), June 25, 1969, as amended), and holdings resulting from all purchases under the Facility, shall be excluded pursuant to Article XXX(c)(ii) for the purpose of the definition of “reserve tranche purchase.”

Decision No. 5591-(77/163)

December 5, 1977

Freely Usable Currencies

Pursuant to Article XXX(f), and after consultation with the members concerned, the Fund determines that until further notice the deutsche mark, French franc, Japanese yen, pound sterling, and U.S. dollar are freely usable currencies.

Decision No. 5719-(78/46)

March 31, 1978

General Sales of the Fund’s Gold

Timing of Gold Auctions

The Executive Directors agree to proceed with the gold auctions on the basis of the arrangements described under Option 2 in the Managing Director’s statement, with attachment [below].

Decision No. 5273-(76/163) TR

December 7, 1976

Timing of Sales of Gold for the Purpose of Distribution

The Executive Directors agree to undertake the first restitution operation on the basis of the arrangements described under Option 2 in the Managing Director’s statement, with attachment [below].

Decision No. 5274-(76/163)

December 7, 1976

Option 2 in the Managing Director’s Statement with Attachment

(2) A second possibility would be to hold the sixth auction on January 26, 1977 for another 780,000 ounces. This would represent the last auction under the present schedule. Beginning early in March, auctions would then be held on the first Wednesday of each month and 525,000 ounces (rounded up from 521,333) would be offered in each of 15 monthly auctions. This schedule would facilitate the completion of the first restitution operations, and the amount to be offered in each of the first two years of the sales program would be approximately equal as shown in column 2 of the annexed table. If the sixth auction were not to be the last under the present schedule so that 780,000 ounces would not be offered, but would be the first of monthly auctions, the amounts to be offered would be the same as under the first possibility. In addition, a monthly auction on the fourth Wednesday of each month would later require an adjustment in the dates in order to avoid an auction during the 1977 Christmas holiday season.

Attachment Timing and Amounts of Auctions and Timing of Restitution

(Amounts in fine ounces)

(1)(2)(3)
Sixth auctionJanuary 12January 26February 2
Amount to be offered510,000780,000540,000
Seventh auctionFebruary 9March 2March 2
Monthly amount510,000525,000540,000
Gold offered in year
ending May 31, 19776,450,0006,255,0006,060,000
Gold offered in
second year6,120,0006,300,0006,480,000
Gold offered in
first two years12,570,00012,555,00012,540,000
Restitution
Notification to Fund
by membersDecember 27, 76December 27, 76January 3, 77
Delivery of restituted
goldJan. 10–14, 77Jan. 10–14, 77Jan. 17–21, 77
Delivery of gold from
sixth auction
(approximate dates)January 24, 77February 9, 77February 16, 77
onwardonwardonward

Gold Distribution: Postponement

1. The Fund notes the requests from Barbados, Burundi, Grenada, Liberia, Panama, Philippines, Sierra Leone, Zaïre, and Zambia to allow these members to postpone their participation in the first gold restitution operation on the ground of balance of payments need.

2. Lebanon, Lesotho, Malawi, Sudan, and Uganda have requested the Fund to allow them to postpone their participation in the first gold restitution operation on the ground of balance of payments need. The Fund agrees to these requests.

3. Postponement, in accordance with paragraphs 1 and 2 above, shall continue until not later than 30 days after the date of the second amendment of the Articles of Agreement.

Decision No. 5314-(77/6)

January 10, 1977

Gold Auctions: Noncompetitive Bids

1. Introduction

The Fund will entertain noncompetitive bids by members that informed the Fund by May 22, 1978 that they wish to have the option described in Section 1 of the Summary of Conclusions on Gold Auctions and Restitution (EBS/76/198, Rev. 1, 5/6/76). Until further notice, the terms and conditions set out in the following paragraphs shall apply to such bids.

2. Amount and Timing of Noncompetitive Bids

A member wishing to exercise its right to submit noncompetitive bids must do so before May 31, 1979. The gold auctions are scheduled to take place on the first Wednesday of each month, and members entitled to do so may submit bids at one or more of the auctions. Each eligible member may submit bids not exceeding in total that part of 25 million ounces that corresponds to its share in total Fund quotas on August 31, 1975 plus the quota of Papua New Guinea.

3. Weight and Quality

The gold will be in bars containing between 350 and 430 fine ounces of gold each and is said to be 995 in 1000 parts or better in fineness. It will be available at the depository at which gold is delivered in the auction in which the bids are submitted or, if a Fund gold depository is located in the territory of the member submitting a bid, at that gold depository.

4. Submission

Bids may be submitted by mail, cable, telegram, or telex. They must be for a number of fine troy ounces in multiples of 400 troy ounces. Bids for the total amount of the member’s entitlement will be rounded up to the nearest standard bar. Bids submitted by mail must be dated and signed by the bidder; those submitted by cable, telegram, or telex must contain the usual test number. All bids must be clearly marked “Noncompetitive Bid” and must be received at the Fund in Washington by 11:00 a.m. EDT or EST, as the case may be, on the day of the auction. Bids may be withdrawn or modified only before that time.

5. Notification, Payment and Delivery

(a) The Fund will notify noncompetitive bidders promptly by cable, telegram, or telex upon completion of the auction of the average auction price. The exact amount of gold awarded and the amount due to the Fund will be communicated to the bidders promptly following the selection of bars.

(b) Payment of the amount due to the Fund must be made within seven business days after dispatch of the notification. An amount equivalent to SDR 35 an ounce shall be paid in currencies specified by the Fund, and the remainder in U.S. dollars.

(c) It is expected that the purchaser will make arrangements with the appropriate Fund gold depository to take delivery of the gold awarded within ten business days after the last date for completion of payment.

Decision No. 5779-(78/74) TR

May 19, 1978

Trust Fund

1. The Executive Directors of the International Monetary Fund (the “Fund”) adopt the Instrument to Establish the Trust Fund (the “Instrument”) that is annexed to this Decision.

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

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

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

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

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

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

Decision No. 5069-(76/72)

May 5, 1976

Instrument to Establish the Trust Fund

Introductory Section

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

Section I. Purposes and Resources of the Trust

Paragraph 1. Purposes

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

Paragraph 2. Resources

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

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

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

Section II. Operations of the Trust

Paragraph 1. Form of balance of payments assistance

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

Paragraph 2. Eligible members

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

Paragraph 3. Conditions for assistance

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

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

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

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

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

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

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

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

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

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

Paragraph 4. Terms and conditions of loans from the Trust

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

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

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

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

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

Paragraph 5. Amounts available for disbursement

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

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

Section III. Administration of the Trust

Paragraph 1. Trustee

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

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

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

Paragraph 2. Separation of assets and accounts

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

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

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

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

Paragraph 3. Reimbursement of expenses

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

Paragraph 4. Investment and other operations and transactions

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

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

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

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

Section IV. Annual Report and Modifications

Paragraph 1. Modifications

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

Paragraph 2. Report

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

Section V. Period of Operation and Liquidation

Paragraph 1. Period of operation

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

Paragraph 2. Liquidation

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

Section VI. Other Activities of the Trust

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

Annex A List of Members Eligible for Trust Assistance

  • Afghanistan

  • Bangladesh

  • Benin

  • Bolivia

  • Botswana

  • Burma

  • Burundi

  • Cambodia

  • Cameroon

  • Central African Rep.

  • Chad

  • Congo, People’s Rep. of

  • Egypt

  • El Salvador

  • Equatorial Guinea

  • Ethiopia

  • Gambia, The

  • Ghana

  • Grenada

  • Guatemala

  • Guinea

  • Haiti

  • Honduras

  • India

  • Indonesia

  • Ivory Coast

  • Jordan

  • Kenya

  • Laos

  • Lesotho

  • Liberia

  • Madagascar

  • Malawi

  • Mali

  • Mauritania

  • Mauritius

  • Morocco

  • Nepal

  • Niger

  • Nigeria

  • Pakistan

  • Papua New Guinea

  • Paraguay

  • Philippines

  • Rwanda

  • Senegal

  • Sierra Leone

  • Somalia

  • South Viet-Nam

  • Sri Lanka

  • Sudan

  • Swaziland

  • Tanzania

  • Thailand

  • Togo

  • Uganda

  • Upper Volta

  • Western Samoa

  • Yemen Arab Republic

  • Yemen, People’s Dem. Rep.

  • Zaïre

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

1. Section II, Paragraph 2 shall read:

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

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

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

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

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

Decision No. 5563-(77/150) TR

October 28, 1977

Annex B Trust Fund: List of Eligible Countries for the Second Period

  • Afghanistan

  • Bangladesh

  • Benin

  • Bolivia

  • Botswana

  • Burma

  • Burundi

  • Cameroon

  • Central African Empire

  • Chad

  • Congo, People’s Republic of the

  • Egypt

  • El Salvador

  • Equatorial Guinea

  • Ethiopia

  • Gambia, The

  • Ghana

  • Grenada

  • Guinea

  • Haiti

  • Honduras

  • India

  • Indonesia

  • Ivory Coast

  • Jordan

  • Kampuchea, Democratic

  • Kenya

  • Lao People’s Democratic Republic

  • Lesotho

  • Liberia

  • Madagascar

  • Malawi

  • Mali

  • Mauritania

  • Morocco

  • Nepal

  • Niger

  • Nigeria

  • Pakistan

  • Papua New Guinea

  • Philippines

  • Rwanda

  • Senegal

  • Sierra Leone

  • Somalia

  • Sri Lanka

  • Sudan

  • Swaziland

  • Tanzania

  • Thailand

  • Togo

  • Uganda

  • Upper Volta

  • Viet Nam

  • Western Samoa

  • Yemen Arab Republic

  • Yemen, People’s Democratic Republic of

  • Zaïre

  • Zambia

Diversification of Investments

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

2. The Managing Director is authorized to place in deposits with the Bank for International Settlements, denominated in SDRs, the profits from gold sales realized in the period from July 1 to September 30, 1978, with the exception of the portion of these profits that must be distributed directly to developing countries in proportion to their quotas on August 31, 1975.

3. If, on the occasion of an intended deposit with the Bank for International Settlements during the period referred to in 2 above, the Managing Director finds that the interest rate offered by the Bank for International Settlements on this SDR-denominated deposit is not sufficiently attractive, the Managing Director shall invest the currency assets involved and the currency assets accruing from any subsequent gold sales prior to September 30, 1978 in U.S. Government securities, and will inform the Executive Board of his action.

4. The Executive Board will review this decision not later than October 9, 1978. Before this review, the staff shall complete arrangements, to the extent feasible, with the authorities of the members whose currencies are included in the SDR basket as of July 1, 1978 and that issue obligations in their currencies that the Trust could hold, for the purpose of making possible the placing of investments in domestic currency with them in the proportions corresponding approximately to their share in the SDR basket.

5. The staff shall also inform the Board, as frequently as practicable, but, in any event, not less than once a month during the period July 1 to September 30, 1978, of the approximate yield of an investment of various maturities composed of individual investments in as many as feasible of the 16 currencies that compose the SDR basket.

Decision No. 5812-(78/90) TR

June 16, 1978

Instrument to Establish the Trust Fund: Diversification of Investments

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

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

Decision No. 5972-(78/189)

December 4, 1978

Diversification of Trust Fund Investments

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

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

Decision No. 5973-(78/189) TR

December 4, 1978

Reproduced on p. 506 below.

Not included in these volumes.

Not included in these volumes.

See also E. B. Decision No. 5694-(78/35), below, p. 503.

See also E. B. Decision No. 4934-(76/5), below, p. 506.

Reproduced on p. 495, above.

See also E. B. Decision No. 5348-(77/33), this page.

The increase became effective on November 23, 1976.

See also E. B. Decision No. 4635-(75/47), below, p. 539.

Corresponds to Rule O-2 of the Rules and Regulations as of August 1, 1979, which are reproduced above, pp. 457–81.

Reproduced above, p. 530.

Corresponds to Rule O-2 of the Rules and Regulations as of August 1, 1979, which are reproduced above, pp. 457–81.

Reproduced above, p. 530.

Resolution No. 27-3, adopted by the Board of Governors effective March 20, 1972.

The resolution and the report are reproduced above, pp. 208–10 and pp. 317–76, respectively.

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