Transcript of a Media Conference Call on IMF Notes Issuance with Andrew Tweedie, Director, IMF Finance Department

July 6, 2009

Washington, D.C.
Wednesday, July 1, 2009

MR. TWEEDIE: Good afternoon, everyone. Perhaps I can just make a few initial comments and then am happy to try to respond to any questions.

Today the Executive Board had an important meeting on the issuance of Notes, and I would say that the Fund took a further important step towards implementing the agreement that was reached by the G-20 heads of state and also endorsed by the IMF membership in April, which was for an immediate increase in the IMF's resources available to lend of $250 billion. You might recall that since then several countries, members of the Fund, have expressed interest in purchasing Notes, and in particular there have been announcements from China, Brazil, and Russia. I think the most recent was Brazil in early June, and at that time the Managing Director indicated that he had asked the IMF staff to bring the necessary documentation to the Board as quickly as possible. So, this is the follow-up step to that. And today I'm pleased to say the Board endorsed the framework for issuing Notes to the official sector. This framework includes the form of a Note purchase agreement that could be signed with members and also the general terms and conditions of the notes.

Maybe I can just summarize a few key points of the framework that was endorsed today. The Note purchase agreements can be agreed with any of the Fund's members or their Central Banks that have a sufficiently strong external balance of payments position, as measured by those members that are included in the Fund's Financial Transactions Plan. There are currently 51 participants in the Financial Transactions Plan. Each Note purchase agreement would set out a maximum amount of the Notes that the member would be willing to purchase, as well as a period over which the member would commit to purchase notes.

The period would be for one year initially but could be extended by the Fund for an additional year, and thereafter the Fund and the member could agree on further extensions up to a total of five years.

That is on the agreements. The actual issuance of Notes would take place when the Fund needs to draw on these arrangements to finance its lending operations. So, Notes would actually be issued as the Fund conducts its lending.

Turning to the financial terms of the notes: They would be denominated in SDRs. They would pay the three-month SDR interest rate. They would have a maximum maturity of five years with three-month interim maturities that would be extendable by the Fund. The Notes would be freely transferable to eligible holders within the official sector, which comprises IMF members, their Central Banks or fiscal agencies, and also other prescribed holders of SDRs. The important point to emphasize is that the Notes are to be issued to the official sector and are transferable within the official sector but are not transferable to the private sector.

Just a couple of other details. There are actually two series of Notes that could be issued called Series A and B.  The only difference between the two, Series A Notes would be immediately encashable by the Fund if the member concerned had a balance of payments need; the Series B Notes would not be immediately encashable but would be encashable within a 12-month period. And the reason for the difference is to assist the IMF in its liquidity management.

The Board has also agreed on an initial limit on the Series A Notes that could be issued per Note purchase agreement of 15 billion SDRs, but this limit could be raised by the IMF at a later date.

I think those are the key points that I'd like to mention at the beginning, and I'd be happy to respond to any questions.

QUESTIONER: I was curious to find out the overall limit, if any, on the issuance of these funds. I've heard 500 billion mentioned, and then there's 150 billion that was mentioned earlier. And I know you just talked about limits for Series A, but I'm sure it's not just sort of an overall cap on this framework.

MR. TWEEDIE: There was no limit or cap set on the overall amount of Notes that could be issued. As you probably know, the original goals that were agreed in the spring were an immediate increase in total financing which could be either through the issuance of Notes or through bilateral credit lines of $250 billion, and the ultimate goal is a tripling of the IMF resources by up to $500 billion, but that would be in the context of an expanded new arrangements to borrow. So, those are the broad goals, but there was no limit set on the Notes themselves.

QUESTIONER: I say the commitments in the press release -- the press release that just come out and said commitments under the -- under such IMF lending arrangements have increased to more than 100 billion in the past year. The question here then is if China, Brazil, and Russia are going to participate their commitments on not a hundred billion, who are the other countries and how much will they (contribute).

MR. TWEEDIE: those are two different things. The commitments is what the Fund has committed to lend in the last year. … that has been about a hundred billion SDRs. The Note issuance is part of the effort to ensure that we have sufficient funds to meet this lending. So, these are two different things. One is the sources of funds, as I mentioned we are seeking from the April summit to raise $250 billion. That's from our members, in addition to our quota resources. And we're doing that to be in a position to lend to countries as needed. And this hundred billion SDRs is what we've committed to lend.

QUESTIONER: How much in Notes are you prepared to issue? I mean, can ten countries participate in this up to 500 billion or are there no limits?

MR. TWEEDIE: I mean, the Board didn't set any limits. … So, we are seeking to raise these total amounts either through borrowing directly, bilateral borrowing lines, or through Notes, but there's no limit that was set on the amount of Notes that could be issued at this stage.

QUESTIONER: When can we expect the no issuance to begin?

MR. TWEEDIE: Well, today was a key step in getting the Board's approval of the framework for issuing Notes. Now the only step remaining would be to sign agreements consistent with that framework with individual members, so that can be done I would hope relatively quickly. As you know -- sorry, I was just going to add as you know three members have already expressed their interest in purchasing Notes -- China for $50 billion and Brazil and Russia for $10 billion each -- and now we have a key step that needed to be implemented first, which was agreement on the framework for doing that.

QUESTIONER: Yes, sorry, just to come back to the amount that the Board approved for issuance. I just heard Mr. Lipsky say that the Board approved the issuance of up to $500 billion in Notes, but I just want to make sure that I understood you correctly when you said there was no limit set on the Notes themselves? Are those two separate issues?  Or are they the same thing?

MR. TWEEDIE: I'm not sure what was said, but the overall target which was set by the membership in April was to treble the Fund's resources, so this is up to a total of $500 billion. This would be, though, in the context of the New Arrangements to Borrow. So, what we're talking about now is an interim step until the expanded New Arrangements to Borrow are in place, and there's no limit that has been set by the Board on the fund-raising for that interim step. Obviously this is a step towards ultimately trebling the Fund's resources.

QUESTIONER: So, the Fund, the Board, has set no limit on the issuance of bonds, and not just on the actual fundraising overall but on the issuance of bonds, is that correct?

MR. TWEEDIE: That's correct.

QUESTIONER: Are there other countries that have come to the Fund expressing interest in purchasing these Notes other than the three, or are they the only ones so far?

MR. TWEEDIE: Oh, we've been in discussions with a number of our members, and a number have expressed interest.  These are the only three that have made announcements to date. But there is, I would say, broader interest in purchasing Notes.


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