The Executive Board of the International Monetary Fund approved on July 1, 2009 a framework for issuing notes to the official sector.
Issuance of the notes would enable members to invest in IMF paper, while providing an immediate supplement to IMF resources for financial assistance to members. The actual issuance of notes would occur at the time of a loan disbursement to a member. A number of IMF members have expressed interest, with Brazil and Russia indicating that they would purchase up to $10 billion, and China up to $50 billion. The notes would have similar financial terms to the IMF’s recent bilateral borrowing agreements.
Purpose. To supplement the IMF’s capacity to provide timely financial assistance to its members.
Issuance. At the time of a non-concessional loan disbursement to a member. Issues will take place with at least 5 business days’ notification from the IMF.
Purchase Agreements. Members can purchase notes directly from the Fund once they have concluded a Note Purchase Agreement (NPA). The NPA includes a limit on total purchases agreed with members during a minimum period of 1 year, extendable by the Fund for a second year. Further extensions could be agreed with the member for a total of up to 5 years.
Purchasing Members. Members with an external position sufficiently strong to be included in the Fund’s financial transactions plan (currently 51 members) can enter into NPAs. The central bank or the member’s fiscal agency could also enter into an NPA.
Maturity. Maximum maturity of 5 years, with 3 month interim maturities that are extendable by the IMF for additional 3-month periods.
Denomination. The principal of notes is denominated in Special Drawing Rights (SDR). Issued in multiples of SDR 10 million.
Issue Price. 100 percent of the nominal amount.
Interest. Payable quarterly based on the average SDR interest rate for the preceding quarter.
Transferability. Notes will be freely transferable to other eligible holders in the official sector. These include all IMF members, their central banks, the fiscal agency of a member, and official institutions that are prescribed holders of SDRs. Transfers to other official entities are permitted with consent from the Fund, but transfers to the private sector are not permitted. The Notes cannot be used in derivative transactions.
Early Repayment. The IMF may make early repayment of all or part of outstanding notes.
Encashability. Purchasing members would be able to obtain early repayment, of part or all of the full amount outstanding, either immediately (Series A notes) or within 12 months (Series B notes), if they have a balance of payments need. This also applies to members that acquire notes through transfers, if they were included in the financial transactions plan at the time of the transfer.