IMF Approves Framework for Issuing Notes to the Official Sector

Press Release No. 09/248
July 1, 2009

The Executive Board of the International Monetary Fund (IMF) approved a framework today for the issuance of notes to member countries and their central banks.

“This innovative framework will further strengthen the IMF’s capacity to bring rapid assistance to its members as and when it is needed,” Managing Director Dominique Strauss-Kahn said. “This new financing tool and our other financing initiatives demonstrate the commitment of the Fund and its members to tackling head-on the effects of the global financial and economic crisis. At the same time, the IMF notes offer a secure investment for our members.”

Under the framework, members may sign agreements to purchase IMF notes up to a limit set by the member. Several members have already expressed their interest in buying IMF paper, with China signaling its intention to invest up to US$50 billion, and Brazil and Russia up to US$10 billion each. (See Press Releases 09/204 09/207, and 09/187).

Issuance of notes could begin after the first note purchase agreement has been concluded with a member. The IMF would issue notes at times when loan disbursements are made to members receiving financial assistance from the IMF. Once purchased by member governments, or their central banks, the notes would be tradable within the official sector, which includes all IMF members, their central banks, and 15 multilateral institutions—those which are designated holders of Special Drawing Rights (SDR—See SDR Factsheet).

The principal of the notes will be denominated in SDR, the Fund’s unit of account, which is a currency basket composed of the U.S. dollar, Euro, Japanese Yen, and Pound sterling. Interest payments will be made quarterly, at the official SDR interest rate, which is a weighted average of 3-month interest rates in these currencies.

The notes have a maximum maturity of five years, which is consistent with the maximum maturity of IMF lending under Stand-By Arrangements and Flexible Credit Line arrangements. Commitments under such IMF lending arrangements have increased to more than SDR 100 billion (about US$150 billion) in the past year, as the Fund has responded flexibly to members’ financing needs during the global crisis.

“This framework for issuing the IMF notes marks a significant step forward in our continuing drive to make sure the IMF can respond effectively to member countries’ needs in these challenging and uncertain times,” the Managing Director underscored.



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