Selected Decisions and Selected Documents of the IMF, Thirty- Sixth Issue -- Multilateral Debt Relief Initiative (MDRI) and Related HIPC Initiative Amendments

Prepared by the Legal Department of the IMF
As updated as of December 31, 2011

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ARTICLE V, SECTION 2(b)
Technical and Financial Services
Financial Services

MULTILATERAL DEBT RELIEF INITIATIVE (MDRI) AND RELATED HIPC INITIATIVE AMENDMENTS

1. Pursuant to Article V, Section 2(b), the Fund adopts the Instrument to Establish the Multilateral Debt Relief Initiative-I Trust (“MDRI-I Trust”) that is annexed as Attachment I to this decision. The Fund shall conduct semi-annual reviews of the financing of the MDRI-I Trust.

2. Pursuant to Article V, Section 2(b), the Fund adopts the Instrument to Establish the Multilateral Debt Relief Initiative-II Trust (“MDRI-II Trust”) that is annexed as Attachment II to this decision. The Fund shall conduct semi-annual reviews of the financing of the MDRI-II Trust.

3.1

4.2

5. Of the resources held in the Special Disbursement Account (SDA) as of January 5, 2006:

    (a) the equivalent of SDR 530 million, which shall include all the proceeds from investment of the profits of the 1999/2000 gold sales held in the SDA as of January 5, 2006, shall be transferred to the HIPC subaccount of the PRGF-HIPC Trust Account and shall be used exclusively to provide debt relief from the Fund under the HIPC Initiative to members that qualify for such relief or, if not needed for such purpose, shall be used to replenish resources from other sources that have been used for such relief;

    (b) the equivalent of SDR 1.5 billion shall be transferred to the MDRI-I Trust established pursuant to paragraph 1 of this decision, and shall be used exclusively to provide debt relief from the Fund in accordance with the provisions of the Instrument establishing that Trust; and

    (c) the remaining balance shall be transferred to the Subsidy Account of the PRGF Trust.

6. In accordance with Article V, Section 12(i), the General Resources Account of the Fund shall be reimbursed annually by the MDRI-I Trust, from resources transferred to the MDRI-I Trust from the SDA, in respect of the expenses of administering SDA resources in the MDRI-I Trust, other than expenses already attributed to other accounts or trusts administered by the Fund or to the General Resources Account.

7.3

8. This decision shall become effective when all third party contributors to the Subsidy Account of the PRGF Trust have consented to the amendments set forth in paragraph 3 above, and the Trustee has received notifications of consent from contributors for transfers to the MDRI-II Trust for the equivalent of SDR 1.12 billion.

Decision No. 13588-(05/99) MDRI,
November 23, 2005,
effective January 5, 2006,
as amended by Decision No. 14649-(10/64),
June 25, 2010

Attachment I

Instrument to Establish the Multilateral Debt Relief Initiative-I Trust

Introductory Section

To help fulfill its purposes, the International Monetary Fund (“the Fund”) has adopted this Instrument to Establish the Multilateral Debt Relief Initiative-I Trust (“the Trust”), which shall be administered by the Fund as Trustee (“the Trustee”). The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. General Provisions

Paragraph 1. Definitions

Wherever used in this Instrument, unless the context otherwise requires:

    (a) “decision point“ and “completion point“ shall have the meaning given to each of them in Section I, Paragraph 1 of the PRGF-HIPC Trust Instrument that is annexed to Decision No. 11436-(97/10), adopted February 4, 1997 (“the PRGF-HIPC Trust Instrument”); and

    (b) “eligible or potentially eligible for HIPC Initiative assistance” means the relevant member either (i) meets the eligibility criterion set forth in Section III, paragraph 1(d) of the PRGF-HIPC Trust Instrument, or (ii) had reached a decision point under the HIPC Initiative as of December 31, 2004.

Paragraph 2. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing balance of payments assistance to low-income developing members by making grants (“Trust grants”) to eligible members that qualify for assistance under the terms of this Instrument.

Paragraph 3. Trust Account and resources

(a) The operations and transactions of the Trust shall be conducted through an account (“the Account”). Within the Account, the Trustee may establish such sub-accounts as it deems necessary for the administration of the resources in the Account.

(b) The resources held in the Account shall consist of:

    (i) transfers from the Special Disbursement Account in accordance with paragraph 5(b) of Decision No. 13588-(05/99) MDRI;

    (ii) grant contributions made to the Trust for the purposes set forth in paragraph 2;

    (iii) loans, deposits and other types of investments made by contributors with the Trust to generate income to be used for the purposes set forth in paragraph 2; and

    (iv) net earnings from investment of resources held in the Account.

Paragraph 4. Unit of account

The SDR shall be the unit of account for commitments and all other operations and transactions of the Trust, provided that commitments for contributions may also be made in currency.

Paragraph 5. Media of payment of contributions and exchange of resources

(a) Resources provided to the Trust may be received in any currency.

(b) Payments by the Trust shall be made in U.S. dollars or such other media as may be agreed between the Trustee and the payee.

(c) Contributions to the Trust may also be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust, provided that any balance of a currency held in the Trust may be exchanged only with the consent of the issuer of such currency.

Section II. Contributions to the Trust

The Trustee may accept contributions of resources for the Account on such terms and conditions as may be agreed between the Trustee and the respective contributors, subject to the provisions of this Instrument. For this purpose, the Managing Director of the Trustee is authorized to accept grants and enter into loan, deposit or other types of investment agreements with the contributors to the Trust.

Section III. Trust Grants

Paragraph 1. Eligibility for assistance

In order to be eligible for assistance from the Trust under Section I, paragraph 2 of this Instrument, a member shall meet the following requirements:

    (a) the member is PRGF-eligible (i.e., it is included in the list of members annexed to Decision No. 8240-(86/56) (SAF), adopted March 26, 1986;

    (b) the member had an annual per capita income of US$380 or less on the basis of the 2004 gross national income (Atlas method) from the World Bank’s Operational Manual as updated on July 21, 2005;

    (c) the member had debt outstanding to the Fund, including to the Fund as Trustee, as of December 31, 2004; and

    (d) in the case of a member that is eligible or potentially eligible for HIPC Initiative assistance, the member has reached the completion point under the HIPC Initiative.

Paragraph 2. Qualification for assistance

The Trustee shall determine whether an eligible member qualifies for assistance under this Instrument in accordance with the criteria set out below:

    (a) Each member eligible for assistance from the Trust that is also eligible or potentially eligible for HIPC Initiative assistance and that reaches the completion point on or after January 5, 2006, shall qualify for assistance under this Instrument when it reaches the completion point.

    (b) Each member eligible for assistance from the Trust that is also eligible or potentially eligible for HIPC Initiative assistance and that reached the completion point prior to January 5, 2006, shall qualify for assistance under this Instrument when the Trustee determines that, since the member reached the completion point, its performance has not deteriorated substantially with respect to: (i) macroeconomic performance, (ii) implementation of a poverty reduction strategy or similar framework, and (iii) the state of its public expenditure management systems. A member will be deemed to have met the requirement set forth in (i) and (ii) of the preceding sentence if the member has a track record of satisfactory macroeconomic performance and satisfactory implementation of a poverty reduction strategy for the six month-period immediately preceding the determination of qualification.

    (c) Each member eligible for assistance from the Trust that is not eligible or potentially eligible for HIPC Initiative assistance shall qualify for assistance under this Instrument when the Trustee determines that the member’s performance is satisfactory with respect to: (i) macroeconomic performance, (ii) implementation of a poverty reduction strategy or similar framework, and (iii) the state of its public expenditure management systems. A member will be deemed to have met the requirement set forth in (i) and (ii) of the preceding sentence if the member has a track record of satisfactory macroeconomic performance and satisfactory implementation of a poverty reduction strategy for the six month-period immediately preceding the determination of qualification.

Paragraph 3. Amount and delivery of assistance

(a) Upon a determination that a member qualifies for assistance pursuant to paragraph 2 above, the Trustee shall repay to the Fund, on behalf of the member, an amount equivalent to the member’s eligible debt.

(b) For purposes of this paragraph 3, eligible debt is defined as that portion of a member’s debt to the Fund (including to the Fund as Trustee) that was outstanding as of December 31, 2004 and that, as of the date of the Trustee’s determination that the member qualifies for assistance pursuant to paragraph 2 above, (i) has not been repaid by the member or with assistance disbursed to the member under the HIPC Initiative, and (ii) is not scheduled to be repaid by assistance committed or disbursed to the member under the HIPC Initiative.

Paragraph 4. Terms of assistance

(a) The assistance to be provided by the Trust to a qualifying member shall be in the form of a Trust grant.

Paragraph 5. Disbursements

(a) Any disbursement of Trust grants shall be subject to the availability of resources to the Trust.

Paragraph 6. Modifications

Any modification of these provisions will affect only Trust grants made after the effective date of the modification.

Section IV. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

    (i) to make all arrangements, including establishment of 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; and

    (ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of assets and accounts, audits and reports

(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.

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

(e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in the Annual Report the report of the external audit firm on the Trust.

Paragraph 3. Investment of resources

(a) Any balance held by the Trust and not immediately needed in operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currency is involved, with the consent of the issuers of such currencies.

Section V. Period of Operation Reduction of Balances and Liquidation

Paragraph 1. Period of operation

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

Paragraph 2. Reduction of Balances

Prior to the liquidation of the Trust in accordance with paragraph 3 below, the equivalent of SDR 280 million of the resources in the Account shall be transferred from the Account (through the Special Disbursement Account) to the Post-Catastrophe Debt Relief Trust established pursuant to Decision No. 14649.

Paragraph 3. Liquidation of the Trust

If the Trustee decides to wind up the operations of the Trust, the resources in the Account shall be used first to discharge all the liabilities of the Trust. Any amount remaining in the Account after the discharge of all the liabilities of the Trust shall be distributed to the Fund and contributors that have provided resources to the Trust, in proportion to their contributions. The resources representing the Fund’s share in such distribution shall be transferred to the SDA.

Section VI. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except that any amendment of Section I, paragraph 2, Section IV, Section V and this Section shall require the consent of all contributors to the Trust.

Attachment II

Instrument to Establish the Multilateral Debt Relief Initiative-II Trust

Introductory Section

To help fulfill its purposes, the International Monetary Fund (“the Fund”) has adopted this Instrument to Establish the Multilateral Debt Relief Initiative-II Trust (“the Trust”), which shall be administered by the Fund as Trustee (“the Trustee”). The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. General Provisions

Paragraph 1. Definitions

Wherever used in this Instrument, unless the context otherwise requires:

    (a) “decision point“ and “completion point“ shall have the meaning given to each of them in Section I, Paragraph 1 of the PRGF-HIPC Trust Instrument that is annexed to Decision No. 11436-(97/10), adopted February 4, 1997 (“the PRGF-HIPC Trust Instrument”); and

    (b) “eligible or potentially eligible for HIPC Initiative assistance” means the relevant member either (i) meets the eligibility criterion set forth in Section III, paragraph 1(d) of the PRGF-HIPC Trust Instrument, or (ii) had reached a decision point under the HIPC Initiative as of December 31, 2004.

Paragraph 2. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing balance of payments assistance to low-income developing members by making grants (“Trust grants”) to eligible members that qualify for assistance under the terms of this Instrument.

Paragraph 3. Trust Account and resources

(a) The operations and transactions of the Trust shall be conducted through an account (“the Account”). Within the Account, the Trustee may establish such sub-accounts as it deems necessary for the administration of the resources in the Account.

(b) The resources held in the Account shall consist of:

    (i) transfers from the Subsidy Account of the PRGF Trust in accordance with paragraph 3 of Decision No. 13588-(05/99) MDRI;

    (ii) grant contributions made to the Trust for the purposes set forth in paragraph 2;

    (iii) loans, deposits and other types of investments made by contributors with the Trust to generate income to be used for the purposes set forth in paragraph 2; and

    (iv) net earnings from investment of resources held in the Account.

Paragraph 4. Unit of account

The SDR shall be the unit of account for commitments and all other operations and transactions of the Trust, provided that commitments for contributions may also be made in currency.

Paragraph 5. Media of payment of contributions and exchange of resources

(a) Resources provided to the Trust may be received in any currency.

(b) Payments by the Trust shall be made in U.S. dollars or such other media as may be agreed between the Trustee and the payee.

(c) Contributions to the Trust may also be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust, provided that any balance of a currency held in the Trust may be exchanged only with the consent of the issuer of such currency.

Section II. Contributions to the Trust

The Trustee may accept contributions of resources for the Account on such terms and conditions as may be agreed between the Trustee and the respective contributors, subject to the provisions of this Instrument. For this purpose, the Managing Director of the Trustee is authorized to accept grants and enter into loan, deposit or other types of investment agreements with the contributors to the Trust.

Section III. Trust Grants

Paragraph 1. Eligibility for assistance

In order to be eligible for assistance from the Trust under Section I, paragraph 2 of this Instrument, a member shall meet the following requirements:

    (a) the member is PRGF-eligible (i.e., it is included in the list of members annexed to Decision No. 8240-(86/56) SAF, adopted March 26, 1986);

    (b) the member had an annual per capita income of more than US$380 on the basis of the 2004 gross national income (Atlas method) from the World Bank’s Operational Manual as updated on July 21, 2005;

    (c) the member had debt outstanding to the Fund, including to the Fund as Trustee, as of December 31, 2004; and

    (d) the member has reached the completion point under the HIPC Initiative.

Paragraph 2. Qualification for assistance

The Trustee shall determine whether an eligible member qualifies for assistance under this Instrument in accordance with the criteria set out below:

    (a) Each member eligible for assistance from the Trust that reaches the completion point on or after January 5, 2006, shall qualify for assistance under this Instrument when it reaches the completion point.

    (b) Each member eligible for assistance from the Trust that reached the completion point prior to January 5, 2006 shall qualify for assistance under this Instrument when the Trustee determines that, since the member reached the completion point, its performance has not deteriorated substantially with respect to: (i) macroeconomic performance, (ii) implementation of a poverty reduction strategy or similar framework, and (iii) the state of its public expenditure management systems. A member will be deemed to have met the requirement set forth in (i) and (ii) of the preceding sentence if the member has a track record of satisfactory macroeconomic performance and satisfactory implementation of a poverty reduction strategy for the six month-period immediately preceding the determination of qualification.

Paragraph 3. Amount and delivery of assistance

(a) Upon a determination that a member qualifies for assistance pursuant to paragraph 2 above, the Trustee shall repay to the Fund, on behalf of the member, an amount equivalent to the member’s eligible debt.

(b) For purposes of this paragraph 3, eligible debt is defined as that portion of a member’s debt to the Fund (including to the Fund as Trustee) that was outstanding as of December 31, 2004 and that, as of the date of the Trustee’s determination that the member qualifies for assistance pursuant to paragraph 2 above, (i) has not been repaid by the member or with assistance disbursed to the member under the HIPC Initiative, and (ii) is not scheduled to be repaid by assistance committed or disbursed to the member under the HIPC Initiative.

Paragraph 4. Terms of assistance

(a) The assistance to be provided by the Trust to a qualifying member shall be in the form of a Trust grant.

Paragraph 5. Disbursements

(a) Any disbursement of Trust grants shall be subject to the availability of resources to the Trust.

Paragraph 6. Modifications

Any modification of these provisions will affect only Trust grants made after the effective date of the modification.

Section IV. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

    (i) to make all arrangements, including establishment of 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; and

    (ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of assets and accounts, audits and reports

(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.

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

(e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in the Annual Report the report of the external audit firm on the Trust.

Paragraph 3. Investment of resources

(a) Any balance held by the Trust and not immediately needed in operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currency is involved, with the consent of the issuers of such currencies.

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, in the judgment of the Fund, to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation of the Trust

If the Trustee decides to wind up the operations of the Trust, the resources in the Account shall be used first to discharge all the liabilities of the Trust. Any amount remaining in the Account after the discharge of all the liabilities of the Trust shall be transferred to the PRGF Trust for use in any current or future subsidy operations authorized for that Trust, except that at the request of a contributor, its pro rata share in any unused resources shall be distributed to the contributor.

Section VI. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except that any amendment of Section I, paragraph 2, Section IV, Section V and this Section shall require the consent of all contributors to the Trust.

1 Ed. Note: Paragraph 3 revised Section IV, paragraph 6 of the PRGF Trust Instrument annexed to Decision No. 8759-(87/176).

2 Ed. Note: Paragraph 4 rescinded Decision No. 12330-(00/118) and modified Decision No. 12063-(99/130).

3 Ed. Note: Paragraph 7 revised Section III, paragraph 4(b) of the Instrument to Establish the PRGF-HIPC Trust annexed to Decision No. 11436-(97/10).

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