## _31stissue (Selected Decisions and Selected Documents — Thirty‑First Issue) ## Source details **Canonical URL:** [_31stissue (Selected Decisions and Selected Documents — Thirty‑First Issue)](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf.json) --- ### PREFACE, CONTACTS, AND EDITORIAL NOTES - This volume is the Thirty‑First Issue of Selected Decisions and Selected Documents of the International Monetary Fund. - Contents: decisions, interpretations, and resolutions of the Executive Board and the Board of Governors; selected documents frequently referenced in Fund activities; certain documents relating to the Fund, the United Nations, and other international organizations. - Editorial policy highlights: - Deletions of decisions that only completed or called for reviews, lapsed, or were superseded. - Renumbering references: where provisions were renumbered by the Second Amendment (effective April 1, 1978), corresponding current provisions cited in footnotes. - Administrative details (preserved exactly): - International Monetary Fund Publication Services, 700 19th Street, N.W. Washington, D.C. 20431, U.S.A. - Telephone: (202) 623-7430 - Telefax: (202) 623-7201 - E-mail: publications@imf.org - Internet: http://www.imf.org - Preface signed by: - The General Counsel - Director of the Legal Department - S EAN HAGAN *Source pagination markers: iii.* *Source: Selected Decisions and Selected Documents — Thirty‑First Issue (preface excerpts).* ### QUOTAS, ELEVENTH AND TWELFTH GENERAL REVIEWS, AND MEMBER PAYMENTS - Eleventh General Review of Quotas — Executive Board/Interim Committee decisions and formula: - Agreed overall increase in total Fund quotas: 45 percent. - Distribution of the 45 percent: - 75 percent distributed in proportion to present quotas; - 15 percent distributed in proportion to members’ shares in calculated quotas (based on 1994 data); - 10 percent distributed to correct quota anomalies (with 1 percent of overall increase among five members far out of line and able to contribute to liquidity). - Executive Board proposal: increase total Fund quotas by 45 percent, from approximately SDR 146 billion to approximately SDR 212 billion. - Rounding rule: quotas rounded to nearest multiple of SDR 0.1 million. - Consent, payment, and participation requirements: - A member’s increase becomes effective only if: - Member notifies Fund of consent by prescribed date; and - Member pays increase in full within prescribed period. - No member with overdue repurchases, charges or assessments to the General Resources Account may consent or pay until current. - Participation threshold: members holding not less than 85 percent of total quotas on December 23, 1997 must have consented. - Consent deadline (Executive Board paragraph 14): before 6:00 p.m., Washington time, January 29, 1999 (Board may extend). - Notices must be received before 6:00 p.m., Washington time, January 31, 2000 (subject to extension). - Payment timing (paragraph 17): pay within 30 days after later of (a) notification of consent, or (b) date participation requirement met; Executive Board authorized to extend. - Executive Board extensions: extended to 6:00 p.m., Washington time, on January 31, 2002 (Decision No. 12533-(00/76), July 18, 2001); further extended to July 31, 2002 (Decision No. 12672-(02/11), January 31, 2002). New period for notices of consent extended to 6:00 p.m., Washington time September 19, 2005; Ed. Note: Decision No. 13778-(06/76), August 25, 2006, extended to 6:00 p.m., Washington time, September 28, 2007. - Annex — Members and Proposed Quotas (In millions of SDRs) — excerpted entries preserved exactly (examples): - 1. Afghanistan, Islamic State of 161.9 - 2. Albania 48.7 - 3. Algeria 1,254.7 - ... - 174. United Kingdom 10,738.5 - 175. United States 37,149.3 - 183. Zimbabwe 353.4 - 1/ Federal Republic of Yugoslavia (Serbia/Montenegro) 1/ 467.7 (Decision No. 10237-(92/150), December 14, 1992 — succession) - Twelfth General Review: - Five‑year period ends January 30, 2003. - Executive Board recommendation to Board of Governors: conclude Twelfth Review by January 30, 2003 with no proposal to increase quotas. ### MEDIA OF PAYMENT AND RESERVE ASSET PAYMENTS - Article III, Section 3(a): 25 percent of any increase in quota to be paid in special drawing rights (SDRs), subject to Board of Governors prescriptions. - Paragraph 8 of proposed Resolution: 25 percent may be paid in SDRs or in currencies of other members selected by the Fund (with concurrence) or any combination; balance paid in member’s own currency. - Reserve asset payment guidance: - Historical averages: reserve asset payments by all members average 20 percent of present quotas (reference to Sixth General Review and additions). - After Seventh General Review completion and 25 percent paid in SDRs, reserve asset payment average would be 21.7 percent of total quotas. - For new members prior to Seventh Review completion, reserve asset payment expected ~20 percent of initial quota; after Seventh Review completion expected ~21.7 percent. - Minimum payment in exceptional circumstances: not less than equivalent of 10 percent of member’s gross reserves or 10 percent of initial quota, whichever is higher. - Decision No. 6266-(79/156), September 10, 1979. *Source: Eleventh and Twelfth General Reviews, Annex, and related decisions (excerpts preserved).* ### SPECIAL DRAWING RIGHTS (SDR) — VALUATION, HOLDERS, USES, ALLOCATIONS - SDR Valuation Basket and calculation guidelines: - SDR Valuation Basket—Revised Guidelines for Calculation of Currency Amounts: referenced pages 672–675. - Method of collecting exchange rates for the calculation of the value of the SDR for purposes of Rule O-2(a): procedures cited (middle rates at London noon, alternatives in New York or ECB, cross‑rate rules), Decision No. 6709-(80/189), December 19, 1980; Rule O-2 references preserved. - Article XVII, Section 3 — Prescribed Holders and other holders: - Documents list prescribed holders: Bank for International Settlements (BIS); Andean Reserve Fund; Swiss National Bank — termination of status as prescribed holder of SDRs (Decision references preserved); use of SDRs in payments to trusts and subsidy operations (pages 677–684). - Article XVIII, Section 2 — Allocation of SDRs: - Allocations for the First Basic Period and Third Basic Period referenced (pages 685–686). - Managing Director proposals and Executive Board/Board of Governors procedures for allocations discussed (Part II and III excerpts preserved): example historic proposal to allocate SDR 4 billion in each of three years of the third basic period (SDR 4 billion per year referenced in report excerpts). - Article XIX, Section 2 — Additional Uses (prescriptions preserved exactly): - Use of SDRs in: - settlement of financial obligations (pages 696–697); - loans (pages 697–699); - pledges (page 699); - transfers as security for performance of financial obligations (page 701); - swap operations (page 703); - forward operations (page 705); - donations (page 706). - Rules for transfers, notices, calculation dates (third business day preceding value date or second business day if agreed), declarations required under Rule P-7, and recording under Rule P-9 are specified in decisions cited (Decision Nos. 6000-(79/1) S; 6001-(79/1) S; 6053-(79/34) S; 6054-(79/34) S; 6336-(79/178) S; 6337-(79/178) S; 6437-(80/37) S). - Designation of participants to provide currency (Article XIX, Section 5): - Review of rules for designation and method of calculating designation amounts (pages 707–710); harmonization principle and “excess holdings” approach discussed (Decision No. 11976-(99/59) S, June 3, 1999). *Source: SDR-related decisions and rules (preserved numeric and procedural detail).* ### USE OF FUND RESOURCES — GUIDELINES ON CONDITIONALITY, MISREPORTING, WAIVERS, SIDE LETTERS, AND SAFEGUARDS - Guidelines on Conditionality and Use of Fund Resources: - Coverage: Guidelines on Conditionality; Side Letters and the Use of Fund Resources. - Key operational elements: - Conditionality: program‑related conditions to safeguard use of Fund resources; focus on variables/measures within member’s control and critical to program goals. - Prior actions, performance criteria, indicative targets, and structural benchmarks used for monitoring. - Responsibility: Fund fully responsible for establishment and monitoring of conditions; no cross‑conditionality to other organizations (but lead agency framework with Bank to be implemented flexibly). - Stand‑by Arrangements and Tranche Policies: - Guidelines on Conditionality — Stand‑By Arrangements (page 287). - Tranche policies, relationship between performance criteria and phasing of purchases — operational guidelines (page 288–292). - Guidelines on performance criteria with respect to external debt and foreign borrowing and discount rate methodology preserved (pages 295–299). - Misreporting, Noncomplying Purchases, and Corrective Action: - Procedures when staff identifies evidence that a performance criterion or condition may not have been observed: - Managing Director promptly informs member; after consultation, if nonobservance found, Managing Director notifies member and submits report to Executive Board with recommendations. - For noncomplying purchases made no more than four years prior to Managing Director notification, Executive Board may (a) expect repurchase within 30 days or (b) waive nonobservance. - Waiver normally granted only if deviation minor or temporary or if corrective policy measures were adopted. - Repurchase expectation nonfulfilment leads Managing Director to report with proposals and possible actions under Article V, Section 5. - Provision in arrangements for suspension of further purchases if member fails to meet repurchase expectation. - Decision No. 12249-(00/77), July 27, 2000 (Guidelines on Corrective Action) and related amendments cited. - De minimis misreporting: - Definition: deviations so small as to be trivial with no impact on program assessment (Decision No. 13849-(06/108), December 20, 2006) — amendments to decisions to address de minimis misreporting preserved. - Operational handling: communications may be made by Area Department representatives; staff report to Board may treat misreporting as de minimis and recommend finding of no effect on program performance; Executive Board finding that misreporting was de minimis precludes publication of the fact of misreporting. - Side Letters: - Definition: confidential communications from authorities to Fund staff complementing LOIs/MEFPs. - Confidentiality: existence and content treated with “utmost confidentiality” by management, staff, and Executive Directors. - Use: sparingly; only where publication would undermine implementation or render it more costly (e.g., exchange market intervention rules, bank closures, contingent fiscal measures). - Communication to Executive Board: side letters considered in restricted session; full text communicated in principle; Managing Director may delete highly specific information at authorities’ request (e.g., market triggers, bank names). - Summing up: Executive Board Meeting 02/59, June 12, 2002; experience and procedures preserved. - Safeguards Assessments: - Purpose: ex ante safeguards assessments of central banks to provide reasonable assurance on control, accounting, reporting, audit systems that manage resources, including Fund disbursements. - Two‑stage assessment approach (Stage 1 off‑site documentation review; Stage 2 on‑site review where needed); later refinements moved to single confidential safeguards assessment for new arrangements (Executive Board Meeting 02/26, March 14, 2002). - Requirements: central banks in new arrangements to publish annual financial statements independently audited by external auditors in accordance with internationally accepted audit standards; list of information/documents to be provided preserved exactly (audited financial statements, management letters, internal audit structure, controls, legislation, etc.). - Review and resource implications: safeguards assessments experimental basis; three‑year review envisaged; resource implications and need for technical assistance noted. ### PSIs, PRGF, ESF, AND TRUST INSTRUMENTS — KEY PROVISIONS AND ACCESS RULES - Policy Support Instrument (PSI): - PSI established to provide an assessment and endorsement framework for PRGF‑eligible members seeking close policy dialogue without Fund financing. - Duration: one to three years, extendable up to four years. - Approval criteria: policies meeting upper credit tranche conditionality standards; member sufficiently committed; PRS Document issued to Executive Board within previous 18 months with JSAN (Joint Staff Advisory Note) — JSAN exceptions noted. - Assessment criteria, indicative targets, structural benchmarks, prior actions specified for reviews; misreporting rules apply (publication and conditioning on accuracy). - Publication provisions and use of side letters and misreporting handling preserved (pages 125–132). - PRGF and Exogenous Shocks Facility (PRGF‑ESF Trust Instrument) — selected elements preserved: - Purpose: Trust loans on concessional terms to low‑income members (PRGF) and to facilitate adjustment to sudden exogenous shocks (ESF). - Unit of account: the SDR. - Access limits: - PRGF: initial maximum limit for a three‑year commitment set at 140 percent of member’s quota; exceptional increase up to 185 percent of quota possible (text preserved). - ESF: maximum limit 50 percent of member’s quota, exceedable in exceptional circumstances. - Terms of loans: interest on outstanding balance charged at one half of one percent per annum (0.5 percent) with repayment in ten equal semi‑annual installments beginning not later than five and a half years from each disbursement and completed by end of tenth year. - Subsidy Accounts, authorized subsidy rules, calculation of subsidy, borrowings for Loan Account, Reserve Account resources and use, termination and retransfer rules preserved (Sections II–V excerpts). - PRGF‑ESF operational rules: eligibility, periodicity, documentation, misreporting and de minimis handling, arrears provisions, and linkage to other creditors and HIPC modalities preserved. - PRGF‑HIPC Trust and HIPC Initiative: - Instrument establishing Trust for Special PRGF Operations for HIPCs and Interim PRGF Subsidy Operations — eligibility, qualification, decision point and completion point mechanics, interim assistance up to 20 percent per 12‑month period and up to 60 percent prior to completion point (exceptional 25 percent and 75 percent); amount committed adjusted if revised data change decision‑point calculations by more than one percentage point; disbursement rules, forms (grants, loans, mixed), and repayment/usage of proceeds rules preserved. - Sunset clause: the PRGF‑HIPC Trust sunset clause to take effect December 31, 2006; grandfathering provisions for members meeting end‑2004 indebtedness criterion (Decision No. 13797-(06/88), October 13, 2006). - Multilateral Debt Relief Initiative (MDRI) — Decision No. 13588-(05/99), November 23, 2005 (effective January 5, 2006): - Establishment of MDRI‑I Trust and MDRI‑II Trust. - Resource transfers from SDA as of January 5, 2006: SDR 530 million to HIPC subaccount of PRGF‑HIPC Trust; SDR 1.5 billion to MDRI‑I Trust; remaining balance to PRGF Subsidy Account. - MDRI‑I and MDRI‑II purpose: make Trust grants to eligible low‑income members qualifying under instrument; eligibility criteria preserved (PRGF-eligibility, per capita income thresholds or HIPC completion point requirements) and repayment/administration/audit rules preserved. ### EMERGENCY ASSISTANCE, POST‑CONFLICT, AND COMPENSATORY FINANCING - Emergency Assistance and Post‑Conflict Assistance: - Emergency assistance converted into special policy; one‑credit tranche typical; for post‑conflict countries access up to 25 percent of quota in exceptional additional purchases; flexibility for concessional financing (ESAF/PRGF) and subsidies for low‑income post‑conflict cases; emphasis on technical assistance and rebuilding capacity; references to relevant Executive Board meetings and decisions preserved. - Enhanced modalities (EPCA adjustments): possible extension to as long as three years and up to 50 percent of quota where rebuilding capacity slow; second tranche provisions described. - Compensatory Financing Facility (CFF): - Purpose: assist members with temporary export shortfalls and excess cereal import costs. - Access and limits: - Limits: 45 percent of quota for export shortfall component; 45 percent for cereal import cost component; combined limit 55 percent of quota (paragraph 9 in Decision No. 8955-(88/126) preserved). - For estimated data use (up to 12 months of estimated merchandise export data): first purchase up to 65 percent of compensatory financing; second purchase recalculated on actual data; overcompensation repurchase rules preserved (prompt repurchase within 30 days when estimated purchases exceed eventual actual entitlement). - Calculation rules: geometric five‑year average centered on shortfall year, netting of imported intermediate inputs where relevant; timing and recalculation rules preserved (paragraphs 15–19). ### ARREARS, REMEDIAL MEASURES, RIGHTS APPROACH, AND TIMETABLE FOR DETERRENCE - Overdue obligations framework and strengthened cooperative strategy: - Timetable and escalation steps preserved (procedural timelines and communications), including: - six weeks: Managing Director informs member that a report will be issued to Executive Board within two weeks unless settled; - two months: Managing Director report to Executive Board and request that Executive Board limit member’s use of Trust resources; - three months: brief factual statement posted on member’s country web page for arrears outstanding more than three months and suspension of access stated; press release issued upon Executive Board decision to limit use of resources; - six months: Executive Board may remove member from PRGF‑ESF eligible list; Ed. Note on reinstatement requiring Executive Board decision; Decision No. 13775-(06/76) and extensions preserved. - Declaration of noncooperation: may be issued when longest overdue obligation outstanding for twelve months; suspension of technical assistance possible; Executive Board may terminate declaration upon progress. - Rights approach and rights accumulation programs: procedures for members with arrears to accumulate rights conditioned on satisfactory performance under monitored programs; interim assistance limits (20 percent per 12‑month period; maximum 60 percent before completion point; exceptional increases to 25 percent and 75 percent); de‑minimis procedures and retransfer rules preserved. - Measures of deterrence and proposed timetable (high‑level elements preserved): - Immediate to 2 weeks to 1 month to 6–12 months escalation sequence and decision thresholds; possible use of communications to Governors and international financial institutions; possible suspension of voting/representation rights and compulsory withdrawal procedures subject to Board/Governors majorities referenced. - Emphasis on case‑by‑case judgments, cooperation with creditors, and use of Fund good offices. ### SURVEILLANCE OVER EXCHANGE ARRANGEMENTS (ARTICLE IV) — PROCEDURES, TRIGGERS, AND BIENNIAL REVIEW - Notification and consultation obligations: - Members to notify Fund promptly of intended exchange arrangements within thirty days after Second Amendment became effective; prompt notification of changes; special procedures for pegged members and members with flexible arrangements (discrete exchange rate changes inconsistent with indicators). - Surveillance triggers (indicators prompting Fund discussion): - protracted large‑scale intervention in one direction; - unsustainable official/quasi‑official borrowing or excessive short‑term official/quasi‑official lending; - introduction, intensification or prolonged maintenance of restrictions or incentives on current transactions/payments or capital flows; - monetary/domestic financial policies that provide abnormal encouragement/discouragement to capital flows; - exchange rate behavior unrelated to underlying economic conditions; and - unsustainable private capital flows. - Appraisal basis: - Appraisal based on developments in balance of payments: size and sustainability of capital flows, reserve position, external indebtedness; appraisal within comprehensive analysis of general economic situation and policies. - Procedures and timelines: - Annual consultations principle; Executive Board to reach conclusions not later than sixty‑five days after termination of discussions (or three months for SAF‑eligible members) (Decision No. 5392-(77/63) procedural timelines preserved). - Ad hoc (supplemental) surveillance procedures: Managing Director may initiate informal confidential discussions and, if necessary, an ad hoc Article IV consultation with specific circulation and lapse‑of‑time adoption procedures (Decision No. 6026-(79/13) and amendments preserved). - Biennial Review findings and guidance (Executive Board Meeting 04/72, July 23, 2004): - Five monitored immediate priorities until next review: - sharpen the focus of Article IV consultations with deeper exchange rate treatment; - enhance financial sector surveillance to same standard as core areas; - deepen coverage of regional and global spillovers in bilateral surveillance; - improving debt sustainability analysis and balance sheet vulnerability treatment; - strengthen surveillance in low‑income countries and integrate external and domestic policy analysis. - Flexibility encouraged on consultation frequency and documentation; emphasize ownership, candor, communication and selectivity. ### DATA, STATISTICS, SDDS AND GDDS — PRINCIPLES, SPECIFICATIONS, AND IMPLEMENTATION - SDDS (Special Data Dissemination Standard) — objectives and elements: - Four dimensions: (1) coverage, periodicity and timeliness of data; (2) data quality; (3) integrity of disseminated data; (4) access by the public. - Subscribers required to provide metadata on DSBB (Dissemination Standards Bulletin Board); quarterly certification on accuracy of metadata; sanctions for persistent nonobservance (posting notes, Executive Director engagement, possible removal from DSBB). - Key prescribed items and timeliness examples preserved (monthly international reserves with 1–4 weeks timeliness; consumer price index monthly within 1–2 months; national accounts annual within 6–9 months; external debt quarterly encouraged). - GDDS (General Data Dissemination System) — objectives and framework: - Focus on data improvement priorities for countries with weaker statistical systems; provides guidance on coverage, periodicity, and timeliness and on socio‑demographic statistics linked to MDG monitoring. - Participation voluntary; metadata posted on DSBB; periodic review and updates expected; review timing notes and “as needed” editorial notes preserved. - Seven additional steps for data improvement (from staff report paragraph 43): - standard tables for public debt reporting; enhanced collection of monetary and financial sector data; promote coherence across initiatives; review contents of International Financial Statistics; experiment with nonfinancial corporate data; elaborate internationally agreed methodologies; consult on SDDS public debt prescriptions in next review. ### BANK–FUND AND FUND–WTO COOPERATION; FSAP CONFIDENTIALITY PROTOCOL - Bank–Fund cooperation: - FSAP (Financial Sector Assessment Program) joint framework, pilot review findings, FSSA/FSSA updates, publication and disclosure policies for FSSAs and ROSCs preserved (Executive Board Meeting references, 00/123; 05/26). - Guidelines for collaboration (Concordat) — principles, division of responsibilities (Bank — development, Fund — macro/stabilization), operational modalities (joint missions, led roles, information sharing), and establishment of joint mechanisms (Joint Implementation Committee) preserved. - FSAP confidentiality and protection of sensitive information: - Three classification levels for sensitive information in FSAP: STRICTLY CONFIDENTIAL; CONFIDENTIAL; FOR OFFICIAL USE ONLY (NOT for PUBLIC USE). - Handling requirements for STRICTLY CONFIDENTIAL: marking each page, lock and key, encrypted electronic transmission; restricted access list (team leader, deputy, team members, immediate supervisors, Managing Director/President or designees, others by agreement). - STRICTLY CONFIDENTIAL expected to be used sparingly; CONFIDENTIAL has wider need‑to‑know distribution (all team members, supervisors, Country Directors, Area Department Mission Chiefs, MAE Country Managers, Managing Director, President, others by agreement). - Consultants in FSAP must sign confidentiality letter (Appendix II): receipt of Protocol, agreement not to disclose or use sensitive information, confidentiality obligations survive termination unless declassified. - Sharing sensitive information between Bank and Fund subject to protocol and safeguards; protocol attachments and Appendix I list relevant policies and staff regulations (e.g., IMF Staff Regulations N-4, N-5, N-6, N-11; World Bank Staff Rules and Administrative Manual statements); Appendix II confidentiality obligations and OFC/AML/CFT program findings and modalities preserved. ### GOVERNANCE, TRANSPARENCY, ARCHIVES, IMMUNITIES, AND RELATIONS WITH OTHER ORGANIZATIONS - Governance and good governance guidance: - Fund’s role: focus on economic aspects of governance related to macro stability and program implementation (avoid political regime judgments); address corruption and governance where judged to have significant macroeconomic impact; modalities: policy advice, technical assistance, transparency promotion, inclusion in Article IV and program conditionality when necessary. - Information handling and limitations in identifying governance deficiencies emphasized; staff rely on authorities’ information and may use independent audits or third‑party information when necessary. - Publication, transparency and documents policy: - Comprehensive publication decision covers Article IV staff reports, LOIs/MEFPs, PRSPs, JSANs, ROSCs, FSAP products, PINs, Chairman’s statements, PSI documentation, SMPs, and other categories with procedures, presumptions, consent modalities, deletions (highly market‑sensitive material) and correction rules preserved (Decision No. 11493-(97/45) and subsequent amendments). - Public Information Notices (PINs): structure (background + Fund’s assessment), draft circulation and member review, indicative release timing (aim: five to ten working days after Executive Board meeting but not before end of working day following circulation of summing up). - Voluntary but presumed publication for UFR staff reports and PPM staff reports affirmed with exceptions for exceptional access cases and other sensitivities (SM/05/343, Sup. 1, 9/22/05). - Archives and privileges: - Opening and access to Fund archives policies and schedules; cooperation with member auditing institutions; immunity and privilege rules for officers and employees; Managing Director’s policy on immunity of Fund officials; procedural handling of requests by official investigating agencies and safeguards for confidentiality and Board notification preserved (Decision No. 12424-(01/13), February 5, 2001). - Relations with other organizations: - Agreement with the United Nations (text and annexes preserved); United Nations Convention on Privileges and Immunities of the Specialized Agencies and Annex V reproduced; IMF–WTO Agreement (decision and text), and procedures for consultation and document exchange preserved (Decision No. 11381-(96/105), November 25, 1996). - ECB invited to attend Executive Board meetings on euro‑area policy matters with observer status (text preserved). ### SELECTED INDEXED FIGURES, DECISIONS, AND IDENTIFIERS (preserved exactly) - Telephone and contact (Publisher): Telephone: (202) 623-7430; Telefax: (202) 623-7201; E‑mail: publications@imf.org; Internet: http://www.imf.org - Dates and numeric thresholds preserved exactly in source excerpts (selected): - Effective date for Second Amendment renumbering: April 1, 1978. - Eleventh Review: increase total quotas by 45 percent; from approximately SDR 146 billion to approximately SDR 212 billion; consent deadline 6:00 p.m., Washington time, January 29, 1999; notices due before 6:00 p.m., Washington time, January 31, 2000. - Quota payment timelines and extensions: 30 days payment after consent or participation requirement met; Executive Board extensions to 6:00 p.m., Washington time, January 31, 2002 (Decision No. 12533-(00/76), July 18, 2001); July 31, 2002 (Decision No. 12672-(02/11), January 31, 2002); Decision No. 13778-(06/76), August 25, 2006 extended to September 28, 2007. - SDR allocation historical proposal: SDR 4 billion in each of three years (third basic period historical proposal). - PRGF/ESF loan interest: one half of one percent per annum (0.5 percent). - PRGF loan repayment: ten equal semi‑annual installments beginning not later than five and a half years from disbursement and completed at end of tenth year. - PRGF access limits: initial maximum limit 140 percent of quota; exceptional up to 185 percent of quota. - PRGF-ESF/Reserve Account transfers and notable SDR amounts: SDR 530 million transfer to HIPC subaccount; SDR 1.5 billion to MDRI‑I Trust (Decision No. 13588-(05/99), November 23, 2005). - Special Disbursement Account off‑market gold transactions: up to 14 million ounces of fine gold; SDR 35 per ounce placement example (Resolution No. 54‑10, September 24, 1999). - Early repurchase expectations: repurchases to begin 2¼ years after each purchase and complete after 4 years for credit tranches; EFF repurchase expectations from 4½ years to 7 years after purchase. - SRF surcharge schedule: initial 300 basis points per annum above Rule I‑6(4) rate (first year), increased by 50 basis points every six months until 500 basis points; Decision No. 11627‑(97/123) SRF. - Burden sharing and rate of charge: exact rates and adjustments referenced in Decision No. 13706-(06/40), April 28, 2006 and Decision No. 13707-(06/40) establishing SDR 60 million generation for Special Contingent Account‑1. - List of Executive Board/Meeting references preserved in table of contents (examples): 97/30, 00/24, 02/38, 02/76, 04/72, 00/113, 05/26, 03/101, 01/116, 02/80, 04/29, 05/78, 05/99, 06/46. - Selected Decision identifiers preserved exactly (examples): - Decision No. 12533‑(00/76), July 18, 2001 - Decision No. 12672‑(02/11), January 31, 2002 - Decision No. 13778‑(06/76), August 25, 2006 - Decision No. 13588‑(05/99) MDRI, November 23, 2005 (effective January 5, 2006) - Decision No. 12249‑(00/77), July 27, 2000 (Guidelines on Corrective Action) - Decision No. 13706‑(06/40), April 28, 2006 (rate of charge for FY 2007: SDR interest rate under Rule T‑1 plus 108 basis points) - Decision No. 6709‑(80/189) S, December 19, 1980 (Rule O‑2 exchange rate guidance) *Final note: this inventory preserves and organizes the substantive findings, procedures, numeric thresholds, decision identifiers, and policy frameworks explicitly contained in the source excerpts.* *Italic: Source — _31stissue — Selected Decisions and Selected Documents (PDF excerpts as provided).* ### 1. International Monetary Fund—Periodicals. 2. International ### _31stissue - 1. International Monetary Fund—Periodicals. 2. International ### PREFACE - This volume is the Thirty-First Issue of Selected Decisions and Selected Documents of the International Monetary Fund. - Contents include: - decisions, interpretations, and resolutions of the Executive Board and the Board of Governors of the International Monetary Fund; - selected documents to which frequent reference is made in the current activities of the Fund; - certain documents relating to the Fund, the United Nations, and other international organizations. - Editorial policy and scope: - Increasing number of decisions in force and longer decision formats have required deletion of certain decisions included in earlier issues: those that only completed or called for reviews of decisions, those that lapsed, and those that were superseded by more recent decisions. - Where references are made to provisions of the Fund’s Articles or Rules and Regulations that were renumbered by, or because of, the Second Amendment of the Fund’s Articles of Agreement (effective April 1, 1978), the corresponding provision currently in effect is cited in a footnote. - Administrative and contact details preserved exactly: - Address orders to: International Monetary Fund Publication Services, 700 19th Street, N.W. Washington, D.C. 20431, U.S.A. - Telephone: (202) 623-7430 - Telefax: (202) 623-7201 - E-mail: publications@imf.org - Internet: http://www.imf.org - Preface signed by: - The General Counsel - Director of the Legal Department - S EAN HAGAN - Pagination markers from source: iii ### OVERVIEW OF CONTENTS (major sections and themes) - Front matter and navigational elements: - PREFACE (page iii) - CONTENTS (page v and following) - Major thematic groupings in the Selected Decisions and Resolutions section: - ARTICLE III — Quotas and Subscriptions - Adjustment of Quotas - Increase in Quotas of Fund Members—Eleventh General Review - New Period for Consent—Increases of Quotas of Members Under the Eleventh General Review - Increase in Quotas of Fund Members—Twelfth General Review of Quotas - Gold and Currency Subscribed to the Fund and Accounting by Members for Transactions with the Fund - Guidelines on Payment of Reserve Assets in Connection with Subscriptions - ARTICLE IV — Exchange Arrangements and Surveillance - Notification of Exchange Arrangements Under Article IV, Section 2 - Surveillance over Exchange Rate Policies - Surveillance: Procedures - Article IV Consultation Documentation—Recent Economic Developments - Multiple summings up and biennial reviews (years and Executive Board Meeting references preserved in table of contents) - Modalities for surveillance over regional monetary unions (Euro Area; Central African Economic and Monetary Union; Eastern Caribbean Currency Union; West African Economic and Monetary Union) - The Role of the Fund in Governance Issues—Guidance Note EBS/97/125, July 2, 1997 - Military Expenditure and the Role of the Fund (Executive Board Meeting 91/138, October 2, 1991) - ARTICLE V, SECTION 2(b) — Technical and Financial Services (Technical Services) - Enhanced Surveillance procedures and midterm review - Summings up on surveillance policy and role of the Fund in dispute settlement between members - Financial Sector Assessment Program (FSAP): pilot review, lessons, and implementation (Executive Board Meeting references 00/123; 05/26) - Confidentiality Protocol—Protection of Sensitive Information in the Financial Sector Assessment Program - Reports on Observance of Standards and Codes (ROSCs) - Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) program assessments and pilot program reviews (Executive Board Meeting references 01/116; 02/80; 04/29) - Technical assistance: Framework Administered Account and regional subaccounts (Pacific Financial Technical Assistance Centre; Africa Regional Technical Assistance Centers) - Policy Support Instrument—Framework - Financial services and facilities: - Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility Trust: trust instrument provisions, access limits, interest rate on trust loans, borrowing limits, and operational arrangements - Transformations and policy decisions related to the Enhanced Structural Adjustment Facility (ESAF) - Establishment of trusts for PRGF-HIPC operations, MDRI and related amendments, administered accounts for post-conflict emergency assistance, and related sunset clauses and eligibility provisions - ARTICLE V, SECTION 3(a),(b),(c) — Use of Fund Resources (beginning of section listing) - Interpretation of Articles of Agreement - Use of Fund’s Resources for Capital Transfers - Use of Fund’s Resources: Meaning of “Consistent with the Provisions of This Agreement” in Article V, Section 3 - Use of Fund’s Resources: Meaning of Article V, (continued in table of contents) ### KEY DOCUMENT TYPES AND RECURRENT ELEMENTS - Decisions, interpretations, resolutions of Executive Board and Board of Governors. - Summings up by the Chairman or Acting Chairman for Executive Board Meetings (numerous meeting references and dates listed throughout the contents). - Guidance notes and protocols (for example, Guidance Note EBS/97/125; Confidentiality Protocol for FSAP). - Trust instruments, legal and operational frameworks for lending facilities, administered accounts, and technical assistance subaccounts. - Reviews and follow-up procedures: biennial surveillance reviews, FSAP reviews, AML/CFT pilot program reviews, HIPC Initiative reviews and updates, PRSP reviews. ### STRUCTURE AND NAVIGATION HIGHLIGHTS (as reflected in table of contents) - The Contents lists primary subject headings (Articles III, IV, V) and then organizes numerous subitems (decisions, summings up, procedures, modalities, trust instruments, program reviews). - Cross-references to Executive Board Meeting identifiers (e.g., 97/30, 00/24, 02/38, 04/72, 05/26, 03/101, 00/123, 04/29, 05/78, 05/99) indicate specific meeting discussions and summings up included in the volume. - Regional and programmatic modalities (Euro Area surveillance; regional monetary unions; FSAP; AML/CFT; PRGF/ESAF/HIPC/MDRI frameworks) are emphasized as substantive clusters of decisions and documents. ### NOTABLE EXACT NUMERICAL AND IDENTIFYING REFERENCES PRESERVED - Publication contact and address: - 700 19th Street, N.W. Washington, D.C. 20431, U.S.A. - Telephone: (202) 623-7430 - Telefax: (202) 623-7201 - Effective date referenced for renumbering: April 1, 1978 - Issue designation: Thirty-First Issue - Identified Executive Board Meeting references (sample from table of contents): 97/30, 00/24, 02/38, 02/76, 04/72, 04/25, 93/15, 84/99, 85/132, 00/123, 05/26, 03/101, 01/116, 02/80, 04/29, 87/171, 87/176, 02/24, 97/10, 02/40, 00/90, 00/108, 05/78, 05/99, 04/29 - Pagination markers visible in source: iii, v, vi, vii, viii, ix, x, xi, etc. *Selected Decisions and Selected Documents — Thirty-First Issue (table of contents and preface excerpts as provided in source).* ### Section 3 (b)(ii)......................................................................... 249 ### _31stissue - Section 3 (b)(ii)......................................................................... 249 ### Guidelines on Conditionality and Use of Fund Resources - Coverage includes "Guidelines on Conditionality" and "Side Letters and the Use of Fund Resources". - Executive Board meeting summaries related to these topics: - "Summing Up by the Acting Chair—Review of Side Letters and the Use of Fund Resources (Executive Board Meeting 02/59, June 12, 2002)" — page 260. - Issues addressed: - Misreporting and noncomplying purchases in the General Resources Account and "Guidelines on Corrective Action" — page 261. - "Making the Misreporting Policies Less Onerous in De Minimis Cases" — page 264. - Establishment of general policy to condition decisions in the General Resources Account on accuracy of information regarding implementation of prior actions — page 265. - Establishment of general policy to condition waiver decisions in the General Resources Account on accuracy of information regarding performance criteria — page 265. - "Summing Up by the Acting Chairman on Strengthening Safeguards on the Use of Fund Resources and Misreporting of Information to the Fund—Policies, Procedures, and Remedies—Preliminary Considerations (Executive Board Meeting 00/32, March 23, 2000)" — page 266. ### Selected Decisions and Selected Documents — Use of Fund Resources, Safeguards, and Program Engagement - Selected Executive Board items and summaries: - "Failure to Meet a Repurchase Expectation and Use of Fund’s General Resources (Executive Board Meeting 85/26, February 20, 1985)" — page 272. - "Overdue Financial Obligations—Amended Decisions" — page 272. - "The Acting Chair’s Summing Up—Safeguards Assessments—Review of Experience and Next Steps (Executive Board Meeting 02/26, March 14, 2002)" — page 273. - "Summing Up by the Chairman—Emergency Financing Mechanism (Executive Board Meeting 95/85, September 12, 1995)" — page 276. - "Post-Program Monitoring" — page 281. - "The Acting Chair’s Summing Up—Conclusions of the Task Force on Prolonged Use of Fund Resources (Executive Board Meeting 03/28, March 24, 2003)" — page 282. - "The Acting Chair’s Summing Up—Review of Ex Post Assessments and Issues Related to the Policy on Longer-Term Program Engagement (Executive Board Meeting 06/46, May 15, 2006)" — page 283. ### Credit Tranche Policies, Arrangements, and Conditionality Operational Guidance - Topics and documents: - "Guidelines On Conditionality—Stand-By Arrangements" — page 287. - "General Policies on Use of the Fund’s Resources: Tranche Policies" — page 288. - "Summing Up by the Acting Chair—Lessons from the Real-Time Assessments of Structural Conditionality (Executive Board Meeting 02/36, April 3, 2002)" — page 288. - "Relationship Between Performance Criteria and Phasing of Purchases Under Fund Arrangements—Operational Guidelines" — page 292. - "Guidelines on Performance Criteria with Respect to External Debt in Fund Arrangements" — page 295. - Chair summaries on external debt management (Executive Board Meetings 79/106 and 79/107, July 6, 1979; Executive Board Meeting 79/121, July 23, 1979) — page 295. - "Guidelines on Performance Criteria with Respect to Foreign Borrowing—Change in Implementation of Revised Guidelines" — page 299. ### Arrangements, Forms, Reviews, and Emergency Assistance - Extended Fund Facility — page 301. - "Stand-By and Extended Arrangements—Standard Forms" — page 305. - "Completion of Reviews Under Stand-By and Extended Arrangements" — page 316. - "Reviews Under Fund Arrangements—Lapse of Time Procedure" — page 316. - Emergency assistance topics: - "Conversion of Emergency Assistance into a Special Policy" — page 318. - "Concluding Remarks by the Chairman—Emergency Assistance—Natural Disasters (Executive Board Meeting 82/16, February 10, 1982)" — page 319. - Summaries on post-conflict country assistance and low-income member country instruments and financing (Executive Board Meetings 95/82, 99/38, 04/32) — pages 322, 325, 330. ### Arrears, Debt Strategy, and Related Summaries - "Arrears to Creditors and Debt Strategy" — page 332. - "Review of Fund Policies and Procedure on Payments Arrears (Executive Board Meeting 80/154, October 17, 1980)" — page 333. - Chair and Acting Chair summings up on debt strategy, private creditor arrears, and lending into arrears (Executive Board Meetings 89/61, 99/64, 02/92) — pages 334, 334, 336. - "Summing Up by the Chairman—Management of the Debt Situation (Executive Board Meeting 91/48, April 3, 1991)" — page 340. ### Access Policy and Exceptional Access Reviews - "Access Policy and Limits in Credit Tranches and Under Extended Fund Facility—Exceptional Access to Fund General Resources—Review" — page 341. - Executive Board summaries on access policy, exceptional access, and precautionary arrangements (Executive Board Meetings 02/94, 03/16, 04/36, 04/90) — pages 347, 353, 358, 362. ### Other Facilities and Mechanisms - Trade-related and balance of payments support mechanisms, including "Trade Integration Mechanism" — page 364. - "Supplemental Reserve Facility and Contingent Credit Lines" — page 366. - "Compensatory Financing Facility" and related summing up on overcompensation (Executive Board Meeting 82/1, January 6, 1982) — pages 370, 380. ### Article V–Related Provisions: Media of Payment, Ineligibility, SDRs, Repurchases, Charges - Use of currencies and SDRs in the General Resources Account and designation procedures — pages 383–390. - Subsections include assessment of balance of payments and gross reserve position (A) — page 383; specification of currencies by the Fund (B) — page 384; transfers of SDRs under Article V, Section 3(f) (C) — page 386. - "Procedures for the Sale of Currencies at the Request of Members with Outstanding Purchases" — page 387. - "Operational Budget—Review of Guidelines for Allocation of Currencies" — page 389. - "Selection of Currencies by the Fund" — page 390. - Article V, Section 5: Ineligibility to Use the Fund's General Resources; postponement and limitation — pages 393–393. - Article V, Section 6: "Sales of SDRs by the Fund" — page 395. - Article V, Section 7: "Repurchases" and "Guidelines for Early Repurchase" — pages 396–398. - Additional summing up: "Summing Up by the Acting Chairman—Review of Fund Facilities—Proposed Decisions and Implementation Guidelines (Executive Board Meeting 00/113, November 17, 2000)" — page 401. - "Attribution of Reductions in Fund’s Holdings of Currencies" — page 403. - Charges, surcharges, accounting, and special charges on overdue obligations; burden sharing and income position reviews for FY 2000–FY 2007 — pages 405–419. ### Other Articles and Institutional Provisions (selected) - Rates for computations and maintenance of value — page 421. - Special Disbursement Account and Structural Adjustment Facility matters; PRGF Trust reserve account and cost of administering PRGF Trust — pages 424–441. - Use of Fund's resources for capital transfers and controls on capital transfers — pages 442–443. - Borrowing frameworks: General Arrangements to Borrow, New Arrangements to Borrow, borrowing agreements with Saudi Arabia, transferability of claims, related procedural and investment arrangements — pages 444–493. - Article VIII: Interpretation of Article VIII, Section 2(b) on unenforceability of exchange contracts — page 495. - Payments restrictions, multiple currency practices, Article VIII and Article XIV interactions, payments arrears, and consultations on members’ policies — pages 497–519. - Article VIII, Section 5: "Furnishing of Information" and data dissemination standards and the SDDS (Executive Board Meeting 96/36, April 12, 1996; Executive Board Meeting 97/125, December 19, 1997) — pages 520–550. ### Governance, Transparency, Archives, and Relations with Other Organizations - Opening and access to Fund archives; policy on access and cooperation with member auditing institutions — pages 579–582. - Privilege for communications and immunities of officers and employees; Managing Director’s policy statement on immunity of Fund officials — pages 583–585. - Relations with other international organizations, including arrangements with GATT/WTO and the IMF-World Bank concordat — pages 588–603 and related Executive Board summings up on collaboration and operational frameworks — pages 604–619. - Exchange of documents with other international agencies — page 627. - Executive Board procedural items, Executive Directors, code of conduct, and staff/Managing Director provisions — pages 632–641. - Investment Account rules and regulations, publication policies, transparency, and Executive Board summings up on transparency (Executive Board Meeting 03/87, September 12, 2003) — pages 642–659. - Policies on publication of information related to use of Fund resources, overdue obligations, suspension of voting rights, and external audit firm rotation and limits — pages 664–669. *Source: _31stissue - Section 3 (b)(ii)......................................................................... 249 (PDF).* ### Section 4 ................................................................................... 671 ### _31stissue - Section 4 ................................................................................... 671 ### ARTICLE XV, SECTION 2 — Valuation of the Special Drawing Right - SDR Valuation Basket—Revised Guidelines for Calculation of Currency Amounts.................................................................... 672 - SDR Valuation Basket—Guidelines for the Calculation of Currency Amounts.................................................................................... 674 - Method of Collecting Exchange Rates for the Calculation of the Value of the SDR for the Purposes of Rule O-2(a) .................. 675 ### ARTICLE XVII, SECTION 3 — Special Drawing Rights: Other Holders - Special Drawing Rights: Other Holders .......................................... 677 - Bank for International Settlements (BIS): Change in Terms and Conditions of Prescription as Holder of SDRs ......................... 680 - Andean Reserve Fund—Holder of SDRs........................................ 680 - Swiss National Bank—Termination of Status as Prescribed Holder of SDRs ......................................................................................... 681 - Use of SDRs in Payment of Trust Fund Obligations ...................... 681 - Use of SDRs in Payment of Subsidy............................................... 682 - Use of SDRs in Operations Under Structural Adjustment Facility ...................................................................................... 682 - Use of SDRs in Financial Operations Under the Enhanced Structural Adjustment Facility Trust or Under an Administered Account..................................................................................... 683 - Use of SDRs in Financial Operations Under the PRGF-HIPC Trust or Under an Administered Account ............................................... 684 ### ARTICLE XVIII, SECTION 2 — Allocation of Special Drawing Rights - Allocation of Special Drawing Rights for the First Basic Period ....685 - Allocation of Special Drawing Rights for the Third Basic Period...686 ### ARTICLE XIX, SECTION 2 — Special Drawing Rights: Additional Uses - Use of SDRs in Settlement of Financial Obligations.......................696 - Use of SDRs in Loans......................................................................697 - Use of SDRs in Pledges ...................................................................699 - Use of SDRs in Transfers as Security for the Performance of Financial Obligations ................................................................701 - Use of SDRs in Swap Operations ....................................................703 - Use of SDRs in Forward Operations ...............................................705 - Use of SDRs in Donations ...............................................................706 ### ARTICLE XIX, SECTION 5 — Designation of Participants to Provide Currency - Review of Rules for Designation and Method of Calculating Designation Amounts ................................................................707 - Rules for Designation—Revision ....................................................710 ### ARTICLE XIX, SECTION 6 — Reconstitution - Abrogation of Rules for Reconstitution ...........................................712 ### ARTICLE XX, SECTION 2 — Charges - Payment of Net Charges and Assessment in the SDR Department for the Financial Year Ended April 30, 1982 ................................. 713 ### ARTICLE XXVI — Remedial Measures on Overdue Financial Obligations to the Fund - Overdue Payments to the Fund—Purchases From Fund................. 715 - Overdue Payments to the Fund—Discussions on Use of Fund Resources (Executive Board Meeting 84/54, April 5, 1984).... 716 - The Chairman’s Summing Up at the Conclusion of the Discussion on Overdue Financial Obligations to the Fund (Executive Board Meeting 85/170, November 25, 1985)...................................... 716 - The Acting Chairman’s Concluding Remarks at the Discussion on Additions to the Special Contingent Account (Executive Board Meeting 88/12, January 29, 1988) ............................................ 717 - The Acting Chairman’s Summing Up at the Conclusion of the Discussion on Overdue Financial Obligations—Six-Monthly Report (Executive Board Meeting 88/19, February 10, 1988) . 718 - Procedures for Dealing with Members with Overdue Financial Obligations to the General Department and the SDR Department (Executive Board Meetings 89/100 and 89/101, July 27, 1989) ......................................................................................... 718 - Statement by the Managing Director on the Strengthened Cooperative Strategy on Overdue Financial Obligations to the Fund (Executive Board Meeting 90/38, March 16, 1990) ................. 729 - Summing Up by the Chairman—Operational Modalities of the Rights Approach (Executive Board Meeting 90/97, June 20, 1990).... 735 - Summing Up by the Chairman—Overdue Financial Obligations to the Fund—Six-Monthly Review; Progress Under the Strengthened Cooperative Strategy; and Special Charges—Annual Review (Executive Board Meeting 91/42, March 25, 1991) ................. 738 - Summing Up by the Acting Chairman—Overdue Financial Obligations to the Fund—Six-Monthly Review; Further Progress Under the Strengthened Cooperative Strategy (Executive Board Meeting 92/58, April 17, 1992).................................................739 - The Acting Chairman’s Summing Up—Overdue Financial Obligations—De-escalation of Remedial Measures Under the Strengthened Cooperative Strategy—Further Considerations (Executive Board Meeting 99/79, July 22, 1999)......................740 - Overdue Financial Obligations—Review of Fund Strategy—Extension of Rights Approach ..................................................743 ### ARTICLE XXX(c) — Calculation of Reserve Tranche: Exclusion of Purchases and Holdings - Compensatory Financing Facility ....................................................744 - Exclusion of Purchases in the Credit Tranches and Under Extended Fund Facility .............................................................................744 - Balances Held in Administrative Account.......................................745 - Supplemental Reserve Facility ........................................................745 ### ARTICLE XXX(f) — Freely Usable Currencies - Freely Usable Currencies .................................................................746 ### GENERAL — Trust Fund and Subsidy Account - Trust Fund: Means of Payment of Interest by Members on Their Indebtedness Under Loan Agreements......................................747 - Trust Fund: Means of Repayment by Members on Their Indebtedness Under Loan Agreements ...........................................................747 - Trust Fund: Special Charges on Overdue Financial Obligations.....748 - Trust Fund: Final Direct Distribution of Profits ..............................748 - Trust Fund: Termination and Transfer of Resources to Special Disbursement Account.............................................................. 748 - Terms of Repayment of Final Loan Disbursement and Amendment of Trust Instrument........................................................................ 750 - Supplementary Financing Facility: Subsidy Account—Instrument ................................................................................. 750 - Supplementary Financing Facility: Subsidy Account—Investment ................................................................................ 757 - Supplementary Financing Facility: Subsidy Account—Suspension of Transfers and Re-Transfer of Surplus....................................... 758 - Supplementary Financing Facility: Subsidy Account—Means of Subsidy Payments ..................................................................... 758 - Supplementary Financing Facility: Subsidy Account—Additional Subsidy Payments for May 1–June 30, 1990 and Subsidy Payments for July 1, 1990–June 30, 1991 ................................ 759 - Supplementary Financing Facility Subsidy Account—Exchange Rate for Payment of Subsidies .......................................................... 759 ### OTHER SELECTED RESOLUTIONS AND RELATED DOCUMENTS (headlines) - A. Request for Interpretation of the Articles of Agreement as to the Authority of the Fund to Use Its Resources.............................. 763 - B. Resolution of the United Nations General Assembly 377(V) Entitled “Uniting for Peace” ..................................................... 764 - C. Composite Resolution on the Work of the Ad Hoc Committee on Reform of the International Monetary System and Related Issues and on a Program of Immediate Action.................................... 765 - First Resolution: Final Report of the Ad Hoc Committee on Reform of the International Monetary System and Related Issues........ 766 - Second Resolution: Transformation of the Interim Committee of the Board of Governors on the International Monetary System into the International Monetary and Financial Committee of the Board of Governors ............................................................................. 767 - Third Resolution: Establishment of Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries............... 771 - Fourth Resolution: Other Immediate Steps......................................777 - Interim Committee: Rules of Procedure ..........................................782 - Development Committee: Rules of Procedure.................................783 - Development Committee: Changes in the Organization of Work and Structure of the Secretariat Function.........................................784 - D. Report of the Managing Director to the Board of Governors and to the Executive Board Pursuant to Article XVIII, Section 4(c) ...786 - E. Off-Market Transactions in Gold by the Fund ............................789 ### SELECTED DOCUMENTS RELATING TO THE FUND, THE UNITED NATIONS, AND OTHER INTERNATIONAL ORGANIZATIONS - A. Agreement Between the United Nations and the International Monetary Fund ..........................................................................793 - B. United Nations Convention on the Privileges and Immunities of the Specialized Agencies and Annex V.....................................800 - C. The International Monetary Fund and the World Trade Organization ..............................................................................824 - Relations with World Trade Organization (WTO)—Fund-WTO Cooperation Agreement..........................................824 - Decision Adopted by the General Council Concerning Agreements Between the WTO and the IMF and the World Bank at Its Meeting on 7, 8, and 13 November 1996 (WT/L/l94, 18 November 1996)....................................................824 - Agreement Between the International Monetary Fund and the World Trade Organization....................................................................828 ### INDEX AND LISTS - Index ................................................................................................835 - LIST OF DECISIONS BY NUMBER — selected entries with pages include: - 2-1 ................................................ 632 - 71-2 .............................................. 763 - 117-1 ............................................ 671 - 408-2 .............................................. 3 - 6000-(79/1) S ................................ 696 - 6001-(79/1) S ................................ 697 - 6053-(79/34) S ................................ 699 - 6054-(79/34) S ................................ 701 - 6209-(79/124) S ................................ 707 - 6336-(79/178) S .............................. 703 - 6337-(79/178) S .............................. 705 - 6358-(79/188) TR ............................ 747 - 6540-(80/98) TR .............................. 748 - 6830-(81/65) ................................ 744 - 6832-(81/65) S ............................... 712 - 7116-(82/68) S ............................... 713 - 7160-(82/85) TR .............................. 747 - 7908-(85/26) ................................ 715 - 8160-(85/186) G/S ........................... 674 - 8239-(86/56) SAF ............................ 682 - 8642-(87/101) S/TR ........................ 681 - 8937-(88/118) ESAF/S ..................... 683 - 9605-(90/170) .............................. 641 - 10225-(92/147) S ............................ 681 - 12062-(99/130) ............................. 684 - 12065-(99/130) PRGF ..................... 441 - 12329-(00/113) ............................. 681 - 12545-(01/84) PRGF ....................... 160 - 12879-(02/113) ............................. 456 - 13167-(04/2) ................................ 681 - 13590-(05/99) ESF .......................... 133 - 13595-(05/99) G/S .......................... 674 - 13772-(06/78) ................................ 743 - 13814-(06/98) .............................. multiple pages including 25, 57, 99, 110, 120, 132, 137, 257, 276, 343, 365, 369, 370, 379, 380, 520, 528, 539, 578, 656, 659 - 13815-(06/98) .............................. 25, 28 - 13849-(06/108) ............................ 130, 130, 132, 133, 159, 181, 191, 263, 264, 521, 526, 528, 655, 659 - LIST OF BOARD OF GOVERNORS’ RESOLUTIONS — selected entries with pages include: - IM-6 .......................................... 763 - 6-8 .......................................... 764 - 24-12 ...................................... 685 - 29-7 ........................................ 766 - 29-8 ........................................ 767 - 29-9 ........................................ 771 - 29-10 ...................................... 777 - 34-3 ........................................ 694 - 48-4 ........................................ 771 - 53-2 .......................................... 10 - 54-9 ........................................ 767 - 54-10 ...................................... 789 - 58-1 .......................................... 18 - 59-4 .......................................... 15 - INTERPRETATIONS UNDER ARTICLE XXIX(a) — listed items include: - Interpretations of Articles of Agreement (71-2) ..............................442 - Unenforceability of Exchange Contracts: Fund’s Interpretation of Article VIII, Section 2(b) (446-4) .............................................495 - Interpretation of Article IX, Section 7 (534-3) ................................583 - Interpretation of Article XII, Sections 3(b)(i) and 3(f) (2-1) ...........632 *Selected Decisions and Selected Documents of the International Monetary Fund* ### 1. Article III, Section 2(a) of the Articles of Agreement pro- ### _31stissue - 1. Article III, Section 2(a) of the Articles of Agreement — Eleventh General Review of Quotas ### Legal basis and timing - Article III, Section 2(a) requires the Board of Governors to "at intervals of not more than five years, conduct a general review, and if it deems it appropriate, propose an adjustment of the quotas of the members." - The five-year period for the Eleventh General Review of Quotas ends on March 31, 1998. - The Tenth General Review was completed in early 1995 without recommending an increase in quotas. ### Interim Committee guidance and Executive Board preparatory work - Interim Committee requests and communiqués cited: April 1995, October 1995, April 1996, September 1996, and April 1997 — calling for continued review and urging timely completion of the Eleventh Review. - The Interim Committee in April 1997 emphasized that the proposed distribution should be "predominantly equiproportional while contributing to a correction of the most important anomalies in the present quota distribution." - Executive Board considered: (i) size of overall increase; (ii) distribution of the increase; (iii) procedures for consent and payment, including members with overdue obligations; and (iv) media for payment. - Executive Board also reviewed broader issues: the Fund’s role in balance of payments financing, quota formulae, declining share of developing countries in quotas, and adequacy of borrowing arrangements (GAB and prospective NAB). ### Agreed overall increase and distribution formula - The Interim Committee agreed that: - the present total of Fund quotas would be increased by 45 percent; - 75 percent of the overall increase would be distributed in proportion to present quotas; - 15 percent of the overall increase would be distributed in proportion to members’ shares in calculated quotas (based on 1994 data); - the remaining 10 percent of the overall increase would be distributed among those members whose present quotas are out of line with their positions in the world economy (measured by excess of share in calculated quotas over share in actual quotas), of which 1 percent of the overall increase would be distributed among five members whose current quotas are far out of line and which are in a position to contribute to the Fund’s liquidity over the medium term. - Executive Board proposal: increase total Fund quotas by 45 percent, from approximately SDR 146 billion to approximately SDR 212 billion. - The Executive Board proposed rounding quotas to the nearest multiple of SDR 0.1 million. ### Adjustments, representation, and special cases - Directors confirmed no intention to re-open issues of the size and composition of the Executive Board, and that existing representation of developing countries should not be affected. - Executive Board proposed adjustments in quotas of France, Germany, Italy, and the United Kingdom that would keep unchanged the increases for all other members as determined under the formula in paragraph 4. - The United Kingdom and France agreed to maintain the equal distribution of quotas between themselves under the Eleventh Review as first agreed under the Ninth General Review. - Quotas proposed for members that had not yet consented or paid under the Ninth Review are calculated on the basis of their proposed Ninth Review quotas. ### Consent, effectiveness, participation requirement, and deadlines - A member’s increase in quota shall not become effective unless: - the member has notified the Fund of its consent to the increase by the date prescribed under paragraph 4; and - the member has paid the increase in quota in full within the period prescribed under paragraph 5; - no member with overdue repurchases, charges or assessments to the General Resources Account may consent or pay until it becomes current in these obligations. - Participation requirement: no increase shall become effective before the Fund determines that members having not less than 85 percent of the total of quotas on December 23, 1997 have consented to the increases. - Consent deadline (per Executive Board paragraph 14): a member may consent at any time before 6:00 p.m., Washington time, January 29, 1999 (the Executive Board may extend the period). - Notices (per Resolution paragraph 4): must be received before 6:00 p.m., Washington time, January 31, 2000 (subject to Executive Board extension). - Payment timing (per paragraph 17): a member must pay the increase in its subscription within 30 days after (a) the date on which the member notifies the Fund of its consent, or (b) the date on which the participation requirement is met, whichever is later. The Executive Board is authorized to extend the period for payment. - Executive Board recommends extending the periods for consent and payment under the Ninth Review until the date when the participation requirement in paragraph 3 of the proposed Resolution on the Eleventh Review has been reached. - When considering extensions, the Executive Board will give particular consideration to members judged to be cooperating with the Fund toward settlement of protracted arrears. ### Payment modalities and liquidity implications - Article III, Section 3(a) requires that 25 percent of any increase in quota shall be paid in special drawing rights (SDRs), subject to Board of Governors prescriptions. - Paragraph 8 of the proposed Resolution provides that 25 percent of the increase should be paid in SDRs or in currencies of other members selected by the Fund, subject to their concurrence, or any combination of SDRs and such currencies. - The balance of the increase shall be paid in a member’s own currency. - Reserve asset payments are intended to strengthen Fund liquidity and will either enlarge or create a reserve tranche position of an equivalent amount. - The Fund offers to assist members that do not hold sufficient reserves to make reserve asset payments by facilitating SDR loans from other members willing to cooperate; such loans would be repaid on the same day from SDR proceeds of drawings of reserve tranche positions established by the payment of SDRs. ### Proposed Resolution highlights and adoption mechanics - The Executive Board recommended that the Board of Governors adopt the attached Resolution covering matters requiring Governors' action. - Adoption of the Resolution requires positive responses from Governors having an 85 percent majority of the total voting power. - Key Resolution provisions: - Article implementing the quota increases to amounts shown in the Annex; - Conditions on consent, payment, participation threshold (85 percent), and deadlines for notices and payments; - Authorization for the Executive Board to extend consent and payment periods. - Ed. Note: Adopted by the Board of Governors, effective January 30, 1998, and designated Resolution No. 53-2. *Source: Excerpt from "Increases in Quotas of Fund Members — Eleventh General Review" (report and proposed Resolution).* ### 5. Each member shall pay to the Fund the increase in its quota ### _31stissue - 5. Each member shall pay to the Fund the increase in its quota ### Payment timing and extensions - Each member shall pay to the Fund the increase in its quota within 30 days after the later of (a) the date on which it notifies the Fund of its consent, or (b) the date of the Fund’s determination under paragraph 3 above, provided that the Executive Board may extend the payment period as it may determine. - Ed. Note: The Executive Board extended this period until 6:00 p.m., Washington time, on January 31, 2002 (Decision No. 12533-(00/76), July 18, 2001). The period was further extended to July 31, 2002 (Decision No. 12672-(02/11), January 31, 2002). - For members that have not yet consented to their increases in quotas under the Ninth Review, the period for consent to such quota increases shall extend to the date determined under paragraph 3 above. - For members that have not yet paid for their quota increases under the Ninth Review, the period for payment for such quota increases shall extend to 30 days after the date determined under paragraph 3 above. ### Consideration for extensions (Executive Board guidance) - When deciding on an extension of the period for consent to or payment for the increase in quotas, the Executive Board shall give particular consideration to the situation of members that may still wish to consent to or pay for the increase in quota, including members with protracted arrears to the General Resources Account, consisting of overdue repurchases, charges or assessments to the General Resources Account, that, in its judgment, are cooperating with the Fund toward the settlement of these obligations. ### Composition of payment - Each member shall pay 25 percent of its increase either in special drawing rights or in the currencies of other members specified, with their concurrence, by the Fund, or in any combination of special drawing rights and such currencies. - The balance of the increase shall be paid by the member in its own currency. ### Annex — Members and Proposed Quotas (In millions of SDRs) - The Annex lists individual proposed quotas for members, preserved here exactly as stated for the listed countries (excerpted examples): - 1. Afghanistan, Islamic State of 161.9 - 2. Albania 48.7 - 3. Algeria 1,254.7 - 4. Angola 286.3 - 5. Antigua and Barbuda 13.5 - 6. Argentina 2,117.1 - 7. Armenia 92.0 - 8. Australia 3,236.4 - 9. Austria 1,872.3 - 10. Azerbaijan 160.9 - 11. Bahamas, The 130.3 - 12. Bahrain 135.0 - 13. Bangladesh 533.3 - 14. Barbados 67.5 - 15. Belarus 386.4 - 16. Belgium 4,605.2 - 17. Belize 18.8 - 18. Benin 61.9 - 19. Bhutan 6.3 - 20. Bolivia 171.5 - 21. Bosnia and Herzegovina 169.1 - 22. Botswana 63.0 - 23. Brazil 3,036.1 - 24. Brunei Darussalam 215.2 - 25. Bulgaria 640.2 - 26. Burkina Faso 60.2 - 27. Burundi 77.0 - 28. Cambodia 87.5 - 29. Cameroon 185.7 - 30. Canada 6,369.2 - 31. Cape Verde 9.6 - 32. Central African Republic 55.7 - 33. Chad 56.0 - 34. Chile 856.1 - 35. China 4,687.2 - 36. Colombia 774.0 - 37. Comoros 8.9 - 38. Congo, Democratic Republic of the 533.0 - 39. Congo, Republic of 84.6 - 40. Costa Rica 164.1 - 41. Côte d’Ivoire 325.2 - 42. Croatia 365.1 - 43. Cyprus 139.6 - 44. Czech Republic 3 - 45. Denmark 1,642.8 - 46. Djibouti 15.9 - 47. Dominica 8.2 - 48. Dominican Republic 218.9 - 49. Ecuador 302.3 - 50. Egypt 943.7 - 51. El Salvador 171.3 - 52. Equatorial Guinea 32.6 - 53. Eritrea 15.9 - 54. Estonia 65.2 - 55. Ethiopia 133.7 - 56. Fiji 70.3 - 57. Finland 1,263.8 - 58. France 10,738.5 - 59. Federal Republic of Yugoslavia (Serbia/Montenegro) 1/ 467.7 - 60. Gabon 154.3 - 61. Gambia, the 31.1 - 62. Georgia 150.3 - 63. Germany 13,008.2 - 64. Ghana 369.0 - 65. Greece 823.0 - 66. Grenada 11.7 - 67. Guatemala 210.2 - 68. Guinea 107.1 - 69. Guinea-Bissau 14.2 - 70. Guyana 90.9 - 71. Haiti 81.9 - 72. Honduras 129.5 - 73. Hungary 1,038.4 - 74. Iceland 117.6 - 75. India 4,158.2 - 76. Indonesia 2,079.3 - 77. Iran, Islamic Republic of 1,497.2 - 78. Iraq 1,188.4 - 79. Ireland 838.4 - 80. Israel 928.2 - 81. Italy 7,055.5 - 82. Jamaica 273.5 - 83. Japan 13,312.8 - 84. Jordan 170.5 - 85. Kazakhstan 365.7 - 86. Kenya 271.4 - 87. Kiribati 5.6 - 88. Korea 1,633.6 - 89. Kuwait 1,381.1 - 90. Kyrgyz Republic 88.8 - 91. Lao People’s Democratic Republic 52.9 - 92. Latvia 126.8 - 93. Lebanon 203.0 - 94. Lesotho 34.9 - 95. Liberia 129.2 - 96. Libya 1,123.7 - 97. Lithuania 144.2 - 98. Luxembourg 279.1 - 99. Macedonia, former Yugoslav Republic of 68.9 - 100. Madagascar 122.2 - 101. Malawi 69.4 - 102. Malaysia 1,486.6 - 103. Maldives 8.2 - 104. Mali 93.3 - 105. Malta 102.0 - 106. Marshall Islands 3.5 - 107. Mauritania 64.4 - 108. Mauritius 101.6 - 109. Mexico 2,585.8 - 110. Micronesia, Federal States of 5.1 - 111. Moldova 123.2 - 112. Mongolia 51.1 - 113. Morocco 588.2 - 114. Mozambique 113.6 - 115. Myanmar 258.4 - 116. Namibia 136.5 - 117. Nepal 71.3 - 118. Netherlands 5,162.4 - 119. New Zealand 894.6 - 120. Nicaragua 130.0 - 121. Niger 65.8 - 122. Nigeria 1,753.2 - 123. Norway 1,671.7 - 124. Oman 194.0 - 125. Pakistan 1,033.7 - 126. Palau, Republic of 3.1 - 127. Panama 206.6 - 128. Papua New Guinea 131.6 - 129. Paraguay 99.9 - 130. Peru 638.4 - 131. Philippines 879.9 - 132. Poland 1,369.0 - 133. Portugal 867.4 - 134. Qatar 263.8 - 135. Romania 1,030.2 - 136. Russia 5,945.4 - 137. Rwanda 80.1 - 138. Samoa 11.6 - 139. San Marino 17.0 - 140. São Tomé and Príncipe 7.4 - 141. Saudi Arabia 6,985.5 - 142. Senegal 161.8 - 143. Seychelles 8.8 - 144. Sierra Leone 103.7 - 145. Singapore 862.5 - 146. Slovak Republic 357.5 - 147. Slovenia 231.7 - 148. Solomon Islands 10.4 - 149. Somalia 81.7 - 150. South Africa 1,868.5 - 151. Spain 3,048.9 - 152. Sri Lanka 413.4 - 153. St. Kitts and Nevis 8.9 - 154. St. Lucia 15.3 - 155. St. Vincent and the Grenadines 8.3 - 156. Sudan 315.1 - 157. Suriname 92.1 - 158. Swaziland 50.7 - 159. Sweden 2,395.5 - 160. Switzerland 3,458.5 - 161. Syrian Arab Republic 293.6 - 162. Tajikistan 87.0 - 163. Tanzania 198.9 - 164. Thailand 1,081.9 - 165. Togo 73.4 - 166. Tonga 6.9 - 167. Trinidad and Tobago 335.6 - 168. Tunisia 286.5 - 169. Turkey 964.0 - 170. Turkmenistan 75.2 - 171. Uganda 180.5 - 172. Ukraine 1,372.0 - 173. United Arab Emirates 611.7 - 174. United Kingdom 10,738.5 - 175. United States 37,149.3 - 176. Uruguay 306.5 - 177. Uzbekistan 275.6 - 178. Vanuatu 17.0 - 179. Venezuela 2,659.1 - 180. Vietnam 329.1 - 181. Yemen, Republic of 243.5 - 182. Zambia 489.1 - 183. Zimbabwe 353.4 - 1/ Under Executive Board Decision No. 10237-(92/150) adopted December 14, 1992, the Federal Republic of Yugoslavia (Serbia/Montenegro) may succeed to the membership of the former Socialist Federal Republic of Yugoslavia. ### New periods for consent and related resolutions - WHEREAS paragraph 4 of the Board of Governors’ Resolution No. 53-2 states that, to become effective, duly executed notices for consent to increases in quota under the Resolution must be received in the Fund before 6:00 p.m., Washington time January 31, 2000, provided that the Executive Board may extend this period as it may determine; - WHEREAS the last extension of the period established in accordance with paragraph 4 of the Resolution expired at 6:00 p.m., Washington time, July 31, 2004; - The Board of Governors resolved that Fund members that have not consented to an increase in their quotas as proposed by Resolution No. 53-2 within the period established in accordance with paragraph 4 of that Resolution, shall have until 6:00 p.m., Washington time September 19, 2005, to submit notices in accordance with paragraph 2 of Resolution No. 53-2, by a duly authorized official of the member, provided that the Executive Board may extend this period as it may determine. - Ed. Note: Decision No. 13778-(06/76), August 25, 2006, extended the period for receiving notices of consent to 6:00 p.m., Washington time, September 28, 2007. ### Twelfth General Review of Quotas — Executive Board report and recommendation - Article III, Section 2(a) requires the Board of Governors to conduct a general review at intervals of not more than five years. - The five-year period for the Twelfth Review will end on January 30, 2003. - The Executive Board discussed role and size of the Fund, adequacy of its resource base, distribution of Fund quotas, and governance reforms, but found there was not the necessary broad support among Executive Directors for a recommendation to increase quotas or implement changes in distribution or governance. - The Fund’s liquidity position appears adequate, barring unforeseen developments that could result in large new demands for Fund resources. - Recommendation: The Executive Board recommends that the Board of Governors adopt a resolution concluding the Twelfth General Review by January 30, 2003 with no proposal to increase quotas. - The resolution notes the intention of the Executive Board during the period of the Thirteenth General Review to monitor the adequacy of Fund resources, consider measures to achieve a distribution of quotas that reflects developments in the world economy, and consider measures to strengthen governance. The Executive Board will provide a status report to the International Monetary and Financial Committee by the 2003 Annual Meeting and may establish a Committee of the Whole to make specific recommendations. ### Gold, currency, and accounting principles - Gold and currency subscribed to the Fund are clearly within its unrestricted ownership. They do not belong in any way to the subscriber. - Although accounting practices of a member are primarily its own concern, each member should prepare its accounts in such a way that misconceptions as to the ownership of the gold and currency subscribed to the Fund would be avoided. - Decision No. 170-3, May 20, 1947. ### Guidelines on payment of reserve assets in connection with subscriptions - These guidelines shall be taken into account by a Committee of the Executive Board established to consider an application for membership or a request for an increase in quota made outside a general review; Committees shall pay due regard to present and prospective economic and financial circumstances of the country concerned. - New members will be expected to pay a part of their initial subscription in reserve assets. - The amount of the subscription to be paid in reserve assets shall be determined in the light of all payments of reserve assets made by existing members and the country’s external reserve position at the time of membership. - A reasonable approximation of past reserve asset payments is the average of all reserve assets actually paid in terms of the quotas of all members rather than proportions paid by individual members. - Taking into account asset payments made by all members in connection with the Sixth General Review and additions, the reserve asset payments made by all members average 20 percent of present quotas. - If all eligible members consent to the full increases under the Seventh General Review and taking into account that 25 percent of any increase in quotas is to be paid in SDRs (or acceptable currency for nonparticipants), the reserve asset payment made by eligible members will average 21.7 percent of total quotas. - Consequently: - For the period prior to the coming into effect of the quotas approved under the Seventh General Review, the reserve asset payment for a country applying for membership can normally be expected to be of the order of 20 percent of its initial quota. - After the Seventh General Review is completed, the reserve asset payment for a country applying for membership would rise to the order of 21.7 percent of its initial quota. - Normally, countries joining would be expected to make a payment of reserve assets calculated along the lines outlined above. Consideration may be given, at the request of a prospective new member, for a payment smaller than the average size of such payments. - In exceptional circumstances, taking into account actual and prospective balance of payments and gross reserve position (including ability to acquire or mobilize external financial assets and any allocations of SDRs in prospect), the size of the reserve asset payment may be reduced, provided that it is not less than the equivalent of 10 percent of the member’s gross reserves or 10 percent of initial quota, whichever was the higher. - In determining the amount of the reserve asset payment, account should be taken of the effect on remuneration payable to the new member; acquisition of a remunerated reserve tranche position would tend to ease the loss of interest income involved in the payment of a reserve asset. The norm for remuneration could be applied for the new member rather than the average of reserve asset payments noted above, subject to the minimum payment in the preceding paragraph. - Decision No. 6266-(79/156), September 10, 1979. *Source: _31stissue - 5. Each member shall pay to the Fund the increase in its quota* ### 7. As regards the amount of reserve asset payments to be made ### 7. As regards the amount of reserve asset payments to be made ### Reserve asset payment amounts for ad hoc quota increases - For ad hoc increases in quotas that occur outside a general review and that are effectively a “catching up” of quota increases already granted to other members in past general reviews, the amount of the reserve assets to be paid shall be based on the amount of reserve assets required as a result of such past general reviews. - For other ad hoc increases, if any, the amount of the reserve asset payment shall be equivalent to 25 percent of the increase in quota. ### Media of payment - Payments of reserve assets shall be made in SDRs to the maximum extent practicable. - Alternatively, payments may be made in a currency that is acceptable to the Fund and which is included in the operational budget as a currency that could be sold on a net basis for the foreseeable future. ### Notification of exchange arrangements (Article IV, Section 2) — subsequent notifications - Members shall be guided by the procedures set forth in Section IV of SM/77/277 with respect to prompt notification of any changes in their exchange arrangements. - Changes requiring notification include: - Any official action adopting a different type of arrangement. - For pegging members: all changes in the peg, including changes in the central point around which margins are maintained and changes in the composition of a composite (other than redistributions of currency weights based on newly available trade or payments data). - For members with flexible exchange arrangements: - Members classified as fixing the rate according to a set of indicators should notify the Fund of discrete exchange rate changes not consistent with those indicators. - All members maintaining flexible arrangements should notify the Fund whenever authorities have taken a significant decision affecting such arrangements, at a minimum when public policy statements have been issued. - If the Managing Director considers a significant change has occurred and no notification has been received, he will consult with the member and may seek a formal notification. ### Surveillance over exchange rate policies — principles - Article IV, Section 3(a) and 3(b) mandate Fund oversight of the international monetary system and firm surveillance over members’ exchange rate policies, adopting specific principles to guide members. - The principles shall: - Be consistent with cooperative arrangements and other exchange arrangements of a member’s choice consistent with the purposes of the Fund and Section 1 of Article IV. - Respect domestic social and political policies and pay due regard to members’ circumstances. - Require each member to provide information necessary for surveillance and, when requested, to consult with the Fund on exchange rate policies. Key principles for members’ exchange rate policies: - A member shall avoid manipulating exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain an unfair competitive advantage. - 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. - Members should take into account the interests of other members, including those of the countries in whose currencies they intervene. ### Indicators prompting Fund discussion with a member (surveillance triggers) - The Fund shall consider the following developments among those which might indicate the need for discussion with a member: - protracted large-scale intervention in one direction in the exchange market; - 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; - (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; - the pursuit, for balance of payments purposes, of monetary and other domestic financial policies that provide abnormal encouragement or discouragement to capital flows; - 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; and - unsustainable flows of private capital. ### Appraisal basis - The Fund’s appraisal of a member’s exchange rate policies shall be based on an evaluation of developments in the member’s balance of payments, including: - the size and sustainability of capital flows; - the member’s reserve position; - the member’s external indebtedness. - The appraisal shall be within the framework of a comprehensive analysis of the general economic situation and economic policy strategy, taking into account domestic and external policies and the extent to which policies serve the objectives of financial stability, sustained sound economic growth, and reasonable levels of employment. ### Procedures for surveillance, notifications, and consultations - 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; in principle, consultations shall take place annually and shall include consideration of observance of the principles and obligations under Article IV, Section 1. Timelines for Executive Board conclusions: - Not later than sixty-five days 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, except for members eligible for financing under the Poverty Reduction and Growth Facility identified in Decision No. 8240-(86/56), SAF, where the Executive Board shall reach conclusions no later than three months from the termination of discussions between the member and the staff.1 - 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. - IV. The Managing Director shall maintain close contact with members regarding their exchange arrangements and exchange policies and will be prepared to discuss important contemplated changes on a member’s initiative. - V. If between Article IV consultations the Managing Director considers that a member’s exchange rate policies may not accord with the exchange rate principles, he shall raise the matter informally and confidentially, conclude promptly whether there is a question of observance, and if so, initiate and conduct a confidential discussion with the member under Article IV, Section 3(b). The Managing Director shall report to the Executive Board on the results of such a discussion as soon as possible and in any event not later than four months after its initiation. If satisfied that the principles are being observed, he shall informally advise all Executive Directors and the staff shall report in the next Article IV consultation; the Managing Director shall not place the matter on the Executive Board agenda unless the member requests it. - VI. The Executive Board shall review the general implementation of the Fund’s surveillance over members’ exchange rate policies at intervals of three years and at such other times as consideration of it is placed on the agenda of the Executive Board. ### Surveillance: procedural review schedule - The Executive Board reviewed procedures relating to surveillance and regular consultations under Article IV and will review them again in December 1979. - The Executive Board will review the document “Surveillance over Exchange Rate Policies” at an appropriate time not later than April 1, 1980, as provided in paragraph 2 of Decision No. 5392-(77/63), adopted April 29, 1977. *Source: 7. As regards the amount of reserve asset payments to be made* ### 3. Supplemental surveillance procedures. ### 3. Supplemental surveillance procedures. ### Procedures for ad hoc (supplemental) surveillance - Whenever the Managing Director considers that important economic or financial developments are likely to affect a member’s exchange rate policies or the behavior of the exchange rate of its currency, he shall initiate informally and confidentially a discussion with the member. - After such discussion the Managing Director may: - report to the Executive Board or informally advise the Executive Directors; and - if the Executive Board considers it appropriate, an ad hoc Article IV consultation between the member and the Fund shall be conducted in accordance with the procedure set out in subparagraph (b). - Subparagraph (b) procedural steps: - A staff report will be circulated to the Executive Directors under cover of a note from the Secretary specifying a tentative date for Executive Board discussion which will be at least 15 days later than the date upon which the report is circulated. - The Secretary’s note will also set out a draft decision taking note of the staff report and completing the ad hoc consultation without discussion or approval of the views contained in the report. - The decision will be adopted upon the expiration of the two-week period following the circulation of the staff report to the Executive Directors unless, within such period, there is a request from an Executive Director or decision of the Managing Director to place the report on the agenda of the Executive Board. - If the staff report is placed on the agenda, the Executive Board will discuss the report and will reach conclusions which will be reflected in a summing up. - Unless otherwise decided by the Executive Board, the conduct of an ad hoc consultation with a member will not affect the consultation cycle applicable to the member or the deadline for completion of the next consultation with the member. - Decision references: Decision No. 6026-(79/13), January 22, 1979, as amended by Decision Nos. 10273-(93/15), January 29, 1993, and 10364-(93/67), May 10, 1993. ### Article IV consultation documentation change - Article IV consultation documentation shall no longer include Recent Economic Development reports. - Instead, the staff could incorporate, as needed, the appropriate information on recent economic developments in a Selected Issues paper as analytical background for key policy issues. - Decision reference: Decision No. 12661-(02/6), January 22, 2002. ### Executive Board summings-up and the Biennial Review — key observations and guidance - Broad satisfaction with current surveillance procedures and affirmation that the principle of annual consultations is a cornerstone for continuity of Fund surveillance, balanced with a recognized need for flexibility in procedures to focus surveillance effectively given strained resources. - Flexibility encouraged on consultation frequency, mission size, and documentation, particularly where economic developments are on a positive track. - Directors generally agreed that greater use should be made of longer consultation cycles to redirect resources toward priority areas; staff and management should periodically identify countries for which annual consultations will be held and those for which consultations are not expected within the next year. In cases of longer-than-annual cycles, the Executive Director for the country concerned would be consulted and the consent of the member would be needed. ### Effectiveness of surveillance (Executive Board Meeting 02/38 summing-up highlights) - 1. Executive Directors expressed deep appreciation for the staff report and welcomed taking stock of Fund surveillance; the 1977 surveillance decision continues to provide an appropriate basis for Fund surveillance over members’ exchange rate policies. - 4. Effectiveness depends on the quality of the Fund’s advice and member implementation; Directors emphasized analytical rigor, sound advice, and complementing objectives with recommendations on alternative ways to achieve them. Advice should take into account social and political realities to enhance ownership. Importance of effective communication, close policy dialogue, outreach to legislative bodies, tailoring mission cycles to national policy agendas, continuity of mission staffing, and strengthening national economic management capabilities via technical assistance. - 5. Some Directors considered the Fund more effective in developing countries than industrial countries; others saw surveillance as equally effective in industrial countries if advice influences domestic political debate. Candid staff reports and summings up are important for conveying clear messages. Incentive schemes for engagement were suggested. - 6. Surveillance coverage has expanded from fiscal, monetary, and exchange rate policies to include external vulnerability assessments, external debt sustainability analyses, financial sector vulnerabilities, and structural and institutional policies—necessary adaptation to globalization and increased international capital flows. - 9. Directors saw scope for enhancing selectivity in individual cases and areas (for example, trade policy where severe distortions hamper macro prospects or have regional/global implications). Greater concentration would strengthen trade issue coverage and focus surveillance. - 10. Core areas (macroeconomic conditions, monetary policy, fiscal policy, exchange rate issues) are typically covered well. Directors welcomed greater candor in evaluation of “soft” exchange rate pegs in countries with market access and urged candid treatment of exchange rate issues across the membership. Some noted a trade-off between candor and transparency given sensitivity. - 11. Need to raise financial sector coverage to the same standard as core areas. FSAP participation generally yields in-depth coverage; in absence of FSAP, financial sector surveillance quality can be uneven. Possible remedies include adding MAE staff to Article IV missions or carrying out full FSSA updates. - 13. Strengthening external vulnerability assessments in emerging market economies: greater attention to private sector balance sheet exposure to interest or exchange rate shocks and to debt sustainability. For market-access countries with flexible exchange rates, ability of financial and non-financial corporates to withstand large exchange rate movements is key but often hampered by inadequate data. Directors urged going beyond a single baseline medium-term scenario in debt sustainability analysis, making assumptions explicit, and using meaningful stress tests or alternative scenarios. - 14. Structural issues outside traditional Fund expertise can be key to a country’s situation; Directors reiterated importance of drawing on outside institutions’ expertise, particularly the World Bank. - 15. Support for current modalities of multilateral surveillance: semi-annual WEO discussions, WEMD sessions, and quarterly Global Financial Stability discussions are appropriate and flexible tools. Directors welcomed enhancements to multilateral surveillance of capital markets enabled by the International Capital Markets Department. ### Additional operational guidance and analytic practice - Encourage use of more sophisticated analytical techniques and spread their use to a greater range of countries. - Article IV reports should contain clear and candid information on the quality of data available to staff, drawing attention to gaps or deficiencies that hamper analysis. - For effective diagnosis of financial vulnerabilities and incipient crises, countries vulnerable to large capital account swings should provide high-quality and timely information on the usability of reserves, on short-term debt, and on developments in market sentiment. - Most Directors supported a selective approach to dissemination and use of early warning system (EWS) models, given sensitivity and imprecision; staff should discuss EWS results with country authorities and keep the Board informed of these discussions. Results require judgment and should be used selectively. - Support stepping up collaboration with the World Bank on corporate sector vulnerability analysis to identify operational indicators and to explore linkages between corporate sector weaknesses and external vulnerability on a case-by-case basis. - Continue efforts to better integrate Fund multilateral and bilateral surveillance activities and to include capital market developments and views of market participants in bilateral surveillance work where relevant. - Maintain uniformity of treatment of member countries while allowing flexibility in consultation frequency, mission size, and documentation provided adequate contact with all countries is maintained. *Source: _31stissue - 3. Supplemental surveillance procedures._* ### 16. Directors agreed that surveillance and Fund-supported pro- ### Directors' conclusions on surveillance, Article IV consultations, and staff‑monitored programs ### Surveillance and Fund‑supported programs - Surveillance and Fund-supported programs share the same broad objective: promotion or restoration of macroeconomic stability, external viability, and sustainable growth. - Periodic reassessment of economic conditions and policies is needed in program countries; this requires “stepping back” from the program framework. - Directors judged a radical separation of surveillance and program activities (for example, through separate mission teams) as not operationally feasible because it would: - entail significant resource costs; - complicate communication with authorities; and - risk inconsistent policy advice. - Most Directors supported clearer guidance on the role and nature of surveillance in program countries to strengthen surveillance while retaining synergies with program reviews. - Management retains the prerogative to alter the composition of Article IV consultation teams to meet particular country circumstances. ### Timing and procedures for Article IV consultations - Better timing of Article IV consultations in program countries would enhance effectiveness; consultations are most valuable: - before a program is negotiated; - when a program has moved off-track; or - when a major change in the program strategy is envisaged between programs. - Directors expressed broad satisfaction with current Article IV consultation procedures and reaffirmed support for the principle of annual Article IV consultations in non‑program countries. - Flexibility in surveillance procedures was encouraged to enable effective focus given persistent strains on staff and Board resources. - Most Directors encouraged flexibility in mission size and in the scope of staff reports, provided core surveillance issues are covered in all Article IV consultations. - Flexibility was also encouraged in the preparation of Selected Issues papers, including instances where no background studies may be needed. - Directors supported strengthening the coverage in Article IV staff reports of the authorities’ response to past policy advice, including fuller accounts of authorities’ views and reasons for their policy actions. - Several Directors proposed considering an annual assessment of the impact of the Fund’s advice as a framework for examining surveillance effectiveness. - Directors emphasized consultations with authorities should be undertaken in a spirit of consultation, based on mutual trust and confidence, and missions should be prepared to discuss alternative policy options. ### Staff‑Monitored Programs (SMPs) - Directors generally agreed SMPs constitute a useful vehicle for closer monitoring of countries’ policies outside a Fund arrangement. - Improvements in the design and documentation of SMPs since the 1998 discussion of the draft guidelines were welcomed. - Less progress has been made in the reporting of performance under SMPs. - Inadequate reporting is of particular concern where an SMP is intended to provide signals to private and/or official creditors. - Because SMPs do not require upper credit tranche conditionality and do not entail Fund endorsement of the member’s policies, Directors considered transparency on performance under SMPs essential to allow creditors and donors to assess policy adjustment quality. - Many Directors supported strengthening performance reporting guidelines and greater transparency; several Directors cautioned that a presumption of publication might conflict with the Fund’s transparency policy and could blur the distinction between SMPs and Fund arrangements. - Directors agreed that a further discussion of signaling SMPs would be useful; some Directors suggested a different instrument might be appropriate in signaling cases. ### Biennial review outcomes and operational guidance - Directors welcomed follow‑up on outstanding issues from the biennial surveillance review and consideration of the Draft Operational Guidance Note for Staff on Surveillance. - The Guidance Note defining the role and nature of surveillance in program countries was seen as a useful clarification; consistent implementation should ensure surveillance in program countries is conducted with an appropriately fresh perspective. - Several Directors favored greater formal separation of surveillance and program activities, but many cautioned against radical separation given important synergies. - The Guidance Note will be finalized in light of the discussion and updated as Board discussions on surveillance evolve. ### Changes in Article IV consultation cycles (decisions) - Each member presently receiving financial assistance under a Fund arrangement shall immediately be placed on the 24-month consultation cycle; in future, whenever a Fund arrangement is approved for a member, that member shall automatically be placed on the 24-month consultation cycle. - Article IV consultations with a member receiving financial assistance under a Fund arrangement will be expected to be completed within 24 months of the date of completion of the previous Article IV consultation, except that the consultation cycle will be shortened under the following circumstances: - (a) where the most recent Article IV consultation with the member was completed 6 months or more before the date of approval of the relevant arrangement, the next Article IV consultation with that member will be expected to be completed by the later of (i) 6 months after the date of approval of the arrangement, and (ii) 12 months, plus a grace period of three months, after the date of completion of the previous Article IV consultation; and - (b) where, with respect to a member whose circumstances do not fall within paragraph 2(a), a program review under an arrangement for that member is not completed by the date for completion specified in the arrangement, the next Article IV consultation with that member will be expected to be completed by the later of (i) 6 months after the date specified in the arrangement for completion of the review, and (ii) 12 months, plus a grace period of 3 months, after the date of completion of the previous Article IV consultation, provided, however, that, where the relevant program review is completed before the later of the dates specified in (i) and (ii) above, the next Article IV consultation will be expected to be completed within 24 months of the date of completion of the previous Article IV consultation with that member. - Upon the expiration or cancellation of an arrangement for a member, that member shall automatically be placed on the standard 12-month consultation cycle and the next Article IV consultation with that member will be expected to be completed by the later of (i) 6 months after such expiration or cancellation, and (ii) 12 months, plus a grace period of 3 months, after the date of completion of the previous Article IV consultation, but in no event later than 24 months after the completion of the previous Article IV consultation. (SM/02/184, Sup. 1, 6/18/02, Sup. 3, 9/5/02) *Summing Up by the Chairman—Biennial Review of the Implementation of the Fund’s Surveillance and of the 1977 Surveillance Decision—Follow Up, Executive Board Meeting 02/76, July 15, 2002* ### 4. Whenever a Policy Support Instrument (“PSI”) is approved ### _31stissue - 4. Whenever a Policy Support Instrument (“PSI”) is approved ### Article IV consultation cycle when a PSI is approved or terminated - Whenever a Policy Support Instrument (“PSI”) is approved for a member, that member shall automatically be placed on a 24-month Article IV consultation cycle. - If the last Article IV consultation was completed 6 months or more before the approval of the PSI, the next consultation is expected to be completed by the later of: - 12 months (plus the usual 3-month grace period) after the last consultation, or - 6 months after the approval of the PSI. - Following termination of a PSI—whether through expiry or lapse—the member is automatically placed back on the standard 12-month cycle and the first consultation is expected to be completed by the later of: - 6 months after the end of the PSI, or - 12 months (plus a grace period of 3 months) after the completion of the previous consultation, - but in no event later than 24 months after the completion of the previous consultation. - (SM/05/343, Sup. 1, 9/30/05) - Decision No. 12794-(02/76), July 15, 2002, as amended by Decision Nos. 12854-(02/96), September 12, 2002 and 13562-(05/85), October 5, 2005 ### Chairman’s Summing Up—Biennial Review: overarching assessment - Executive Board Meeting 04/72––July 23, 2004. - Directors welcomed the review of surveillance implementation and confirmed that the 1977 Surveillance Decision continues to provide an appropriate basis for Fund surveillance over members’ exchange rate policies. - Surveillance should evolve and adapt with the world economy and membership requirements. - Four facets of surveillance were analyzed: focus and depth of economic analysis and policy advice; policy dialogue with country authorities; communication and signaling of policy messages; and assessments of surveillance effectiveness. ### Focus and quality of analysis — key findings and guidance - Priority matters at the apex of the Fund’s hierarchy of concerns: - external sustainability; - vulnerability to balance of payments or currency crises; - sustainable growth and the policies to achieve it; - for systemically important countries, conditions and policies affecting the global or regional economic outlook. - Directors’ recommendations and observations: - Keep Article IV consultations focused on country-specific, macroeconomically relevant topics. - Use more discriminating coverage of issues outside traditional Fund expertise and greater use of information from appropriate outside sources. - More selective coverage of trade matters, focused on issues that influence stability and growth prospects. - Explore streamlining formal requirements relating to Article IV consultation coverage and alternative channels to provide some information to the Board. - Exchange views with members early to define priority topics for Article IV consultations, while staff retains responsibility for topic selection. - Each Article IV staff report should spell out the strategic focus of the consultation; consider disseminating multi-year country work programs around limited priorities. - Improve integration of bilateral, regional, and multilateral surveillance to better capture global and regional spillovers. - For largest Fund members, provide fuller treatment of the global impact of their economic conditions and policies. - Use alternative scenarios more extensively to quantify potential impacts and highlight risks to short- and medium-term outlooks. - Enhance treatment of exchange rate issues: identify de facto exchange rate regimes; systematically use a broad range of indicators and analytical tools for external competitiveness; present policy dialogue clearly when views diverge; consider regional context where helpful; assist countries contemplating greater exchange rate flexibility. - Strengthen financial sector coverage to be on par with other areas via FSAP participation, MFD/ICM missions, and training of area department staff. - Continue refining vulnerability assessments and balance sheet analysis despite data constraints; integrate components of vulnerability assessments for clearer presentation; recognize relevance for advanced and emerging market economies. - For areas outside traditional expertise (investment climate, institutional reforms, social issues): exercise greater selectivity, use outside sources, and give attention to implementation of past recommendations. - In low-income countries, use Article IV consultations to analyze alternative macroeconomic frameworks under different aid flow assumptions and to consider external shocks and resilience; draw on World Bank information for monitoring progress toward Millennium Development Goals. - For program countries, continue improving stocktaking of economic policy strategy and encourage use of alternative scenarios; follow up on Ex Post Assessments (EPAs). ### Policy dialogue with country authorities — recommendations - Maintain close and frank policy dialogue; frequent contacts outside Article IV consultations build trust. - Encourage use of cross-country studies to add value to policy discussions and strengthen collaboration. - Consider encouraging member-prepared policy statements as inputs to Article IV consultations to strengthen engagement and country ownership, subject to avoiding constraints on candor or undue burden. - Promote greater continuity of staff assignments to sustain coherence in policy dialogue and country knowledge. - Explore use of one-page notes to improve communications with senior policymakers as complements to Article IV mission concluding statements. ### Communication and signaling — guidance - Effective communication of Fund policy messages is essential for surveillance effectiveness and for informing domestic debate and market participants. - Publication remains crucial for transparency but should not undermine the Fund’s role as a confidential advisor or reduce candor in dialogue. - Encourage development of outreach programs and enhanced contacts with local think tanks. - Members should not hesitate to use the “right of reply” in the transparency policy. - Internally disseminate best practices and experiment with formats and styles of Article IV staff reports. - On signaling mechanisms: Directors discussed instruments including low-access precautionary arrangements, low access PRGFs, and various forms of Fund and staff monitoring; considered whether members’ presentation of their own quantitative frameworks and detailed policy agendas might facilitate assessment. - Key characteristics to consider in future signaling discussions: whether activation should be based on a minimum standard; whether assessment is by staff or by the Fund (the Board); and whether publication is presumed. - Independently of new mechanisms, Messages delivered through surveillance should be made clearer. ### Assessing the effectiveness of surveillance — approach and commitments - Regular assessments of surveillance effectiveness are important but challenging due to broadened scope and increased public nature of surveillance. - Effectiveness should be assessed from both outcome and process perspectives (e.g., whether members can express views on others’ policies and adherence to mutually agreed obligations). - Directors regretted that the present review did not examine the quality of advice in individual surveillance exercises and expect staff to address this in the next review. - Support for setting monitorable strategic objectives in surveillance reviews to guide staff until the next review. - Maintain requirement that Article IV consultation reports include a brief assessment of authorities’ responses to key policy challenges identified in previous consultations. - Encourage more thorough Board exchanges on the effectiveness of individual Article IV consultations. - Continue methodological work on assessing effectiveness, including case studies. ### Use of staff resources and priority objectives - Given resource limitations, define priorities among strategic objectives while ensuring even-handed implementation across members. - Immediate Fund-wide priorities to be monitored until the next surveillance review: - sharpening the focus of Article IV consultations, with deeper treatment of exchange rate issues; - enhancing financial sector surveillance; - deepening coverage of regional and global spillovers in bilateral surveillance. - Additional monitored areas: improving debt sustainability, reducing balance sheet vulnerabilities, and surveillance in low-income countries. *The Chairman’s Summing Up—Biennial Review of the Implementation of the Fund’s Surveillance and of the 1977 Surveillance Decision, Executive Board Meeting 04/72––July 23, 2004* ### 1. The Executive Board has reviewed the general implementa- ### 1. The Executive Board has reviewed the general implementa- tion of the Fund’s surveillance over members’ exchange rate policies ### Review scope and basis - The Executive Board reviewed the general implementation of the Fund’s surveillance over members’ exchange rate policies. - The review was conducted as required by paragraph VI of Procedures for Surveillance contained in the document entitled “Surveillance over Exchange Rate Policies” attached to Decision No. 5392-(77/63), adopted April 29, 1977, as amended. ### Timing of next review - The next review shall be conducted no later than December 31, 2006. *Source: _31stissue - 1. The Executive Board has reviewed the general implementa-* ### 2. The Executive Board has reviewed the document entitled ### _31stissue - 2. The Executive Board has reviewed the document entitled ### Review of "Surveillance Over Exchange Rate Policies" - The Executive Board has reviewed the document entitled “Surveillance Over Exchange Rate Policies” attached to Decision No. 5392-(77/63), adopted April 29, 1977, as amended, as required by paragraph 2 of that decision. - The next review of the document shall be conducted no later than December 31, 2006. - Decision No. 13302-(04/74), July 23, 2004, as amended by Decision Nos. 13751, July 19, 2006 and 13802-(06/93), October 27, 2006. ### Summing Up — Review of Data Provision to the Fund for Surveillance Purposes - Executive Board Meeting 04/25, March 15, 2004. - Directors welcomed further opportunity to review progress in the provision of data to the Fund by members, noting that better data: - support strengthened Fund surveillance and crisis prevention; - allow members to formulate sounder economic policies. - Directors reaffirmed underlying principles: - timely, accurate, and comprehensive data are essential for effective surveillance; - data needs vary according to members’ circumstances; - data requirements evolve over time with changes in the scope and focus of surveillance. - Directors’ assessment of coverage and frequency of data provision: - a rising share of the membership now provides data deemed adequate for Fund surveillance; - most members—including virtually all countries with market access—now report core statistical indicators on a timely basis; - in just under one-third of the Fund’s membership—consisting mostly of countries with small populations or low per capita incomes—severe data deficiencies continue to hamper policy analysis and Fund surveillance. - Directors’ views on addressing deficiencies: - focus efforts going forward on countries with severe data deficiencies; - recognize that overcoming long-standing statistical capacity constraints will often require time, national efforts, and international support calibrated to circumstances. - Treatment of data quality and ROSCs: - Directors supported addressing data quality issues in the Statistical Issues Appendix based on available Reports on the Observance of Standards and Codes (ROSCs). - Most Directors agreed the table of common indicators required for surveillance should include summary assessments of data quality when available from data modules of ROSCs. - Some Directors expressed concerns about adequacy of data ROSCs for providing assessments of data quality, noting that the quality of individual common indicators is not directly assessed in ROSCs and cautioning against inappropriate viewing of these assessments as ratings of members’ statistics. ### Implementation and Reporting Expectations in Article IV Consultations - Directors called for strengthened implementation of the framework for data provision to the Fund: - Article IV consultation reports should identify data shortcomings; - indicate where analysis of key issues is significantly affected by these shortcomings or where important policy conclusions may be subject to unusual uncertainty due to data weaknesses; - recommend remedial actions where data prove inadequate for effective surveillance. - Directors encouraged staff to seek full compliance with existing guidelines on treatment of data issues in staff reports, noting coverage will vary by case. - Most Directors supported continued inclusion in Article IV summings up of a paragraph assessing adequacy of data provision to the Fund, particularly where there are shortcomings. - For countries with severe and long-standing data deficiencies: - greater elaboration of remedial strategies in Article IV staff reports; - encourage participation in the GDDS to provide a structured framework for statistical improvement; - emphasize importance of technical assistance to strengthen statistical systems and need for country authorities to demonstrate ownership by committing necessary local resources. - Technical assistance priorities in statistics should be guided by identified deficiencies in data provision to the Fund. ### Data Needs Emerging from Strengthened Surveillance Workstreams - Directors discussed data implications of four areas to strengthen Fund surveillance: - the balance sheet approach; - the framework for debt sustainability assessments; - liquidity management; - financial soundness indicators for financial sector surveillance. - Most Directors agreed a priority is to improve data availability for balance sheet analysis. - emphasized importance of breakdowns of assets and liabilities to gauge currency and maturity mismatches in sectoral balance sheets; - emphasized the need to address weaknesses in public debt data. - Directors recognized improving availability of data for balance sheet analysis will involve costs for member countries and the Fund. - some Directors emphasized balancing benefits of improved data against resource costs, including costs to member countries. - most Directors endorsed a pragmatic action plan involving: - (a) continuation of current efforts to improve external debt data, foreign direct investment data, and compilation of financial soundness indicators; and - (b) the seven additional steps outlined in paragraph 43 of the staff report. - It was suggested that a reduced set of core financial soundness indicators be included within the SDDS. - Directors endorsed approaches to minimize risk of misperceptions from publication of different data series for a given variable: - strengthen metadata and explain data differences; - promote common sourcing and better sharing of data across the Fund; - include a general disclaimer on published staff reports. - Directors generally supported acceleration and extension of the Integrated Monetary Database Project for prospective medium-term efficiency gains. ### The Seven Additional Steps (as outlined in the staff report, paragraph 43) - development of a standard set of tables to help guide reporting of public debt data to the Fund, including appropriate breakdowns; - enhanced collection of monetary and financial sector data, including through development and use of standard reporting forms; - promotion of greater coherence of data needs across policy initiatives, such as FSIs and the balance sheet approach; - review of the contents of the International Financial Statistics to explore the scope for reflecting data needed for policy initiatives; - continued experimentation with the use of nonfinancial corporate data from a variety of sources; - continued elaboration of internationally agreed methodologies to incorporate pertinent breakdowns and details; - initiation of consultations on the SDDS prescriptions for public debt in the context of the next review of the Fund’s Data Standards Initiatives. ### Resource Implications and Timing - Directors reviewed resource implications of measures to improve data availability: - many steps to strengthen availability of data are compatible with medium-term budget plans if current pace of implementation is maintained; - some steps—expanded reporting of public domestic debt data, enhanced collection of monetary and financial data, and review of the International Financial Statistics (IFS)—will involve additional costs. - Majority view: - additional costs should be accommodated within the existing budget envelope; - preferred course is to boost efficiency of existing data initiatives and prioritize statistical activities (possible delay of the review of IFS contents). - Alternate view: - expand the resource envelope to accommodate additional costs to protect effectiveness and high quality of the Fund’s data work while not crowding out other important activities, including data ROSCs. - Directors agreed the next review of data provision to the Fund should be conducted in about two years’ time. - Editorial Note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews will be conducted on an “as needed” basis. The expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews. ### Surveillance: Procedures—Implementation of Three-Month Period - The Executive Board approves the proposed method of applying the three-month rule for implementing the procedures for surveillance, set forth in EBD/83/161. - Decision No. 7427-(83/83), June 8, 1983. - Attachment EBD/83/161 explains: - Procedure II states that “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.” - The three-month period begins from the last day of discussions between the authorities and the staff mission and is counted off on a calendar basis. - The first Board day (viz., Monday, Wednesday, or Friday) upon completion of the three-month period is regarded as the deadline for Executive Board discussion. - The procedure is administered flexibly; when Board discussion is scheduled one or two Board days after the deadline, waiver papers may not be circulated. - Recognizes recurrent gaps in the Board schedule (examples from 1983) and prescribes that if a three-month deadline falls during such a period, the Friday of the week immediately following such a period would be regarded as the applicable deadline. ### Modalities for Surveillance over Regional and Currency-Unions’ Policies - Surveillance over monetary and exchange rate policies: members of the euro area - Decision No. 11846-(98/125), December 9, 1998, effective December 11, 1998. - Key modalities: - The current frequency of Article IV consultations with individual euro-area countries, generally on the standard 12-month cycle, would be maintained, at least during the initial period of Stage 3 of EMU. - Note: envisaged some scaling back of resources devoted to individual Article IV consultations in the area of monetary and exchange rate policies to provide resources needed for surveillance of the common policies of the euro area. - Twice-yearly staff discussions with EU institutions responsible for common policies in the euro area, held separately from discussions with individual euro-area countries but considered integral to the Article IV process for each member; consultations with individual countries to be clustered around discussions with relevant EU institutions. - An annual staff report and Board discussion on “The Monetary and Exchange Rate Policies of Euro-Area Countries in the Context of the Article IV Consultations with these Countries,” considered part of the Article IV process with individual members; the paper will also cover economic policies from a regional perspective. - A summing up of the Board’s annual discussion on euro-area policies cross-referenced in summings up for Article IV consultations with euro-area countries. - Modalities for surveillance over Central African Economic and Monetary Union (CEMAC) policies - Decision No. 12899-(02/119), December 4, 2002. - Staff will hold annual discussions with regional institutions responsible for common policies in CEMAC, held separately from those with individual CEMAC members; there will be an annual staff report and Board discussion of common policies, treated as integral to Article IV consultations with each member. - If considered necessary by the Managing Director, staff will hold a second round of discussions during the year and report informally to the Board to provide context for bilateral consultations that do not coincide with the annual Board discussion. - The frequency of Article IV consultations with individual CEMAC members shall be determined in accordance with the Board decisions on consultation cycles. (SM/05/429, 12/22/05) - Decision No. 13654-(06/1), January 6, 2006. - Modalities for surveillance over Eastern Caribbean Currency Union (ECCU) policies - Decision No. 13655-(06/1), January 6, 2006. - Staff will hold annual discussions with regional institutions responsible for common policies in the ECCU, held separately from discussions with individual ECCU members; annual staff report and Board discussion treated as integral to Article IV consultations with each member. - If necessary, staff will hold a second round of discussions during the year and report informally to the Board to provide context for bilateral consultations not coinciding with the annual Board discussion. - The frequency of Article IV consultations with individual members shall be determined in accordance with Board decisions on consultation cycles. (SM/05/429, 12/22/05) - Modalities for surveillance over West African Economic and Monetary Union (WAEMU) policies - Decision No. 13656-(06/1), January 6, 2006. - Staff will hold annual discussions with regional institutions responsible for common policies in WAEMU, held separately from discussions with individual WAEMU members; there will be an annual staff report and Board discussion of common policies treated as integral to Article IV consultations with each member. - If necessary, staff will hold a second round of discussions during the year and report informally to the Board to provide context for bilateral consultations not coinciding with the annual Board discussion. - The frequency of Article IV consultations with individual WAEMU members shall be determined in accordance with the Board decisions on consultation cycles. (SM/05/429, 12/22/05) *Source: Selected Decisions and Selected Documents (extracts as provided).* ### 1. Reflecting the increased significance that member countries ### _31stissue - 1. Reflecting the increased significance that member countries ### Background and Board discussions - On January 15, 1997, the Executive Board held a preliminary discussion on the role of the Fund in governance issues, followed by a discussion on May 14, 1997 on guidance to the staff. - The discussions revealed a strong consensus among Directors on the importance of good governance for economic efficiency and growth. - The Interim Committee Declaration of September 26, 1996 on Partnership for Sustainable Global Growth attached particular importance “to promoting good governance in all its aspects.”1 - Concluding Remarks by the Chairman, SUR/97/48 (5/21/97). ### Channels through which the Fund promotes good governance - Policy advice: - Assist member countries in creating systems that limit ad hoc decision making, rent seeking, and undesirable preferential treatment. - Encourage liberalization of the exchange, trade, and price systems, and elimination of direct credit allocation. - Technical assistance: - Enhance capacity to design and implement economic policies, build effective policy-making institutions, and improve public sector accountability. - Promotion of transparency: - Improve transparency in government budget, central bank, and public sector financial transactions. - Provide assistance to improve accounting, auditing, and statistical systems. - Address specific governance issues, including corruption, when judged to have a significant macroeconomic impact.1 ### Guiding objectives for enhanced Fund involvement - A more comprehensive treatment in the context of both Article IV consultations and Fund-supported programs of governance issues within the Fund’s mandate and expertise. - A more proactive approach in advocating policies and development of institutions and administrative systems that aim to eliminate opportunities for rent seeking, corruption, and fraudulent activity. - An evenhanded treatment of governance issues in all member countries. - Enhanced collaboration with other multilateral institutions, in particular the World Bank, to make better use of complementary expertise. ### Responsibility and scope of Fund involvement - Responsibility for governance lies first and foremost with national authorities; staff should build on national willingness and commitment. - Fund involvement should be limited to economic aspects of governance related to macroeconomic stability, external viability, and orderly economic growth. - Principal spheres for Fund contribution: - Improving management of public resources through reforms covering public sector institutions (e.g., the treasury, central bank, public enterprises, civil service, and the official statistics function), including administrative procedures (e.g., expenditure control, budget management, and revenue collection). - Supporting development and maintenance of a transparent and stable economic and regulatory environment conducive to efficient private sector activities (e.g., price systems, exchange and trade regimes, banking systems and related regulations). ### Areas of Fund focus and reliance on other institutions - The Fund should focus policy advice and technical assistance on areas of traditional purview and expertise: - Institutional reforms of the treasury, budget preparation and approval procedures, tax administration, accounting and audit mechanisms, central bank operations, and the official statistics function. - Reforms of market mechanisms: exchange, trade, and price systems; aspects of the financial system. - Regulatory and legal advice: taxation, banking sector laws and regulations, free and fair market entry (e.g., tax codes and commercial and central bank laws). - Where the Fund does not have comparative advantage (e.g., public enterprise reform, civil service reform, property rights, contract enforcement, procurement practices), it will rely on expertise of other institutions, especially the World Bank, while retaining the ability to include such policies in discussions or conditionality when necessary for program objectives. ### Principles limiting involvement and information needs - Fund judgments should not be influenced by the nature of a political regime nor interfere in domestic or foreign politics of any member. - The Fund may need to take a view on whether a member is able to formulate and implement appropriate policies; management may seek information about the political situation as essential to judging prospects for policy implementation. - Reference: Guidelines on Conditionality, Decision No. 6056-(79/138), paragraph 7. ### Criteria for Fund action on governance issues - The Fund’s mandate and resources do not allow it to be an investigative agency or guardian of financial integrity; staff should address governance issues, including corruption, on the basis of economic considerations within its mandate. - Staff involvement should be guided by assessment of whether poor governance would have significant current or potential impact on macroeconomic performance in the short and medium term, and on the government’s ability to pursue policies for external viability and sustainable growth. - For individual instances of corruption, staff should raise cases with authorities where there is reason to believe they could have significant macroeconomic implications—either because amounts involved are potentially large or because corruption is symptomatic of wider governance problems requiring policy or regulatory changes (examples: diversion of public funds through misappropriation, tax/customs fraud with connivance of public officials, misuse of official foreign exchange reserves, abuse of powers by bank supervisors). - Corrupt practices that do not meet the threshold of significant macroeconomic implications should be addressed through efforts to promote transparency and remove unnecessary regulations and opportunities for rent seeking, including recommending improvements in government management processes and systems or referral to competent institutions for assistance. ### Modalities of Fund involvement - The Fund’s main contribution across all member countries will be support for policy reforms that remove opportunities for rent-seeking and sustained efforts to strengthen institutions and administration capacity. - Article IV consultations: - Staff should be alert to reforms that promote good governance (e.g., reduced scope for generalized rent seeking, enhanced transparency in decision making and budgetary processes, reductions in tax exemptions and subsidies, improved accounting and control systems, improvements in statistical dissemination, improvements in composition of public expenditure, accelerated civil service reform). - Staff should bring to authorities’ attention potential risks that poor governance could adversely affect private market confidence and reduce private capital inflows and investment. - Advice should be based on broadly agreed best international practices and principles of transparency, simplicity, accountability, and fairness. - In international transactions involving corruption, staff should pay equal attention to both sides and recommend stopping practices that could significantly distort economic outcomes (e.g., tax deductibility of bribes, certain operations of official agencies). - Use of Fund resources: - Safeguarding Fund resources must be taken into account in Fund-supported programs. - Conditionality related to governance emanates from concern with macroeconomic policy design and implementation as means to safeguard Fund resources. - Conditionality (prior actions, performance criteria, benchmarks, conditions for completion of a review) may be attached to policy measures including economic aspects of governance required to meet program objectives (examples: elimination of tax exemptions, recovery of nonperforming loans). - Staff may recommend conditionality in areas covered by other institutions if measures are critical to program success. - Weak governance should be addressed early in the reform effort. - Financial assistance could be suspended or delayed on account of poor governance if there is reason to believe it could have significant macroeconomic implications that threaten program implementation or the purpose of Fund resources. - Corrective measures that begin to address governance should be prior actions for resumption of Fund support; key measures could be structural benchmarks or performance criteria (examples: recuperation of foregone revenue, changes in tax or customs administration). - Staff should exercise judgment on adequacy of authorities’ actions; a period of monitoring prior to resumption of financial support may be appropriate. - Authorities’ policy responses could include changes in management in public institutions, removal of individuals from involvement in particular operations where corruption occurred, and efforts to recover misappropriated government funds, while avoiding prejudice to related domestic legal processes. ### Technical assistance - The Fund’s technical assistance programs should continue to contribute to improving economic aspects of governance in areas of Fund expertise, including: - Budget management and control, - Tax and customs administration, - Central bank laws and organization, - Foreign exchange laws and regulations, - Macroeconomic statistical systems and dissemination practices. - Technical assistance missions should bring to authorities’ attention procedures and practices that fall short of best international practices. ### Identification of governance problems in Fund work - In Article IV consultations, program negotiations, and technical assistance missions, staff should be alert to poor governance aspects that influence policy implementation and private sector activity. - Examples of issues to identify and address: - Weak and poorly remunerated civil service—may warrant civil service reform including restructuring, selective pay increases, or transparency in privatization. - Inconsistencies or improbabilities in data and accounts indicating weak administration (e.g., tax collection falling short of expected yields due to weak administration, procedural complexities, or widespread abuse of exemptions). - Data inconsistencies not judged to result from statistical collection/compilation problems should be brought to authorities’ attention. - Greater transparency in macroeconomic policy implementation could build private sector confidence—for example, consolidation of all extra budgetary accounts within the budget, the early publication of the budget, and early reporting on the outcome at the end of the fiscal year. * _31stissue - 1. Reflecting the increased significance that member countries* ### 19. It is recognized that there are clear practical limitations to the ### 19. It is recognized that there are clear practical limitations to the ability of the staff to identify deficiencies in governance ### Governance detection and information handling - The availability, quality, and reliability of information are likely to be important factors affecting Fund involvement in corruption cases. - The staff should continue to rely on information provided by the authorities. - If inconsistencies in public accounts and reports suggest a problem, the staff should, in the first instance, raise the issue with the authorities. - In seeking information, staff may face tension in the working relationship with country authorities in specific cases potentially involving corrupt practices. - Where widespread rumors of corrupt practices have some genuine credence, an independent audit may be desirable to address concerns. - If further information is required to resolve an issue that has a significant macroeconomic impact, it may be appropriate to use information from third parties, including other international organizations and donors. - Due to the confidential nature of information obtained from member countries, staff enquiries must be handled with discretion and regard for sensitivity. ### Coordination with multilateral institutions and donors - The Fund should collaborate with other multilateral institutions and donors in addressing economic governance issues while exercising independent judgment in formulating policy advice. - Staff should focus analysis and technical assistance on issues within the Fund’s expertise; conditionality may apply to measures addressing governance concerns in areas outside Fund staff’s expertise (see paragraph 6). - Staff should keep abreast of partner organizations’ policies and country-level governance efforts, including activities of the World Bank in areas outside Fund competence but important for the Fund’s advocated economic policies (e.g., the reliable enforcement of contracts). - Given common interests, the Fund should seek to strengthen collaboration on governance issues, particularly with the World Bank, including coordination of action to improve governance when requested by authorities. ### Donor response scenarios and Fund policy responses - Two distinct cases where donor responses affect the Fund’s relations with members: - Case 1: Bilateral donors or creditors withhold or interrupt external support because of concern over political and/or economic aspects of governance. - The Fund should have an independent view on economic implications. - Staff should examine whether these issues have a direct and significant impact on macroeconomic developments in the short or medium term. - If so, staff should assist the member through policy advice and technical assistance within its expertise and coordinate with donors to address governance issues before recommending Fund financial support. - If not, but donors continue to withhold support, staff should assist authorities in reformulating a program with greater internal adjustment to compensate for reduced external financing, paying due regard to medium-term sustainability in the absence of a resumption of external assistance. - If reformulation is not feasible because of a lack of financing assurances (i.e., adequate external financing for the reformulated program is not in place), as a last resort staff should recommend that the Fund withhold its own financial support but continue to provide technical assistance. - Case 2: Governance issues significantly affect short- or medium-term economic developments but donors/creditors continue financial assistance and do not assist the government in improving governance. - Fund staff still has an independent responsibility to raise the governance issue with authorities and report to the Board. - Staff may raise concerns with donors and creditors, including at consultative group meetings and round tables, but such instances must be addressed with care under Board guidance and respecting confidentiality. - There are clear limitations to what the Fund can achieve in improving governance without active support from the international community. ### Reporting to the Executive Board - The Executive Board will be kept informed about developments in significant cases involving governance issues and will have the opportunity to comment on the operation of these guidelines as country cases are brought forward. - There will be a periodic review by the Executive Board of the Fund’s experience in governance issues. ### Military expenditure, data needs, and Article IV surveillance (Executive Board Meeting 91/138, October 2, 1991) - Directors noted that military expenditures can have an important bearing on a member’s fiscal policy and external position; information about such expenditures may be necessary for a full and internally consistent assessment of a member’s economic position and policies. - The scale of global resources devoted to military spending was estimated at nearly 5 percent of world GDP. - Directors emphasized that national security and judgments regarding appropriate military expenditure levels are sovereign prerogatives of national governments and not within the Fund’s domain. - The Fund’s surveillance responsibilities require members to report certain data; at a minimum and for all members, aggregate data including fiscal expenditures (including off-budget accounts), international trade, and external assets and liabilities must be reported fully to the Fund. - These data should encompass military transactions, even if not separately identified. - The staff will seek comprehensive macroeconomic data and, when inconsistencies suggest significant reporting gaps, will inform the Board and supplement authorities’ data with other sources as appropriate. - Directors agreed that the Fund staff should enhance work to improve the comprehensiveness, comparability, and timeliness of data reported by authorities. - Data on military expenditures should not serve as a basis for establishing performance criteria or similar conditions associated with Fund-supported programs. - When countries contemplate downsizing military establishments, authorities may provide detailed data to permit analysis of possible macroeconomic effects; Fund staff would work closely with Bank staff on structural issues associated with reallocating domestic resources. - The macroeconomic effects of military spending may be analyzed from a regional and global perspective in the WEO. - The staff will continue to request a breakdown of government expenditures, but at a highly aggregated level, in the context of Article IV consultations; the staff will continue to rely on voluntary cooperation of authorities in data submission. - Data deficiencies impairing assessment of a member’s economic position and prospects would be brought to the Board’s attention as normally reported. ### Enhanced surveillance: procedures and decisions - Decision No. 8222-(86/45), March 12, 1986 - When the Executive Board approves a member’s request for consultations under enhanced surveillance, annual and midyear consultation reports prepared by staff may be transmitted by the member to creditor banks and other creditor financial institutions party to arrangements specified by the member, on the understanding that recipients assure the member the reports will not be used for any purpose other than specified arrangements and will be kept confidential. - Reports shall not be transmitted by the member earlier than two weeks after their circulation to members of the Executive Board. - Decision No. 10365-(93/67), May 10, 1993 — Enhanced Surveillance: Midterm Review - The midterm review staff report is circulated to Executive Directors under a Secretary’s note specifying a tentative discussion date at least 15 days after circulation. - The Secretary’s note sets out a draft decision taking note of the staff report and completing the review without discussion or endorsement of views contained in the report; the decision is adopted upon expiration of the two-week period following circulation unless an Executive Director or the Managing Director requests placement on the Executive Board agenda. - If placed on the agenda, the Executive Board discusses the report and reaches conclusions reflected in a summing up. - Summing up by the Chairman — Biennial Review of the Fund’s Surveillance Policy (Executive Board Meeting 93/15, January 29, 1993) - The Executive Board agreed that the criteria relating to enhanced surveillance set out in SM/92/234 would be appropriate. - Principal features of proposed revised enhanced surveillance procedures (summary): 1. Enhanced surveillance procedures would be initiated by a member with a request for Fund monitoring of its macroeconomic and structural policies, usually at the time of the Article IV consultation. 2. The Executive Board would respond to the member’s request on a case-by-case basis, taking into account among other things a member’s track record of adjustment. 3. Each Executive Board approval of the procedures would be only until the time of the next Article IV consultation with the member (or a 12-month period), when a further request could be presented. 4. The member’s request would be granted on the strength of a quantified economic policy program discussed with Fund staff, usually as part of consultation discussions. A mid-term review of progress under the economic program is expected before the next scheduled Article IV consultation; failing which Directors would be informed of the absence of the review and reasons. The review report would be issued by staff under the same procedures as interim consultations and the Executive Board would take note on a lapse-of-time basis unless a discussion was requested by a Director or the Managing Director. 5. Enhanced surveillance would not involve Executive Board approval or endorsement of the macroeconomic program presented by the member. *https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### 6. Information on the economic program and its implementa- ### _31stissue - 6. Information on the economic program and its implementa- ### Availability of information to donors and creditors - Authorities could make information on the economic program and its implementation, as well as the staff’s assessment contained in the staff reports, available to donors and creditors on a timely basis. - In addition to the staff report, official creditors/donors would also receive the Chairman’s summing up of the Executive Board discussion. ### Summing Up — Settlement of Disputes Between Members Relating to External Financial Obligations—Role of the Fund (Executive Board Meeting 84/99, June 22, 1984) - Four general points from the Board discussion: - Directors generally endorsed the Fund’s approach in the three major aspects addressed in the staff paper. - The functioning of the international monetary system depended on members fulfilling their international financial obligations promptly and according to terms; the Fund has a direct interest and role under the Articles of Agreement in settlement of overdue obligations. - Circumstances surrounding overdue obligations are typically complex and case-specific; Directors preferred case-by-case handling within present policies and procedures rather than detailed codification, and urged caution and restraint in judgments on claims. - Importance of helping member governments improve their statistical base and information on external debt obligations, particularly in overdue claims cases; the Fund could provide technical resources to help sort out complex debt circumstances, including individual cases. - Specific comments: - Under Article VIII and Article XIV the Fund is entitled to examine the context of nonpayment to determine whether it involves an exchange restriction subject to Fund approval; members are obliged to provide required information. - Directors endorsed existing policies/practices for dealing with disputed financial obligations for members using Fund resources, focusing on identification and treatment of payments arrears. - Restoring a member’s financial position requires reduction and elimination of external payments arrears; the Fund’s involvement in helping countries deal with large arrears has varied with case severity. - The Fund should be ready to provide technical and analytical expertise to help members negotiate financing agreements with external creditors. - Most Directors attached importance to the principle that a member should give comparable treatment to all creditors, though not seeking detailed definition; enforcement responsibility lies primarily with creditors, and the Fund should consider creditor actions when assessing viability and progress under a Fund-supported program. - Paris Club negotiations were seen as the best mechanism to address debt relief to close a member’s financing gap; a Paris Club Agreed Minute could be used to judge whether a financing gap has been closed and has implications for non-participating official creditors through the debtor’s commitment to comparable treatment. - If a bilateral agreement required by the Paris Club is not ratified within the specified period, the arrears involved should generally be included in arrears calculations for the Fund-supported program, but the Fund should exercise flexibility and case-by-case judgment if the debtor made best efforts. - Decisions on whether a country’s financing gap has been closed and whether rescheduling/refinancing agreements are being fulfilled should be made by the Fund, taking into account particular member circumstances and preconditions by other agencies. - Use of the Fund’s good offices: - Management and staff should stand ready to use good offices to help members engaged in disputes over external financing obligations, consistent with Fund’s responsibilities and authority to provide financial and technical services. - Good offices should be limited in scope and frequency, consistent with available resources and substantially technical. - The Fund must remain neutral in debt disputes; good offices are meant to bring parties together and the Fund should act only if both parties wish it to provide good offices. ### Chairman’s Summing Up — Role of the Fund in Assisting Members with Commercial Banks and Official Creditors (Executive Board Meeting 85/132, September 4, 1985) - General remarks: - Enhanced surveillance procedures were developed to help members address debt problems and improve relations with creditors in an orderly, broader framework. - The Fund played a central role in limiting debt-crisis disruptions and promoting normalization of debtor/creditor relations, but enhanced surveillance involves risks: weakening of Fund conditionality, over-involvement with commercial banks, and potential harm to Fund credibility if it substitutes for market assessments. - Enhanced surveillance should be limited, under Executive Board guidance, essentially to help promote MYRAs (multi-year rescheduling arrangements), though not all MYRAs must be associated with enhanced surveillance. - Criteria and procedures for enhanced surveillance: - a. Criteria for adoption (most Directors felt enhanced surveillance could be undertaken when the four conditions are met): - First, at the request of a member country, which must initiate the procedures; - Second, where a good record of adjustment has been shown; - Third, where a MYRA is needed to normalize market relations and facilitate return to voluntary or spontaneous financing; - Fourth, where the member can present an adequate quantified policy program in the framework of consultations with Fund staff (part of enhanced surveillance procedures). - b. Length of the Fund’s involvement: - Early cases covered rather long periods; Directors felt the Fund should try to limit enhanced surveillance to about the consolidation period of a MYRA, with flexibility to extend slightly beyond consolidation when warranted. - c. Trigger mechanisms: - Many Directors feared staff involvement in designing/negotiating trigger mechanisms between banks and members would dilute banks’ monitoring responsibility and engage the Fund in on/off signals; most Directors felt staff should not negotiate or take responsibility for designing/assessing triggers, though staff may give technical views if the member requests. - d. Contents and distribution of staff reports: - Staff reports under enhanced surveillance should provide full and frank assessments. - Most Directors agreed countries could release staff reports to creditor banks not earlier than two weeks after issuance to the Executive Board. - Authorization to release should be by a general decision for all enhanced surveillance cases rather than individual case decisions. - Reports released to creditor banks would reflect only the staff’s views and not contain references to Executive Board discussions; no amendments other than deletion of Board discussion references. - e. Involvement of the Executive Board: - Procedure: member request for enhanced surveillance → management assesses and determines whether to submit the request for Board endorsement; management to consult informally with Executive Directors when criteria raise delicate interpretation problems. - g. Review of the policy: - Directors suggested periodic review of enhanced surveillance policy, with an initial review in about one year. ### Summing Up — Financial Sector Assessment Program (FSAP) Reviews and Lessons - FSAP review (Executive Board Meeting 00/123, December 13, 2000) — Overview and lessons: - Directors welcomed reviewing FSAP after completion of missions to all 12 pilot countries and further experience; guidelines were timely to continue FSAP. - FSAP provides a coherent, comprehensive framework to identify financial system vulnerabilities, strengthen analysis of macroeconomic and financial stability issues, identify development needs/priorities, and help authorities develop policy responses. - Financial System Stability Assessments (FSSAs) derived from FSAP findings and Article IV consultations focus on stability issues relevant to Fund surveillance; FSSAs are preferred tools for strengthening monitoring of financial systems under bilateral surveillance. - FSAP should ensure strategic components of assessments are reflected in country programming and that appropriate technical assistance/support is provided to national authorities requesting it. - Staff encouraged to develop analytical techniques including macroprudential indicators, stress tests and scenario analysis, and assessment methodologies of financial sector standards in collaboration with standard-setting bodies. - Standards and codes: - Assessments of observance of international standards, codes, and best practices play an important role within FSAP to identify vulnerabilities, regulatory gaps, and medium-term reform/development needs; summary standards assessments feed into FSSAs and ROSCs. - Financial sector standards assessments are resource-intensive; relevant standards should be carefully selected to avoid stretching costs and procedures. - Bank-Fund collaboration: - The joint nature ensures best expertise is mobilized; division of responsibilities post-joint work ensures clear accountability: Fund primary responsibility in systemic stability, Bank in development aspects. - Coverage and frequency: - Prioritization criteria for FSAP country selection may include a country’s systemic importance, external sector weakness/financial vulnerability, exchange rate/monetary regime, and geographical balance. - Prioritization means difference in timing, not treatment; higher priority to systemically important countries within a year is warranted. - For surveillance purposes, focused updates of FSSA findings can be undertaken by Fund staff in the context of subsequent Article IV consultations. - If a country volunteers but cannot be accommodated, or opts out, Article IV mission teams can be reinforced with financial sector expertise. - Scope of FSSAs for countries with significant offshore financial centers (OFCs) should encompass cross-border effects and international repercussions while maintaining country-specific focus. - Resource implications: - Pace of FSAP depends on prioritization in practice; Directors broadly agreed on aiming for a pace of up to 30 assessments per year, subject to further assessment in budget discussions. - Publication and circulation (2000 review): - FSAP reports prepared as confidential documents for national authorities; management policy not to authorize publication of main volume and confidential documents should be continued. - Management intended to provide authorization for publication by authorities of detailed assessments of observance of standards and codes included in FSAP reports. - Most Directors agreed voluntary publication policy for FSSAs was appropriate; authorized Fund publication of FSSAs after associated Article IV consultation concluded, subject to: (i) consent of the member; (ii) same deletions policy for highly market-sensitive information as Article IV staff reports; and (iii) same internal circulation and release rules as Article IV staff reports. - Publication of an FSSA could proceed even if the member did not consent to publication of the relevant Article IV consultation report. - Next review: Directors agreed further review of FSAP experience should take place in 18 months’ time. - FSAP review and follow-up (The Acting Chair’s Summing Up — Executive Board Meeting 05/26, March 18, 2005): - Directors noted the program remains a cornerstone of Fund and Bank financial sector work; about 120 countries, two-thirds of the membership, have participated or requested participation. - Assessments remain comprehensive, highlight vulnerabilities, and heighten awareness of international financial standards; expertise gained has improved Fund and Bank advice. - The joint Bank-Fund character and the voluntary nature of the program should remain unchanged; voluntary participation yields greater country ownership. - Streamlining measures have been effective; prioritization and streamlining produced assessments better tailored to country circumstances and reduced average costs per FSAP. - Directors cautioned against FSAPs that are too narrow and noted increasing share of resources to AML/CFT assessments could crowd out other important assessments. - Definition of updates: minimum element comprises assessment of financial sector developments and progress implementing earlier FSAP recommendations; updates should contain financial stability analysis, reassessments of key development/structural issues, and factual updates of key standards and codes; flexibility to include additional elements when justified. - Frequency: an average frequency of FSAP updates of about five years seems reasonable, with country-specific frequency depending on developments, willingness, systemic importance, resource availability, and track record in implementing recommendations. - Deepening treatment of developmental issues in low-income countries welcomed; in-depth fact-finding by Bank staff prior to main missions can help identify priority development issues without delaying main assessment. - Broad country coverage achieved but regional imbalances remain; some systemically-important countries had not requested initial assessments and were encouraged to do so. - Annual reporting to the Board on country participation in FSAP was endorsed to increase program awareness. - For countries not undertaking FSAPs, self-assessments and domestic reforms are welcomed as preparatory steps. - Strengthened follow-up monitoring of financial systems is needed; more systematic participation in Article IV consultations by financial sector specialists and more technical support from headquarters encouraged. - Technical assistance follow-up should be more systematic and flexible to improve country ownership; follow-up meetings among authorities, staff, and donors suggested in appropriate cases. - Publication policy debate: about two-thirds of countries volunteered to publish FSSAs; views divided on moving to presumed publication—some Directors saw benefits to presumed publication for program effectiveness and reform support, others saw conflict with voluntary nature; no clear Board consensus and issue to be revisited later. - Directors urged continued research on developmental and stability issues, and noted potential value in regional financial exercises for regions with substantial cross-border links. - Next review: Directors agreed the next review of the FSAP should take place in three years to allow implementation of recommendations from forthcoming evaluations and standards and codes reviews. *Italic: Selected decisions and selected documents, Technical and Financial Services.* ### 1. The World Bank (the “Bank”) and the International Mone- ### The World Bank (the “Bank”) and the International Monetary Fund (the “Fund”) ### Purpose and scope of the FSAP cooperation - The World Bank and the Fund have agreed to cooperate in the implementation of a Financial Sector Assessment Program (the “FSAP”) designed to: - assist the authorities of members of the Bank and Fund in determining the condition of their financial sectors; - identify strengths, vulnerabilities and risks in these sectors; - assess the observance and implementation of internationally accepted financial sector standards; and - elaborate reforms that would address vulnerabilities and risks, and position the sectors to contribute more effectively to financial stability, economic growth and the reduction of poverty. - The Protocol is an application of existing policies and guidelines of the Institutions concerning safeguarding of sensitive information and documents (listed in Appendix I) and does not represent the adoption of new policies or guidelines. ### Need for confidentiality and information sharing - Effective FSAP implementation requires that financial institutions and governmental entities feel comfortable sharing market-sensitive information and documents with FSAP teams composed of Bank and Fund staff and consultants. - To encourage sharing, the Protocol describes procedures to prevent unauthorized access to and disclosure of sensitive information obtained through the FSAP. ### Classification and handling of sensitive information - Three levels of classification will be used for sensitive information provided in connection with the FSAP: - STRICTLY CONFIDENTIAL - CONFIDENTIAL - FOR OFFICIAL USE ONLY (NOT for PUBLIC USE) - STRICTLY CONFIDENTIAL: - Intended for information/documents of highly sensitive nature or inadequately protected by the CONFIDENTIAL classification. - Access restricted solely to persons with a specific need to know. - Control and tracking system to be established for STRICTLY CONFIDENTIAL documents, including maintenance of control logs. - Handling requirements: - (i) marked with such classification on each page; - (ii) kept under lock and key or given equivalent protection when not in use; - (iii) physical documents transmitted by an inner sealed envelope indicating the classification marking and an outer envelope indicating no classification, or electronic documents transmitted by encrypted or password-secured files. - Individuals deemed to have a specific need to know: - (i) the FSAP team leader and deputy leader; - (ii) FSAP team members directly involved with the substance of the sensitive information; - (iii) immediate supervisors of FSAP team members who are staff members of the Institutions, who need the information to fulfill their management function; - (iv) the Managing Director of the Fund, the President of the World Bank Group, or their respective designated representatives; and - (v) other individuals by agreement between the FSAP team leader or deputy leader and the provider of the sensitive information. - CONFIDENTIAL: - For information/documents restricted to persons with a need to know or a legitimate interest. - Handling requirements: - (i) marked with such classification on the cover and first page; - (ii) kept out of view of unauthorized individuals when not in use; - (iii) transmitted in appropriately marked envelopes. - Individuals deemed to have a need to know or legitimate interest: - (i) all FSAP team members; - (ii) immediate supervisors and department heads of FSAP team members who are staff members of the Institutions; - (iii) the relevant Country Directors and Sector Leaders in the Bank, and the relevant Area Department Mission Chiefs and MAE Country Managers in the Fund; - (iv) the Managing Director of the Fund, the President of the World Bank Group, or their respective designated representatives; and - (v) other individuals by agreement between the FSAP team leader or deputy leader and the provider of the sensitive information. - Authorization is not required for further distribution on a need-to-know basis within a specific office of one of the Institutions, but any such further disclosure must include notice to each additional recipient that the information is CONFIDENTIAL. - FOR OFFICIAL USE ONLY (NOT for PUBLIC USE): - Documents so classified shall be marked on the cover and first page. - No other specific restrictions on handling or transmission beyond the general requirement to prevent public access. - General guidance: - In general, the lowest appropriate category of classification should be used, decided by the FSAP team leader in consultation with the provider. - It is expected that the majority of sensitive information will be classified as either NOT for PUBLIC USE or CONFIDENTIAL, and that the STRICTLY CONFIDENTIAL classification will be used only sparingly. ### Transmitting, referencing, and downgrading classifications - Cover letters or transmittal forms shall bear the classification of the most restricted attached documents. - Documents that quote from or contain sensitive information from classified documents shall be marked with the same security classification as the original information with the most restricted classification contained in the records, and shall be treated the same as the original information. - E-mail messages that convey sensitive information from classified records shall have distribution lists reflecting the restrictions of the relevant classification. - At the time of initial classification as “STRICTLY CONFIDENTIAL” or “CONFIDENTIAL,” the recipient will make a good faith effort to reach agreement with the provider on specific downgrading instructions (e.g., when, in what circumstances, or under what conditions it might receive a lower classification). ### Participation of staff and consultants in FSAP teams - FSAP team leaders are responsible for providing each team member a copy of this Protocol and attachments. - Institutional policies and guidelines in Appendix I provide procedures and measures in the event of breach by staff members. - Prior to the first FSAP mission, FSAP team leaders shall consult with relevant country authorities regarding participation of any consultant (private or public sector) in the FSAP team. - In selecting consultants, FSAP team leaders will take into account concerns expressed by the relevant authorities about the security of sensitive information in connection with participation of any particular consultant. - The same consultation procedure applies if a consultant is proposed to be added after the first mission. - Consultants participating in an FSAP team must execute a confidentiality letter in the form of Appendix II (unless equivalent elements are in their consulting contracts). Required elements include: - (i) acknowledgment of receipt of a copy of this Protocol and its attachments; - (ii) agreement not to disclose or use to private advantage sensitive information known to the consultant by reason of participation in the FSAP team; and - (iii) agreement that confidentiality obligations undertaken shall survive termination of the consultant’s contract, unless the obligations refer to sensitive information that have been declassified for public use. - In the event of a breach of confidentiality by a consultant, the Institution with which the consultant has a contract will address the matter in accordance with that Institution’s rules and procedures. ### Sharing of sensitive information between the Institutions and with authorities - Sensitive information entrusted to staff and consultants of either Institution, as well as FSAP-related documents generated by staff and consultants of either Institution, will be shared with identified counterparts in the other Institution, subject to the restrictions and procedures described in this Protocol. - Nothing in the Protocol limits Institution staffs from sharing sensitive information entrusted to them through the FSAP with the relevant country authorities that are authorized to receive the information. ### Disclosure of the Protocol and Appendix I (policies and guidelines) - The Protocol and attachments shall not be classified. - Prior to commencement of the initial FSAP mission, copies will be provided to appropriate authorities and will be made available on request to representatives of financial institutions participating or proposing to participate in the FSAP. - Appendix I lists the following policies and guidelines (Attachments I(a) to I(i)) concerning safeguarding of confidential information and documents: - (a) Guidelines for Bank-Fund Collaboration in the Financial Sector (June 1999); - (b) World Bank Principles of Staff Employment, paragraph 3.1(d); - (c) World Bank Staff Rule 3.01, Section 4.02, Disclosure and Use of Non-public Information (April 1999); - (d) World Bank Policy on Disclosure of Information (March 1994); - (e) World Bank Administrative Manual Statement 10.20, Security of Records (September 1996); - (f) World Bank Administrative Manual Statement 10.20B, Confidentiality in Financial Sector Work (January 1998); - (g) International Monetary Fund Staff Regulations N-4, N-5, N-6, and N-11; - (h) International Monetary Fund Staff Code of Conduct, Section 20, Use and Disclosure of Information (July 1998); - (i) International Monetary Fund, General Administrative Order No. 26, Rev. 2 and Supplement 1, Records, September 5, 1990; and, - (j) International Monetary Fund, General Administrative Order No. 35, Information Security (September 1990). *Source: Protocol text on FSAP cooperation between the World Bank and the International Monetary Fund (excerpt).* ### APPENDIX II ### APPENDIX II ### Confidentiality obligations for FSAP consultants - Consultants participating in the Financial Sector Assessment Program (FSAP) for a country confirm receipt and reading of the Protocol on Protection of Sensitive Information in the Financial Sector Assessment Program and attachments (the “Documents”). - Consultants agree: - to observe the procedures described in the Documents; - not to disclose or use for private advantage sensitive information known by reason of FSAP participation; - that confidentiality obligations under the FSAP survive termination of the FSAP assignment, unless the sensitive information (as defined in the protocol) has been declassified for public use. ### Offshore Financial Centers (OFCs) — assessment program: findings and proposed evolution - Background and assessment results: - OFC assessment program initiated in June 2000. - All major jurisdictions contacted since program start have been assessed. - Improvements to supervisory and regulatory systems in a number of OFCs have been observed. - Supervision and regulation of the non-banking sector often remains weak and needs strengthening in many OFCs. - Recognized risks and mitigation: - OFCs can pose prudential and financial integrity risks to the international financial system. - Effective consolidated supervision in the home country can mitigate prudential risks, but weaknesses and gaps in supervision remain. - AML/CFT requires worldwide implementation of relevant international standards. - Agreed broad elements for the future OFC program: - regular monitoring of OFCs’ activities and compliance with supervisory standards; - improved transparency of OFC supervisory systems and activities; - technical assistance in collaboration with bilateral and multilateral donors; - collaboration with standards-setters and onshore and offshore supervisors to strengthen standards and exchanges of information. - Implementation principles and modalities: - Participation in OFC assessments and monitoring should remain voluntary. - Monitoring of OFCs’ activities and compliance should become a standard component of the Fund’s financial sector work. - Maintain appropriate distribution of resources between offshore and onshore centers. - Module 2 assessments every 4–5 years of supervisory and regulatory systems’ compliance with international standards is generally appropriate, with flexibility for more frequent targeted assessments where needed. - For the time being, the OFC program should remain separate from the FSAP, with the next review to reevaluate the need for a separate program; objective should be eventual integration into regular FSAP/ROSC procedures for some Directors. - Publication, confidentiality, and reporting: - Jurisdictions publishing OFC assessment reports welcomed; publication improves transparency and promotes market discipline. - Policy of voluntary publication supported; failure to publish may send adverse market signals. - Reclassify the Module 2 main report as a staff report to be circulated to the Board; Board members may request discussion. - Detailed assessment reports should remain confidential and not be circulated to the Board unless authorities choose to publish them. - Technical assistance and information sharing: - Technical assistance should continue, focusing on OFCs with resources and commitment or those with greatest shortcomings. - Fund to limit itself to identifying areas where standards-setters should provide further guidance; Fund not to set supervisory standards itself. - Recognize significant costs to meeting international standards, especially for small, low-income jurisdictions; staff to explore donor assistance. - Strengthen information sharing arrangements and collaboration with standards-setters and supervisors while protecting confidentiality. - Resource use and monitoring: - Support for rebalancing resources within existing budget envelope, including introduction of offsite monitoring and risk-focused assessments that are less resource-intensive than full assessments. - Jurisdictions encouraged to disseminate more information and to work with the Fund to develop data for general dissemination. - Staff to continue providing periodic updates on OFC program progress; Board to conduct next review in 2–3 years.1 ### AML/CFT — standards, methodology, pilot program, and follow-up - Key steps and endorsements: - FATF 40 Recommendations and 8 Special Recommendations on Terrorism Financing (FATF 40+8) conditionally added to the list of areas and associated standards and codes useful to Fund operational work. - Endorsed a 12-month pilot program of AML/CFT assessments and accompanying ROSCs involving the Fund, the World Bank, the FATF, and FATF-Style Regional Bodies (FSRBs). - Four guiding principles for Fund’s role in AML/CFT assessments: - staff involvement in assessing non-prudentially-regulated financial sector activities confined to those that are macroeconomically relevant and pose significant AML/CFT risk; - assessment procedures transparent and consistent with mandates and expertise of involved institutions and compatible with the uniform, voluntary, and cooperative nature of the ROSC exercise; - assessments followed up with appropriate technical assistance at the request of assessed countries to build institutional capacity; - assessments conducted in accordance with the comprehensive and integrated methodology. - Conditions for adopting FATF 40+8 as the associated standard: - i. FATF Secretariat, in consultation with Fund/Bank staff, satisfactorily completes the draft comprehensive and integrated assessment methodology by the Annual Meetings for consideration at the October FATF Plenary; - ii. the FATF endorses in its October Plenary the comprehensive and integrated assessment methodology and its use in FATF/FSRB mutual evaluations and Fund/Bank staff-led assessments; - iii. the FATF agrees in its October Plenary to undertake mutual evaluations consistent with the ROSC process as elaborated in Section II of SM/02/227; - iv. the FATF does not undertake a further round of the non-cooperative countries and territories (NCCT) initiative, at least during the period of the 12-month pilot project. - Assessment approaches endorsed: - FATF and FSRBs-led assessments and associated ROSCs (undertaken in context of FATF/FSRB mutual evaluations; would not include Fund/Bank staff); - Fund/Bank staff-led assessments and associated ROSCs (undertaken by Fund/Bank staff, including experts under staff supervision, plus other experts not affiliated with Fund/Bank staff). - In Fund/Bank-led assessments, some Directors preferred a unified approach with Fund/Bank responsibility for the whole process. - Scope limitations and expert selection: - Fund staff (and experts under staff supervision) would not assess implementation of criminal laws and activities of non-prudentially-regulated financial sector parts that are not macro-relevant and do not pose significant AML/CFT risk. - Fund must ensure selection of outside experts guarantees independence of assessors and confidentiality of information. - Pilot program outcomes and quality assessments: - Executive Directors welcomed participation by FATF and FSRBs in the pilot program. - Initial finding: FATF/FSRB assessments prepared in accordance with ROSC principles, linked to FSAP, and generally of good quality. - Full review of quality and consistency of FATF/FSRB reports and coordination to be provided in about 18 months’ time. - Pilot program led to considerable deepening of international attention to AML/CFT and substantial technical assistance provision. - Most jurisdictions responded positively to assessments; higher- and middle-income countries show generally high compliance with FATF recommendations; many lower-income countries face challenges due to resource shortages. - Noted more general weaknesses regarding compliance with the eight special recommendations on terrorist financing, but increased awareness among jurisdictions of need for strong legislative and institutional frameworks. - Technical assistance and capacity building: - Delivery of technical assistance is key to raising global compliance. - Fund made significant and increased contributions in legislative drafting, supervisory support, establishing financial intelligence units, and training. - Fund to work closely with bilateral and multilateral donors while respecting their mandates and expertise. - Delivery of technical assistance to strengthen FSRBs’ capacity to conduct assessments is cost-effective. - Assessment workload, sharing, and future expectations: - During the pilot, the Fund/Bank conducted the majority of assessments; FATF/FSRBs expected to conduct 15 to 20 countries per year combined going forward. - Staff requested to ensure close collaboration and coordination with FATF/FSRBs on assessment schedules. - Bank committed to share assessment burden equally with the Fund during transition and later. - AML/CFT assessments should be a regular part of the Fund’s work and included in all FSAP and OFC assessments. - Review, integration, and quality control: - Emphasized need to integrate work of independent AML/CFT experts (IAEs) into overall assessment process and strengthen IAEs’ contribution while ensuring quality control. - 12-month pilot seen as vehicle to learn lessons on methodology, two assessment approaches, and coordination; comprehensive review at end of pilot expected to assess lessons learned, consistency, and quality. - Options for future Fund involvement and resource considerations: - Many Directors preferred continuing status quo (Option 1) limiting staff involvement to core mandate areas. - Majority of the Executive Board supported Fund becoming fully accountable, together with the Bank, for AML/CFT assessments and providing technical assistance including in sectors covered by IAEs (Option 3). - Directors agreed assessing countries’ capacity to implement AML/CFT laws effectively is part of the Fund’s core mandate and does not constitute law enforcement. - Costs and resource implications: - Uncertainty about the eventual cost of additional assessment and technical assistance work. - Need for better cost estimates to inform judgments; experience in fiscal year 2005 transition period expected to refine cost estimates. - Some Directors suggested introducing a cap in the fiscal year 2005 budget for assessments. - Extension of AML/CFT work should not crowd out other essential activities, including ongoing technical assistance. - Redeployment and allocation of additional resources and staff positions for expanded work to be taken up as part of the fiscal year 2005 budget discussion. - Directors urged generous support from bilateral and multilateral donors of financing and expert resources. - Reporting requests: - Directors expressed interest in receiving reports on: - (i) review of quality and consistency of FATF/FSRBs’ assessments and coordination in about 18 months’ time; - (ii) comprehensive review of overall effectiveness of the Fund/Bank program in about three years’ time.1 *Source: APPENDIX II, SELECTED DECISIONS AND SELECTED DOCUMENTS, extracted from the provided PDF content.* ### 1. Pursuant to Article V, Section 2(b), the Fund adopts the In- ### _31stissue - 1. Pursuant to Article V, Section 2(b), the Fund adopts the In- ### Establishment of the Framework Account - The Fund establishes an account (the “Framework Account”) pursuant to Article V, Section 2(b) to administer resources contributed by: (i) governments or other official agencies of countries and (ii) intergovernmental organizations (individually “Contributor,” collectively “Contributors”), in order to finance technical assistance activities of the Fund. - Resources provided by Contributors to the Framework Account shall be: (i) grants, or (ii) proceeds of grants or loans that have been received by the Contributor from entities other than the Fund for the purpose of financing technical assistance to the Contributor. - Resources may be used by the Fund only for technical assistance activities consistent with its purposes, in accordance with the procedures specified in paragraph 3 of the Instrument. ### Subaccounts: establishment, terms, and use - Financing of technical assistance activities shall be implemented through the establishment and operation of subaccounts within the Framework Account. - A subaccount may be established with resources from one or more Contributors. - With the agreement of the Managing Director and after consultation with the Contributors of such a subaccount, a Contributor may be added to the subaccount following the subaccount’s establishment. - Establishment of a subaccount: - Is subject to prior approval by the Fund, upon the recommendation of the Managing Director. - Requires the Managing Director to specify essential terms regarding: - (i) the nature, design and implementation of the technical assistance activities to be financed from the subaccount; and - (ii) the method by which the costs of those activities will be financed from resources contributed to the subaccount. - Further understandings shall determine conditions and methods used for disposition of any net contributions for purposes of paragraph 13. - Following establishment, the Fund is authorized to use the resources in the subaccount in accordance with the understandings reached between the Contributor(s) and the Managing Director. ### Costing, disbursements, and currency - Costs charged to a subaccount for Fund-incurred costs in performing technical assistance activities shall be based on standard costs as determined by the Fund, unless otherwise agreed between the Fund and the Contributor(s). - A subaccount shall also be charged an amount equivalent to a percentage of such costs so as to help cover the expenses incurred by the Fund in the administration of the technical assistance activities financed from the subaccount. - Resources in a subaccount may be used to make disbursements to the Fund’s General Resources Account as required to reimburse the Fund for expenditures incurred by the Fund on account of any technical assistance activity financed by resources from such subaccount. - All transactions and operations of the Framework Account shall be denominated in U.S. dollars. ### Investment of subaccount resources and administration - Resources held in a subaccount pending disbursement shall be invested at the discretion of the Managing Director. - Earnings net of any costs associated with such investments shall accrue to the subaccount and shall be available for the purposes of the subaccount. - Subject to Fund approval for subaccount establishment, the Managing Director is authorized: - (i) to make all arrangements, including establishment of accounts in the name of the Fund, as he deems necessary to carry out operations of the Framework Account; and - (ii) to take all other measures he deems necessary to implement the Instrument. ### Asset separation and liabilities - Assets held in the Framework Account shall be accounted for separately from assets and property of other Fund accounts or administered accounts. - Assets and property in other accounts shall not be used to discharge liabilities, obligations, or losses of the Fund incurred in administration of the Framework Account. - Assets and property in the Framework Account shall not be used to discharge liabilities, obligations, or losses incurred by the Fund in administration of other accounts. - Assets and property held in each subaccount shall not be used to discharge liabilities, obligations, or losses incurred by the Fund in the administration of any other subaccount. ### Financial records, audits, and reporting - The Fund shall maintain separate financial records and prepare separate financial statements for the Framework Account, including a breakdown with respect to each subaccount, in accordance with generally accepted accounting principles. - Financial statements for the Framework Account shall be expressed in U.S. dollars. - For each subaccount, a report on the subaccount’s expenditures and a review of activities financed by it shall be prepared and furnished to the subaccount’s Contributor(s) annually, or more often if agreed between the Contributor(s) and the Managing Director. - The External Audit Firm selected under Section 20 of the Fund’s By-Laws shall audit the operations and transactions conducted through the Framework Account; the audit shall relate to the financial year of the Fund. - The Fund shall report on the position of the Framework Account, including a breakdown with respect to each subaccount, in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the External Audit Firm on the Framework Account. ### Application of Fund rules - Subject to the Instrument’s provisions, the Fund shall apply, mutatis mutandis, the same rules and procedures as apply to operation of the General Resources Account of the Fund when administering the Framework Account. ### Termination and disposition of balances - The Framework Account or any subaccount thereof may be terminated by the Fund at any time; termination of the Framework Account shall terminate each subaccount thereof. - A subaccount may be terminated by: - the Contributor of the resources to the subaccount; or - in the case of a subaccount comprising resources from more than one Contributor, by all Contributors participating at the time of termination. - A Contributor to a multi-Contributor subaccount may cease its own participation at any time without termination of the subaccount. - Termination is effective on the date the Fund or the Contributor(s) receives notice of termination, or such later date as specified in the notice. - The Managing Director and the Contributor(s) shall reach understandings on the disposition upon termination of any balances, net of amounts of continuing liabilities and commitments under the financed activities, that may remain in the subaccount with respect to the Contributor or Contributors participating at the time of termination. - Managing Director and Contributor(s) may also reach understandings regarding retransfer to the Contributor of its contribution, net of continuing liabilities and commitments, prior to termination; absent such understandings, any net contribution shall be retransferred to the Contributor only upon termination of the subaccount. ### Specific approved subaccounts (decisions) - Approval of the “Pacific Financial Technical Assistance Centre Subaccount” to administer resources to be contributed by the Government of Australia, and any subsequent Contributors, as described in EBS/02/84, 5/15/02. Decision No. 12751-(02/52), May 22, 2002. - Approval of the “Africa Regional Technical Assistance Centers Subaccount” to administer resources to be contributed by the Governments of France, the Federal Republic of Germany, Italy, the Netherlands, Norway/Ministry of Foreign Affairs, Sweden, and the United Kingdom, and any subsequent Contributors, as described in EBS/02/135 (7/26/02). Decision No. 12832-(02/88), August 9, 2002. ### Policy Support Instrument (PSI): general - The Fund will provide technical services described in the Decision to members eligible for assistance under the Poverty Reduction and Growth Facility (PRGF), i.e., included in the list of members annexed to Decision No. 8240-(85/56), as amended, and that: - (a) have a policy framework focused on consolidating macroeconomic stability and debt sustainability, while deepening structural reforms in key areas in which growth and poverty reduction are constrained; and - (b) seek to maintain a close policy dialogue with the Fund through the Fund’s endorsement and assessment of their economic and financial policies under a Policy Support Instrument (PSI). - A PSI is a decision of the Executive Board setting forth a framework for the Fund’s assessment and endorsement of a member’s economic and financial policies. - A PSI may be approved for a duration of one to three years, and may be extended up to an overall maximum period of four years. - Members with overdue financial obligations to either the Fund’s General Resources Account (GRA) or to the PRGF Trust are not eligible for a PSI. ### PSI documentation requirements - Program Documents: - The member’s program for the PSI period will be described in a letter and/or memorandum that may be accompanied by a technical memorandum (“Program Documents”). - Initial Program Documents will include: - (a) a macroeconomic policy framework, including a quantified framework for at least the first 12 months under the PSI, with quarterly or semi-annual quantitative targets, and proposed assessment criteria for the first and second scheduled reviews; and - (b) key structural measures needed to meet program objectives. - Program Documents will be updated as appropriate in the context of reviews under the PSI. - Poverty Reduction Strategy (PRS) Documents: - The member’s program will be based on the member’s poverty reduction strategy, set forth in a Poverty Reduction Strategy Paper (PRSP), PRSP Preparation Status Report, Interim PRSP (“I-PRSP”), or Annual Progress Report (“APR”). ### PSI approval criteria - A member’s request for a PSI may be approved only if the Fund is satisfied that: - (a) the policies in the Program Documents meet the standards of upper credit tranche conditionality; - (b) the member’s program will be carried out and the member is sufficiently committed to implement the program; and - (c) the member has a poverty reduction strategy evidenced by a PRS Document issued to the Executive Board within the previous 18 months, accompanied by a Joint Staff Advisory Note (“JSAN”), provided no JSAN will be required in connection with a PRSP preparation status report (in which case staff’s analysis of the PRSP preparation status report will be included in the staff report on a request for a PSI or a review under a PSI). - A member may be expected to adopt measures prior to Executive Board approval of a PSI when such actions are critical for successful program implementation. ### Program reviews under a PSI - Implementation under a PSI will be assessed through program reviews, normally scheduled semi-annually. - A review can be completed only if the Executive Board is satisfied that: - the member’s program is on-track; and - the conditions for PSI approval (paragraph 6) continue to be met. - If a scheduled review is conducted but not completed, the Executive Board may return to that review unless the previous scheduled review was not completed. Documentation supporting a return must be issued prior to the earliest test date of the next periodic quantitative assessment criteria. - Implementation monitoring will be based on assessment criteria, indicative targets, structural benchmarks and prior actions. ### Assessment criteria, indicative targets and prior actions - Assessment criteria: - For each review, the Fund shall establish assessment criteria which may include: - (a) assessment criteria linked to that review; and - (b) assessment criteria that will apply on a continuous basis. - Assessment criteria apply to clearly-specified quantitative variables or structural measures that can be objectively monitored and are critical for achieving program goals or for monitoring implementation; nonobservance would normally signify the program is off-track. - In principle, quantitative assessment criteria shall be established with test dates at six month intervals. - Documentation for a scheduled review would normally be issued to the Executive Board within 4 months of the earliest test date for the periodic quantitative assessment criteria linked to that review and shall be issued before the earliest test date of periodic quantitative assessment criteria linked to the next scheduled review. - A review will not be completed unless each assessment criterion related to that review is observed or a waiver for nonobservance is granted. - A waiver for nonobservance will be granted only if the Fund is satisfied that, notwithstanding the nonobservance, the program will be successfully implemented because of the minor or temporary nature of the nonobservance or because of corrective actions taken by the authorities. - To complete a review, assessment criteria must be established for the shorter of: - (a) the next two scheduled reviews, or - (b) the remaining period of the PSI. - Indicative targets and structural benchmarks: - Variables and measures may be established as quantitative indicative targets or structural benchmarks to be examined in a review’s assessment of program performance. - Prior actions: - A member may be expected to adopt measures prior to the Executive Board’s completion of a review. ### Misreporting and follow-up - Any decision approving a PSI or completing a review will be conditional upon the accuracy of information provided by the member regarding implementation of prior actions or performance under related assessment criteria. - If staff become aware of evidence indicating a member’s reporting of such information was inaccurate, the Managing Director shall promptly inform the member. - If, after consultation, the Managing Director finds the member had reported inaccurate information, the Managing Director shall promptly notify the member of this finding. - In any case where a PSI was approved, or a review was completed, no more than three years prior to the date the Managing Director informs the member (per paragraph 11), the Executive Board shall decide whether misreporting has occurred and shall reassess program performance in light of that determination. *Decision No. 10942-(95/33), April 3, 1995, as amended by Decision Nos. 11162-(95/121), December 19, 1995, and 12641-(01/126) December 6, 2001; Ed. Note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews under the above paragraph will be conducted on an “as needed” basis; the expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews.* ### 14. The Fund shall proceed to make relevant information public ### 31stissue - 14. The Fund shall proceed to make relevant information public ### Publication following finding of misreporting - The Fund shall proceed to make relevant information public in every case following an Executive Board decision under paragraph 13 above that misreporting has occurred, with prior Executive Board review of the text for publication. ### Definitions and treatment of de minimis misreporting - For the purposes of this decision: - (a) Whenever the Managing Director considers there is evidence that the member's reporting of information noted in paragraph 10 above was inaccurate, but the nonobservance of the relevant assessment criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the communication referred to in paragraph 11 may be made by a representative of the relevant Area Department. - (b) If the Managing Director determines that, in fact, a member has reported such inaccurate information to the Fund, but the nonobservance was de minimis in nature, as defined in paragraph 1 of Decision No. 13849: - The notification referred to in paragraph 12 may be made by a representative of the relevant Area Department. - The Executive Board shall be informed of the misreporting in a staff report on a review under the relevant PSI or, if no such review is provided for, a staff report which deals with issues other than the misreporting. - The staff report shall include a recommendation that the Executive Board find that the misreporting was de minimis in nature and had no effect on program performance under the PSI. - In rare cases where no review is provided for and no other staff report on the member is to be issued to the Board promptly after the Managing Director concludes that misreporting has taken place: - The Managing Director shall consult Executive Directors. - If deemed appropriate by the Managing Director, a stand-alone report on the misreporting will be prepared for consideration by the Executive Board normally on a lapse-of-time basis. - (c) Whenever the Executive Board finds that a member has misreported information referred to in paragraph 10, but that the nonobservance of the relevant assessment criterion or other specified condition was de minimis in nature as defined in paragraph 1 of Decision No. 13849: - (i) The Executive Board shall also find that the misreporting had no effect on program performance; and - (ii) The fact of misreporting shall not be published by the Fund. ### Applicability of UFR and other policies to PSIs - The Guidelines on Conditionality (Decision No. 12864-(02/102), September 25, 2002) shall apply where relevant and except where this Decision sets forth different or more specific provisions. - The Fund’s policies on the following subjects shall apply by analogy to PSIs: - (a) requirement of full program financing; - (b) arrears to official sector and external private creditors; and - (c) use of side letters. ### Termination of a PSI - A member may cancel a PSI at any time by notifying the Fund of such cancellation. - A PSI for a member will terminate upon: - (a) the relevant member incurring overdue financial obligations to the GRA or PRGF Trust; or - (b) noncompletion of two consecutive PSI scheduled reviews. ### Miscellaneous definitions and provisions - For purposes of this decision: - (a) the terms PRSP, PRSP Preparation Status Report, I-PRSP, and APR shall have the meaning given to each of them in Section I, Paragraph 1 of the PRGF-HIPC Trust Instrument (Annex to Decision No. 11436-(97/10), adopted February 4, 1997, as amended); and - (b) the term JSAN shall have the meaning given to it in Section I, Paragraph 1 of the PRGF-HIPC Trust Instrument (Annex to Decision No. 11436-(97/10), adopted February 4, 1997, as amended). ### Periodic review - The Fund will review application of this Decision at intervals of five years. ### Instrument to Establish the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust — Introductory and key provisions - Introductory: - The Instrument establishes the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (the “Trust”), administered by the Fund as Trustee. - Section I — General Provisions: - Paragraph 1. Purposes: - The Trust shall assist in fulfilling the purposes of the Fund by providing loans on concessional terms (“Trust loans”) to low-income developing members that qualify for assistance under this Instrument in order to: - (a) support programs under the Poverty Reduction and Growth Facility (“PRGF”) to strengthen substantially and in a sustainable manner their balance of payments position and to foster durable growth, leading to higher living standards and a reduction in poverty; and - (b) support programs under the Exogenous Shocks Facility (“ESF”) to facilitate an adjustment to a sudden and exogenous shock. - Paragraph 2. Accounts of the Trust: - The operations and transactions of the Trust shall be conducted through a Loan Account, a Reserve Account, a PRGF Subsidy Account, an ESF Subsidy Account and a PRGF-ESF Subsidy Account (the latter three accounts collectively referred to herein as “Subsidy Accounts”). The resources of the Trust shall be held separately in each Account. - Paragraph 3. Unit of Account: - The SDR shall be the unit of account for commitments, loans, and all other operations and transactions of the Trust, provided that commitments of resources to the Subsidy Accounts may be made in currency. - Paragraph 4. Media of Payment of Contributions and Exchange of Resources: - (a) Resources loaned or donated to the Trust shall be received in a freely usable currency, subject to the provisions of (c) below, and provided that resources may be received by the Subsidy Accounts in other currency. - (b) Payments by the Trust to lenders or donors shall be made in U.S. dollars or such other media as may be agreed between the Trustee and such lenders or donors. - (c) Loans or donations 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 issuers of such currencies. ### Section II — Trust Loans: eligibility and conditions - Paragraph 1. Eligibility and Conditions for Assistance: - (a) The members on the list annexed to Decision No. 8240-(86/56) SAF, as amended, shall be eligible for assistance from the Trust. - (b) Assistance under the PRGF: - (1) Assistance shall be committed and made available under a single three-year arrangement (“PRGF arrangement”) in support of a three-year macroeconomic and structural adjustment program presented by the member. The member shall present a detailed statement for the first twelve months. Disbursements shall, in principle, be phased at semiannual intervals (one upon approval and at approximately six-monthly intervals thereafter) with semiannual performance criteria and appropriate monitoring in the form of quarterly quantitative benchmarks and structural benchmarks. PRGF arrangements may provide for quarterly performance criteria and reviews where closer monitoring is needed. - (2) Before approving a PRGF arrangement, the Trustee shall be satisfied that the member has a protracted balance of payments problem and is making an effort to strengthen substantially and in a sustainable manner its balance of payments position. - (3) The Trustee shall not approve a new PRGF arrangement or complete a review under a PRGF arrangement unless it finds that: - (i) the member has a poverty reduction strategy set out in an I-PRSP, PRSP preparation status report, PRSP, or APR, issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months; - (ii) the I-PRSP, PRSP preparation status report, PRSP, or APR has been the subject of an analysis in a Joint Staff Advisory Note also issued to the Executive Board, provided that no Joint Staff Advisory Note will be required in connection with a PRSP preparation status report (in which case the analysis will be included in the staff report); and - (iii) if there are weaknesses in the member’s poverty reduction strategy that are critical to Fund support under a PRGF arrangement, they have been addressed. - (c) Assistance under the ESF: - (1) Assistance shall be committed and made available under an arrangement (“ESF arrangement”) in support of a macroeconomic and structural adjustment program presented by the member. The period shall range from one to two years. Where the period exceeds one year, the member shall present a detailed statement for at least the first twelve months. Disbursements may be phased (i) at semiannual intervals with semiannual performance criteria and quarterly quantitative benchmarks and structural benchmarks, or (ii) at quarterly intervals with quarterly performance criteria. Phasing will be determined by the Trustee based on duration, balance of payments need, volatility, and administrative capacity. - (2) Before approving an ESF arrangement, the Trustee shall be satisfied that the member has a balance of payments need whose primary source is a sudden and exogenous shock. ESF arrangements will normally be approved only where the Trustee determines that the member does not need to implement structural reforms of the type normally supported by a PRGF arrangement. - (3) The Trustee shall not approve a new ESF arrangement or complete a review under an ESF arrangement unless it finds that: - (i) the member has a poverty reduction strategy set out in an I-PRSP, PRSP preparation status report, PRSP or APR, issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months; and - (ii) the I-PRSP, PRSP preparation status report, PRSP, or APR has been the subject of an analysis in a Joint Staff Advisory Note also issued to the Executive Board, provided that no Joint Staff Advisory Note will be required in connection with a PRSP preparation status report (in which case the analysis will be included in the staff report). - In exceptional circumstances the Trustee may approve an ESF arrangement where (i) and (ii) are not met at the time of approval if assured of the member’s commitment; issuance of the relevant documents shall be a condition for completion of the first review. - (d) General Provisions: - (1) A member may not obtain assistance from the Trust under the PRGF and the ESF at the same time. - (2) Commitments under arrangements under this Instrument may be made for the period through December 31, 2011. - (3) The Managing Director shall not recommend for approval, and the Trustee shall not approve, a request for an arrangement under this Instrument whenever the member has an overdue financial obligation to the Fund in the General Resources Account, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee, or while the member is failing to meet specified repurchase or repayment expectations (specific Decision numbers and paragraphs cited in the text). - (4) The Trustee shall not complete a review under an arrangement under this Instrument unless and until all other conditions for the disbursement of the corresponding loan have been met or waived. *Source: Decision No. 13561-(05/85), October 5, 2005, as amended by Decision Nos. 13814-(06/98), November 15, 2006, and 13849-(06/108), December 20, 2006 (text excerpt).* ### 2. Amount of Assistance ### 2. Amount of Assistance ### Access limits and eligibility - An initial maximum limit on access to resources under the PRGF shall be established by the Trustee as a proportion of members’ quotas in the Fund, with provisions allowing that maximum limit to be exceeded in exceptional circumstances. - A maximum limit on access to resources under the ESF shall be established by the Trustee as a proportion of members’ quotas in the Fund, with provisions allowing that maximum limit to be exceeded in exceptional circumstances. - These access limits shall be subject to review from time to time by the Trustee in the light of actual utilization of resources available to the Loan Account. - Members that notify the Trustee they do not intend to make use of Trust resources under the PRGF and ESF shall be excluded from calculations of the access limits on Trust loans. - Access for each qualifying member under the PRGF or ESF shall be determined by Trustee assessment of: - the balance of payments need of the member; - the strength of its adjustment program; - the amount of the member’s outstanding use of credit extended by the Fund; - its record in using Fund credit in the past. - Access under the ESF shall also take into account the size and likely persistence of the shock. - Amounts committed under a PRGF or ESF arrangement may be increased at the time of any review to meet larger balance of payments needs or, for PRGF, to support a strengthening of the program. - The amount committed to a member under a PRGF arrangement shall not be reduced because of developments in its balance of payments, unless such developments are substantially more favorable than envisaged at approval and derive in particular from improvements in the external environment. - Any commitment is subject to the availability of resources to the Trust. ### Disbursements (Paragraph 3) - Any disbursement is subject to the availability of resources to the Trust. - Disbursements under an arrangement must precede the expiration of the arrangement period. - If phased amounts do not become available due to delays in program implementation, nonobservance of conditions, or delays in new understandings, the Trustee may rephase those amounts over the remaining arrangement period. - The Trustee may extend: - a PRGF arrangement for up to one year to allow disbursement of rephased amounts or provide additional resources, subject to appropriate conditions consistent with PRGF terms; - an ESF arrangement for up to the overall maximum two-year period referred to in Section II, paragraph (c)(1) to allow disbursement of rephased amounts or provide additional resources, subject to appropriate conditions consistent with ESF terms. - When requesting an ESF disbursement, the member shall represent that it has a need because of its balance of payments or its reserve position or developments in its reserves; the Trustee shall not challenge this representation prior to providing the disbursement. - If after a disbursement the Trustee determines the disbursement took place in the absence of a need, the Trustee may expect the member to repay an amount equivalent to the disbursement, together with any interest accrued thereon, normally within a period of 30 days from the date of the Executive Board decision establishing that the member is expected to make an early repayment. - If the member fails to meet a repayment expectation within the period established by the Trustee: - the Managing Director shall promptly submit a report to the Executive Board together with a proposal on how to deal with the matter, and - interest shall be charged on the amount subject to the repayment expectation at the rate applicable to overdue amounts under paragraph 4 of this Section. - Disbursements shall normally be made on the fifteenth and the last day of the month; if these days are not business days of the Trustee, the disbursement shall be made on the preceding business day. - Following qualification for a disbursement, the disbursement shall be made on the first of these value dates for which the necessary notifications and payment instructions can be issued by the Trustee. - No disbursement under any commitment to a member shall be made after the expiration of the period referred to in Section III, paragraph 3. - In cases of misreporting and noncomplying disbursements of Trust loans, the provisions of Appendix I (incorporated at the end of the Instrument) shall apply. - Disbursements under an arrangement to a qualifying member shall be suspended in all the cases specified in Paragraph 1(d)(3) of this Section. ### Terms of loans (Paragraph 4) - Interest on the outstanding balance of a loan under the PRGF and the ESF shall be charged at the rate of one half of one percent per annum subject to the provisions of Section IV, paragraph 5, and provided that interest at a rate equal to the rate of interest on the SDR shall be charged on the amounts of any overdue interest on or overdue repayments of Trust loans. - Trust loans shall be disbursed in a freely usable currency as decided by the Trustee. - Trust loans shall be repaid, and interest paid, in U.S. dollars or other freely usable currency as decided by the Trustee. - The Managing Director is authorized to make arrangements under which, at the request of a member, SDRs may be used for disbursements to the member or for payment of interest or repayments of loans by the member to the Trust. - The Trustee may not reschedule the repayment of loans from the Trust. - Trust loans shall be repaid in ten equal semi-annual installments beginning not later than five and a half years from the date of each disbursement and completed at the end of the tenth year after that date. ### Modifications (Paragraph 5) - Any modification of these provisions will affect only loans made after the effective date of the modification, provided that modification of the interest rate shall apply to interest accruing after the effective date of the modification. ### Borrowing for the Loan Account (Section III) - Resources held in the Loan Account shall consist of: - the proceeds of loans made to the Trust for that Account; and - payments of principal and interest on Trust loans, subject to the provisions of Section V, paragraph 3. - The Trustee may borrow resources for the Loan Account on such terms and conditions as may be agreed between the Trustee and the respective lenders; the Managing Director is authorized to enter into borrowing agreements and agree to their terms and conditions. - Commitments for drawings under loan agreements to the Loan Account of the ESAF Trust entered into before November 30, 1993 shall extend through December 31, 1997; under loan agreements entered into after November 30, 1993 shall extend through December 31, 1999. - The drawdown period under loan agreements to the Loan Account of the PRGF-ESF Trust for loans entered into or amended after September 19, 2001 shall normally extend through December 31, 2014. The drawdown period may be extended by mutual agreement between the Trustee and the lender; the Managing Director is authorized to conclude such agreements. - Drawings on commitments of individual lenders over time shall be made so as to maintain broad proportionality relative to commitments, provided that the Trustee will aim to draw fully all loans entered into prior to August 31, 2001 before calling on loans entered into after that date. - Calls on a lender’s commitment shall be suspended temporarily if, at any time prior to: - June 30, 1997, in case of a commitment under a loan agreement entered into before November 30, 1993; - June 30, 1999, in case of a commitment under a loan agreement entered into after November 30, 1993; or - June 30, 2014, in case of a commitment under a loan agreement entered into after August 31, 2001; the lender represents to the Trustee that it has a liquidity need for such suspension and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees. - The suspension shall not exceed three months, provided that it may be extended for further periods of three months by agreement between the lender and the Trustee. No extension shall be agreed which, in the judgment of the Trustee, would prevent drawing of the full amount of the lender’s commitment. - Following any suspension, calls will be made thereafter so as to restore proportionality of calls on all lenders as soon as practicable. - Payments of principal and interest on borrowing for the Loan Account shall be made from payments into that account of principal and interest made by borrowers under Trust loans. - Payments of the authorized subsidy shall be made from the Subsidy Accounts in accordance with Section IV, and, as required, payments shall be made from the Reserve Account in accordance with Section V. - The Trust shall pay interest on outstanding borrowing for Trust loans promptly after June 30 and December 31 of each year, unless particular loan modalities make other times necessary. ### Subsidy Accounts (Section IV) - Resources held in the PRGF-ESF Subsidy Account shall consist of: - the proceeds of donations made to the Trust for the Subsidy Account of the PRGF Trust prior to January 5, 2006, unless a donor notifies the Trustee that it wishes to transfer the proceeds of its outstanding donation to another Subsidy Account by March 6, 2006; - the proceeds of loans made to the Trust for the Subsidy Account of the PRGF Trust prior to January 5, 2006, unless a lender notifies the Trustee that it wishes to transfer the proceeds of its outstanding loan to another Subsidy Account by March 6, 2006; - the proceeds of donations made to the Trust for the PRGF-ESF Subsidy Account; - the proceeds of loans made to the Trust for the PRGF-ESF Subsidy Account; - transfers from the Special Disbursement Account in accordance with Decision No. 10531-(93/170); - transfers from the Special Disbursement Account in accordance with paragraph 5(c) of Decision No. 13588-(05/99) MDRI; and - net earnings from investment of resources held in that Account. - Resources held in the ESF Subsidy Account shall consist of: - the proceeds of donations made to the Trust for that Account; - the proceeds of loans made to the Trust for that Account; and - net earnings from investment of resources held in that Account. - Resources held in the PRGF Subsidy Account shall consist of: - the proceeds of donations made to the Trust for that Account; - the proceeds of loans made to the Trust for that Account; - transfers from the Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations (PRGF-HIPC Trust) in accordance with Section III bis of the Instrument establishing that Trust; and - net earnings from investment of resources held in that Account. - The Trustee may accept donations for any Subsidy Account on terms agreed with donors; to the extent possible, annual contributions should be made before May 30 of each year. The Managing Director is authorized to accept donations and agree to their terms and conditions. - The Trustee may, in exceptional circumstances, borrow resources for any Subsidy Account from official lenders on agreed terms and conditions: - to prefinance an amount that is firmly committed to be donated to the Trust for the relevant Subsidy Account; repayment of principal and any payments of interest on such borrowing shall be contingent upon receipt by the relevant Subsidy Account of the donated amount; and - so that the relevant Subsidy Account may benefit from net investment earnings on proceeds of a loan extended at a concessional interest rate; repayment of principal and any payment of interest on such borrowing shall be made exclusively from the proceeds of liquidation of the investment and the earnings thereon. - The Managing Director is authorized to enter into borrowing agreements for Subsidy Accounts. - Authorized subsidy rules: - The Trustee shall draw upon resources in the PRGF-ESF Subsidy Account to pay the difference, with respect to each interest period, between interest due by borrowers and interest due on resources borrowed for loans under the PRGF or ESF, provided PRGF-ESF resources are drawn only if no other resources are immediately available in the PRGF Subsidy Account or the ESF Subsidy Account, as applicable. Resources in the PRGF-HIPC Trust transferable to the PRGF Subsidy Account shall not be considered immediately available in the PRGF Subsidy Account. - The Trustee shall draw upon resources in the ESF Subsidy Account to pay the difference, with respect to each interest period, between interest due by borrowers and interest due on resources borrowed for loans under the ESF. - The Trustee shall draw upon resources in the PRGF Subsidy Account to pay the difference, with respect to each interest period, between interest due by borrowers and interest due on resources borrowed for loans under the PRGF. - Calculation of subsidy (Paragraph 5): - The amount of the subsidy shall be determined by the Trustee in light of: - (i) the objective of ensuring that the PRGF and ESF are highly concessional facilities and, to the extent possible, of reducing the rate of interest charged on Trust loans to 0.5 percent, - (ii) the rate of interest on resources available to the Loan Account, and - (iii) the availability and prospective availability of resources to the Subsidy Accounts. - The Trustee shall keep the operation of the Subsidy Accounts under review. If it determines resources available or committed are likely to be insufficient to reduce the rate of interest on either PRGF or ESF loans to 0.5 percent throughout the operation of the Trust, the Trustee shall seek such additional resources as may be necessary. - Should adequate additional resources not be forthcoming to reduce the rate on either PRGF or ESF loans to 0.5 percent, the Trustee shall recalculate the subsidy to reduce that interest rate to the lowest feasible rate that could be applied throughout the remaining life of the Trust. The rate of interest charged on all outstanding loans under the relevant facility shall be adjusted accordingly in succeeding interest periods. Borrowers shall be notified promptly of such adjustments. Further recalculations and adjustments shall be made in subsequent interest periods as necessary. - If interest due to lenders under the PRGF or ESF for an interest period has exceeded interest due by borrowers under the relevant facility, together with the authorized subsidy for that period, and payment to lenders of that difference has been made from the Reserve Account in accordance with Section V, paragraph 2, then an amount equivalent to that difference shall be added to the interest due by the relevant borrowers for the succeeding interest period. Payment of that amount shall be made to the Reserve Account in accordance with Section V, paragraph 3. The additional interest due shall not be taken into account in the calculation of the authorized subsidy for that same interest period. ### Termination arrangements (Paragraph 6) - Upon completion of the subsidy operations authorized by this Instrument, the Fund shall wind up the affairs of the Subsidy Accounts. - Any resources remaining in the PRGF-ESF Subsidy Account shall be used to reduce to the fullest extent possible, in accordance with this Instrument, to 0.5 percent the interest rate paid by borrowers on PRGF and ESF loans, by means of payments to such borrowers. Any resources remaining after that subsidization shall be distributed to the Fund, donors, and lenders that contributed to the PRGF-ESF subsidy operation, in proportion to their contributions. The resources representing the Fund’s share in such distribution shall be transferred to the Special Disbursement Account. - Any resources remaining in the ESF Subsidy Account shall be used to reduce to the fullest extent possible, in accordance with this Instrument, to 0.5 percent the interest rate paid by borrowers on ESF loans, by means of payments to such borrowers. Any resources remaining after that subsidization shall be distributed to donors and lenders that contributed to the ESF subsidy operation, in proportion to their contributions. - Any resources remaining in the PRGF Subsidy Account shall be used to reduce to the fullest extent possible, in accordance with this Instrument, to 0.5 percent the interest rate paid by borrowers on PRGF loans, by means of payments to borrowers. Any resources remaining after that subsidization shall be distributed to donors and lenders that contributed to the PRGF subsidy operation, in proportion to their contributions. - For distributions in this paragraph 6, account will be taken of donations, the net earnings from investment of proceeds of concessional loans extended to the Subsidy Accounts under paragraph 3(b), and the subsidy element of concessional loans extended to the Trust under Section III; the subsidy element associated with such loans shall be calculated as the difference, if positive, between the SDR rate of interest and the interest on such loans, applied to the amount of the loans during the period they were outstanding. - Prior to termination of the PRGF-ESF Subsidy Account as above, the equivalent of SDR 1.12 billion of the resources in that Account that are not derived from the Special Disbursement Account shall be transferred from the Subsidy Account to the Multilateral Debt Relief Initiative-II Trust established pursuant to paragraph 2 of Decision No. 13588-(05/99) MDRI, upon notification by sufficient contributors that up to the full amount of their outstanding contributions may be used for such a transfer. *Source: _31stissue - 2. Amount of Assistance* ### Section V. Reserve Account ### Section V. Reserve Account ### Resources (Paragraph 1) - The resources held in the Reserve Account shall consist of: - (a) transfers by the Fund from the Special Disbursement Account in accordance with Decision No. 8760-(87/176), adopted December 18, 1987, as amended by Decision No. 10531-(93/170), adopted December 15, 1993; - (b) net earnings from investment of resources held in the Reserve Account; - (c) net earnings from investment of any resources held in the Loan Account pending the use of these resources in operations; - (d) payments of overdue principal or interest or interest thereon under Trust loans, and payments of interest under Trust loans to the extent that payment has been made to a lender from the Reserve Account; - (e) transfers by the Fund from the Special Disbursement Account in accordance with Decision No. 10286-(93/23) ESAF, adopted February 22, 1993; and - (f) repayments of the principal under Trust loans, to the extent that resources in the Reserve Account have been used to make payments to a lender due to a difference in timing between scheduled principal repayments to the lender and principal repayments under Trust loans. ### Use of resources (Paragraph 2) - The resources held in the Reserve Account shall be used by the Trustee to make payments of principal and interest on its borrowing for Trust loans, to the extent that the amounts available from receipts of repayments and interest from borrowers under Trust loans, together with the authorized subsidy under Section IV, paragraph 4, are insufficient to cover the payments to lenders as they become due and payable. ### Payments to the Reserve Account (Paragraph 3) - Any repayment of principal under Trust loans, to the extent that repayment to a lender has been made from the Reserve Account due to differences in timing between scheduled principal repayments to the lender and principal repayments under Trust loans, any payments of overdue principal or interest or interest thereon under Trust loans, and any payments of interest under Trust loans to the extent that payment has been made to a lender from the Reserve Account, shall be made to the Reserve Account. ### Review of resources (Paragraph 4) - If resources in the Reserve Account are, or are determined by the Trustee likely to become, insufficient to meet the obligations of the Trust that may be discharged from the Reserve Account as they become due and payable, the Trustee shall review the situation in a timely manner. ### Reduction of resources and liquidation (Paragraph 5) - (a) Whenever the Trustee determines that amounts in the Reserve Account of the Trust exceed the amount that may be needed to cover the total liabilities of the Trust to lenders that are authorized to be discharged by the Reserve Account, the Trustee shall retransfer such excess amount to the Fund’s Special Disbursement Account. - (b) Notwithstanding (a) above, the equivalent of up to SDR 250 million may be transferred from the Reserve Account to the Special Disbursement Account to be used to provide Trust grants or Trust loans, as defined in the Instrument to Establish a Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations. Transfers will be made only when and to the extent that the Trustee of the Trust established by that Instrument determines that there are no other resources immediately available for this purpose. - (c) Upon liquidation of the Trust, all amounts in the Reserve Account remaining after discharge of liabilities authorized to be discharged by the Reserve Account shall be transferred to the Special Disbursement Account. *Source: _31stissue - Section V. Reserve Account* ### 4. When a member’s longest overdue financial obligation has ### _31stissue - 4. When a member’s longest overdue financial obligation has ### Notification and Board communications (six weeks) - When a member’s longest overdue financial obligation has been outstanding for six weeks, the Managing Director will inform the member concerned that, unless all overdue obligations are settled, a report concerning the arrears to the Trust will be issued to the Executive Board within two weeks. - The Managing Director will recommend to the Executive Board whether a written communication should be sent to a selected set of Fund Governors, or to all Fund Governors. - If sent to a selected set of Fund Governors, an informal meeting of Executive Directors will be held to consider the thrust of the communication. - If sent to all Fund Governors, a formal Board meeting will be held to consider a draft text and preferred timing. ### Executive Board reporting and public disclosure (two months; three months; review cadence) - A report by the Managing Director to the Executive Board will be issued two months after a financial obligation has become overdue, and will be given substantive consideration by the Executive Board one month later. - The report will request that the Executive Board limit the member’s use of Trust resources. - A brief factual statement noting the existence and amount of arrears outstanding for more than three months will be posted on the member’s country-specific page on the Fund’s external website. - The statement will indicate that the member’s access to the Fund’s resources, including PRGF, ESF and HIPC resources, has been and will remain suspended for as long as such arrears remain outstanding. - A press release will be issued following the Executive Board decision to limit the member’s use of the Trust resources; a similar press release will be issued following a decision to lift such limitation. - Periods between subsequent reviews of reports on the member’s arrears by the Executive Board will normally not exceed six months. - The Managing Director may recommend advancing the Executive Board’s consideration of the reports regarding overdue obligations. ### Annual reporting (six months) - The Annual Report and the financial statements will identify those members with overdue obligations to the Trust outstanding for more than six months. ### Removal from PRGF-ESF-eligible list (six months) - When a member’s longest overdue financial obligation has been outstanding for six months, the Executive Board will review the situation of the member and may remove the member from the list of PRGF-ESF-eligible countries. - Any reinstatement of the member on the list of PRGF-ESF eligible countries will require a new decision of the Executive Board. - The Fund shall issue a press release upon the decision to remove a member from the list of PRGF-ESF-eligible countries and upon reinstatement. Relevant information shall be included in the Annual Report for the year concerned. ### Declaration of noncooperation (twelve months) - A declaration of noncooperation with the Trust may be issued by the Executive Board whenever a member’s longest overdue financial obligation has been outstanding for twelve months. - The decision to issue such a declaration would be based on an assessment of: - (i) the member’s performance in meeting its financial obligations to the Trust taking account of exogenous factors that may have affected the member’s performance; - (ii) whether the member had made payments to creditors other than the Fund while continuing to be in arrears to the Trust; and - (iii) the preparedness of the member to adopt comprehensive adjustment policies. - The Executive Board may at any time terminate the declaration of noncooperation in view of the member’s progress in implementing adjustment policies and cooperation with the Fund in discharging its financial obligations. - Upon a declaration of noncooperation, the Fund could decide to suspend the provision of technical assistance. - The Managing Director may limit technical assistance if, in his judgment, that assistance was not contributing adequately to resolving problems associated with overdues to the Trust. - The Fund shall issue a press release upon the declaration of noncooperation and upon the termination of the declaration; information contained in such press releases shall be included in the Annual Report(s) for the year(s) concerned. ### PRGF Trust—continuing provisions and loan maturity - All provisions applying to assistance under the Poverty Reduction and Growth Facility Trust Instrument, other than those amended or deleted pursuant to Part I of this Decision, shall continue to apply to assistance committed after November 20, 1998 under such Instrument, including the maturity of loans, which will continue to be repaid in ten equal semiannual installments beginning not later than five and a half years from the date of each disbursement and completed at the end of the tenth year after that date. ### Use of Fund resources and suspensions related to arrears - The Managing Director shall not recommend, and the Fund shall not approve, a request by a member for the use of the Fund’s general resources, Special Disbursement Account resources, or resources administered by the Fund as Trustee, whenever the member is in arrears, or is failing to meet a repayment expectation, to the Poverty Reduction and Growth Facility Trust. - Provision shall be made in Stand-By and Extended Arrangements for the suspension of further purchases whenever a member fails to meet a repayment obligation to the PRGF Trust or a repayment expectation to that Trust within the period established by the Executive Board pursuant to Section II, paragraph 3(c) of the PRGF-ESF Trust Instrument and the provisions of Appendix I to the PRGF Trust Instrument. ### PRGF/ESF access and operational limits - The initial maximum limit on access of each eligible member to the resources of the Trust under a three-year commitment under the Poverty Reduction and Growth Facility shall be set at 140 percent of the member’s quota in the Fund, minus resources committed to the member for loans in association with Trust loans. - The maximum limit may be increased in exceptional circumstances not to exceed 185 percent of the member’s quota in the Fund, subject to the same deductions as above. - The maximum limit on total outstanding access for each eligible member under the ESF shall be 50 percent of a member’s quota in the Fund, provided that this limit may be exceeded in exceptional circumstances. - The Fund shall review the maximum access limit and the exceptional maximum limit under the PRGF, and the maximum access limit under the ESF. - A review concluded that the limits remain appropriate; the Fund shall review these limits no later than April 1, 2007. ### PRGF/ESF financial terms, valuation, and borrowing authorizations - The interest rate on loans from the Trust shall be set at 0.5 percent effective April 20, 1988. - All operations and transactions under borrowing agreements, administered accounts or in connection with any other form of contribution to the PRGF Trust and the PRGF-HIPC Trust shall be changed to a two business day valuation rule. - The Managing Director, after consulting with all creditors, is authorized to confirm that he does not intend to propose borrowing of more than SDR 16 billion for the Loan Account of the PRGF Trust except after consultation with all creditors (Decision No. 12559-(01/85), August 23, 2001, effective September 23, 2001). - The Managing Director, after consulting with all creditors, is authorized to confirm that he does not intend to propose borrowing of more than SDR 20 billion for the Loan Account of the PRGF and Exogenous Shocks Facility Trust except after consultation with all creditors (Decision No. 13773-(06/78), August 30, 2006). *Excerpted from Selected Decisions and Selected Documents contained in the supplied content.* ### 2. Terms and conditions of loans under the Enhanced Structural ### 2. Terms and conditions of loans under the Enhanced Structural Adjustment Facility ### Commitments, cutoff and disbursement dates - Commitments of resources under the enhanced facility will be made upon approval of a three-year arrangement. - Commitments may be made at any time until the cutoff date; most Directors agreed that the cutoff date should be November 30, 1989. - Most Directors considered that the final date for disbursements should not now be extended beyond June 30, 1992, while noting that maintaining this date would imply little flexibility to accommodate delays under annual programs for arrangements agreed later in the commitment period. - All commitments and disbursements will be subject to the availability of resources. ### Financial terms, maturities and interest - Disbursements from the Special Disbursement Account in conjunction with enhanced structural adjustment arrangements will be provided under the financial terms applying to loans under the existing facility, as amended. - To the extent possible, the financial terms applying to loans from the Enhanced Structural Adjustment Facility Trust will be the same as those under the existing facility. - Maturities of loans will be five and a half to ten years. - Most Directors believed it appropriate to set the initial interest rate charged on loans from the Trust at 0.5 percent per annum. - If resources available or committed to the Subsidy Account are likely to be insufficient to maintain the rate of interest at 0.5 percent throughout the period of operation of the Trust, the Fund should seek the additional resources necessary; the interest rate will be adjusted as necessary at the beginning of each six-month interest period whenever resources available to the Subsidy Account are judged insufficient to maintain a rate of 0.5 percent on loans under the enhanced facility. - Directors accepted that proposals to safeguard resources lent to the Trust were adequate to provide necessary assurance to potential creditors; the phrase “all such initiatives as might be necessary” had to be understood to include the possible use of gold. ### Legal documentation and security for lenders - The intended terms for the Trust’s lending determine essential features of the borrowing arrangements to be concluded by the Fund as Trustee for the Enhanced Structural Adjustment Facility Trust and the lenders to it; these have been set out in a prototype circulated to potential lenders and annexed to EBS/87/245. - While comparability in substance among agreements is required, alterations to the form and structure of the prototype will be made to meet particular legal and institutional requirements of individual lenders. - There was discussion of the security to be provided to claims on the Trust and acceptance that safeguards proposed were adequate; views were recorded on rescheduling, temporary encashment through use of the Reserve, and temporary suspension of calls. ### Monitoring, benchmarks, and program framework - Resources under the enhanced facility will be committed upon Board approval of a three-year arrangement and disbursements will be made semiannually in accordance with provisions specified in annual arrangements. - Preparation of policy framework papers will be an essential element of the enhanced facility, and the policy framework process will be strengthened to reflect the summing up of the June 1987 review of the structural adjustment facility and continuing discussions with eligible recipient countries, the World Bank, and interested donors. - Objectives of programs under the enhanced facility: promote, in a balanced manner, both balance of payments viability and growth through mobilization of domestic and external resources, improvements in resource allocation, and removal of structural impediments. - Programs should involve a substantial effort to strengthen the external payments position in a sustainable manner, and assure substantial progress during the three-year program period toward an overall position and structure of the balance of payments consistent with orderly relations with creditors and a reduction in restrictions on trade and payments while permitting timely servicing of obligations to the Fund. - Monitoring of enhanced programs will be conducted through benchmarks: - Most Directors favored the establishment of quarterly quantitative benchmarks for key financial variables. - Structural benchmarks will be used to monitor implementation of the most important structural policy measures. - Most Directors supported establishing some benchmarks, including where appropriate some structural benchmarks, as semiannual performance criteria in all cases. - Midyear reviews will also be required in most cases. - Performance criteria will be limited in number and will generally involve only a subset of the benchmarks; prior actions will be required sparingly but when necessary. - In the event of a substantial delay in completion of a midyear review or in agreeing on an annual program, the total amount of resources to be made available to a member could be reduced or rephased over the remaining period of the arrangement. ### Access limits, differentiation and review - Access to resources of the enhanced facility will be differentiated according to the strength of the member’s adjustment program and its financing need; the structure of external debt and prospective debt service burden, along with expected evolution of other macroeconomic aggregates, will be important elements in the assessment. - Directors generally agreed that access under three-year enhanced structural adjustment arrangements will be subject to a maximum limit of 250 percent of quota. - Directors stressed that access limits do not constitute entitlements; access should normally be below the maximum and guidelines should be applied so that the rate of access for all qualifying members would average about 150 percent of quota. - In highly exceptional circumstances, the maximum could be exceeded, but it was not envisaged that access would exceed 350 percent of quota even in these cases. - Access limits and the operation of both the enhanced facility and the existing facility will be subject to review in light of experience and utilization of available resources. - The amount of resources committed to an individual qualifying member under a three-year arrangement and the amounts for the second- and third-year arrangements will be reviewed at the time of consideration of each annual program. - Most Directors indicated that, subject to availability of resources, amounts committed to a member would not normally be reduced because of developments in its balance of payments. - If balance of payments developments were markedly more favorable than envisaged at approval of the three-year arrangement, particularly due to improvements in the external environment, it would be suggested that the member reduce voluntarily its use of enhanced resources (either by requesting lower access at approval of an annual arrangement or by forgoing in whole or in part a midyear disbursement). ### Disbursement timing and front-loading - Disbursements of loans under enhanced structural adjustment arrangements will be made semiannually, upon approval of an annual arrangement, and subsequently on the basis of observance of performance criteria and, in most cases, completion of a midyear review. - There was a range of views regarding the possibility of limited front-loading; consensus that, subject to availability of resources, a uniform distribution of disbursements would be preferable. - Guideline: any front-loading should not result in first-year disbursements exceeding 40 percent of the total amount to be made available under the three-year enhanced structural adjustment arrangement. - Scope for a higher first-year disbursement may exist in some very exceptional cases. - Existing policies regarding members with overdue obligations to the Fund will be retained; how best to deal with cases of large and protracted arrears is a question to be returned to in a different context. ### Relationship with other Fund facilities and reserves treatment - Members qualifying for loans under the enhanced structural adjustment facility would retain eligibility for access to the Fund’s general resources. - Access to the Fund’s general resources for such members will be examined carefully on a case-by-case basis, taking into account factors in present guidelines, including past performance and use of Fund resources, terms, possible availability of financing from the enhanced facility and other sources, and the speed and time profile of anticipated balance of payments adjustment. - It was reconfirmed that lending to the ESAF Trust could be considered as part of a member’s official reserves by the Fund. - Access to the Fund’s general resources could be provided for members that had extended loans to the Trust and needed liquidity in an amount not exceeding their claim; purchases under these circumstances would be allowed if the member represented that it had a need because of developments in its reserves in the sense of Article V, Section 3(b)(ii), and the Fund agreed that the purchase was justified taking into account the amount of the requested purchase and the existence of a claim on the Trust. - Purchases under these circumstances could be given certain characteristics by a decision to be taken when required (for instance, special repurchase periods and exclusion from definition of reserve tranche purchases), subject to adoption by an 85 percent majority. *Source: 2. Terms and conditions of loans under the Enhanced Structural Adjustment Facility (selected excerpts).* ### 7. Directors observed that there is scope for more extensive and ### _31stissue - 7. Directors observed that there is scope for more extensive and ### Communications, Transparency, and Reporting (Paragraphs 7–8) - Directors observed scope for more extensive and effective communications with the authorities, development aid partners, and civil society in PRGF countries, and in reporting on these communications in staff reports. - Directors agreed that Fund staff need to more actively explain to a broad audience their views and analysis regarding the links between the macroeconomic framework and growth and poverty reduction outcomes in the context of work on PRGF-supported programs. - Directors welcomed the increased transparency of PRGF-supported programs and discussed options for further enhancement to be taken up in the context of the upcoming review of Fund transparency. - Directors saw merit in publishing LOI/MEFPs and PRSPs in original languages when original language versions of these documents are provided by the authorities. ### Capacity Building and Technical Assistance (Paragraph 9) - Need identified for further capacity building to: - develop and assess macroeconomic frameworks; - analyze the profile of poverty; and - conduct poverty and social impact analyses. - Directors emphasized additional efforts at capacity building as key to ensuring full ownership of the reform agenda in PRGF countries. - Directors emphasized ongoing efforts by the Fund and others to increase technical assistance to PRGF countries, including through the proposed new regional technical assistance centers in Africa. - Directors welcomed additional efforts on analyzing macroeconomic policies in the specific context of low-income countries as part of the Fund’s research agenda. ### Diversity of Low-Income Country Circumstances and Financing Review (Paragraph 10) - Directors took note of diverse circumstances among low-income countries, including: - countries with little or no balance-of-payments need for Fund resources; - countries affected by commodity price or other shocks; - countries emerging from conflict. - Agreement that staff should report back to the Board by the end of 2002 on issues relating to the current structure of Fund financial assistance for the poorest countries, noting limited available financing resources. - There was mixed support for post-program monitoring to apply to PRGF resources; Directors agreed to address this in the broader review of concessional Fund assistance to low-income countries. ### Timing of Future Reviews (Paragraph 11) - Directors agreed the experience with the PRGF and PRGF-supported programs should be reviewed again at the latest before the Spring Meetings in 2005, though some Directors preferred a review by Spring 2004. ### Establishment of the Trust for Special PRGF Operations and Interim PRGF Subsidy Operations (Decision summary) - The Fund adopts the Instrument to Establish a Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations (annexed to the decision). - The Fund shall conduct semi-annual reviews of the financing of the Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations. - Decision No. 11436-(97/10), February 4, 1997, as amended by Decision Nos. and dates: - 11492-(97/45), April 24, 1997; - 11861-(98/131) ESAF, December 18, 1998; - 12087-(99/118) PRGF, October 21, 1999, effective November 2, 1999; - 12132-(00/9) PRGF, January 27, 2000; - 12349-(00/118), December 1, 2000; - 12561-(01/85) PRGF, August 23, 2001, effective September 19, 2001; - 12680-(02/17) PRGF, February 20, 2002; - 12696-(02/27) PRGF, March 15, 2002; - 12777-(02/65), June 20, 2002; - 12874-(02/110), October 25, 2002; - 13224-(04/33), April 1, 2004; - 13367-(04/98) PRGF, October 18, 2004; - 13373-(04/105) PRGF, November 9, 2004; - 13588-(05/99) MDRI and 13590-(05/99) ESF, November 23, 2005, effective January 5, 2006; - 13775-(06/78), August 30, 2006; - 13797-(06/88), October 13, 2006; - 13849-(06/108), December 20, 2006. ### Annex: Instrument — Introductory and General Provisions (selected) - Purpose: The Trust shall assist in fulfilling the purposes of the Fund by providing balance of payments assistance to low-income developing members by: - (a) making grants (“Trust grants”) and/or loans (“Trust loans”) to eligible members that qualify for assistance under the terms of this Instrument for purposes of the Initiative; and - (b) subsidizing the interest rate on interim PRGF operations to PRGF-eligible members. - Operations and transactions are conducted through an Account; sub-accounts may be established as necessary. - Resources held in the Account consist of: - (a) grant contributions made to the Trust for the purposes of paragraph 2; - (b) loans, deposits and other types of investments made by contributors with the Trust to generate income to be used for the purposes of paragraph 2; - (c) transfers from the Special Disbursement Account for the purposes of paragraph 2; and - (d) net earnings from investment of resources held in the Account. - 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. - Media of payment and exchange: - (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. ### Annex: Selected Definitions (Section I, Paragraph 1) - “Initiative”: the program endorsed in September 1996 and enhanced in September 1999 for reducing external debt burden of heavily indebted poor countries. - “DSA”: debt sustainability analysis jointly prepared by Fund and Bank staffs and the concerned member. - “decision point”: normally at the end of the initial three-year performance period when Trustee decides qualification and amount of assistance. - “completion point”: time for decision to disburse remaining undisbursed assistance committed for a qualifying member. - “debt sustainability”: achievement of a sustainable level of external debt which shall be 150 percent for the present value of debt-to-exports ratio calculated on the basis of data available at the decision point. - Special case: if at the decision point a country has (i) an exports-to-GDP ratio of at least 30 percent, and (ii) a fiscal revenues-to-GDP ratio of at least 15 percent, a “debt sustainability” target of below 150 percent for the present value of debt-to-exports ratio at the decision point may be set with the specific target determined so as to reduce the present value of debt-to-revenue ratio to 250 percent at the decision point. - For these calculations, amounts subject to an early repurchase or repayment expectation established under the Misreporting Guidelines shall not constitute external debt. - “traditional debt relief mechanisms”: application of Naples terms by Paris Club creditors involving a 67 percent present value reduction of eligible debt at the decision point and at least comparable treatment by other official bilateral and commercial creditors. - “interim PRGF subsidy operations”: operations to subsidize the interest rate on interim PRGF financing following full commitment under PRGF arrangements; interim PRGF operations are expected to take place during the period 2001/02–2011. - “self-sustained PRGF operations”: PRGF-type operations financed on a revolving basis from Special Disbursement Account (SDA) resources through retransfer from the PRGF Trust Reserve Account when no longer needed to cover total liabilities of the 1987 PRGF Trust to lenders. - “PRSP”: Poverty Reduction Strategy Paper; “I-PRSP”: Interim Poverty Reduction Strategy Paper. - “PRSP preparation status report”: report updating the I-PRSP in anticipation of a full PRSP. - “APR”: Annual Progress Report on PRSP implementation. - “Joint Staff Advisory Note”: Bank and Fund staff analysis of PRSP strengths and weaknesses, identifying priority action areas. - “Misreporting Guidelines”: Guidelines on Corrective Action for Misreporting and Noncomplying Purchases in the General Resources Account (Decision No. 12249-(00/77), adopted July 27, 2000), and related provisions in the 1987 PRGF-ESF Instrument (Decision No. 8759-(87/176), adopted December 18, 1987). ### Section II: Contributions to the Trust (selected) - The Trustee may accept contributions of resources for the Account on terms agreed between the Trustee and contributors, subject to the Instrument. - The Managing Director of the Trustee is authorized to accept grants and enter into loan, deposit or other types of investment agreements with contributors to the Trust. *Source: Selected Decisions and Selected Documents, Instrument to Establish a Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations (excerpt).* ### Section III. Trust Grants and Loans ### Section III. Trust Grants and Loans ### Eligibility for assistance - A member shall meet the following requirements to be eligible for assistance from the Trust under Section I, paragraph 2(a): - (a) the member is PRGF-ESF eligible, i.e., it is included in the list of members annexed to Decision No. 8240-(86/56) SAF, as amended; - (b) the member was pursuing a program of adjustment and reform by October 1, 1996, or the member shall have adopted such a program in the period beginning October 1, 1996 and ending December 31, 2006, supported by the Fund through PRGF, ESF, or Extended Arrangements, or, on a case-by-case basis as determined by the Trustee, a Stand-By Arrangement, a decision on rights accumulation, or financial support under the Fund’s emergency assistance policy in post-conflict countries; - (c) in support of the member’s adjustment and reform program, the member shall have received or is eligible to receive assistance to the full extent available under traditional debt relief mechanisms; - (d) after the assumed full application of traditional debt relief mechanisms, the member’s external debt situation, based on end-2004 data, is unsustainable, as determined by the debt sustainability thresholds in Section I, Paragraph 1(v) of this Instrument. ### Qualification for assistance - The Trustee determines whether an eligible member qualifies for assistance in accordance with: - (a) At the decision point, the DSA shall indicate that the member’s external debt situation, even after the assumed full application of traditional debt relief mechanisms, would not be sustainable. The member shall have in place a satisfactory poverty reduction strategy set out in an I-PRSP, PRSP preparation status report, PRSP, or APR, issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months, and the subject of an analysis in a Joint Staff Advisory Note also issued to the Executive Board. - (b) The member has not agreed on an exit operation with Paris Club creditors on Naples terms after September 1999. - (c) The member has established a track record of strong policy performance under Fund-supported programs covering macroeconomic policies and structural and social policy reforms. This requirement shall normally be satisfied by: - an initial three-year performance period leading up to the decision point, followed by a second performance period leading up to the completion point; and - satisfactory implementation of a set of predefined key policy reforms, a stable macroeconomic position, and adherence to its Fund-supported program. - The member shall have prepared a PRSP and implemented satisfactorily the strategy therein for at least one year by the completion point as evidenced by an APR issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months, and the subject of a Joint Staff Advisory Note analysis. - Programs counted toward the first three-year period: PRGF, ESF, or Extended Arrangements, or case-by-case credit for SAF arrangements, Stand-by Arrangements, decisions on rights accumulations, or emergency assistance for post-conflict countries. Programs for the second period: PRGF, ESF, or Extended Arrangements. - The required period shall be evaluated flexibly by the Trustee. Members could receive credit toward the decision point for programs underway prior to adoption of the Initiative. - (d) For a member that reached a decision point or a completion point prior to January 27, 2000, a commitment of assistance under the revised provisions and delivery may be made by the Trustee on the basis of assessments by the Trustee regarding satisfactory adjustment and reform efforts and overall progress in poverty reduction that is broadly acceptable. - (e) All other creditors (holding debt claims above a de minimis amount) of the member shall have agreed to take action under the initiative. ### Amount of assistance - Determination and commitment: - (a) At the decision point, in consultation with the Bank, the eligible member and its other creditors, the Trustee shall determine the amount of resources from the Trust to achieve a reduction in the present value of debt owed to the Fund by the member. The amount to be committed shall be confirmed by the Trustee in the context of satisfactory assurances regarding exceptional assistance from the member’s other creditors. - (b) At the decision point, based on external debt sustainability targets established for the member, the Trustee shall commit the amount to permit a reduction in the present value of debt owed by it to the Fund. The specific amount will be based on: - (i) the Fund’s share in the present value of the multilateral debt of the member at the decision point; and - (ii) the assistance to be provided by multilateral creditors, in terms of a reduction in the present value of the debt owed to them by the member sufficient to achieve the debt sustainability targets, taking into account exceptional assistance by Paris Club creditors and at least comparable action by other official bilateral and commercial creditors under the Initiative. - Adjustment rule: The Trustee shall adjust the committed amount (whether disbursed or not) if, on revised information, recalculation of the member’s debt sustainability position used for the decision point shows the recalculated amount of relief to be provided under the Initiative exceeds or falls short of the amount originally committed by more than one percentage point of the targeted net present value of debt as defined in Section I paragraph 1(v). Adjustments shall not be made: - (i) after the completion point; or - (ii) in the case of an excess of more than one percentage point, if such excess is attributable to incorrect information on exports, gross domestic product, or fiscal revenues that was not provided by or at the behest of the member. - If amounts already disbursed exceed the adjusted amount, the Trustee shall retransfer to the Trust any amount remaining in the account equivalent to such excess. - Member delays and reassessment: - (c) In case of protracted delays by a member in reaching the completion point because of problems in policy implementation, the Trustee may reassess the member’s eligibility and qualification for assistance, including the amount committed at the decision point. - Interim assistance: - (d) Following commitment at the decision point, the Trustee may advance interim assistance up to: - (i) 20 percent of the total assistance committed for each 12-month period following the decision point, and - (ii) a maximum of 60 percent of the total assistance committed prior to the member reaching the completion point, - provided that the amount in any 12-month period does not exceed the amount of debt service falling due to the Fund during that period. - In exceptional circumstances, interim assistance could be raised to 25 percent and 75 percent, respectively. - If the Trustee determines a performance-related condition for such disbursement was not met, the Trustee shall retransfer any amount remaining in the account from such disbursement up to the total amount of such disbursement as well as all net investment income accrued on the amounts disbursed on the basis of incorrect information provided, except that no retransfer shall be made if: - (i) the member’s completion point has been reached; - (ii) the Trustee decides such disbursement remains appropriate in view of the member’s record of policy implementation and poverty reduction efforts; or - (iii) in cases where the Executive Board finds the nonobservance of the relevant performance-related condition to be de minimis in nature as defined in paragraph 1 of Decision No. 13849 ("de minimis"). - Procedures for de minimis determinations: If the Managing Director or Trustee believes nonobservance is de minimis, (i) communications with the member may be made by a representative of the relevant Area Department, and (ii) the Executive Board shall be informed of the misreporting in a staff report which deals with issues other than the misreporting; where such a staff report cannot be issued promptly, the Managing Director shall consult Executive Directors and, if appropriate, prepare a stand-alone report for consideration normally on a lapse-of-time basis. The Fund shall issue press releases on decisions regarding misreporting circumstances and remedies, except for misreporting involving nonobservance judged de minimis. - Completion point disbursement: - (e) At the completion point, the Trustee shall disburse the amount committed at the decision point, as may have been subsequently adjusted, less any disbursements made after the decision point. - If amounts included in the member’s external debt were later found subject to an early repurchase or repayment expectation under the Misreporting Guidelines, the Trustee shall recalculate and adjust its commitment excluding those amounts. - The Trustee retains the right to commit additional assistance at the completion point, beyond that already committed, but only so as to bring the ratio of the net present value of debt-to-exports to 150 percent (or debt-to-fiscal revenue to 250 percent), if deterioration is primarily attributable to a fundamental change in economic circumstances due to exogenous factors. Disbursement of such additional assistance shall be approved at the completion point or thereafter, whenever assurances specified in subparagraph (f) with respect to such assistance have been obtained. - (f) Approval of disbursements shall be given in the context of satisfactory assurances regarding the exceptional assistance to be provided under the Initiative by the member’s other creditors. ### Terms of assistance - Form and choice: - (a) Assistance provided by the Trust to a qualifying member shall be either through a Trust grant or a Trust loan, or both. The Trustee chooses among these on a case-by-case basis, taking into account the objective of bringing the debt-service-to-exports ratio (after Initiative assistance from the Fund and other creditors) to the debt sustainability target agreed at the decision point. The maturity of a Trust loan shall be determined by the Trustee on a case-by-case basis, subject to paragraph 4(c), taking into account smoothing the time profile of the member’s total external debt service and its debt service to the Fund. - The schedule for using proceeds shall be agreed by the Trustee and the member, taking into account the same criteria for deciding among a Trust grant, a Trust loan, or a combination and the maturity of such loan. - Use of proceeds: - (b) Trust grants and Trust loans (including any income from investment of their proceeds) advanced as interim assistance shall be used to meet the member’s debt service payments on its existing debt to the Fund as they fall due, in accordance with the agreed schedule for using proceeds. - Trust grants and Trust loans (including investment income) disbursed at the completion point, along with any amounts previously advanced as interim assistance that remain unused at the completion point, shall be used to effect the early repayment of the member’s qualifying debt to the Fund, in accordance with the agreed schedule for using proceeds. - Notwithstanding paragraph 6, the preceding sentence shall also apply to Trust grants and Trust loans (including investment income) that, prior to January 5, 2006, had been disbursed to a member at the completion point or advanced as interim assistance and remained unused at the completion point, once agreement is reached between the Trustee and the member on a modified schedule for using the proceeds as provided in (a). - Loan terms: - (c) Trust loans shall be provided to members interest-free and shall have a maturity of no less than ten (10) years and up to twenty (20) years, including a grace period of no less than five-and-a-half (5½) years and up to ten-and-a-half (10½) years. The Trustee may not reschedule the repayment of Trust loans. ### Disbursements - (a) Any disbursement of Trust grants and Trust loans shall be subject to the availability of resources to the Trust. - (b) The proceeds of a Trust grant or Trust loan (or both) shall be paid into a separate account for the benefit of the member and administered by the Trustee. The Trustee shall use these proceeds (including any income from investments of such proceeds) in accordance with paragraph 4(b). The terms and conditions for the operation of such account shall be determined by the Trustee. ### Modifications - Any modification of these provisions will affect only Trust grants or Trust loans made after the effective date of the modification, provided that any modification of the interest rate shall apply to interest accruing after the effective date of the modification. ### Section III bis. Subsidies for Interim PRGF Operations - For purposes of Section I, paragraph 2(b) of this Instrument, and to the extent that resources in the PRGF Subsidy Account and the PRGF-ESF Subsidy Account of the PRGF-ESF Trust are insufficient for interim PRGF subsidy operations, the Trustee shall transfer to the PRGF Subsidy Account of the PRGF-ESF Trust, as needed, resources in the Trust Account not earmarked for assistance under Section III of this Instrument. Any such transfers shall be limited to the amounts needed for subsidy payments. ### Section IV. Administration of the Trust H3: 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. H3: 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 audit committee 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 audit committee on the Trust. H3: 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. *Source: _31stissue - Section III. Trust Grants and Loans* ### Section V. Period of Operation and Liquidation ### Section V. Period of Operation and Liquidation ### 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." ### Liquidation of the Trust - If the Trustee decides to wind up operations: - Resources in the Account shall be used first to discharge all the liabilities of the Trust. - Any amount remaining after discharge of liabilities shall be used first to reimburse the SDA for transfers made in accordance with Decision No. 11434-(97/10), adopted February 4, 1997. - Any remaining amount after reimbursement to the SDA shall then be made available for self-sustained PRGF operations. - Exception: at the request of the contributor, its pro rata share in any unused resources contributed to finance the operations referred to in Section I, Paragraph 2(a) of this Instrument, after the completion of such operations, shall be distributed to the contributor. ### Amendment of the Instrument (Section VI) - The Fund may amend the provisions of the Instrument, except: - Any amendment of Section I, paragraph 2, Section IV, Section V and this Section shall require the consent of all contributors to the Trust. --- ### PRGF-HIPC Trust Instrument — Sunset Clause on Eligibility (selected decision text) ### Key decisions and provisions - The Fund decides not to extend further the sunset clause on eligibility set forth in Section 111, paragraph 1 (b) of the Instrument to Establish a Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations ("PRGF-HIPC Trust Instrument"), annexed to Decision No. 11436-(97/10), adopted February 4, 1997. - Accordingly, the sunset clause on eligibility shall take effect on December 31, 2006, as scheduled. - Grandfathering provision: - Notwithstanding the above, the Fund decides to grandfather members that have been, or in the future are, included on the list of members assessed by the Executive Board to have met the end-2004 indebtedness criterion set forth in Section 111, paragraph 1(d) of the PRGF-HIPC Trust Instrument, and who have not yet met the policy performance criterion set forth in Section 111, paragraph 1 (b) of the PRGF-HIPC Trust Instrument. - Such members could become eligible for assistance under the HIPC Initiative if they adopt, at any time, a program of adjustment and reform of the kind specified in Section 111, paragraph 1 (b) of the PRGF-HIPC Trust Instrument. - Decision citation: (SM/06/288, Sup. 2, 10/5/06) Decision No. 13797-(06/88), October 13, 2006. --- ### Trust for Special ESAF Operations for Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations — Terms and Conditions for Administration of Account provided under Section III, Paragraph 5(b) of Trust ### Account resources and sub-accounts - Resources of the Account shall consist of: - (i) the proceeds of grants and/or loans paid into the Account for the benefit of a member by the ESAF-HIPC Trust, - (ii) contributions by other donors to the reduction of a member’s debt service payments on its existing debt to the Fund, - (iii) net earnings from the investment of resources held in the Account. - The Trustee shall establish a separate sub-account within the Account for each member for which resources have been paid. - A sub-account shall be established whenever the Fund, as Trustee of the ESAF-HIPC Trust, grants final approval of a Trust grant and/or Trust loan under the ESAF-HIPC Trust. ### Use of sub-account resources - Following establishment of a sub-account, the Fund, as Trustee, is authorized to use sub-account resources (including net income) to: - repay the member’s existing debt to the Fund, in accordance with the Schedule for using the proceeds of grants and loans as determined under the provisions of Section III, Paragraphs 4(a) and 4(b) of the Instrument to Establish the PRGF-HIPC Trust. - The Trustee is authorized to retransfer back to the Trust an amount equivalent to: - (i) resources disbursed from the Trust into a sub-account in excess of the amount needed to meet the Fund’s share of debt reduction in accordance with Section III, paragraph 3(b) of the Instrument to Establish the PRGF-HIPC Trust, or - (ii) resources disbursed as interim assistance from the Trust into a sub-account on the incorrect understanding that all performance-related conditions specified for such disbursement were met, in accordance with Section III, paragraph 3(d) of the Instrument to Establish the PRGF-HIPC Trust. - Editorial note: The remaining text of Paragraph 3 was added by Decision No. 12697-(02/27) ESAF and will apply to disbursements of interim assistance approved after March 15, 2002, including the disbursements made under existing commitments. ### Investment of resources (Paragraph 4) - (a) Resources held in a sub-account and not immediately needed for operations shall be invested. - (b) Permissible investments include: - (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; - (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 conditions: - Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used. - When an exchange of currency is involved, consultation is required "with the consent of the issuers of such currencies." - Earnings, net of any transactions costs, shall accrue to the sub-account and shall be available for the purposes of the sub-account. - (c) The Managing Director of the Trustee is authorized to: - (i) make all arrangements, including establishment of accounts in the name of the Trustee, with such depositories as necessary to carry out the operations of the Account, - (ii) take all measures necessary to implement the provisions of this decision. ### Unit of account and currencies (Paragraph 5 and 6) - The SDR shall be the unit of account. - (a) Resources received into a sub-account may be in U.S. dollars or such other media as may be determined by the Trustee. - (b) Resources held in a sub-account may be currencies or currencies exchanged for SDRs in accordance with arrangements made by the Trustee for the holding and use of SDRs. - (c) The Trustee may exchange any of the resources held in a sub-account provided that any balance of a currency held in the sub-account may be exchanged only with the consent of the issuer of such currency. - (d) Payments made from a sub-account shall be made in U.S. dollars or such other media as may be determined by the Trustee. ### Segregation of assets and operational rules (Paragraphs 7–9) - Assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Trustee. - Assets of the Account shall not be used to discharge or meet any liabilities, obligations, or losses incurred by the Trustee in administering other accounts. - Assets and property held in a sub-account shall not be used to discharge or meet any liabilities, obligations, or losses of the Trustee in administering any other sub-account. - Subject to the decision's provisions, the Trustee shall apply, mutatis mutandis, the same rules and procedures as apply to operations of the General Resources Account of the Fund. - No charge shall be levied for services rendered by the Trustee in the administration, operation, and termination of the Account. ### Financial records, audit, reporting (Paragraph 10) - (a) The Trustee shall maintain separate financial records and prepare separate financial statements for the Account in accordance with generally accepted accounting principles. Financial statements for the Account shall be expressed in SDRs. - (b) The External Audit Committee selected under Section 20 of the Trustee’s By-Laws shall audit the operations and transactions conducted through the Account. The audit shall relate to the financial year of the Trustee. - (c) The Trustee shall report on the resources and operations of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the External Audit Committee on the Account. ### Termination and sub-account wind-up (Paragraph 11) - (a) The Account shall remain in effect for as long as is necessary, in the judgment of the Trustee, to conduct and to wind up the business of the Account. - A sub-account for a particular member would be wound up when the resources of that sub-account have been exhausted in servicing the member’s obligations to the Fund. - (b) Any balance remaining in a sub-account upon termination and after the discharge of all obligations of that sub-account shall be transferred promptly to the member for which the sub-account had been established. ### Decision citation and amendments - Decision No. 11698-(98/38) ESAF, April 1, 1998, as amended by Decision Nos. 12697-(02/27) ESAF, March 15, 2002 and 13589-(05/99) MDRI, November 23, 2005, effective January 5, 2006. --- ### Executive Board Summings Up (selected excerpts) ### Chairman’s Summing Up — Modalities for Special ESAF Operations in the Context of the HIPC Initiative and Other ESAF Issues (Executive Board Meeting 97/10, February 4, 1997) - Establishment of ESAF-HIPC Trust and modalities to place accumulating resources into that account to finance special ESAF operations. - Authorization for early transfer of Reserve Account resources to the Special Disbursement Account (SDA) for financing special ESAF operations where other resources are not immediately available. - Directors’ operational guidance highlights: - Presumption that ESAF arrangements with HIPC-eligible countries, especially in the second stage, should be among the stronger ESAF arrangements, with more frontloading of policy reform and forceful action on critical structural measures. - Any shortening of the second stage would be exceptional and decided case-by-case by the Boards of the Fund and the Bank. - Approval of more than two three-year ESAF arrangements should be exceptional; however, continued ESAF should in principle be open to all ESAF-eligible members. - Reduction at completion point of assistance committed at the decision point would be taken only in concert with all other creditors and only where a major windfall transforms the member’s economic circumstances, not when improvement results from ambitious adjustment and reform. - Vulnerability factors to be considered at the decision point in determining debt sustainability targets may include additional factors such as the present value of external debt-to-GDP ratio. - Reference to extended arrangements as satisfying requirement of a track record of strong policy performance covers the possibility that interim ESAF operations could take the form of extended arrangements in the General Resources Account. - Assistance provided by the Fund and other multilateral creditors should preserve the financial integrity of institutions and their preferred creditor status; satisfactory assurances from other involved creditors are needed before commitments or disbursements. - Directors requested an early report on progress on financing the ESAF/HIPC initiatives, including bilateral contributions; staff to discuss in context of a paper on the use of SCA-2 resources. ### Acting Chair’s Summing Up — HIPC Initiative status and financing (Executive Board Meeting 02/40, April 9, 2002) - Directors considered HIPC Initiative important to eradicate poverty and welcomed steady progress under the enhanced HIPC Initiative. - By end-March 2002: - "26 countries have reached their decision points, of which 4 countries have reached their completion points." - "The committed debt relief under the enhanced HIPC Initiative would lower the outstanding stock of external debt of these countries by two thirds." - The relief would lower, on average, debt-service payments during 2001–05, compared to 1998–99, by about one third relative to exports and by almost one half relative to government revenue, thus allowing for significant increases in social and poverty-related spending. - Directors emphasized that HIPC debt relief should not displace other forms of development aid to HIPCs or to non-HIPCs. *Source: _31stissue - Section V. Period of Operation and Liquidation* ### 2. Directors urged the staff to continue to work with the re- ### Directors urged the staff to continue to work with the remaining HIPCs ### Progress toward decision and completion points - Directors urged the staff to continue to work with the remaining HIPCs, most of which are conflict-affected, to bring them to decision points as soon as conditions permit. - Progress has been slow in bringing countries that have reached their decision points to the completion point, when the remaining debt relief could be provided on an irrevocable basis. - Directors underscored the need for these countries to remain on track with their economic reform and poverty reduction programs in order to reach their floating completion points, while acknowledging that this will require additional effort in the context of the current global economic slowdown and the decline in primary commodity prices. - It was agreed that the Bank and the Fund should retain the requirement of at least one-year of satisfactory PRSP implementation before the completion point under the HIPC Initiative (except as provided for in retroactive cases). - In cases of satisfactory PRSP progress where other completion point triggers have been met and the financial cost of delaying the completion point is significant, countries’ completion point requests could be submitted for Board consideration without waiting for a full year of PRSP implementation; this would require an amendment of the HIPC Instrument. ### Creditor participation and risks - Directors regretted that participation so far by non-Paris Club official and commercial creditors has been poor. - Directors expressed concern about repeated attempts by some official bilateral creditors to sell their claims on HIPCs to the secondary market with attendant risk of litigation. - Directors stressed that participation by all creditors is necessary for the successful implementation of the HIPC Initiative and urged nonparticipating creditors to agree to participate as soon as possible. - Directors called on the staff to take all possible measures, within existing institutional constraints, to help secure a more effective participation of all creditors. - Most Directors welcomed the new supplementary measures proposed by the staff. - Some Directors expressed concern about the proposal that non-Paris Club creditors with Fund-supported programs be allowed to include the amount of their debt relief to HIPCs in their financing gaps. ### Policy performance, PRGF programs, and timing flexibility - Directors stressed that a track record of strong policy performance under Fund- and Bank-supported programs is central to the success of the HIPC Initiative. - In interpreting the practical modalities of ascertaining observance of the standard completion point condition on track record performance under a PRGF-supported program: - In the case of extended interruptions of policy performance (more than six months), a satisfactory track record in the form of the completion of one review of a PRGF-supported program covering a period of policy implementation of at least six months would be required immediately before the completion point. - While satisfactory macroeconomic performance prior to the completion point is essential, many Directors felt some flexibility should be applied to take into account factors beyond the control of the authorities. ### External environment, commodity dependence, and debt sustainability - Directors expressed concern that the recent global slowdown, coupled with a significant decline in primary commodity prices, has weakened HIPCs’ growth and export performance over the past two years and led to a deterioration of external debt indicators for many of them. - Continued export volume growth in most HIPCs has moderated the slowdown in real GDP growth, and the overall impact of recent changes in the international economic environment has varied considerably across HIPCs. - Of the four countries that have reached their completion points, two seem to be in a good position to maintain long-term debt sustainability, but the situation of the other two is more mixed. - For the 20 countries that reached their decision points by end-2001, 8 to 10 are likely to have NPV of debt-to-exports ratios at the completion point above the 150 percent threshold; for 6 of these countries, such deviations were anticipated at the time of their decision points, but to a lesser degree. - Directors recalled that the enhanced HIPC Initiative provided for the consideration on a case-by-case basis of additional debt relief at the completion point where exceptional exogenous shocks have caused fundamental changes in a country’s economic circumstances, but: - Potential additional HIPC relief is not meant to compensate for slippages in policy reform and/or imprudent new external borrowing, nor could it be provided on an ongoing basis to deal with future economic shocks. - Any additional debt relief at the completion point would increase the overall costs of the HIPC Initiative; the financing implications would need to be explored in due course. - Directors noted that virtually all HIPCs are heavily dependent on primary commodities for their export earnings and government revenue, leaving them vulnerable to adverse external developments. - Achieving long-term debt sustainability requires: continued policy reforms to accelerate growth and diversify exports; strengthened external debt management capacity by the HIPCs themselves; improved access for their exports to world markets; and external financing on appropriate terms. ### Financing terms, debt management, and monitoring - Given HIPCs’ limited repayment capacity, almost all new financing should be in the form of highly concessional loans and grants. - Directors encouraged HIPCs to significantly strengthen their debt management capacities during the HIPC process, especially in increasing transparency and accountability on new borrowing and on the use of borrowed resources. - Directors stressed the importance for HIPCs, as well as the Fund and the Bank, to closely monitor HIPC country debt indicators to detect potential debt-servicing problems at an early stage. ### PRGF financing, pledges, and resource adequacy - Directors welcomed the progress made in securing financing for the interim PRGF and the Fund’s participation in the HIPC Initiative. - New PRGF loan resources of SDR 4.4 billion had been pledged, of which SDR 4.1 billion are now available. - Nearly all the pledged bilateral subsidy contributions to the PRGF-HIPC Trust have become effective; Directors urged that the remaining bilateral contributions to the PRGF-HIPC Trust be made effective soon to ensure full funding of PRGF-HIPC operations. - Directors welcomed contributions by several countries to subsidize post-conflict emergency assistance and encouraged further pledges by other members to ensure resources remain sufficient to subsidize charges by the poorest members beyond 2002. - Directors were in broad agreement with staff analysis that available and pledged loan and subsidy resources appeared sufficient to finance PRGF operations and the Fund’s share of HIPC Initiative assistance. - Accumulated balances in the Reserve Account were judged to adequately protect providers of both current and new loans to the PRGF Trust. - Directors noted that consideration might need to be given to mobilizing additional loan and subsidy resources should the recent high demand for PRGF resources continue. - Over the long term, the adequacy of the level of self-sustained PRGF operations would need assessment. - Any expansion of the list of eligible countries under the HIPC Initiative, or significant topping up at the completion points, if warranted, would increase the cost of the Fund’s HIPC Initiative assistance, necessitating mobilization of additional resources. - Some Directors called for a fuller assessment of the potential costs of topping up going forward. - Directors looked forward to a further discussion later this year of the Fund’s concessional assistance to low-income countries. *Summing Up by the Chairman—Enhanced Initiative for Heavily Indebted Poor Countries (HIPCs) and Poverty Reduction Strategy Papers (PRSPs)—Progress Reports and Review of Implementation; Executive Board Meeting 00/90, September 5, 2000* ### 2000. In this regard, some Directors noted that an updated country- ### 31stissue - 2000. In this regard, some Directors noted that an updated country- ### HIPC Initiative: track record, eligibility, and timing - Directors agreed that an overall track record of three years of Bank- and Fund-supported programs prior to the decision point should in general be maintained, but that this should be interpreted flexibly on a case-by-case basis. - Track record requirements immediately preceding a decision point may need to be applied flexibly, especially for countries that have experienced significant program interruptions. - Emphasis that countries need to demonstrate strong commitment to reform programs, particularly in the areas of governance and accountability. - The link between debt relief and poverty reduction must be clearly maintained; importance of establishing a clear framework for tracking public expenditure on poverty reduction. - A few Directors favored maintaining a track record requirement under Fund-supported programs immediately prior to the decision point for the most difficult cases to ensure a prospect for a durable resolution of countries’ debt problems. - Directors urged potential HIPC countries not yet on IDA- and IMF-supported adjustment programs to embark on them expeditiously to begin establishing eligibility for HIPC debt relief. - Most Directors favored extending the current end-2000 sunset date for entry into such programs and eligibility for Initiative assistance by a further two years to end-2002. - Directors underscored the critical importance of prudent debt management and securing adequate concessional financing for successful implementation of the HIPC Initiative. - Debt relief should account for the impact of recent adverse terms of trade developments; the existing framework is flexible in this regard. - Debt relief is only one element of a comprehensive poverty reduction strategy; increased access to industrial country markets is also critical. - Staff urged to seek participation and contributions from all creditors, including non-Paris Club bilateral creditors; financing problems faced by non-Paris Club creditors (especially those that were themselves HIPC countries) require innovative and flexible solutions. - Expectation that all donors will take necessary steps to fulfill early pledges of contributions in a timely manner. - Fund financing issues to be discussed separately on September 13th, 2000. ### Floating completion point structural conditionality - Several Directors questioned the extent of floating completion point structural conditionality. - Staff urged to continue focusing floating completion point requirements on: - a key number of policy actions on poverty reduction, - requiring a stable macroeconomic position, - ensuring the country has kept on track with its Fund-supported program. ### Streamlining preliminary HIPC documents (Executive Board Meeting 00/108, November 3, 2000) - Directors agreed preliminary documents should be streamlined to focus on a few key issues (paragraph 7 of the paper), notably: - eligibility; - track record; - summary debt sustainability analysis; - timing of possible decision points; - possible triggers for the floating completion point; - likely assistance under the Initiative. - Directors emphasized streamlining must not compromise quality and coverage of information presented to the Board. - Requests that preliminary documents include: - rationale for choice of completion point triggers; - details on debt service profiles before and after HIPC Initiative assistance; - more information on expenditure tracking and monitoring of debt relief; - plans for interim relief; - policies on transparency; - adequate information on a country’s performance under the PRGF and justifications for any shortening of the required track record. - For the remainder of the year, streamlined preliminary documents to be discussed by the Board on a case-by-case basis after a review period of five working days. - Directors generally supported a review of experience with these arrangements early in 2001. ### PRSPs (Poverty Reduction Strategy Papers): progress, challenges, and guidance - Directors welcomed progress to date and favorable country responses in preparing nationally owned poverty reduction strategy documents. - Noted that in many cases interim PRSPs exhibited higher levels of information, participation, and political authority involvement than envisaged. - Challenges in moving from interim to full PRSPs include: - reliance on inadequate poverty data; - limited institutional and analytical capacity of governments and civil society; - need to ensure broad-based participation does not undermine national parliaments and democratic processes. - Directors welcomed involvement of multilateral and bilateral development partners in upgrading data and building institutional capacity; efforts need to be redoubled to ensure views of the poor are taken into account. - Further analytical work needed on the link between growth and poverty reduction; Bank and Fund staff intensifying research efforts and a Board review expected in the near future. - Tension recognized between accelerating debt relief and maintaining the pace of IDA and IMF concessional assistance while linking HIPC resources and concessional financing to country-owned poverty reduction strategies; this inherent tension will intensify as countries move to full PRSPs. - Quality of PRSPs expected to improve over successive cycles; a wide range should be expected for first PRSPs. - World Bank intention welcomed to strengthen links between PRSPs and IDA assistance through use of a Poverty Reduction Support Credit. - Tension also exists between country ownership and IDA/IMF requirements to assess whether strategies provide an adequate basis for concessional lending; Board-supported approach to amplify guidance to staff on assessing core content and participatory process to enhance transparency without infringing country ownership—guidance should not be overly prescriptive. - One-year interval between interim PRSP discussion and completion of full PRSP may be too short. - Staff recommendation endorsed: countries unable to complete a full PRSP within a year of their initial interim PRSP could provide a progress report, accompanied by an updated Joint Staff Assessment, as a basis for continued access to concessional assistance and, where applicable, interim debt relief. - A few Directors favored a fuller update of the PRSP document, including participatory process progress and planned use of HIPC debt relief resources. - Directors welcomed background staff paper on key features of PRGF-supported programs (SM/00/193) as useful guidance to integrate macroeconomic policies and other aspects of poverty reduction strategies, and to support increased national ownership; looked forward to these changes being included in new PRGF arrangements and to the paper being made publicly available. ### PRGF, MDRI, ESF and related adjustments (Executive Board Meeting extracts 2005) - Executive Directors reiterated strong support for the Enhanced HIPC Initiative; noted: - twenty-eight countries have reached their decision points; - eighteen of them have now reached the completion point. - HIPC Initiative debt relief committed to countries that have reached the decision point, together with additional debt forgiveness, represents a two-thirds reduction of their overall debt stock. - As a result, debt-service payments for most HIPCs are expected to decline to less than 10 percent of exports—below the debt service ratio for non-HIPC low-income countries—and thus to help HIPCs increase poverty-reducing expenditures substantially. - In the twenty-eight countries that have reached the decision point, such expenditures were almost four times as great as debt-service payments in 2004. - Continued adherence to a strong policy framework and appropriate debt management remain essential after the completion point to ensure lasting exit from unsustainable debt and maximize benefits for poverty reduction and the Millennium Development Goals. - Many countries have yet to progress to the completion point; their interim progress will depend on satisfactory performance under PRGF arrangements and development and implementation of poverty reduction strategies. - High priority attached to assisting countries in improving institutional capacity and policy processes, particularly improved public expenditure management and adequate tracking of poverty outlays. - Majority of HIPCs’ bilateral creditors have agreed to provide debt relief, but full participation of non-Paris Club and commercial creditors remains an important challenge. - Directors regretted withdrawal of participation by some non-Paris Club creditors; expressed concern over increase in lawsuits initiated by private creditors against HIPCs. - Recommendations to enhance creditor participation included: enhancing transparency of creditor participation, more explicit attention in Article IV consultations, targeted technical assistance to improve debt management systems, intensified moral suasion, and creditor education of the HIPC methodology. - Staff urged to explore legal possibilities of reducing litigation at an international level; some Directors noted HIPCs could do more to promote contacts with non-Paris Club creditors. - Preliminary list provided by staff to identify countries potentially eligible for HIPC assistance under extended sunset clause welcomed. - Directors supported methodological approach of carefully reviewing available data before concluding on HIPC eligibility; encouraged prompt advancement and expected a final list early in 2006. - Robust and reliable list important given eligibility of new HIPC entrants for 100 percent debt relief from IMF, IDA, and AfDF under the G-8 debt cancellation proposal. - Some Directors counseled caution in publishing the list given implications for credit flows and the preliminary nature of assessments. - Financing additional HIPC cases will be critical. - Eligible or potentially eligible HIPCs to decision point will face challenges (many conflict-affected; several with substantial arrears to official creditors); staff urged to work with authorities to develop strategies to move ahead and encouraged eligible countries to establish track records and satisfactory poverty reduction strategies to qualify for debt relief under enhanced HIPC Initiative. - Potentially eligible countries without IMF- or IDA-supported programs since the beginning of the Initiative should make every effort to start one before the expiry of the sunset clause at end-2006 to become eligible for debt relief under the enhanced HIPC Initiative; Directors reiterated importance of high program quality and preserving key HIPC principles. ### Multilateral Debt Relief Initiative (MDRI) and Exogenous Shocks Facility (ESF) (Executive Board Meeting 05/99, November 23, 2005) - Adoption of decisions to implement MDRI and to establish an Exogenous Shocks Facility (ESF) within the PRGF Trust. - MDRI: upon determination of qualification of an eligible member for debt relief, the Fund would use resources from the applicable MDRI Trust to repay, on behalf of the qualifying member, its eligible debt to the Fund (including to the Fund as Trustee). Debt relief under the MDRI would only be provided to a qualifying member upon its request. - Conditions for non-HIPCs to qualify for MDRI: - Satisfactory performance in the same three key areas applicable to HIPCs: (i) macroeconomic performance; (ii) implementation of a poverty reduction strategy or similar framework; and (iii) the public expenditure management (PEM) system. - Proposed specific qualification requirements: a track record of at least 6 months of sound macroeconomic policies and satisfactory implementation of a poverty reduction strategy (or equivalent framework) in the period immediately prior to the assessment, and an assessment that the quality of the PEM system would allow resources freed by debt relief to help meet the MDGs. - PEM quality to be assessed drawing from a variety of sources; if a country fails the test, staff would propose remedial actions involving sustained strengthening of its PEM system. - ESF purpose and modalities reaffirmed, including eligibility, qualification, conditionality, access guidelines, and financing terms. - Renaming and subsidy account arrangements: - Current PRGF Subsidy Account to be renamed the PRGF-ESF Subsidy Account; resources to be used flexibly to subsidize either PRGF or ESF loans. - Creation of two new subsidy accounts—one to receive earmarked contributions and provide subsidies for PRGF loans only, and the other to receive earmarked contributions and provide subsidies for ESF loans only. - Resources in the PRGF-ESF Subsidy Account to be used only if there are no resources in the PRGF Subsidy Account or in the ESF Subsidy Account, as the case may be. - Use of PRGF Subsidy Account resources for the MDRI requires consent of all contributors to that account; amendments to the PRGF Trust to establish ESF will require consent of these contributors and all lenders to the Loan Account. - To address a contributor refusing consent, Directors agreed to authorize the Managing Director to return remaining resources attributable to such dissenting contributor in full; contributors and lenders urged to provide early consent so MDRI debt relief can be provided to qualifying countries in early January 2006 as planned. - Members with arrears to the Fund in the GRA or to the Fund as Trustee will not be eligible for MDRI debt relief until such arrears are cleared. - Follow-up paper expected on issues related to three protracted arrears cases (Liberia, Somalia, and Sudan). *Source: Selected Decisions and Selected Documents (Executive Board meeting extracts and Acting Chair’s Summing Up) contained in the provided document.* ### 1. Pursuant to Article V, Section 2(b), the Fund adopts the In- ### Decision No. 13588-(05/99) MDRI, November 23, 2005, effective January 5, 2006 ### Key decisions and requirements - The Fund adopts the Instrument to Establish the Multilateral Debt Relief Initiative-I Trust (“MDRI-I Trust”) (Attachment I). - The Fund adopts the Instrument to Establish the Multilateral Debt Relief Initiative-II Trust (“MDRI-II Trust”) (Attachment II). - The Fund shall conduct semi-annual reviews of the financing of the MDRI-I Trust. - The Fund shall conduct semi-annual reviews of the financing of the MDRI-II Trust. - 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. ### Resource transfers and allocations (SDA as of January 5, 2006) - The equivalent of SDR 530 million, including all 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. - 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. - The remaining balance shall be transferred to the Subsidy Account of the PRGF Trust. - Transfers to enable establishment of the MDRI-II Trust require notifications of consent from contributors for transfers to the MDRI-II Trust for the equivalent of SDR 1.12 billion. ### MDRI-I Trust — Purposes and resources (Attachment I, Introductory Section and Section I) - Purpose: provide balance of payments assistance to low-income developing members by making grants (“Trust grants”) to eligible members that qualify under the Instrument. - Account and resources: - Operations conducted through an Account; Trustee may establish sub-accounts. - Resources consist of: - transfers from the Special Disbursement Account in accordance with paragraph 5(b) of Decision No. 13588-(05/99) MDRI; - grant contributions made to the Trust; - loans, deposits and other types of investments made by contributors to generate income for the Trust; - net earnings from investment of resources held in the Account. - Unit of account: the SDR for commitments and all other operations and transactions (commitments for contributions may also be made in currency). - Media of payment: - Resources may be received in any currency. - 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. - Contributions may be made in or exchanged for SDRs in accordance with arrangements made by the Trust. - The Trustee may exchange resources, provided any balance of a currency held in the Trust may be exchanged only with the consent of the issuer of such currency. ### MDRI-II Trust — Purposes and resources (Attachment II, Introductory Section and Section I) - Purpose: same as MDRI-I Trust — provide balance of payments assistance by making Trust grants to eligible members. - Account and resources: - Operations conducted through an Account; Trustee may establish sub-accounts. - Resources consist of: - transfers from the Subsidy Account of the PRGF Trust in accordance with paragraph 3 of Decision No. 13588-(05/99) MDRI; - grant contributions made to the Trust; - loans, deposits and other types of investments made by contributors to generate income for the Trust; - net earnings from investment of resources held in the Account. - Unit of account and media of payment: same provisions as MDRI-I Trust. ### Eligibility, qualification, and assistance (MDRI-I Instrument — Section III) - Eligibility requirements (Paragraph 1): - Member is PRGF-eligible (included in the list annexed to Decision No. 8240-(86/56) SAF, adopted March 26, 1986). - 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. - Member had debt outstanding to the Fund, including to the Fund as Trustee, as of December 31, 2004. - For members eligible or potentially eligible for HIPC Initiative assistance, the member has reached the completion point under the HIPC Initiative. - Qualification criteria (Paragraph 2): - (a) Members also eligible or potentially eligible for HIPC Initiative assistance that reach the completion point on or after January 5, 2006 shall qualify for assistance when they reach the completion point. - (b) Members that reached the completion point prior to January 5, 2006 shall qualify when the Trustee determines 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 public expenditure management systems. A track record of satisfactory macroeconomic performance and satisfactory implementation of a poverty reduction strategy for the six month-period immediately preceding the determination suffices for (i) and (ii). - (c) Members not eligible or potentially eligible for HIPC Initiative assistance shall qualify when the Trustee determines satisfactory performance with respect to (i) macroeconomic performance, (ii) implementation of a poverty reduction strategy or similar framework, and (iii) the state of public expenditure management systems. A track record of satisfactory macroeconomic performance and satisfactory implementation of a poverty reduction strategy for the six month-period immediately preceding the determination suffices for (i) and (ii). - Amount and delivery of assistance (Paragraph 3): - Upon qualification, the Trustee shall repay to the Fund, on behalf of the member, an amount equivalent to the member’s eligible debt. - 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: - (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. - Terms and disbursements: - Assistance is in the form of a Trust grant. - Disbursements are subject to the availability of resources to the Trust. - Modifications affect only Trust grants made after the effective date of the modification. ### Administration, accounting, investment, and reporting (Section IV) - Trustee: the Fund shall administer the Trust as Trustee; decisions and actions taken by the Fund in that capacity shall be identified as such. - The Fund shall apply the same rules as apply to the operation of the General Resources Account of the Fund, subject to the Instrument’s provisions. - The Managing Director of the Trustee is authorized to make arrangements, establish accounts in the name of the IMF (accounts of the Fund as Trustee), and take administrative measures necessary to implement the Instrument. - Separation of assets and audits: - Trust resources shall be kept separate from other Fund accounts and used only for Trust purposes. - Other Fund accounts shall not be used to discharge Trust liabilities or losses; Trust resources shall not be used to discharge liabilities or losses of other Fund accounts. - The Fund shall maintain separate financial records and prepare separate financial statements for the Trust. - The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust for the Fund’s financial year. - 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 the external audit firm’s report on the Trust. - Investment of resources: - Any balance not immediately needed shall be invested. - Permitted investments include: - marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; - 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; - deposits with a commercial bank, a national official financial institution of a member, or an international financial institution denominated in SDRs or in the currency of a member. - Investments not involving currency exchange shall be made only after consultation with the member whose currency is to be used; investments involving exchange require the consent of the issuers of such currencies. ### Period of operation and liquidation (Section V) - Period: The Trust shall remain in effect for as long as is necessary, in the judgment of the Fund, to conduct and wind up the business of the Trust. - Liquidation: - If the Trustee decides to wind up operations, Trust resources shall first be used to discharge all liabilities of the Trust. - Any remaining amount shall be distributed to the Fund and contributors in proportion to their contributions. - The resources representing the Fund’s share in such distribution shall be transferred to the SDA. ### Amendment provisions (Section VI) - The Fund may amend the Instrument, except that any amendment of Section I, paragraph 2, Section IV, Section V and Section VI shall require the consent of all contributors to the Trust. - The decision (paragraph 8) becomes effective when: - all third party contributors to the Subsidy Account of the PRGF Trust have consented to the amendments set forth in paragraph 3; 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* ### Section III. Trust Grants ### Section III. Trust Grants ### Eligibility for assistance - A member shall meet all of the following requirements to be eligible for assistance from the Trust under Section I, paragraph 2: - (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. ### Qualification for assistance - The Trustee determines whether an eligible member qualifies for assistance in accordance with: - (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 that reached the completion point prior to January 5, 2006 shall qualify 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 in (i) and (ii) above 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. ### Amount and delivery of assistance - Upon determination that a member qualifies: - (a) The Trustee shall repay to the Fund, on behalf of the member, an amount equivalent to the member’s eligible debt. - (b) 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: - (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. ### Terms of assistance and disbursements - (a) Assistance to a qualifying member shall be in the form of a Trust grant. - (a) Any disbursement of Trust grants shall be subject to the availability of resources to the Trust. ### Modifications - Any modification of these provisions will affect only Trust grants made after the effective date of the modification. *Source: _31stissue - Section III. Trust Grants* ### 1. Pursuant to Article V, Section 2(b), the Fund adopts the In- ### _31stissue - 1. Pursuant to Article V, Section 2(b), the Fund adopts the In- ### Instrument to Establish the Post-SCA-2 Administered Account — key provisions - Decision No. 12061-(99/130), December 8, 1999. - The Fund adopts the Instrument to Establish the Post-SCA-2 Administered Account (the “Account”) pursuant to Article V, Section 2(b). - Purpose and governance: - The Account is established for the temporary administration of resources transferred to the Account by a member following the termination of the SCA-2, while deciding on the final disposition of those resources. - The Account shall be governed and administered by the Fund in accordance with the terms and conditions of the Instrument. - Unit of account and transfers: - The SDR shall be the unit of account. - Transfers may be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Managing Director for the holding and use of SDRs by the Account. - Investment and operations: - The resources of the Account shall be invested, and the proceeds of investments reinvested, at the discretion of the Managing Director. - The Managing Director is authorized to (i) make all arrangements, including establishment of accounts in the name of the International Monetary Fund, with such depositories of the Fund as may be necessary to carry out the operations of the account, and (ii) to take all measures necessary to implement the provisions of this Instrument. - Disposition of resources: - The Fund shall transfer all or part of the resources received from a member, together with the member’s pro rata share of the investment returns, to the PRGF-HIPC Trust, or otherwise in accordance with the member’s instructions. - Segregation and liabilities: - The assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Fund. - The assets in the Account shall not be used to discharge or meet any liabilities, obligations, or losses incurred by the Fund in the administration of such other accounts. - Administration and rules: - Subject to the provisions of this Instrument, the Fund, in administering the Account, shall apply mutatis mutandis the same rules and procedures as apply to operations of the General Resources Account of the Fund. - Charges and records: - No charge shall be levied on the members for the services rendered by the Fund in the administration, operation, and termination of this Account. - The Fund shall maintain separate financial records and prepare separate financial statements for the Account. - Audit and reporting: - The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the operations and transactions of the Account. The audit shall relate to the financial year of the Fund. - The Fund shall report on the assets and property and on the operations and transactions of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the external audit firm and the External Audit Committee. - Termination and disputes: - The Account shall be terminated upon completion of the transfers contemplated in paragraph 4. - Any questions between a member and the Fund arising hereunder shall be settled by mutual agreement. ### Guidelines on Conditionality — Principles (A) - Basis and purpose: - Conditionality is program-related conditions intended to ensure Fund resources are provided to assist members in resolving their balance of payments problems in a manner consistent with the Fund’s Articles and that establishes adequate safeguards for the temporary use of the Fund’s resources. - Early warning and prevention: - Conditionality is one element in a broad strategy including consultations, multilateral surveillance, World Economic Outlook, discussions of capital market developments, advice on standards and codes, and technical assistance to encourage precautionary adoption of sound policies. - Ownership and capacity to implement programs: - National ownership and adequate administrative capacity are crucial; the member has primary responsibility for selection, design, and implementation of its economic and financial policies. - Circumstances of members: - The Fund will pay due regard to domestic social and political objectives, economic priorities, causes of balance of payments problems, and administrative capacity; conditionality and program design will reflect the member’s circumstances and the provisions of the facility. - Approval of access to Fund resources: - A member’s request to use Fund resources will be approved only if the Fund is satisfied the member’s program is consistent with the Fund’s provisions and policies and that it will be carried out, and in particular that the member is sufficiently committed to implement the program. - The Managing Director will be guided by these principles in making recommendations to the Executive Board. - Focus on program goals: - Fund-supported programs should be directed primarily toward: - (a) solving the member’s balance of payments problem without recourse to measures destructive of national or international prosperity; and - (b) achieving medium-term external viability while fostering sustainable economic growth. - Scope of conditions: - (a) Conditions will be established only on variables or measures reasonably within the member’s direct or indirect control and that are either (i) of critical importance for achieving program goals or monitoring implementation, or (ii) necessary for implementation of specific provisions of the Articles or policies adopted under them. - (b) Conditions will normally consist of macroeconomic variables and structural measures within the Fund’s core areas of responsibility; variables outside core areas may be established but may require more detailed explanation of their critical importance. The Fund’s core areas comprise: macroeconomic stabilization; monetary, fiscal, and exchange rate policies, including underlying institutional arrangements and closely related structural measures; and financial system issues related to functioning of domestic and international financial markets. - (c) Program-related conditions may be outcomes-based or actions-based; formulation will be based on the member’s circumstances. - Responsibility of the Fund for conditionality: - The Fund is fully responsible for establishment and monitoring of all conditions attached to the use of its resources; there will be no cross-conditionality to other organizations. - When conditions relate to areas outside core responsibility, the Fund will draw on advice of other multilateral institutions, particularly the World Bank. - The application of a lead agency framework between the Fund and the Bank will be implemented flexibly. - The Fund’s policy advice, program design, and conditionality will, insofar as possible, be consistent and integrated with those of other international institutions within a coherent country-led framework; roles of each institution and any relevant conditionality will be stated clearly in Fund-related program documents. ### Guidelines on Conditionality — Modalities (B) - Nature of Fund arrangements: - A Fund arrangement is a decision of the Executive Board by which a member is assured that it will be able to make purchases or receive disbursements from the Fund in accordance with the terms of the decision during a specified period and up to a specified amount. - Fund arrangements are not international agreements; language having a contractual connotation will be avoided. Appropriate consultation clauses will be incorporated. - Members program documents: - Authorities’ policy intentions should be described in documents such as a Letter of Intent (LOI), or a Memorandum on Economic and Financial Policies (MEFP) that may be accompanied by a Technical Memorandum of Understanding (TMU). - Documents should be prepared by the authorities with cooperation and assistance of Fund staff and submitted to the Managing Director for circulation to the Executive Board. - Documents should reflect authorities’ policy goals and strategies and clearly distinguish conditions on which Fund financial support depends from other program elements. - Detailed policy matrices should be avoided in LOIs and MEFPs unless necessary to express policy intentions. - Monitoring of performance: - Implementation may be monitored on the basis of prior actions, performance criteria, program and other reviews, and variables established as structural benchmarks or indicative targets. - (a) Prior actions: members may be expected to adopt measures prior to approval when critical for successful implementation; Managing Director will keep Executive Directors informed of progress. - (b) Performance criteria: a variable or measure established as a formal condition for making purchases or disbursements; they apply to clearly-specified variables objectively monitored by staff and critical for program goals. - (c) Reviews: - (i) Program reviews: provide framework to assess whether program is broadly on track; program reviews are completed only if Executive Board is satisfied program remains on track. Reviews are expected every six months, but uncertainties may warrant more frequent monitoring. - (ii) Financing assurances reviews: where member has outstanding sovereign external payments arrears to private creditors or outstanding non-sovereign arrears due to exchange controls, every purchase or disbursement after approval will be subject to completion of a financing assurances review while such arrears remain outstanding; financing assurances reviews may also be established where the member has outstanding arrears to official creditors. - (d) Other variables and measures: Fund may examine indicative targets and structural benchmarks subject to same principles as paragraph 7. - (i) Indicative targets: may be used where uncertainty prevents establishment as performance criteria; as uncertainty is reduced, they will normally be established as performance criteria. - (ii) Structural benchmarks: may be established where measures cannot be specified in objectively monitored terms or where non-implementation would not by itself warrant interruption of purchases or disbursements; they serve as markers of progress in implementing critical structural reforms. *Attachment: Instrument to Establish the Post-SCA-2 Administered Account; Guidelines on Conditionality (excerpts).* ### 12. Waivers. The Fund will grant a waiver for nonobservance of ### _31stissue - 12. Waivers. The Fund will grant a waiver for nonobservance of ### Waivers for nonobservance of performance criteria - The Fund will grant a waiver for nonobservance of a performance criterion only if satisfied that, notwithstanding the non-observance, the program will be successfully implemented, either because of the minor or temporary nature of the nonobservance or because of corrective actions taken by the authorities. - The Fund will grant a waiver of the applicability of a performance criterion only if satisfied that, notwithstanding the unavailability of the information necessary to assess observance, the program will be successfully implemented and there is no clear evidence that the performance criterion will not be met. ### Floating tranches - Conditions will normally apply to specified dates or continuously. - When the Fund judges that a member will need to implement a particular structural measure or meet a particular performance target during the program period but not necessarily by a specific date, and when flexibility in timing would promote national ownership, the arrangement may provide for the purchase or disbursement of Fund resources to be made available whenever the measure is implemented or the target observed. - These floating tranches are expected to apply primarily to structural performance criteria that are included because of their importance for medium-term external sustainability and growth. ### Evaluation and review - Program evaluation: - The staff will prepare an analysis and assessment of the performance under programs supported by use of the Fund’s resources in connection with Article IV consultations and as appropriate in connection with further requests for use of the Fund’s resources. - Periodic review: - The Fund will review the application of this Decision at intervals of five years and at such other times as consideration of it is placed on the agenda of the Executive Board. - These reviews will evaluate the consistency of conditionality with these guidelines, the appropriateness and implementation of programs, and the effectiveness of policy instruments. - Repeals: - Decision No. 270-(53/95), Decision No. 6056-(79/38), and Decision No. C-3220-(01/24) are repealed. (SM/02/276, Rev. 1, 9/23/02) ### Side letters — confidentiality and definition - Confidentiality: - The existence and content of side letters will be treated with the utmost confidentiality by management, Fund staff, and Executive Directors. - Definition: - A side letter is a letter or other written communication from a member’s authorities to Fund management or staff containing confidential policy understandings complementary to or elaborating upon those in new or currently applicable letters of intent supporting a request for the use of Fund resources. - Understandings in side letters will not contradict or detract from those contained in the applicable letters of intent. ### Use of side letters - Members are encouraged to include all policy undertakings in letters of intent; side letters will be used sparingly and only where authorities consider, and management agrees, exceptional communication is required. - Use justified only if publication would directly undermine the authorities’ ability to implement the program or render implementation more costly; normally limited to cases where premature release would cause adverse market reaction or undermine preparation of domestic groundwork. - Examples of matters that could in some cases be considered for inclusion in side letters: - (i) exchange market intervention rules; - (ii) bank closures; - (iii) contingent fiscal measures; - (iv) measures affecting key prices. ### Communication of side letters to the Executive Board - Staff will advise members’ authorities of this decision before authorities send side letters. - The Executive Board will consider any side letter in a restricted session soon after the relevant letter of intent is issued to the Board. At this session, each Executive Director’s constituency will be represented by only one person. A numbered copy of the side letter will be made available to each such representative and, at the end of the meeting, each copy will be returned. Staff will be present to answer any questions. - In principle, the full text of a side letter will be communicated to the Executive Board. However, at the request of the authorities, the Managing Director may delete from the copies to be communicated to the Board information of such specificity that: - (i) it is substantially immaterial to Executive Directors’ consideration of the request for the use of Fund resources; and - (ii) disclosure would: (a) seriously hamper the authorities’ capacity to conduct economic policy; or (b) confer an unfair market advantage upon persons not authorized to have knowledge of the information. - Information that might be deleted under paragraph 9 includes: figures regarding foreign exchange markets (e.g., exchange rate intervention triggers or amounts of intervention), names of specific banks or companies, or specific dates for the introduction of certain policy measures. - Executive Directors communicating information about a side letter to their authorities should: - (i) limit the recipients to those who have a strict need to know; - (ii) inform the recipients of the need to treat the information as highly confidential; - (iii) inform the recipients about the procedures that apply to the communication of side letters to the Executive Board under this decision. - Executive Directors that communicate information about a side letter to their authorities will inform promptly the Managing Director and the Executive Director for the member that sent the side letter of such communication. - Review: - This decision will be reviewed by the Executive Board within one year, provided, however, that it will be reviewed promptly before that time if the confidentiality of any side letter has not been observed. ### Summing up by the Acting Chair—Review of Side Letters (Executive Board Meeting 02/59, June 12, 2002) - Directors welcomed the review of side letters and agreed policy has enhanced accountability while reducing the number of side letters. - Procedures have maintained required confidentiality and focused side letters on highly market-sensitive issues where premature release would undermine implementation or increase costs. - Oral understandings have been rare and should continue to be discouraged; in exceptional cases the Board will be informed appropriately. - Need for systematic reporting to the Board on implementation of understandings in side letters was stressed; implementation will generally be summarized in staff reports while maintaining confidentiality. Information on implementation of prior actions and performance criteria will always be specifically reported to the Board. - Some Directors suggested higher-confidentiality staff reports for sensitive implementation information; most Directors preferred existing side letter procedures for safeguarding confidentiality. Experience will be monitored and reviewed as appropriate. ### Misreporting and noncomplying purchases — guidelines on corrective action - Context: - A “noncomplying purchase” arises when a member made a purchase in the General Resources Account it was not entitled to make under the arrangement or governing decisions because information available at the time later proved incorrect. - When such a case arises, the member will be called upon to take corrective action regarding an outstanding noncomplying purchase, either by repurchase or by use of its currency in Fund transactions and operations, unless the Fund decides circumstances justify continued use. - Steps should be taken to improve accuracy and completeness of information reported to the Fund and to define performance criteria and conditions to facilitate accurate reporting. - Guidelines (applicable to purchases made after the date of this decision): 1. Whenever evidence comes to the attention of the staff indicating that a performance criterion or other condition applicable to an outstanding purchase made in the General Resources Account may not have been observed, the Managing Director shall promptly inform the member concerned. 2. If, after consultation with the member, the Managing Director finds that, in fact, the performance criterion or other condition was not observed, the Managing Director shall promptly notify the member of this finding and submit a report to the Executive Board together with recommendations. 3. In any case where the noncomplying purchase was made no more than four years prior to the date on which the Managing Director informed the member, the Executive Board may decide either: - (a) that the member shall be expected to repurchase from the Fund the outstanding amount of its currency resulting from the noncomplying purchase normally within a period of 30 days from the date of the Executive Board decision, or - (b) that the nonobservance will be waived pursuant to paragraph 5. 4. Instead of repurchasing as provided for in paragraph 3(a), the member may request the Fund to use an equivalent amount of its holdings of the member’s currency in the Fund’s transactions and operations, but if such use cannot be made within 20 days from the date of the Executive Board decision the member shall be expected to make a repurchase in accordance with paragraph 3(a). 5. A waiver under paragraph 3(b) will normally be granted only if the deviation from the relevant performance criterion or other condition was minor or temporary, or if, subsequent to the purchase, the member had adopted additional policy measures appropriate to achieve the objectives supported by the relevant decision. 6. If a repurchase pursuant to paragraph 3(a) has not been effected, the Managing Director shall submit promptly a report to the Executive Board accompanied by a proposal on how to deal with this matter, in which the Managing Director may recommend that the Fund initiate action under Article V, Section 5 of the Articles. 7. Provision shall be made in Fund arrangements for the suspension of further purchases under an arrangement whenever a member fails to meet a repurchase expectation pursuant to these guidelines. 8. Nothing in these guidelines shall limit the power of the Fund to take, in cases of noncomplying purchases, other action that could be taken pursuant to the Fund’s Articles and Rules. 9. For the purposes of this decision: - (i) whenever the Managing Director considers there is evidence indicating that a member may have made a noncomplying purchase, but the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the communication in paragraph 1 may be made by a representative of the relevant Area Department; - (ii) if the Managing Director determines that a member has made a noncomplying purchase and considers that the nonobservance was de minimis as defined in paragraph 1 of Decision No. 13849, the notification in paragraph 2 may be made by a representative of the relevant Area Department, and the Managing Director’s report contemplated in paragraph 2 shall, wherever possible, be included in a staff report on the relevant member that deals with issues other than the noncomplying purchase and shall include a recommendation that the related nonobservance be considered de minimis and that a waiver for nonobservance be granted. If such a staff report cannot be issued promptly, the Managing Director shall consult Executive Directors and, if appropriate, prepare a stand-alone report normally on a lapse-of-time basis; - (iii) whenever the Executive Board finds that a noncomplying purchase has been made but that the nonobservance was de minimis in nature as defined in paragraph 1 of Decision No. 13849, a waiver for nonobservance shall be granted by the Executive Board. *Decision No. 12864-(02/102), September 25, 2002, as amended by Decision No. 13814-(06/98), November 15, 2006* ### 1. In order to address cases of misreporting that are considered to be ### 1. In order to address cases of misreporting that are considered to be ### De minimis misreporting — scope and amendments - To be considered de minimis, a deviation from a performance criterion, assessment criterion or other specified condition would be so small as to be trivial with no impact on the assessment of performance under the relevant member's program, as illustrated by the examples set out in Table 1 of EBS/06/86. - The text indicates amendments are made to the decisions referred to below to address de minimis misreporting. - Decision reference cited: Decision No. 13849-(06/108), December 20, 2006. - Note: Paragraphs 2–7 of Decision No. 13849-(06/108) contain amendments that have been inserted into the respective amended decisions (Decision Nos. 7842-(84/165), 11832-(98/119) ESAF, 13561-(05/85), 11436-(97/10), 13564-(05/85), and 13183-(04/10)). ### Conditioning use of the Fund’s resources on accuracy of information - Any decision on the use of resources in the General Resources Account (including decisions approving an arrangement or an outright purchase, completing a review, or granting a waiver either of applicability or for the nonobservance of a performance criterion) will be made conditional upon the accuracy of information provided by the member regarding implementation of prior actions specified in the decision. - Decision No. 12250-(00/77), July 27, 2000 - Any decision granting a waiver for the nonobservance of a performance criterion under an arrangement will be made conditional upon the accuracy of data or other information provided by the member to assess observance of the performance criterion in question. - Any decision waiving the applicability of a performance criterion under an arrangement will be made conditional upon: - (i) the accuracy of the member’s representation that the information necessary to assess observance of the relevant performance criterion is unavailable, and - (ii) the accuracy of data provided by the member to assess observance of the same performance criterion for a preceding period (if applicable). - Decision No. 12251-(00/77), July 27, 2000 ### Executive Board summing up — strengthening safeguards and misreporting - Reliable information is essential to surveillance, financing, and technical assistance; dependence on members’ readiness to provide needed information is longstanding practice. - Directors noted recent instances involving allegations of misuse of Fund resources and cases of misreporting and emphasized the need to strengthen safeguards on the use of Fund resources. - The September 1999 Interim Committee called on the Fund to perform an authoritative review of its procedures and controls to identify ways to strengthen safeguards on the use of its funds. ### Ex ante safeguards — safeguards assessments framework and principles - Purpose: Safeguards assessments of central banks are intended to provide reasonable assurance that the central bank’s control, accounting, reporting, and auditing systems in place to manage resources, including Fund disbursements, are adequate to ensure the integrity of operations. - Directors observed safeguards assessments would not prevent misuse by a willful override of controls or manipulation of data. - Key endorsed principles and requirements: - Central banks of member countries making use of Fund resources should publish annual financial statements independently audited by auditors external to the central banks in accordance with internationally accepted audit standards. - Benchmarks to be based on the Fund’s Code of Good Practices on Transparency in Monetary and Financial Policies. - Country-specific circumstances must be taken into account; technical assistance is important for implementing recommendations. - Two-stage assessment approach: - Stage 1: Authorities of a member seeking a new Fund arrangement furnish documents listed in the attachment as early as possible and grant permission for Fund staff to hold discussions with their independent auditors; staff review yields a preliminary judgment about adequacy of controls, reporting, and audit mechanisms. - Stage 2: If Stage 1 information is insufficient, an on-site review by a multidisciplinary team prior to presentation of the arrangement for Board approval, or in any case no later than the first review. - Teams: Multidisciplinary, including experts from central banks and private accounting firms; led by Fund staff for consistency; confidentiality emphasized. - Reporting: Safeguards assessment reports are confidential; results to be made available to the Executive Board in summary form, with more detailed information available to Board members on request. - Application timing: - For Fund arrangements approved after June 30, 2000: - (i) central banks subject to the two-stage assessment approach described above, with the expectation that in many cases the first stage would suffice; and - (ii) central banks must publish annual financial statements independently audited by auditors external to the central banks in accordance with internationally accepted audit standards. - For Fund arrangements in effect before June 30, 2000: - The two-stage assessment approach would not be applied as a transitional arrangement, but audit arrangements would be assessed to determine whether central banks publish annual financial statements independently audited by auditors external to the central banks in accordance with internationally accepted audit standards. - Members with possible disbursements subject to program reviews after September 30, 2000 would be required to furnish the Fund with the documents listed in points (1) to (3) of the attachment three months before the first program review after September 30, 2000. - Review and experimental basis: - Safeguards assessments to be carried out on an experimental basis. - A review of the Fund’s experience with this approach should be undertaken with the involvement of the outside panel of experts within 12–18 months. - Resource implications: Management will return to the Board should resource requirements exceed those available under the Fund’s current fiscal year 2001 budget proposals. ### List of information/documents to obtain from member country central banks (information requirements) - 1. Copies of audited (or unaudited if no audit is performed) financial statements for the past three years, together with related audit reports. - 2. Copies of all management letters issued by the external auditors in connection with their audit of the financial statements for the past three years. - 3. Copies of all audit reports (including agreed-upon procedures engagements) issued by the external auditors during the past three years. - 4. A description of the central bank’s management structure, including the organizational reporting structure. - 5. A description of the organizational structure and reporting lines of the internal audit department, including details of the senior management staff in the department and a summary of staff resources (experience and qualifications). - 6. A summary of high-level internal controls in place for the banking, accounting, and foreign exchange departments of the central bank. - 7. Listing of all reports issued by the internal audit department in the past three years and a summary description of findings. Potentially, copies of reports dealing with operational and financial controls during the same period. - 8. Details of the full legal names of any subsidiaries of the central bank, and a description of their business and the nature of their relationship with the central bank. A listing of all correspondent banks. - 9. A listing of all accounts held by government agencies with the central bank. - 10. Copies of current legislation governing the central bank. ### Failure to meet a repurchase expectation and use of Fund’s general resources - Executive Board Meeting 85/26, February 20, 1985: - If a member were failing to meet a repurchase expectation pursuant to the Guidelines on Corrective Action with respect to a noncomplying purchase, the Fund would not negotiate or approve either a stand-by or extended arrangement for the member or the use of the Fund’s general resources outside an arrangement, as in the case of an overdue financial obligation to the Fund. ### Overdue financial obligations — amended decisions - References in Fund decisions to Decision No. 7842-(84/165) on the guidelines on corrective action in cases of misreporting and noncomplying purchases in the General Resources Account shall be understood to be references to Decision No. 12249-(00/77), July 27, 2000. *Source: Selected Decisions and Selected Documents (extracts) from the provided IMF PDF content.* ### 2. Decision No. 7931-(85/41), March 13, 1985, and Decision ### 2. Decision No. 7931-(85/41), March 13, 1985, and Decision ### Safeguards Assessments—Review of Experience and Next Steps (Executive Board Meeting 02/26, March 14, 2002) - Directors judged the safeguards policy, adopted experimentally in March 2000 as an ex ante mechanism, to be "an unqualified success." - Observed benefits - Widely accepted by central banks. - Helped improve central banks' operations and accounting procedures. - Enhanced the Fund’s reputation and credibility as a prudent lender. - Key vulnerabilities revealed by safeguards assessments - (i) A substantial number of central banks’ financial statements are not subject to an independent and external audit conducted in accordance with internationally accepted standards. - (ii) Several central banks have poor controls over foreign reserves and data reporting to the IMF. - (iii) A number of central banks have adopted an unclear financial reporting framework and inadequate accounting standards. - Implications and staff/director guidance - Vulnerabilities may lead to possible misreporting to the Fund or misuse of central bank resources, including Fund disbursements. - Some findings warranted corrective measures under program conditionality, ranging from prior actions to policy commitments in letters of intent. - Fund conditionality should be limited to areas highly relevant to safeguarding the use of Fund resources. - Staff were advised to tailor assessments and remedial measures to the specific circumstances of individual countries. - Coverage and scope - Safeguards assessments should extend to countries that augment an existing Fund arrangement or that have a Rights Accumulation Program. - Many Directors favored extension to countries with stand-alone CFFs and to countries with outstanding obligations to the Fund that do not currently have a Fund-supported program. - Views differed on staff-monitored programs (SMPs); most agreed SMP countries should be encouraged to undergo safeguards assessments voluntarily. - Safeguards assessments should remain narrowly focused on safeguarding use of Fund resources and not be converted into an institution-building exercise; they should not be applied to fiscal issues and other public agencies without a new staff mandate. - Some Directors urged raising safeguards issues in Article IV consultations for countries with outstanding obligations but no safeguards assessment. - Shift in focus and monitoring - Over the next three or four years, focus should shift from initial assessments to monitoring of past commitments. - Improvements in external communications and closer coordination with technical assistance were welcomed. - Need to strengthen internal communications among Fund staff to ensure consistency in applying the safeguards policy. - Monitoring modalities and information requirements - Commitments by authorities to implement safeguards recommendations would be monitored in conjunction with overall program conditionality; main focus on efficacy of implementation. - Central banks should provide annually to Fund staff their annual audited financial statements and related audit reports, including management letters and special audit reports, for as long as Fund credit remains outstanding. - Periodicity of monitoring influenced by timing for implementing past recommendations; on-site monitoring may be necessary in some cases. - Procedures for future safeguards assessments - Modalities broadly similar to existing procedures but narrowed and made more effective based on lessons learned. - All member countries receiving a new arrangement from the IMF after June 30, 2000, would be subject to a full safeguards assessment. - Where a previous assessment exists, the nature and extent of a new assessment would be based on known risk factors, including findings and date of previous assessment, results of safeguards monitoring, and new developments at the central bank. - Stage One (off-site) and Stage Two (on-site) distinction would no longer apply; a single, confidential safeguards assessment report would be prepared for all new arrangements. - Deadlines and resourcing - Assessment should, in principle, be completed prior to the Executive Board’s approval of a new arrangement; deadline retained of completion by no later than the first program review under the arrangement. - If the deadline is not met, a staff report recommending completion of a review under the arrangement would contain, in the appraisal, an explicit statement to this effect and the reasons for proposing completion of the review despite the delay in the safeguards assessment. - Several Directors suggested augmenting policy so key weaknesses are addressed as soon as possible and prior to the second review under any program, taking administrative capacity into account. - Many Directors supported allocating more staff resources to safeguards tasks (some preferring redeployment); continued use of technical experts from central banks encouraged. - Confidentiality and reporting - Safeguards assessment reports should remain confidential documents. - Executive Board to be kept informed by (i) a summary of findings and recommendations identified by safeguards assessments in staff reports; and (ii) periodic summary reports to the Executive Board on safeguards assessment findings in general. - A few Directors believed countries wishing to publish their reports should be allowed to do so. - Directors supported publication of the staff report after deletion of references to individual countries. - Review timing - Agreed that a review of the safeguards policy should take place in three years, if not earlier, with suggested involvement of external experts in the review process. - (Editorial note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews will be conducted on an “as needed” basis. The expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews.) ### Emergency Financing Mechanism (Summing Up by the Chairman—Executive Board Meeting 95/85, September 12, 1995) - Purpose and characterization - Directors considered proposed "emergency financing mechanism" (EFM) but viewed it as an emergency procedure rather than a new financing mechanism. - Essence: provide exceptional procedures to facilitate rapid approval of Fund support in crisis situations while assuring necessary conditionality. - No necessary link between exceptional procedures to facilitate rapid Fund response and exceptional access or need for supplementary financing. - Relation to supplementary resources - Potentially large and front-loaded access in some emergencies may imply need to call upon supplementary resources. - Issues related to possible expansion of the GAB and/or supplementary borrowing arrangements, and their activation modalities and criteria, remain open for further consideration. - Moral hazard and usage limits - Directors stressed emergency procedures should be limited to truly exceptional circumstances; Fund’s role should remain catalytic and use of procedures not a guarantee against sovereign default. - Importance of strengthened Fund surveillance and close cooperation with members to help avoid crises and facilitate rapid responses. - Members expected to come early to the Fund with a strong and comprehensive economic program. - Board involvement and decision processes - Emphasized continuous and substantive involvement of the Executive Board in utilization of emergency procedures. - Management would inform the Board immediately of its intention to activate emergency procedures; close communication and consultation throughout the process. - Specific elements and operational features (listed elements as presented) - Emergency procedures to be used only in rare circumstances representing or threatening to give rise to a crisis in a member’s external accounts requiring immediate Fund response; identification based on initial judgment by management in consultation with the Executive Board, with potential for spillover effects being an important element of the Board’s final judgment. - Conditions for activation include readiness of the member to engage immediately in accelerated negotiations with the Fund, with prospect of early agreement on—and implementation of—measures sufficiently strong to address the problem; prior actions normally expected; member’s past cooperation with the Fund would bear on speed. - Executive Board to be informed immediately by management of intention to activate emergency procedures, nature of emergency, initial outlines of planned responses, and likely timetable for Board discussion; strict confidentiality to be maintained. - A short written report to be circulated to the Executive Board as soon as feasible, describing the member’s current economic situation. - During negotiations, the Executive Board would be briefed regularly on developments, progress of negotiations, likely key program parameters (including level and phasing of access), likely impact on the Fund’s liquidity and possible need to activate borrowing arrangements, and any timetable changes; briefings provide opportunity for Board guidance. - Consultations with key creditors to be initiated at outset where support from other creditors is likely to be important; Executive Board to be informed of relevant developments via informal briefings. - Once agreement reached on a program, documents to be circulated as soon as possible; staff would aim to do this within, say, five days. The Executive Board would be prepared to consider the request for an arrangement as early as 48 to 72 hours after circulation of the documentation. - Decisions regarding key parameters, including access and phasing, to be taken in the context of the Executive Board’s consideration of the arrangement, in accordance with existing rules and practices of the Fund. - Early involvement and high frequency briefing of the Executive Board to be a centerpiece of procedures facilitating rapid Fund response; after approval, close monitoring by staff and continued Board involvement until emergency definitively resolved. - In most cases, the full review of the initial policy response and the reaction of markets could be expected to be conducted within one to two months of approval of the arrangement, to allow modifications to policies as necessary. - There would be an understanding, rather than a legal obligation, that the member would make early repurchase of resources made available under emergency procedures, provided the member overcame its crisis quickly. - Conclusion - Directors agreed to strengthen the Fund’s ability to act quickly in crisis situations and endorsed the broad outlines of proposed emergency procedures. - Management planned to report to the Interim Committee on this basis; issues related to supplementary financing arrangements to be considered further for implications on the emergency financing mechanism. *Italicized source attribution: Selected Decisions and Selected Documents — Use of the Fund’s Resources (Excerpts from Executive Board meetings and decisions as presented in the source content.)* ### 1. If outstanding credit to a member from the Fund’s General ### 31stissue - 1. If outstanding credit to a member from the Fund’s General ### Post-Program Monitoring (PPM): triggers and scope - PPM is expected where outstanding credit to a member from the Fund’s General Resources Account (GRA), or from the Fund as Trustee of the Poverty Reduction and Growth Facility Trust (PRGF Trust), or a combination thereof, exceeds a threshold of 100 percent of quota, and the member: - does not have a program supported by a Fund arrangement, and - is not implementing a staff monitored program with reports issued to the Executive Board, and - does not have a program supported by a Policy Support Instrument (“PSI”). - The Managing Director shall recommend PPM to the Executive Board in such cases, unless the Managing Director judges the member’s circumstances (including strength of policies, external position, or expectation of a successor arrangement or staff monitored program within the next six months) make PPM unwarranted. - PPM will normally cease when the member’s outstanding credit falls below the threshold of 100 percent of quota. - The Managing Director may also propose PPM to the Executive Board even if outstanding credit is below the 100 percent of quota threshold when developments suggest the need for PPM, particularly where progress toward external viability is in question. ### Frequency, content, and reporting under PPM - For members subject to PPM, there will normally be two PPM Board discussions in a twelve-month period. - One PPM discussion will normally coincide with the Article IV consultation. - The member is expected to engage with staff on its policies, which shall include a quantified macroeconomic framework. - Staff will report to the Executive Board on: - the member’s policies, - the consistency of the macroeconomic framework with the objective of medium-term viability, - the implications for the member’s capacity to repay the Fund. - The Executive Board’s discussion of a PPM paper will be reflected in a Public Information Notice (PIN); publication of the PIN will follow the normal PIN procedure, including the requirement of the member’s consent. *Decision No. 13454-(05/26), March 14, 2005, as amended by Decision No. 13563-(05/85), October 5, 2005* ### Prolonged use, Ex Post Assessments (EPAs), and Longer-Term Program Engagement (LTPE) - Definition of prolonged use / LTPE: - A country will be considered a prolonged user when it has spent 7 or more of the last 10 years under upper credit tranche stand-by or extended arrangements including precautionary arrangements, or a mix of GRA and PRGF or ESAF resources. - For countries using the Fund’s concessional resources, the assessment process is triggered when a country has gone through two or more multi-year arrangements under the PRGF or ESAF (through completion, expiration without making all scheduled purchases, or cancellation). - Treatment of precautionary arrangements: - Precautionary arrangements that remain undrawn would not count toward LTPE, parallel to the treatment of members using the Policy Support Instrument. - If the member draws upon a precautionary arrangement, the period during which the arrangement is effective would count toward LTPE. - Purpose and expected content of EPAs: - EPAs are intended to strengthen due diligence for members identified as having long-term program relationships with the Fund. - An EPA will include analysis of economic problems, a critical review of progress during Fund-supported programs, and a forward-looking assessment with lessons learned and a strategy for future Fund engagement; where appropriate, an explicit “exit strategy.” - The staff report for the final review under any Fund-supported program will include a concise description of the degree to which the program has achieved its initial objectives. - Findings from the 32 EPA reports reviewed: - In most cases, EPAs found program design was consistent with members’ macroeconomic and structural challenges and that Fund involvement had not undermined institutional development. - Several EPAs were critical of the design of structural reforms, in terms of both the scope and the number of structural conditions. - EPAs highlighted the need to streamline conditionality and focus on measures critical to program success; issues of ownership and Bank-Fund collaboration remain important. - Country authorities, with a few exceptions, thought EPAs described past policies and programs accurately and provided valuable lessons. - Recommendations and operational modifications for EPAs: - Enhance selectivity and focus on a few critical issues to improve analytical content and shorten reports. - Include systematic discussions of reasons for program success or failure and potential exit strategies. - Expand outreach to donors, outside experts, and country authorities, allowing on a need basis the EPA-team leader to visit the country before finalization and, in selected cases, to hire an external consultant, while safeguarding confidentiality. - Prepare EPAs as stand-alone documents by an interdepartmental team led by a mission chief from a department other than the home area department, while being mindful of cost containment; alternatively, allow discretion to merge EPAs with Article IV or program review reports in cases where programs have largely achieved objectives. - Introduce an interval of at least five years between EPAs for the same country, with this suggested as a benchmark rather than a strict rule. - Consider reducing EPA team size as a cost-saving measure. - Staff follow-up: - The staff will prepare revised guidelines for implementation of the policy on longer-term program engagement and circulate them to the Board in due course. ### Credit tranche and stand-by arrangement guidelines (selected points) - Access to Fund resources in the credit tranches will normally be provided through a stand-by arrangement. - A representation of need by a member for a purchase requested under a stand-by arrangement will not be challenged by the Fund. - The normal period for a stand-by arrangement will range from 12 to 18 months. If a longer period is requested by a member and is considered necessary by the Fund to enable the member to implement its adjustment program successfully, the stand-by arrangement may extend beyond this range, up to a maximum of three years. - Phasing and performance clauses will be omitted in stand-by arrangements within the first credit tranche. They will be included in all other stand-by arrangements but will apply only to purchases outside the first credit tranche. - For an arrangement within the first credit tranche, a member may be required to describe the general policies it plans to pursue, including its intention to avoid introducing or intensifying exchange and trade restrictions. *The Acting Chair’s Summing Up—Conclusions of the Task Force on Prolonged Use of Fund Resources, Executive Board Meeting 03/28, March 24, 2003; The Acting Chair’s Summing Up—Review of Ex Post Assessments and Issues Related to the Policy on Longer-Term Program Engagement, Executive Board Meeting 06/46, May 15, 2006; Decision No. 12865-(02/102), September 25, 2002* ### 2000. They generally agreed that this experience is broadly positive, ### _31stissue - 2000. They generally agreed that this experience is broadly positive, ### Review purpose and overall assessment - Central objectives: streamlining and focusing conditionality on measures critical for achieving program objectives; fostering national ownership of Fund-supported programs to enhance success and effectiveness. - Directors’ overall judgment: the experience is "broadly positive" while identifying areas for further strengthening of implementation. - Directors reaffirmed that streamlining conditionality aims to enhance program success by concentrating on conditions critical to macroeconomic objectives. ### Focus of conditionality and core areas - Increased focus on the core areas of fiscal, financial, and exchange rate policies was welcomed. - Structural conditions in the fiscal domain remain important, especially: - improving expenditure management - enhancing revenue performance - Financial sector conditions emphasized strengthened supervision, internal consistency, and measures aimed at overall strengthening of the financial system. - Structural conditionality outside core areas may remain necessary when justified by magnitude of impact on fiscal and external balances (examples: privatization, governance, public enterprise and civil service reform). ### Balancing parsimony and coverage - Some Directors saw scope for further streamlining, especially in non-core areas; others preferred caution to ensure important measures are covered. - Inclusion of structural conditionality beyond core areas should be clearly explained and justified in relation to program goals. - The determination of whether an action is critical to program success is inherently a matter of judgment; staff reports should provide enough information to facilitate such judgments. ### PRGF arrangements and growth-related conditionality - In PRGF arrangements, structural measures oriented primarily toward achieving growth and poverty reduction objectives can be considered macro-critical. - Need for more work on defining and promoting sources of growth in PRGF countries, including scope for stronger emphasis on financial sector development. - Some Directors considered growth-enhancing policies may be macro-critical in restoring medium-term balance-of-payments viability and debt sustainability in stand-by and extended arrangements. - In cases of sudden and massive private capital outflows, a critical mass of frontloaded reform may be required to restore market confidence; conditionality should focus on reforms that tackle the root of the crisis and avoid overloading programs. ### Variation across countries and uniformity of treatment - Country-specific circumstances (need to establish a track record, frontloaded reforms, administrative capacity limits) have been the main reason for variation in conditionality scope and coverage. - Most Directors found the use of modalities broadly satisfactory but noted that inclusion/exclusion of conditions was not always clearly linked to country circumstances. - Some Directors suggested narrowing variation among country experiences to ensure greater uniformity, while recognizing the difficulty of more specific guidelines. - A numerical gauge of conditionality application was seen as less important than ensuring the right conditionality in individual cases. ### Collaboration with the World Bank and other agencies - Further strengthening and clarification of collaboration with the World Bank is key to effective streamlining of conditionality. - Fund-supported programs should be consistent with an overall country-led framework, often requiring Bank and other agency support. - Directors stressed careful documentation in staff reports on: - division of labor between the Fund and the Bank - structure and timing of Bank conditionality - progress achieved - implications for the fiscal situation and the program - Concern expressed that Fund streamlining might not reduce overall conditionality across all international financial institutions; careful assessment and monitoring requested. ### Next steps and guidelines development - Directors agreed to consolidate progress and next consider development of new guidelines on conditionality, building on the Interim Guidance Note of September 2000 and experience since then. - Objectives for new guidelines: enable parsimonious and consistent application of conditionality, based on national ownership, to enhance program effectiveness. - Directors looked forward to periodic reviews of evolving experience to ensure consistent implementation and contribution to program effectiveness. ### Operational guidelines on phasing of performance criteria and purchases (key points) - 1. Limit lag between beginning of annual program period and Executive Board discussion of supporting annual arrangement to a minimum to facilitate quarterly performance criteria and purchases throughout the period. - 2. Fund expectation: members seeking support should limit reporting lags to two months; in exceptional cases exceeding two months, staff will explain reasons and steps to reduce lags. - 3. Limit period between management approval of an adjustment program and Board discussion of supporting arrangement to no more than three months. If exceeded, staff to confirm program remains appropriate; otherwise renegotiate. - 4. There would be no fewer than four purchases during a 12-month period of the arrangement, five being preferred. As a general rule: - the date of the second purchase would not be earlier than two months from the initial purchase on approval; - the date of the last purchase would not be earlier than two months before the end of the arrangement. - Exception: initial approval in principle with final approval up to 30 days later. - 5. Test dates for performance criteria to be distributed as evenly as possible. Normally: - date of the first performance test not earlier than arrangement effective date; - date of the last performance test not earlier than three months from the end of the arrangement. - 6. Performance criteria should initially cover as much of the 12-month period as possible. Reasonable expectation: performance criteria initially governing purchases over at least six months of the arrangement (normally at least two sets of performance criteria). Staff report to explain if minimum not met. - 7. Indicative targets to be included at the outset for parts of the 12-month arrangement where performance criteria are yet to be established, with provision for review to replace indicative targets with performance criteria; indicative targets also for the last month of the arrangement. - 8. For segments within a multiyear arrangement, normally performance criteria set to the end of each underlying annual program period. The purchase after the end of the underlying annual program contingent on: - understandings on next year’s program; and - observance of performance criteria for the end of the preceding period or those established in the new program; or - a waiver approved by the Board in case of nonobservance. - 9. In extended arrangements, performance criteria and purchases could be phased at semiannual intervals, provided appropriate monitoring (normally quarterly benchmarks) is ensured. - Decision No. 7925-(85/38), March 8, 1985, as amended by Decision No. 8887-(88/89), June 6, 1988 ### Guidelines on performance criteria with respect to external debt - Executive Board approved Chairman’s summing up on external debt management policies. - Decision No. 6230-(79/140), August 3, 1979, as amended by Decision Nos. 11096-(95/100), October 25, 1995, and 12274-(00/85), August 24, 2000 - When the size and rate of growth of external indebtedness is relevant to program design, a performance criterion relating to official and officially guaranteed foreign debt will be included in upper credit tranche arrangements. - Coverage of the criterion: - includes all forms of debt constituting current (not contingent) liabilities created under contractual arrangements (loans, suppliers’ credits, leases) that require future payments in assets or services; - includes foreign debts with maturities of over one year; - in appropriate cases, may include other financial instruments with potential to create substantial external liabilities for governments. - Formulation: - usually in terms of debts contracted or authorized; - in appropriate cases may be in terms of net disbursements or net changes in the stock of external official and officially guaranteed debt. - Flexibility to avoid discouraging concessional capital flows by excluding debts defined as concessional based on currency-specific discount rates using OECD commercial interest reference rates and including a grant element of at least 35 percent, provided a higher grant element may be required in exceptional cases. - Normally the performance criterion will include a subceiling on foreign debt with maturities of over one year and up to five years; additional subceilings may be included on debt with specified maturities beyond five years or with specified grant element lower than 35 percent. - Application guided by general conditionality guidelines (Decision No. 6056-(79/38)), especially ensuring regard to domestic social and political objectives, economic priorities, and member circumstances; limiting performance criteria to those necessary to evaluate program implementation; and ensuring coordination to maintain nondiscriminatory treatment of members. *Source: Selected Decisions and Selected Documents (excerpts).* ### 2. In analyzing the amount and terms of new debt that would be ### _31stissue - 2. In analyzing the amount and terms of new debt that would be ### External debt assessment and performance criteria - When analyzing the amount and terms of new debt appropriate over the medium term, staff will take into account prospective developments in the member’s external payments situation and the profile of its external indebtedness. - Staff will ensure consistency between external debt management policies and domestic financial policies; where external debt per se is not a matter for concern but adjustment programs aim to reduce excess demand and restore overall public sector balance, the credit ceiling for the public sector will cover both domestic and foreign financing of the overall public sector deficit. - Normally the performance criterion will relate to official and officially guaranteed foreign debt and will include: - official entities for which the government is financially responsible; and - private debt for which official guarantees have been extended and which therefore constitute a contingent liability of the government. - If a member’s external debt management policy covers private sector debt without official guarantee and there is an established regulatory machinery to control such debt, the performance criterion on foreign debt should be adapted accordingly. - Staff are encouraged to include short-term debt of a maturity of less than one year in performance criteria relating to foreign debt, while allowing flexibility for differing institutional reporting procedures and statistical difficulties. ### Concessional debt treatment and discount rate methodology - The guideline provides for excluding from the coverage of performance criteria those debts defined as concessional on the basis of currency-specific discount rates based on the OECD commercial interest reference rates (CIRRs) and including a specified grant element. - Staff will take into account credits associated with concessional debts when discussing appropriate amounts of debt. - For implementation of the Guidelines on Performance Criteria with Respect to Foreign Borrowing, the Executive Board endorses the revised method of calculating the discount rate described in SM/96/86 (4/8/96), Decision No. 11248-(96/38), April 15, 1996. - Under arrangements approved from May 1, 1996 onwards: - the average of CIRRs over the last ten years should be used as the discount rate for assessing the concessionality of loans of a maturity of at least 15 years; and - for loans with shorter maturities, the average CIRRs of the preceding six-month period (February 15 to August 14 or August 15 to February 14) should be used in assessing concessionality. - To both the ten-year and six-month averages, the same margins for differing repayment periods as those used by the OECD continue to be added: - 0.75 percent for repayment periods of less than 15 years; - 1 percent for 15 to 19 years; - 1.15 percent for 20 to 29 years; and - 1.25 percent for 30 years or more. - The staff proposes this as an interim methodology to minimize frequent changes in assessments of concessionality and to ensure longer-term multilateral and bilateral loans are not subject to borrowing limits in a way not intended by the Board. - Note: Where a CIRR is not available for a given currency or time period, a rate based on five-year government bond yields in the currency concerned is used as a proxy in Table 1 (not included in this volume). - It is intended to use the 10-year averages at end-1995 throughout 1996. ### Definition of debt for performance criteria - The term “debt” means a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, which requires the obligor to make one or more payments in the form of assets (including currency) or services at some future point(s) in time; these payments will discharge principal and/or interest liabilities incurred under the contract. - Primary forms of debt include: - (i) loans: advances of money by the lender to the obligor made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets equivalent to fully collateralized loans (such as repurchase agreements and official swap arrangements); - (ii) suppliers’ credits: contracts where the supplier permits the obligor to defer payments until after delivery of goods or services; and - (iii) leases: arrangements under which property is provided for use for one or more specified period(s) usually shorter than the total expected service life of the property while the lessor retains title. For the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding payments that cover operation, repair, or maintenance. - Under this definition: - arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt; and - failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt. - Financial instruments not covered under the definition but having the potential to create substantial external liabilities for governments will be included in the performance criterion where appropriate and will be explicitly specified. ### Extended Fund Facility (EFF) — purpose and main terms - Purpose: - Establish a facility to give medium-term assistance to members in special circumstances of balance of payments difficulty (noted as likely beneficial for developing countries). - Apply to economies suffering serious payments imbalance related to structural maladjustments in production and trade and to economies characterized by slow growth and an inherently weak balance of payments position. - Preconditions for a request: - A member contemplating a request should consult the Managing Director before making the request. - The Fund will meet a request for an extended arrangement if satisfied that: - (a) the solution will require a longer period than existing tranche policies provide; and - (b) the member has presented: - (i) a program setting forth objectives and policies for the whole period of the extended arrangement adequate for the solution; and - (ii) a detailed statement of the policies and measures for the first 12 months constituting an initiation of the program, considered substantial in the member’s circumstances. - For each subsequent 12-month period, the member will present a detailed statement of progress and policies and measures to further realization of program objectives, with modifications as necessary. - Duration, amounts, and performance clauses: - Extended arrangements will be for periods not exceeding three years; where appropriate and at the member’s request, an existing arrangement may be lengthened up to four years. - Each arrangement will prescribe the total amount and the annual installments within the total available according to the arrangement’s terms. - 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 implementation of necessary policies. - Repurchases and schedules: - A member with an extended arrangement will make repurchases corresponding to purchases outstanding under the arrangement as soon as its balance of payments problems have been overcome and, in any event, within an outside range of four to ten years after each purchase. - Not later than four years after the first purchase the member will propose a schedule of repurchases for all purchases outstanding; normally schedules will provide for repurchases of each purchase in 12 equal six-monthly installments. - Charges and related policies: - 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. - Except as otherwise provided, extended arrangements shall be subject to the Fund’s decisions and policies on stand-by arrangements. - Review threshold and timing: - The Fund will review this decision 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. - Repurchase expectations for purchases after November 28, 2000: - In addition to paragraph 5 repurchases, a member will be expected to repurchase an amount of the Fund’s holdings of its currency resulting from purchases under this decision made after November 28, 2000 equal to, and at the time of, the six-monthly installments of repurchases falling due during the period beginning four years and ending seven years after the date of the purchase, subject to Fund consideration of the member’s external position and possible amendment of the schedule. - The Fund shall not approve, and the Managing Director shall not recommend for approval, any request for the use of the Fund’s general resources by a member that is failing to meet a repurchase expectation under paragraph 10(a). - Provision shall be made in each stand-by and extended arrangement for suspension of further purchases under the arrangement whenever a member fails to meet a repurchase expectation under paragraph 10(a). *Italicized source attribution: Selected Decisions and Selected Documents (excerpt) from the referenced IMF PDF content unit.* ### 11. The Fund shall review the time-based repurchase expectation ### 11. The Fund shall review the time-based repurchase expectation ### Review requirement - The Fund shall review the time-based repurchase expectation scheme set out in paragraph 10(a) of Decision No. 4377-(74/114), adopted September 13, 1974, no later than November 30, 2005. - Decision No. 4377-(74/114), September 13, 1974, as amended by Decision Nos.: - 6339-(79/179), December 3, 1979, - 6830-(81/65), April 22, 1981, effective May 1, 1981, - 8885-(88/89), June 6, 1988, - 10182-(92/132), November 3, 1992, - 10186-(92/132), November 3, 1992, and - 12343-(00/117), November 28, 2000. ### Stand-by and extended arrangements — approval of standard forms - The Executive Board approves the standard forms of stand-by and extended arrangements contained in Attachments A and B to SM/93/207 (9/3/93), and the standard clauses contained in Attachment C to SM/93/207, to be added to those arrangements in cases of requests for: - (i) a decision on external contingency financing under the compensatory and contingency financing facility in association with an arrangement, or - (ii) set-asides in support of operations involving debt reduction. - Decision No. 10464-(93/130), September 13, 1993. ### Attachment A — Form of Stand-By Arrangement (key provisions) - Letter of request to the Fund by (Minister of Finance and/or Governor of Central Bank) setting forth: - (a) objectives and policies for the period of the stand-by arrangement; - (b) policies and measures for the [first year] of the stand-by arrangement; - (c) understandings regarding [a] review[s] of progress and policies for the remaining period. - Financing and purchase rights: - 1. [For a period of _______ years from ______________] [For the period from ____________ to ________________] (member) will have the right to make purchases from the Fund in an amount equivalent to SDR _________ million, subject to paragraphs 2, 3, 4, and 5 below, without further review by the Fund. - 2(a). Purchases shall not, without the consent of the Fund, exceed the equivalent of SDR _______ million, provided that purchases shall not exceed the equivalent of SDR _______ million until ____________, and the equivalent of SDR _______ million until ____________. - 2(b). The right to make purchases during the remaining period shall be subject to such phasing as shall be determined. - 2(c). None of the limits in (a) or (b) shall apply to a purchase that would not increase the Fund’s holdings of (member’s) currency subject to repurchase beyond 25 percent of quota. - Performance criteria and limits on purchases: - 3. (Member) will not make purchases that would increase the Fund’s holdings of (member’s) currency subject to repurchase beyond 25 percent of quota: - (a) during any period in which data at the end of the preceding period indicate that specified performance criteria in the attached [letter] [memorandum] is not observed; examples include limits on net international reserves, net domestic borrowing of the public sector, net domestic assets of the Central Bank, or other quantitative or structural performance criteria monitored at the end of the preceding period. - (b) [if at any time during the period of the arrangement] [while] specified continuously monitored criteria (e.g., limits on contracting and guaranteeing external public debt with original maturity of ___, or limits on external payments arrears) are not observed. - (c) after _______ and _______, until the respective review[s] contemplated in paragraph ___ of the attached [letter] [memorandum] is [are] completed. - (d) if at any time the member: - (i) imposes or intensifies restrictions on the making of payments and transfers for current international transactions, or - (ii) introduces or modifies multiple currency practices; or - (iii) concludes bilateral payments agreements inconsistent with Article VIII, or - (iv) imposes or intensifies import restrictions for balance of payments reasons. - When prevented from purchasing because of paragraph 3, purchases will be resumed only after consultation and understandings reached between the Fund and (member). - Ineligibility, arrears, and other suspensions: - 4. (Member) will not make purchases during any period in which (member): - (i) has an overdue financial obligation to the Fund or is failing to meet a repurchase expectation in respect of specified Decisions (Decision No. 7842-(84/165), Decision No. 9331-(89/167), paragraphs 17 and 31 of Decision No. 8955-(88/126), Decision No. 11627-(97/123) SRF, paragraph 1(b) of Decision No. 5703-(78/39) or paragraph 10(a) of Decision No. 4377-(74/114)); or - (ii) is failing to meet a repayment obligation to the PRGF Trust established by Decision No. 8759-(87/176) PRGF, or a repayment expectation to that Trust pursuant to Appendix I to the PRGF Trust Instrument. - 5. (Member’s) right to engage in transactions covered by the arrangement can be suspended only with respect to requests received after (a) a formal ineligibility, or (b) an Executive Board decision to suspend transactions or consider a proposal; purchases resume only after consultation and understandings reached. - Operational and reporting provisions: - 6. Purchases shall be made in currencies of other members selected in accordance with Fund policies and procedures, unless the Fund agrees to provide SDRs at the time of purchase at the request of (member). - 7. (Member) shall pay a charge for the stand-by arrangement in accordance with Fund decisions. - 8(a). (Member) shall repurchase the amount of its currency resulting from a purchase in accordance with the Articles of Agreement and Fund decisions, including repurchase as (member’s) balance of payments and reserve position improves. - 8(b). Any reductions in (member’s) currency held by the Fund shall reduce the amounts subject to repurchase in accordance with Fund principles at the time of the reduction. - 9. During the arrangement period (member) shall remain in close consultation with the Fund and provide requested information through reports at intervals or dates requested by the Fund. - 10. In accordance with paragraph ____ of the attached letter, (member) will consult the Fund on adoption of any measures appropriate at the initiative of the government or when the Managing Director requests consultation because criteria in paragraph 3 have not been observed or consultation is otherwise desirable. After the arrangement period, while (member) has outstanding purchases in the upper credit tranches, the government will consult with the Fund from time to time at the initiative of the government or at the request of the Managing Director concerning (member’s) balance of payments policies. ### Attachment B — Form of Extended Arrangement (key provisions) - Letter of request by (Minister of Finance and/or Governor of Central Bank) setting forth: - (a) objectives and policies for the period of the extended arrangement; - (b) policies and measures for the first year of the extended arrangement; - (c) understandings regarding reviews of progress for the second and third years. - Financing and purchase rights: - 1. For a period of [three years] from ____________ (member) will have the right to make purchases from the Fund in an amount equivalent to SDR _________ million, subject to paragraphs 2, 3, 4, and 5 below, without further review by the Fund. - 2(a). Purchases shall not, without Fund consent, exceed the equivalent of SDR_____ million until ____________, the equivalent of SDR______ million until ____________, the equivalent of SDR______ million until ____________, and the equivalent of SDR______ million until ____________. - 2(b). Until (end of second year) purchases shall not, without Fund consent, exceed the equivalent of SDR __________ million. - 2(c). Right to make purchases during the second and third years shall be subject to phasing as determined. - Performance criteria and limits on purchases: - 3. (Member) will not make purchases under the extended arrangement: - (a) during any period in which data at the end of the preceding period indicate that specified performance criteria in the attached [letter] [memorandum] is not observed (examples similar to stand-by arrangement). - (b) [if at any time during the period] specified continuously monitored criteria (e.g., limits on contracting or guaranteeing external public debt with original maturity of ____, or limits on external payments arrears) are not observed. - (c) after ____ and ____, until the review[s] contemplated in paragraph ___ of the attached [letter] [memorandum] is [are] completed. - (d) if at any time the member: - (i) imposes or intensifies restrictions on payments and transfers for current international transactions, or - (ii) introduces or modifies multiple currency practices; or - (iii) concludes bilateral payments agreements inconsistent with Article VIII, or - (iv) imposes or intensifies import restrictions for balance of payments reasons. - When prevented from purchasing because of paragraph 3, purchases will be resumed only after consultation and understandings reached between the Fund and (member). - Ineligibility, arrears, and other suspensions: - 4. (Member) will not make purchases during any period in which (member) has an overdue financial obligation to the Fund or is failing to meet a repurchase expectation pursuant to specified Decisions (same list as under stand-by), or is failing to meet a repayment obligation to the PRGF Trust (Decision No. 8759-(87/176) PRGF) or repayment expectation pursuant to Appendix I to the PRGF Trust Instrument. - 5. (Member’s) right to engage in transactions covered by the extended arrangement can be suspended only with respect to requests received after (a) a formal ineligibility, or (b) an Executive Board decision to suspend transactions or consider a proposal; purchases resume only after consultation and understandings reached. - Operational and reporting provisions: - 6. Purchases shall be made in currencies of other members selected in accordance with Fund policies and procedures, unless the Fund agrees to provide SDRs at the time of purchase at the request of (member). - 7. (Member) shall pay a charge for the extended arrangement in accordance with Fund decisions. - 8(a). (Member) shall repurchase currency resulting from a purchase in accordance with the Articles of Agreement and Fund decisions, including repurchase as (member’s) balance of payments and reserve position improves. - 8(b). Any reductions in (member’s) currency held by the Fund shall reduce the amounts subject to repurchase in accordance with Fund principles at the time of the reduction. - 9. During the period of the extended arrangement (member) shall remain in close consultation with the Fund and provide requested information through reports at intervals or dates requested by the Fund. - 10. In accordance with paragraph ___ of the attached letter, (member) will consult with the Fund on adoption of any measures appropriate at the initiative of the government or whenever the Managing Director requests consultation because criteria in paragraph 3 have not been observed or consultation is otherwise desirable. After the arrangement period and while (member) has outstanding purchases under this arrangement, the government will consult with the Fund from time to time at the initiative of the government or at the request of the Managing Director concerning (member’s) balance of payments policies. ### Completion of reviews and lapse of time procedures - The Fund shall not complete a review under a stand-by or extended arrangement unless and until all other conditions for the availability of an associated purchase have been met or waived (EBS/00/172, 8/18/00). - Decision No. 12278-(00/86), August 25, 2000. - The Executive Board approves the proposed procedures with regard to lapse of time completion of reviews under Fund arrangements, as set forth in EBD/96/160, Supplement 1. - Decision No. 11515-(97/59), June 9, 1997. *Source: _31stissue - 11. The Fund shall review the time-based repurchase expectation* ### 1. Use of the lapse of time procedure to complete program re- ### _31stissue - 1. Use of the lapse of time procedure to complete program re- ### Lapse of time procedure for completing program reviews — eligibility and proposers - Use of the lapse of time procedure to complete program reviews under Fund arrangements may be proposed by: - the Chairman, - the Executive Director for the country concerned, or, with that Director’s agreement, one or more other Executive Directors. - A proposal must state the reasons why lapse of time consideration seemed warranted. - Lapse of time consideration should not be proposed unless: - (i) the staff has determined that all the performance criteria have been met, or where the staff has found that the requested waivers or modifications were minor so that the thrust of the policies and objectives supported by an arrangement could be maintained; and - (ii) there did not appear to be any general policy issues requiring Board discussion. ### Timing and procedural deadlines for proposals and objections - Proposals by the Chairman for lapse of time approval are made when a staff paper is circulated to the Executive Board. - Proposals by an Executive Director(s) should be made as soon as possible after the paper’s circulation. - General timing rule: such a proposal should in general be made at least five business days prior to the scheduled Board date. - A proposal would not be entertained if made within the four business days prior to the scheduled Board date. - An objection to a proposal for lapse of time approval must be made at least two business days preceding the scheduled Board date. - The objection of any one Director is sufficient to hold the Board discussion as scheduled. - No reason for the objection needs to be stated. - If an objection is received, the discussion will take place on the originally scheduled Board date. - If no objection is received, the proposed decision(s) on the program review would be approved with effect on the date of the originally scheduled Board discussion. - A copy of the approved decision(s) will be sent by the Secretary to the authorities of the country concerned. - Note: under current practice, when a matter is approved under the lapse of time procedure, unless otherwise specified, the effective date of the decision is the same day as the close of the lapse of time period. Consistent with the procedures contained in SM/96/214, Supplement 1, the lapse of time period would close two business days prior to the scheduled Board date and the effective date of decision would be the originally scheduled Board date. ### Circulation of reasons, responses, and limitations - The reasons given by Director(s) for proposing the use of the lapse of time procedure, any responses of Directors to that proposal, and any comments or qualifications expressed by Directors when agreeing to the lapse of time proposal: - will be circulated to all Directors; - will not be made part of the formal record of Board proceedings. - When program reviews are combined with Article IV consultations, it is expected that the lapse of time procedure would be resorted to only rarely, even where the program review itself could be completed on a lapse of time basis. - These procedures will be reviewed together with the review of lapse of time procedures for Article IV consultations. ### Emergency Assistance — conversion of emergency assistance into a special policy (summary of scope and treatment) - The Fund will be prepared to provide financial assistance to members afflicted by natural disasters or in post-conflict situations. - This assistance will be provided in accordance with the provisions of this decision and the guidelines on emergency assistance for natural disasters and post-conflict situations set out in: - pages 17 and 18 of EBM/82/16 (2/10/82); - Summing Up by the Chairman—Fund Involvement in Post Conflict Countries—Executive Board Meeting 95/82, September 6, 1995 (BUFF/95/98 (9/19/95)); - Summing Up by the Acting Chairman—Fund Assistance to Post-Conflict Countries—Executive Board Meeting 99/38, April 5, 1999 (BUFF/99/48 (4/9/99)). ### Financial and operational exclusions for emergency purchases - Purchases under this decision and holdings resulting from such purchases shall be excluded for the purposes of the definition of reserve tranche purchase pursuant to Article XXX(c). - Except for the purpose of determining the level of conditionality applied to purchases in the credit tranches, the Fund’s holdings of a member’s currency resulting from purchases under this decision shall be considered separate from the Fund’s holdings of the same currency resulting from purchases under any other policy on the use of the Fund’s general resources. *Selected decisions and selected documents — excerpt from the provided content unit* ### 4. In order to carry out the purposes of this decision, the Fund ### 4. In order to carry out the purposes of this decision, the Fund ### Waiver of 200 percent of quota limitation - The Fund will be prepared to grant a waiver of the limitation of 200 percent of quota in Article V, Section 3(b)(iii), whenever necessary to permit purchases under this decision or to permit other purchases that would raise the Fund’s holdings of the purchasing member’s currency above that limitation because of purchases outstanding under this decision. - Decision No. 12341-(00/117), November 28, 2000 ### Emergency assistance — natural disasters (Concluding remarks and Section III guidelines) - Management and staff should have discretion and judgment to determine what constitutes a disaster serious enough to merit emergency assistance; such judgments should consider: - the gravity of the situation, - the impact on the balance of payments, - the type of help the Fund can offer. - Flexible practices are preferred over rigid guidelines; the Board will decide on each particular case. - Broad guidelines for emergency assistance to members afflicted by natural disasters: - (a) Usual instruments: purchases under the compensatory financing facility (CFF), stand-by and extended arrangements. Where immediate financing needs from a major disaster would seriously deplete external reserves, emergency assistance in the form of quick outright purchases would be provided under a flexible application of tranche policies. - (b) Target and limits of emergency assistance: - Emergency assistance is designed to provide only limited foreign exchange required for immediate relief. - Historical experience: in half of past cases, outright purchases amounted to 25 percent of quota; in the remaining half, purchases ranged from 42–50 percent of quotas. - On the basis of experience, resources would continue to be limited to the equivalent of one credit tranche, though larger amounts could be made exceptionally available. - Additional financing needs should be provided under the CFF and within the framework of stand-by and extended arrangements. - (c) Treatment with subsequent CFF requests: - The amount of an emergency purchase would be taken into account when determining the size of additional support under a subsequent stand-by or extended arrangement. - To avoid double compensation if a member requests a CFF purchase after an emergency purchase, the part of export shortfall already compensated by the emergency purchase would be determined at the time of the CFF request, deducted from the calculated shortfall, and an equivalent amount of the emergency purchase reclassified as a CFF purchase. - (d) Timing and policy safeguards: - Timing is crucial; quick Fund assistance can provide relief and encourage other financing. - A flexible and pragmatic approach will be followed considering country circumstances, nature and extent of the disaster, and the need to safeguard the revolving character of Fund resources. - (e) Conditional cooperation: - For emergency assistance requests, the member must describe general policies planned, including intention to avoid introducing or intensifying exchange and trade restrictions. - The request will be granted when the Fund is satisfied the member will cooperate with the Fund toward finding appropriate balance of payments solutions. - Member cooperation in designing and adopting, when appropriate and as circumstances permit, necessary adjustment measures would be an element in assessing cooperation associated with CFF purchases in the upper tranche; assessments remain pragmatic and case-by-case. ### Fund involvement in post-conflict countries — Summing Up (Executive Board Meeting 95/82, September 6, 1995) - Directors endorsed staff views on coordination among Bretton Woods institutions, regional development banks, the UN, and bilateral donors/creditors; agreed to expand scope of emergency assistance to include carefully defined post-conflict situations but urged caution about the Fund’s limited role. - The Fund should provide early technical assistance and policy advice; financial support can be provided at a relatively early stage, subject to adequate safeguards. - Operational criteria for post-conflict emergency assistance (endorsed by most Directors): - disrupted institutional/administrative capacity such that a comprehensive Fund-supported program is not yet possible, but with sufficient planning/implementation capacity and demonstrated authorities’ commitment; - urgent balance of payments need to rebuild reserves and meet essential external payments; - a role for the Fund in catalyzing support from other official sources; - Fund support to be part of a concerted international effort. - Access and tranching: - Access should generally be limited to one credit tranche. - Existing emergency assistance guidelines provide flexibility to handle exceptional needs. - Tranching of total resources in some instances to ensure effective use and incentivize development of a comprehensive economic program. - Proposed Fund financial assistance for post-conflict countries should generally be available only if the member intends to move within a relatively short time frame to an upper credit tranche stand-by or extended arrangement, or to an ESAF arrangement. - For ESAF-eligible members: - Concessional resources would be appropriate. - Majority favored seeking interest subsidies from bilateral donors on a case-by-case basis when Fund resources are provided under the emergency policy; some expressed caution. - Conditionality and program design: - Assistance and conditionality should be tailored to country circumstances and address rebuilding administrative/institutional capacity. - Conditions would include a statement of economic policies; a quantified macroeconomic framework where possible; and the authorities’ intention to move as soon as possible to an upper credit tranche stand-by/extended arrangement or ESAF arrangement. - Response should include a comprehensive technical assistance program with institution-building and provision for financing. ### Enhancing emergency/post-conflict assistance (Summing Up, Executive Board Meeting 99/38, April 5, 1999) - Directors reaffirmed the post-conflict emergency assistance policy as a sound basis, while calling for enhanced assistance and stronger international community efforts to maintain peace and support transitions. - Concessionality and financing approaches: - Financial assistance on concessional interest rates preferred for low-income post-conflict countries rather than GRA charges. - Under any GRA-based approach, essential to seek interest subsidies from bilateral donors on a case-by-case basis; endorsed idea of an administered account at the Fund to mobilize subsidies. - Insufficient support for establishing a new special facility within the GRA, though staff asked to continue examining this, including using income from SRF purchases to help subsidize GRA charges. - Support for early replacement of GRA resources by ESAF resources when the member can obtain an ESAF arrangement; this would address concessionality and maturity issues but should not weaken ESAF conditionality or ration resources. - Access and program length: - Most countries using emergency post-conflict assistance have been able to move to an upper credit tranche arrangement within about a year, but this may not always be possible. - Where rebuilding institutions and policy implementation is slow and a member cannot implement a Fund arrangement after about a year under emergency assistance, additional access of up to another 25 percent of quota in the form of outright purchases could be provided. - The additional 25 percent of quota would normally be tranched. - A few Directors preferred smaller and/or more back-loaded disbursements; a few preferred a larger initial amount. - Each purchase requires Board approval and remains subject to satisfactory progress in rebuilding capacity and macroeconomic stability. - Continued emphasis on the Fund’s catalytic role as part of a concerted international effort, including technical support from other agencies. - Arrears issues for post-conflict countries: - Post-conflict countries with large protracted arrears pose particular difficulties relative to the Fund’s arrears strategy and can raise moral hazard and preferred creditor status concerns. - Directors noted attractive features in World Bank proposals for post-conflict assistance for heavily indebted poor countries in arrears to multilaterals, but emphasized Fund considerations: uniformity of treatment, pre-arrears payments to the Fund, track record length prior to arrears clearance, and financing procedures for arrears clearance. - Directors supported considering relaxation of the Fund’s calls for payments as a test of cooperation in the pre-arrears clearance stage if the member is judged to be cooperating on policies and other multilaterals take comparable action; judgments to be case-by-case and account for debt servicing capacity. - A solid track record remains important; a drastic shortening or elimination of the track record was generally seen as undesirable. - Arrears clearance: continue case-by-case approach, allowing sequential clearance of arrears to multilaterals and development of arrears clearance plans in coordination with other creditors. - In absence of concessional financing for arrears clearance or rights encashment, arrears could be cleared through a bridge to a new GRA arrangement. - Directors reconfirmed views against the Fund matching Paris Club rescheduling as inconsistent with Fund monetary character, but recognized exceptional use of Article provisions (postponement of repurchases and/or payment of GRA charges in domestic currency) may be considered as countries near arrears clearance operations. - Arrears clearance alone will not ensure sustainable debt service positions; following clearance and a satisfactory track record, countries’ debt to the Fund and other creditors would remain subject to the HIPC Initiative; mobilization of concessional resources for the ESAF and HIPC Initiative is critical. - Follow-up: - Staff to return to the Board with proposals for policy modifications and proposed decisions to give effect to agreed enhancements; a joint Bank-Fund report will be prepared for the Interim and Development Committees. ### Enhancements to Emergency Post-Conflict Assistance (EPCA) — Acting Chairman’s summing up (04/32, March 31, 2004) - Directors welcomed proposed changes for EPCA to allow: - a longer duration for a member emerging from conflict to build capacity with EPCA support prior to moving to a Fund-supported program; - more frequent assessments of the member country’s policy performance. - Steps suggested to achieve balance: - Amending 1999 policy wording to indicate a second tranche of 25 percent of quota could be made available when “the member is not in a position to implement a Fund arrangement after about a year or more under a program supported by emergency assistance” (text quoted exactly). - Extending length of EPCA-supported programs in total to as long as three years with as much as 50 percent of quota (although no more than 25 percent of quota per year). Where rebuilding capacity takes long, there could be a stronger presumption that access to both first and second phases of 25 percent of quota would be divided into two (or more) purchases over a longer program period and perhaps tapered over time. - Supporting each purchase by a clear assessment of political commitment and the member’s progress in increasing its ability to implement a program and rebuilding administrative capacity. - Extending the policy on safeguards assessments to cover members making use of EPCA resources, consistent with a shift to more phased EPCA financing. - If progress under EPCA is insufficient for the member to move to a PRGF arrangement, considering in the next Article IV consultation after EPCA expiration the appropriateness of (i) a staff-monitored program, or (ii) an explicit shift to surveillance rather than program/pre-program relationship. - For those able to design and implement PRGF-supported programs, continuing consideration of early replacement of emergency post-conflict assistance by concessional resources provided under the PRGF (by adjusting access appropriately). *Italic: Excerpted from Selected Decisions and Selected Documents (pages provided).* ### conclusions set forth [below]. ### conclusions set forth [below]. Decision No. 3153-(70/95), October 26, 1970 ### Treatment of payments arrears in Fund-supported programs - Fund financial assistance to members having payments arrears should be granted on the basis of performance criteria or policies with respect to the treatment of arrears similar to the criteria or policies described for the approval of the payments restrictions. - In general, the understandings should provide for the elimination of the payments arrears within the period of the stand-by arrangement. - Such understandings should be based on the concept of a given level of payments arrears and should be reflected in the performance criteria included in stand-by arrangements in the higher credit tranches. - The letter of intent should include a statement that there would be no imposition of new restrictions or increase in the level of delayed payments to support policies designed to deal with arrears. - Where Fund financial assistance is being provided, but only through the first credit tranche, the adoption of a viable program directed toward the elimination of the payments arrears should be an important factor in considering whether the country was making reasonable efforts to redress its international financial situation. - Ed. Note: See p. 505 for paragraphs 1 through 3. ### Guidance from Executive Board meetings and staff approach - Executive Board Meeting 80/154, October 17, 1980: - Staff should continue to be guided by the approach set forth in Executive Board Decision No. 3153-(70/95). - In stabilization programs supported by use of the Fund’s resources, members are expected to take steps to reduce and eventually eliminate payments arrears relating to capital transactions as well as to payments and transfers for current international transactions. - When payments arrears are large in relation to a member’s available foreign exchange resources, it may not be possible to aim at the elimination of the arrears within the program period; special arrangements may be needed for the renegotiation of outstanding debt obligations. - Depending on the member’s circumstances and the length of the program, it may not be possible in the early stages of a program to go beyond requiring the avoidance of any further increase in arrears. ### Fund policy on lending into arrears to private creditors - Executive Board Meeting 99/64, June 14, 1999: - Modification of financing assurances and arrears policies to permit lending into arrears is an adaptation intended to reinforce the Fund’s ability to promote effective balance of payments adjustment while providing adequate safeguards. - Directors concurred that lending into sovereign arrears to private creditors should be on a case-by-case basis and only where: - (i) prompt Fund support is considered essential for the successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and is making a good faith effort to reach a collaborative agreement with its creditors. - Directors concurred that lending into nonsovereign arrears stemming from the imposition of exchange controls should be on a case-by-case basis and only where: - (i) prompt Fund support is considered essential for the successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies, is making a good faith effort to facilitate a collaborative agreement between private debtors and their creditors, and a good prospect exists for the removal of exchange controls. - All purchases by the member would remain subject to financing reviews to bring developments at an early stage to the attention of the Executive Board and to assess whether the member’s adjustment efforts are undermined by developments in creditor-debtor relations. - Policy outlined supersedes all previous policies regarding lending into arrears to private creditors. - Importance of monitoring experience with lending into arrears and keeping the policy under review. ### Clarifying the “good faith” criterion and debtor–creditor dialogue - Executive Board Meeting 02/92, September 4, 2002: - Policy pillars: timely support to limit economic dislocation and the debtor’s early, constructive dialogue with creditors to secure a reasonably timely and orderly agreement. - Greater clarity about the good faith dialogue could provide better guidance and promote a better framework for engagement in sovereign debt restructuring, while preserving flexibility. - Principles to guide the dialogue: - First, when a member judges a restructuring is necessary, it should engage in an early dialogue with its creditors, which should continue until the restructuring is complete. - Second, the member should share relevant, non-confidential information with all creditors on a timely basis, which would normally include: - an explanation of the economic problems and financial circumstances that justify a debt restructuring; - a briefing on the broad outlines of a viable economic program and its implications on the broad financial parameters shaping the envelope of resources available for restructured claims; and - the provision of a comprehensive picture of the proposed treatment of all claims on the sovereign, including those of official bilateral creditors, and the elaboration of the basis on which the debt restructuring would restore medium-term sustainability. - Third, the member should provide creditors with an early opportunity to give input on the design of restructuring strategies and the design of individual instruments. - Implementation approach: - The form of the dialogue is generally left to the debtor and its creditors, but a member in arrears would be expected to initiate a dialogue prior to agreeing on a Fund-supported program. - Where an organized negotiating framework is warranted and a representative creditor committee exists, expectation to enter good faith negotiations with this committee, including sharing of confidential information (subject to safeguards) and agreement to a standstill on litigation by creditors represented in the committee. - In less complex cases or where no representative committee forms within a reasonable period, the member should engage creditors through a less structured dialogue. - Judgments about good faith will consider factors such as case complexity, representativeness of creditor committees, and whether a reasonable period has elapsed to allow formation of a representative committee. - The Fund should retain flexibility to continue support notwithstanding lack of progress in creditor negotiations if creditors request terms inconsistent with Fund-established adjustment and financing parameters. - Decisions on an adequate macroeconomic framework remain the sole purview of the Fund. - Purchases while a member has outstanding arrears to private creditors remain subject to financing reviews. - Importance of strengthening debtor–creditor dialogue in good times. ### Safeguards, good offices, and debt management modalities - Executive Board Meeting 91/48, April 3, 1991: - No need for substantial modifications to guidelines for Fund support for debt operations; implemented in close collaboration with the World Bank. - Need to strengthen safeguards to ensure linkages to Fund arrangements in commercial bank agreements do not adversely affect member countries or the Fund. - “Condition precedent” clauses linking bank disbursements to Fund purchases should be discouraged where feasible and accepted only when necessary in concerted financing cases. - “Mandatory prepayment” clauses should be structured to avoid linking bank prepayments to early repurchases made pursuant to expectations or obligations established by the Fund. - Members should inform staff early about envisaged linkages to Fund arrangements in bank packages. - Executive Board Meeting 84/99, June 22, 1984: - Management and staff should stand ready to use their good offices to help members engaged in a dispute over an external financing obligation, but such good offices should be limited in scope and frequency and substantially technical. - The Fund must remain neutral in debt disputes; good offices are meant to bring parties together. - The Fund should act only if both parties wish the Fund to provide its good offices. *Source: conclusions set forth [below]. Decision No. 3153-(70/95), October 26, 1970; selected Executive Board meeting records and summings-up as cited in the provided content.* ### 1. The Fund has reviewed the guidelines and the limits for ac- ### The Fund has reviewed the guidelines and the limits for access by members to the Fund’s general resources in the credit tranches and under the Extended Fund Facility set forth in Decision No. 12932-(03/6), adopted January 31, 2003 ### Key provisions of Decision No. 12932-(03/6) - Subject to paragraph 2, access by members to the Fund’s general resources in the credit tranches and under the Extended Fund Facility shall be subject to: - an annual limit of 100 percent of quota, and - a cumulative limit of 300 percent of quota, net of scheduled repurchases. - These limits shall not be regarded as targets. - Within these limits, the amount of access in individual cases will vary according to the circumstances of the member in accordance with criteria established by the Executive Board. ### Paragraph 2 — exceptional access and procedural requirements - Overall access by members to the Fund’s general resources shall be subject to: - an annual limit of 100 percent of quota, and - a cumulative limit of 300 percent of quota, net of scheduled repurchases. - The Fund may approve access in excess of the limits set forth in this decision in exceptional circumstances, provided that, at a minimum, the four substantive criteria set forth in BUFF/02/159 (9/20/02) would need to be met to justify such access for members facing a capital account crisis. - The procedures set forth in BUFF/02/159 (9/20/02) and BUFF/03/28 (3/5/03) shall apply to all cases involving access in excess of the limits set forth in this decision. - Requests for such access in cases of members not facing a capital account crisis shall be justified in light of the four substantive criteria set forth in BUFF/02/159 (9/20/02). *Selected Decisions and Selected Documents — excerpt* ### 3. The guidelines for access, the access limits set forth in this ### 3. The guidelines for access, the access limits set forth in this decision, and the experience with access in amounts exceeding these limits ### Considerations Governing Amount of Access - A request for the Fund’s resources will be met only if the Fund is satisfied that: - the payments imbalance faced by the member is large in relation to its quota; - the member’s financing need from the Fund exceeds the amount available in the credit tranches or under the Extended Fund Facility; and - the problem requires a relatively long period of adjustment and a period of repurchases longer than three to five years. - Important factors in determining the amount of access: - the member’s actual or potential need for resources from the Fund, taking into account other sources of financing and the desirability of maintaining a reasonable level of reserves; access cannot exceed this need; - the need to preserve the revolving character of Fund resources (the member’s ability to service indebtedness to the Fund); - timing and extent of expected improvement in the member’s balance of payments; adjustment policies must strengthen the balance of payments sufficiently to allow repurchases without strain; - the member’s outstanding use of Fund credit and its record in using Fund resources in the past. ### Access Limits, Repurchase Periods, and Arrangement Length - Typical arrangement durations and repurchase timing: - Stand-by arrangements involving enlarged access will normally exceed one year and may extend to three years; extended arrangements will be normally three years. - The Fund has considered successive one-year stand-by arrangements within a medium-term strategy as consistent practice when the arrangement amount exceeds the credit tranches. - Repurchases and maturity specifics under the policy on enlarged access: - Repurchases of borrowed resources begin three and one half years after the purchase, whether under a stand-by or extended arrangement. - Repurchases of ordinary resources under a stand-by arrangement must be made during the regular three- to five-year period after the purchase. - Repurchases of ordinary resources under an extended arrangement must be made during a four- to ten-year period after the purchase. - Access limits in relation to quota: - Access at or close to the annual limit of 102 percent of quota is justified under certain conditions (limited outstanding use of Fund resources, comprehensive adjustment program, ability and willingness to implement). - In especially large need cases with rapid, sufficient, and durable balance of payments improvement, financing could exceed the 102 percent limit and reach up to the 125 percent limit. - The Interim Committee reaffirmed that the Fund should have flexibility in exceptional cases of going beyond the 125 percent limit. ### Differentiated Approaches by Case Type - Cases where adjustment is expected to produce rapid turnaround: - Fund support might appropriately be given in the form of an extended arrangement; substantial Fund financing can be critical to restoring confidence and reviving capital flows. - Cases requiring stretched adjustment periods beyond three years: - Fund support should normally be in the form of successive shorter-term stand-by arrangements, each within a medium-term strategy; annual Fund financing should be moderate and well below the 102 percent limit. - Cases where the Fund’s role is primarily catalytic (sustainable position in doubt, heavy debt-service burdens): - Limited-scale Fund financing is justified if the member takes appropriate steps and such support will maintain the confidence of other creditors. - The great bulk of external financing must normally come from sources other than the Fund; the Fund cannot be the residual source of finance if sufficient external financing cannot be obtained. - The amount of Fund financing must be closely related to the expected rate of improvement in the overall balance of payments, with a clear prospect of net repurchases to restore credit tranche position. ### Exceptional Access: Criteria and Experience - Four substantive criteria for exceptional access in capital account crises (as discussed by Directors): - (i) The member is experiencing exceptional balance of payments pressures on the capital account resulting in a need for Fund financing that cannot be met within the normal limits; - (ii) A rigorous and systematic analysis indicates that there is a high probability that debt will remain sustainable; - (iii) The member has good prospects of regaining access to private capital markets within the time Fund resources would be outstanding, so that the Fund’s financing would provide a bridge; and - (iv) The policy program provides a reasonably strong prospect of success, including adjustment plans and institutional and political capacity to deliver adjustment. - Practical observations from past exceptional access cases: - Some programs supported by exceptional access achieved external viability, resumed growth with limited vulnerability, and regained private market access (sometimes more slowly than expected). - In other cases, adjustment plus exceptional access did not prevent restructuring of obligations; borrowing members have remained current on repayment obligations to the Fund. - Little evidence that exceptional access in general has had large effects on moral hazard by increasing investor or country risk-taking. ### Procedural and Prudential Safeguards for Exceptional Access - Strengthened decision-making and transparency measures endorsed by the Board: - Increase the burden of proof in program documentation: thorough discussion of need and proposed level of access, rigorous debt sustainability analysis, and assessment of risks to the Fund and effect on liquidity. - Formalize requirements for early Board consultation on the status of negotiations in exceptional access cases, including confidential briefings before negotiations are concluded. - Require an ex post evaluation by staff of programs supported by exceptional access within a year after the end of the arrangement; consideration that the Independent Evaluation Office also perform evaluations. - Consider a presumption of public disclosure of Fund staff reports on programs with exceptional access; Board to revisit this in the review of transparency policy. - Prudential considerations and exposure management: - Directors agreed more systematic and comprehensive information on a member’s capacity to repay and the Fund’s exposure is needed. - Some Directors proposed setting a maximum absolute exposure level for a single member triggering burden-sharing precautionary balances; most Directors opposed this on uniformity and signaling grounds. - Calls for increasing quotas were noted to provide the Fund with adequate resources to deal with new crises. - Terms, charges, and maturities: - Most Directors saw limited scope to use higher rates of charge to discourage exceptional access. - Several Directors favored availability of somewhat longer maturities in some capital account crises; concern about blurring distinctions between SRF and SBA resources suggests fuller review required. - Interest in a presumption that Supplemental Reserve Facility (SRF) resources would be used when cumulative access exceeds limits under credit tranches and the EFF; importance of early repurchase policy noted. ### Early Board Consultation and Documentation Procedures - Procedures for early consultation in cases involving access above limits: - Once management decides exceptional access may be appropriate, it will consult the Board promptly in an informal meeting. - Directors will receive a concise note at least two hours prior to the informal session, setting out: (i) a tentative diagnosis; (ii) outlines of needed policy measures; (iii) the basis for judging exceptional access may be necessary, with a preliminary evaluation of the four substantive criteria and debt sustainability; and (iv) likely timetable for discussions. - Additional consultations normally expected between the initial informal meeting and the Board’s consideration of the staff report to keep the Board abreast of program-financing parameters, assumed rollover rates, developments, negotiation progress, and timetable changes. - Staff report for arrangements proposing exceptional access will include: consideration of each of the four substantive criteria (including rigorous debt sustainability analysis); thorough discussion of need and proposed level of access; assessment of risks to the Fund and effect on liquidity; and systematic information on the member’s capacity to repay. - Management will consult with the Board specifically before concluding program discussions and before any public statement on a proposed level of access. - Strict confidentiality must be maintained; public statements should not prejudge the Board’s final decision. ### Application to Precautionary Arrangements and Follow-Up Work - Directors’ views on exceptional access in precautionary arrangements: - Divergent views: many Directors felt existing policies were adequate and cautioned against creating expectations of financing as “insurance”; others saw a gap left by expiration of Contingent Credit Lines and advocated a new policy to provide ex ante assurances in crisis prevention. - Some Directors suggested modifying the SRF to allow its use in precautionary arrangements; Board to review applicability of SRF to precautionary settings. - Follow-up and monitoring: - Staff to prepare follow-up papers on implementing the new framework, including procedures for early Board consultation and private sector involvement, and on the appropriate maturity of Fund lending in capital account crises and the mix between SRF and SBA resources. - A stock-taking of the framework’s operation was planned after one year; the Board scheduled regular reviews of access policy under the credit tranches and the EFF, with the next review timing noted in internal scheduling. - Directors supported inclusion in program documentation of a standard table gauging proposed access levels against a broader set of metrics complementing quota-based metrics. - Exit strategies and financing mix: - Experience indicates members’ capacity to repurchase and reduce large Fund exposure depends on improvements in both current and capital accounts. - In some cases, high debt levels will require sustained high primary fiscal surpluses into the medium term; continued Fund financing for some countries for a period of time could not be ruled out. - The Fund provided a very high share of total official financing in recent exceptional access arrangements; Directors noted scope for increased financing from other official sources as members graduate from Fund use, though some saw the Fund remaining the primary official financier. *Source: Decision No. 13462-(05/32), April 1, 2005, as amended by Decision No. 13814-(06/98), November 15, 2006 (EBS/83/233) — Selected decisions and selected documents on use of the Fund’s resources.* ### 1. The Fund is prepared to provide financial assistance to ### _31stissue - 1. The Fund is prepared to provide financial assistance to ### Assistance for balance of payments difficulties arising from others' trade liberalization - The Fund is prepared to provide financial assistance to members experiencing balance of payment difficulties as a result of trade liberalization measures undertaken by other countries. - Such assistance shall be made available: - (i) in the upper credit tranches under a Stand-by Arrangement, - (ii) under the Extended Fund Facility, or - (iii) under the Poverty Reduction and Growth Facility, - and shall be subject to the general access limits established from time to time under such policies. - Liberalization measures undertaken by other members would normally be limited to measures introduced either: - (i) under a WTO agreement or - (ii) on a nondiscriminatory basis. - Financing under this decision may be provided to address existing or anticipated balance of payments difficulties either at the time of: - the approval of an arrangement, or - completion of a program review under such an arrangement, - upon the Fund’s determination that the member is implementing economic adjustment policies that are designed to address the identified balance of payments problems. - When requesting financing under paragraph 2, the member may also request that the Fund indicate willingness to consider providing additional financing if difficulties are larger than anticipated. This additional financing: - shall not exceed 10 percent of quota, - may be requested by the member and be provided at any time during the period of the arrangement upon a determination by the Fund, in the context of a special review under the arrangement, that: - (i) the member’s adjustment program is broadly on track and - (ii) the additional financing is justified by unanticipated balance of payments difficulties of the type identified in paragraph 1. - Nothing in this decision prevents a member from requesting Fund financial assistance outside this decision to address the balance of payments problems identified in paragraph 1. - This decision shall be reviewed no later than December 31, 2007. - Decision No. 13229-(04/33), April 2, 2004, as amended by Decision No. 13814-(06/98), November 15, 2006. - Ed. Note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews will be conducted on an “as needed” basis. The expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews. ### Supplemental Reserve Facility (SRF) — purpose and conditions - The Fund will be prepared to provide financial assistance in accordance with this section to a member experiencing exceptional balance of payments difficulties due to a large short-term financing need resulting from a sudden and disruptive loss of market confidence reflected in pressure on the capital account and the member’s reserves, if there is a reasonable expectation that the implementation of strong adjustment policies and adequate financing will result, within a short period of time, in an early correction of such difficulties. - This facility is likely to be utilized where the magnitude of the outflows may create a risk of contagion that could pose a potential threat to the international monetary system. - When approving a request under this section, the Fund will take into account financing provided by other creditors; members using this facility will be encouraged to seek to maintain participation of creditors, both official and private, until the pressure on the balance of payments ceases. All options should be considered to ensure appropriate burden sharing. - The Fund may make use of resources under this section conditional upon the adoption by the member of measures under Article VI, Section 1 of the Fund’s Articles of Agreement. - Financing under this section will be available to members under a stand-by or extended arrangement in addition to resources in the credit tranches or under the extended Fund facility, in cases where: - (i) a member faces the type of balance of payments difficulties described above and - (ii) the projected access in the credit tranches or under the extended Fund facility, taking into account outstanding purchases, would otherwise exceed either the annual or cumulative limit. - In such cases, unless medium-term financing needs require access beyond the annual or cumulative limit, financing in the credit tranches or under the extended Fund facility will not be provided beyond those limits, and financing beyond either limit will be provided only under this section. - Financing will be determined by the Fund taking into account: - the financing needs of the member, - its capacity to repay, including the strength of its program, - its outstanding use of Fund credit, - its record in using Fund resources in the past and in cooperating with the Fund in surveillance, - and the Fund’s liquidity. - Financing under this section will be committed for a period of up to one year, even if the corresponding arrangement is longer, and will generally be available in two or more purchases. - The first purchase will be available at the time of approval of financing under this section, normally coinciding with approval of the corresponding arrangement. - Subsequent purchases will be available subject to the conditions of the corresponding arrangement. - The corresponding arrangement will identify the total amount and phasing of the financing under this section. - Repurchase terms: - (a) A member making purchases under this section shall repurchase outstanding amounts within two and a half to three years from the date of each purchase in two equal installments; the first installment shall become due two and a half years and the second installment shall become due three years from the date of each purchase. - (b) The member will be expected to repurchase those amounts six months before they become due, provided the Fund may, upon request, decide to extend one or more such repurchase expectations by six months. If a member fails to make a repurchase as expected, the Fund may require the member to repurchase within a specified period not to exceed the repurchase schedule under (a). - (c) The Fund shall not approve, and the Managing Director shall not recommend for approval, a request for use of general resources by a member that is failing to meet a repurchase expectation under (b). Provision shall be made in each stand-by and extended arrangement for suspension of further purchases whenever a member fails to meet a repurchase expectation under (b). - Purchases under this section and holdings resulting from such purchases shall be excluded for the purposes of the definition of reserve tranche purchase pursuant to Article XXX(c). - Charge and surcharge on holdings: - During the first year from the date of the first purchase financed under this section, the rate of charge under Article V, Section 8(b) on holdings acquired as a result of purchases under this section shall be 300 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing. - Such rate shall be increased by 50 basis points at the end of that period and every six months thereafter, until the surcharge reaches 500 basis points, subject to the provisions of paragraph 9. - Pending a decision on the use to be given to the income generated under this section, such income shall not be taken into account when determining the amount of net income in excess of the net income target for purposes of paragraph 3 of Decision No. 11482-(97/42), April 21, 1997. - The provisions of Decision No. 8165-(85/189) G/TR, December 30, 1985, except Section IV, shall apply to overdue financial obligations arising under this section, subject to the following provision: - The rate of charge on overdue repurchases shall be determined by the Fund but shall not be less than the maximum rate of charge specified in paragraph 8. - Except for determining the level of conditionality applied to purchases in the credit tranches, the Fund’s holdings of a member’s currency resulting from purchases under this section shall be considered separate from holdings resulting from purchases under any other policy on the use of the Fund’s general resources. - The Fund will be prepared to grant a waiver of the limitation of 200 percent of quota in Article V, Section 3(b)(iii), whenever necessary to permit purchases under this section or to permit other purchases that would raise the Fund’s holdings of the purchasing member’s currency above that limitation because of purchases outstanding under this section. - This section and its operation will be reviewed no later than January 31, 1999. - Decision No. 11627-(97/123) SRF, December 17, 1997, as amended by Decision Nos. 11866-(99/1) SRF, December 22, 1998; 11895-(99/11) SRF, January 25, 1999; 11942-(99/48) SRF/CCL, April 23, 1999; 11982-(99/61) SRF/CCL, June 8, 1999; 12197-(00/48) SRF/CCL, May 4, 2000; 12340-(00/117) SRF/CCL, November 28, 2000; 12902-(02/120) CCL, December 6, 2002; 12943-(03/15), February 21, 2003; and 13814-(06/98) November 15, 2006. - Ed. Note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews will be conducted on an “as needed” basis. The expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews. ### Compensatory Financing Facility — scope and limits - The Fund is prepared to extend financial assistance, in accordance with this Decision, to members that encounter balance of payments difficulties arising out of: - (i) temporary export shortfalls or - (ii) excess costs of cereal imports. - Purchases under this Decision and holdings resulting from such purchases shall be excluded for the purposes of the definition of reserve tranche purchase pursuant to Article XXX(c). - Except for determining the level of conditionality applied to purchases in the credit tranches, the Fund’s holdings of a member’s currency resulting from purchases under this Decision shall be considered separate from holdings resulting from purchases under any other policy on the use of the Fund’s general resources. In cases of concurrent requests for purchases under this Decision and for purchases in the credit tranches, purchases under this Decision shall be deemed to be made first. - The Fund will be prepared to grant a waiver of the limitation of 200 percent of quota in Article V, Section 3(b)(iii), whenever necessary to permit purchases under this Decision or to permit other purchases that would raise the Fund’s holdings of the purchasing member’s currency above that limitation because of purchases outstanding under this Decision. - The Fund shall indicate in an appropriate manner which purchases by a member are made pursuant to Section II or Section III of this Decision, as well as the export shortfall component and the cereal import cost component of each purchase under Section III. - When a request for a purchase is made under either Section II or Section III on account of circumstances already taken into account in calculating amounts made or to be made under the other Section, double compensation shall be avoided when calculating the amount of the requested purchase. - In providing financing pursuant to this Decision, the Fund shall pay due attention to the member’s capacity to service its financial obligations to the Fund, and, having regard to the outstanding financial obligations of the member to the Fund, may reduce the amount of financing accordingly. - “Arrangement” will mean an upper credit tranche stand-by arrangement, an extended arrangement, or an arrangement under the Poverty Reduction and Growth Facility (PRGF). - Access limits for the Fund’s holdings of a member’s currency resulting from purchases under this Decision: - (a) 45 percent of the member’s quota for purchases on account of an export shortfall under Section II or Section III; - (b) 45 percent of the member’s quota for purchases on account of an excess of cereal import costs under Section III; and - (c) a combined limit of 55 percent of the member’s quota for purchases on account of an export shortfall component under Section II or Section III and an excess cereal costs component under Section III. ### Compensatory Financing — export fluctuations (Section II): qualification, timing, and calculation - The Fund is prepared to assist members, particularly primary exporters, encountering balance of payments difficulties produced by temporary export shortfalls. - Members may expect their request for purchases under this Section will be met, subject to the Decision, where the Fund is satisfied that the shortfall is short-term and largely attributable to circumstances beyond the control of the member, and: - (a) at the time of the request, the member’s balance of payments position apart from the effects of the export shortfall is satisfactory; or - (b) at the time of the request, the Fund approves an arrangement, or, in the case of an existing arrangement, either completes a review under such an arrangement or determines that the member’s policies are such as would, in the Fund’s view, continue to meet the criteria for the use of the Fund’s resources in the upper credit tranches. - Under paragraph 10(a), the full amount of compensatory financing shall be made available in one purchase, unless estimated data are used for 9 months or more of the 12-month period referred to in paragraph 15, in which case financing shall be made available in two purchases: - (a) the first purchase shall not exceed 65 percent of the amount of compensatory financing; and - (b) the second purchase request shall not exceed the difference between the compensatory financing recalculated at the time of the request for the second purchase and the amount of the first purchase and shall not be approved until actual statistical data becomes available for at least 6 months of the 12-month period used for the purposes of the first purchase; if the policy implementation or external circumstances differ materially from that originally anticipated at the time of the request for the first purchase, the Fund may decide not to approve, or to reduce, the amount available under the second purchase. - Under paragraph 10(b), compensatory financing shall be made available in more than one purchase, which shall normally be for equal amounts, unless recalculated, and: - (a) the request for a first purchase will be met immediately, subject to the Decision; - (b) requests for subsequent purchases will be met if, at the time of the request: - the member continues to have an arrangement, and - the Fund decides the member has met the conditions for the purchase or disbursement under the associated arrangement, including observance or waiver of any applicable performance criteria or other conditions specified therein; - provided that the last purchase shall not take place earlier than six months from the first purchase, and any actual statistical data that has become available for the shortfall year shall be used to recalculate the amount of any subsequent purchases. - Timing limit: A purchase under paragraph 11 or the first purchase under paragraph 11(a) or paragraph 12 shall not be approved under this Section later than six months after the end of the 12-month period referred to in paragraph 16, provided that it may be approved up to seven months after the end of such period if the delay beyond six months is the result of circumstances external to the member. - Calculation rule: If, in the opinion of the Fund, adequate data on receipts from services other than investment income are available, the member requesting a purchase under this Section shall specify whether the receipts shall be included or excluded in the calculation of the shortfall. The choice by the member to include such receipts shall continue to apply for a period of three years. *Italicized source attribution: Selected Decisions and Selected Documents (extracts as supplied).* ### 15. The existence and amount of an export shortfall for the pur- ### 15. The existence and amount of an export shortfall for the purpose of any purchase under this Section ### Determination of shortfall period and data - The existence and amount of an export shortfall for the purpose of any purchase under this Section shall be determined with respect to the latest 12-month period preceding the request (or, in the case of paragraph 11(a) or paragraph 12, the first request) for which the Fund has sufficient statistical data. - A member may request a purchase in respect of a shortfall year for which not more than 12 months of the data on merchandise exports and on receipts from services are estimated. - When the Fund allows a member to purchase under the proviso in paragraph 15, the Fund may use such methods as it considers reasonable for estimating exports during the period for which sufficient statistical data are not available. ### Definition and computation of export shortfall (paragraph 16) - 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. - For the purposes of this Section, the shortfall shall be the amount by which the member’s export earnings in the shortfall year are less than the geometric average of the member’s export earnings for the five-year period centered on the shortfall year. - In computing the five-year geometric average, the Fund, in conjunction with the member, will use an estimate based on a judgmental forecast for the period of the two post-shortfall years, provided that any amount by which the forecast for the period of the two post-shortfall years would exceed the member’s export earnings for the period of the two pre-shortfall years by more than 20 percent shall not be included in such computation. - If, in the opinion of the Fund, adequate statistical data are available for this purpose, the calculations and estimates under this paragraph of earnings from an export item shall, with respect to a purchase on account of an export shortfall under this Section or Section III, be made net of the value of imported intermediate inputs, where such value exceeds 50 percent of the gross earnings from the export item and the exclusion of the value of the export item would increase or reduce by at least 10 percent the amount that could otherwise be purchased on account of the export shortfall. ### Overcompensation (paragraphs 17–19) - If a member has made a purchase under this Section on the basis of estimated data and the amount of the purchase exceeds the amount that could have been purchased on the basis of actual statistical data, the member will be expected to make a prompt repurchase in respect of the outstanding purchase, in an amount equivalent to the excess. - The calculation of such an excess with respect to a purchase shall be made on the basis of the same post-shortfall year projections used for the calculation of the purchase, provided that if the member has made more than one purchase with respect to the same 12-month period, the calculation of any excess with respect to all such purchases will be made on the basis of the post-shortfall year projections used for the latest of such purchases. - Provision shall be made in all arrangements for the suspension of further disbursements under the arrangement whenever a member fails to meet a repurchase expectation pursuant to paragraph 17. - The Managing Director shall not recommend for approval, and the Fund shall not approve, a request for the use of the Fund’s general resources by a member that is failing to meet such an expectation. - If a member requests financing under this Section in relation to a shortfall year that in whole or in part is included in the period of the two post-shortfall years concerning any earlier purchase under this Section, the amount of the requested purchase shall be adjusted so as to take into account any amount by which such earlier purchase differs from the amount that could have been purchased on the basis of the data available at the time of the request. --- ### Section III. Compensatory Financing of Fluctuations in the Cost of Cereal Imports ### Qualification and timing of purchases (paragraphs 20–23) - The Fund is prepared to extend financial assistance subject to the provisions of this Decision to members that encounter a balance of payments difficulty produced by an excess in the cost of their cereal imports. - For a period of three years from the date of a member’s first request for a purchase in respect of cereal imports under this Section, any purchases by the member in respect of its export shortfalls shall be made under this Section instead of under Section II of this Decision. The same provision shall apply if, after the end of the three-year period, the member makes a new purchase in respect of cereal imports under this Section. - A member with balance of payments difficulties may expect that its request for a purchase under this Section will be met if the Fund is satisfied that any shortfall in exports and any excess costs of cereal imports that result in a net shortfall in the member’s exports are of a short-term character and are largely attributable to circumstances beyond the control of the member, and - (a) at the time of the request, the member’s balance of payments position, apart from the effects of the net shortfall in the member’s exports, is satisfactory; or - (b) at the time of the request, the Fund approves an arrangement, or, in the case of an existing arrangement, either completes a review under such an arrangement or determines that the member’s policies are such as would, in the Fund’s view, continue to meet the criteria for the use of the Fund’s resources in the upper credit tranches. - Paragraphs 11, 12, and 13 shall apply mutatis mutandis to this Section. The applicable 12-month period shall be the period referred to in paragraph 25. ### Calculation of net shortfall and treatment of components (paragraphs 24–31) - (24)(a) Subject to the limits specified in paragraph 9, a member may request a purchase under this Section for an amount equal to the net shortfall in its exports calculated as the sum of its export shortfall and the excess in its cereal import costs. - (24)(b)(i) For the calculation of the net shortfall in exports, an excess in exports shall be considered a negative shortfall in exports and a shortfall in cereal import costs shall be considered a negative excess in cereal import costs. - (24)(b)(ii) An export shortfall shall be determined in accordance with Section II. - (24)(b)(iii) An excess in cereal import costs shall be determined in accordance with paragraphs 25 and 26. - (25) The existence and amount of an excess in the cost of cereal imports shall be determined, for the purpose of purchases under this Section, with respect to the latest 12-month period preceding the request for which the Fund has sufficient statistical data, provided that the Fund may allow a member to make a purchase on the basis of estimated data in respect of a 12-month period ending not later than 12 months after the latest month for which the Fund has sufficient statistical data on the member’s cereal import costs. The estimates used for this purpose shall be made in consultation with the member. The calculation of a member’s shortfall or excess in exports and its excess or shortfall in the cost of its cereal imports shall be made for the same 12-month period. - (26) For identification of short-term excess costs of cereal imports, the Fund, in consultation with the member concerned, will seek to establish reasonable estimates regarding the medium-term trend of the member’s cereal import costs. For the purposes of this Section, the excess in a member’s cereal imports for the 12-month period referred to in paragraph 25 shall be the amount by which the member’s cereal imports in that 12-month period are more than the arithmetic average of the member’s cereal imports for the five-year period centered on that 12-month period. - (27) The amount of a purchase under this Section, as defined in paragraph 24, may be either on account of an export shortfall or on account of an excess in cereal import costs, or the amount may consist of two components, one on account of an export shortfall and the other on account of an excess in cereal import costs. A member shall allocate the amount of its purchase under this Section between the export shortfall and cereal import components, each as limited by paragraph 9(a) or paragraph 9(b), provided that in no case the combined amount shall exceed the limit in paragraph 9(c). - (28)(a) The part of a purchase relating to an export shortfall, subject to the limit in paragraph 9(a), shall not exceed the lesser of the export shortfall defined in paragraph 24(b)(ii) and the net shortfall in exports defined in paragraph 24(a). - (28)(b) The amount of a purchase relating to an excess in cereal import costs, subject to the limit in paragraph 9(b), shall not exceed the lesser of the excess in cereal import costs defined in paragraph 24(b)(iii) and the net shortfall in exports defined in paragraph 24(a). - (29)(a) Subject to paragraph 31, when a reduction in the Fund’s holdings of a member’s currency is attributed to a purchase under this Section, the member shall attribute that reduction between the outstanding cereal import component and export shortfall component of the purchase. - (29)(b) When the Fund’s holdings of a member’s currency resulting from a purchase under this Section or Section II are reduced by the member’s repurchase or otherwise, the member’s access to the Fund’s resources under this Section will be restored pro tanto, subject to the limits in paragraph 9. - (30)(a) After the expiration of the period referred to in paragraph 21, the total amount of the export shortfall components of a member’s purchases outstanding under this Section shall be counted as having been purchased under Section II. - (30)(b) The provisions of Section II shall continue to apply to the export shortfall component of a purchase under this Section after the expiration of the period referred to in paragraph 21. - (31) The provisions of paragraph 17, 18, and 19 shall apply mutatis mutandis to purchases under this Section. The applicable 12-month period shall be the period referred to in paragraph 25. --- ### Section IV. Other Provisions and Related Decisions ### References and review - (32) All references in other Fund decisions to the Compensatory and Contingency Financing Facility shall be read as the Compensatory Financing Facility. - (33) The Fund will review this Decision not later than June 30, 2003 (SM/02/364, 11/27/02). - Decision No. 8955-(88/126), August 23, 1988, as amended by Decision Nos. listed in the source, and further notes regarding review frequency pursuant to Decision No. 13814-(06/98), November 15, 2006. ### Executive Board summing up—Overcompensation (Executive Board Meeting 82/1, January 6, 1982) - The Executive Board approves the legal interpretation given by the staff in SM/81/234. - The Executive Board agrees for the time being not to change the legal status of a representation to repurchase any amount of overcompensation under the compensatory financing facility. - The Executive Board agrees to maintain present and past practice under which an overcompensated member would continue to make prompt repurchases, and emphasizes the importance it attaches to maintaining the high standards of prompt repurchase that have generally characterized past experience. - Prompt repurchase in the context of the compensatory financing facility decision would mean that the repurchase would normally be made within a period of 30 days. - If the normal period of prompt repurchase cannot be respected, a report will be made to the Executive Board within a period of up to two weeks as judged necessary by the management and Treasurer, normally accompanied by a proposal on how to deal with the question. - Should experience show an increase in frequency of overcompensation or a deterioration in repurchase behavior, the Executive Board would review the whole policy issue. - Conclusions in SM/81/234 clarify that representations to repurchase are not legally binding obligations under prior practice, and that since the date of the Second Amendment the Fund has authority under Article V, Section 7(d), to require prompt repurchase of overcompensation amounts as a legal obligation. *Source: _31stissue - 15. The existence and amount of an export shortfall for the pur- (PDF chapter/section).* ### 2. Under procedures to be adopted, the currency of a member ### _31stissue - 2. Under procedures to be adopted, the currency of a member ### Selection and sale of members’ currencies (overview) - Normally, the Fund will select a member’s currency for use in operations of the General Resources Account that result in a net reduction of the Fund’s holdings of that currency only if the member’s balance of payments and gross reserve position is judged to be sufficiently strong. - The Fund may nevertheless make net reductions in holdings of a currency of a member with a strong reserve position even if it has a moderate balance of payments deficit. - If a member with outstanding purchases subject to repurchase has a balance of payments and gross reserve position judged sufficiently strong for operational budgets and designation plans, its currency normally will be sold by the Fund under Article V, Section 3(d) only if the member and the Fund agree. (See Decision No. 6774-(81/35), March 5, 1981 and Decision No. 6274-(79/158), September 14, 1979.) ### Harmonization principle (promotion of balanced Fund positions) - A member’s “position in the Fund” is defined as its reserve tranche position plus any outstanding loans to the Fund by the member or an institution of the member under credit arrangements judged by the Fund to provide it, on a continuing basis, the ability to finance uses of its resources by members on terms comparable to those applicable to the Fund’s use of its currency holdings. - Subject to constraints, currencies shall be selected for purchases, repurchases, and transfers of SDRs in a way as to promote, over time, equalization of the ratios of members’ positions in the Fund (as defined) to their gold and foreign exchange holdings. - Limitations on applying the harmonization principle: - Not carried beyond the point where the Fund’s holdings of a member’s currency are substantially below the average level, expressed as a percentage of quota, at which the Fund holds the currencies of members that do not have purchases outstanding and whose balance of payments and gross reserve position is sufficiently strong in accordance with paragraph 1. - The Fund will seek to maintain adequate working balances of a currency. ### Flexibility and operational considerations - Guidelines are to be applied so the Fund retains flexibility to: - (i) adapt the use of currencies to the needs and circumstances of members and of the Fund (including needs to stabilize exchange markets, effects on the Fund’s financial position and liquidity, and special considerations for issuers of a reserve currency where the ratio of Fund position to gold and foreign exchange holdings may not be an appropriate measure), and - (ii) execute transactions and operations expeditiously and in a manner that pays due regard to the convenience of members (including avoiding excessive numbers of currencies in single transactions). - Decision references: Decision No. 6274-(79/158), September 14, 1979; Decision No. 6774-(81/35), March 5, 1981. ### Procedures for sale of currencies at request of members with outstanding purchases - Emphasis on consultation: Managing Director to consult with member prior to submission of a proposed sale to the Executive Board; proposals to be agreed with the member where possible. (Decision No. 6352-(79/183), December 12, 1979.) - Procedural guidelines: - a. As far as practicable, a member wishing its currency to be sold should consult the Managing Director before the end of the second month of the quarterly period prior to the beginning of the period in which the currency would be sold, to enable inclusion in the next operational budget. - b. After consultation and the member’s agreement, the Managing Director will propose to the Executive Board that the currency be included in the operational budget, covering integration of sales with other currencies and SDRs. - c. Proposals by the Managing Director for sales of a currency of a member with purchases outstanding guided by: - (i) Proposals would not normally be made for sales if such sales would give rise to repayments of borrowing by the Fund, or if they would be attributed by the member to repurchase obligations falling due within the quarterly period of the budget. - (ii) Amounts involved should not detract significantly from promoting balanced positions in the Fund or maintaining the SDR holdings of the General Resources Account within a particular range. ### Sales of currencies of members indebted to the Fund (Annex) - For debtor members judged sufficiently strong but whose outstanding purchases are not subject to early repurchase guidelines: - The Fund would not insist on its right to sell such a member’s currency; sales occur only by agreement between member and Fund. - The Managing Director is authorized to approach particularly strong members to reduce indebtedness in amounts calculated under the guidelines. - Rule of attribution changed to give a member with outstanding indebtedness under excluded facilities financed by borrowing (other than the GAB) the option to apply the consequent reduction in the Fund’s holdings of its currency to an enlargement of its reserve tranche position rather than to discharge outstanding obligations. - Calculation of amounts: - Amounts of such currencies included for sales in an operational budget will be calculated in accordance with the guidelines on early repurchase. - If another debtor member (not under excluded facilities financed by borrowings nor subject to early repurchase guidelines) agrees to sale of its currency, the Fund would calculate amounts to be sold in the same manner; at the member’s request, calculated amounts may be reduced for the first two successive budget periods. - Calculation of sales ceases or is reduced when sales of the currency equal the outstanding indebtedness to the Fund. ### Operational budget—review of guidelines for allocation of currencies (Decision No. 11837-(98/121), November 30, 1998) - Key new guidelines approved pursuant to Decision No. 11386-(96/107) (December 2, 1996) and replacing Decision No. 10279-(93/19) (February 10, 1993): - 2. Currencies to be used for transfers in the operational budget will be allocated in proportion to members’ quotas. - 3. Currencies to be used for receipts in the operational budget will be allocated to promote over time-balanced positions in the Fund in relation to quotas. Receipts in currencies will be allocated to members with positions in the Fund above the average of all members included in the operational budget. The amount allocated in each currency shall be in proportion to the difference between the member’s position in the Fund and the projected average of all members included in the operational budget, expressed as a percent of quota, at the end of the budget period. - 4. A member’s “position in the Fund” is defined as its reserve tranche position plus any outstanding loans to the Fund by the member or an institution of the member under credit arrangements judged by the Fund to provide it, on a continuing basis, the ability to finance uses of its resources by members on terms comparable to those applicable to the Fund’s use of its currency holdings for this purpose. - 5. The Fund’s holdings of a member’s currency in terms of quota resulting from allocations of currencies for transfers shall not be reduced below a floor of one-half of the projected average level, in percent of quota, of the Fund’s holdings of usable currencies at the end of the budget period. - 6. The Fund will seek to maintain adequate working balances of each member’s currency included in the operational budget for transfers of not less than 10 percent of the quotas of these members. - 7. These guidelines will enter into effect with the operational budget for the period December 1998–February 1999. Their operation will be reported to the Executive Board in the context of the quarterly operational budgets. - 8. The guidelines will be reviewed by the Executive Board not later than December 31, 2000 (EBS/98/194, 11/17/98). ### Transfers of SDRs and related reviews - Under Article V, Section 3(f), the Fund shall provide SDRs instead of the currencies of other members to a participant making a purchase in accordance with decisions on the operational budgets taken under Rule O-10. The Executive Board shall keep under review the amount of the Fund’s holdings of SDRs in the General Resources Account and determine from time to time the approximate range within which the Fund will aim to maintain these holdings. (Decision No. 6275-(79/158) G/S, September 14, 1979.) - Sales of SDRs by the Fund: pursuant to Article V, Section 6(b) and (c), the Fund shall provide a member at its request with SDRs from the General Resources Account in exchange for an equivalent amount of the currencies of other members to enable the member to pay SDRs to increase its quota under Board of Governors Resolution No.34-2 on the Seventh General Review of Quotas or in accordance with that Resolution. The amount a member may receive shall not exceed the difference between the member’s SDR holdings and the amount of its quota payment due in SDRs at the time of payment. (Decision No. 6663-(80/160) S, October 31, 1980.) ### Repurchase expectations and early repurchase guidelines (Article V, Section 7) - Members that make purchases in the General Resources Account are expected normally to repurchase as their balance of payments and reserve position improves. - The Fund reaffirms the continued need for the general policy on early repurchase under the first sentence of Article V, Section 7(b), including following the introduction in November 2000 of time-based repurchase expectations for purchases in the credit tranches and under the Extended Fund Facility and the Compensatory Financing Facility. - The guidelines set forth the Fund’s expectations and encourage members to make voluntary advance repurchases in lieu of or in addition to early repurchases; they apply to the Fund’s holdings of currency that result from purchases under Article V, Section 3 that are subject to repurchase under the Articles and policies of the Fund. *Selected Decisions and Selected Documents (media of payment) as presented in the source content.* ### 1. A member’s balance of payments and reserve position will ### _31stissue - 1. A member’s balance of payments and reserve position will ### Early repurchase expectations and conditions - A member’s balance of payments and reserve position will be deemed normally to have improved sufficiently for early repurchases to be expected if it is judged sufficiently strong for the purposes of a quarterly designation plan and financial transactions plan as determined by the Fund. - A member that makes a purchase in the credit tranches or under a special policy of the Fund will not be expected to make early repurchases within six months of a purchase. - The Managing Director will report on observance by members of the guidelines for early repurchase in each financial transactions plan. - This decision will be reviewed from time to time in light of experience. ### Quarterly expected repurchase amount (calculation and limits) - During the quarter following adoption of the designation plan and financial transactions plan, a specified amount of the Fund’s holdings of the member’s currency will be repurchased. - Specified amount for the expected quarterly repurchase (subject to paragraphs 4 and 5): - 1.5 percent of the member’s gross reserves plus (minus) 5 percent of the increase (decrease) in gross reserves over the latest six-month period for which data are available (“latest gross reserves”). - The quarterly amount will be subject to a limit of 4 percent of the member’s latest gross reserves. - A quarterly repurchase will be limited to an amount that will not (i) reduce the member’s latest gross reserves below 250 percent of the member’s quota, and (ii) exceed, together with the member’s early repurchases during the preceding three quarters, 10 percent of these reserves. ### Credits for advance repurchases and carryover - The specified amount under paragraph 3 represents the minimum reduction expected during the quarter. - If repurchases made during a quarter in advance of repurchase maturities exceed the minimum expected during that quarter, the excess will give rise to a credit that will meet pro tanto the expectations of early repurchase for the next five quarters. - At the end of a quarter the credit will be reduced by the larger of: - (i) the repurchase expectation for the quarter that is deemed to be satisfied by the credit, and - (ii) the repurchase obligations that would have matured during the quarter but have been discharged by the advance repurchase. - If, during the two quarters prior to being added to the list of members whose positions are considered sufficiently strong, a member’s repurchases in advance of maturity exceed the minimum reduction expected during those two quarters, a credit will be given in accordance with paragraph 4. Any credit still available when a member’s position is no longer considered sufficiently strong will continue to apply in accordance with paragraph 4. ### Time-based repurchase expectations (credit tranches and EFF) - For purchases in the credit tranches: - Members will be expected to begin repurchases 2¼ years after each purchase and complete repurchases after 4 years. - Under the Extended Fund Facility (EFF): - Members will be expected to meet repurchase expectations starting from 4½ years and ending 7 years after each purchase. - Time-based repurchase expectations will not apply to any purchases made to date, but will apply to purchases made after these decisions are adopted. - Members may request extensions of repurchase expectations; the Fund may extend on request if the member’s external position is not sufficiently strong to repay early without undue hardship or risk. - Elements considered in assessing external position include: - level of international reserves, - outlook for the balance of payments, - access to international capital markets, - the member’s overall external position, including any relevant special factors. - Repurchase expectations can be extended at any time; the Board encouraged requests at least two months before an expectation falls due. - If a member fails to meet an unextended repurchase expectation: - its right to make further drawings, including under ongoing arrangements, would be automatically suspended; - the Managing Director would not recommend, and the Board would not approve, new arrangements or outright purchases; - the Managing Director would be informed immediately; a communication from the Managing Director would be sent to the member after two weeks; the Executive Board would be informed after one month; and a substantive consideration by the Executive Board would occur after three months. - Recognition for meeting repurchase expectations: - Mentioned in summings up and, if published, Public Information Notices (PINS) following Article IV or post-program monitoring discussions, and reported on the member’s country-specific page on the web site. - Extensions will be made public as a factual statement posted on the IMF web site on the member’s country-specific page and in the next weekly update of “Fund Financial Activities: Week at a Glance.” - The Board agreed to review the operation of early repurchase expectations by November 2005. ### Time-based repurchase schedules for credit-tranche and compensatory/other facilities - Repurchases of amounts resulting from a purchase under the credit tranches and subject to charges under Article V, Section 8(b), or under specified compensatory and emergency decisions: - 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. - For purchases in the credit tranches or under the Compensatory Financing Facility made after November 28, 2000: - A member will be expected to repurchase the Fund’s holdings of its currency in equal quarterly installments during the period beginning two years and ending four years after the date of the purchase. - The Fund may, upon request by the member, amend the schedule if the member’s external position is not sufficiently strong for repurchases to be made in accordance with the expectation schedule. - In determining whether to amend the schedule, the Fund may consider all relevant information, including the size of the member’s foreign reserves, the member’s medium-term balance of payments outlook, and the degree of the member’s access to international capital markets. - The Fund shall review the time-based repurchase expectation scheme set out in paragraph 1(b), no later than November 30, 2005. ### Scheduling, media of payment, and substitutions - Decisions on timing 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 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. - If a member with an outstanding obligation to pay gold in repurchase has made an equivalent repurchase with special drawing rights, it shall be regarded as having discharged its obligation in accordance with Schedule B, paragraph 2. - If the member has made an equivalent repurchase with currencies of other members, it shall be regarded as having discharged its obligation 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 currencies of other members specified by the Fund in accordance with Article V, Section 7(i). - If no equivalent repurchase is made 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 in accordance with Schedule B, paragraph 2. - Dates for payment of special drawing rights or currencies of other members and for substitutions after the date of the Second Amendment shall be determined in accordance with Schedule B, paragraph 1. - Repurchase under Schedule B, paragraph 4 shall be completed four years after the date of the Second Amendment. If the Fund’s holdings of a member’s currency subject to paragraph 4(ii) are in excess of 10 percent 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. ### Attribution of reductions in the Fund’s holdings of currencies - General freedom to attribute a reduction in the Fund’s holdings of its currency: - A member shall be free to attribute a reduction to (i) any obligation to repurchase, and (ii) to enlarge its reserve tranche, subject to paragraphs (b)–(e). - Constraints on attribution: - If the reduction results from the sale of a member’s currency or from operational payments by the Fund, an attribution may not be made to an obligation to repurchase financed from borrowed resources unless the Fund is obligated or entitled immediately to repay the lender on the occasion of such attribution. - An attribution to create a reserve tranche may only be made if the reduction results from the sale of the member’s currency or from operational payments by the Fund in that currency and if the member’s obligations to repurchase do not include an obligation relating to a purchase financed through borrowing under the GAB. - Specific attribution timing rules: - A reduction resulting from a repurchase made pursuant to a repurchase expectation under paragraph 1(b) of Decision No. 5703-(78/39) shall be attributed to the member’s repurchase obligation arising from the same purchase one year after the original date on which that repurchase expectation was to be met. - A reduction resulting from a repurchase made pursuant to a repurchase expectation under paragraph 10(a) of Decision No. 4377-(74/114) shall be attributed to the member’s repurchase obligation arising from the same purchase three years after the original date on which that repurchase expectation was to be met. - A reduction attributed to a reserve tranche position will not discharge an expectation of repurchase under the Guidelines for Early Repurchase. - If a member, when asked, does not make an attribution in accordance with paragraph 1, it will be deemed to be discharging the first maturing repurchase obligation. ### Charges and surcharges on holdings in excess of quota - Changes in any schedule of charges levied under Article V, Section 8(c), (d), and (e) shall apply to all holdings subject to the schedule that are obtained by the Fund after the date of this decision. - Surcharge on purchases in credit tranches and under the Extended Fund Facility: - The rate of charge under Article V, Section 8(b) on the Fund’s combined holdings of a member’s currency in excess of 200 percent of the member’s quota in the Fund resulting from purchases in the credit tranches and under the Extended Fund Facility made after the date of this decision shall be 100 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing. - The rate on such holdings in excess of 300 percent of the member’s quota shall be 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing. - This decision shall be reviewed after November 30, 2004. *Selected Decisions and Selected Documents.* ### 1. A member whose holdings of SDRs are insufficient for the pay- ### 1. A member whose holdings of SDRs are insufficient for the payment of the total of estimated charges due and payable by it within the next thirty days ### Payment options when SDR holdings are insufficient - A member whose holdings of SDRs are insufficient for the payment of the total of estimated charges due and payable by it within the next thirty days may: - (a) obtain SDRs from the General Resources Account up to a reasonable estimate of the balance of SDRs needed for the payment; or - (b) pay the balance of the charges in the currencies of other members. - 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. - The currencies for which the SDRs would be sold under paragraph 1(a) or that would be paid under paragraph 1(b) and paragraph 2 shall be selected by the Fund from those currencies that the Fund would receive in accordance with the operational budget in effect at the time. - Decision No. 5702-(78/39) G/S, March 22, 1978, effective April 1, 1978, as amended by Decision No. 7096-(82/57) G/S, April 23, 1982. ### Accounting for charges from members with overdue obligations - Effective November 1, 1986, accrued charges on the use of the Fund’s general resources from a member that is overdue in meeting any financial obligation to the Fund for six months or more will not be included in accrued income unless the member is current in the payment of charges. - Charges that are not included in accrued income will instead be reported as deferred income, and will be recorded as income only when paid. - Once charges from a member have been reported as deferred income, charges subsequently accrued will not be included in accrued income until the member becomes current in the payment of charges. - Decision No. 8433-(86/175), October 31, 1986. ### Special charges on overdue financial obligations to the Fund - I. Overdue Repurchases - The Fund reviewed rates of charge to be levied under Article V, Section 8(c) on its holdings of a member’s currency that have not been repurchased in accordance with the Articles or decisions of the Fund. - Within three business days after (i) the due date for the repurchase by a member of the Fund’s holdings of its currency or (ii) the effective date of this decision, whichever is the later, the Fund shall consult with the member on the reduction of the Fund’s holdings of the member’s currency that should have been repurchased. The consultation shall take place by rapid means of communication. - Unless the Fund’s holdings of the member’s currency are reduced within the period referred to in Section IV by the amount that should have been repurchased, the rate of charge on the holdings that should have been repurchased shall be increased by a percentage equal to the excess, if any, of the rate of interest on the SDR over the rate of charge levied on the holdings under Rule I-6(4). For the purposes of this calculation, any adjustments in the rate of charge referred to in Rule I-6(4) that may be made to cover deferred income or for placement to the Special Contingent Account shall not be taken into consideration. - Ed. Note: This decision replaced Decision No. 7930-(85/41), March 13, 1985. - II. Overdue Charges in the General Resources Account - A special charge equal to the rate of interest on the SDR shall be paid by a member on the unpaid amount of charges owed by it under Article V, Section 8(a) and (b). - III. Overdue Interest and Repayments on Trust Fund Loans - The Fund shall levy a special charge on: - (i) the amount of overdue interest on Trust Fund loans, at a rate equal to one half of the sum of the rate of interest on Trust Fund loans and the rate of interest on the SDR, and - (ii) the overdue amounts of repayments of Trust Fund loans, at a rate equal to one half of the sum of the rate of interest on Trust Fund loans and the rate of interest on the SDR, less one-half percent. - IV. Waiver of Special Charges - Special charges under Sections I, II, and III shall be levied in respect of an overdue financial obligation as of the due date or the effective date of this decision, whichever is the later, unless the obligation is discharged within ten business days after the applicable date. - Effective May 1, 1992, special charges under Sections I and II shall not be levied on overdue obligations of a member that is overdue in meeting any financial obligation to the Fund subject to special charges under Sections I and II for six months or more. - Effective May 1, 1993, special charges under Section III shall not be levied on overdue obligations of a member that is overdue for six months or more in meeting any financial obligation to the Fund subject to special charges under Section III. - V. Notification and Payment of Special Charges - 1. Special charges levied under this decision shall be payable following the end of each of the Fund’s financial quarters and the member shall be notified promptly of any special charges due. The charges shall be payable on the second business day following the dispatch of the notification. - 2. Special charges in respect of overdue repurchases and charges in the General Resources Account shall be paid in SDRs to that Account. Special charges in respect of overdue repayments and interests on Trust Fund loans shall be paid in U.S. dollars to the Special Disbursement Account. Such payments may be made also in SDRs to a prescribed holder on behalf of the Special Disbursement Account, provided that use of SDRs is in accordance with Decision No. 8642-(87/101) S/TR, adopted July 9, 1987. - VI. Entry into Effect and Review - This Decision will enter into effect on February 1, 1986. - It will be reviewed shortly after October 31, 1986 at the time of the mid-year review of the Fund’s income position for the financial year ending April 30, 1987, and thereafter annually in connection with the annual reviews of the Fund’s income position. - Decision No. 8165-(85/189) G/TR, December 30, 1985, effective February 1, 1986, as amended by Decision Nos. 8496-(87/3) G/TR, January 7, 1987, 8641-(87/101) G/S/TR, July 9, 1987, 8923-(88/110) G/TR, July 21, 1988, 10000-(92/58) G/TR, April 17, 1992, 10337-(93/49) G/TR, April 9, 1993, 10352-(93/49) G/TR, April 9, 1993, 10551-(94/1) G/TR, January 7, 1994, and 13001-(03/39) G/TR, April 25, 2003. ### Review of system of special charges - The Fund has reviewed the system of special charges applicable to overdue obligations to the General Resources Account, the Structural Adjustment Facility, and the Trust Fund. - (EBS/06/51, 4/12/06) - Decision No. 13709-(06/40) G/SAF/TR, April 28, 2006. ### Setoff in connection with a retroactive reduction of charges due by members in arrears - 1. When the Fund decides upon a retroactive reduction in the rate of charge specified in Rule I-6(4), the amount to be paid to a member that has charges or repurchases overdue, in the General Resources Account, on the effective date of the payment by the Fund, shall be set off pro tanto, as of that date, against such overdue obligations in the following manner: the member shall be requested to specify which overdue obligations, among the categories listed in paragraph 2, it wishes to discharge by the setoff; in the absence of a response by the member within seven business days after the request, the setoff shall apply to the member’s overdue obligations, within the categories listed in paragraph 2, in the descending order of maturities. - 2. The setoff under paragraph 1 shall apply to: - (a) special charges due on the amount of overdue charges under Executive Board Decision No. 8165-(85/189) G/TR, December 30, 1985; - (b) special charges due on the amount of overdue repurchases under Article V, Section 8(c); - (c) charges due under Article V, Section 8(a) or (b); - (d) overdue repurchase obligations. - Decision No. 8271-(86/74), April 30, 1986. ### Burden sharing—principles and FY 2000 implementation - Section I. Principles of Burden Sharing - 1. The financial consequences for the Fund which stem from the existence of overdue financial obligations shall be shared between debtor and creditor member countries. - 2. The sharing shall be applied in a simultaneous and symmetrical fashion. - Section II. Determination of the Rate of Charge - The rate of charge for financial year 2000 referred to in Rule I-6(4) shall be adjusted in accordance with the provisions of Section IV. - Section III. Amount for Special Contingent Account I - An amount equivalent to 5 percent of the Fund’s reserves at the beginning of the financial year shall be generated during financial year 2000 in accordance with the provisions of Section IV, and shall be placed to the Special Contingent Account-1 referred to in Decision No. 9471-(90/98), adopted June 20, 1990. - Section IV. Implementation of Burden Sharing - 1. During financial year 2000, notwithstanding Rule I-6(4)(a) and (b) and Rule I-10, the rate of charge referred to in Rule I-6(4) and the rate of remuneration prescribed in Rule I-10 shall be adjusted in accordance with the provisions of this Section. - 2. (a) In order to generate the amount to be placed to the Special Contingent Account-1 in accordance with Section III, the rate of charge, and, subject to the limitation in (c), the rate of remuneration, shall be adjusted in accordance with the provisions of this paragraph, so as to produce equal amounts of income. - (b) If income from charges becomes deferred during an adjustment period as defined in (d), the rate of charge and, subject to the limitation in (c), the rate of remuneration, shall be further adjusted, in accordance with the provisions of this paragraph, so as to generate, in equal amounts, an additional amount of income equal to the amount of deferred charges. For the purposes of this provision, special charges on overdue financial obligations under Decision No. 8165-(85/189) G/TR, adopted December 30, 1985, as amended, shall not be taken into account. - (c) No adjustment in the rate of remuneration under this paragraph shall be carried to the point where the average remuneration coefficient would be reduced below 85 percent for an adjustment period. - (d) The adjustments under this paragraph shall be made as of May 1, 1999, August 1, 1999, November 1, 1999, and February 1, 2000: shortly after July 31 for the period May 1 to July 31; shortly after October 31 for the period from August 1 to October 31; shortly after January 31 for the period from November 1 to January 31; shortly after April 30 for the period from February 1 to April 30. - (e) The operation of this decision shall be reviewed when the adjustment in the rate of remuneration reduces the remuneration coefficient to the limit in (c) above. - 3. (a) Subject to paragraph 3 of Decision No. 8780-(88/12), adopted January 29, 1988, the balances held in the Special Contingent Account-1 shall be distributed in accordance with the provisions of this paragraph to members that have paid additional charges or have received reduced remuneration as a result of the adjustment when there are no outstanding overdue charges and repurchases, or at such earlier time as the Fund may decide. - (b) An amount equal to the proceeds of any adjustment for deferred charges shall be distributed, in accordance with the provisions of this paragraph, to members that have paid additional charges or have received reduced remuneration when, and to the extent that, charges, the deferral of which had given rise to the same adjustment, are paid to the Fund. Distributions under this provision shall be made quarterly. - (c) Distributions under (a) or (b) shall be made in proportion to the amounts that have been paid or have not been received by each member as a result of the respective adjustments. - (d) If a member that is entitled to a payment under this paragraph has any overdue obligation to the Fund in the General Department at the time of payment, the member's claim under this paragraph shall be set off against the Fund's claim in accordance with Decision No. 8271-(86/74), adopted April 30, 1986, or any subsequent decision of the Fund. - (e) Subject to paragraph 4 of Decision No. 8780-(88/12), adopted January 29, 1988, if any loss is charged against the Special Contingent Account-1, it shall be recorded in accordance with the principles of proportionality set forth in (c). - Decision No. 11945-(99/49), April 30, 1999. ### Implementation of burden sharing in FY 2001 and adjustment for deferred charges - Section I. Principles of Burden Sharing - 1. The financial consequences for the Fund, which stem from the existence of overdue financial obligations shall be shared between debtor and creditor member countries. - 2. The sharing shall be applied in a simultaneous and symmetrical fashion. - Section II. Determination of the Rate of Charge - The rate of charge referred to in Rule I-6(4) shall be adjusted in accordance with the provisions of Sections III and IV. - Section IV. Adjustment for Deferred Charges - 1. (a) If income from charges becomes deferred during an adjustment period as defined in (c), notwithstanding Rule I-6(4)(a) and (b) and Rule I-10, the rate of charge referred to in Rule I-6(4), and, subject to the limitation in (b), the rate of remuneration prescribed in Rule I-10, shall be adjusted in accordance with the provisions of this paragraph, so as to generate, in equal amounts, an additional amount of income equal to the amount of deferred charges. For the purposes of this provision, special charges on overdue financial obligations under Decision No. 8165-(85/189)G/TR, adopted December 30, 1985, shall not be taken into account. - (b) No adjustment in the rate of remuneration under this paragraph shall be carried to the point where the average remuneration coefficient would be reduced below 85 percent for an adjustment period. - (c) The adjustments under this paragraph shall be made as of the first day after each financial quarter beginning May 1, August 1, November 1 and February 1: - shortly after July 31 for the period May 1 to July 31; - shortly after October 31 for the period August 1 to October 31; - shortly after January 31 for the period from November 1 to January 31; - shortly after April 30 for the period from February 1 to April 30. - 2. (a) An amount equal to the proceeds of any adjustment for deferred charges shall be distributed, in accordance with the provisions of this paragraph, to members that have paid additional charges or have received reduced remuneration, when, and to the extent that, charges, the deferral of which had given rise to the same adjustment, are paid to the Fund. Distribution under this provision shall be made quarterly. - (b) Distribution under (a) shall be made in proportion to the amounts that have been paid or have not been received by each member as a result of the respective adjustments. - (c) If a member that is entitled to a payment under this paragraph has any overdue obligation to the Fund in the General Department at the time of payment, the member’s claim under this paragraph shall be set off against the Fund’s claim in accordance with Decision No. 8271-(86/74), adopted April 30, 1986, or any subsequent decision of the Fund. - Section V. Review - The operation of this decision shall be reviewed when the adjustment in the rate of remuneration reduces the remuneration coefficient to the limit set forth in paragraphs 2(b) of Section III and 1(b) of Section IV. - Decision No. 12189-(00/45), April 28, 2000, effective May 2, 2000. ### Rate of charge and income disposition decisions - RATE OF CHARGE ON THE USE OF FUND RESOURCES FOR FY 2007 - Pursuant to the last sentence of Rule I-6(4)(a), as amended by Decision No. 13705-(06/40), effective May 1, 2006, the rate of charge shall be the SDR interest rate under Rule T-1 plus a margin of 108 basis points. - (EBS/06/51, 4/12/06) - Decision No. 13706-(06/40), April 28, 2006. - INCOME POSITION—REVIEW OF RATE OF CHARGE ON USE OF FUND RESOURCES FOR FY 2005 - 1. Effective November 1, 2004, the proportion of the rate of charge to the SDR interest rate under Rule T-l shall be 136 percent. - 2. Any net income for financial year 2005 in excess of the net income target for FY 2005 of SDR 191 million shall be used, first, to reduce retroactively, to the extent possible, but not below 136 percent, the proportion of the rate of charge to the SDR interest rate under Rule T-l referred to in paragraph I of Decision No. 13236-(04/42), adopted April 30, 2004, for the period May 1, 2004 to October 31, 2004, and second, to further reduce retroactively the proportion of the rate of charge for the entire FY 2005. In all other respects, Decision No. 13236-(04/42), adopted April 30, 2004, shall continue to apply. - (EBS/04/171, 12/6/04) - Decision No. 13398-(04/113), December 13, 2004. - DISPOSITION OF NET INCOME FOR FY 2006 - 1. The Fund’s net income for FY 2006 derived from the application of paragraph 2 of Decision No. 13483-(05/37), adopted April 22, 2005, shall be placed to the Fund’s Special Reserve after the end of the financial year. - 2. The expenses derived from the implementation of International Accounting Standard 19—Employee Benefits during FY 2006 shall be charged against the Fund’s Special Reserve and shall be recorded separately in the financial records of the Fund. - (EBS/06/51, 4/12/06) - Decision No. 13704-(06/40), April 28, 2006. - SURCHARGES ON PURCHASES UNDER THE SUPPLEMENTAL RESERVE FACILITY, AND IN CREDIT TRANCHES AND UNDER EXTENDED FUND FACILITY—DISPOSITION OF NET OPERATING INCOME - For FY 2006, after meeting the cost of administering the PRGF Trust, any remaining net operational income generated by the surcharges on holdings arising from purchases under the Supplemental Reserve Facility and the level based surcharges on holdings arising from purchases in the credit tranches and under the Extended Fund Facility shall be placed, after the end of that financial year, to the General Reserve. - (EBS/05/62, 4/11/05) - Decision No. 13486-(05/37) SRF, April 22, 2005. - BURDEN SHARING—IMPLEMENTATION IN FY 2007 (heading appears in source). *Selected decisions and selected documents from the cited IMF text.* ### Section I. Principles of Burden Sharing ### Section I. Principles of Burden Sharing ### Principles of Burden Sharing - The financial consequences for the Fund that stem from the existence of overdue financial obligations shall be shared between debtor and creditor member countries. - The sharing shall be applied in a simultaneous and symmetrical fashion. ### Determination of the Rate of Charge - The rate of charge referred to in Rule I-6(4) shall be adjusted in accordance with the provisions of Section IV of this decision and Section IV of Executive Board Decision No. 12189-(00/45), adopted April 28, 2000. ### Adjustment for Deferred Charges - Notwithstanding paragraph 1(a) of Section IV of Executive Board Decision No. 12189-(00/45), adopted April 28, 2000, the rate of charge and the rate of remuneration determined under that Section shall be rounded to two decimal places. ### Amount for Special Contingent Account-1 - An amount of SDR 60 million shall be generated during financial year 2007 in accordance with the provisions of this Section and shall be placed to the Special Contingent Account-1 referred to in Decision No. 9471-(90/98), adopted June 20, 1990. - To generate the amount (notwithstanding Rule I-6(4)(a) and (b) and Rule I-10): - The rate of charge referred to in Rule I-6(4) and, subject to the limitation below, the rate of remuneration prescribed in Rule I-10 shall be adjusted. - Adjustments to the rate of charge and the rate of remuneration shall be rounded to two decimal places. - No adjustment in the rate of remuneration shall be carried to the point where the average remuneration coefficient would be reduced below 85 percent for an adjustment period. - The adjustments shall be made as of May 1, 2006, August 1, 2006, November 1, 2006 and February 1, 2007; shortly after July 31 for the period May 1 to July 31; shortly after October 31 for the period from August 1 to October 31; shortly after January 31 for the period from November 1 to January 31; shortly after April 30 for the period from February 1 to April 30. - Distribution of balances in Special Contingent Account-1: - Subject to paragraph 3 of Decision No. 8780-(88/12), adopted January 29, 1988, balances held in Special Contingent Account-1 shall be distributed to members that have paid additional charges or have received reduced remuneration as a result of the adjustment when there are no outstanding overdue charges and repurchases, or at such earlier time as the Fund may decide. - Distributions shall be made in proportion to the amounts that have been paid or have not been received by each member because of the respective adjustments. - If a member entitled to a payment has any overdue obligation to the Fund in the General Department at the time of payment, the member’s claim shall be set off against the Fund’s claim in accordance with Decision No. 8271-(86/74), adopted April 30, 1986, or any subsequent decision of the Fund. - Subject to paragraph 4 of Decision No. 8780-(88/12), if any loss is charged against the Special Contingent Account-1, it shall be recorded in accordance with the principles of proportionality set forth above. ### Review - The operation of this decision shall be reviewed when the adjustment in the rate of remuneration reduces the remuneration coefficient to the limit set forth in paragraph 2(b) of Section IV of this decision and Section IV of Executive Board Decision No. 12189-(00/45), adopted April 28, 2000. - (EBS/06/51, 4/12/06) Decision No. 13707-(06/40), April 28, 2006 ### Fund Income Position for FY 2007—Mid-Year Review - Pursuant to Rule I-6(4)(b), the Fund has conducted the mid-year review of its income position for FY 2007 and decides to leave unchanged the rate of charge established by Decision No. 13706-(06/40), adopted April 28, 2006. - (EBS/06/163, Sup. 1, 12/19/06) Decision No. 13857-(07/1), January 3, 2007 ### Burden Sharing—Review of Implementation in FY 2007 - The Fund reviewed implementation of burden sharing in FY 2007 established by Decision No. 13707-(06/40), adopted April 28, 2006, and decides to limit the amount to be generated during FY 2007 in accordance with Section IV, paragraph 1 of the decision, to the amount accumulated during the period May 1, 2006 through October 31, 2006. - (EBS/06/163, Sup. 1, 12/19/06) Decision No. 13858-(07/1), January 3, 2007 ### Rates for Computations and Maintenance of Value (Article V, Sections 10 and 11) - Exchange rate for computations by the Fund relating to the currency of a member in the General Resources Account: - On the occasion of the use of that currency in an operation or transaction between the Fund and a member (other than the case specified in (b) below) the rate shall be the rate determined as of the date of the Fund’s instructions for execution; if this rate cannot be used, the rate of the preceding day closest thereto that is practicable. The value date shall be the second business day after the date of the dispatch of the Fund’s instructions, or as early thereto as is practicable. - Payments received by the Fund after the due date and payments made to the Fund on an unscheduled basis shall be valued at the exchange rate in effect on the day of receipt, provided that, if a late payment is received within ten business days from the date of the instructions and there is a shortfall or overpayment caused by the difference between the exchange rate used for the instructions and the exchange rate in effect on the day of receipt, no adjustment shall be made if the shortfall or overpayment does not exceed SDR 5,000, unless the member that issues the currency requests the adjustment irrespective of costs. - On all other occasions the rate shall be the rate at which the currency is held by the Fund. - The Fund shall adjust its holdings of the currency of a member in the General Resources Account: - whenever a computation relating to the currency is made in accordance with paragraph 1(a); - at the end of the Fund’s financial year; - when the member requests the Fund to adjust the Fund’s holdings of its currency; - with respect to the euro, on the last business day of each month; - with respect to the U.S. dollar, on the last business day of each month; - on such other occasions as the Fund may decide. - Adjustments 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), the rate of the preceding day closest thereto for which a rate is communicated shall be used. - Whenever the Fund adjusts its holdings, the Fund shall establish an account receivable or an account payable for the amount payable by or to the member under Article V, Section 11. - For adjustments, the Fund’s holdings shall consist of total balances in the General Resources Account plus any account receivable or minus any account payable in the currency as of the date of the adjustment. - For the purpose of applying the Articles as of any date, the Fund’s holdings shall consist of actual holdings plus the balance in any account receivable or minus the balance in any account payable on that date. - 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, as amended by Decision Nos. 11859-(98/130), December 17, 1998, and 12998-(03/39), April 25, 2003 ### Special Disbursement Account: Termination and Transfer of Resources; Investment - Of the resources received in the Special Disbursement Account as a consequence of the termination of the Trust Fund which are not used for the Subsidy Account, SDR 1,500 million shall be used to provide balance of payments assistance on concessional terms, on a uniform basis, to low-income developing members in need of such assistance under arrangements similar to those set forth in the Trust Instrument. The remainder shall be used to provide assistance to low-income developing members in accordance with the second sentence of subsection 12(f)(ii) of Article V of the Articles of Agreement under a decision of the Fund to be taken not later than June 30, 1986. If no such decision is taken by that date, the remainder shall be used on the same terms as the SDR 1,500 million referred to above. - The Managing Director is authorized to invest a member’s currency held in the Special Disbursement Account in accordance with Article V, Section 12(h). - Decision No. 6704-(80/185) TR, December 17, 1980 - Decision No. 12152-(00/21), March 3, 2000: The Fund will review this investment strategy before September 30, 2002. ### Structural Adjustment Facility—Use of Resources of Special Disbursement Account (Annex highlights) - Purposes: - Provide balance of payments assistance on concessional terms, on a uniform basis, to low-income developing members in need of such assistance, in accordance with these Regulations. - Resources: - Resources available for the Facility shall consist of the assets made or to be made available pursuant to Executive Board Decision No. 6704-(80/185) TR and Decision No. 8237-(86/56) SAF. - Conditions for Assistance: - Assistance provided in the form of loans on the terms specified in paragraph 7 to eligible members that qualify under paragraph 5. - Amount of Assistance: - Potential access expressed as a uniform proportion of quotas, determined from time to time, at least annually. - Members that notify the Fund they will not use Facility resources shall be excluded from calculations. - If a member’s potential access changes after commitment, the three-year commitment amount will be proportionately modified; if increased after disbursements but before expiration, up to the balance may be disbursed upon Fund determination of reasonable effort to strengthen balance of payments. - Access under other Fund policies remains available per their terms. - Qualification for Assistance: - An eligible member shall consult the Managing Director before an initial request for a three-year commitment. - Resources committed upon approval by the Fund of an arrangement in support of a three-year macroeconomic and structural adjustment program. - Fund must be satisfied that the member has a protracted balance of payments problem and is making a reasonable effort to strengthen its position. - A member is deemed to be making a reasonable effort if it has presented a three-year adjustment program and the first of three annual programs. - Resources under three-year commitments made available in the form of loans under three annual arrangements; an annual arrangement may not be approved before expiration of the preceding annual arrangement except under exceptional circumstances. - An annual arrangement shall be approved only for a member with a satisfactory program and a need for balance of payments assistance. - If a member ceases to be eligible during the commitment period, the commitment remains in effect subject to the Regulations. - Disbursements: - One disbursement per annual arrangement upon approval. - Disbursements suspended while the member has an overdue financial obligation to the Fund in the General Resources Account, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee; disbursements made when overdue obligation discharged. - No disbursement under a three-year commitment shall be made after the expiration of the commitment period. - Terms of Loans: - Interest charged at the rate of one half of one percent per annum on outstanding balance; paid on June 30 and December 31 each year (or next day if payment day is not a business day). - Additional interest charged on (i) overdue interest on Facility loans, at a rate equal to one half of the sum of the rate of interest on loans under the Facility and the rate of interest on the SDR, and (ii) overdue amounts of repayments of loans under the Facility, at a rate equal to one half of the sum of the rate of interest on loans under the Facility and the rate of interest on the SDR, less one half percent, and subject to rules on waiver, notification, and payment of special charges under Executive Board Decision No. 8165-(85/189) G/TR, adopted December 30, 1985, or any subsequent decision. - Effective May 1, 1993, such additional interest shall not be levied on overdue obligations of a member that is overdue for six months or more in meeting any financial obligation to the Fund subject to additional interest under this paragraph. - Repayment: A member shall repay each 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. *Source: Decision No. 13707-(06/40) and related Executive Board decisions and annexed Regulations as presented in the supplied document.* ### 3. On the request of a member when repayment of an install- ### _31stissue - 3. On the request of a member when repayment of an install- ### Rescheduling of repayments - On the request of a member when repayment of an installment is due under a loan, the Fund may reschedule the repayment to a date not later than two years after the due date if the Fund finds that repayment on the due date would result in serious hardship for the member and that such rescheduling would not impair the ability of the Special Disbursement Account to meet the liabilities of the Facility. ### Unit of account - The SDR shall be the unit of account for commitments, loans, and all other operations under the Facility. (Paragraph 8) ### Media of payment - Loans shall be disbursed and repaid, and interest paid, in U.S. dollars. - The Managing Director is authorized to make arrangements under which, at the request of a member, SDRs may be used for disbursements to the member or payment of interest or repayments of loans by it to the Fund. (Paragraph 9) ### Reimbursement of expenses - The General Resources Account of the Fund shall be reimbursed annually by the Special Disbursement Account in respect of the expenses of administration of the Facility that are paid from the General Resources Account. - Reimbursement shall be made on the basis of a reasonable estimate of these expenses by the Fund. (Paragraph 10) ### Reserves and modifications - The Fund may establish, in the Special Disbursement Account, such reserves for the purposes of the Facility as it deems appropriate. (Paragraph 11) - Any modification of these Regulations will affect only loans made after the effective date of the modification, provided that a modification of the interest rate shall apply to interest accruing after the effective date of the modification. (Paragraph 12) - Decisions and other actions taken by the Fund in the administration of the Facility shall be identified as such. (Paragraph 13) ### Loans under the Enhanced Structural Adjustment Facility (ESAF) and interaction with SAF - Assistance from the Structural Adjustment Facility, in conjunction with loans from the Enhanced Structural Adjustment Facility Trust, under the Enhanced Structural Adjustment Facility established by Decision No. 8757-(87/176) SAF/ESAF, adopted December 18, 1987 shall be governed by these Regulations subject to specified provisions. - (a) Amounts of such assistance shall be identified in any commitment, arrangement, or disbursement under the Enhanced Structural Adjustment Facility and shall remain available for disbursement until the expiration of any commitment under the Enhanced Structural Adjustment Facility. - (b) If the full amount of resources committed to an eligible member under a three-year arrangement under the Structural Adjustment Facility has not been disbursed and a subsequent three-year commitment is made under the Enhanced Structural Adjustment Facility for that member, the undisbursed amounts under the previous arrangement may be made available to the member under the three-year arrangement under the Enhanced Structural Adjustment Facility. ### Disbursement modalities for ESAF-related annual arrangements - Disbursements under each annual arrangement shall be made in two installments: - the first after approval of the corresponding annual arrangement, and - the second after (i) a finding by the Managing Director that the performance criteria that have been established for that disbursement have been met, and a determination by the Fund that the midterm review of the program supported by the arrangement has been completed to the satisfaction of the Fund, or (ii) if so specified in the annual arrangement, a finding by the Managing Director that the performance criteria that have been established for that disbursement have been met. - Disbursements shall be made at the same time as the corresponding disbursements under Trust loans. - If a second disbursement under an annual arrangement is not made pursuant to the above, the period of the three-year commitment may be extended, and the corresponding amount may be made available during the extended period, subject to these Regulations. - If a three-year commitment has expired with undrawn amounts, the Fund may approve a new commitment for that member, subject to these Regulations, provided that: - the member submits a three-year macroeconomic and structural adjustment program; and - the amount of resources that could be made available under the new commitment shall not exceed the undrawn amounts under the expired commitment. - The new commitment may be made under a one-year or a two-year arrangement, with annual access to be determined on the basis of the strength of the member’s program and its balance of payments need. - If a member has received loans from the Structural Adjustment Facility in conjunction with loans from the Enhanced Structural Adjustment Facility Trust, any payment made by the member for the discharge of an obligation under any such loan shall also be attributed to the obligation under the other loan having the same due date in proportion to the respective amounts of such obligations. ### Use of SDRs in operations - (Section header present: "III. USE OF SDRS IN OPERATIONS"; source text does not provide further details in the excerpt.) ### List of eligible members and access amounts (as of March 29, 1989) - The members on the list annexed to this decision are eligible to receive balance of payments assistance under the Structural Adjustment Facility within the Special Disbursement Account (“the Facility”). - The potential access of each eligible member to the resources of the Facility as of March 29, 1989 shall be 50 percent of quota; no more than 15 percent of quota shall be disbursed under the first annual arrangement; no more than 20 percent of quota shall be disbursed under the second annual arrangement; and no more than 15 percent of quota shall be disbursed under the third annual arrangement. ### Annex: Low-Income Developing Members Eligible for Assistance Under Structural Adjustment Facility Within Special Disbursement Account - Afghanistan - Albania 1/ - Angola 1/ - Armenia 2/ - Azerbaijan 3/ - Bangladesh - Benin - Bhutan - Bolivia - Burkina Faso - Burundi - Cambodia - Cameroon 5/ - Cape Verde - Central African Republic - Chad - Comoros - Congo, Democratic Republic of - Congo, Republic of 3/ - Côte d’Ivoire 1/ - Djibouti - Dominica - Eritrea 7/ - Ethiopia - Gambia, The - Georgia 2/ - Ghana - Grenada - Guinea - Guinea-Bissau - Guyana - Haiti - Honduras 1/ - India 9/ - Kenya - Kiribati 8/ - Kyrgyz Republic 2/ - Lao People’s Democratic Republic - Lesotho - Madagascar - Malawi - Maldives - Mali - Mauritania - Moldova, Republic of 4/ - Mongolia 1/ - Mozambique - Myanmar - Nepal - Nicaragua 1/ - Niger - Liberia - Nigeria 1/ - Pakistan - Papua New Guinea 6/ - Rwanda - St. Lucia - St. Vincent and the Grenadines - Samoa - São Tomé and Príncipe - Senegal - Sierra Leone - Solomon Islands - Somalia - Sri Lanka - Sudan - Tajikistan 2/ - Tanzania - Timor-Leste 6/ - Togo - Tonga 8/ - Uganda - Uzbekistan 6/ - Vanuatu - Vietnam - Yemen, Republic of - Zambia - Zimbabwe 1/ - Notes included in source: - * Effective November 22, 1999, the Enhanced Structural Adjustment Facility (ESAF) was renamed the Poverty Reduction and Growth Facility (PRGF). Unless otherwise indicated, the list of countries below were first made SAF (and later ESAF and PRGF) eligible on March 26, 1986. - 1/ Added by Decision No. 9986-(92/48) SAF, April 7, 1992 and has indicated that it does not intend to make use of the resources of the Structural Adjustment Facility. - 2/ Added by Decision No. 10535-(93/170) SAF, December 15, 1993. - 3/ Added by Decision No. 10989-(95/53) SAF, May 30, 1995. - 4/ Added by Decision No. 11924-(99/31), March 23, 1999. - 5/ Added by Decision No. 10598-(94/14) SAF, February 23, 1994. - 6/ Added by Decision No. 13027-(03/56), June 11, 2003. - 7/ Added by Decision No. 10873-(95/1), January 5, 1995. - 8/ Added by Decision No. 8542-(87/36) SAF, March 2, 1987. - 9/ India has indicated that it does not intend to make use of the resources of the Structural Adjustment Facility. ### Reviews, transfers, and Trust interactions - The Fund shall review the operation of the Structural Adjustment Facility within the Special Disbursement Account not later than May 31, 1988. - The Executive Board established the Enhanced Structural Adjustment Facility (ESAF). Loans under that Facility shall be provided by the Enhanced Structural Adjustment Facility Trust, normally in conjunction with loans under the Structural Adjustment Facility, on concessional terms, to low-income developing members that qualify for assistance. - The use of resources provided by lenders that agree to support arrangements under the Enhanced Structural Adjustment Facility through loans to qualifying members shall be used in association with loans under the Enhanced Structural Adjustment Facility and in accordance with the arrangements between the Fund and the lenders. - The Fund shall review the operation of the Enhanced Structural Adjustment Facility, of the Structural Adjustment Facility, and of the Enhanced Structural Adjustment Facility Trust, not later than March 31, 1989. ### Transfers from the Special Disbursement Account (SDA) to ESAF Trust Reserve Account - Resources to be transferred to the Enhanced Structural Adjustment Facility Trust Reserve Account include: - (i) all income already received or to be received from the investment of resources available for the Structural Adjustment Facility within the Special Disbursement Account; - (ii) all interest already received or to be received, including from special charges, on loans under the Structural Adjustment Facility; - (iii) all repayments of loans under the Structural Adjustment Facility; and - (iv) all the resources held in the Special Disbursement Account that are derived from the termination of the 1976 Trust Fund and that can no longer be used under the Structural Adjustment Facility, and that have not been transferred to the Subsidy Account of the ESAF Trust in accordance with Decision No. 10531-(93/170) SAF; - provided that the above resources shall be retransferred to the Special Disbursement Account when and to the extent that they are needed for the reimbursement of the expenses incurred by the General Resources Account in the administration of the Structural Adjustment Facility and the Trust, which must be reimbursed in accordance with paragraph 10 of the Regulations for the Administration of the Structural Adjustment Facility and paragraph 3 of this decision. - Whenever the Trustee determines that amounts in the Reserve Account of the Trust exceed the amount that may be needed to cover the total liabilities of the Trust to lenders that are authorized to be discharged by the Reserve Account, the Trustee shall retransfer such excess amounts to the Special Disbursement Account. Upon liquidation of the Trust, all amounts in the Reserve Account remaining after discharge of liabilities authorized to be discharged by the Reserve Account shall be transferred to the Special Disbursement Account. - The Special Disbursement Account shall reimburse the General Resources Account annually in respect of the expenses of conducting the business of the Enhanced Structural Adjustment Facility Trust. - Resources transferred under this decision shall be available to cover liabilities that are authorized to be discharged by the Reserve Account with respect to members that are eligible for assistance from the Structural Adjustment Facility and have notified the Fund of their intention not to make use of the resources of the Structural Adjustment Facility. - This decision replaces Decision No. 8237-(86/56) SAF, adopted March 26, 1986. ### Subsequent decisions and reassignments - The Fund reviewed the operation of the SAF within the SDA and decided that from the date this decision becomes effective it will no longer approve commitments to provide assistance from the SAF in conjunction with loans from the ESAF Trust. - With the exception of resources transferred pursuant to specified subparagraphs of Decision No. 8760-(87/176), SDR 260 million of the resources held in the SDA derived from the termination of the 1976 Trust Fund shall be maintained in that account for further use under the SAF, and SDR 400 million of the resources held or to be received by the SDA that are derived from the termination of the 1976 Trust Fund shall be transferred promptly after the effectiveness of this decision to the Subsidy Account of the ESAF Trust for the subsidization of ESAF Trust loans. - Modalities of gold pledge for use of PRGF Trust resources under rights approach: As long as loans from the Poverty Reduction and Growth Facility Trust to members for the financing of “rights” as defined in the Managing Director’s Summing Up at EBM/90/97 of June 20, 1990 are outstanding, the Fund shall review the adequacy of the Reserve Account of the ESAF Trust by end March and end September of each year. *Source: Selected Decisions and Selected Documents, SPECIAL DISBURSEMENT ACCOUNT (excerpt).* ### 2. The Fund shall determine whether the amounts held in the ### The Fund shall determine whether the amounts held in the Reserve Account, plus other available means of financing, are sufficient ### Reserve Account adequacy review and authorized response (paragraph 2) - The Fund shall determine whether the amounts held in the Reserve Account, plus other available means of financing that would effectively restore the resources of the Trust, are sufficient to meet all obligations which could give rise to a payment from the Reserve Account to lenders to the Loan Account of the ESAF Trust in the six months following a review under paragraph 1. - If the Fund determines these resources are insufficient (the “potential shortfall”), the Managing Director is authorized and instructed to sell gold held in the General Resources Account in an amount that would generate proceeds available for transfer to the Special Disbursement Account under Article V, Section 12(f), up to the equivalent of the potential shortfall in the Reserve Account. ### Conditions and limits on gold sales (paragraph 2, paragraph 3) - Proceeds of such gold sales shall be subject to the following limit (paragraph 2(i)): - These proceeds shall not exceed the equivalent of the previous drawings on the Reserve Account attributable to overdue obligations under loans from the ESAF Trust to members for the financing of rights as described above, plus foregone interest earnings on amounts equivalent to these drawings, and less any amounts corresponding to these drawings that have been subsequently paid by such members or for which the Reserve Account has previously been replenished from the proceeds of a gold sale under this decision. - Additional limit (paragraph 2(ii)): - The total amount of gold available for sale under this decision shall not exceed the amount specified in paragraph 4. - Placement rule for proceeds (paragraph 3): - The proceeds of any sale of gold under this decision in excess of an amount equivalent at the time of the sale to one special drawing right per 0.888 671 gram of fine gold shall be placed in the Special Disbursement Account and shall be transferred immediately thereupon to the Reserve Account. ### Retention, reassessment, and amendment constraints (paragraphs 4–6) - Retention of gold holdings (paragraph 4): - The Fund shall retain full ownership of holdings of gold of 3 million ounces in the General Resources Account, less any amounts sold pursuant to this decision, as long as loans from the ESAF Trust to members for the financing of rights as described above remain outstanding. - Reassessment requirement (paragraph 5): - The need to maintain the full amount specified in paragraph 4 available for sale shall be reassessed on the occasion of the reviews under paragraph 1. - This amount shall not be reduced without the consent of all lenders to the Loan Account of the ESAF Trust. - Amendment constraint (paragraph 6): - This decision shall not be amended by the Fund except with the consent of all lenders to the Loan Account of the ESAF Trust. ### Termination conditions (paragraph 7) - This decision shall be terminated on the earlier of: - (i) when after all loans that may be made from the ESAF Trust have been fully disbursed, the resources held in the Reserve Account exceed the amounts outstanding under ESAF Trust loans, or - (ii) when after all loans that may be made from the ESAF Trust for the financing of rights as described above have been fully disbursed, there are no outstanding obligations under such ESAF Trust loans, with respect to which a gold sale can be made under this decision. ### Subsequent PRGF Trust actions and related decisions (selected extracts) - PRGF Trust—Reserve Account—Review: - The Fund reviewed adequacy of balances in the Reserve Account of the PRGF Trust and determines that they are sufficient to meet all obligations that could give rise to payments from the Account to lenders to the Loan Account of the PRGF Trust in the six months from October 1, 2005 to March 31, 2006. (SM/05/346, 9/8/05) - Decision No. 13570-(05/80) PRGF, September 15, 2005 - Cost of administering PRGF Trust: - For FY 2007, no reimbursement shall be made to the General Resources Account from the Reserve Account of the PRGF-ESF Trust (through the Special Disbursement Account, SDA) for the cost of Administering the PRGF-ESF Trust. (EBS/06/51, 4/12/06) - Decision No. 13708-(06/40) PRGF, April 28, 2006 *Decision No. 10286-(93/23) ESAF, February 22, 1993, as amended by Decision No.12229-(00/66) PRGF, June 30, 2000* ### Annex to this decision or established in accordance with para- ### _31stissue - Annex to this decision or established in accordance with para- ### Paragraph 3 — Adherence - Any member or institution specified in the Annex may adhere to this decision in accordance with paragraph 3(c). - 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; adherence requires that the Fund agree and no participant object, and shall follow paragraph 3(c). - When giving notice under paragraph 3(b) a member or institution shall specify the amount, expressed in terms of the special drawing right, of the credit arrangement it is willing to enter into, provided that the amount shall not be less than the credit arrangement of the participant with the smallest credit arrangement. - Adherence under paragraph 3(c) requires depositing with the Fund an instrument stating that the member or institution has adhered in accordance with its law and has taken all steps necessary to carry out the terms and conditions of this decision. On deposit 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 - The decision becomes effective when 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 - Amounts of participants’ credit arrangements may be reviewed from time to time and changed with the agreement of the Fund and all participants. ### Paragraph 6 — Initial Procedure - When a participating member (or member whose institution is a participant) approaches the Fund on an exchange transaction or stand-by or extended arrangement and the Managing Director, after consultation, considers the transaction necessary to forestall or cope with an impairment of the international monetary system and that the Fund’s resources need supplementation, the Managing Director shall initiate the procedure for making calls under paragraph 7. ### Paragraph 7 — Calls (Procedure and Conditions) - The Managing Director shall make a proposal for calls only after consultation with Executive Directors and participants; a proposal becomes effective only if accepted by participants and approved by the Executive Board. Each participant shall notify the Fund of acceptance of a proposal involving a call under its credit arrangement. - Currencies and amounts to be called shall be based on the present and prospective balance of payments and reserve position of participating members and on the Fund’s holdings of currencies. - Unless otherwise provided in an approved proposal for future calls, purchases of borrowed currency under a stand-by or extended arrangement shall be made in the currencies of participants in proportion to the amounts in the proposal. - If a participant requests that calls not be made on it or be reduced, the Managing Director may propose substitute amounts from other participants subject to paragraph 7(a); the original proposal remains effective unless replaced. - When the Fund makes a call pursuant to paragraph 7, the participant shall promptly make the transfer in accordance with the call. ### Paragraph 8 — Evidence of Indebtedness - The Fund shall issue, on request, non-negotiable instruments evidencing the Fund’s indebtedness to a participant; form to be agreed between Fund and participant. - Upon repayment of the instrument and all accrued interest it shall be returned for cancellation. If less than the amount is repaid, the instrument shall be returned and a new instrument for the remainder substituted with the same maturity date. ### Paragraph 9 — Interest - The Fund shall pay interest on its indebtedness at a rate equal to the combined market interest rate computed by the Fund for determining the rate it pays on holdings of special drawing rights. A change in the method of calculating this rate shall apply only if the Fund and at least two thirds of the participants having three fifths of the total amount of the credit arrangements so agree; if a participant so requests when the agreement is reached, the change shall not apply to the Fund’s indebtedness to that participant outstanding at the date the change becomes effective. - Interest shall accrue daily and shall be paid as soon as possible after each July 31, October 31, January 31, and April 30. - Interest due to a participant 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 use of general resources and stand-by and extended arrangements (including period of use) shall apply to purchases of currency borrowed by the Fund. - Nothing in this decision affects the Fund’s authority with respect to requests for use of its resources by individual members; access shall be determined by the Fund’s policies and practices and shall not depend on whether the Fund can borrow under this decision. ### Paragraph 11 — Repayment by the Fund (Timing, Options, and Conditions) - Subject to other provisions of 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 is committed to repurchase earlier than five years, the Fund shall repay at that date. - Repayment under paragraph 11(a) or 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. - Before the five-year date the Fund, after consultation, may repay in part or in full; the Fund may choose to repay in the participant’s currency, or in special drawing rights within Article XIX, Section 4 limits unless the participant agrees to exceed that limit, or, with agreement, in other actually convertible currencies. - 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. - If indebtedness arises from transfers to finance a reserve tranche purchase and the Fund’s non-repurchase holdings of that drawer’s currency are reduced due to net sales during a quarterly operational budget period, the Fund shall repay at the beginning of the next quarterly period an amount equivalent to that reduction, up to the amount of indebtedness. - Repayment under paragraph 11(c) shall be made in proportion to the Fund’s indebtedness to the participants that made the transfers. - A participant may give notice asserting a balance of payments need for repayment of part or all of the Fund’s indebtedness and request such repayment; the Fund shall give the overwhelming benefit of any doubt to the participant’s representation. Repayment shall be made after consultation in currencies of other members that are actually convertible, or 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 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. - 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. - 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 that drawer’s purchases. - When any repayment is made to a participant, the amount that can be called for under its credit arrangement shall be restored pro tanto. - The Fund shall be deemed to have discharged its obligations to a participating institution to make repayment or pay interest if it transfers an equivalent amount in special drawing rights to the member in which the institution is established. ### Paragraph 12 — Rates of Exchange - 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. - For all 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 shall be in writing or by rapid means of communication and 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-1 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 is not necessary for 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 - 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. - 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 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 - This decision shall continue in existence for four years from its effective date. - A new period of five years shall begin on the effective date of Decision No. 7337-(83/37), adopted February 24, 1983. References in paragraph 19(b) to the period prescribed in paragraph 19(a) shall refer to this new period and to any subsequent renewal periods decided pursuant to paragraph 19(b). - When considering renewal for the period following the five-year period in paragraph 19(a), the Fund and the participants shall review the functioning of this decision, including provisions of paragraph 21. - The decision may be renewed for such period(s) 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. - Withdrawal of adherence under paragraph 19(b) by a participant shall not preclude its subsequent adherence in accordance with paragraph 3(b). - If the 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 termination or expiration until repayment is completed. - If a participant withdraws adherence under 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) as of the date of withdrawal shall continue to apply to any indebtedness of the Fund under the former credit arrangement until repayment is completed. ### Paragraph 20 — Interpretation - Any question of interpretation not 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 this purpose participants shall be deemed to include former participants to which paragraphs 8 through 14, 17 and 18(b) continue to apply pursuant to paragraph 19(c) to the extent any such former participant is affected by the interpretation question. ### Paragraph 21 — Use of Credit Arrangements for Nonparticipants - The Fund may make calls in accordance with paragraphs 6 and 7 for exchange transactions requested by members that are not participants if the exchange transactions are: - (i) transactions in the upper credit tranches, - (ii) transactions under stand-by arrangements extending beyond the first credit tranche, - (iii) transactions under extended arrangements, or - (iv) transactions in the first credit tranche in conjunction with a stand-by or an extended arrangement. - All provisions relating to calls shall apply except as provided in paragraph 21(b). - The Managing Director may initiate the procedure for calls in connection with such requests if, after consultation, he considers the Fund faces an inadequacy of resources to meet actual and expected requests for financing reflecting an exceptional situation associated with balance of payments problems of members of a character or aggregate size that could threaten the stability of the international monetary system. In making proposals the Managing Director shall pay due regard to potential calls under other provisions of this decision. ### Paragraph 22 — (Abrogated) - See Decision No. 10175-(92/129), October 28, 1992. ### Paragraph 23 — Associated Borrowing Arrangements - A borrowing arrangement between the Fund and a member that is not a participant, or an official institution of such a member, under which the member or official institution undertakes to make loans to the Fund for the same purposes and on terms comparable to those made by participants, may, with the concurrence of all participants, authorize the Fund to make calls on participants in accordance with paragraphs 6 and 7 for exchange transactions with that member, or to make requests under paragraph 11(e) in connection with an early repayment of a claim under the borrowing arrangement, or both. Such calls or requests shall be treated as if they were in respect of a participant. - Nothing in this decision shall preclude the Fund from entering into other types of borrowing arrangements, including arrangements between the Fund and a lender involving an association with participants that do not contain the authorizations in paragraph 23(a). *Annex: Participants and Amounts of Credit Arrangements — Amount in Special Drawing Rights (table follows in source).* ### 1. United States of America 4,250,000,000 ### _31stissue - 1. United States of America 4,250,000,000 ### Participants' commitments (listed amounts) - 1. United States of America 4,250,000,000 - 2. Deutsche Bundesbank 2,380,000,000 - 3. Japan 2,125,000,000 - 4. France 1,700,000,000 - 5. United Kingdom 1,700,000,000 - 6. Italy 1,105,000,000 - 7. Canada 892,500,000 - 8. Netherlands 850,000,000 - 9. Belgium 595,000,000 - 10. Sveriges Riksbank 382,500,000 - 11. Swiss National Bank 1,020,000,000 - Aggregate line shown: 17,000,000,000 ### Selected decisions — procedural framework for Supplementary Resources borrowings - Decision No. 1289-(62/1), January 5, 1962, as amended by Decision Nos. 1362-(62/32), July 9, 1962, effective October 12, 1962, 1415-(62/47), September 19, 1962, 4421-(74/132), October 23, 1974, 5792-(78/79), June 2, 1978, 6241-(79/144), August 24, 1979, 7337-(83/37), February 24, 1983, 10175-(92/129), October 28, 1992, 8733-(87/159), effective December 26, 1988, 10176-(92/129), October 28, 1992, 11609-(97/112), November 19, 1997, and 12879-(02/113), November 12, 2002. - Letter from Mr. Baumgartner, Minister of Finance, France to Mr. Dillon, Secretary of the Treasury, United States, December 15, 1961 outlines the consultative procedure to be followed by Participating Countries and Institutions in connection with borrowings by the Fund of Supplementary Resources. ### Consultative procedure for use of Supplementary Resources (summary of steps A–F) - A. A participating country needing Fund drawing or stand-by agreement that might use Supplementary Resources shall consult with the Managing Director first and then with other participants. - B. If the Managing Director proposes Supplementary Resources to be lent to the Fund, participants shall consult and inform the Managing Director of amounts of their currencies they consider appropriate to lend, taking into account the Managing Director’s recommendations and their present and prospective balance of payments and reserve positions. Participants shall aim at reaching unanimous agreement. - C. If unanimous agreement is not possible, whether participants will facilitate by lending currencies will be decided by a poll of the participants. The prospective drawer is not entitled to vote. A favorable decision requires: - (1) a two-thirds majority of the number of participants voting; and - (2) a three-fifths majority of the weighted votes of the participants voting, weighted on the basis of the commitments to the Supplementary Resources. - D. If decision in paragraph C is favorable, further consultations determine amounts of currencies each participant will loan to attain the agreed general order of magnitude. A participant may notify that calls should not be made on it or should be for a smaller amount for balance of payments reasons; participants shall then consult on additional amounts others could provide. - E. When agreement is reached under paragraph D, each participant shall inform the Managing Director of the calls it is prepared to meet under its credit arrangement with the Fund. - F. If a participant that has loaned its currency subsequently requests reversal of its loan leading to further loans by others, that participant shall consult with the Managing Director and other participants. ### Consultative arrangements and meetings - Participants will designate representatives empowered to act with respect to proposals for use of the Supplementary Resources. - In event of proposals for calls or other matters requiring consultations, a consultative meeting will be held among all participants. The representative of France shall call the first meeting, and participants will determine the Chairman. The Managing Director of the Fund or his representative shall be invited to participate. - Participants should, to the fullest extent practicable, use facilities of international organizations to keep each other informed of balance of payments developments that could give rise to use of Supplementary Resources. ### General Arrangements to Borrow (GAB) — transferability of claims (key provisions) - The Fund consents in advance to the transfer of outstanding claims to repayment under the GAB (pursuant to paragraph 13 of the revised GAB effective December 26, 1983) on the terms and conditions set out below: 1. All or part of any claim under the GAB may be transferred at any time to a participant in the GAB. 2. From the value date of the transfer, the transferred claim shall be held by the transferee on the same terms and conditions as claims originating under its credit arrangement, except that the transferee shall acquire the right to request early repayment on balance of payments grounds pursuant to paragraph 11(e) of the GAB only if, at the time of transfer, (i) the transferee is a member, or the institution of a member, whose balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget; or (ii) the transferee is the Swiss National Bank, and the balance of payments and reserve position of the Swiss Confederation is, in the opinion of the Fund, sufficiently strong to justify such acquisition. 3. The price for the claim transferred shall be as agreed between the transferee and the transferor. 4. The transferor shall inform the Fund promptly of the claim being transferred, the name of the transferee, the amount of the claim being transferred, the agreed price for transfer of the claim, and the value date of the transfer. 5. The transfer shall be registered by the Fund if it is in accordance with the terms and conditions of this decision and shall be effective as of the agreed value date. 6. If all or part of a claim is transferred during a quarterly period as described in paragraph 9(b) of the GAB, the Fund shall pay interest to the transferee on the amount of the claim transferred for the whole of that period. - Decision No. 7628-(84/25), February 15, 1984, effective April 10, 1984. ### Transferability of claims under Saudi Arabia’s Borrowing Agreement (key provisions) - Pursuant to paragraph 9 of the Borrowing Agreement with Saudi Arabia (effective December 26, 1983), the Fund consents in advance to transfer of outstanding claims under that Agreement on the terms set out: 1. All or part of any claim may be transferred at any time to any member of the Fund, the central bank or other agency of any member, or any official entity prescribed as a holder of SDRs pursuant to Article XVII, Section 3. 2. On the value date, all rights and obligations of Saudi Arabia with respect to the transferred claim vest in the transferee, except: - (a) the transferee acquires the right to request early repayment on balance of payments grounds provided in paragraph 6(d) of the Agreement only if, at the time of transfer, (i) the transferee is a member, or the agency of a member, whose balance of payments and reserve position is considered sufficiently strong for its currency to be usable in net sales in the Fund’s operational budget, or (ii) the transferee is the Swiss National Bank, and the balance of payments and reserve position of the Swiss Confederation is, in the opinion of the Fund, sufficiently strong to justify such acquisition; - (b) if the transferee is a member or the agency of a member, references in the Agreement to payment in Saudi riyals shall be deemed references to payment in the member’s currency, and if the transferee is not a member or the agency of a member such references shall not apply; and - (c) the right to repayment on withdrawal provided in paragraph 10 of the Agreement shall apply only if the transferee is a member or the agency of a member, and that member withdraws from the Fund. 3. The price for the claim transferred shall be as agreed between the transferor and the transferee. 4. The transferor shall inform the Fund promptly of the claim being transferred, the name of the transferee, the amount of the claim being transferred, the agreed price for the transfer, and the value date of the transfer. 5. The transfer shall be registered by the Fund if in accordance with the terms and conditions of this decision and effective as of the value date agreed. 6. If a claim is transferred during the quarterly period ending on a date specified in paragraph 5(b) of the Agreement, the Fund shall pay interest to the transferee on the amount of the claim transferred for the whole of that period. *Source: _31stissue - 1. United States of America 4,250,000,000 (PDF chapter/section).* ### 7. If requested by the holder of a claim under the Agreement, ### If requested by the holder of a claim under the Agreement, ### Borrowing agreement with Saudi Arabia — overview - Saudi Arabia will stand ready to lend Saudi riyals to the Fund up to a maximum amount equivalent to one thousand five hundred million SDRs (SDR 1,500,000,000) to assist the Fund in financing purchases by members for the same purposes and in the same circumstances as are prescribed in the GAB. - The Agreement entered into force on December 26, 1983 (Ed. Note: The Agreement with Saudi Arabia entered into force on December 26, 1983). - The Agreement may be changed by agreement between Saudi Arabia and the Fund. - Renewal authority: Managing Director authorized to propose renewals; further renewal for five years from December 26, 2003 was proposed and entered into force on December 26, 2003 (Decision No. 12907-(02/122), December 12, 2002; reply accepting received). ### Period of the credit arrangement and renewal (Paragraph 2) - Calls may be made during a period of five years from the date this Agreement enters into force, unless the Fund’s right to make calls is terminated earlier. - When a renewal of the GAB decision is under consideration, the Fund and Saudi Arabia shall consult regarding renewal or other arrangements. - Provisions of paragraphs 4 through 13 continue to apply after termination until all Fund obligations are discharged. ### Calls (Paragraph 3) — conditions and procedures - Calls may be made only pursuant to a proposal of the Managing Director that has become effective in accordance with (d). - Managing Director may propose calls (including future calls under stand-by or extended arrangements) if: (i) a proposal for the same purchases could be made under the GAB and (ii) after consultation with Saudi Arabia at the same time and manner as GAB participants. - The Managing Director shall take into account present and prospective balance of payments and reserve position of Saudi Arabia and the Fund’s holdings of Saudi riyals when deciding on proposals and amounts. - A proposal becomes effective only when Saudi Arabia notifies the Fund it accepts the proposal and the proposal is approved by the Executive Board. - When the Fund makes a call, Saudi Arabia shall transfer to the account of the Fund, free of any charge or commission, an amount of Saudi riyals equivalent to the amount of the call on the date specified in the call. - Saudi Arabia shall exchange the riyals for a freely usable currency of its choice in accordance with Article V, Section 3 of the Articles. - If Saudi Arabia represents that future calls should no longer be made or be smaller due to its balance of payments and reserve position, and the Fund, after giving Saudi Arabia the overwhelming benefit of any doubt, determines the representation is justified, the Fund shall comply. ### Evidence of indebtedness (Paragraph 4) - At Saudi Arabia’s request the Fund shall issue a nonnegotiable instrument or instruments evidencing the Fund’s outstanding indebtedness under this Agreement in a form to be agreed. - Upon repayment of amounts evidenced, instruments returned for cancellation; if balance remains outstanding, a new instrument issued for the remainder with the same maturity date. ### Interest (Paragraph 5) - Interest rate: equal to the combined market interest rate computed by the Fund from time to time under its Rules and Regulations for the purpose of determining the rate at which it pays interest on holdings of SDRs. - If the Fund changes the method of computing the combined market interest rate, the new method applies to amounts borrowed hereunder only if applied to borrowing under the GAB and Saudi Arabia agrees. - Interest shall accrue daily and be paid as soon as possible after each July 31, October 31, January 31, and April 30. ### Repayment by the Fund (Paragraph 6) - Repayment term: the Fund shall repay an amount equal to each amount transferred by Saudi Arabia five years after the date the transfer was made, subject to other provisions. - If a purchasing member is committed to repurchase by installments on fixed dates earlier than five years, the Fund shall repay in corresponding installments on those fixed dates. - Whenever a reduction in the Fund’s holdings of a purchasing member’s currency is attributed to a purchase financed with an amount transferred by Saudi Arabia, the Fund shall promptly make a corresponding repayment to Saudi Arabia. - If amount financed a reserve tranche purchase and Fund’s holdings not subject to repurchase are reduced due to net sales during a quarterly period covered by an operational budget, the Fund shall make corresponding repayment at the beginning of the next quarterly period. - Amounts repaid under (c) and (d) shall be credited against outstanding indebtedness in the order in which such indebtedness would fall due under (a). - The Fund shall not reduce its holdings of the currency of a member whose purchases were financed by borrowing hereunder below an amount equal to the outstanding amount of such borrowing plus any outstanding amount borrowed under the GAB to finance purchases by the same member. - When any repayment is made to Saudi Arabia, the amount that the Fund may call for under the credit arrangement shall be restored pro tanto. - Early repayment on balance of payments grounds: if Saudi Arabia represents it has a balance of payments need for repayment before the due date and the Fund, after giving Saudi Arabia’s representation the overwhelming benefit of any doubt, determines there is such a need, the Fund shall make early repayment as requested. ### Media of payment (Paragraph 7) - Payments of interest and principal shall be made, as determined by the Fund after consultation with Saudi Arabia, in Saudi riyals, in SDRs or in currencies that are actually convertible. - Limitations: (i) unless Saudi Arabia agrees, SDRs shall not be used in early repayment under paragraph 6(c) if the effect would be to increase Saudi Arabia’s holdings of SDRs above the limit specified in Article XIX, Section 4 of the Articles; (ii) Saudi riyals shall not be used in early repayment on balance of payments grounds under paragraph 6(d). - Currencies other than Saudi riyals used for payment shall be selected by the Fund from those that can be used in net sales under the operational budget of the Fund in effect at the time the payment is made. ### Rates of exchange (Paragraph 8) - All amounts under the Agreement shall be denominated in SDRs as valued by the Fund from time to time. - The SDR value of Saudi riyals to be transferred and of payments to be made by the Fund in currencies shall be determined in accordance with Rule O-2 of the Rules and Regulations of the Fund. ### Transferability (Paragraph 9) - Saudi Arabia may transfer all or part of its claims under this Agreement only with the prior consent of the Fund and on such terms and conditions as the Fund may approve. ### Withdrawal from membership (Paragraph 10) - If Saudi Arabia withdraws from membership in the Fund, no further calls shall be made hereunder. - The Fund’s outstanding indebtedness hereunder shall be treated as an amount due from the Fund for purposes of Article XXVI, Section 3, and Schedule J of the Articles. ### Suspension of exchange transactions and liquidation (Paragraph 11) - The Fund’s right to make calls and its obligation to make repayment under this Agreement shall be suspended during any suspension of exchange transactions under Article XXVII of the Articles. - In the event of liquidation of the Fund, no further calls shall be made; the Fund’s outstanding indebtedness shall constitute a liability under Schedule K of the Articles. - For paragraph 1(a) of Schedule K, the currency in which each amount of the Fund’s indebtedness is payable shall be first Saudi riyals and then any currency that is actually convertible. ### Amendment (Paragraph 12) - This Agreement may be amended at any time by agreement between Saudi Arabia and the Fund. - If the revised and enlarged GAB is modified while this Agreement is in effect, Saudi Arabia and the Fund will consult to determine whether consequential modifications should be made. - If Saudi Arabia proposes conversion or replacement of the credit arrangement into an arrangement of the type referred to in paragraph 23(a) or 23(b) of the revised GAB Decision, the Fund will consider steps to effect such conversion or replacement subject to concurrence of GAB participants as necessary. ### Interpretation and settlement of disputes (Paragraph 13) - Any question of interpretation not falling within Article XXIX of the Articles, and any dispute arising hereunder, shall be settled to the mutual satisfaction of Saudi Arabia and the Fund. ### Renewal of the 1983 borrowing agreement (summary) - The 1983 borrowing agreement entered into force on December 26, 1983 and was renewed for successive five-year periods from December 26, 1988; December 26, 1993; and December 26, 1998. - Executive Board Decision No. 12907-(02/122), adopted December 12, 2002, authorized a further renewal for a period of five years from December 26, 2003. The reply indicating Saudi Arabia’s acceptance was received by the Fund on July 18, 1983 (Ed. Note) and the renewal entered into force on December 26, 2003. ### New Arrangements to Borrow — preamble and definitions (beginning) - Preamble: countries with financial capacity agree to make available resources in the form of loans up to specified amounts when supplementary resources are needed to forestall or cope with impairment of the international monetary system or exceptional situations threatening its stability; terms and conditions adopted under Article VII, Section 1. - Selected definitions (Paragraph 1): - “amount of a credit arrangement” means the maximum amount expressed in special drawing rights that a participant undertakes to lend to the Fund under a credit arrangement. - “Articles” means the Articles of Agreement of the International Monetary Fund. - “available commitment” means a participant’s credit arrangement less any committed or drawn balances. - “borrowed currency” or “currency borrowed” means currency transferred to the Fund’s account under a credit arrangement. - “call” means a notice by the Fund to a participant to make a transfer under its credit arrangement to the Fund’s account. - “credit arrangement” means an undertaking to lend to the Fund on the terms and conditions of this decision. - “currency actually convertible” means currency included in the Fund’s quarterly operational budget for transfers. - “drawer” means a member that purchases borrowed currency from the Fund in an exchange transaction, including an exchange transaction under a stand-by or extended arrangement. - “indebtedness” of the Fund means the amount it is committed to repay under a credit arrangement. - “member” means a member of the Fund. - “participant” means a participating member or a participating institution. - “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, or an official institution of a nonmember that has entered into a credit arrangement with the Fund. - “participating member” means a member that has entered into a credit arrangement with the Fund. - Special provision for the Hong Kong Monetary Authority (HKMA): treated as an official institution of the member whose territories include Hong Kong with conditions regarding currency (principally U.S. dollars in principle), non-application of paragraph 6 A to the member, and references to balance of payments and reserve position understood to refer to Hong Kong. *Selected Decisions and Selected Documents — _31stissue - 7.* ### Annex to this decision or established in accordance with paragraph ### _31stissue - Annex to this decision or established in accordance with paragraph ### Adherence (Paragraph 3) - Any member or institution specified in the Annex may adhere to this decision in accordance with paragraph 3(c). - Any member or institution not specified in the Annex, including an institution of a nonmember, may apply to become a participant at the time of renewal of this decision in accordance with paragraph 19. - Admission conditions for new participants: - Requires agreement of the Fund and participants representing 80 percent of total credit arrangements under the renewed decision (paragraph 3(b)). - Applicant must specify the amount, expressed in special drawing rights, of the credit arrangement it wishes to enter into; amount shall not be less than the credit arrangement of the participant with the smallest credit arrangement. - Admission of a new participant leads to a proportional reduction in credit arrangements of existing participants whose credit arrangements are above the smallest participant’s arrangement, in an aggregate amount equal to the amount of the new participant’s credit arrangement less any increase decided under paragraph 5(a), provided no participant’s credit arrangement is reduced below the minimum amount set out in the Annex. - Adherence formalities (paragraph 3(c)): - Deposit with the Fund of an instrument setting forth adherence in accordance with the member’s or institution’s law and steps taken to carry out terms and conditions. - On deposit, the member or institution becomes a participant as of the date of deposit or of the effective date of this decision, whichever is later. ### Entry into Force and Changes in Credit Arrangements (Paragraphs 4–5) - Entry into force: - This decision becomes effective when adhered to by members or institutions in the Annex with credit arrangements amounting to not less than SDR 28.9 billion, including the five members or institutions with the largest credit arrangements (Paragraph 4). - Increases and reviews of credit arrangements: - When a member or institution is authorized under paragraph 3(b) to adhere, the total amount of credit arrangements may be increased by the Fund with agreement of participants representing 85 percent of total credit arrangements; increase shall not exceed the amount of the new participant’s credit arrangement (Paragraph 5(a)). - Individual credit arrangements may be reviewed and changed with agreement of the Fund and participants representing 85 percent of total credit arrangements, including each participant whose arrangement is changed; this provision may be amended only with consent of all participants (Paragraph 5(b)). ### Initiation, Proposals, and Calls (Paragraphs 6–7) - Initiation of procedure (Paragraph 6): - Managing Director may initiate the procedure in paragraph 7A when a participating member or a member whose institution is a participant approaches the Fund for an exchange transaction or a stand-by or extended arrangement and, after consultation, the Managing Director considers the transaction necessary to forestall or cope with an impairment of the international monetary system and that the Fund’s resources need supplementation. - For nonparticipants, the Managing Director may initiate the procedure if the exchange transactions meet specified criteria (upper credit tranches; stand-by extending beyond first credit tranche; extended arrangements; first credit tranche in conjunction with stand-by or extended arrangement) and, after consultation, considers Fund resources need supplementation because of an exceptional situation associated with balance of payments problems of members of a character or aggregate size that could threaten the international monetary system (Paragraph 6B). - Proposals (Paragraph 7A): - Managing Director shall make proposals only after consultation with Executive Directors and participants. - A proposal must identify the prospective drawer, the amount, and the period during which resources may be called. - If a participant cannot meet calls because of its present and prospective balance of payments and reserve position, it shall notify the Fund and other participants; institutions of nonmembers shall consult on the nonmember’s position before determining inability to meet calls (Paragraph 7A(c)). - Unless otherwise specified, proposals are for calls proportional to each participant’s credit arrangement (Paragraph 7A(d)). - Exceptions permitted where proportional calls cannot be made: - Circumstances where at least one participant’s available commitment is insufficient (Paragraph 7A(e)(i)). - Circumstances where at least one participant lacks sufficient amounts of the type of currency or currencies needed (Paragraph 7A(e)(ii)). - Concurrence requirement: - Concurrence of every participant that would undertake to provide proportionately more resources than at least one other participant is required before acceptance (Paragraph 7A(f)). - Acceptance and approval: - If participants are not unanimous, decision by poll requires an 80 percent majority of total credit arrangements of participants eligible to vote (Paragraph 7A(g)). - Prospective drawer, its participating institution, and participants that notified they will not meet calls are ineligible to vote (Paragraph 7A(h)). - A proposal becomes effective only if accepted by participants pursuant to paragraph 7A(g) and then approved by the Executive Board (Paragraph 7A(i)). - After acceptance, commitments and drawings are not affected by subsequent changes in credit arrangement amounts (Paragraph 7A(j)). - Calls (Paragraph 7B): - Each call shall be made in proportion to the amounts in the proposal unless otherwise provided (Paragraph 7B(a)). - Calls may not be made on a participant when, based on its present and prospective balance of payments and reserve position, the member is not included and is not being proposed by the Managing Director to be included in the list of countries in the quarterly operational budget for transfers of its currency (Paragraph 7B(b)). - When a call is made, the participant shall promptly make the transfer in accordance with the call (Paragraph 7B(c)). ### Evidence of Indebtedness, Interest, and Use of Borrowed Currency (Paragraphs 8–10) - Evidence of indebtedness (Paragraph 8): - On request, the Fund shall issue non-negotiable instruments evidencing the Fund’s indebtedness to the participant; form to be agreed between Fund and participant (Paragraph 8(a)). - Upon repayment of the instrument and all accrued interest, instrument shall be returned for cancellation; if partial repayment, new instrument for remainder with same maturity date shall be substituted (Paragraph 8(b)). - Interest (Paragraph 9): - The Fund shall pay interest at a rate equal to the combined market interest rate computed by the Fund from time to time for determining the rate at which it pays interest on holdings of special drawing rights, or any such higher rate as may be agreed between the Fund and participants representing 80 percent of the total credit arrangements (Paragraph 9(a)). - Change in method of calculating combined market interest rate applies to indebtedness only if Fund and participants representing 80 percent of total credit arrangements so agree; a participant may request exclusion for indebtedness outstanding at date the change becomes effective (Paragraph 9(b)). - Interest shall accrue daily and be paid as soon as possible after each July 31, October 31, January 31, and April 30 (Paragraph 9(c)). - Interest due may be paid in special drawing rights, in the participant’s currency, in the currency borrowed, or in other currencies that are actually convertible (Paragraph 9(d)). - Use of borrowed currency (Paragraph 10): - Fund’s policies and practices under Article V, Sections 3 and 7 on use of general resources and stand-by and extended arrangements apply to purchases of currency borrowed by the Fund. - Nothing in this decision affects the Fund’s authority with respect to requests for use of its resources by individual members; access determined by the Fund’s policies and practices and shall not depend on whether the Fund can borrow under this decision. ### Repayment and Rates of Exchange (Paragraphs 11–12) - Repayment by the Fund (Paragraph 11): - Subject to other provisions of 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 (Paragraph 11(a)). - If the drawer is committed to repurchase at a fixed date earlier than five years, Fund shall repay participants at that earlier date (Paragraph 11(a)). - Repayment shall be, as determined by the Fund, in the currency borrowed whenever feasible, in the currency of the participant, in special drawing rights in an amount that does not increase the participant’s holdings of special drawing rights above the limit under Article XIX, Section 4, unless the participant agrees to accept SDRs above that limit, or, after consultation, in other currencies that are actually convertible (Paragraph 11(a) and 11(b)). - Fund may make early repayment in part or in full after consultation (Paragraph 11(b)). - When a reduction in the Fund’s holdings of a drawer’s currency is attributed to a purchase of currency borrowed under this decision, the Fund shall promptly repay an equivalent amount (Paragraph 11(c)). - Repayment under paragraph 11(c) shall be made in proportion to the Fund’s indebtedness to participants that made transfers in respect of which repayment is being made (Paragraph 11(d)). - A participant may give notice representing a balance of payments need for repayment before the date prescribed in paragraph 11(a); Fund shall give the overwhelming benefit of any doubt to the participant’s representation; repayment shall be made after consultation in actually convertible currencies or in SDRs as determined by the Fund (Paragraph 11(e)). - When repayment is made to a participant, the amount that can be called under its credit arrangement shall be restored pro tanto (Paragraph 11(f)). - Fund deemed to have discharged obligations to a participating institution to make repayment or to pay interest if Fund transfers an equivalent amount in SDRs to the member in which the institution is established (Paragraph 11(g)). - Rates of exchange (Paragraph 12): - Value of any transfer calculated as of the date of dispatch of instructions for the transfer, in terms of the special drawing right in accordance with Article XIX, Section 7(a) (Paragraph 12(a)). - Value of a currency in terms of the SDR shall be calculated by the Fund in accordance with Rule O-2 of the Fund’s Rules and Regulations (Paragraph 12(b)). ### Transferability, Notices, Amendments, Withdrawal, and Termination (Paragraphs 13–19) - Transferability (Paragraph 13): - A participant may not transfer all or part of its claim to repayment under a credit arrangement except with prior consent of the Fund and on such terms and conditions as the Fund may approve. - Notices (Paragraph 14): - Notice to or by a participating member shall be in writing or by rapid means of communication and given to or by the fiscal agency designated in accordance with Article V, Section 1 of the Articles and Rule G-1 of the Rules and Regulations. - Notice to or by a participating institution shall be in writing or by rapid means of communication and given to or by the participating institution. - Amendment (Paragraph 15): - Except as provided in paragraphs 5(b), 15(b) and 16, this decision may be amended during the period prescribed in paragraph 19(a) and any subsequent renewal periods only by a decision of the Fund and with the concurrence of participants representing 85 percent of total credit arrangements. - If an amendment materially affects the interest of a participant that voted against it, that participant has the right to withdraw its adherence by giving notice within 90 days from date the amendment was adopted (Paragraph 15(b)). - Withdrawal of adherence (Paragraph 16): - A participant may withdraw its adherence in accordance with paragraph 19(b) but may not withdraw within the period prescribed in paragraph 19(a) except with agreement of the Fund and all participants. - Withdrawal from membership (Paragraph 17): - If a participating member or a member whose institution is a participant withdraws from membership in the Fund, the participant’s credit arrangement ceases when withdrawal takes effect; Fund’s indebtedness under the credit arrangement treated as an amount due from the Fund for purpose of Article XXVI, Section 3, and Schedule J. - Suspension and liquidation (Paragraph 18): - Right of Fund to make calls under paragraph 7 and obligation to make repayments under paragraph 11 shall be suspended during any suspension of exchange transactions under Article XXVII. - In event of liquidation, credit arrangements cease and Fund’s indebtedness constitutes liabilities under Schedule K; ordering of currencies for payment specified (Paragraph 18(b)). - Period and renewal (Paragraph 19): - Decision continues in existence for five years from its effective date (Paragraph 19(a)). - Renewal: Fund shall adopt decision on renewal and modification, if any, not later than twelve months before end of five‑year period; any participant may advise Fund not less than six months before end of the five‑year period that it will withdraw its adherence to the decision as renewed (Paragraph 19(b)). - If decision terminated or not renewed, paragraphs 8–14, 17 and 18(b) continue to apply in connection with any indebtedness in existence at date of termination until repayment is completed (Paragraph 19(c)). ### Interpretation and Relationship with Other Borrowing Arrangements (Paragraphs 20–22) - Interpretation (Paragraph 20): - Any question of interpretation not falling within Article XXIX shall be settled to mutual satisfaction of Fund, participant raising the question, and all other participants; participants include former participants to which paragraphs 8–14, 17 and 18(b) continue to apply pursuant to paragraph 19(c). - Relationship with the General Arrangements to Borrow (Paragraph 21): - New Arrangements to Borrow (NAB) shall be facility of first and principal recourse, except: - In event of a request for a drawing by a participating member (or member whose institution is participant) in both the General Arrangements to Borrow and the New Arrangements to Borrow, a proposal for calls may be made under either arrangement (Paragraph 21(a)(i)). - If a proposal for calls under the NAB is not accepted under paragraph 7A, a proposal may be made under the General Arrangements to Borrow (Paragraph 21(a)(ii)). - Outstanding drawings and commitments under the New and General Arrangements shall not exceed SDR 34 billion, or such other amount of total credit arrangements as may be in effect in accordance with this decision (Paragraph 21(b)). - Available commitments under NAB shall be reduced pro tanto by outstanding drawings on, and commitments of, the participant under the General Arrangements to Borrow; available commitments under the General Arrangements shall be reduced pro tanto by the extent to which its credit arrangement under the General Arrangements exceeds its available commitment under the NAB (Paragraph 21(b)). - References to drawings and commitments under the General Arrangements include drawings and commitments under the Associated Borrowing Arrangements (Paragraph 21(c)). - Other borrowing arrangements (Paragraph 22): - Nothing in this decision precludes the Fund from entering into any other types of borrowing arrangements. ### Annex — Participants and Amount of Credit Arrangements - General rules: - Size of each participant’s credit arrangement initially based on relative economic strength as reflected in its quota. - Credit arrangements are subject to a minimum of SDR 340 million. - Amounts adjusted between some participants provided total for participants involved does not change and minimum is observed. - Amounts, in terms of SDRs of the individual credit arrangements and their total will remain in effect unless changed in accordance with this decision. - Size of Hong Kong Monetary Authority’s (HKMA) credit arrangement has not been calculated on basis of quota of the member whose territories include Hong Kong; special provision on activation of the NAB to meet requests from such member applies. - Participant credit arrangements (Amount in Millions of Special Drawing Rights): - Australia 810 - Austria 412 - Belgium 967 - Canada 1396 - Chile 1 340 - Denmark 371 - Deutsche Bundesbank 3557 - Finland 340 - France 2577 - Hong Kong Monetary Authority 340 - Italy 1772 - Japan 3557 - Korea 340 - Kuwait 345 - Luxembourg 340 - Malaysia 340 - Netherlands 1316 - Norway 383 - Saudi Arabia 1780 - Singapore 340 - Spain 672 - Sveriges Riksbank 859 - Swiss National Bank 1557 - Thailand 340 - United Kingdom of Great Britain and Northern Ireland 2577 - United States of America 6712 - Editorial note on Chile: - Ed. Note: The Fund agreed to Chile’s request to adhere to the NAB decision. Adherence will become effective when participants representing 80 percent of total credit arrangements under the NAB decision so agree (Decision No. 12881-(02/113), November 12, 2002). ### NAB Meetings, Chairmanship, and Support (Attachment) - Meetings: - Participants agreed to meet once a year at the time of the annual Fund/Bank meetings in addition to meetings needed for activation, renewal, or amendment of the NAB. - Objective: review and discuss macroeconomic and financial markets developments, especially those that could impact financial system stability and lead to possible need for the Fund to seek supplementary resources as set out in the preamble of the NAB. - Representation: participants represented by a minister or central bank governor or both; principal representative may appoint deputies. Level (Ministerial or Deputy) determined each year in light of issues. - Chairmanship: - Chairmanship of the NAB grouping rotates annually in English alphabetical order of participants as listed in the Annex, beginning with the first name on that list. - Chair, in consultation with participants, determines the meeting agenda and level of representation. - Support: - IMF headquarters staff, under direction of the Chair, provide secretariat support, logistic support, and maintain an archive of documents concerning deliberations and decisions under the NAB. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### 1. All or part of any claim under the NAB may be transferred at ### 1. All or part of any claim under the NAB may be transferred at ### Transfer of NAB claims — key provisions - All or part of any claim under the NAB may be transferred at any time to a participant in the NAB. - As from the value date of the transfer, the transferred claim shall be held by the transferee on the same terms and conditions as claims originating under its credit arrangement, except that the transferee shall acquire the right to request early repayment of the transferred claim on balance of payments grounds pursuant to paragraph 11(e) of the NAB only if, at the time of the transfer, (i) the transferee is a member, or the institution of a member, whose balance of payment and reserve position is considered sufficiently strong for its currency to be usable in net transfers in the Fund’s operational budget; or (ii) the transferee is the institution of a nonmember, and the balance of payments and reserve position of the nonmember is, in the opinion of the Fund, sufficiently strong to justify such acquisition. - The price for the claim transferred shall be as agreed between the transferee and the transferor. - The transferor of a claim shall inform the Fund promptly of: - the claim that is being transferred, - the name of the transferee, - the amount of the claim that is being transferred, - the agreed price for transfer of the claim, and - the value date of the transfer. - 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 transferee and the transferor. - If all or part of a claim is transferred during a quarterly period as described in paragraph 9(c) of the NAB, the Fund shall pay interest to the transferee on the amount of the claim transferred for the whole of that period. - If requested, the Fund shall assist in seeking to arrange transfers. - This decision shall become effective on the date of effectiveness of the NAB. - Decision No.11429-(97/6), January 27, 1997 ### Note on procedural substitution (footnote) - In the event that the Chair was unable to perform its functions, a substitute would be provided by the participant immediately above the Chair on the list of participants in the Annex, or, if that substitute were not available, by the participant immediately below the Chair in that list. --- ### Establishment of the Borrowed Resources Suspense Accounts - The Managing Director is authorized: - (i) to establish Borrowed Resources Suspense Accounts within the General Department, - (ii) to transfer to these Accounts balances of currencies borrowed before these can be used in transactions or received in repurchases made before repayment can be made, and - (iii) to invest these balances until they can be transferred to the General Resources Account for immediate use in a transaction or an operation. - A Borrowed Resources Suspense Account for each currency shall be opened, as needed, with the depository designated pursuant to Article XIII, Section 2, by a member whose currency is to be borrowed, used for investment, or used in repayment or the payment of interest and shall be operated in accordance with the standard procedures for the operation of the Fund’s No. 1 and Securities Accounts with the depository. - Decision No. 6844-(81/75), May 5, 1981 ### Investment by the Fund of currencies held in the Borrowed Resources Suspense Accounts - The Managing Director is authorized to invest currencies held in the Borrowed Resources Suspense Accounts in one or more of the following ways: - (a) deposits with a national official financial institution of a member, or an international financial institution, that are denominated in special drawing rights; - (b) marketable obligations issued by a member or by a national official institution of a member and denominated in special drawing rights; and - (c) marketable obligations issued by an international financial institution and denominated in special drawing rights. - The policy on the investment of the undisbursed amounts held in the Borrowed Resources Suspense Accounts shall take into account the operational needs of the General Resources Account, including the dates on which members are expected to make purchases from the Fund under its Policy on Enlarged Access. - When arranging placements, the Managing Director shall consider terms offered by: - a national official financial institution of the member issuing the currency borrowed that will accept investments denominated in special drawing rights, and - the Bank for International Settlements, for all or part of the intended investment in SDR-denominated deposits. - If the Managing Director considers that none of the offers made by the central banks and by the BIS is sufficiently attractive, he shall inform the Executive Board promptly and make other proposals to it for investment in SDR-denominated obligations. - The Managing Director is authorized to transfer borrowed funds at the time of the original receipt from the Borrowed Resources Suspense Account in the depository designated by the member whose currency was borrowed to the Borrowed Resources Suspense Account in the depository designated by the member whose currency is to be used in an investment when this transfer is necessary to effect an investment denominated in special drawing rights, and when this transfer has been concurred in by the two members whose currencies will be involved. - Decision No. 6845-(81/75), May 5, 1981 --- ### Guidelines for borrowing by the Fund — summary - Quota subscriptions are and should remain the basic source of the Fund’s financing; borrowing can, on a temporary basis, provide an important supplement to its resources. - The Executive Board approves the following guidelines on borrowing by the Fund: - 1. Fund borrowing shall remain subject to a process of continuous monitoring by the Executive Board. For this purpose, the Executive Board will regularly review the Fund’s liquidity and financial position, taking into account all relevant factors of a quantitative and qualitative nature. - 2. In advance of any further borrowing undertaken by the Fund, except in the case of borrowing under the General Arrangements to Borrow, the Executive Board shall establish in the context of circumstances prevailing at that time, limits expressed in terms of the total of Fund quotas above which the total of outstanding borrowing plus unused credit lines would not be permitted to rise. - 3. Any limits that may be adopted as a result of a review pursuant to paragraph 2 above are not to be understood, at any time, as targets for borrowing by the Fund. - Decision No. 9862-(91/156), November 15, 1991 - Ed. Note: This decision replaced Decision No. 7040-(82/7), as amended by Decision No. 7589-(83/181). --- ### Article VIII, Section 2(b) — Unenforceability of Exchange Contracts ### Fund interpretation and effects - The Board of Executive Directors has interpreted, under Article XVIII of the Articles of Agreement, the first sentence of Article VIII, Section 2(b): - "Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member." - Meaning and effect: - 1. Parties entering into exchange contracts involving the currency of any member and contrary to exchange control regulations of that member which are maintained or imposed consistently with the Fund Agreement will not receive the assistance of the judicial or administrative authorities of other members in obtaining the performance of such contracts. Obligations of such contracts will not be implemented by judicial or administrative authorities of member countries (for example, by decreeing performance or by awarding damages). - 2. By accepting the Fund Agreement members have undertaken to make the principle effectively part of their national law. This applied to all members, whether or not they have availed themselves of the transitional arrangements of Article XIV, Section 2. - It follows that tribunals will not refuse recognition of the exchange control regulations of another member on public policy grounds (ordre public), and such contracts will be treated as unenforceable even if private international law would point to a different governing law. - The Fund will assist with any problems arising in relation to this interpretation or advise whether particular exchange control regulations are maintained or imposed consistently with the Fund Agreement. - Decision No. 446-4, June 10, 1949 - Ed. Note: Corresponds to Article XXIX of the Articles of Agreement after the Second Amendment. --- ### Payments restrictions and policies ### Payments restrictions for security reasons — jurisdictional policy - Article VIII, Section 2(a) applies to all restrictions on current payments and transfers, irrespective of motivation. - Policy decision where members impose restrictions solely for preservation of national or international security: - 1. A member intending to impose restrictions on payments and transfers for current international transactions that are not authorized by Article VII, Section 3(b) or Article XIV, Section 2 and that, in the judgment of the member, are solely related to preservation of national or international security, should, whenever possible, notify the Fund before imposing such restrictions. Any member may obtain a decision of the Fund prior to imposition by so indicating in its notice, and the Fund will act promptly. If advance notice is precluded, the member should notify the Fund as promptly as circumstances permit, but ordinarily not later than 30 days after imposing such restrictions. Each notice will be circulated immediately to the Executive Directors. Unless the Fund informs the member within 30 days after receiving notice that it is not satisfied that such restrictions are proposed solely to preserve such security, the member may assume that the Fund has no objection to the imposition of the restrictions. - 2. The Fund will review the operation of this decision periodically and reserves the right to modify or revoke, at any time, the decision or the effect of the decision on any restrictions imposed pursuant to it. - Decision No. 144-(52/51), August 14, 1952 ### Bilateralism and convertibility — Fund stance - The decision records the Fund’s views on the use of bilateral arrangements. - Key points: - 1. Fund policies and attitude on bilateral arrangements that involve exchange restrictions and limit a multilateral payments system are integral to its policy on restrictions, aiming at elimination of foreign exchange restrictions and earliest possible establishment of a multilateral system of payments for current transactions, based on Articles I, VIII and XIV. - 2. The Fund welcomes reduced reliance on bilateral arrangements but urges full collaboration of all members to reduce and eliminate reliance on bilateralism as rapidly as practicable. - 3. The Fund will have discussions with members on the need to retain bilateral arrangements or facilitate their reduction by others. During the coming year, the Fund will explore with all countries party to bilateral arrangements involving exchange restrictions the need for continuation, possibilities of early removal, and ways (including use of the Fund’s resources) the Fund can assist. The Fund will pay particular regard to the payments position and prospects of the members concerned. - Decision No. 433-(55/42), June 22, 1955 ### Official clearing and payments arrangements — temporary exemption - Pending completion of the review of jurisdictional aspects of official clearing and payments arrangements, the Fund shall not object to maintenance in existing official clearing or payments arrangements of settlement provisions that do not require settlement of balances at least as frequently as every three months if such provisions were in force before July 1, 1994. - Decision No. 10749-(94/67), July 20, 1994 ### Retention quotas: decision and transmittal letter — conclusions and next steps - The Fund examined retention quotas and similar practices and concluded: - 1. Members should work toward and achieve as soon as feasible the removal of retention quotas and similar practices, particularly where they lead to abnormal shifts in trade causing unnecessary damage to other countries. Members should endeavor to replace these practices by more appropriate measures leading to currency convertibility. - 2. The Fund will enter into consultation with each member concerned to agree on a program for implementation of 1 above, including appropriate attention to timing of any action. - 3. The Fund does not object to practices that, by their nature, can be regarded as devices designed solely to simplify the administration of official exchange allocations. - The Managing Director was asked to send a transmittal letter to all members summarizing the decision and the Fund’s findings on retention quotas and similar practices. - The Board emphasized case-by-case handling and expected members to cooperate in individual discussions to enable the Fund to reach appropriate outcomes. *Selected Decisions and Selected Documents (excerpts).* ### conclusions. ### conclusions. ### Discrimination for balance of payments reasons - Decision No. 201-(53/29), May 4, 1953 - The decision deals exclusively with discriminatory restrictions imposed for balance of payments reasons. - Observations: - "Considerable progress" has been made in some countries toward elimination of discriminatory restrictions; "much remains to be done" in others. - Recent international financial developments have established an environment favorable to elimination of discrimination for balance of payments reasons, including: - "a substantial improvement in the reserve positions of the industrial countries in particular" - "widespread moves to external convertibility" - Policy stance: - The Fund considers "that there is no longer any balance of payments justification for discrimination by members whose current receipts are largely in externally convertible currencies." - Where discriminatory restrictions have been long maintained, "a reasonable amount of time may be needed fully to eliminate them" but "this time should be short" and members "will be expected to proceed with all feasible speed in eliminating discrimination against member countries, including that arising from bilateralism." - For countries whose current receipts are still subject to limitations on convertibility (particularly in payments relations with state-trading countries), the Fund "will be prepared to consider whether balance of payments considerations would justify the maintenance of some degree of discrimination, although not as between countries having externally convertible currencies." - The Fund reaffirms its basic policy on bilateralism as stated in its decision of June 22, 1955. ### Article VIII and Article XIV: acceptance of obligations and consultations - Decision No. 955-(59/45), October 23, 1959 - Context: - "Substantial improvement in the balance of payments and the reserve positions of a number of Fund members" has led to "important and widespread moves to the external convertibility of many currencies." - Many members "either have reached or are nearing a position in which they can consider the feasibility of formally accepting the obligations of Article VIII, Sections 2, 3, and 4." - Guidance on Article VIII and Article XIV acceptance: - Members may notify the Fund under Article XIV, Section 3 that they "accept the obligations of Article VIII, Sections 2, 3, and 4, and no longer avail themselves of the transitional provisions of Article XIV." - Before giving such notice, members should, "as far as possible, eliminate measures which would require the approval of the Fund," and "satisfy themselves that they are not likely to need recourse to such measures in the foreseeable future." - If members, "for balance of payments reasons, propose to maintain or introduce measures which require approval under Article VIII," the Fund will grant approval only where it is satisfied that: - "the measures are necessary" and - "their use will be temporary while the member is seeking to eliminate the need for them." - For measures requiring approval under Article VIII and maintained or introduced for nonbalance of payments reasons, the Fund believes "the use of exchange systems for nonbalance of payments reasons should be avoided to the greatest possible extent," and the Fund is "prepared to consider with members the ways and means of achieving the elimination of such measures as soon as possible." - Members having measures needing approval under Article VIII "should find it useful to consult with the Fund before accepting the obligations of Article VIII, Sections 2, 3, and 4." - Consultations: - If members maintain measures subject to Sections 2 and 3 of Article VIII, they "shall consult with the Fund with respect to the further maintenance of such measures." - Consultations under Article VIII are not otherwise required or mandatory, but the Fund recommends periodic discussions "ordinarily" at "intervals of about one year" to exchange views on monetary and financial developments and to provide technical facilities and advice. - Information sharing with GATT context: - Fund members that are contracting parties to the GATT and which impose import restrictions for balance of payments reasons "will facilitate the work of the Fund by continuing to send information concerning such restrictions to the Fund." - The Fund, by agreement with members not contracting parties to the GATT that impose import restrictions for balance of payments reasons, "will seek to obtain information relating to such restrictions." ### Surveillance, Article VIII acceptance encouragement, and payments arrears - Decision No. 1034-(60/27), June 1, 1960; Summing Up by the Chairman—Biennial Review of the Fund’s Surveillance Policy; Executive Board Meeting 93/15, January 29, 1993 - Executive Directors emphasized "the importance of a greater commitment of members to current account convertibility as evidenced by the acceptance of Article VIII obligations." - Many members "have availed themselves of Article XIV for too long and should take appropriate steps to remove remaining restrictions." - The staff will "intensify its efforts to encourage countries to accept the obligations of Article VIII, especially in those long-standing cases where there are no restrictions subject to Articles VIII or XIV." - Payments arrears—policy conclusions: - Decision No. 3153-(70/95), October 26, 1970 — Conclusions 1. "Undue delays in the availability or use of exchange for current international transactions that result from a governmental limitation give rise to payments arrears and are payments restrictions under Article VIII, Section 2(a), and Article XIV, Section 2." - Limitations may be formal (e.g., compulsory waiting periods for exchange) or informal/ad hoc. 2. Restrictions resulting in payments arrears arising from informal or ad hoc measures "do particular harm" because of uncertainty and adverse effects on the creditworthiness of the debtor country that may extend beyond existence of restrictions. 3. The Fund should aim in consultation reports at "a more systematic treatment of restrictions on payments and transfers for current international transactions that produce payments arrears." - Where payments arrears arise from governmental limitation on availability of foreign exchange at the time a payment falls due, or on timely transfer of proceeds, "the payments arrears should be treated in the consultation papers as evidence of a payments restriction requiring approval in Article VIII or Article XIV consultation decisions." - The staff must establish whether payments arrears exist by ascertaining whether there has been "a substantial delay beyond that usually required for ascertaining the bona fides of exchange applications or the time that can be regarded as normally required for the administrative processing of applications for exchange." - If payments arrears exist and approval of the restriction giving rise to them is requested, the member should "submit a satisfactory program for their elimination." - Approval, if given, should be "only for a temporary period and generally with a fixed terminal date." Approval should be "wherever feasible in terms of the level of arrears outstanding." - The elimination program should provide "for a maximum permissible delay to which a payment or transfer could be subjected, together with a phased reduction in the outstanding level." ### Consultations on members' policies in present circumstances - Decision No. 4134-(74/4), January 23, 1974 — Payments Policies; 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 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." - The Committee stressed the importance of avoiding "competitive depreciation and the escalation of restrictions on trade and payments," and emphasized pursuing policies that sustain "appropriate levels of economic activity and employment, while minimizing inflation." - It was recognized that recent developments would create serious payments difficulties for many developing countries and agreed there should be "the closest international cooperation and consultation in pursuit of these objectives." 2. 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. Consultations of the Fund on the policies members are following "will be conducted with a view to the attainment of these objectives." ### Multiple Currency Practices: decisions, policies, and Fund jurisdiction - Decision No. 237-2, December 18, 1947; Letter to Members, December 19, 1947 - The Fund transmitted its decisions on multiple currency practices (Executive Board Document No. 235, Revision 2) and requested members to be guided by the memorandum and to initiate discussions with the Fund on pressing problems. - The memorandum states that exchange systems engaging in multiple currency practices are frequently complex and that policy "must develop progressively" through consultations. - Key policy points (I. Policies) A. General 1. Consultation: - "There should be continuing consultation on multiple currency practices between the Fund and the members concerned." - Members should, "as a minimum, consult the Fund before introducing a multiple currency practice, before making a change in any of the multiple rates of exchange, before reclassifying transactions subject to different rates, and before making any other type of significant change in their exchange systems." 2. Stability and Restrictions: - In most cases, multiple currency practices are both systems of exchange rates and restrictions on payments and transfers for current international transactions. - Where inconvenient to deal with both aspects simultaneously, priority should be given to features affecting "exchange stability and orderly exchange arrangements among members." 3. Removal: - "Early steps should be taken toward the removal of multiple currency practices which are clearly not necessary for balance of payments reasons." - "The Fund will encourage members engaging in multiple currency practices for balance of payments reasons to establish as soon as possible conditions which would permit their removal, with the general objective of seeking removal not later than the end of the transitional period." - Where complete removal by the end of the transitional period proves impossible, the Fund will assist members "to eliminate the most dangerous aspects" and "to exercise reasonable control over those retained." B. Specific Practices 1. Fixed Exchange Rates: - Members should consult the Fund on any changes in practices involving fixed exchange rates, including changes in rates or reclassification of transactions. - Elimination of restrictions on current transactions is "highly commendable" even if restrictions on capital transactions must be retained. 2. Taxes on Exchange Drafts: - Use of taxes on exchange drafts that result in "an unusually large difference between buying and selling rates for a currency is not in accord with the objectives of the Fund Agreement" and the Fund shall "seek the elimination of such practices as rapidly as practicable." 3. Fluctuating Rates of Exchange: (a) Free Markets: - Where a free market with a fluctuating rate exists as part of a multiple currency practice, the member should "agree with the Fund on the scope of the transactions permitted to take place in that market." - Objective: "to eliminate the fluctuations in the free market as soon as such action is reasonably practicable." - When elimination is not reasonably practicable, the Fund will encourage members "to exclude current transactions from the free market to the extent that this would be reasonable in the circumstances of each case." (b) The Auction System: (i) The purpose of an auction system should be agreed with the Fund and any change in scope should be agreed with the Fund; "The fewer the transactions subject to the auction rate, and the less essential the goods involved, the better." (ii) Depending on circumstances, monetary authorities should undertake to "keep the auction rate stable, or to maintain it within certain limits, or to make every effort to prevent brisk fluctuations." (iii) Where auction rates exist or are proposed, circumstances should be examined "to determine whether a fixed rate should be substituted for the auction rate." (iv) If a reduction of the money supply is desirable where an auction system exists, "the proceeds of the auction market should be directed toward this end." - II. Jurisdiction of the Fund - Multiple currency practices are often restrictive practices and systems of exchange rates; "exchange stability depends on effective rates." - Members' undertakings 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") are "fundamental considerations" in interpreting rights and obligations under Article XIV, Section 2 or Article VIII, Section 3 to maintain, introduce, or adapt multiple currency practices. - Subject to these general principles, conclusions are agreed with respect to the Fund’s jurisdiction and the obligations of members. - A. Practices Subject to Article VIII, Section 3 (text continues beyond the excerpt provided). *Italic source attribution: Selected excerpts from "conclusions." (decisions and documents as cited in the source text).* ### 1. Maintenance. A member maintaining multiple currency ### 1. Maintenance. A member maintaining multiple currency ### Practices under Article VIII, Section 3 - A member maintaining multiple currency practices at the time the Agreement entered into force, if it does not take advantage of Article XIV, is required by Article VIII, Section 3, to consult with the Fund for their progressive removal or obtain the Fund’s approval for their maintenance. - Members that have not been occupied by the enemy, and former enemy-occupied members which have not taken advantage of the transitional arrangements, whether or not they have existing multiple rate practices, may introduce a new practice only under Article VIII, Section 3, which provides expressly for the necessity of approval by the Fund. - If a multiple currency practice is in force by virtue of Article VIII, Section 3: - the member may change or adapt such practice only after consulting with the Fund and obtaining its approval. - members may reclassify commodities subject to the practices only after consultation with the Fund and Fund approval. ### Practices subject to Article XIV, Section 2 (transitional provisions) - Multiple currency practices, when applied to current international transactions, constitute a type of restriction on payments and transfers for current international transactions for the purposes of Article XIV, Section 2. - The Fund may, if it deems such action necessary in exceptional circumstances, make representations to any member that conditions are favorable for the withdrawal of any particular restriction, or for the general abandonment of restrictions. This power: - (a) applies at any time after the entry into force of the Fund Agreement and - (b) gives the Fund the power to determine what is meant by “in exceptional circumstances.” - Members may maintain multiple currency practices during the transitional period under Article XIV, Section 2, only if the maintenance of such practices is necessary for settling members’ balance of payments in a manner which does not unduly encumber their access to the resources of the Fund. - Members are under a duty to withdraw such practices as soon as they are able without them to settle their balance of payments in a manner which will not unduly encumber their access to the resources of the Fund. - Under Section 4 of Article XIV, the Fund may make representations in exceptional circumstances that conditions are favorable for withdrawal of any particular restriction, even if justified for balance of payments reasons, if conditions favor substitution by a practice not inconsistent with the purposes of the Agreement. - Only former enemy-occupied members availing themselves of the transitional provisions may introduce a new multiple currency practice under Article XIV, Section 2, provided the Fund agrees that the practice is necessary and does not find it inconsistent with the purposes of the Fund Agreement or with Article IV, Section 4(a). - A member maintaining multiple currency practices under Article XIV may adapt existing restrictions provided such action: - is consistent with the obligations of Article IV, Section 4(a), - is dictated by “changing circumstances,” and - is subject to a duty to consult with and obtain the approval of the Fund before changing the practice. - A member maintaining multiple currency practices under Article XIV may reclassify commodities subject to such practices under the power to adapt restrictions in Section 2 of Article XIV, provided, however, that under the existing restrictions the effective rates are other than parity. ### Exchange taxes and official measures - When a tax affects an obligation undertaken by the members of the Fund, the relationship between the tax and the obligation is of direct concern to the Fund and subject to its jurisdiction. - Whenever exchange taxes are used to modify par values, create multiple currency practices, or introduce restrictive exchange controls, they are subject to the Fund’s jurisdiction. - The Fund has authority to deal with exchange matters irrespective of the official device or procedure involved. ### Rates differing from parity - An effective buying or selling rate which, as the result of official action (e.g., the imposition of an exchange tax), differs from parity by more than 1 percent, constitutes a multiple currency practice. ### Executive Board findings and policy conclusions (review and decisions) - The Executive Board reviewed the staff paper on the “Review of Fund Policies on Multiple Currency Practices” and agreed with its general approach. - Unification of the exchange rates in multiple rate systems is a basic objective of the Fund; several members have been successful in achieving this objective, and others have made considerable progress. - Complex multiple rate systems damage the economies of the countries maintaining them and harm other countries: they are difficult to administer, involve frequent changes, discrimination, export subsidization, a considerable spread between rates, and undue differentiation between classes of imports. - The Executive Board concluded it is necessary and feasible to make more rapid progress in simplifying complex multiple rate systems and adopted these decisions: 1. Early and substantial steps should be taken to simplify complex multiple rate systems. The Fund will not approve such systems unless countries maintaining them are making reasonable progress toward simplification and ultimate elimination, or are taking measures or adopting programs likely to result in such progress. 2. The Fund will press for simplification where there is clear evidence that a multiple currency system is damaging to other members and will be reluctant to approve changes that make systems more complex. 3. The Fund will intensify collaboration and stand ready to provide technical assistance for economic programs and measures directed toward exchange simplification; if proposed programs are adequate and appropriate, the Fund will give sympathetic consideration, if requested, to the use of its resources. - Decision reference: Decision No. 649-(57/33), June 26, 1957. ### Policy on multiple currency practices (Decision No. 6790-(81/43), March 20, 1981, as amended by Decision No. 11728-(98/56), May 21, 1998) - Official action should not cause exchange rate spreads and cross rate quotations to differ unreasonably from those arising from normal commercial costs and risks. - (a)(i) Official action that gives rise to a spread of more than 2 percent between buying and selling rates for spot exchange transactions between the member’s currency and any other member’s currency would be considered a multiple currency practice and would require the prior approval of the Fund. - (a)(ii) An exchange spread that arises without official action would not give rise to a multiple currency practice. - (a)(iii) Deviations between buying and selling rates for spot transactions and for other transactions would not be considered multiple currency practices if they represent additional costs and exchange risks for these other transactions. - (b) Action by a member resulting in midpoint spot exchange rates of other members’ currencies against its own currency differing by more than 1 percent from midpoint spot exchange rates for these currencies in their principal markets would give rise to a multiple currency practice. If differentials of more than 1 percent in these cross rates persist for more than one week, the resulting multiple currency practice would become subject to Fund approval under Article VIII, Section 3. - When interpretation difficulties arise concerning these criteria, particularly the nature of official actions, the staff will present relevant information to the Executive Board for determination. - The Fund will be prepared to grant approval of multiple currency practices introduced or maintained for balance of payments reasons provided: - the member represents and the Fund is satisfied that the measures are temporary and are being applied while the member endeavors to eliminate its balance of payments problems, and - they do not give the member an unfair competitive advantage over other members or discriminate among members. - The Fund will be reluctant to grant approval for the maintenance of broken cross exchange rates. - The Fund will not approve multiple currency practices under complex multiple rate systems unless countries are making reasonable progress toward simplification and ultimate elimination, or are taking measures or adopting programs likely to result in such progress. - The Fund may grant temporary approval of multiple currency practices introduced or maintained principally for nonbalance of payments reasons provided they: - do not materially impede the member’s balance of payments adjustment, - do not harm the interests of other members, and - do not discriminate among members. - To assist Board decisions concerning approval or nonapproval under Article VIII, Section 3: - the reasons underlying the practice and its effects will be analyzed in reports on Article IV consultations or other staff papers dealing with exchange systems. - approval will be granted for periods of approximately one year, to provide for continual review by the Executive Board, except where the practice is maintained only for existing arrangements and for a specified period of time. ### Scope: capital transactions - The phrase “multiple currency practices” in Fund decisions relating to the use of the Fund’s resources does not, except as otherwise provided, include multiple currency practices applying solely to capital transactions. - Decision reference: Decision No. 8648-(87/104), July 17, 1987. *Selected decisions and selected documents excerpt: “Maintenance. A member maintaining multiple currency practices”* ### 8. After the expiration of the period specified in the Managing ### _31stissue - 8. After the expiration of the period specified in the Managing ### Procedure after the expiration of the Managing Director’s notification period - After the expiration of the period specified in the Managing Director’s notification to the member, the Managing Director shall make a report to the Executive Board under Rule K-1 for breach of obligation, unless the Managing Director is satisfied that the member’s response meets the requirements specified in his notification. - The report shall: - identify the nature of the breach; - include the member’s response (if any) to the Managing Director’s notification; - may recommend the type of remedial actions to be taken by the member. ### Consideration of the report by the Executive Board - Within 90 days of the issuance of the Managing Director’s report, the Executive Board will consider the report to decide whether the member has breached its obligations. - Before reaching a decision, the Executive Board may request from the staff and the authorities additional clarification of the facts respecting the alleged breach of obligation; the Executive Board will specify a deadline for the provision of such clarification. - If the Executive Board finds the member’s failure to provide information required under Article VIII, Section 5 is due to its inability to provide the information in a timely and accurate fashion, the Executive Board may: - call upon the member to strengthen its capacity to provide the required information; - ask the Managing Director to report periodically on progress made by the member in that respect. - The member may request technical assistance from the Fund. ### Remedial actions, deadlines, and follow-up - If the Executive Board finds that the member has breached its obligation, the Executive Board may: - call upon the member to prevent recurrence and to take specific measures (which may include improvements in statistical systems or other measures appropriate to the circumstances) (paragraph 11(a)); - if the member is still not providing required information, call upon the member to provide such information (paragraph 11(b)). - The Executive Board will specify a deadline for taking remedial actions under (a) and (b); in principle, the deadline will not exceed 90 days for actions specified under (b). - The decision may note the intention of the Managing Director to recommend the issuance of a declaration of censure if the specified actions are not implemented within the specified period. - The member may, before the Board meeting, provide a statement specifying remedial actions and a proposed timeframe; the member may request technical assistance from the Fund. - At expiration of the period specified by the Executive Board, the Managing Director shall report to the Executive Board on the status of the specified actions. If the member has not taken the specified actions within the specified period, the Managing Director may recommend and the Executive Board may decide: 1. to extend the period before further steps under the procedural framework are taken; 2. to call upon the member to take additional remedial actions within a specified timeframe; or 3. to issue a declaration of censure against the member. ### Declaration of censure - If a member fails to implement the actions specified by the Executive Board before the established deadline, the Managing Director may recommend and the Executive Board may decide to issue a declaration of censure. - Before adoption of a declaration of censure, the Executive Board may issue a statement to the member setting out its concerns and giving the member a specified period to respond. - The declaration of censure will: - identify the breach of obligation under Article VIII, Section 5 and the specified remedial actions the member has failed to take within the specified timeframe; - may specify a new deadline for implementation and may identify further remedial actions to be implemented before the specified deadline; - note that failure to implement any of the actions called for in the declaration within the specified timeframe may result in the issuance of a complaint for ineligibility under Article XXVI (a) and the imposition of that measure. - At the expiration of the period specified by the Executive Board, the Managing Director shall report to the Executive Board on the status of the specified actions. ### Sanctions under Article XXVI (escalation) - Following adoption of a declaration of censure, if the Executive Board finds the member has failed to implement any of the actions called for in the declaration within the specified timeframe, the Managing Director may issue a complaint to the Executive Board and recommend that the Executive Board declare the member ineligible to use the general resources of the Fund for its breach of obligation under Article VIII, Section 5. - The Executive Board decision declaring the member ineligible to use the general resources of the Fund will note that the member’s persistence in its failure to fulfill its obligations under Article VIII, Section 5 following the declaration of ineligibility may result in the issuance of a complaint for the suspension of the member’s voting and related rights and in the imposition of this measure. - If the member persists in its failure to fulfill its obligations under Article VIII, Section 5 for six months after the declaration of ineligibility, the Managing Director may issue a complaint and recommend that the Fund suspend the member’s voting and related rights. - The Executive Board decision suspending the member’s voting and related rights will note that persistence following the declaration of suspension may result in the issuance of a complaint for compulsory withdrawal and initiation of proceedings for compulsory withdrawal. - If the member persists in its failure to fulfill its obligation under Article VIII, Section 5 for six months after the suspension of its voting rights, the Managing Director may initiate proceedings for the compulsory withdrawal of the member from the Fund. - All Executive Board decisions arising from a breach of obligation under these procedures, including a decision to issue the statement of concern referred to in paragraph 12, will give rise to a public announcement with prior review of the text by the Executive Board. ### Procedures for inaccurate information in specified circumstances (paragraph 18) - Paragraph 18 applies where a member provides inaccurate information required under Article VIII, Section 5: - (i) for the purposes of a performance criterion under an arrangement in the General Resources Account, or - (ii) for another purpose in circumstances where the relevant information is reported to the Fund with respect to a performance criterion under an arrangement under the Poverty Reduction and Growth Facility or the Exogenous Shocks Facility, or an assessment criterion under a Policy Support Instrument, and understandings have been reached that such reporting shall be made for other purposes as well, and where the deviation is judged to be de minimis as defined in paragraph 1 of Decision No. 13849. - Whenever the Managing Director considers a deviation described in paragraph 18(a) to be de minimis in nature: - (i) the consultations and notifications contemplated in paragraph 6 may be made by a representative of the relevant Area Department; and - (ii) the report of the Managing Director contemplated in paragraph 8 shall, wherever possible, be included in a staff report on the relevant member that deals with issues other than the potential breach of Article VIII, Section 5 and, with respect to potential remedial actions, shall include a recommendation that no further action be taken by the Fund. - If a stand-alone document cannot be issued promptly after the Managing Director concludes a breach has arisen, the Managing Director shall consult Executive Directors and, if deemed appropriate, prepare a stand-alone report under Rule K-1 for Board consideration normally on a lapse-of-time basis. - Whenever the Executive Board finds under paragraph 11(a) that a breach has occurred but that the relevant deviation was de minimis: - (i) the Executive Board shall decide that no further action be taken by the Fund with respect to the breach, and - (ii) under paragraph 17, the finding of breach of obligation shall not be published by the Fund. ### ANNEX A — Data items referred to in paragraph 1 - The data referred to in paragraph 1 of this decision are the national data on the following matters: - (i) reserve, or base money; - (ii) broad money; - (iii) interest rates, both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds; - (iv) revenue, expenditure, balance and composition of financing (i.e., foreign financing and domestic bank and nonbank financing) for the general and central governments respectively; the stocks of central government and central government-guaranteed debt, including currency and maturity composition and, if the debt data are amenable to classification on the basis of the residency or nonresidency of the holder, the extent to which the debt is held by residents or nonresidents; - (v) balance sheet of the central bank; - (vi) external current account balance; - (vii) exports and imports of goods and services; - (viii) the international reserve assets and reserves liabilities of the monetary authorities, specifying separately any reserve assets which are pledged or otherwise encumbered as well as net derivative positions; - (ix) gross domestic product, or gross national product; - (x) consumer price index; - (xi) gross external debt; - (xii) consolidated balance sheet of the banking system. - Footnotes preserved from source: - The general government consists of the central government (budgetary funds, extrabudgetary funds, and social security funds) and state and local governments. - Gross external debt is the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to nonresidents by residents of an economy. (SM/03/386, Sup. 1, 1/23/04). *Decision No. 13183-(04/10), January 30, 2004, as amended by Decision Nos.13814-(06/98), November 15, 2006, and 13849-(06/108), December 20, 2006* ### 1. Coverage, periodicity, and timeliness of data ### _31stissue - 1. Coverage, periodicity, and timeliness of data ### Definitions and general considerations - Purpose: Comprehensive economic and financial data, disseminated on a timely basis, are essential to the transparency of macroeconomic performance and policy. - SDDS focus: - Basic data most important for policy and performance across four sectors: real, fiscal, financial, and external. - Minimum coverage necessary; subscribers encouraged to disseminate additional data and metadata (e.g., practices for measuring core inflation, forward-looking indicators, interest rates used as operating targets) on a strictly voluntary basis. - For each sector the SDDS provides: - (a) a comprehensive statistical framework—national accounts for the real sector, government operations for fiscal data, analytical accounts of the banking system for financial data, and balance of payments accounts for external transactions; - (b) data that permit tracking of the principal measures in the comprehensive frameworks; and - (c) other data relevant to the sector (often prices, interest rates, exchange rates). - Periodicity = frequency of compilation. Timeliness = lapse of time between a reference date (or close of a reference period) and dissemination. - Dissemination forms include formal publications (including news releases), announcement of availability on request, electronic databases, diskettes/tapes/CD-ROMs, recorded telephone messages, facsimile services. ### Specifications (coverage, periodicity, timeliness) - The SDDS specifications for coverage, periodicity, and timeliness are summarized in attached Table 1; further specifications for international reserves, reserve liabilities, and related items in Table 2. - "As relevant" items: subscribing members have flexibility to adopt approaches most relevant to their circumstances. - "Encouraged" items: not binding but countries are encouraged to develop and disseminate them in the indicated periodicity and timeliness. - Real sector: - Prescribed comprehensive framework: national accounts (nominal levels, real (price-adjusted) levels, and associated prices (deflators or price indices)). - Tracking GDP on a more frequent basis: a single production index or a selection of production indices. - Price statistics prescribed: consumer price indices and producer or wholesale price indices. - Fiscal sector: - Prescribed comprehensive framework: general (central plus state or provincial and local) government or the public sector, depending on policy focus. - Tracking indicators: central government indicators for more frequent and timely fiscal stance tracking. - Government debt prescribed in terms of central government debt. - Financial sector: - Prescribed comprehensive framework: analytical accounts of the banking system covering all units included in principal national measures of money aggregates (such as M2 or M3). - Tracking category: central bank analytical accounts for more timely banking system data. - Interest rates should include rates on short- and long-term government securities as appropriate. - External sector: - Prescribed comprehensive framework: balance of payments data. - Tracking categories (more frequent and timely): international reserves, reserve liabilities and related items, and merchandise trade. - Dissemination of monthly total official reserve assets within one week is prescribed. - Most reserves-related data in Table 2: prescribed with monthly periodicity and timeliness, with weekly periodicity and timeliness encouraged. - International investment position: annual data (components consistent with the IMF Balance of Payments Manual (5th Ed.)) are to be disseminated within two-three quarters of the end of the reference year, with quarterly periodicity and timeliness encouraged. - Exchange rates: should be disseminated on a daily basis; forward exchange rates (three- and six-month rates) on an “as relevant” basis if a robust forward market exists. - External debt: data covering four sector categories—(1) the general government, (2) the monetary authorities, (3) the banking sector, and (4) all other sectors—are to be disseminated with quarterly periodicity and timeliness. - Data should be broken down by maturity—short and long-term—on an original maturity basis and by instrument, as set out in the IMF Balance of Payments Manual (5th Ed.). - SDDS encourages dissemination of supplementary information on future debt service payments (principal and interest components separately identified), twice yearly for the first four quarters and the following two semesters ahead, with a lag of one quarter. - Dissemination of a domestic/foreign currency breakdown of external debt with quarterly periodicity and timeliness is encouraged. ### Flexibility - Members that do not produce or disseminate data categories/components designated "as relevant" are nevertheless deemed to be in observance of SDDS coverage specifications. - Two flexibility options for periodicity and timeliness: - First: For national accounts and balance of payments, quarterly periodicity must be met, but the specified data may be issued on a less timely basis than prescribed if the tracking categories are disseminated with the periodicity and timeliness prescribed for the tracking categories. - Second: For any other two prescribed data categories (except international reserves and external debt), periodicity may be less frequent and/or timeliness may be less than prescribed. - Targeted flexibility option for timeliness of monthly central government operations: - Available for subscribers disseminating, with a one-quarter lag, quarterly accrual-based general government operations (GGO) data in line with the Fund’s Government Finance Statistics Manual 2001 or an equivalent standard. - Allowed for the last month of the fiscal year (up to three months lag) and the first month of the new fiscal year (up to two months lag). - To use this option, a subscriber must begin disseminating quarterly GGO data for at least the last quarter of the fiscal year in which the option is exercised. - A 12-month transition period was established through end-November 2004 during which the periodicity and timeliness of central government and general government operations data could be on a “best-effort” basis. ### Access by the public - Principle: Dissemination of official statistics is a public good; ready and equal access is required for the public, including market participants. - SDDS prescribes: - (a) Advance dissemination of release calendars, with flexibility for distribution of release dates for up to two data categories; and - (b) Simultaneous release to all interested parties. ### Integrity - Confidence in official statistics depends on objectivity and professionalism of the producing agency; transparency of practices and procedures is key. - SDDS prescribes dissemination of: - (a) the terms and conditions under which official statistics are produced, including those relating to the confidentiality of individually identifiable information; - (b) the identification of internal government access to data before release; - (c) the identification of ministerial commentary on the occasion of statistical release; and - (d) the provision of information about revision and advance notice of major changes in methodology. ### Quality - Quality addressed by monitorable proxies to assist users in judging quality. - SDDS prescribes dissemination of: - (a) documentation on methodology and sources used in preparing statistics; and - (b) component detail, reconciliations with related data, and statistical frameworks that support statistical cross-checks and provide assurance of reasonableness. ### Implementation of the SDDS - 1. Subscription to the SDDS - Subscription is voluntary. - Members wishing to subscribe should first communicate intent to Fund staff, with an undertaking to provide metadata (other than summary descriptions of methodology) as soon as possible. - After receiving necessary metadata, Fund staff will work with the member to determine compliance and identify needed changes. - If no changes are needed, the member may inform the Secretary of the Fund of its subscription. If changes are required, they should be discussed, implemented, and then the member may inform the Secretary of the Fund of its subscription. - Members may publicly announce intent to improve data and dissemination practices with the goal of subscribing. - The Fund’s public identification of a member’s subscription will be made by posting the member’s metadata on the Dissemination Standard Bulletin Board (“DSBB”). - Within three months of posting metadata on the DSBB, the member must provide the summary descriptions of methodology called for under the SDDS. - 2. Dissemination Standard Bulletin Board (DSBB) - The Fund will establish and maintain an electronic DSBB on the Internet to identify subscribing members and provide wide access to members’ metadata. - Responsibility for metadata and the underlying economic and financial statistics rests with member countries. - Subscribers are required to establish a national summary data page on the Internet linked electronically to the DSBB via hyperlinks. - The national summary data page must contain, at a minimum, the most recent observation for the prescribed data category and the next most recent observation; it may contain additional information. - Responsibility for data on the national summary data page rests with individual subscribers. - Note: Members that subscribe after December 31, 1999 must have established a national summary data page that will be electronically linked to the DSBB by the time of subscription. - 3. Observance of the SDDS and Removal from the DSBB - Subscribers are expected to observe the elements of the four dimensions of the SDDS. Deviations are brought immediately to the subscriber’s attention; subsequent steps follow a graduated approach distinguishing minor and serious deviations. - Fund staff will continuously monitor observance of the data dimension and the advance release calendars element of the access dimension. - For nonobservance, Fund staff will try to resolve issues directly, then via the Executive Director representing the subscriber, and if unresolved will bring the matter to the subscriber’s Governor for the Fund. Fund staff may post a note on the DSBB indicating nonobservance, describe the problem, the subscriber’s response, and efforts underway to remedy it. - If problems persist without satisfactory corrective measures, the matter may be referred to the Executive Board, which could decide to delete the subscriber’s metadata from the DSBB. - Quarterly certification requirement for metadata accuracy: - Subscribers must certify, on a quarterly basis, the accuracy of metadata posted on the DSBB. - Subscribers will notify Fund staff, within three working days of the end of each calendar quarter, that either: (1) all metadata posted on the DSBB are fully accurate; or (2) certain metadata are inaccurate. - If inaccurate, subscribers must provide corrected metadata within a further five working days. - The DSBB will post the date on which metadata were last certified by the subscriber. - If a subscriber fails to meet certification for two successive certification dates, the Executive Director representing the subscriber will be approached to help resolve the issue, and subsequent steps for nonobservance will be followed. - If a subscriber makes changes between certification dates that affect metadata accuracy, the subscriber should inform Fund staff and work to amend affected metadata expeditiously; revised metadata must be provided at the next quarterly certification. A note may be posted on the DSBB pending revision. - An annual report assessing each subscribing member’s observance of SDDS undertakings will be posted on the DSBB. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### 4. Review, Revisions, and Withdrawal ### 4. Review, Revisions, and Withdrawal ### Review process - Reviews of the SDDS will be conducted by the Fund at intervals determined by the Executive Board of the Fund. - At the completion of these reviews, revisions of the SDDS may be adopted. ### Revisions - Revisions to the SDDS may be adopted following completion of Fund reviews. ### Withdrawal procedure - A member may withdraw its subscription to the SDDS at any time by sending a notification to the Managing Director of the Fund. - Upon withdrawal, the relevant metadata would be removed promptly from the DSBB. ### Editorial note on timing of future reviews - Ed. Note: Pursuant to Decision No. 13814-(06/98), November 15, 2006, future reviews will be conducted on an “as needed” basis. The expectation going forward is that “as needed” would generally mean a lag of at least five years between any such reviews. *4. Review, Revisions, and Withdrawal — _31stissue - 4. Review, Revisions, and Withdrawal_* ### 1. The General Data Dissemination System’s (the System) ob- ### The General Data Dissemination System’s (the System) objectives, comprising four dimensions of good practices in data production and dissemination ### System purposes and guidance - The System’s purposes: - (1) to encourage member countries to improve data quality; - (2) to provide a framework for evaluating needs for data improvement and setting priorities; and - (3) to guide member countries in the provision to the public of comprehensive, timely, accessible, and reliable economic, financial, and socio-demographic statistics in a world of increasing economic and financial integration. - The guidance comprises four dimensions: - The data: coverage, periodicity, and timeliness - Quality of the disseminated data - Integrity of the disseminated data - Access by the public ### The four dimensions (Box 1): key elements - The Data — Coverage, Periodicity, and Timeliness - Recommends dissemination of reliable, comprehensive, and timely economic, financial, and socio-demographic data as described in Table 1. - Quality - Recommends dissemination of documentation on methodology and sources used in preparing statistics. - Recommends dissemination of component detail, reconciliations with related data, and statistical frameworks that support statistical cross-checks and provide assurance of reasonableness. - Integrity - Recommends dissemination of the terms and conditions under which official statistics are produced, including those relating to the confidentiality of individually identifiable information. - Recommends identification of internal government access to data before release. - Recommends identification of ministerial commentary on the occasion of statistical releases. - Recommends provision of information about revisions and advance notice of major changes in methodology. - Access by the public - Recommends dissemination of advance release calendars. - Recommends simultaneous release to all interested parties. ### The data dimension — structure and emphasis - Focus areas: - The System focuses on data most important in evaluating performance and policy in four macroeconomic sectors: real, fiscal, financial, and external, plus complementary socio-demographic data. - Socio-demographic data specified under the GDDS are closely aligned with the majority of the indicators used to monitor progress towards the Millennium Development Goals (MDG) and cover most indicators used to monitor progress on national poverty reduction strategies. - The System addresses development and dissemination by: - (1) presenting objectives for comprehensive frameworks in each of the four macroeconomic and financial sectors; - (2) encouraging development and dissemination of macroeconomic and financial indicators of appropriate periodicity and timeliness reflecting countries’ needs and abilities; - (3) encouraging development and dissemination of basic components for socio-demographic data of appropriate periodicity and timeliness. - The System emphasizes development of comprehensive frameworks but does not specify detailed component breakdowns; it recommends internationally accepted aggregates and balancing items and cites accepted standards (1993 SNA, GFSM 2001, MFSM 2000, BPM5) as guidance. ### Table 1 — A. Comprehensive Frameworks (selected objectives, periodicity, timeliness) - Real Sector — National Accounts - Objective: Producing and disseminating the full range of national accounts aggregates and balancing items in nominal and real terms, yielding Gross Domestic Product, Gross National Income, Gross Disposable Income, Consumption, Saving, Capital Formation, and Net Lending/Net Borrowing. Producing and disseminating sectoral accounts and national and sectoral balance sheets, as relevant. - Periodicity: Annual - Timeliness: 6–9 months - Fiscal Sector — Central government operations - Objective: Producing and disseminating comprehensive data on transactions and debt, emphasizing coverage of all central government units; use of appropriate analytical framework; development of detailed classifications with breakdowns (debt holder, instrument, currency), as relevant. - Encouraged extension(s): General government or public sector operations data, strongly encouraged where sub-national levels of government or public enterprise operations are of analytical or policy importance - Periodicity: Annual - Timeliness: 2–3 months - Financial Sector — Depository corporations survey - Objective: Producing and disseminating comprehensive data emphasizing coverage of all depository corporations (banking institutions); use of an appropriate analytical framework; development of classifications of external assets and liabilities, domestic credit by sector, and components of money (liquidity) and non-monetary liabilities. - Periodicity: Monthly - Timeliness: 10–14 months - External Sector — Balance of payments (including IIP) - Objective: Producing and disseminating comprehensive data on the main aggregates and balancing items of the balance of payments, with detailed components, as relevant. - Encouraged extension(s): International Investment Position (IIP) - Periodicity: Annual - Timeliness: 6–9 months ### Table 1 — B. Data Categories and Indicators (selected core indicators, periodicity, timeliness) - Real Sector - National accounts aggregates: GDP (nominal and real); encouraged extensions Gross national income, capital formation, saving. Periodicity: Annual (quarterly encouraged). Timeliness: 6–9 months. - Production index/indices: Manufacturing or industrial indices. Timeliness: As relevant; 6–12 weeks for all indices. - Price indices: Consumer price index, Producer price index. Periodicity: Monthly. Timeliness: 1–2 months. - Labor market indicators: Employment, unemployment, wages/earnings, as relevant; disaggregation by age, sex, employment status, occupation and industry as appropriate. Periodicity: Annual. Timeliness: 6–9 months. - Fiscal Sector - Central government aggregates: Revenue, expenditure, balance, and financing with breakdowns (debt holder, instrument, currency) as relevant. Interest payments: Quarterly; Timeliness: 1 quarter. - Central government debt: Domestic debt and foreign debt, with appropriate breakdowns. Government guaranteed debt. Periodicity: Annual (quarterly encouraged). Timeliness: 1–2 quarters. - Financial Sector - Broad money and credit aggregates: Net external position, domestic credit, broad or narrow money. Periodicity: Monthly. Timeliness: 1–3 months. - Central bank aggregates: Monetary base. Periodicity: Monthly. Timeliness: 1–2 months. - Interest rates: Short and long-term government security rates, policy variable rate; Money or interbank rates and a range of deposit and lending rates. Periodicity: Monthly. - Stock market: Share price index, as relevant. Periodicity: Monthly. - External Sector - Balance of payments aggregates: Imports and exports of goods and services, current account balance, reserves, overall balance. Periodicity: Annual (quarterly strongly encouraged). Timeliness: 6 months. - External debt and debt service schedule: Public and publicly guaranteed external debt, broken down by maturity; private external debt not publicly guaranteed and debt service schedule. Periodicity: Quarterly (for some items); Twice yearly with data for 4 quarters and 2 semesters ahead for certain schedules. Timeliness: ranges including 3–6 months and 6–9 months depending on series. - International reserves: Gross official reserves denominated in U.S. dollars; Reserve-related liabilities. Periodicity: Monthly. Timeliness: 1–4 weeks. - Merchandise trade: Total exports and total imports; Major commodity breakdowns. Periodicity: Monthly. Timeliness: 8–12 weeks. - Exchange rates: Spot rates. Periodicity: Daily. ### Table 1 — C. Socio-Demographic Data (selected categories, periodicity, timeliness, related MDG indicators) - Population characteristics: size and composition derived from census, surveys, or vital registration systems; disaggregation by age, sex, and region as appropriate. - Dynamics of growth: vital statistics: births, deaths and migration; reporting of mortality rates, crude birth rate, fertility rate, and life expectancy. - Related MDG indicators cited: 13. Under-five mortality rate; 14. Infant mortality rate. - Periodicity: Annual (Census every ten years). Timeliness: 3–6 months for annual updates; 9–12 months for Census. - Education - Inputs: measures of current financial, human, and physical resources available to public and private educational institutions, recorded by level of education or type of program; disaggregation by region recommended. - Process: measures of student progress through school, such as enrollments, dropouts, and repetitions, recorded by level of education and sex. - Outcomes: educational attainment measured by progress through school, graduations, and completions by level; literacy; disaggregation by age and sex. - Related MDG indicators cited: 6. Net enrolment ratio in primary education; 7. Proportion of pupils starting grade 1 who reach grade 5; 8. Literacy rate of 15–24-year olds; 9. Ratio of girls to boys in primary, secondary, and tertiary education; 10. Ratio of literate women to men of 15–24-year olds. - Periodicity: Annual. Timeliness: 6–12 months following beginning of school year. - Health - Inputs: measures of current financial, human, and physical resources available to public and private health systems; private (household) expenditures on health services; disaggregation by region. - Process (service delivery): measures describing number of clients served and type of care provided; disaggregation by region. - Outcomes: statistics on mortality and morbidity, including mortality by cause and incidence of disease by age, sex, region and other patient characteristics. - Related MDG indicators cited (selected): 15. Proportion of 1-year old children immunized against measles; 16. Maternal mortality ratio; 17. Proportion of births attended by skilled health personnel; 18. HIV prevalence among 15–24-year old pregnant women; 19. Condom use rate of the contraceptive prevalence rate; 20. Number of children orphaned by HIV/AIDS; 21. Prevalence and death rates associated with malaria; 22. Proportion of population in malaria risk areas using effective malaria prevention and treatment measures; 23. Prevalence and death rates associated with tuberculosis; 24. Proportion of tuberculosis cases detected and cured under directly observed treatment short course; 30. Proportion of population with sustainable access to an improved water source, urban and rural; 31. Proportion of urban population with access to improved sanitation. - Periodicity: Annual (outbreaks of contagious diseases should be reported at higher frequency and with greater timeliness). Timeliness: 3–6 months following end of reference period. - Income poverty - Measures: number and proportion of people or households with less than minimum standard of income or consumption; valuation of minimum consumption bundle; measures of distribution of household or per capita income or consumption, and incidence of low consumption. ### Implementation and usage implications (drawn from System emphasis) - Encourage development of comprehensive frameworks and core indicators across four macroeconomic sectors and socio-demographic domains to support transparency of macroeconomic performance and policy. - Promote dissemination practices that enhance quality, integrity, and public access: methodological documentation, component detail and reconciliations, disclosure of pre-release access and ministerial commentary, release calendars, and simultaneous release. - Support alignment of socio-demographic data with MDG indicators and national poverty reduction monitoring needs. - Recognize practical complexities where some data categories are compiled by private organizations; inclusion is warranted for completeness but requires adaptation of official agency responsibilities for access, integrity, and quality. *Source: Excerpt from the GDDS Annex and Table 1 as presented in the provided content.* ### 1. Proportion ### 1. Proportion ### Poverty and other socio-demographic measures - Core poverty measures listed: - 1. Proportion of population below $1 (PPP) per day - 2. Poverty gap ratio (incidence x depth of poverty) - 3. Share of poorest quintile in national consumption - Other poverty measures encouraged: - measures of deprivation or insecurity used to identify the population living in poverty, such as evidence of malnutrition, endemic diseases, educational achievement, and lack of access to basic services - Disaggregation encouraged: - Separate poverty estimates for urban and rural populations or for major regions, states, or provinces. - Disaggregation of data by region. - Recommended periodicity/timeliness for poverty statistics (as presented in source table excerpt): - "3–5 years 6–12 months following the survey" (preserve original formatting as in source) ### Periodicity and timeliness — system objectives and priorities - System priority: - Recognizes importance of high periodicity and timeliness but attaches priority to improvements in data quality because of tradeoffs in still-developing statistical systems. - Definitions: - Periodicity: frequency of compilation of the data. - Timeliness: lapse of time between a reference date (or close of a reference period) and dissemination. - Forms of dissemination mentioned: - formal publications (news releases, periodicals); - announcing availability on request, electronic databases; - diskette, tape, CD-ROM versions; - brief recorded telephone messages and fax services for high-frequency categories. - Timeliness objectives: - Objectives set out in Table 1 as ranges recognizing diversity of countries. - Short end corresponds to SDDS timeliness requirements; high end relates to good practice across a broad group of countries. - System encourages improvements over time consistent with data quality. ### Comprehensive frameworks (macroeconomic and financial sectors) — objectives and timeliness targets - General objective: - Encourage production and dissemination of complete sets of data with widest coverage, using appropriate analytical frameworks and classification schemes. - National accounts: - Emphasis on full range of national accounts aggregates and balances (GDP, national and disposable income, consumption, saving, capital formation, net lending/net borrowing). - Guidance: 1993 SNA and regional counterparts recommended. - Long-term objective: development of accounts for principal sectors and national/sectoral balance sheets. - Recommended dissemination frequency and timeliness: complete national accounts data be disseminated annually and within 10–14 months after end of the reference year. - Central government operations: - Complete coverage of all central government units (budgetary and extra-budgetary accounts, social security funds, decentralized agencies). - Use GFSM 2001 as guideline. - Recommended dissemination: complete data annually within 6–9 months. - Encouraged: development of general government or public sector operations data; production of summary indicators may be prioritized when analytically significant. - Depository corporations survey (financial sector comprehensive framework): - Coverage: all depository corporations included in broad money aggregates. - Analytical framework: based on broad money, domestic credit, external assets and liabilities. - Guidance: IMF Monetary and Financial Statistics Manual. - Recommended dissemination: monthly data within 2–3 months of end of reference month. - External sector (balance of payments): - Objective: production and dissemination of complete balance of payments accounts. - Guidance: fifth edition of IMF Balance of Payments Manual and Supplement on financial derivatives. - Recommended dissemination: complete balance of payments data annually within 6–9 months of end of reference year. - International investment position: - Encouraged development of component detail according to Balance of Payments Manual (fifth edition) and dissemination of framework or components as feasible. ### Indicators (macroeconomic and financial sectors) — recommended indicators, periodicity, timeliness - General approach: - For each sector (real, fiscal, financial, external) three indicator types: summary measures from comprehensive frameworks; tracking data for principal measures; other relevant data. - Many indicators expected to be produced more frequently and more timely than comprehensive frameworks; timeliness specified as ranges. - Real sector: - Recommended indicator: GDP at nominal and real levels. - Encouraged: breakdowns of GDP by major expenditure category and/or productive sector; gross national income, saving, capital formation. - Classification encouraged: 1993 SNA (or regional counterpart). - Dissemination: annual indicators recommended; quarterly indicators encouraged; recommended timeliness for annual indicators: within 6–9 months. - GDP tracking: - Use single production index or selection of production indices relevant to country structure. - Monthly measure recommended for manufacturing or industrial production; "as relevant" notation recognizes quarterly or half-yearly indices may be better for seasonal crop production. - Price statistics: - Recommended: consumer price indices; producer price indices encouraged. - Monthly periodicity recommended with timeliness of 1–2 months after end of reference period. - Labor market: - Annual periodicity and 6–9 months timeliness recommended after consultation with ILO Bureau of Statistics. - "As relevant" notation for coverage in countries with large informal or subsistence sectors. - Disaggregation relevant for MDG Indicator No. 11 and MDG Indicator No. 45. - Fiscal sector indicators: - Recommended indicators: central government aggregates (revenue, expenditure, appropriate balance, financing). - Recommended dissemination: quarterly within one quarter. - Debt coverage: total debt of central government, classified domestic and foreign "as relevant"; annual periodicity recommended, quarterly encouraged where debt is major policy significance. - Dissemination of information on government guaranteed debt encouraged. - Financial sector indicators: - Broad money and credit aggregates for depository corporations survey; include net external position, domestic credit, narrow or broad money. - Classification encouraged: Monetary and Financial Statistics Manual. - Recommended dissemination: monthly within 1–3 months. - Central bank: - Specified component: monetary base. - Recommended dissemination: monthly within 1–2 months. - Interest rates: - Include short- and long-term government securities rates and a policy variable rate (e.g., central bank lending rate). - Dissemination of deposit and lending rates encouraged; monthly observations called for. - No specific timeliness required due to media and commercial availability; where administratively determined, changes should be disseminated as soon as possible. - Stock markets: - Where a stock market exists, dissemination of share price indices by official agencies encouraged. - External sector indicators: - Current account: imports and exports of goods and services; current account balance. - Financial (capital) account: reserves data and overall balance. - Classification encouraged: Balance of Payments Manual (fifth edition). - Recommended periodicity: annual with quarterly dissemination strongly encouraged; for annual data, dissemination within 6 months recommended. - External debt and trade: - Public and publicly guaranteed external debt stock data recommended with quarterly periodicity and timeliness of one to two quarters of the reference date. - Associated debt service schedule: disseminated twice yearly, within three to six months of the reference period, and with data for four quarters and two semesters ahead. - GDDS encourages dissemination of private debt not publicly guaranteed and associated debt service schedule with annual periodicity within six to nine months. - Reserves and trade statistics timeliness: - Monthly gross official reserve assets in U.S. dollars disseminated within one to four weeks recommended; reserve-related liabilities encouraged. - Monthly merchandise trade (total imports and exports) dissemination recommended within eight to twelve weeks; major commodity breakdowns encouraged with slightly longer lag. - Merchandise trade and external debt data enable calculation of ratio of external debt service to exports of goods and services (MDG Indicator No. 44). - Exchange rates: - Spot exchange rates recommended to be available daily; if available via media or on-line, official redissemination may be monthly or preferably weekly end period and period average rates. ### Basic components (socio-demographic data) — coverage and scope - Section C of Table 1 presents basic components for socio-demographic data: population, education, health, and poverty. - Purpose: - Provide data useful in monitoring and evaluating long-term economic objectives to complement core macroeconomic categories. - Scope and limitations: - These basic components do not represent the full range of statistics relevant for social policies (e.g., housing, criminal justice, scientific and cultural activities not included; environmental statistics not included at present). - Importance: - Information produced is important to governments, non-governmental and international organizations, and civil society. *Selected Decisions and Selected Documents — excerpt from source PDF chapter.* ### 38. The System makes no specific recommendations concerning ### _31stissue - 38. The System makes no specific recommendations concerning ### Scope for socio-demographic indicators (paragraphs 38–39) - The System makes no specific recommendations concerning which social or demographic indicators should be compiled or reported by participating countries; countries should construct indicators to meet their own national needs based on good statistical practices. - Basic components for the socio-demographic data listed in Section C of Table 1 include information on inputs of resources (financial as well as human) into the social area, linking to public expenditure policies. - The System is designed as a comprehensive framework spanning a broad range of interrelated policy areas in the social and economic spheres and is appropriate for covering indicators used to monitor progress within national poverty reduction strategies. - Each socio-demographic data category specifies related MDG indicators which could be used to gauge the effectiveness of poverty-reduction policies. - There are no equivalent comprehensive frameworks for socio-demographic data comparable to national accounts, but guidelines, standard classification systems, and examples of “best practice” exist; detailed guidance and references are provided in the Guide to the General Data Dissemination System, IMF, 2001. ### Quality (section 2; paragraphs 40–41) - Data quality must have a high priority; data users must be provided with information to assess quality and quality improvements. - Dissemination of documentation on methodology and sources: - Documentation may take several forms, including summary notes accompanying releases, separate publications, and papers available on request. - Members are encouraged to prepare and disseminate statements about important features of quality (e.g., kinds of errors, sources of noncomparability over time, measures of coverage for census data, sample error for survey data). - Dissemination of component detail, reconciliations, and statistical frameworks: - Encourage dissemination of components underlying aggregates, dissemination within statistical frameworks (accounting identities and statistical relationships), and comparisons and reconciliations with related data (e.g., exports/imports as part of national accounts and balance of payments). - Component detail must respect confidentiality of individually identifiable information and statistical reliability. ### Integrity (section 3; paragraphs 42–45) - Official statistics must command public confidence; transparency of producer practices and procedures is key. - Dissemination of terms and conditions under which official statistics are produced: - Terms may include statistics laws, charters, and codes of conduct; these may specify relationships of statistical units, legal authority to collect data, requirement to publish, terms of reference for the chief statistician/director, and procedures related to confidentiality of individual responses. - Dissemination forms include annual reports, abstracts in key publications, and statements referring to confidentiality; use of logos/insignia is suggested to remind users of production terms. - Identification of internal government pre-release access: - The System calls for listing persons/positions within government (outside the producing agency) who have pre-release access, at least for the most sensitive data categories and indicators; forms of disclosure include brief public notices and annual reports. - Identification of ministerial commentary on statistical releases: - Ministerial commentary should be identified so its source is transparent; identification may take forms such as separate ministerial statements or labeling of agency material in releases (use of source lines, logos). This practice targets sensitive data categories and indicators. - Provision of information about revisions and advance notice of major methodological changes: - Provide information about past revisions (policy followed and data on size of past revisions) and advance notices of changes in methodology (e.g., changes in base year, major sample size expansions, new data sources, reclassifications). - Advance notices may be brief statements in preceding presentations of unrevised data or stand-alone notices, identifying kinds of changes and sources for additional information; members encouraged to provide access to explanations after revisions are released. ### Access by the public (section 4; paragraphs 46–47) - Dissemination of official statistics is a public-good activity; ready and equal access are principal requirements. - Advance dissemination of release calendars: - Agencies are encouraged to disseminate calendars for the year ahead showing no-later-than targets for comprehensive frameworks and annual indicators and a range of dates, such as 3–5 days, for more frequent data. - Agencies are encouraged to make known the name and address of an office or person who can provide latest information about likely release dates, including for irregular periodicity and newly disseminated data. - Simultaneous release to all interested parties: - Objective is to release data to all interested parties at the same time; release may consist of summary data with detail provided later. - The objective may be met by providing at least one publicly identified and accessible location where data are available to all on an equal basis once released. - Pre-release access for government agencies is governed by the integrity provisions (see identification of internal government access). ### Implementation and participation in the GDDS (paragraphs 48–53) - Participation is voluntary and involves: - A commitment to use the GDDS as a framework for developing national systems for production and dissemination of macroeconomic, financial, and socio-demographic data; - Designation of a country coordinator to work with Fund staff; and - Preparation of metadata describing current statistical production and dissemination practices and plans for short- and longer-term improvements (or indicating no improvements required). - Metadata descriptions should correspond to objectives for data, quality, access, and integrity dimensions, identifying major shortcomings, steps to address them, necessary resources (including technical assistance), and time frames. Improvements to be undertaken within the next year and within 2 to 5 years should be identified. - Participation is publicly recognized by the Fund when metadata are posted on the Fund’s Dissemination Standards Bulletin Board (DSBB); members may indicate intent to participate earlier by communicating with the Fund (such communications are not publicly recognized until metadata are posted). - Members that subscribe to the SDDS are not expected to participate in the GDDS but may find the GDDS useful. - The Fund stores metadata provided by participants and disseminates them through the DSBB. Accuracy of metadata and underlying statistics rests with member countries. Participants are expected to review metadata at least once a year and update as necessary. - Members may withdraw participation at any time by sending an appropriate communication to the Fund. - Reviews of the System’s content and implementation procedures will be conducted by the Fund at appropriate intervals; views of producers and users will be sought. (Editorial note indicates future reviews on an “as needed” basis, with an expectation of a lag of at least five years between reviews.) ### Archives, access, and related Board decisions (selected excerpts) - Opening of Fund archives: Executive Board decisions set schedules for public access to various archival materials (historical thresholds of 30 years, 20 years, 10 years, and 5 years for different document classes are noted in the text). Access exclusions include attorney-client privileged Legal Department records, externally furnished materials with confidentiality markings unless consent is given, personnel and medical records, and Grievance Committee documents. - Policy adjustments: Decision No. 12981-(03/34), April 9, 2003, introduces additional document series available after 10 years and calls for a reasonable cost recovery scheme for ad hoc requests for Board approval of exceptions to archives access rules; no charge for requests from government officials of member countries. - Cooperation with investigations by members’ auditing institutions: The Executive Board adopts procedures to cooperate, upon request, with investigating agencies of members for preparation of reports on the Fund and its activities, while expecting restraint in requesting such investigations given the Fund’s multilateral character and existing assessment mechanisms. *Source: _31stissue - 38. The System makes no specific recommendations concerning (IMF PDF chapter/section).* ### 1. All requests from official investigating agencies will be noti- ### _31stissue - 1. All requests from official investigating agencies will be notified to the Executive Board at least two weeks before the commencement of any cooperation with the agency pursuant to the request. The notification will include the full text of the terms of reference of the enquiry and any special features of the enquiry. Executive Directors will have an opportunity to comment on all aspects of the notification, as they deem suitable. ### Cooperation with Investigating Agencies — Procedures and Conditions - Management and staff readiness: - Management and staff will be prepared to meet a request if it is channeled through an Executive Director’s office and provides: - (i) a precise description of the terms of reference of the enquiry; and - (ii) written assurances that: - confidential information provided in the course of the enquiry will not be disclosed; - management and staff will be given an opportunity to review any report resulting from the enquiry before its circulation outside the agency to ascertain that no confidential information is being disclosed in the report and that the factual information is correct; and - the views of management and staff will be included in the report in an acceptable manner. - Scope of documents to be provided: - In principle only documents and information available to the Executive Board will be made available to the agency. - The consent of Executive Directors whose statements are involved should be requested before transmitting grays or Executive Board minutes to the agency. - Requests by the agency for access to additional documents and information (other than those relating to the Fund’s internal advisory procedures) will be submitted to the Executive Board for approval if management supports the request. - The Executive Board will not approve the request unless it has reviewed the relevant document or information; the procedures for the review will ensure the confidentiality of the document or information. - Notification and denial: - The Executive Board will be informed of requests which are denied by management under paragraph 2 or 3. - In such cases, management or the relevant Executive Director may consult with the Executive Board. - Reporting and resource assessment: - All published reports resulting from such investigations will be circulated to the Executive Board for information, together with an assessment of the staff resources used by the Fund in the enquiry. - Breach of assurances: - If, in the judgment of management, an investigative agency did not respect the written assurances provided in accordance with paragraph 2(ii), it shall so inform the Executive Board and propose any remedial action it considers necessary. - Review timetable and decisions: - These procedures will be reviewed not later than January 30, 2004. (SM/00/97, Rev. 1, Sup. 2, 2/2/01) - Decision No. 12424-(01/13), February 5, 2001, as amended by Decision No. 12936-(03/8), February 4, 2003 - The Executive Board reviewed the procedures and they shall be reviewed again before January 31, 2007. (SM/04/7, 1/12/04). Decision No. 13172-(04/6), January 20, 2004 ### Article IX, Section 7 — Privilege for Communications (Interpretation) - Questions and Decisions: - Question No. 1: Does Section 7 of Article IX apply to rates charged for official communications of the Fund? - Decision on Question No. 1: Yes. Section 7 of Article IX applies to rates charged for official communications of the Fund. - Question No. 2: If a member exercises regulatory powers over the rates charged for communications, is it relieved of the obligation of Section 7 by reason of privately owned or operated transmission facilities? - Decision on Question No. 2: No. A member which exercises regulatory powers over the rates charged for communications is not relieved of its obligation under Section 7 of Article IX by reason of private ownership or operation of facilities. - Question No. 3: Is the member’s obligation under Section 7 satisfied if official communications of the Fund may be sent only at rates which exceed the rates accorded the official communications of other members in comparable situations? - Decision on Question No. 3: No. The obligation is not satisfied where rates charged the Fund exceed rates accorded other members in comparable situations. - Reference: Decision No. 534-3, February 20, 1950 ### Article IX, Section 8 — Immunities and Privileges of Officers and Employees; Managing Director’s Policy Statement on Immunity of Fund Officials - Executive Board action: - The Executive Board expressed support for the Managing Director’s policy statement on the immunity of Fund officials. - Decision No. A-11780, June 17, 2002 - Core policy clarifications: - Article IX, Section 8 provides immunity from legal process for all Governors, Executive Directors, Alternates, members of committees, representatives appointed under Article XII, Section 3(j), advisors of any of the foregoing persons, officers, and employees of the Fund, with the exception when the Fund waives this immunity. - The Policy Statement clarifies rights and steps if a Fund official is arrested or detained while on mission, on assignment to resident representative posts or field offices, or at headquarters. - Rights and actions available to the Fund when an official is arrested/detained: - The Fund has the right: - (1) to visit and converse freely with the official; - (2) to be apprised of the grounds for the arrest or detention, including the main facts of the case and the formal charges against the official; - (3) to assist the official in arranging for legal assistance; and - (4) to appear in legal proceedings to defend any interest of the Fund affected by the arrest or detention. - Members are required, as part of their obligation to respect immunities, to give the Fund a full and timely opportunity to exercise these rights. - A Fund official who is arrested or detained will be entitled to contact the Fund, or have the authorities notify the Fund of his arrest or detention. - Managing Director’s determinations and follow-up: - If the Managing Director concludes that the official’s acts are covered by immunity and the immunity has not been waived by the Executive Board, the Managing Director will inform the Executive Board and notify the authorities of his conclusions and insist on the immediate release of the official and the dismissal of any charges to which the immunity applies. - If authorities fail to respect immunities or ancillary obligations, the Managing Director will report the matter to the Executive Board under Rule K-1 of the Rules and Regulations, and the Executive Board will be asked to consider the application of sanctions to the member for breach of its obligations under the Articles. - If Fund officials are incarcerated, the Fund will seek to monitor their treatment and the conditions in which they are held, to ensure humanitarian treatment, adequate nourishment and medical care. - Note on terminology: - For purposes of this Policy Statement, the term “officials” includes all persons listed in Article IX, Section 8. ### Relations with Other International Organizations — GATT Consultation Arrangement - Arrangement agreed: - The Fund agrees that the informal arrangement of an administrative character proposed by the Chairman of the Contracting Parties constitutes a satisfactory basis for consultation and cooperation between the Fund and the Contracting Parties to the General Agreement on Tariffs and Trade. - Decision No. 363-1, September 24, 1948 - Operational elements: - The Chairman of the CONTRACTING PARTIES will notify the Managing Director of particular instances where consultation is desired and will furnish available information to assist the Fund. - The CONTRACTING PARTIES authorized their Chairman to initiate requests when contracting parties are not in session. - Any request for consultation by either the Fund or the CONTRACTING PARTIES shall be accompanied by available information that would contribute to the effectiveness of the consultation. - Due regard shall be paid to safeguarding confidential information and special obligations of the Fund and the CONTRACTING PARTIES. - Particular procedures can be worked out case by case until more formal procedures are developed if necessary. - Correspondence: - Letter from Chairman S/L.D. WILGRESS to the Managing Director, dated 9 September 1948, describing the proposed administrative arrangement. - Draft reply by the Managing Director accepting the informal arrangement. ### IMF–World Bank Concordat (Bank–Fund Collaboration) - Purpose and scope: - The March 31, 1989 memorandum (SM/89/54, REV. 1) sets out guidelines to secure constructive and stronger collaboration between the Fund and the World Bank and provides administrative and procedural steps necessary for closer cooperation. - Objectives: - Ensure the closest possible collaboration and working relations to serve member governments effectively in meeting development needs and supporting macroeconomic and structural change. - Avoid administrative friction and facilitate orderly resolution of differences of views. - Implementation: - The staff will be instructed to implement the guidelines embodied in the document in a spirit of close collaboration. - The matter will be brought to the agenda for discussion on a date to be announced. - Attachment: - Memorandum to the Executive Board of the International Monetary Fund and the Board of Executive Directors of the World Bank, March 30, 1989, FROM: The Managing Director; The President; SUBJECT: Bank-Fund Collaboration in Assisting Member Countries. *Italic: Selected Decisions and Selected Documents, pages as provided in the source content.* ### 1. Guidelines for collaboration between our two institutions have ### _31stissue - 1. Guidelines for collaboration between our two institutions have ### Background and history of the guidelines - Guidelines for collaboration between our two institutions have been in place since 1966. They have been reviewed and strengthened on a number of occasions since then.1 - Additional collaboration procedures were added to the original guidelines in 1970, and guidelines, as expanded, were reviewed and affirmed by managements of both institutions in 1980, and by the Fund in 1984 and the Bank in 1985.1 ### Severity of member countries' problems and institutional responsibility - Member countries are struggling to restore stability, to adjust their economies to a more rapidly changing and less benign international environment, and to restore growth, while they continue to grapple with their massive debt overhangs and limited availability of both concessional funds and commercial capital. - The majority of the members of our two organizations face serious problems. Many of them face the urgent need for change in policies, institutions, and the incentive framework. - Both institutions and their Boards have responsibility to ensure procedures make possible, to the fullest extent practicable: - comprehensive analyses by our staffs; - early exchange of views on differences; and - a system to refer remaining differences to the appropriate level of management for resolution. ### Division of primary responsibilities - The existing guidelines assign primary responsibilities as follows: - The Bank: “...primary responsibility for the composition and appropriateness of development programs and project evaluation, including development priorities.” - The Fund: “...primary responsibility for exchange rates and restrictive systems, for adjustment of temporary balance of payments disequilibria, and for evaluating and assisting members to work out stabilization programs as a sound basis for economic advance.” - The guidelines recognize a broad range of matters of common interest, including: the structure and functioning of financial institutions; the adequacy of money and capital markets; the actual and potential capacity of the member to generate domestic savings; the financial implications of economic development programs (internal and external); foreign debt problems; and so on. - On matters in the area of primary responsibility of the Bank, the Fund (and Fund missions) “will not engage in a critical review of those matters with member countries unless it is done with the prior consent of the Bank.” Corresponding provisions were made for the Bank and Bank missions. ### Evolution of activities and the need for strengthened collaboration - Overlap of activities of the two institutions grew rapidly in the 1970s and 1980s as both attempted to respond to massive financing and adjustment requirements. - Fund responses included: - increased consideration of structural issues in stand-by arrangements; - extended the repayment period of extended arrangements to 10 years; - introduced the Structural Adjustment Facility (SAF) and the Enhanced Structural Adjustment Facility (ESAF). - Bank responses included: - introduction of Structural Adjustment Loans (SALs) in 1980; - subsequent introduction of Sector Adjustment Loans (SECALs). - Continuous and successful cooperation exists: close contacts between staffs improve understanding, lead to improved and consistent policy advice, better coordination of amounts/forms/timing of financial assistance, and greater effectiveness in mobilizing additional financial support. - Despite cooperation, differences of view arise on issues such as exchange rate, the level of external assistance sufficient to provide reasonable prospects for sustained and successful adjustment efforts and resumption of growth, the speed of adjustment, and the need to maintain adequate levels of public sector development expenditures. - Differences have also centered on trade-offs between efficiency gains from structural measures (accrued over time) and balance of payments and budgetary impacts. ### Principle for handling disagreements and institutional independence - The institutions reaffirm the 1966 guideline principle that views on matters clearly within the area of “primary responsibility” of one institution “should be expressed to members only by or with the consent of that institution.” - Enhanced collaboration procedures are intended to assure resolution of issues while allowing both Bank and Fund to explore their legitimate concerns and take them into account in policy advice and lending operations. - The objective of enhanced collaboration is to avoid differing policy advice, but not to prevent one institution from undertaking analysis in areas of the other's primary responsibility. - If differences persist after thorough common examination and are not resolved by management, the institution that does not have primary responsibility would, except in exceptional circumstances, yield to the judgment of the other institution. In such rare cases, managements will wish to consult their respective Executive Boards before proceeding. - Each institution should rely as much as possible on analyses and monitoring of the other in areas of the other's primary responsibilities, while safeguarding the independence of institutional decisions. ### Procedures for Enhanced Collaboration — overview - Existing procedures and practices are designed to ensure quality of analysis and policy advice and to explore differences of view. Differences are typically worked out at the working level and resolved in the majority of cases. - To further strengthen collaboration and facilitate resolution of remaining differences, new or more formal steps have been agreed in the following areas: I. Strengthening Collaboration - Supplement daily interactions and ad hoc contacts (including monthly and ad hoc meetings between the Managing Director and the President) with regular meetings of senior staff of each institution. - Regular meetings between Bank Regional Vice Presidents and the corresponding Fund Area Department Directors to review current operational concerns and anticipate/reduce staff differences. - Senior-level strategy review meetings for countries of common concern, normally chaired by the Deputy Managing Director of the Fund and the Senior Vice President, Operations, of the Bank, supported by a few senior staff on each side. - Whenever conditionality or advice to countries on major issues is involved, agreement should be sought promptly, beginning with working-level sharing of information and views at the earliest stages, and involving superiors when working-level resolution cannot be achieved. - Managers are responsible to seek resolution of any major differences of view between the institutions before the matter is discussed with the member, and before either staff makes proposals to the member. - The Deputy Managing Director of the Fund and the Senior Vice President, Operations, of the Bank will meet to discuss any issues not resolved at the Fund Director/Bank Regional Vice President Level and advise the Managing Director and the President if any differences remain. - Strengthen systematic exchange of information on future country work and mission plans by country: Area Departments and Regions are expected to maintain a forward-looking calendar of at Least one year that would be updated periodically. Deviations from the work plan or calendar would be communicated to the other institution without delay. - Ad hoc study groups may be established under the direction of the Fund’s Director of Research and the Bank’s Vice President, Development Economics, to examine analytical issues arising in areas of common work between the two institutions. - In low-income countries, PFP discussions should continue to be handled jointly and, whenever possible, with a single mission chief at an appropriate rank, on the basis of pre-agreed terms of reference. The decision on whether the chief should be from the Bank or from the Fund will be determined on a case-by-case basis. - When parallel missions are in the field, they are expected to cooperate fully and meet jointly with country authorities, following positions clearly agreed in advance. - Assuming members agree, the Fund management could issue an invitation for one or more Bank staff to be attached to missions involving the use of Fund resources in SAF/ESAF-eligible countries where the Bank was also financially active. Comparable provisions would be made to invite Fund staff to participate in Bank appraisal missions for SALs or SECALs in the same countries. II. Improved Collaboration to Support Adjustment Programs - Under existing procedures, Bank staff includes a discussion of the Fund’s financial relations, the status of any negotiations for the use of Fund resources, and results of any recent Fund reviews in the President’s Report to the Bank’s Executive Board on a proposed adjustment loan, since adjustment lending operations are not normally undertaken unless an appropriate Fund arrangement is in place.1 - In the absence of a Fund arrangement, the Bank staff should ascertain whether the Fund has any major outstanding concerns about the adequacy of macroeconomic policies prior to formulating its own assessment in connection with approval of draft loan documents.1 - The Fund’s assessment of macroeconomic policies is taken into account in the Bank’s assessment of its conditions prior to the release of subsequent tranches. - Strengthen coordination where the Fund’s assessment of macroeconomic policies is needed for countries with no existing Fund arrangements. The Bank will ask the Fund’s views, leaving time for consultations with country authorities as needed. In comparable circumstances, Fund management will ask the Bank’s staff views prior to recommending approval of an adjustment program involving the use of Fund resources. III. A PFP-Like Document for Middle-Income Countries - Some Directors suggested preparing PFP-like documents for some middle-income countries requesting the use of Fund resources, particularly those requesting arrangements under the EFF.3 - Preparation of medium-term plans could be useful for non-SAF-eligible countries where the member seeks a multi-year commitment of resources from its creditors or where structural changes are prominent in the programs (e.g., under the EFF). This matter would be presented to the Executive Boards for consideration after further consultations between the two staffs and managements. IV. Collaboration in the Context of the Debt Strategy - In the context of the debt strategy, the Fund is looked to by commercial and official financing communities for an assessment of balance of payments prospects and financing requirements of member countries undertaking stabilization programs. Bank views are sought with respect to Longer-term external resource requirements and growth prospects. - Both institutions have an interest in the member’s medium-term balance of payments prospects and creditworthiness as affected by financing techniques, including menu items and other innovative forms of financing aimed at debt reduction. - A task force will be established to promote cooperation, analysis, and exchange of information on financing techniques by our institutions. V. Collaboration in the Presence of Overdue Obligations - (Text for section V begins in the source but is not included in the provided excerpt.) *Italicized source attribution: Excerpt from the document "_31stissue - 1. Guidelines for collaboration between our two institutions have" (PDF chapter/section).* ### 23. Both the Bank and the Fund urge members with overdue obli- ### _31stissue - 23. Both the Bank and the Fund urge members with overdue obli- ### Overdue obligations and cross-institutional effects - Both the Bank and the Fund urge members with overdue obligations to one or both institutions to become current with both. - If a member country has overdue obligations to one institution, this will affect the other institution’s assessment of the justification for extending its own financial assistance. - Each institution’s policies require review of a member’s ability to meet its financial obligations in light of that member’s discharge of its obligations to the other institution. - Fund management would find it difficult to present a request for a Fund arrangement to the Executive Board for a member with overdue obligations to the Bank: - because of its implications for ability to meet Fund obligations; and - because continued access to Bank or IDA Lending is often necessary to ensure that an adjustment program is adequately financed. - Fund management proposes to seek the views of the Bank in all cases where the use of Fund resources was requested by a member with overdue obligations to the Bank, and would not be prepared to support such a request when arrears to the Bank were an indication that the resources of the Fund would not be safeguarded. - Bank management would advise its Board with regard to countries with overdue obligations to the Fund and would not be prepared to recommend approval of an IBRD or IDA loan if the overdue obligations to the Fund were an indication that the resources of the Bank would not be safeguarded. - The two managements will act in the full spirit of solidarity when one institution is confronted with arrears: - arrears constitute a major challenge to the cooperative nature of the institutions; and - in such instances, they will provide their good offices and support to help eliminate those arrears. ### Independence of institutional decisions (Sections 24–25) - Executive Directors of the Bank and the Fund have stressed the need to avoid cross-conditionality: each institution must continue to proceed with its own financial assistance according to the standards in its Articles of Agreement and policies adopted by its Executive Board. - The Bank’s assessment of structural and sectoral policies will continue to be an important element in decisions regarding Fund lending, but the ultimate decision on whether to support the program rests with the Fund’s Executive Board. - The Fund’s assessments will continue to be an important element in decisions regarding Bank adjustment lending, but the ultimate decision rests with the Bank’s Executive Directors. - Procedure in presence of disagreement or arrears: - If Fund management were to submit a program for approval despite the Bank’s reservations about structural policies or in the presence of arrears to the Bank, Fund management would present the case to an informal meeting of the Fund’s Executive Board for discussion prior to communicating its decision to the member concerned. - Bank management would adopt the corresponding procedure. ### Dealing with other institutions (Section 26) - Activities and roles of the Fund and the Bank have expanded; coordinating activities to assist members in mobilizing resources have grown rapidly. - To avoid conflicting views in reports to other groups (the OECD, DAC, UN) and to the maximum extent feasible: - draft reports prepared by either institution will be sent to the other well in advance of the circulation date for review and comments; - this will provide an additional opportunity to identify possible problems and to resolve them. ### Longer-term promotion of mutual understanding (Sections 27–28) - Proposal to initiate an exchange of staff on two- to three-year secondments at the senior professional levels to better acquaint staff of the two institutions with each other’s thinking, practices, and constraints. - During the period of the secondment, staff members would be wholly integrated into the regular staff of the institution to which they have been seconded. - For administrative reasons, there might need to be some limit on the number of secondments at any one time. - Both the Fund and the Bank remain committed to strengthening their collaboration in a longer-term perspective; the measures set out are intended to resolve emerging differences of view and limit potential areas of conflict. *Fund/Bank Collaboration: Invitation to the Bank to Send a Staff Member as an Observer — Executive Board Meeting 70/30, April 10, 1970* ### 2. The Executive Board authorizes the issuance of a general ### The Executive Board authorizes the issuance of a general invitation to the International Bank for Reconstruction and Development to send a staff member as an observer to attend Fund Board discussions ### Authorization - The Executive Board authorizes the issuance of a general invitation to the International Bank for Reconstruction and Development to send a staff member as an observer to attend Fund Board discussions on staff reports on missions relating to Article VIII and Article XIV consultations and use of Fund resources in areas of common interest. ### Bank-Fund collaboration — historic Board discussions and key takeaways - Executive Board Meeting 84/171, November 28, 1984 — Chairman’s Summing Up - Proposal: attendance at Board discussions in each institution by appropriate staff member(s) from the other to obtain fuller understanding of involvement in countries receiving financial assistance from both Bank and Fund. - Directors prepared to reaffirm the invitation extended in 1970 for ad hoc, selective attendance in countries with programs in both institutions. - Expectation of reciprocity from the Bank regarding staff attendance at the Fund’s Board meetings. - Exchange of notes between institutions suggested to facilitate expression of specific concerns and questions by Executive Directors. - Active participation by Bank staff in Fund Board meetings (beyond observer attendance) did not receive necessary support in the Executive Board. - Executive Board Meeting 98/102, September 22, 1998 — Concluding Remarks; Report of the Managing Director and the President on Bank-Fund Collaboration - Directors generally agreed that the 1989 Concordat still provides a valid framework but noted a need to better reflect present realities where macroeconomic and sectoral issues are increasingly intertwined. - Emphasis on developing practical mechanisms and reinforcing a culture of collaboration among staffs to manage unavoidable overlaps. - Framework helpful for interaction in surveillance, policy advice, lending operations, and crisis management; lessons from the Asian crisis should be applied elsewhere. - Important elements: seek Bank advice early in its areas of expertise and ensure timely Bank response; strengthen Bank capacity for intensive structural assessments and quick policy advice delivery. - Pilot program in enhanced Bank-Fund collaboration in low-income countries welcomed. - Operational improvements supported: joint electronic information system, cross-participation in missions, possible joint missions when appropriate. - Role of country authorities: framework should account for country needs, delineation of responsibilities should be clear to authorities, and countries should be involved in collaborative efforts. - Strengthened coordination between Executive Boards of the two institutions was identified as a beneficial contribution. ### Review of Bank-Fund collaboration in strengthening financial systems - Key conclusions and guidance - Broad division of responsibilities from the 1989 Concordat, and elaboration in August 1997, remains a valid framework; recent crisis experience exposed problems in operational coordination and the need to improve collaboration procedures. - Mandates: Fund — surveillance over macroeconomic and stabilization policies; Bank — promote overall economic development, structural and sectoral reforms. Distinctions may blur in financial sector work. - In crisis and short-term stabilization programs, the Fund should retain responsibility for overall stabilization, including urgent structural adjustment measures; Bank engagement should begin at an early stage or when problems emerge. - Need for timely Bank responses due to mismatches in operational time schedules. - Support for cross-participation in missions to alleviate staff pressures and ease burden on national authorities; greater sharing of information while preserving confidentiality. - Possibilities for formal linkages between Fund-supported programs and related Bank sectoral work to avoid duplication and assure complementary policy advice. - Support for establishment of a Bank-Fund Financial Sector Liaison Committee: - Focus: facilitate coordination in financial sector work, improve efficiency of use of staff resources and experts, resolve disagreements. - Assist in prioritizing assignments and delineating work in overlapping areas to country-specific situations. - Committee to be flexible and not a panacea; periodic reporting by managements to Boards and review of Committee activities suggested. - Bank and Fund should play a catalytic role in developing commonly-accepted policies and good practices; should rely on specialized agencies in areas outside their core fields. - Fund may, with prior consent of authorities, augment internal resources by drawing on experts from national and other international organizations for monitoring financial systems under Article IV surveillance. - Need to coordinate dissemination of standards and technical assistance to avoid overlapping requests, conflicting advice, and suboptimal use of expert resources; outside experts should be held to same standards as staff. - Peer review procedures suggested as a follow-up mechanism for Article IV findings in countries with substantial problems; institutional arrangement could be coordinated by the Fund with other international bodies; prior consent from authorities required. ### Strengthening IMF-World Bank collaboration on country programs and conditionality — Progress Report - Executive Board Meeting 04/26, March 17, 2004 — Acting Chair’s Summing Up - Close collaboration indispensable for supporting member countries in promoting financial stability, sustainable growth, and poverty reduction. - Bank-Fund collaboration critical for Fund assistance to low-income countries in context of the PRGF/HIPC Initiative framework and progress toward the Millennium Development Goals. - Effective collaboration requires clear demarcation of responsibilities based on mandates and comparative advantages; conditionality should focus on reforms critical to program success. - Two main coordination elements: designation of one institution as lead agency in particular policy areas; systematic information-sharing between institutions. - Early engagement between Bank and Fund staffs emphasized to harmonize roles. - Survey responses from national authorities and staff indicate clearer division of labor and common perspectives on critical reform areas, but results should be interpreted with caution. - Indications that collaboration is increasingly strengthening national ownership; need for further progress in aligning program design and conditionality with country reform priorities and implementation capacity. - Continued improvements needed in implementation of agreed division of labor, coordination with government authorities to strengthen country ownership, and information-sharing between staffs. - Increased upstream engagement (surveillance or pre-program situations) and coordination in program design recommended to set priorities and clarify division of labor. - Strong cooperation at country level required; provide right incentives to staffs. - Decision to strengthen role of the Joint Implementation Committee (JIC) welcomed to monitor and improve collaboration at senior staff level; JIC to be expanded to cover matters affecting both low- and middle-income countries. - Formal mechanisms should not substitute for early and informal consultations among staffs and authorities. - Emphasis on thematic collaboration areas: joint work on public expenditure and financial management; strengthened coordination on poverty and social impact analysis (PSIA) with Bank assistance for PSIA in Fund-supported reforms. - Formal mechanisms in the PRSP process strengthen collaboration for low-income countries; principles for collaboration remain the same for middle-income countries despite differing arrangements. - Board documents should specify lead roles and report on the other institution’s engagement; support for use of assessment letters to convey Fund views when PIN or Chairman’s statement is not up-to-date. - Consideration of including comprehensive policy tables in Fund staff reports showing structural reforms, lead agency, sequencing and timing of reform steps. - Next review of collaboration expected by 2007 to allow additional experience under the enhanced framework; future reviews may include larger set of case studies and possibly an external review of Fund-Bank collaboration. ### Operational framework for Debt Sustainability Assessments (DSAs) in low-income countries - Executive Board Meeting 05/34, April 11, 2005 — Acting Chair’s Summing Up - Directors welcomed joint Fund-World Bank operational framework for DSAs in low-income countries as important to help avoid unsustainable debt build-up while pursuing the Millennium Development Goals. - Key elements of the framework endorsed: - (i) country-specific, policy-dependent external debt-burden thresholds to guide debt sustainability assessments; - (ii) forward-looking simulations of debt and debt service under a baseline scenario and in the face of shocks; - (iii) prudent borrowing strategies to contain risks of debt distress. - Proposed country-specific thresholds for external debt-burden indicators, including classification of countries based on policy and institutional performance, were endorsed. - Thresholds centered on the operational threshold of the HIPC Initiative to preserve coherence with the international community’s approach to debt sustainability. - Preferred option noted to require less grant financing than alternatives, recognizing grant availability is not assured. - Thresholds to be guideposts rather than rigid ceilings; individual country circumstances, including domestic public sector debt burden, must be factored into assessments. - Concerns expressed that rigid implementation could foreclose development opportunities if additional grant financing or debt relief does not materialize; others cautioned against perceptions that thresholds can be consistently exceeded because they are indicative. - Need for adequate conditionality on grants to reduce moral hazard; caution against over-optimistic export projections in DSAs. - Most Directors supported use of the World Bank’s Country Policy and Institutional Assessment (CPIA) to classify policy and institutional quality, subject to periodic review and avoiding mechanical application. - Transitional arrangements welcomed for applying the new DSA framework to HIPCs while the HIPC Initiative remains under way; acknowledgment of differences between backward-looking HIPC DSAs and forward-looking framework DSAs. - Joint DSA preparation for each low-income country supported; Fund and World Bank staffs expected to agree on the DSA baseline and assessment of risk of debt distress in almost all cases. - In highly exceptional cases where staffs cannot agree, differing views should be reported early to country authorities and later to the Boards; staffs urged to avoid this outcome. - Minor revisions to DSAs permitted only where both staffs agree revisions are minor and do not change overall assessment or produce inconsistent DSAs; clarification requested on what constitutes a minor update. - Framework viewed as an important addition to the Fund’s toolkit for balancing adjustment, lending, grants, and debt restructuring/relief in low-income countries. - Importance of close coordination with other IFIs and donors to guide concessionality decisions and ensure framework guides donor and creditor decisions. - Staffs to work with countries to build ownership of analytical underpinnings and integrate country-led approaches. - Staffs asked to report after a six- to twelve-month period on results of country application of the proposed framework and to update the framework in light of experience. *Selected decisions and selected documents (pages provided).* ### 1. The European Central Bank (ECB) shall be invited to send a ### The European Central Bank (ECB) shall be invited to send a representative to meetings of the Executive Board ### Invitations and scope - The European Central Bank (ECB) shall be invited to send a representative to meetings of the Executive Board on: - Euro-area policies in the context of the Article IV consultations with member countries under Decision No. 12899-(02/119); - Fund surveillance under Article IV over the policies of individual euro-area members; - Role of the euro in the international monetary system; - World economic outlook; - Global financial stability reports; and - World economic and market developments. ### Additional mutually relevant agenda items - The ECB shall be invited to send a representative to meetings of the Executive Board on agenda items recognized by the ECB and the Fund to be of mutual interest for the performance of their respective mandates. - It is understood, for purposes of this paragraph and provided that there is no objection from the member concerned, that the ECB shall be invited to send a representative to meetings of the Executive Board on: - Fund surveillance under Article IV over the United States of America and Japan; - Fund surveillance under Article IV over the non-euro area member countries of the European Union; and - Fund surveillance over the policies of, and on use of Fund resources by, members that are accession countries to the European Union. - Currently, the following members are accession countries to the European Union: Bulgaria, Croatia, Macedonia, former Yugoslav Republic of, Romania, and Turkey. - The Executive Board will be informed by management, after consultation with the Presidency of the Council of the European Union, of any changes to that list. ### Observer status and participation - At Executive Board meetings, the representative of the ECB will have the status of observer and, as such, will be able to address the Board with the permission of the Chairman on matters within the responsibility of the ECB. ### Information sharing - The Fund shall communicate to the ECB (i) the agenda for all Board meetings and (ii) the documents for the Executive Board meetings to which the ECB has been invited. *Source: _31stissue - 1. The European Central Bank (ECB) shall be invited to send a representative to meetings of the Executive Board_* ### 5. The Board notes that the ECB has agreed to preserve the confi- ### Guidelines/Framework for Fund Staff Collaboration with the World Trade Organization ### Purpose and scope - Provides Fund staff with guidelines for cooperation with the World Trade Organization (WTO), established on January 1, 1995. - Builds on prior Fund–GATT collaboration; guidelines to be periodically reviewed and modified as necessary. - Cooperation expected to cover: balance of payments consultations; coherence in global economic policymaking; consistency of policy advice and obligations; resolution of open jurisdictional issues; staff contacts; representation; document exchange; research and information exchange. ### Balance of payments consultations - Fund participation in consultations of the WTO Committee on Balance of Payments Restrictions with common members. - WTO members applying trade restrictions to safeguard balance of payments must consult the WTO Committee; the WTO Committee is required to consult the Fund regarding the member’s macroeconomic situation, particularly balance of payments position and level of international reserves. - The WTO Committee must accept the Fund’s findings of statistical and other facts relating to foreign exchange, monetary reserves, and balance of payments, and its determination as to the seriousness of the member’s international reserve situation. - Fund commitments: - Provide the WTO Committee timely information and assessment of the consulting member’s balance of payments situation. - Provide the latest RED report of the consulting member to the WTO Committee on a timely basis. - When a recent RED is not available or significant changes have occurred, provide updated information on recent economic developments (transmittal of such supplementary information is submitted for Board approval on a lapse of time basis). - For a full consultation by the WTO Committee, the Fund representative will provide a statement cleared by the Fund’s Executive Board. ### Coherence in global economic policymaking - WTO charter calls for cooperation with the Fund and the Bank to achieve greater coherence in global economic policymaking. - Fund contributions: - Assess coherence between macroeconomic and trade policies, including exchange rates. - Take WTO trade concerns into account in Fund work. - Fund and WTO staffs to define elements and mechanisms for achieving coherence, including formal and informal communication channels. ### Consistency of policy advice and obligations - In surveillance, Fund and WTO should ensure policy consistency and avoid duplication. - Fund surveillance examines trade policy alongside other economic and financial policies for their impact on domestic adjustment and other Fund members; WTO surveillance covers specific trade aspects and overall trade policy via the trade policy review mechanism (TPRM). - Fund staff actions: - Place greater emphasis on specific macroeconomic/trade linkages. - Take into account WTO views as enunciated in Trade Policy Reviews (TPRs); when TPRs are out of date or unavailable, seek information from the WTO Secretariat including informal staff visits. - Provide information on macroeconomic policies of common members to assist WTO surveillance, especially where a recent Article IV consultation report is not available. - Ensure recommended policy measures and program conditionality are consistent with a member’s WTO obligations, recognizing Uruguay Round commitments. - Seek information from the member and WTO on the nature and level of tariff obligations under WTO-administered agreements and take this into account in policy formulation. - Consult WTO staff promptly where ambiguity exists about WTO-consistency of specific measures. - Cross-conditionality principle: - Fund-supported programs should avoid directly linking use of Fund resources to performance of obligations under WTO-administered agreements. - Fund programs may include reductions in subsidies or trade barriers consistent with or beyond Uruguay Round commitments if necessary for program objectives; such provisions do not alter obligations vis-à-vis other WTO members (e.g., reducing applied tariffs below “bound” levels does not require the member to “bind” at the lower level). - Coordination: - Fund staff will continue to consult and coordinate with Bank staff in design of trade reforms in Fund-supported programs. ### Resolution of open jurisdictional issues - Final Act of the Uruguay Round includes a Declaration on the Relationship of the WTO with the IMF, confirming continued application of Article XV of GATT 1947 (now GATT 1994) on collaboration with the Fund in trade in goods. - Article XV requires WTO to seek cooperation with the Fund to pursue coordinated policy on exchange questions (Fund jurisdiction) and quantitative restrictions/other trade measures (WTO jurisdiction). - GATS Article XI safeguards rights and obligations of Fund members under the Fund’s Articles regarding restrictions on current international transactions. - Expectations: - WTO will not authorize countermeasures against exchange measures consistent with the Fund’s Articles, or find such measures to violate Multilateral Agreements or GATS in the absence of inconsistency with the Fund’s Articles. - Fund and WTO will clarify jurisdictional issues to protect rights and obligations of Fund members. ### Staff contacts, representation, and secondments - Fund’s Geneva Office to provide ongoing liaison with the WTO, supplemented by headquarters contacts. - Periodic meetings (at least annually) between appropriately senior Fund and WTO staff to identify common issues and means of enhancing collaboration; Bank staff invited for trilateral discussions when relevant. - Increased use of informal staff visits (e.g., en route to Article IV and/or UFR consultations) and reciprocal visits by WTO staff to Fund headquarters for informal discussions on specific country cases or policy issues. - Consideration may be given to staff secondments. - Representation: - Observer status in the WTO and the Fund is under discussion. - Director-General of the WTO (or representative) could be invited as observer to Interim and Development Committees and joint Annual Meetings; invited as observer in selected Fund Board meetings covering general trade policy issues. - WTO Secretariat expected to treat Fund Board/CWTO deliberations as strictly confidential; likewise Fund staff to treat WTO deliberations with strict confidentiality. ### Document exchange - Fund will transmit to the WTO Committee on Balance of Payments Restrictions the latest RED report or similar document on the consulting member (and a Fund statement where relevant). - Director-General of the WTO will be regularly provided, for confidential use of the Secretariat, Article IV Consultation reports (staff reports and REDs) on common members. - Consideration might be given to transmitting Chairman’s Summing-Up of the Board discussion to the WTO Director-General for common members, provided concerned Executive Director raises no objection. - For Fund members seeking WTO accession, consideration might be given to transmitting Article IV Consultation reports to the WTO Director-General, provided the concerned Executive Director raises no objection. - Fund staff to ensure up-to-date macroeconomic assessments are available to WTO staff at the time of TPR preparation or as needed; where there is a considerable interval between Article IV discussion and the TPR, Fund staff should provide updated factual information. - Fund staff expect to continue to receive on a confidential basis most WTO documents (minutes and reports of councils and bodies, member reports, and TPR reports). ### Research and information exchange - Fund staff will seek WTO Secretariat views on selected reports with prominent international trade policy issues; Fund staff expect to comment on selected WTO staff reports in which macroeconomic issues are discussed. - Joint studies and seminars on topics of mutual interest could be considered. - Greater use of each other’s basic data to improve awareness and reduce duplication, taking into account confidentiality requirements. - Fund staff have requested access to the WTO’s Integrated Database to investigate economic and financial implications of the Uruguay Round on individual countries; this access should not require new communications links as Fund staff could obtain relevant data from the World Bank which has already been granted access. ### Exchange of documents with other international agencies (criteria and procedures) - Staff reports pertaining to (i) surveillance under Article IV, Section 3(a) and (b), (ii) the use of Fund resources by members, and (iii) technical assistance reports may be transmitted by the Managing Director to international agencies with specialized responsibilities within the Fund’s field of interest, subject to reciprocal transmittal of comparable documents and confidentiality assurances. - Such transmittals and exchanges to be carried out in accordance with criteria in SM/90/120 (6/20/90) and Correction 1 (7/17/90), and in SM/93/24 (1/28/93), and in light of EBM/90/105 and EBM/90/106 (7/2/90). - Documents referred to in paragraph 11 of the Agreement between the Fund and the WTO may be transmitted to the WTO Secretariat on the sixth working day after their circulation to Executive Directors, provided there is no objection by the member concerned. ### SM/90/120: Criteria for access to Fund documents - Three basic criteria: - (i) Commonality of operational interest and need: documents available in principle to international organizations that share the Fund’s current operational and financial interest in the particular member country and have an operational need for the information. - (ii) Reciprocity: recipient organizations to make arrangements to ensure reciprocity of comparable country papers. - (iii) Confidentiality: recipient organizations must assure the Fund that documents will be used only for specified purposes and kept confidential; a senior official must request regular transmittal and assure material is for internal and exclusive use by staff only and will not be quoted or used in publication. - Indicative list of agencies meeting criteria (subject to evolution): AfDB, AsDB, Arab Monetary Fund, CDB, IsDB, IDB, EC Commission, EIB, UNDP (on countries receiving technical assistance under executing agency arrangement). Staff to keep agency and country indicative lists under periodic review. ### SM/93/24: Procedural modifications for timelier release - Requests for clearance of document transmittal may be made on a “no objection” basis in the Secretary’s cover note when first circulated to Executive Directors, saving paperwork and time. - Documents prepared for transmittal can be dispatched at a time indicated on the cover note—either immediately after Board consideration or, in exceptional cases, at a specified date before Board discussion. - Modified procedures apply only to transmittal of staff reports and REDs sent to various agencies on a regular basis; ad hoc requests to continue to be cleared as in the past with area and issuing department concurrence and the concerned Executive Director. ### Executive Board and related governance items (selected extracts) - Decision and date references preserved from the source text include, among others: - Decision No. 12925-(03/1), December 27, 2002, as amended by Decision Nos. 13414-(05/01), December 23, 2004 and 13612-(05/108), December 22, 2005. - Decision No. 10968-(95/43), April 21, 1995. - Decision No. A-9786-(93/20), February 11, 1993, as amended by Decision No. A-10615-(96/105), November 25, 1996. - Decision No. 12239-(00/71), July 14, 2000, as amended by Decision No. 13146-(03/114), December 12, 2003. - Decision No. 2-1, May 8, 1946; Decision No. 574-2, May 18, 1950, as amended by Decision No. 2620-(68/141), November 1, 1968; Decision No. 597-4, July 28, 1950; Decision No. 180-5, June 25, 1947. ### Code of Conduct for Members of the Executive Board (key provisions) - Executive Directors entrusted with ensuring the Fund carries out its mandate; highest standards of personal and professional conduct required. - Application: provisions apply to Executive Directors, Alternates, Advisors; Temporary Alternates subject to same provisions. - Basic standards: - Observe highest ethical conduct; perform duties with integrity; comply with local laws. - Treat colleagues and staff with courtesy and respect; avoid harassment, physical or verbal abuse. - Ensure Fund property and services used for official business only. - Protection of confidential information: responsibility to protect security of confidential information provided to or generated by the Fund. - Public statements: make clear whether speaking personally or on behalf of the Executive Board. - Conflicts of interest: - Avoid conflicts or appearances of conflict; inform the Ethics Committee and withdraw from decision-making if conflict arises. - Seek Ethics Committee advice for potential conflicts. - Personal financial affairs: - Do not use or disclose confidential information for private financial transactions. - Executive Directors should not engage in short-term trading (combination of buying and selling within six months) in gold, foreign currencies, and closely related financial instruments for speculative purposes. The term “combination” excludes one-way transactions for household, education, or travel expenses. - Follow guidance provided to staff for compliance. - Disclosures: make written disclosure to a compliance officer of any financial or business interests of self or immediate family members; rules governing senior staff disclosures shall apply until Executive Board determines specifics. - Gifts and entertainment: ordinary courtesies may be accepted; substantial and unusual gifts, favors, entertainment, loans, or services of significant monetary value should not be accepted. - Post-Fund employment: should not let prospective employment affect duties; recuse where involvement could benefit prospective employer; on leaving the Fund, do not use or disclose confidential information or contact Fund officials for confidential information outside official channels. - Ethics Committee: - Comprised of five Executive Directors (Chairperson, four members, five alternates) selected at general election of Executive Directors; serve for two years. - General Counsel (or representative) as permanent secretary; may seek views of Fund’s Ethics Officer ex officio. - Committee considers alleged misconduct by an Executive Director and unresolved concerns from compliance officer disclosures; Executive Director concerned may present views but not participate in deliberations. - If majority concludes misconduct occurred, Committee makes recommendations to Committee of the Whole on whether to issue a warning or transmit the warning to the Governor(s) who appointed the Executive Director. - Committee of the Whole actions: (i) no further action; (ii) issue warning to Executive Director; (iii) issue warning and transmit to Governor(s). Lack of consensus in Committee of the Whole refers matter to the Executive Board. - Decision No. 12239-(00/71), July 14, 2000, as amended by Decision No. 13146-(03/114), December 12, 2003. *Text summarized from EB/CGATT/95/1 Supplement 1 and associated selected decisions and documents as provided in the source content.* ### 1. Any question of procedure that arises shall be decided before ### 1. Any question of procedure that arises shall be decided before ### Procedural rules for meetings and proposals - Any question of procedure that arises shall be decided before the discussion of substantive matters is resumed. (Paragraph 1) - If there is more than one proposal on any subject under consideration, the proposals shall be considered one at a time and in the order in which they were submitted. If two or more proposals are submitted together, they shall be considered simultaneously and shall be decided upon in the order in which they have been presented. (Paragraph 2) - An amendment is germane to the subject of a proposal and adds to, deletes from, or revises that proposal. The Chairman shall rule on the question whether a motion is a new proposal or a proposed amendment. (Paragraph 3) - If an amendment to any proposal or previously proposed amendment is offered, consideration of the amendment shall be completed before consideration is resumed of the proposal or previously proposed amendment to which it relates. If more than one amendment is proposed, the amendments shall be considered in the reverse order of their submission. (Paragraph 4) - The Chairman may rule that parts of a proposal or proposed amendment shall be considered or decided upon separately. If the parts are severed, they shall be taken up in the order in which they appeared in the proposal or proposed amendment. (Paragraph 5) - If a proposal or proposed amendment is adopted, any inconsistent proposals or proposed amendments shall not be considered. (Paragraph 6) - The Chairman shall rule on questions of procedure, including questions of the application of these guidelines. (Paragraph 7) - The Executive Directors may revise rulings made under these guidelines and may depart from or amend these guidelines at any time. (Paragraph 8) ### Authorized signatories (Article XII, Section 4) - All instructions and instruments in writing purporting to be binding on the Fund or to be an exercise of any right of the Fund shall be signed for the Fund by either: - (a) the Managing Director; or - (b) such other official or officials of the Fund or other person or persons as the Managing Director shall designate in writing. (Paragraph 1) - Authority to sign instructions and instruments for the Fund granted by a designation under subparagraph (b) of paragraph 1 shall not be delegable. (Paragraph 2) - Any signature pursuant to this decision may be a facsimile signature or other means of identification if it is authorized in writing by the Managing Director. (Paragraph 3) - This decision supersedes all prior general signature authority decisions of the Executive Board without prejudice to action taken pursuant to them. (Paragraph 4) - Decision No. 9605-(90/170), 1 - December 7, 1990 - Ed. Note: The current Registry of Signatory Authority, which contains the list of authorized signatories and certified signatures, is maintained on file with each department. ### Investment Account — Establishment and transfer (Article XII, Section 6) - The Fund establishes within the General Department an Investment Account as provided for in Article XII, Section 6(f)(i). (Decision No. 13710-(06/40) IA, April 28, 2006) (Paragraph 1) - The assets of the Investment Account shall be kept separately from the other accounts of the General Department. (EBS/06/57, 4/17/06) (Paragraph 2) - Transfer of currencies: - Pursuant to Article XII, Section 6(f)(ii), the Fund shall transfer from the General Resources Account to the Investment Account currencies in an amount equivalent to the amount of the Fund’s general and special reserves at April 30, 2006. This transfer shall be effected in the context of the Financial Transactions Plan for the quarterly period March through May 2006 and June through August 2006. (Decision No. 13712-(06/40), April 28, 2006) (Transfer paragraph 1) - The currencies transferred shall be used for immediate investment in accordance with Article XII, Section 6(f) and the Rules and Regulations adopted pursuant to Decision No. 13711-(06/40). (EBS/06/57, 4/17/06) (Transfer paragraph 2) ### Investment Account — Rules and Regulations (Decision No. 13711-(06/40), April 28, 2006; EBS/06/57 Annex I) - Objective of the Investment Account (IA) - The objective of the IA is to provide a vehicle for the investment of a part of the Fund’s assets so as to generate income that may be used to help meet the expenses of conducting the business of the Fund. (Annex I, paragraph 1) - Sources of Investment Account Assets - The IA will be funded initially through the transfer of currencies from the GRA in an amount equivalent to the total amount of the Fund’s general and special reserves at the time of the decision authorizing the transfer. - The IA may retain or invest income from its investments and may reinvest proceeds of assets that mature or that it sells, subject to paragraph 3. (Annex I, paragraph 2) - Uses of Investment Account Income - The IA’s income from investment may be invested, retained in the IA, or used to meet the expenses of conducting the business of the Fund. - The Fund will decide on the use of the IA’s income for each financial year, including whether any portion should be transferred to the GRA for use in meeting the expenses of conducting the business of the Fund. (Annex I, paragraph 3) - Termination or Reduction of the Investment Account - The IA shall be terminated in the event of liquidation of the Fund and may be terminated, or the amount of the currency transferred to the IA may be reduced, prior to liquidation of the Fund by a 70 percent majority of the total voting power. - The procedures specified in Article XII, Sections 6(f) (vii), (viii) and (ix) will apply in the event of termination or a reduction in assets. (Annex I, paragraph 4) ### Investment guidelines, eligible investments, and risk/supervision - Investment Objective - The investment objective of the IA is to achieve investment returns that exceed the SDR interest rate over time while minimizing the frequency and extent of negative returns and underperformance over a 12-month investment horizon. Achieving this objective would help diversify the sources and increase the level of the Fund’s income, thereby strengthening its finances over time. (Annex I, paragraph 5) - Eligible Investments (Annex I, paragraph 6) - A member’s currency held in the IA may be invested only in marketable obligations of that member or in marketable obligations of international financial organizations, provided that the IA may invest only in obligations denominated in special drawing rights (SDRs) or in the currency used for investment. - Marketable obligations of a member shall include the obligations of its central bank and official agencies. Marketable obligations of international financial organizations shall include without limitation SDR-denominated deposits with the Bank for International Settlements. - The IA’s investment in the instruments specified above may only be made directly in the cash markets. Derivative securities—including forwards, futures, options and swaps—may not be used to establish or hedge positions in eligible investments. - Only long positions may be established in eligible investments. Short selling or any form of leverage is not permitted. - Portfolio denominational limits and member concurrence - The IA’s portfolio will be limited to eligible investments denominated in SDRs or in the currencies included in the SDR basket. - No investment shall be made without the concurrence of the member whose currency is used to make the investment. (Annex I, paragraph 7) - Supervision (Annex I, paragraph 8) - The Managing Director will supervise the IA’s investment activities, including negotiating agreements with external investment managers and custodial agents; ensuring conformity with the Articles of Agreement and these rules; establishing investment benchmarks and guidelines; placing investments in eligible BIS deposits and in the BIS’ Medium-Term Instruments (MTIs); monitoring and evaluating IA asset performance; supervising hiring/firing of external managers; supervising custodial arrangements; adjusting portfolio allocation in response to market conditions and Fund financing needs; and preparing regular reports to the Executive Board. - Custody arrangements (Annex I, paragraph 9) - IA assets may be held in safekeeping by one or more custodian banks which will value assets, and hold and invest short-term residual cash balances. - Risk controls (Annex I, paragraph 10) - The Managing Director will establish specific risk control procedures and a mechanism to monitor their observance by asset managers. - Investment guidelines and benchmarks will set explicit limits for exposure to interest rate, foreign exchange, liquidity, credit and operational risks. - Reporting requirements (Annex I, paragraph 11) - The Managing Director will provide semi-annual reports to the Executive Board on IA operations and investment activities. - Semi-annual reports will analyze IA operations in the context of the Fund’s overall financial position and income, including assessment of appropriate IA size and disposition of assets and earnings; analysis of changes in valuation of IA assets; the investment guidelines and benchmark being followed; discussion of applicable controls and evaluation of risk control procedures; and assessment of market conditions that may affect valuation. - Ad hoc reports will be prepared as warranted by market or other developments. - IA assets will be audited by the Fund’s external auditors and included in the Fund’s financial statements. ### Publication policies (Article XII, Section 7) - Authorization and consent for publication (Paragraph 1) - The Managing Director shall arrange for publication by the Fund of the documents on the attached list, subject to the consent of the member concerned in the case of Documents 1–11, 13, and 16–23 and to the authorization of the World Bank in the case of Documents 6, 11, and 19. - For purposes of this decision: - Documents 1–4, 6, 9–10, 11, 13, 17, 19, and 22–23 are “Country Documents.” - Documents 5, 7–8, 16, 18, and 20–21 are “Country Policy Intentions Documents.” - Documents 14 and 15 are “Fund Policy Documents.” - Executive Board encouragement and presumptions (Paragraphs 2–3) - The Executive Board encourages each member to consent, where required, to publication. - A member’s consent to publication of Documents 1–2, 4–11, 13, 18–23 shall be voluntary but presumed. Consent to publication of Documents 3 and 16–17 shall be voluntary. - The presumption in paragraph 3(a) means that Fund publication of an applicable document would be expected to occur within thirty calendar days of the Executive Board meeting at which that document was considered. If, by the time of the relevant Executive Board meeting, the member concerned has not communicated its consent, the Secretary will remind the member to communicate its publication decision within thirty calendar days following the meeting. Unless the member’s explicit consent is received, Documents 1–11, 13, and 16–23 shall not be published. (Paragraph 3(b)) - Conditions linked to approvals (Paragraph 4) - The Managing Director will not recommend approval of: - (i) a PRGF arrangement or completion of a review under such arrangement, - (ii) a HIPC decision point or completion point decision, or - (iii) a member’s request for a Policy Support Instrument (PSI) or completion of a review under a PSI, - if the member does not consent to publication of its I-PRSP, PRSP, PRSP preparation status report, or PRSP annual progress report (Document 5 or Document 18). - The Managing Director will generally not recommend approval of a request to use the Fund’s general resources that would result in the member obtaining exceptional access unless that member consents to publication of the associated staff report. - Use of the Fund’s general resources under an arrangement approved before July 1, 2004 shall not be affected by this policy unless there is a change in the terms, conditions or timing of the arrangement. - Exceptional access is defined for purposes of this paragraph as access by a member to the Fund’s general resources in excess of an annual limit of 100 percent of the member’s quota, or a cumulative limit (net of scheduled repurchases) of 300 percent of the member’s quota. (Paragraph 4(b)) - Consent procedures and Secretary’s role (Paragraphs 5–6) - A member’s consent shall be communicated in writing, normally to the Secretary of the Fund; consent may be communicated by the Executive Director elected, appointed, or designated by the member. - The Secretary’s cover note will indicate whether a communication has been received from the member regarding publication and, if so, the member’s intentions. - Member statements and deletions/rephrasing (Paragraphs 7–9) - If a Fund staff report (Documents 1, 9, 17, and 22) on a member is to be published, the member shall be given the opportunity to provide a statement regarding the staff report and the Executive Board assessment; such statement shall be published together with the staff report. (Paragraph 7) - Prior to publication of a Country Document or a Country Policy Intentions Document that has been the basis of a Fund decision, or of Document 16, the member may propose deletions limited to: - (i) highly market-sensitive material (mainly on outlook for exchange rates, interest rates, the financial sector, and assessments of sovereign liquidity and solvency), or - (ii) material not in the public domain on a policy the country authorities intend to implement where premature disclosure of operational details would seriously undermine implementation. - Highly-market sensitive material is defined as material that (a) is not in the public domain, (b) is market relevant within the near term, and (c) is sufficiently specific to create a clear risk of triggering a disruptive market reaction if disclosed. Politically sensitive material shall not be deleted unless it satisfies (i) or (ii). Information relating to any performance criterion or structural benchmark (Documents 1, 7–9 and 16–17), or to any assessment criterion or structural benchmark (Documents 1, 20–22), may not be deleted unless it could have been communicated in a side letter pursuant to Decision No. 12067, adopted September 22, 1999. (Paragraph 8(a)) - If the Managing Director determines the proposed deletions satisfy the criteria, the deletions may be accompanied by minor rephrasing to retain candor or minimize misinterpretation. (Paragraph 8(b)) - Members’ requests for deletions shall be communicated in writing no later than (i) twenty-one calendar days after the Executive Board has considered the document, or (ii) thirty-five calendar days after the document was issued to the Executive Board, whichever is later. - Once approved by the Managing Director, deletions and related rephrasing shall be circulated to the Executive Board in redlined form with justification for each modification. In case of serious disagreement, the Managing Director or the member’s Executive Director may refer the matter to the Executive Board. If the Managing Director views the deletions as undermining the overall assessment and credibility of the Fund, the Managing Director may recommend that the document not be published. (Paragraph 9) - Corrections (Paragraph 10) - Other changes to Country Documents and Country Policy Intentions Documents shall be limited to correction of (i) data and typographical errors, (ii) factual mistakes, and (iii) mischaracterization of views expressed by the authorities concerned. - Corrections shall normally substitute text in existing sentences rather than add or delete entire sentences. *Selected Decisions and Selected Documents (excerpts from the supplied content).* ### 11. Corrections will normally be made to a document prior to its ### _31stissue - 11. Corrections will normally be made to a document prior to its ### Corrections and post-Board changes - Corrections will normally be made to a document prior to its consideration by the Executive Board. - Corrections made after Executive Board consideration shall be limited to: - (i) cases where the correction is brought to the attention of the Executive Board before the conclusion of the Executive Board’s consideration of the document, and - (ii) cases where the failure to make the correction would undermine the overall value of publication. - Corrections shall be circulated to the Executive Board in redlined form. - Corrections with significant implications for the substance of the document shall be discussed and justified in a supplementary staff report or in a corrections memorandum issued to the Executive Board. ### Chairman’s statements on use of Fund resources and PSIs - After the Executive Board: - (i) adopts a decision regarding a member’s use of Fund resources (including a decision completing a review under a Fund arrangement), or - (ii) adopts a decision approving a PSI, or conducts a review under a PSI, or - (iii) completes a discussion on a member’s participation in the HIPC Initiative, or - (iv) completes a discussion on a member’s I-PRSP, PRSP, PRSP preparation status report, or APR in the context of the use of Fund resources or a PSI, - a Chairman’s statement on the discussion, emphasizing the key points made by Executive Directors, will be released to the public. - Where relevant, the Chairman’s statement will contain: - a summary of HIPC Initiative decisions pertaining to the member, and - the Executive Board’s views on the member’s I-PRSP, PRSP, PRSP preparation status report, or APR in the context of use of Fund resources or a PSI. - Waivers for nonobservance, or of applicability, of performance criteria, and any other matter as may be decided by the Executive Board from time-to-time (Document 12), and waivers for nonobservance of assessment criteria, and any other matter as may be decided by the Executive Board from time-to-time (Document 24), will be mentioned in the factual statement section of the press release containing the Chairman’s statement or in a factual statement issued in lieu of a Chairman’s statement as provided for in paragraph 14(b). - Prior to release: - If any Executive Director so requests, the Chairman’s statement will be read by the Chairman to the Executive Board and Executive Directors will have an opportunity to comment. - The Executive Director elected, appointed, or designated by the member concerned will have the opportunity to review the Chairman’s statement, to propose minor revisions, if any, and to consent to its publication immediately after the Executive Board meeting. - Limitations: - No press release or Chairman’s statement published under this paragraph shall contain any reference to a discussion or decision pertaining to a member’s overdue financial obligations to the Fund where a press release following an Executive Board decision to limit the member’s use of Fund resources because of the overdue financial obligations has not yet been issued. - In the case of an Executive Board meeting pertaining solely to such a discussion or decision, no Chairman’s statement will be published. ### Article IV Public Information Notices (PINs) - Following completion of an Article IV consultation, the Fund may release a Public Information Notice (PIN) reporting on the results. - If a member has consented to publication of Document 1, such publication will be made along with the publication of a PIN. - Terms for PINs: - a. The PIN will be brief (normally 3–4 pages) and will consist of two sections: - (i) a background section, a draft of which should be attached to the staff report whenever possible, with factual information on the economy of a member, including a table of economic indicators; and - (ii) the Fund’s assessment of the member’s prospects and policies. This section will correspond closely to the Chairman’s summing up of the Executive Board discussion. - b. The Executive Director concerned will have the opportunity to review the draft PIN prior to its release to propose changes, if any, consistent with paragraphs 8 through 11 above. - c. In case of a serious disagreement between the Managing Director and the Executive Director concerned on the draft, either may request the Executive Board to consider the matter. - d. The PIN will be released shortly following the completion of the Article IV consultation. As an indicative target, the Fund will aim to issue the PIN five to ten working days following the relevant Executive Board meeting, but in any event not before the end of the working day following the circulation of the summing up as a Fund document. - e. Confirmed practices: - (i) the release of PINs shall not affect the current Article IV consultation summing up process. In particular, the Chairman’s summing up will continue to be provided to the Executive Director concerned for review following the Executive Board meeting, and - (ii) the possibility of releasing PINs shall not affect in any way the staff’s reporting to the Executive Board on consultation discussions with members. ### Non-publication of PINs and Chairman’s statements—Factual statements in lieu - 14.a. If a member does not consent to publication of a PIN following the Executive Board’s conclusion of an Article IV consultation (Document 4), or following a post-program monitoring or ex post assessment discussion by the Executive Board pertaining to that member (Document 13), a brief factual statement informing that the Executive Board has concluded that consultation or discussion will be released instead. - 14.b. If a member does not consent to publication of a Chairman’s statement (Documents 10 and 23) under paragraph 12 where one would be applicable, or if no Chairman’s statement has been issued because a decision was taken on a lapse-of-time basis, a brief factual statement describing the Executive Board’s decision relating to: - (i) that member’s use of Fund resources (including HIPC initiative decisions (Document 11), Document 12, and consideration of Documents 5, when relevant), or - (ii) the approval of a PSI for that member, or the conduct of a review under that member’s PSI (including Document 24 and consideration of Document 18, when relevant) - will be released instead. ### Fund policy documents and staff reports - 15. After the Executive Board meets on policy issues, it shall be presumed, unless otherwise decided by the Executive Board, that the staff report considered at the meeting (Document 14) and/or a PIN (Document 15) on the discussion will be published. - The presumption of publication does not apply to Executive Board meetings on policy issues dealing with administrative matters (e.g., operating budget, personnel policies, staff retirement plan, asset management), for which Documents 14 and/or 15 may be published on a case-by-case basis. - Factors in deciding publication of Documents 14 and/or 15 include whether discussions have reached completion or whether informing the public of the state of discussions would be useful. - The staff shall make a recommendation on the publication of a staff policy paper and/or a PIN on its cover. - A PIN on policy discussions will be based on the decision adopted by the Executive Board and/or the Chairman’s summing-up, and will include a short background section. ### Managing Director’s pre-publication changes to policy staff reports - 16.a. Prior to publication of a Fund policy staff report, the Managing Director may make necessary factual corrections, deletions, and related rephrasing with respect to the report (including of highly market-sensitive material and country-specific references). However, staff’s proposals in a report shall not be modified prior to its publication. - If confusion might arise from differences between staff’s proposals in the report and the Executive Board’s conclusions as reflected in the PIN, the published report will clearly indicate which staff proposals the Executive Board did not endorse. - 16.b. Paragraph 16.a. shall not apply to the World Economic Outlook and Global Financial Stability Report. Staff may modify these documents prior to publication to take into account views expressed at the relevant Executive Board meeting. ### Other changes required before publication - 17. Before publication the following shall be removed: - (i) references to unpublished Fund documents, - (ii) references to certain internal processes not disclosed to the public under existing policies, including inquiries regarding possible misreporting and breaches of members’ obligations, and - (iii) any discussion of a breach of obligation under Article VIII, Section 5 or misreporting under applicable Fund policies that the Managing Director has proposed be treated as de minimis in nature as defined in paragraph 1 of Decision No. 13849. ### Timing and means of publication - 18. Documents may be published under this decision only after their consideration by the Executive Board, except for: - (i) I-PRSPs, PRSPs, PRSP preparation status reports, or APRs in the context of the use of Fund resources or a PSI; - (ii) joint staff advisory notes (JSANs) circulated to the Executive Board for information in the context of the use of Fund resources or a PSI; - (iii) documents circulated to the Executive Board for information only; and - (iv) Reports on Observance of Standards and Codes (ROSCs) and Assessment of Financial Sector Supervision and Regulation (AFSSR) Reports. - Documents under items (i), (iii) and (iv) may be published immediately after circulation to the Executive Board. - Documents under item (ii) may be published only after the stated period within which an Executive Director may request that the document be placed on the agenda of the Executive Board. - 19. Publication by the Fund under this decision shall normally mean publication on its website but may include publication through other media. ### Repeal of superseded decisions and Article XII, Section 8 - 20. The following decisions are repealed: - (i) Decision No. 11971 (99/58), adopted June 3, 1999; - (ii) Decision No. 11972-(99/58), adopted June 3, 1999; - (iii) Decision No. 11974-(99/58), adopted June 3, 1999; - (iv) Decision No. 10138-(94/61), adopted July 11, 1994; and - (v) Decision No. 11493-(97/45), adopted April 24, 1997. - The decision set forth in EBD/98/64 (6/19/98), approved on a lapse-of-time basis on June 24, 1998, is repealed to the extent that it relates to publication of final Decision and Completion Point documents under the HIPC Initiative. - 21. Nothing in this decision shall be construed to be inconsistent with the power of the Fund to decide under Article XII, Section 8, by a seventy percent majority of the total voting power, to publish a report made to a member regarding its monetary or economic conditions and developments which directly tend to produce a serious disequilibrium in the international balance of payments of members. ### Other matters; review - 22. For documents pertaining to a country which is not a member of the Fund: - (i) references to “member” shall be taken to mean “country”; and - (ii) references to “Executive Director elected, appointed, or designated by that member” shall be taken to refer to the appropriate authorities of the country concerned. - 23. This decision shall be reviewed in light of experience at regular intervals not to exceed five years. - Ed. Note: Pursuant to Decision No. 13814-(06/98), the frequency interval of reviews is extended from three years to five years after 2009. ### List of documents covered by the decision (selected items) - I. Surveillance and Supporting Documents - 1. Article IV and Combined Article IV/Use of Fund Resources Staff Reports - 2. Selected Issues Papers and Statistical Appendices - 3. Reports on Observance of Standards and Codes (ROSCs), Financial Sector Stability Assessment (FSSA) Reports and Assessment of Financial Sector Supervision and Regulation (AFSSR) Reports - 4. Public Information Notices (PINs) following Article IV consultations and regional surveillance discussions - II. Use of Fund Resources by a Member - 5. I-PRSPs, PRSPs, PRSP Preparation Status Reports, and PRSP Annual Progress Reports (APRs) - 6. Joint Fund/World Bank Staff Advisory Notes (JSANs) on I-PRSPs, PRSPs, PRSP Preparation Status Reports, and APRs - 7. Letters of Intent and Memoranda of Economic and Financial Policies (LOIs/MEFPs) - 8. Technical Memoranda of Understanding (TMUs) with policy content - 9. Use of Fund Resources, Post-Program Monitoring and Ex Post Assessment Staff Reports (excluding staff reports dealing solely with a member’s overdue financial obligations to the Fund) - 10. Chairman’s Statements - 11. Preliminary, decision point, and completion point documents under the HIPC Initiative - 12. Statements on Fund decisions on waivers of applicability, or for nonobservance, of performance criteria, and any other matter as may be decided by the Executive Board from time-to-time - 13. PINs following Executive Board discussions on post-program monitoring and ex post assessments - III. Fund Policy Documents - 14. Fund Policy Issues Papers - 15. PINs following Executive Board discussions on policy issues - IV. Staff Monitored Programs (SMPs) - 16. LOIs/MEFPs for SMPs - 17. Stand-alone Staff Reports on SMPs - V. Policy Support Instrument (PSI) - 18. I-PRSPs, PRSPs, PRSP Preparation Status Reports, and APRs in the context of PSIs - 19. JSANs on I-PRSPs, PRSPs, PRSP Preparation Status Reports, and APRs in the context of PSIs - 20. LOIs/MEFPs for PSIs - 21. TMUs with policy content for PSIs - 22. Staff Reports for PSIs - 23. Chairman’s Statements for PSIs *Source: _31stissue - 11. Corrections will normally be made to a document prior to its* ### 24. Statements on Fund decisions on waivers of nonobservance of ### 24. Statements on Fund decisions on waivers of nonobservance of assessment criteria, and any other matter as may be decided by the Executive Board from time-to-time. (SM/05/343, Sup. 1, 9/22/05) ### Overview and context - Document records Executive Board deliberations and Summings Up on the Fund’s transparency policy and related publication practices. - Relevant Decisions and meeting references include Decision No. 13564-(05/85), October 5, 2005, as amended by Decision Nos. 13814-(06/98), November 15, 2006; 13817-(06/98), November 15, 2006; and 13849 (06/108), December 20, 2006. - Key meetings cited: Executive Board Meeting 03/87, September 12, 2003; other Summings Up and meetings from 1999, 2000, 2001, 2003 are referenced to show policy evolution. ### Move toward presumed publication and scope - Board agreed to establish a policy of voluntary but presumed publication for: - all UFR (use of Fund resources) staff reports; and - Post-Program Monitoring (PPM) staff reports. - Effective timing: - Changes to Article IV and related reports and UFR policy effective July 1, 2004 where explicitly stated. - Amendments to the Transparency Policy Decision to be prepared and circulated to the Executive Board for approval; except for those changes effective on July 1, 2004, other changes become effective upon the Board’s approval of the amendments. - Next review of the Fund’s transparency policy expected to take place by June 2005. ### Exceptional access arrangements - In exceptional access cases, Managing Director will generally not recommend Board approval of a program or completion of a review unless the authorities consent to publication of the associated staff report. - Application: - The new publication policy for UFR staff reports in exceptional access cases applies to new arrangements approved on or after July 1, 2004 that contain exceptional access, and to existing arrangements that, by reason of augmentation after July 1, 2004, will result in exceptional access. - Exceptional access arrangements in place as of July 1, 2004 are grandfathered. - Board discussion noted tensions: - Need for transparency to strengthen confidence in exceptional access cases (often involving capital account crises). - Concerns that publication could conflict with the need for frank assessments given high market sensitivity. ### Article IV reports, PINS, and related papers - Move to voluntary but presumed publication for: - all Article IV staff reports; - Article IV Public Information Notices (PINS); and - related Article IV papers (Selected Issues papers, Statistical Annexes and Appendices prepared as background material for Article IV consultations). - If a member does not wish a PIN to be published, the Fund will issue a brief press release promptly to inform the public that the Board had concluded the consultation. - Timing rule under presumed publication: publication expected to occur within thirty calendar days of Board consideration of the relevant papers. - If the member has not decided on publication intentions by the time of the Board meeting, the Secretary will remind the member to communicate publication intentions to the Fund within thirty calendar days following the Board meeting. - Presumption of publication requires the explicit consent of the member prior to publication; without such consent the report would not be published. ### Reports on Observance of Standards and Codes (ROSCs), FSSAs, and FSAP material - Directors considered presumed publication for ROSCs and Financial System Stability Assessments (FSSAs). - Decision: retain existing policy of voluntary publication for ROSCs and FSSAs, while encouraging members to publish these reports. - FSAP technical notes (FTNs): - When FTNs raise issues of sufficient relevance to surveillance, they should be included in background material for Article IV consultations and thus be subject to the Fund’s publication policy on Article IV and related reports. - When FTNs are prepared jointly with World Bank staff, circulation and publication would be coordinated with the World Bank. - Publication of FTNs not circulated to the Board as background for Article IV consultations follows practice applied to technical assistance reports. - When authorities request publication and management consents, FTNs would be circulated to the Board prior to publication and subsequently published on the Fund’s external website. ### Deletions, corrections, and market-sensitive material - Board re-examined allowing deletions for highly politically sensitive material; majority did not support extending deletions policy to “high political sensitivity” due to practical difficulties in objective testing and risk to candor. - Agreement to continue current deletions policy, with scope covering highly market-sensitive information including: - exchange and interest rate matters; - highly market-sensitive material in vulnerability assessments; and - banking and fiscal areas. - When third-party analysis is presented in a staff report, the source should be indicated, or a staff assessment of such analysis should be included. - Management may recommend withholding publication when deletions of highly market-sensitive material would undermine the overall assessment of the Fund and its credibility. - For policy papers: - Apply broad principles for deletions and corrections used for country staff reports. - Modifications before publication limited to factual corrections and deletions of highly market-sensitive material and of country-specific references. - If the summing up differs from staff recommendations and Directors consider this may cause confusion, the published staff policy paper will indicate clearly in the text those staff positions the Board had not endorsed. ### Administrative papers, agendas, and publication modalities - On administrative papers, most Directors agreed publication should continue to be considered on a case-by-case basis, although some favored presumed publication. - Staff recommendations regarding publication of administrative papers will be explained to Executive Directors when the paper is circulated. - Directors supported publication of the Board agenda at the same time as it is made available to Executive Directors, with indication that the agenda is tentative and subject to change; staff to elaborate on modalities. ### Overdue financial obligations and publicity upon suspension of voting rights - Policy on missed repurchase expectations: - When a member has failed for three months to meet a repurchase expectation under paragraph 1(b) of Decision No. 5703-(78/39), paragraph 10(a) of Decision No. 4377-(74/114), or paragraphs 6(b) or 19 of Decision No. 11627-(97/123) SRF/CCL, a brief factual statement noting such failure and the resulting suspension of use of Fund resources will be posted on the member’s country-specific page on the Fund’s external website. - This statement will be removed when the Executive Board lifts the suspension, or if the member meets the missed repurchase expectation or settles the associated repurchase obligation. (EBS/01/122, 7/23/01) - Publicity upon suspension of voting rights: - Decision No. 12547-(01/84) SRF/CCL, August 22, 2001: The Fund shall issue a press release upon its decision to suspend voting rights of a member and thereafter upon termination of suspension; include the information contained in such press releases, where pertinent, in the Annual Report for the year concerned. - Decision No. 10305-(93/32), March 10, 1993 referenced. ### Misreporting policy and publication - Board retained current policy on publication of cases of misreporting: - After the Board determines that misreporting occurred, the Fund proceeds to make relevant information public in every case, with Board review of the text for publication. - Some Directors suggested introducing the concept of material importance of misreporting as affecting the decision to publish; staff to reflect and consider workable proposals for future Board discussion. ### Public Information Notices (PINS) — structure and release - Public Information Notices following completion of Article IV consultations: - The PIN will be brief (normally 3–4 pages) and consist of two sections: - (a) Background section with factual information on the economy, including a table of economic indicators. When possible, a draft of this section would be included in the staff report on Article IV consultation discussions to permit an early opportunity for comment. - (b) The Fund’s assessment of the member’s prospects and policies; this section will correspond closely to the Chairman’s summing up of the Executive Board discussion. - Editing of the summing up for PINs will be minimal, removing only highly market-sensitive information, mainly Fund views on exchange rate and interest rate matters. *Source: Selected Decisions and Selected Documents (excerpts from Executive Board Summings Up and related decisions).* ### 2. Member’s Consent to the Release of a Public Information ### 2. Member’s Consent to the Release of a Public Information ### Notice and Procedures for Consent - The release of a Public Information Notice shall be subject to the consent of the member concerned, normally to be communicated through its Executive Director, in accordance with the following procedures: - (a) A member may indicate its intention to consent to the release of a Public Information Notice at any time prior to issuance of the Chairman’s summing up of the Article IV consultation as a Fund document, but is free not to do so. - (b) The Executive Director concerned will have the opportunity to review the draft Public Information Notice prior to its release. - (c) In case of a serious disagreement between the Managing Director and the Executive Director concerned on the draft, either may request the Executive Board to consider the matter. - (d) A Public Information Notice will be released only upon the written consent of the member, normally communicated through the Executive Director concerned, to the proposed draft. The release of each Public Information Notice will require a separate written consent. A consent can be withdrawn at any time prior to the release of the Public Information Notice. - (e) It is understood that no pressure will be exerted on a member to provide consent for the release of a Public Information Notice by the Managing Director, Fund staff, or other members. ### Timing of Release - The Public Information Notice will be released shortly following the completion of the Article IV consultation. - Indicative target: the Fund will aim to issue the Public Information Notice five to ten working days following the relevant Executive Board meeting. - Constraint: in any event not before the end of the working day following the circulation of the summing up as a Fund document. ### Confirmation of Present Practices - (a) Release of Public Information Notices shall not affect the current Article IV consultation summing up process. The Chairman’s summing up will continue to be provided to the Executive Director concerned for review following the Executive Board meeting. - (b) The possibility of releasing Public Information Notices shall not affect in any way the staff’s reporting to the Executive Board on consultation discussions with members. *Decision No. 11493-(97/45), April 24, 1997* --- ### Summings Up for Internal Purposes on Use of Fund Resources ### Change in Practice - Following any Executive Board meeting on the use of Fund resources by a member combined with an Article IV consultation: - Summings up for internal purposes on the use of Fund resources shall no longer be prepared. - Instead, a paragraph or paragraphs concerning Executive Directors’ views regarding the member’s Fund-supported program shall be attached to the summing up of the Board discussion of the Article IV consultation. - Such paragraph(s) shall not be published with any Public Information Notice following the meeting. *Decision No. 12663-(02/6), January 22, 2002* --- ### External Audit Firm Mandatory Rotation and Limits on Provision of Audit-Related Services and Non-Audit-Related Services ### Key Decisions and Limits - 1. The contract to conduct the annual external audit of the financial statements of the Fund required under Article XII, Section 7(a) of the Fund’s Articles of Agreement and Section 20 of the Fund’s By-Laws shall be subject to bids every five years. - 2. There shall be a mandatory rotation of the Fund’s external audit firm every 10 years. If the Fund’s external audit firm is awarded a second consecutive 5-year contract after the first 5-year period, the new contract will require that the audit firm rotate the engagement partner and the audit manager. - 3. The Fund’s external audit firm shall not be eligible to bid for, and shall not be awarded, the provision of non-audit-related consulting services to the Fund. The provision of audit-related consulting services to the Fund by the Fund’s external audit firm shall be subject to the prior approval of the Executive Board after consultation with the External Audit Committee (EAC), provided that, under no circumstances, shall the remuneration of the Fund’s external audit firm for such services exceed 33 percent of the value of the five-year contract for conducting the annual audit of the financial statements of the Fund. - 4. This decision shall not preclude the Fund’s current external audit firm from submitting bids in accordance with this decision and completing any other existing contracts with the Fund. *Decision No. 13323-(04/78), August 5, 2004* --- ### Article XIV — Meaning of “Exceptional Circumstances” in Article XIV, Section 4 ### Interpretation - The language in Article XIV, Section 4 (quoted) indicates: - (a) applies at any time after the entry into force of the Fund Agreement; and - (b) gives the Fund the power to determine what is meant by “in exceptional circumstances.” *Decision No. 117-1, January 6, 1947* --- ### Article XV, Section 2 — Valuation of the Special Drawing Right (SDR) ### Selection and Weights of Currencies - 1. The value of the special drawing right shall be determined on the basis of the four currencies whose exports of goods and services during the five-year period ending 12 months before the effective date of this decision had the largest value, and which have been determined by the Fund to be freely usable currencies in accordance with Article XXX(f). - 2. The percentage weights of each of the currencies selected shall reflect: - (i) the value of the balances of that currency held at the end of 1999, and thereafter at the end of each year of the relevant five-year period, by the monetary authorities of members other than those forming part of the monetary union; and - (ii) the value of exports of goods and services of the members or monetary unions issuing the currencies over the relevant five-year period. - 3. Effective January 1, 2001, the value of one special drawing right shall be the sum of the values of specified amounts of the four currencies listed below. These amounts shall be determined on December 29, 2000, to ensure that, at the average exchange rates for the three-month period ending on that date, the shares correspond to the weights specified. - Currency weights (in currency): - U.S. dollar 0.632 - Euro 0.410 - Japanese yen 18.4 - Pound sterling 0.0903 - 4. Revisions: - (a) Currencies determining the SDR shall be determined in accordance with paragraph 1, provided that a currency shall not replace another currency unless the value of exports of the non-included currency during the relevant period exceeds that of the included currency by at least 1 percent. - (b) The amount of the four currencies shall be determined on the last working day preceding the effective date of the relevant revision to ensure that, at the average exchange rates for the three-month period ending on that date, the shares correspond to percentage weights established under (c). - (c) Percentage weights shall be established in accordance with paragraph 2, in a manner that would maintain broadly the relative significance of the underlying factors. The percentage weights shall be rounded to the nearest 1 percent or as may be convenient. - 5. Determination of amounts shall ensure the value of the SDR in terms of currencies on the last working day preceding the five-year period is the same before and after revision (SM/00/180, 7/24/00). *Decision No. 12281-(00/98), October 11, 2000, as amended by Decision No. 13595-(05/99), November 23, 2005, effective January 1, 2006* ### Guidelines for Calculation of Currency Amounts - 1. Currency units will be determined so that the value of the SDR calculated on December 31 on the basis of the new basket will be the same as that actually prevailing on that day. - 2. Currency amounts for the new basket will be expressed in two significant digits provided that the deviation of the percentage share of each currency resulting from the application of average exchange rates for October–December from the percentage weight will be the minimum on average and will not exceed one half percentage point for any currency. - 3. If no solution is obtained with two significant digits, express amounts in three significant digits; if still no solution, use four significant digits. - 4. If more than one solution is found at the chosen level of significant digits, employ the solution with the smallest average deviation. *Decision No. 8160-(85/186) G/S, December 23, 1985, as amended by Decision No. 12283-(00/98) October 11, 2000* --- ### Method of Collecting Exchange Rates for the Calculation of the Value of the SDR (Rule O-2(a)) ### Procedures for Exchange Rates - 1. Equivalents in United States dollars of the amounts of currencies specified in Rule O-1 shall be based on spot exchange rates against the United States dollar. For each currency the exchange rate shall be the middle rate between the buying and selling rates at noon in the London exchange market as determined by the Bank of England. - 2. If the exchange rate cannot be obtained from the London exchange market: - Use the middle rate at noon in the New York exchange market determined by the Fund on the basis of buying and selling rates communicated by the Federal Reserve Bank of New York; or - If not available there, use the middle rate determined by the Fund on the basis of the euro reference rates of the European System of Central Banks communicated by the European Central Bank. - If the rate against the United States dollar cannot be obtained directly in these markets, calculate indirectly by use of a cross rate against another currency specified in Rule O-1. - 3. If on any day the exchange rate for a currency cannot be obtained in accordance with 1 or 2, the rate for that day shall be the latest rate determined in accordance with 1 or 2, provided that after the second business day the Fund shall determine the rate. *Decision No. 6709-(80/189) S, December 19, 1980, as amended by Decision No. 12157-(00/24) S, March 9, 2000* --- ### Article XVII, Section 3 — Special Drawing Rights: Other Holders ### Terms and Conditions for Prescribed Holders - 1. Acceptance, Holding, and Use by Prescribed Holders - (a) Acceptance and use: - A prescribed holder may accept or use SDRs (i) in exchange for an equivalent amount of a monetary asset other than gold in a transaction entered into by agreement with a participant, or another prescribed holder, or (ii) in an operation entered into by agreement with a participant or another prescribed holder in accordance with and on the same terms and conditions established at that time for participants by decisions of the Fund under Article XIX, Section 2(c). - (b) Holding: - A prescribed holder may hold SDRs accepted in accordance with (a) above or received as interest paid on its holdings of SDRs in accordance with Article XX, Section 1. - 2. Acceptance and Use by Participants in Transactions and Operations with Prescribed Holders: - Participants may enter into transactions and operations by agreement with a prescribed holder in accordance with paragraph 1(a). - 3. Application of General Provisions: - Holding and acceptance/use by prescribed holders shall be governed by the Articles, By-Laws, Rules and Regulations, and Fund decisions that apply to all holders of SDRs. - 4. Exchange Rates: - Rules, Regulations, and decisions determining exchange rates at the time of each use or acceptance of SDRs by a participant shall apply to each use or acceptance by a prescribed holder. - A prescribed holder shall not levy any charge or commission in respect of a transaction involving SDRs. - 5. Information and Recording: - The Fund shall inform prescribed holders of matters relevant to acceptance, holding, and use of SDRs. - A prescribed holder shall inform the Fund promptly of facts necessary to record any transactions or operations in which it accepts or uses SDRs. - 6. Consultation and Review: - (a) Consultation between the Fund and a prescribed holder shall be held at the request of the Fund or the prescribed holder concerning the application of this decision or the decision prescribing the holder or with respect to transactions or operations entered into involving SDRs. - (b) The Executive Board shall review periodically this decision and decisions prescribing holders. - 7. General Undertaking: - Each prescribed holder shall collaborate with the Fund, participants, and other prescribed holders to facilitate the effective functioning of the Special Drawing Rights Department and the proper use of SDRs in accordance with the Articles and prescribed terms and conditions. - 8. Suspension: - During any period in which a suspension is in effect under Article XXIII, Section 1 with respect to participants, the suspension shall apply to the same extent to prescribed holders. - 9. Termination: - (a) Prescription of a holder may be terminated by the Fund by decision of the Executive Board or by notice from the prescribed holder in writing to the Fund at its principal office. Termination becomes effective on the date specified in the Executive Board decision but not earlier than the date of the decision, or when notice from the prescribed holder is received by the Fund. - (b) A prescribed holder whose status has been terminated may continue to hold the SDRs it held on termination and to receive SDRs as interest on its holdings and may continue to use SDRs to dispose of them in transactions or operations in accordance with paragraph 1(a). Such a prescribed holder shall make arrangements, with the concurrence of the Fund, to dispose of its holdings of SDRs as expeditiously as possible, and shall exchange SDRs for a freely usable currency selected by the prescribed holder when requested by the Fund. *Decision No. 6467-(80/71) S, April 14, 1980* --- *Source: _31stissue - 2. Member’s Consent to the Release of a Public Information (selected decisions and selected documents) — as provided in the supplied PDF content* ### 1980. These terms and conditions shall replace those set forth in ### _31stissue - 1980. These terms and conditions shall replace those set forth in ### Decisions prescribing and terminating holders of SDRs - Decision No. 6484-(80/77) S, April 18, 1980 — Andean Reserve Fund prescribed as a holder of special drawing rights in accordance with Article XVII, Section 3(i) of the Articles of Agreement. - The Andean Reserve Fund is authorized to accept, hold, and use special drawing rights on the terms and conditions specified in Decision No. 6467-(80/71) S, adopted April 14, 1980 (“Terms and Conditions for the Acceptance, Holding, and Use of Special Drawing Rights by Other Holders Prescribed under Article XVII, Section 3”). - Decision No. 6486-(80/77) S, April 18, 1980 — (related decisions noted). - Decision No. 10225-(92/147) S, December 8, 1992 — Fund notes termination of the Swiss National Bank’s status as a prescribed holder of SDRs as of November 19, 1992, and concurs in arrangement for sale of its SDR holdings in a transaction by agreement on February 1, 1993. (EBS/92/197, 12/1/92) ### Prescriptions for use of SDRs in Fund-related operations - Use of SDRs in payment of Trust Fund obligations (Decision No. 8642-(87/101) S/TR, July 9, 1987): - A participant, by agreement with a prescribed holder and at the instruction of the Fund, may transfer SDRs to the prescribed holder in repayment of Trust Fund loans, in payment of interest on Trust Fund loans and in payment of special charges in respect of overdue repayments and interest of Trust Fund loans. - The Fund shall record operations pursuant to this prescription in accordance with Rule P-9. - Use of SDRs in payment of subsidy (Decision No. 8186-(86/9) SBS/S, January 15, 1986): - SDRs may be transferred to the participant in discharge of subsidy payable from the Supplementary Financing Facility Subsidy Account, at the instruction of the Fund as Trustee of that Account. - The Fund shall record operations pursuant to this prescription in accordance with Rule P-9. - Use of SDRs in operations under Structural Adjustment Facility (Decision No. 8239-(86/56) SAF, March 26, 1986): - A prescribed holder, by agreement with a participant and at the instruction of the Fund, may transfer SDRs to the participant in disbursement of a loan payable from the Structural Adjustment Facility within the Special Disbursement Account (“the Facility”). - A participant, by agreement with a prescribed holder and at the instruction of the Fund, may transfer SDRs to the prescribed holder in repayment of loans, and/or payment of interest on loans, under the Facility. - The Fund shall record operations pursuant to these prescriptions in accordance with Rule P-9. - Use of SDRs in financial operations under the Enhanced Structural Adjustment Facility Trust or under an administered account (Decision No. 8937-(88/118) ESAF/S, July 28, 1988): - A participant or prescribed holder, by agreement with a prescribed holder and at the instruction of the Fund, may transfer SDRs to that prescribed holder in effecting a payment due to the Fund in connection with financial operations under the Enhanced Structural Adjustment Facility Trust or under an administered account established for the benefit of the Enhanced Structural Adjustment Facility Trust. - A prescribed holder, by agreement with a participant or another prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or other prescribed holder in effecting a payment due from the Fund in connection with financial operations under the Enhanced Structural Adjustment Facility Trust or under an administered account established for the benefit of the Enhanced Structural Adjustment Facility Trust. - The Fund shall record operations pursuant to these prescriptions in accordance with Rule P-9. - Use of SDRs in financial operations under the PRGF-HIPC Trust or under an administered account (Decision No. 12062-(99/130), December 8, 1999): - (i) A participant or a prescribed holder, by agreement with a participant or a prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or prescribed holder in effecting a transfer to or from the Post-SCA-2 Administered Account or in effecting a payment due to or by the Fund in connection with financial operations under the PRGF-HIPC Trust or under an administered account established for the benefit of the PRGF-HIPC Trust. - (ii) Operations pursuant to these prescriptions shall be recorded in accordance with Rule P-9. ### Allocation of Special Drawing Rights — legal basis and prior resolutions - Article XVIII, Section 2; Article XXIV, Section 4 referenced as legal basis for allocations. - Resolution No. 24-12, October 3, 1969 — First basic period allocations: - Basic period of three years beginning January 1, 1970. - Allocations during the basic period on January 1, 1970; January 1, 1971; and January 1, 1972. - Allocations on the basis of quotas on the day before the dates of the allocations. - Rate for the first allocation: 17.5 percent. - Rate for the second and third allocations: 15 percent. - These rates to be adjusted, to the nearest one tenth of one percentage point, by multiplying them by the ratio of $20 billion to the total of quotas on the day before allocation of those participants which were members of the Fund on December 31, 1969. ### Proposal for allocation of SDRs for the third basic period — Managing Director’s reasoning and proposal - Procedural context: - Article XVIII, Section 4(a) and (b) require the Managing Director to submit proposals and to conduct consultations to ascertain broad support among participants. - On June 29, 1977, the Managing Director reported he was not in a position to make a proposal before January 1, 1978 for the third basic period starting January 1, 1978, but could make a proposal at any time during that period once conditions were met. - Consultations pursuant to Article XVIII, Section 4(b) were conducted; paragraph 4 of the Interim Committee Press Communiqué after its meeting on September 24, 1978, stated: “In the Committee’s view the Fund should make allocations of 4 billion SDRs in each of the next three years 1979 to 1981.” - Need to supplement reserves — findings and rationale: - Conclusion: there is at present “a long-term global need ... to supplement existing reserve assets” as required by Article XVIII, Section 1(a). - Observations: - With greater exchange rate flexibility, countries might have been expected to make do with much smaller reserves. - Important changes in world financial markets have made it possible for most countries to obtain reserves via international money and capital markets. - Experience shows countries tend to increase their reserves as the level of their international transactions rises; such increases can be expected to continue. - Allocation does not depend on a finding that long-term global need cannot be met except by allocation. - Additions to net reserves via allocation of SDRs avoid the periodic refinancing difficulty associated with additions to gross reserves through market borrowing. - Objective: make the special drawing right the principal reserve asset of the international monetary system (Articles VIII, Section 7 and Article XXII); exclusive reliance on reserve currencies is not compatible with that objective. - Historical trend: holdings of SDRs declined from about 10 percent of reserves excluding gold at the beginning of 1972 to about 4 percent at present; the volume of SDRs had not increased since the beginning of 1972. - Size and period of allocation — proposed figures and reasoning: - World trade conservatively estimated to increase by some 10 percent a year for the next five years. - Present level of members’ holdings of foreign exchange and Fund-related assets: SDR 230 billion. - An average increase of SDR 20 billion a year over the next five years would appear to be a low estimate of the likely growth in official reserves. - Consideration of expansionary effects and inflation expectations suggests allocations should be modest in annual size and duration. - Proposal: the Fund should make allocations of SDR 4 billion in each of the next three years 1979 to 1981. - In specifying these amounts, also considered agreement that SDRs will be used in partial payment for quota increases under the Seventh General Review of Quotas. - Timing: the first allocation to be made as of the first day of the month following the effective date of the resolution of the Board of Governors; succeeding two allocations to be made as of the same day in each of the subsequent two years. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### Part II. Elements of the Proposal ### Part II. Elements of the Proposal ### Proposed basic period - Article XVIII, Section 2(a) allows basic periods to run consecutively and to be five years in duration, but permits the Fund to provide that the duration shall be other than five years. - Historical sequencing: - First basic period: three years running from January 1, 1970. - Second basic period began on January 1, 1973 and ran five years. - Third basic period began on January 1, 1978. - Proposal: - Make allocations under Article XVIII, Sections 2(c) and 4(c)(ii) for three years of the third basic period. - The basic period would end on the final day of the year in which the last of the three annual allocations is made. - The third basic period that began on January 1, 1978 would thus have a terminal date of December 31, 1981 and a duration of four years, with allocations in the last three of those four years. ### Participation during basic period - Article XVIII, Section 2(d) governs members becoming participants after a basic period begins (here, as from January 1, 1978). - New participants include two classes: - (a) Those that were not participants at the start of the third basic period but that were participants on the effective date of the proposed resolution. - (b) Those that become participants after the effective date of the resolution. - Article XVIII, Section 2(d) declares: - A new participant shall not receive allocations in the basic period in which it becomes a participant but authorizes the Fund to decide to permit the member to receive allocations made after it becomes a participant. - The decision is taken by the Executive Board by a majority of the votes cast. - Expectation: The Executive Board would react sympathetically to requests by new participants, in class (a) or (b), to receive allocations made in the third basic period after becoming participants. ### Allocations as percentages of quotas - Article XVIII, Section 2(b): “The rates at which allocations are to be made shall be expressed as percentages of quotas on the date of each decision to allocate,” with an allowance under Section 2(c) to use quotas on other dates. - Under the assumption that only current participants receive allocations: - The rate for the first allocation would be 10.6 percent of quotas. - Methodology and targets: - Percentages are designed so each of the three allocations will be close to SDR 4 billion and the total amount allocated will be close to SDR 12 billion. - The total would not be increased if the Executive Board, by the date the resolution of the Board of Governors becomes effective, decides to make new participants in class (a) eligible to receive the allocations for that period. - The total amount of allocations would be reduced if participants entitled to receive allocations “opt out.” - The total amount of allocations would be increased when any new participants in class (b) are made eligible by Executive Board decision to receive allocations made after they become participants. - Rounding and precision: - Because the percentage is to be rounded to the nearest one-tenth of one percentage point, an allocation could in practice exceed or fall short of the desired amount by not more than one-twentieth of one percentage point of total quotas, i.e., a difference in absolute terms that would not be greater than about SDR 19 million on the basis of quotas at the present time. - Opt-out conditions: - For a participant to be able to “opt out,” in accordance with Article XVIII, Section 2(e), it must not have voted in favor of the resolution and must inform the Fund before the first allocation under the resolution that it does not wish to receive allocations under that resolution. ### Basis for each allocation and interrelated issues - Proposal: The basis for each allocation shall be quotas on the day before that allocation. - Rationale: To address expected increases in quotas under the Seventh General Review occurring during the third basic period. - Effect: Participants whose new quotas have gone into effect by the day prior to an allocation will receive allocations based on their share in the total quotas prevailing on that day; participants whose new quotas have not gone into effect would receive a much reduced share. - Interrelation with Seventh General Review: - The draft resolution provides that it would not become effective unless the draft resolution on the Seventh General Review of Quotas proposed for simultaneous adoption by the Board of Governors is adopted. - This provision follows paragraph 3 of the Interim Committee’s communiqué of September 24, 1978. - Executive Board decisions on aspects of the SDR referred to in paragraph 5 of the communiqué will become effective on the dates provided in those decisions if the draft resolution becomes effective. ### Part III — Proposal for the Allocation of Special Drawing Rights (core proposal) - Proposed operative elements: - The third basic period, which began on January 1, 1978, shall end on December 31, 1981. - Allocations during this basic period shall be made as of the first day of the month following the effective date of the resolution of the Board of Governors and as of the same date in each of the subsequent two years. - The rate for each participant receiving an allocation shall be the percentage, rounded to the nearest one-tenth of one percentage point, resulting from dividing SDR 4 billion by the total of quotas on the day before allocation of those participants that were eligible to receive allocations on the date on which this resolution becomes effective. - Recommendation timeline: - The Managing Director’s proposal was concurred in by the Executive Board on October 25, 1978. ### Proposed Resolution of the Board of Governors (as adopted) - Preamble highlights: - Managing Director submitted proposal pursuant to Article XVIII, Section 4. - Managing Director declared the proposal consistent with Article XVIII, Section 1(a) and ascertained broad support among participants. - Executive Board concurred in the proposal. - Resolved operative paragraphs (summary): - The third basic period, which began on January 1, 1978, shall end on December 31, 1981. - The Fund shall make allocations to participants in the Special Drawing Rights Department that are eligible, in accordance with the Articles of Agreement, to receive allocations during the third basic period. - Allocations shall be made as of the first day of the month following the date on which this resolution becomes effective and as of the same date in each of the subsequent two years. - The rate for the allocations to participants eligible to receive allocations shall be the percentage, rounded to the nearest one-tenth of one percentage point, resulting from dividing SDR 4 billion by the total of quotas on the day before allocation of those participants that were eligible to receive allocations on the date on which this resolution becomes effective. - Effectiveness condition: This resolution shall become effective if it and the proposed resolution on the Seventh General Review of Quotas are adopted by the necessary majority of the total voting power for each. - Adoption note: - Ed. Note: Adopted by the Board of Governors, effective December 11, 1978, and designated Resolution No. 34-3. ### Special Drawing Rights: Additional Uses — key prescriptions and decisions - Use of SDRs in settlement of financial obligations - Authority: Article XIX, Section 2(c). - Conditions for use between participants by agreement: - Obligation denominated in: - (i) SDRs, or - (ii) the currency of a member, or - (iii) the currency of a nonmember or another unit of account composed of currencies applied under an intergovernmental agreement with completed arrangements 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. - The amount of SDRs used for obligations under (ii) or (iii) must be equal in value, in terms of the SDR, at the time of settlement, to the amount of the obligation. - Calculation timing: - Calculations 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. - Notification and declarations: - Participants intending to use or acquire SDRs shall inform the Fund of denomination, amount, and intended value date. - As required by Rule P-7 the lender and the borrower shall declare intended use in accordance with this prescription. - Transfers only upon receipt by the Fund of instructions from transferor and transferee. - Recording: The Fund shall record operations under this prescription in accordance with Rule P-9. - Review: The Fund shall review this decision prior to June 30 of each year. - Decision citation: Decision No. 6000-(79/1) S, December 28, 1978, as amended by Decision No. 6438-(80/37) S, March 5, 1980. - Use of SDRs in loans - Authority: Article XIX, Section 2(c). - Conditions for loans between participants by agreement: - Principal denominated in: - (i) SDRs, or - (ii) the currency of a member, or - (iii) the currency of a nonmember or another unit of account composed of currencies with arrangements for valuation under Article XIX, Section 7(a) and Rule O-2. - The amount of SDRs used in a loan under (ii) or (iii) must be equal in value, in terms of the SDR, at the time of use, to the amount of the loan. - Borrower obligations under loan agreement: - (i) If loan denominated in SDRs, repay with the same amount of SDRs, or equivalent at 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 unit of account under (iii) in accordance with valuation arrangements referred to therein. - (ii) If loan denominated in the currency of a member and to be repaid in SDRs, 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 loan under (iii) and to be repaid in SDRs, repay with the equivalent in SDRs at the time of repayment in accordance with the valuation arrangements referred to in (iii). - Calculation timing for 1(b) and (c): 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. - Repayment and interest payment with SDRs shall follow the prescription for settlement of financial obligations. - Notification and declarations: - Participants intending to lend or borrow under this prescription shall inform the Fund of amount, value date, denomination, rate of interest, maturity, and means of repayment. - As required by Rule P-7 the lender and borrower shall declare intended use in accordance with this prescription. - Transfers only upon receipt by the Fund of instructions from transferor and transferee. - Recording: The Fund shall record operations under this prescription in accordance with Rule P-9. - Review: The Fund shall review this decision prior to June 30 of each year. - Decision citation: Decision No. 6001-(79/1) S, December 28, 1978. - Use of SDRs in pledges - Authority: Article XIX, Section 2(c). - Conditions for pledging SDRs between participants by agreement: - Obligation denominated in: - (i) SDRs, or - (ii) the currency of a member, or - (iii) the currency of a nonmember or another unit of account composed of currencies with arrangements for valuation under Article XIX, Section 7(a) and Rule O-2. - Notification and declarations: - Parties intending a pledge shall inform the Fund of terms: amount and denomination of obligation to be secured, amount of SDRs to be pledged, effective date of pledge, and the party or entity designated to give instructions to the Fund to terminate or transfer the pledged SDRs. - As required by Rule P-7 the parties shall declare intended use in accordance with this prescription. - Recording and operational rules: - The Fund records a pledge only upon receipt of instructions from the parties. - A change in pledge terms, if consistent with the prescription, takes effect upon receipt by the Fund of instructions from the parties. - Amount of pledged SDRs shall be set aside and not used during pledge period except per instructions authorized by terms of pledge or to discharge an obligation of the pledgor under the Articles of Agreement. - Amount transferred to pledgee in satisfaction of secured obligation shall discharge an equal amount, in terms of the SDR, of the secured obligation at the time of transfer. - Calculations for transfers: exchange rate of the third business day preceding the date of transfer or of the second business day preceding the date of transfer if agreed between the parties. - The Fund shall give adequate notice to the parties before pledged SDRs are to be transferred (either in accordance with terms or to discharge an obligation of the pledgor). - Notice under the Fund’s action may include advice on ways to discharge the obligation without use of pledged SDRs or to restore the pledge. - Recording: The Fund shall record operations under this prescription in accordance with Rule P-9. - Review: The Fund shall review this decision prior to June 30 of each year. - Decision citation: Decision No. 6053-(79/34) S, February 26, 1979, as amended by Decision No. 6438-(80/37) S, March 5, 1980. - Use of SDRs in transfers as security for the performance of financial obligations - Authority: Article XIX, Section 2(c). - Conditions for transfers between participants by agreement: - Obligation denominated in: - (i) SDRs, or - (ii) the currency of a member, or - (iii) the currency of a nonmember or another unit of account composed of currencies with arrangements for valuation under Article XIX, Section 7(a) and Rule O-2. *Source: Part II. Elements of the Proposal, _31stissue - Part II. Elements of the Proposal* ### 2. Participants intending to engage, as transferor or transferee, ### _31stissue - 2. Participants intending to engage, as transferor or transferee, ### SDRs transferred as security — procedural requirements and Fund actions - Participants intending to engage, as transferor or transferee, in an operation involving the transfer of SDRs as security shall inform the Fund of: - the terms of the security arrangement relating to the amount and denomination of the obligation to be secured; - the amount of SDRs to be transferred; - the effective date of the transfer; - any agreement by the parties regarding SDRs received from the Fund as interest in respect of the transferred SDRs; and - the party or other entity designated by the parties to the operation to give instructions to the Fund for the retransfer. - Parties to the operation shall declare, as required by Rule P-7, that the intended use of SDRs will be in accordance with this prescription. - The Fund shall record a transfer of SDRs under this prescription upon the receipt by the Fund of instructions from the parties to the operation. - Changes in the terms of the security arrangement (if consistent with the prescription) take effect upon receipt by the Fund of instructions from the parties. - At the request of the parties, the amount of SDRs transferred as security shall be set aside and shall not be used during the period of the security arrangement except: - in accordance with instructions authorized by the terms of the arrangement; or - in order to discharge an obligation of the transferee under the Articles of Agreement. - Retransfer or retention of SDRs transferred as security: - The amount of SDRs transferred as security shall be retransferred in accordance with instructions authorized by the terms of the security arrangement, or retained in the absence of such instructions. - The amount of SDRs retained shall discharge an equal amount, in terms of the SDR, of the secured obligation at the time of the retention. - Calculations shall be made at the exchange rate of the third business day preceding the date of retention or of the second business day preceding the date of retention if agreed between the parties. - The Fund shall give adequate notice to the parties before SDRs held by the transferee as security are to be: - retransferred in accordance with the terms of the arrangement; or - reduced in order to discharge an obligation of the transferee under the Articles of Agreement. - The notice under 5(b) may include advice on ways to discharge the obligation without the use of the SDRs held as security or to restore these holdings. - The Fund shall record operations under this prescription in accordance with Rule P-9. - The Fund shall review this decision prior to June 30 of each year. - Decision references: Decision No. 6054-(79/34) S, February 26, 1979, as amended by Decision No. 6438-(80/37) S, March 5, 1980. ### Use of SDRs in swap operations — prescriptions and participant obligations - Permitted operation (Article XIX, Section 2(c)): - One party may transfer SDRs to another in exchange for an equivalent amount of currency or another monetary asset (other than gold) for 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. - Parties undertake to reverse the exchange within a period and at an exchange rate agreed by them. - Calculations for transfers under 1(a) shall be made at the exchange rate of the third business day preceding the date of the transfer or of the second business day preceding the date of the transfer if agreed by the parties. - Parties may agree on and modify operation terms provided consistency with the prescription. - Parties may agree on payment of compensation if reversal is not carried out. - Participants intending to use or receive SDRs pursuant to this prescription shall inform the Fund of: - (a) the amount of SDRs and the period of the operation; - (b) the monetary asset, the exchange rate and the value date for the exchange under 1(a); - (c) the monetary asset, the exchange rate and the value date for the reversal of the exchange; - (d) any agreement for the payment of interest, or compensation in accordance with 4 above; and - (e) any modification of these terms. - Parties shall declare, as required by Rule P-7, that the intended use of SDRs will be in accordance with this prescription. - Transfers of SDRs pursuant to this prescription shall be made only upon the receipt by the Fund of instructions from the transferor and the transferee. - If the Fund changes the terms and conditions of this prescription, any outstanding operation inconsistent with the new terms shall be completed within 12 months from the date of the Fund’s decision. - The Fund shall record operations pursuant to this prescription in accordance with Rule P-9. - Decision reference: Decision No. 6336-(79/178) S, November 28, 1979. ### Use of SDRs in forward operations — prescriptions and notification requirements - Permitted operation (Article XIX, Section 2(c)): - A participant may undertake to transfer SDRs at a specified future date more than three business days after the date of the agreement, in exchange for an agreed amount of currency or another monetary asset (other than gold). - Parties may agree on and modify terms provided consistency with the prescription. - Participants intending to use or receive SDRs pursuant to this prescription shall inform the Fund of: - (a) the amount of SDRs and the period of the operation; - (b) the monetary asset, the exchange rate and the value date for the exchange; and - (c) any modification of these terms. - Parties shall declare, as required by Rule P-7, that the intended use of SDRs will be in accordance with this prescription. - Transfers of SDRs pursuant to this prescription shall be made only upon the receipt by the Fund of instructions from the transferor and the transferee. - If the Fund changes the terms and conditions of this prescription, any outstanding operation inconsistent with the new terms shall be completed within 12 months from the date of the Fund’s decision. - The Fund shall record operations pursuant to this prescription in accordance with Rule P-9. - Decision reference: Decision No. 6337-(79/178) S, November 28, 1979. ### Use of SDRs in donations — simple notification and recording rules - A participant may donate SDRs to another participant by agreement. - Participants intending to donate or receive SDRs shall inform the Fund of the amount of SDRs and the value date for the transfer. - Parties shall declare, as required by Rule P-7, that the intended use of SDRs will be in accordance with this prescription. - Transfers shall be made only upon receipt by the Fund of instructions from the transferor and the transferee. - The Fund shall record operations pursuant to this prescription in accordance with Rule P-9. - Decision reference: Decision No. 6437-(80/37) S, March 5, 1980. ### Designation of participants to provide currency — review, principles, and revised rules - Executive Directors approved summary and conclusions on understanding that if during the first year after a participant receives an allocation for the first time designation would bring the participant close to the acceptance limit, the staff will take steps to moderate the rate at which the limit is approached. - Decision reference: Decision No. 6209-(79/124) S, July 24, 1979. - Key observations and conclusions: - The designation system has a key role in guaranteeing the usability of the SDR. - If the SDR is regarded as an attractive reserve asset, participants may make less use of their SDR holdings in transactions with designation and rely more on transactions and operations by agreement between participants and payments to the Fund. - The volume of transactions with designation depends mainly on the extent to which the Fund transfers SDRs to purchasing members that use the SDRs to obtain foreign exchange in transactions with designation. - Structure of designation provisions: - Article XIX, Section 5: participants whose balance of payments and gross reserve position is sufficiently strong shall be subject to designation; the Fund shall designate participants “in such manner as will promote over time a balanced distribution of holdings of special drawing rights among them.” - Rules for designation in Schedule F implement the “excess holdings” principle: promote equality in participants’ “excess holding ratios” (holdings of SDRs in excess of net cumulative allocations as a proportion of gold and foreign exchange holdings). - Rules can be reviewed and changed by Executive Board decision by majority of votes cast. - Conclusions on calculation principles: - Choice of “excess holdings” rather than total holdings concentrates designation on net users of SDRs to restore holdings to allocation levels. - Using participants’ gold and foreign exchange holdings as basis harmonizes excess holdings; alternative of using unused acceptance obligations exists but is not preferred. - Present method promotes harmonization at a moderate pace, balancing restoration for net users and maintaining a broad list of participants for designation. - Acceptance limit: - Under the Articles, the amount a participant can be required to accept is restricted to the point where its excess holdings are twice its allocation (the acceptance limit). - For some participants, the limit is reached more rapidly because reserves are large relative to SDR allocations; staff view is that slowing approach to the limit is neither necessary nor desirable. - Execution of designation plans: - Method established for each quarterly period when the plan is adopted by the Executive Board; continuation of this procedure is proposed. - Execution generally designates participants in broad proportion to maximum amounts for which they are included in the plan while avoiding undue fragmentation. - Exceptions may be proposed when warranted; if exclusion of a participant is pending, further designation of that participant would be avoided to the extent practicable. - Experience and outlook: - Over more than nine years, the designation mechanism has functioned satisfactorily. - About four fifths of total designation has been directed to participants whose holdings of SDRs were below their allocations due to prior uses. - Major volume of designation transactions in the last two and a half years resulted from transfers of SDRs to participants making purchases from the General Resources Account; these participants have generally used the SDRs in transactions with designation, although some retain SDRs to meet reconstitution obligations or make payments to the Fund. - With the Fund receiving approximately SDR 5 billion as a result of quota increases under the Seventh Review, there is likely to be a continuing volume of transactions with designation resulting from transfers of SDRs by the Fund to members making purchases. - Staff does not propose changes in present principles and procedures for designation. - Revised rules for designation (Pursuant to Article XIX, Section 5(c)): - (a) Participants subject to designation under Article XIX, Section 5(a)(i) shall be designated for such amounts as will promote over time equality in the ratios of the participants’ holdings of special drawing rights in excess of their net cumulative allocations to their existing Fund quotas. - (b) The formula to give effect to (a) shall: - (i) designate participants in proportion to their existing Fund quotas when the ratios are equal; and - (ii) designate in such manner as gradually to reduce the difference between low and high ratios. - Decision reference: Decision No. 11976-(99/59) S, June 3, 1999. ### Reconstitution — abrogation of prior rules - The Executive Board decides to abrogate, with effect from April 30, 1981: - 1. The rules for reconstitution under Schedule G, paragraph 1(a); and - 2. Rules R-1 through 6 of the Fund’s Rules and Regulations. - Decision references: Decision No. 5699-(78/38) G/S (adopted March 22, 1978, effective April 1, 1978); Decision No. 5936-(78/168) S (adopted October 25, 1978, effective December 11, 1978); Decision No. 6063-(79/43) S (March 14, 1979); Decision No. 6832-(81/65) S, April 22, 1981. ### Charges — payment of net charges and assessment in the SDR Department for year ended April 30, 1982 - The Executive Board notes the course of action set out in EBS/82/80. - Decision reference: Decision No. 7116-(82/68) S, May 7, 1982. - Treatment of participants failing to hold adequate SDRs to meet net charges and assessments: - (i) Where members had sufficient SDRs to pay assessments, these amounts were collected first by debiting their respective SDR accounts; the balance of SDR holdings was applied toward payment of net charges. - (ii) A member not having any SDRs was not in a position to pay its assessment of SDR 4,669. This amount will be carried as a receivable in the General Resources Account until collectible. - (iii) The unpaid balance of net charges, SDR 15,419,868, will be shown separately in the balance sheet of the Special Drawing Rights Department under the caption “Charges due but not paid.” This item will appear below “Net cumulative allocations of SDRs to participants” and the total of the two items will correspond to the total in the balance sheet of holdings of SDRs by participants. - (iv) When these participants acquire sufficient SDRs to pay the charges due, the entry will be cancelled in accordance with Article XX, Section 5 which states, in part, that “special drawing rights acquired by a participant after the date for payment shall be applied against its unpaid charges and cancelled.” - The course of action follows application of the Articles of Agreement and was adopted in 1978 when one participant did not hold sufficient SDRs to pay the assessment and charges due for the financial year ending April 30, 1978. ### Overdue payments to the Fund — context (truncated in source) - The source includes the heading "OVERDUE PAYMENTS TO THE FUND—PURCHASES FROM FUND" followed by ellipses; content beyond this heading is not present in the supplied excerpt. *Selected Decisions and Selected Documents, pages 702–715 (excerpts as provided).* ### 3. Other stand-by or extended arrangements granted by the ### 3. Other stand-by or extended arrangements granted by the Fund ### Inclusion of provisions in new arrangements - "Other stand-by or extended arrangements granted by the Fund after the date of this decision shall include also the provision in 1 or 2 above." ### Inclusion of provisions in existing arrangements - "The provision in 1 and 2 above shall be included also in an existing stand-by or an extended arrangement when the Fund and the member reach understandings regarding the circumstances in which further purchases may be made under the arrangement." *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### 5. Decision No. 7678-(84/62), April 20, 1984, shall cease to ### _31stissue - 5. Decision No. 7678-(84/62), April 20, 1984, shall cease to ### Board reaffirmation and policy stance on members with overdue payments - The Executive Board unanimously reaffirmed the practice that management will not submit to the Board any requests for the use of Fund resources under a stand-by or extended arrangement as long as the member concerned has overdue payments to the Fund. (Executive Board Meeting 84/54, April 5, 1984) - The Board confirmed the practice of not entering into discussions on the use of Fund resources with members in arrears, while keeping channels of communication open to assist members to organize their affairs to permit repayment. - The Chairman’s Summing Up (Executive Board Meeting 85/170, November 25, 1985) stressed: - Members in arrears should give priority to actions designed to enable them to repay the Fund. - The Fund should keep open channels of communication to help formulate adjustment policies and catalyze external assistance to support settlement of arrears prior to formal Fund commitment. ### Timetable and review intervals after arrears emerge - A majority of Directors favored reducing the period between the emergence of arrears and the first substantive Board consideration from five-month to three months; issuing the complaint two months after arrears have arisen instead of three months would be consistent with the discussion. - The review period following the first substantive consideration would remain three months, but the three months is an outer limit and actual timing should consider member circumstances and performance. - Once declared ineligible to use the Fund’s resources, a majority of Directors would like to review the member’s situation every six months. - The Managing Director notifies the Executive Board normally one month after an obligation has become overdue. - When the longest overdue obligation has been outstanding for six weeks, the Managing Director informs the member that unless the overdues are settled a complaint will be issued to the Executive Board in two weeks’ time. - A complaint by the Managing Director is issued two months after an obligation has become overdue, and is given substantive consideration by the Executive Board one month later. - The decision on limiting access and subsequent review periods would normally not exceed three months. ### Immediate staff and management actions upon overdue obligations - Whenever a member fails to settle an obligation on time, the staff immediately sends a cable urging prompt payment; this is followed up through the office of the Executive Director concerned. - When an obligation has been outstanding for two weeks, management sends a communication to the Governor stressing seriousness and urging full and prompt settlement; the communication will note the Managing Director’s intention to raise the possibility of communicating with Governors if payment is not received. - The Managing Director may raise overdue obligations directly with the head of government when considered useful. ### Public disclosure and suspension of access - When a member has overdue financial obligations outstanding for more than three months, a brief factual statement noting the existence and the amount of such arrears will be posted on the member’s country-specific page on the Fund’s external website; the statement will be updated as necessary and will indicate that the member’s access to the Fund, including PRGF and HIPC resources, has been and will remain suspended for as long as arrears remain outstanding. - A press release will be issued following the Executive Board’s decision to limit the member’s use of the general resources or to suspend its right to use SDRs; a similar press release will be issued when such limitation or suspension is lifted. - The Annual Report and the financial statements identify members with overdue obligations outstanding for more than six months. ### Declaration of ineligibility, intensified collaboration, and remedial pathways - If a member persists in failing to settle overdue obligations, the Executive Board declares the member ineligible to use the general resources of the Fund; timing varies according to circumstances and member efforts. - Procedures for members with protracted arrears declared ineligible include further reviews at intervals of not more than six months. - For members with protracted arrears willing to cooperate, the Fund adopts an intensified collaborative approach incorporating exceptional efforts by the international financial community. - For members judged not to be cooperating actively, remedial measures would be applied, including limiting or suspending technical assistance where appropriate; the Managing Director may limit technical assistance if it is not contributing adequately to resolution of overdues. ### Communications with Governors and international financial institutions - The Managing Director would recommend whether communications should be sent to a selected set of Fund Governors or to all Fund Governors. If to a selected set, an informal meeting of Executive Directors would be held about six weeks after overdues emerge to consider the communication’s thrust; if to all Governors, a formal Board meeting would consider draft text and timing. - A sample text for a communication to all Fund Governors is provided in Attachment I. - For protracted arrears where the member is not cooperating, the staff would prepare a draft communication to all Governors and certain international financial institutions along the lines of Attachment II; such communications to other institutions would not request specific actions and would leave action to the institution’s discretion. ### Intermediate and final remedial measures: censure, noncooperation, and compulsory withdrawal - A declaration of censure or noncooperation is an intermediate step between a declaration of ineligibility and a resolution on compulsory withdrawal; the decision is based on assessment of: - (i) the member’s performance in meeting financial obligations to the Fund (accounting for exogenous factors); - (ii) whether the member made payments to other creditors while in arrears to the Fund; - (iii) the member’s preparedness to adopt comprehensive adjustment policies. - The declaration would follow communications to Governors after ineligibility and would be considered at a subsequent post-ineligibility review; the period between such communications and declaration could be about six months, determined case-by-case. - Upon a declaration of noncooperation, technical assistance to the member will be suspended unless the Executive Board decides otherwise. (EBS/01/122, 7/13/01) - Directors noted the availability of procedures under Section 22 of the By-Laws on compulsory withdrawal; these would be pursued only after exhausting other avenues and if the member, despite a declaration of noncooperation, has not shown willingness to cooperate. ### Attachments and draft texts included in the statement - Attachment I: Draft First Letter to All Governors (text for drawing Governors’ attention to a complaint regarding a member’s overdue obligations and requesting assistance). - Attachment II: Draft Second Letter to All Governors and Certain International Financial Institutions (text indicating ineligibility date, SDR amount of overdues as of [date], longest overdue obligation outstanding for [ ] months, possible declaration of noncooperation). - Attachment III: Draft Declaration on Censure or Noncooperation (text noting continued arrears since declaration of ineligibility; optional note that member made payments to other creditors while not discharging obligations to the Fund; finds member not cooperating; urges discharge; reminds of Section 22 By-Laws on compulsory withdrawal). - Attachment III final line: EBM/89/100 and 89/101, July 27, 1989, as amended by Decision No. 12546-(01/84), August 22, 2001. *https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf* ### 2. Measures of deterrence ### 2. Measures of deterrence ### Overview - Measures of deterrence are a key element of the strengthened cooperative strategy to address overdue financial obligations to the Fund. - Executive Directors supported widening the scope and strengthening application of deterrent measures, including establishing a clear timetable and sequence from emergence of arrears to initiation of procedures for compulsory withdrawal. - The timetable would be followed in all cases unless the Executive Board judged a different approach justified in an individual case. ### Strengthened timetable of procedures (selected time points and actions) - Immediately - Staff sends a cable urging the member to make the payment promptly; followed up through the office of the concerned Executive Director. - The member is not permitted any use of the Fund’s resources nor is any request for the use of Fund resources placed before the Executive Board until the arrears are cleared. - 2 weeks - Management sends a communication to the Governor for the member stressing the seriousness of the failure to meet obligations and urging full and prompt settlement. - 1 month - The Managing Director notifies the Executive Board that an obligation is overdue. - 6 weeks - The Managing Director notifies the member that unless the overdue obligations are settled promptly a complaint will be issued to the Executive Board. - The Managing Director would consult with and recommend to the Executive Board that a communication concerning the member’s situation be sent to selected Fund Governors or to all Fund Governors if the member has not improved its cooperation. - 2 months - A complaint regarding the member’s overdue obligations is issued by the Managing Director to the Executive Board. - 3 months - The complaint is given substantive consideration by the Executive Board. The Board has usually decided to limit the member’s use of the general resources and, if overdue SDR obligations are involved, suspend its right to use SDRs. - 6–12 months - The Executive Board will review its decision on limitation within three months, with the possibility of a second review if warranted. - It is proposed that, depending on the Executive Board’s assessment of the specific circumstances and of the efforts being made by the member to fulfill its obligations to the Fund, a declaration of ineligibility be considered to take effect not more than twelve months after the emergence of arrears. - It is proposed that the sending of communications to all Fund Governors and the heads of selected international financial institutions regarding the member’s continued failure to fulfill its financial obligations to the Fund be considered at the same time as the declaration of ineligibility. - Up to 15 months - It is proposed that a declaration of noncooperation be considered within three months after the dispatch of the communications. - Up to 18 months - In case an amendment of the Articles would be adopted, it is proposed that a decision on suspension of voting and representation rights be considered within three months after the declaration of noncooperation. - Up to 24 months - It is proposed that the procedures on compulsory withdrawal be initiated within six months after the decision on suspension (in case an amendment of the Articles would be adopted) or nine months after the declaration. ### Ineligibility, noncooperation, and compulsory withdrawal — timing and procedures - Proposal: a member in arrears to the Fund would be declared ineligible to use the general resources no later than twelve months after the emergence of arrears, with exact timing depending on the Executive Board’s assessment of circumstances and member efforts. - Communications to all Fund Governors and heads of selected international financial institutions regarding continued failure would be considered within three months after the declaration of ineligibility. - The Executive Board would be asked to consider a declaration of noncooperation not later than four months after the dispatch of these communications (i.e., within nineteen months of the emergence of arrears), unless there had been a decisive improvement. - Proposed initiation of procedures for compulsory withdrawal by the Executive Board within five months of the declaration of noncooperation (i.e., within two years of the emergence of arrears), if noncompliance and lack of cooperation continued. - Voting thresholds: - A recommendation of compulsory withdrawal can be made by the Executive Board by a simple majority. - Withdrawal can be required only by a majority of Governors having 85 percent of the total voting power. ### Amendment of Articles: suspension of voting and related rights - Staff to prepare a paper for Executive Board consideration focusing on substantive issues related to an amendment of the Articles of Agreement to introduce suspension of voting and related rights for continuing breach of obligations. - Matters for discussion: scope of suspension; conditions for suspension; relationship of suspension to other deterrent measures; decision-making procedures; majority required. - The Chairman continued to believe the qualified majority for suspension should be set at 70 percent of the total voting power. ### Financing, Fund balances, and possible exceptional measures - In circumstances of compulsory withdrawal and rebuilding precautionary balances, the Executive Board might consider increasing the Fund’s operating income or supplementing it by other exceptional means. - As a last resort, sale of part of the Fund’s gold could help restore the Fund’s financial position. ### Rights approach and rights accumulation programs (RAP) - Under the rights approach, a member in arrears will be able to earn rights, conditioned on satisfactory performance under an adjustment program monitored by the Fund, toward a disbursement from the Fund once overdue obligations have been cleared and a successor arrangement approved. - Utilization limitations and timing: - Initially limited to the eleven members that had financial obligations to the Fund overdue for six months or more at end-1989. - Utilization further limited to those of the eleven members that adopt a comprehensive economic program that can be endorsed by the Executive Board as a rights accumulation program by the time of the Spring 1991 meeting of the Interim Committee (with recognition that some Directors favored longer time). - Program parameters: - Executive Directors considered a three-year period to be appropriate as a norm for a rights accumulation program, with scope for variation. - Rights may, where unavoidable, accumulate up to the amount of arrears outstanding at the beginning of the rights accumulation program. - Members expected, at minimum, to remain current with obligations to the Fund and the World Bank falling due during the rights accumulation period. - Phasing, monitoring, and lapse rules: - Preference for even phasing of accumulation within annual programs, based on quarterly monitoring, though some front-loading could be allowed. - If waivers or modifications are not granted after nonobservance of performance, members would be permitted to retain previously accumulated rights for six months before they would lapse. - Plan: normally rights would lapse at a rate of 25 percent of accumulated rights per quarter; this rate could be adjusted depending on circumstances. - If a new rights accumulation program were endorsed after rights had begun to lapse, accumulation would resume and the program period would normally be extended. - Financing of accumulated rights: - Accumulated rights would be financed by a Fund disbursement upon approval of a successor arrangement, after satisfactory performance and once overdue obligations had been cleared. - For SAF-eligible members, mix between SAF/ESAF and GRA resources would be approved as part of successor arrangements. - Where a blend of GRA and SAF/ESAF resources is appropriate, GRA use would normally be under an extended arrangement and the extended and SAF/ESAF arrangements would operate concurrently. - Total access to ESAF resources would be in accordance with the access limits of that facility. - Approval to use ESAF Trust resources for financing of rights would await the decision on the gold pledge. ### De-escalation and lifting remedial measures - De-escalation should establish clear understandings to strengthen incentives for cooperation and encourage rapid reform, payments, and full clearance of arrears. - From a legal and practical point of view, until full clearance of overdue obligations, it would be appropriate to consider lifting only a declaration of noncooperation and a suspension of voting rights, as opposed to other remedial measures. - Starting point for de-escalation: Executive Board determination that a member has credibly begun, or adequately strengthened, cooperation, evidenced by a sustained track record of performance on economic policies and payments to the Fund. - Evaluation periods: - An evaluation period would be established to assess commitment to resuming a normal relationship and sustainability of cooperation; the Board could specify actions required before lifting measures and the approximate length of the evaluation period. - For suspension of voting and related rights, an evaluation period of about two years’ duration would be considered as a guideline before the Board would consider lifting the suspension by a 70 percent majority of the total voting power; a longer or shorter period could be appropriate depending on circumstances. - For lifting a declaration of noncooperation (which has no legal or procedural effect under the Fund’s Articles), successful completion of about one year of the evaluation period would be required before the Board would consider lifting this measure by a simple majority vote; the period could be shortened where performance warranted. - Reimposition - If a member subsequently failed to sustain cooperation after removal of remedial measures, remedial measures could be reintroduced at a more accelerated pace than the standard timetable, taking into account sequencing required by the Fund’s Articles. ### Policy intent and operational guidance - The strengthened timetable aims to: - Make clear the need to prevent arrears and to act expeditiously to deal with them. - Provide sufficient time for members to adopt adjustment measures to restore domestic and external balance. - Not be understood as a period of grace; the Executive Board should be prepared to accelerate action when appropriate, especially prior to declaration of ineligibility. - For members with protracted arrears, the new schedule should be applied with a degree of flexibility, recognizing these members have already had substantial time to demonstrate cooperation. - The Fund expects tangible and continuous support from the international financial community: - Bilateral creditors and multilateral agencies should initiate intensive dialogue to persuade members to respect the Fund’s preferred creditor status, consider reducing or suspending assistance to noncooperating members, and avoid rescheduling in the absence of a Fund arrangement or Fund-monitored program (Paris Club practice). - Creditors receiving payments from members in arrears to the Fund should be requested to urge members to direct payments to the Fund. - The Board agreed a member must discharge overdue obligations to the General Resources Account before being permitted to consent or pay for an increase in its quota in connection with the Ninth General Review; proposals for quota increases should lapse if the quota is not increased within the prescribed period, with consideration for cooperating members in arrears under Fund-monitored programs. ### Extensions and reviews - Executive Directors endorsed extension and flexibility in implementation timing of rights programs where necessary: - One-year extension of the deadline established for members in protracted arrears to enter into a rights accumulation program (noting some Directors preferred shorter or longer extensions depending on case). - The timetable of procedures for applying remedial measures was reaffirmed as appropriate and to be implemented according to Executive Board judgment regarding member cooperation. - The Fund reaffirmed support for the strengthened cooperative strategy and agreed to extend the availability of the rights approach until end-August 2007 (EBS/06/111, 8/16/06). *Source: 2. Measures of deterrence — REMEDIAL MEASURES ON OVERDUE FINANCIAL OBLIGATIONS (selected excerpts).* ### 2. Purchases under this decision and holdings resulting from ### _31stissue - 2. Purchases under this decision and holdings resulting from ### Exclusion of purchases and reserve tranche definition - Purchases under this decision and holdings resulting from such purchases shall be excluded for the purposes of the definition of “reserve tranche purchase” pursuant to Article XXX(c). - Decision No. 8955-(88/126), August 23, 1988, as amended. ### Exclusion of Purchases in the Credit Tranches and under Extended Fund Facility - Purchases in the credit tranches or under extended arrangements (Decision No. 4377-(74/114), September 13, 1974, as amended), and holdings resulting from such purchases, shall be excluded pursuant to Article XXX(c)(iii) for the purpose of the definition of “reserve tranche purchase.” - The Fund will review this decision before April 30, 1984. - Decision No. 6830-(81/65), April 22, 1981, effective May 1, 1981. ### Balances held in administrative account - Balances held in the administrative accounts of the Fund, to the extent that they are not in excess of 0.1 percent of a member’s quota, shall not be considered as part of the Fund’s holdings of a member’s currency for: - determining a member’s reserve tranche position in the Fund, and - calculation of holdings for the purposes of charges (Article V, Section 8(b)(ii)); remuneration (Article V, Section 9(a)); and the determination of a member’s entitlement to appoint an Executive Director (Article XII, Section 3(c)). - Decision No. 7060-(82/23), February 22, 1982. ### Supplemental Reserve Facility (SRF) - Purchases under this Decision and holdings resulting from such purchases shall be excluded for the purposes of the definition of reserve tranche purchase pursuant to Article XXX(c). - Decision No. 11627-(97/123) SRF, December 17, 1997, as amended by Decision No. 11866-(99/1) SRF, December 22, 1998. ### Freely usable currencies (Article XXX(f)) - Pursuant to Article XXX(f), and after consultation with the members concerned, the Fund determines that, effective January 1, 1999 and until further notice, the euro, Japanese yen, pound sterling, and U.S. dollar are freely usable currencies. - Decision No. 11857-(98/130), December 17, 1998. ### Trust Fund: means of payment and repayment of interest and principal - Payments of interest on members’ indebtedness under their loan agreements with the Fund as Trustee of the Trust Fund shall be made with U.S. dollars. - Such payments may be made also in SDRs in accordance with Decision No. 8642-(87/101) S/TR, adopted July 9, 1987. - Decision No. 6358-(79/188) TR, December 19, 1979, as amended by Decision No. 8640-(87/101) S/TR, July 9, 1987. - Repayment of members’ indebtedness under their loan agreements with the Fund as Trustee of the Trust Fund shall be made with U.S. dollars. - Such repayment may be made also in SDRs in accordance with Decision No. 8642-(87/101) S/TR, adopted July 9, 1987. - Decision No. 7142-(82/85) TR, June 18, 1982, as amended by Decision No. 8640-(87/101) S/TR, July 9, 1987. ### Trust Fund: termination, transfer of resources, and repayment terms - The Trustee decides, with effect from the date disbursements under loans from the Trust Fund are completed, that the repayment terms of such loans will not be changed, provided that if the Trustee finds that repayment of an installment on the due date would result in serious hardship for the borrower the Trustee may reschedule the repayment to a date not later than two years after the date such repayment was originally due. - The Trust Fund shall be terminated as of April 30, 1981 or the date on which disbursements under Trust Fund loans are finally completed, whichever is the later. After that date, activities shall be confined to completion of unfinished business and winding up. - Resources of the Trust Fund held on the termination date or subsequently received by the Trustee, except those resources still being held for distribution to members or required to satisfy specified liabilities, shall be transferred, as expeditiously as possible, to the Special Disbursement Account in accordance with Section V, paragraph 2 of the Trust Instrument. - Decision No. 6704-(80/185) TR, December 17, 1980. - Terms of repayment for the final disbursement of loans to certain members that will receive as a final disbursement about 0.4 percent of quota: one installment equal to the amount of the disbursement to be repaid not later than the end of the tenth year from the date of disbursement. - Decision No. 6793-(81/45), March 25, 1981. ### Subsidy Account — Supplementary Financing Facility (Instrument) - Purpose: - The Account shall reduce the cost to eligible developing members, in accordance with Section 8, of using the Fund’s resources under the policies referred to in Section 7 of the Instrument. - Resources of the Account shall consist of: - (a) amounts donated to the Account; - (b) amounts transferred to the Account from the Special Disbursement Account of the Fund; - (c) the proceeds of borrowing by the Fund for the Account; and - (d) the income or net gains from investment of resources of the Account. - Section 4: Amounts transferred from Special Disbursement Account - (a) Subject to (b), a total equivalent to SDR 750 million shall be transferred to the Account from the assets received by the Special Disbursement Account of the Fund on termination of the operation, in its present form, of the Trust Fund established by Executive Board Decision No. 5069-(76/72). These transfers shall be made as the amounts are received in the Special Disbursement Account. - (b) If the Executive Board determines that amounts already transferred together with other assets available are sufficient to carry out operations and meet liabilities in full, it may authorize suspension of further transfers and re-transfer of any surplus back to the Special Disbursement Account, provided transfers shall be resumed up to the total amount specified in (a) if necessary. - Section 5: Borrowing - (a) The Fund may borrow resources for the Account; the aggregate amount of such borrowing, including interest payable on the borrowing, shall not exceed the SDR 750 million that could be transferred under Section 4. - (b) Payments of interest and repayments of principal under each loan shall be made exclusively from the resources of the Account. Donations shall not be used for this purpose without the consent of the donor. Resources transferred from the Special Disbursement Account shall be applied, as necessary, to make payments due under such loans, including interest, in priority to other uses. - Section 6: Investment - Balances of currency held in the Account not immediately needed shall be invested promptly in accordance with Section 14. - Section 7: Authorized subsidy - The Fund shall draw upon the Account to reduce the cost to eligible members of the periodic charges paid to the General Resources Account on holdings of their currencies acquired by the Fund as a result of all purchases under: - (a) the Supplementary Financing Facility (Decision No. 5508-(77/127)), and - (b) the policy on exceptional use of the Fund’s resources (Decision No. 5732-(78/65)), as amended by Decision No. 5998-(79/1). - Section 8: Eligible members - (a) Members eligible to receive a subsidy are those that, according to the latest data provided by the World Bank before April 30, 1981, had per capita incomes in 1979 not in excess of that of the member with the highest per capita income in 1979 that was eligible to receive assistance from the Trust Fund. - (b) Also eligible are any other members that, according to the latest data provided by the World Bank before April 30, 1982, had per capita incomes in 1979 not in excess of that reference per capita income. - Section 9: Calculation and payment of the subsidy - (a) The subsidy shall be calculated as a percentage per annum of the currency holdings referred to in Section 7 and shall be determined by the Fund in the light of resources available to the Account. Determination and payment shall be made annually after the close of each financial year following the date of the Instrument. The Fund shall, as far as practicable, seek to ensure that, within the limits specified in Section 10, the percentage at which the subsidy is determined shall be equal over the entire period during which a subsidy is provided. - (b) Eligible members that had per capita incomes in 1979 not in excess of the per capita income used for determining eligibility for assistance from the International Development Association shall receive the full amount of the subsidy. All other eligible members shall receive a subsidy equal to one half of that amount. - (c) The amount of subsidy determined shall be paid to each eligible member as soon as practicable after the determination is made. - Section 10: Amount of subsidy - The subsidy provided to any member shall not exceed the equivalent of three percent per annum of the currency holdings specified in Section 7, nor reduce the effective charges on such holdings: - (a) if the holdings were acquired under a stand-by arrangement, below the charges which would have been applicable had such holdings been acquired under the Fund’s policies on the regular use of its resources in the credit tranches; or - (b) if the holdings were acquired under an extended arrangement, below the charges which would have been applicable had such holdings been acquired under the Extended Fund Facility. - For the purpose of the calculation of charges under (a) and (b), any adjustment in the rate of charge referred to in Rule I-6(4) to cover deferred income and placements to the Special Contingent Account shall not be taken into consideration. - Section 11: Administration - The Account shall be administered by the Fund as Trustee and, subject to the Instrument, apply the same rules and procedures as apply to operations and transactions in the General Resources Account. - Section 12: Separation of assets - (a) Resources of the Account shall be held separately from resources of all other accounts of the Fund and used only for the purposes of the Account. - (b) Except to the extent contemplated in Section 4, property and assets held or administered in other accounts shall not be available to discharge liabilities or meet losses of the Account. - Section 13: Exchange of resources - (a) Donations or loans shall be paid in a freely usable currency, or at the donor/lender’s option, in the currency of the member. Amounts paid in a member’s currency shall be exchanged by the member for freely usable currency if requested by the Fund. Donations and loans may also be made available in SDRs under arrangements for holding and use of SDRs. - (b) The Fund may sell or exchange any of the resources of the Account, provided balances of currencies may be exchanged only with the concurrence of the issuers of such currencies. - Section 14: Authorized investments - Investments may be made in: - (a) marketable obligations issued by an international financial organization and denominated in SDRs or in the currency of a member; - (b) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in that member’s currency; and - (c) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution denominated in SDRs or in the currency of a member. - Investments not involving an exchange of currency shall be made only after consultation with the member whose currency is to be used. - Section 15: Administrative expenses - The Account shall pay annually to the General Resources Account an amount equivalent to one thousandth per annum of the value of the resources in the Account at the end of each financial year, other than resources attributable to donations made under Section 3, provided that this amount may be varied if the Fund considers such variation appropriate on the basis of a reasonable estimate of its expenses. - Section 16: Accounts, audit, and reports - (a) The Fund shall maintain separate financial records and prepare separate financial statements for the Account. - (b) The audit committee selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Account. The audit shall relate to the financial year of the Fund. - (c) The Fund shall report on the resources and operations of the Account in the annual report of the Executive Board to the Board of Governors and shall include in that annual report the report of the audit committee on the Account. *Selected Decisions and Selected Documents — excerpt.* ### Section 17. Amendment ### _31stissue - Section 17. Amendment ### Section 17 — Amendment - The Fund may amend the provisions of this Instrument, except this Section and Sections 1, 4, 5(b), 12, and 18. - The Account and its resources shall thereafter be governed by the Instrument as amended. ### Section 18 — Termination Arrangements - Upon completion of the subsidy operations authorized by this Instrument the Fund shall wind up the affairs of the Account. - Any resources remaining in the Account after all outstanding liabilities of the Account have been discharged in full shall be applied as follows: - First, to reimburse the Special Disbursement Account up to the full amount transferred to the Account under Section 4, net of any previous re-transfers. - Then, to reimburse donors pro rata, up to the amounts of their donations. - Any remaining balance in the Account shall be transferred to the Special Disbursement Account. ### SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT — Investment - The Managing Director shall place in deposits, denominated in SDRs, with the Bank for International Settlements, or in investments in a call account, denominated in SDRs, with the International Bank for Reconstruction and Development, the currencies received by the SFF Subsidy Account, unless the Managing Director considers that the terms offered are not sufficiently attractive. - If terms are not sufficiently attractive, the Managing Director shall inform the Executive Board promptly and make other proposals to it for investment in SDR-denominated obligations. - Decision No. 6854-(81/78) SBS, May 8, 1981, as amended by Decision No. 8184-(86/9) SBS, January 15, 1986. ### SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT — Suspension of Transfers and Re-transfer of Surplus - In accordance with Section 4(b) of the Instrument establishing the SFF Subsidy Account (Decision No. 6683-(80/185) G/TR), transfers from the Special Disbursement Account to the SFF Subsidy Account shall be suspended as soon as arrangements can be made for the investment of resources retained in the Special Disbursement Account. - Any resources of the SFF Subsidy Account above the amounts necessary to meet its future liabilities shall be promptly re-transferred to the Special Disbursement Account as soon after the date of this decision as possible and as they may be received in the future. - Decision No. 7989-(85/81) SBS, May 28, 1985. ### SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT — Means of Subsidy Payments - Subsidy payments made after the effective date of this Decision with respect to charges paid on holdings of currency referred to in Section 7 of the Instrument establishing the SFF Subsidy Account may be made, at the discretion of the Fund, in SDRs to beneficiaries agreeing to receive them, or in U.S. dollars, or in a combination of these two assets. - Subsidy payments in U.S. dollars shall be made on the basis of the SDR/U.S. dollar exchange rate in effect three business days before the payment date. - Decision No. 8185-(86/9) SBS/S, January 15, 1986. ### SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT — Additional Subsidy Payments for May 1–June 30, 1990 and Subsidy Payments for July 1, 1990–June 30, 1991 - Additional subsidy payments shall be made with respect to charges paid on holdings of currency referred to in Section 7 of the Instrument for the period May 1, 1990 through June 30, 1990, in the amount indicated to each of the eligible members as listed in Column 2 of Table 2 in EBS/91/123. - Subsidy payments shall be made with respect to charges paid on holdings of currency referred to in Section 7 for the period July 1, 1990 through June 30, 1991, in the amount indicated to each of the eligible members as listed in Column 5 of Table 2 in EBS/91/123. - The subsidy payments shall be made to each eligible member on July 31, 1991. - Decision No. 9788-(91/105) SBS, July 31, 1991. ### SUPPLEMENTARY FINANCING FACILITY SUBSIDY ACCOUNT — Exchange Rate for Payment of Subsidies - All pending subsidy payments under the SFF Subsidy Account shall be made on the basis of the SDR/U.S. dollar exchange rate in effect two business days before the payment date, and, if this rate cannot be used, the rate of the preceding date closest thereto that is practicable. (EBS/03/54, 4/18/03) - Decision No. 13005-(03/39) SBS, April 25, 2003. *Selected decisions and resolutions excerpted from _31stissue - Section 17. Amendment.* ### 2. Chairman ### 2. Chairman ### Chairman selection and first meeting - The Development Committee shall select a Chairman from among its members, who shall serve for such period as the Committee determines. - The Chairman of the Boards of Governors of the Bank and the Fund, or a governor designated by him shall convene the first meeting of the Committee and shall preside over it until the Chairman has been selected. ### Meetings (composition and participation) - Members of the Development Committee, associates, and the executive directors of the Bank and the Fund, or in their absence their alternates, shall be entitled to participate in meetings of the Committee, unless the Committee decides to hold a session restricted to members, the President of the Bank, and the Managing Director of the Fund. - Participation in respect of each item on the agenda of a meeting shall be limited to one person in respect of each member government or group of member governments that appoint a member of the Committee. - The President of the Bank and the Managing Director of the Fund shall be entitled to participate in all meetings of the Development Committee, and each may designate a representative to participate in his place at any meeting when he is not present. - Each of the President and the Managing Director may be accompanied normally by two members of his staff, at any unrestricted session of the Committee. - The Development Committee shall invite the heads of other international financial or economic organizations, as well as other persons, to attend or participate in meetings of the Committee relating to their areas of responsibility. ### Terms of Reference (mandate and priorities) - The Development Committee shall maintain an overview of the development process and shall advise and report to the Boards of Governors of the Bank and the Fund on all aspects of the broad question of the transfer of real resources to developing countries, and shall make suggestions for consideration by those concerned regarding the implementation of its conclusions. - The Committee shall review, on a continuing basis, the progress made in fulfillment of its suggestions. - The Development Committee shall establish a detailed program of work, taking account of the topics listed in Annex 10 of the Outline of Reform, and shall bear in mind the need for coordination with other international bodies. - The Committee shall give urgent attention to the problems of (i) the least developed countries and (ii) those developing countries most seriously affected by balance of payments difficulties in the current situation. ### Procedures (meetings, quorum, secretariat, reporting) - The Development Committee shall meet at the time of the annual meetings of the Boards of Governors of the Bank and the Fund and, in addition, as often as required. The Chairman may call meetings after consulting the members of the Committee and shall consult them on calling a meeting if so requested by any member of the Committee. - A quorum for any meeting of the Development Committee shall be two thirds of the members of the Committee. - The Development Committee may establish subcommittees or working groups from time to time. - The Committee shall appoint an Executive Secretary who shall be entitled to participate in all Committee meetings. The Executive Secretary, supported by a small staff as necessary, and drawing on the staffs of the Bank and the Fund to the maximum extent feasible, shall be responsible to the Committee for carrying out the work directed by the Committee. - Appropriate arrangements shall be made for the coordination of the work of the Development Committee and the work of the Executive Directors of the Bank and the Fund. - The President of the Bank and the Managing Director of the Fund shall arrange to carry out technical work requested by the Committee and provide administrative support for the Committee within the competence of their organizations. - The Committee may request assistance from international organizations or other bodies or individuals in connection with the preparation of its work. - In reporting any suggestions or views of the Development Committee, the Chairman shall seek to establish a sense of the meeting. In the event of a failure to reach a unanimous view, all views shall be reported, and the members holding such views shall be identified. - The Development Committee shall report not less than once a year to the Boards of Governors on the progress of its work and may publish such other reports as it deems desirable to carry out its purposes. - The Development Committee may determine any aspect of its procedure that is not established by this Resolution. ### Administrative costs and review - The Bank and the Fund shall make such financial appropriations, in equal proportions, as are necessary for carrying out the work of the Development Committee. - At the end of two years from the effective date of this Resolution, the Boards of Governors of the Fund and the Bank shall review the performance of the Committee, and shall take such action as they deem appropriate. - Resolution No. 29-9, October 2, 1974 ### Fourth Resolution (No. 29-10): Other Immediate Steps ### Need for Immediate Steps - The Board of Governors notes the view of the Committee on Reform of the International Monetary System and Related Issues that it will be some time before a reformed system can be finally agreed and fully implemented, and endorses the Committee’s proposal that, in the interim period, the Fund and its members should pursue the general objectives set out in paragraph 1 of the Outline and should observe, so far as they are applicable, the principles contained in Part I of the Outline. - The Board endorses the Committee’s proposals in Part II of the Outline that a number of steps should be taken immediately to begin an evolutionary process of reform and to help meet the current problems facing both developed and developing members, and calls upon members to collaborate with the Fund and with each other to give effect to those proposals. ### The Adjustment Process (surveillance and principles) - The Board endorses the Committee’s recommendation that members should be guided in their adjustment action by the general principles set out in paragraph 4 of the Outline. - The Board endorses the Committee’s call to members to cooperate with one another and with international institutions, during the current period of exceptional and widespread payments imbalances, to find orderly means to deal with these imbalances without adopting policies that would aggravate the problems of other members, and to promote equilibrating capital flows. - The Board welcomes Decision No. 4241-(74/67), adopted by the Executive Directors on June 13, 1974, to establish a facility in the Fund to assist members in meeting the initial impact of the increase in the cost of oil imports. - The Fund shall exercise surveillance of the adjustment process through the Council when established (and, for the time being, the Interim Committee on the International Monetary System) and the Executive Directors, on the lines of the procedures set out in paragraphs 5–10 of the Outline, and subject for the time being to the following provisos: - (a) the Fund shall seek to gain further experience in the use of the objective indicators, including reserve indicators, on an experimental basis, as an aid in assessing the need for adjustment, but shall not use such indicators to establish any presumptive or automatic application of pressures; - (b) determination of what is a disproportionate movement in reserves shall be made in the light of the broad objectives of members for the development of their reserves over a period ahead, as discussed with the Fund; and - (c) the pressures that may be applied to members in large and persistent imbalance shall continue to be those at present available to the Fund. ### Exchange Rates - The Board notes that the Committee has stressed that, during the interim period, exchange rates will continue to be a matter for international concern and consultation, and has attached particular importance to the avoidance of competitive depreciation or undervaluation. - The Board notes that the Executive Directors have taken Decision No. 4232-(74/67), adopted June 13, 1974, on guidelines for the management of floating exchange rates during the present period of widespread floating. ### Controls - The Board endorses the Committee’s recommendation that, during the interim period, countries should be guided by the principles set out in paragraphs 14–17 of the Outline in relation to controls and to cooperative action to limit disequilibrating capital flows. - The Board endorses the Committee’s view that particular importance must be attached to avoiding the escalation of restrictions on trade and payments for balance of payments purposes during the interim period. - The Board endorses the invitation to members to subscribe on a voluntary basis to the Declaration concerning trade and other current account measures for balance of payments purposes attached to the Committee’s final communiqué, and requests members to consider subscribing to the Declaration if they have not already done so. - The Board notes that the Executive Directors are developing the necessary procedures in connection with the Declaration, and are making arrangements for continuing close cooperation with the CONTRACTING PARTIES to the General Agreement on Tariffs and Trade. ### Global Liquidity - The Board endorses the Committee’s call to members to cooperate with the Fund during the interim period in seeking to promote the principle of better management in global liquidity as set out in paragraph 2(d) of the Outline. - The Fund shall assess global reserves and take decisions on the allocation and cancellation of special drawing rights consistently with paragraph 25 of the Outline. - The Fund shall periodically review the aggregate volume of official currency holdings in accordance with paragraph 19 of the Outline and, if they are judged to show an excessive increase, the Fund shall consider with the members concerned what steps might be taken to secure an orderly reduction. - The Fund shall give consideration to substitution arrangements. - The Fund shall give further study to arrangements for gold in the light of the agreed objectives of reform. ### Valuation of the Special Drawing Right - The Board notes that, following the Committee’s recommendation concerning the interim valuation and interest rate of the special drawing right, the Executive Directors have taken Decisions No. 4233(74/67) S, adopted June 13, 1974; No. 4234-(74/67) S, adopted June 13, 1974; No. 4236-(74/67) S, adopted June 13, 1974; No. 4257-(74/76), adopted June 28, 1974; and No. 4261-(74/78) S, adopted July 1, 1974. - These decisions provide for an interim valuation of the special drawing right without prejudice to the method of valuation to be adopted in a reformed system. ### The Special Interests of Developing Countries - The Committee recognized the serious difficulties facing many developing members, and agreed that their needs for financial resources will be greatly increased. - The Committee called upon members with available resources and upon development finance institutions to make arrangements to increase the flow of concessionary funds, and to give consideration to measures including the redistribution of aid effort in favor of members in greatest need, interest subsidies, and short-term debt relief on official loans in the special circumstances of members without access to financial markets. - The Board notes Decision No. 4377-(74/114), adopted September 13, 1974, to establish a new facility in the Fund under which developing members in particular are likely to receive balance of payments finance for longer periods and in amounts larger in relation to quota than has been the practice under existing tranche policies. - The Committee is not unanimous on establishing a link between development assistance and the allocation of special drawing rights; the Board invites the Interim Committee established by the Second Resolution to consider the possibility and modalities of establishing such a link simultaneously with the preparation by the Executive Directors of draft amendments of the Articles of Agreement, envisaged for presentation to the Board by February 1975. ### General Review of Quotas - The Board endorses the Committee’s request to the Executive Directors to complete, as soon as possible, their work on the current general review of quotas, and in doing so to bear in mind the general purposes of the reform. ### Amendments to the Articles of Agreement - The Board notes that certain immediate steps recommended in Part II of the Outline require amendment of the Articles of Agreement, and that the Executive Directors have begun consideration of draft amendments pursuant to paragraph 41 of the Outline. - The Board requests the Executive Directors to transmit any draft amendments they prepare pursuant to paragraph 41 of the Outline to the Interim Committee for consideration in accordance with paragraph 3(ii) of the Second Resolution and, if agreed, for presentation to the Board of Governors for its approval. - Resolution No. 29-10, October 2, 1974 ### Interim Committee: Rules of Procedure (selected points) - The Secretary of the Fund shall be informed of the appointment of all members of the Committee and their associates and of the designation of alternates. The Secretary shall notify periodically all Governors and members of the Committee of these appointments and shall notify all members of the Committee of these designations. - Except in special circumstances, the Chairman shall cause all members of the Committee and their associates to be notified at least ten days in advance of any meeting. - Persons invited by the Committee to attend during the discussion of an item on the agenda of a meeting may submit documents on that item and join in the discussion. - A provisional agenda to be adopted by the Committee shall be prepared for each meeting by the Chairman after consulting the members of the Committee and the Managing Director of the Fund, and shall be distributed as far in advance of the meeting as possible. Any member of the Committee may propose the addition of an item to the provisional agenda. - Adopted by the Interim Committee October 3, 1974 ### Development Committee: Rules of Procedure (selected points) - The Executive Secretary of the Committee shall be informed of the appointment of all members of the Committee and their associates and of the appointment of alternates. The Executive Secretary shall notify periodically all Governors and members of the Committee of these appointments. - Except in special circumstances, the Chairman shall, after consultation with the members, cause all members of the Committee and their associates to be notified at least 30 days in advance of any meeting, and documents shall be distributed at least 30 days in advance of the meeting, if possible. - Persons invited by the Committee to attend during the discussion of an item on the agenda of a meeting may submit documents on that item and join in the discussion. - A provisional agenda to be adopted by the Committee shall be prepared for each meeting by the Chairman after consulting the members of the Committee, the President of the Bank and the Managing Director of the Fund, and shall be distributed as far in advance of the meeting as possible. Any member of the Committee may propose the addition of an item to the provisional agenda. - Adopted by the Development Committee January 17, 1975 ### Development Committee: Changes in Organization of Work and Secretariat Structure - The Development Committee would be continued as a Joint Bank/Fund Committee with its present broad mandate to consider all matters relating to the transfer of real resources. - The Development Committee’s main function would be that of a discussion forum, including its use as a “reserve forum” for the discussions of issues relating to the operations of the institutions when circumstances warrant it. *Source: _31stissue - 2. Chairman* ### 3. The Chairman of the Development Committee, the Manag- ### 3. The Chairman of the Development Committee, the Managing Director of the Fund, and the President of the Bank would be jointly responsible for organizing the work of the Development Committee with a view to more effective performance. ### Development Committee: institutional arrangements and working methods - Joint responsibility: The Chairman of the Development Committee, the Managing Director of the Fund, and the President of the Bank would be jointly responsible for organizing the work of the Development Committee to improve effectiveness. - Independence and mandate: - The independence of the Development Committee would be reflected in the ability to present ideas freely to members of the Committee. - The work of the Committee would not be bound by a narrow definition of the responsibilities of the Bank and the Fund. - Use of Boards as preparatory bodies: - The Boards of the Bank and the Fund would be used as preparatory bodies for the work of the Development Committee, including its agenda and work program, and for reviewing and sharpening issues in papers prepared for Committee consideration. - Executive Directors’ input: - To assure that proposals and views expressed by the Executive Directors are fully reflected in the papers, agenda and work program, when they meet on Development Committee matters, they will do so as Committees of the Whole of the Executive Boards. - Ministerial Deputies: - Senior officials would not be part of the institutional framework. - Ministerial Deputies could meet on an ad hoc basis, when appropriate, to consider special issues. - The decision to convene Deputies would be one for the Ministers, since they would be Deputies to Ministers. - Secretariat and staffing: - The Secretariat would be reduced to a senior official who would serve as Executive Secretary. - He would assist the Chairman, Managing Director and President in ensuring the effectiveness of the Development Committee’s work. - Secretariat service required by the Development Committee would be provided by Bank/Fund staff. - Working Group and Task Forces: - The Working Group would be abolished. - Task Forces—with a specific limited task and duration—might be used for certain issues with approval of the Development Committee. - Preparation of studies and papers: - Studies and papers for the Committee would normally be prepared by regular Fund/Bank staff. - Consultants or other agencies may be asked by the Committee to contribute work under certain circumstances. - Adoption: - Adopted by the Development Committee April 1, 1979 *Key institutional emphasis: joint leadership, Committee independence, streamlined Secretariat, use of Boards as preparatory bodies, abolition of permanent Working Group in favor of time-limited Task Forces.* --- ### Report of the Managing Director to the Board of Governors and to the Executive Board Pursuant to Article XVIII, Section 4(c) - Legal context and timing: - The report is submitted pursuant to Article XVIII, Section 4(c) of the Articles of Agreement. - The present basic period, which is the third one, began on January 1, 1978 and will end on December 31, 1981. - The Managing Director must submit his proposal, or his report if unable to make a proposal, not later than June 30, 1981. - Article XVIII, Section 4 requirements: - The Managing Director must submit a proposal if he is satisfied that a proposal would be (i) consistent with Section 1(a) of Article XVIII and (ii) would have broad support among participants in accordance with Section 4(b). - If not so satisfied, he shall report to the Board of Governors and to the Executive Board. - Relevant text quoted: - Section 1(a): The Fund shall seek to meet the long-term global need, as and when it arises, to supplement existing reserve assets in such manner as will promote the attainment of its purposes and will avoid economic stagnation and deflation as well as excess demand and inflation in the world. - Section 4(b): Before making any proposal, the Managing Director, after having satisfied himself that it will be consistent with the provisions of Section 1(a) of this Article, shall conduct such consultations as will enable him to ascertain that there is broad support among participants for the proposal... - Under Article XVIII, Section 4(d), and Article XXI(a)(i) decisions of the Board of Governors approving proposals of the Managing Director require an eighty-five percent majority of the total voting power of participants in the Special Drawing Rights Department. - As all members of the Fund are now participants in the Special Drawing Rights Department, this means eighty-five percent of the total voting power in the Fund. - Executive Board and Interim Committee deliberations on fourth basic period allocations: - The Executive Board considered allocations in meetings in January and April 1981; discussions did not lead to a conclusion on allocations due to a wide range of views. - The Interim Committee considered the question at its meeting in Libreville, Gabon, on May 21, 1981; its communiqué noted: - Consideration based on the Articles of Agreement and factors including strengthening the role of the SDR as a reserve asset and the need to avoid an undue increase in international liquidity. - Many members supported continuation of allocations in the fourth basic period and urged efforts to achieve a consensus. - Some members considered no case had been established for an allocation in the near future. - The Committee urged the Executive Board to continue deliberations to enable the Managing Director to submit a proposal that would command necessary support. - Managing Director’s conclusion and next steps: - On the basis of discussions to date, the Managing Director concluded he was not in a position to make, by June 30, 1981, a proposal for allocations of SDRs in the fourth basic period that would command broad support among members in accordance with the Articles. - Pursuant to Article XVIII, Section 4(c)(ii), he remains obliged to make a proposal as soon as he is satisfied the requirements of Article XVIII, Section 4(b) are fulfilled. - He will submit a proposal for allocations of SDRs in the fourth basic period as soon as further discussions and consultations lead him to the conclusion that there is broad support for a proposal consistent with the Articles. - The Executive Board was requested by the Interim Committee to continue deliberations to enable the Managing Director to make a proposal as soon as possible. - Date of report conclusion: June 9, 1981 *Key policy point: No SDR allocation proposal could be made by June 30, 1981 due to lack of broad support; further consultations and Executive Board deliberations required.* --- ### Off-Market Transactions in Gold by the Fund — Resolution - Transaction outline: - Off-market transactions in gold consisting of sales of up to 14 million ounces of fine gold on the basis of prices in the market to cooperating members with repurchase obligations to the Fund falling due, and acceptance of the same amount of gold from those members in payments of their repurchase obligations falling due to the Fund. - Allocation of proceeds: - The Fund will place an amount of the sales proceeds equivalent to SDR 35 per ounce of fine gold in the General Resources Account. - The balance of the sales proceeds will be placed in the Special Disbursement Account for investments for the benefit of the ESAF-HIPC Trust. - Rationale and nature of operation: - The Interim Committee requested endorsement by the Board of Governors of this approach as a one-time operation of a highly exceptional nature. - The operation is part of a broader financing package to allow the Fund to contribute to the resolution of the debt problems of the HIPCs at the turn of the millennium and to the continuation of concessional operations to support countries’ efforts to achieve sustained growth and poverty reduction. - Formal resolution: - Resolution No. 54-10, September 24, 1999 *Key figures preserved exactly: up to 14 million ounces; SDR 35 per ounce; Resolution No. 54-10; September 24, 1999.* --- ### United Nations–Fund Agreement: Selected Articles I–XII (key provisions) - Article I — General: - Purpose: Define terms on which the United Nations and the Fund shall be brought into relationship. - The Fund is a specialized agency established by agreement among its member governments and having wide international responsibilities as defined in its Articles of Agreement. - Both organizations are subject to necessary limitations for safeguarding confidential material; nothing in the agreement shall require furnishing information that would, in the judgment of either, constitute a violation of confidence or interfere with orderly conduct of operations. - Editorial note: The Agreement was approved by the Board of Governors of the Fund on September 17, 1947 and by the General Assembly of the United Nations on November 15, 1947, and it came into force on November 15, 1947. - Article II — Reciprocal Representation: - United Nations representatives entitled to attend and participate without vote in meetings of the Board of Governors of the Fund; invited to participate without vote in meetings especially called by the Fund for the particular purpose of considering the United Nations point of view. - Fund representatives entitled to attend meetings of the General Assembly for purposes of consultation. - Fund representatives entitled to attend and participate without vote in meetings of committees of the General Assembly, Economic and Social Council, Trusteeship Council and their subsidiary bodies dealing with matters in which the Fund has an interest. - Sufficient advance notice of meetings and agendas to be given to arrange adequate representation. - Article III — Proposal of Agenda Items: - In preparing the agenda for meetings of the Board of Governors, the Fund will give due consideration to items proposed by the United Nations; reciprocal consideration by UN organs for items proposed by the Fund. - Article IV — Consultation and Recommendations: - The United Nations and the Fund shall consult together and exchange views on matters of mutual interest. - Neither organization will present formal recommendations to the other without reasonable prior consultation; formal recommendations made after consultation will be considered as soon as possible by the appropriate organ of the other. - Article V — Exchange of Information: - The United Nations and the Fund will arrange for the current exchange of information and publications of mutual interest, subject to Article I paragraph 3. - Article VI — Security Council: - The Fund takes note of obligation of those members who are also UN Members to carry out decisions of the Security Council through their action in appropriate specialized agencies, and will have due regard for decisions of the Security Council under Articles 41 and 42 of the UN Charter. - The Fund agrees to assist the Security Council by furnishing information in accordance with Article V of this agreement. - Article VII — Assistance to the Trusteeship Council: - The Fund agrees to cooperate with the Trusteeship Council by furnishing information and technical assistance upon request, consistent with the Fund’s Articles of Agreement. - Article VIII — International Court of Justice: - The General Assembly authorizes the Fund to request advisory opinions of the International Court of Justice on legal questions arising within the scope of the Fund’s activities other than questions relating to the relationship between the Fund and the United Nations or any specialized agency. - Whenever the Fund requests such an advisory opinion, the Fund will inform the Economic and Social Council of the request. - Article IX — Statistical Services: - Cooperation to eliminate unnecessary duplication in collection, analysis, publication and dissemination of statistical information. - The Fund recognizes the United Nations as the central agency for statistics serving general purposes of international organizations, without prejudice to the Fund’s right to concern itself with statistics essential for its purposes. - The United Nations recognizes the Fund as the appropriate agency for statistics within its special sphere, without prejudice to the UN’s right to concern itself with statistics essential for its purposes. - Mutual commitments to give full consideration to each other’s requirements in statistical activities. - Agreement to furnish each other promptly with all non-confidential statistical information. - Article X — Administrative Relationships: - Consultations concerning personnel and other administrative matters to secure practicable uniformity and efficient use of services and facilities; determination of equitable financing for special services furnished by one organization to the other. - The Fund will participate in the work of the Coordination Committee and its subsidiary bodies to the extent consistent with the agreement. - The Fund will furnish to the United Nations copies of the annual report and the quarterly financial statements prepared pursuant to Section 7(a) of Article XII of its Articles of Agreement. - The United Nations will take into consideration that the Fund does not rely for its annual budget upon contributions from its members, and that the appropriate authorities of the Fund enjoy full autonomy in deciding the form and content of such budget. - Officials of the Fund shall have the right to use the laissez-passer of the United Nations in accordance with special arrangements to be negotiated between the Secretary-General of the United Nations and the competent authorities of the Fund. - Article XI — Agreements with Other Organizations: - The Fund will inform the Economic and Social Council of any formal agreement the Fund enters into with any specialized agency, and will inform the Council of the nature and scope of any such agreement before it is concluded. - Article XII — Liaison: - (Article XII title appears; substantive text continues beyond provided excerpt.) *Key institutional themes: reciprocal representation and consultation, exchange of information, statistical cooperation, administrative coordination, recognition of respective statistical and budgetary autonomy.* *Selected content extracted from the supplied PDF chapter/section.* *Italic: Source — Selected Decisions and Selected Documents (excerpts provided in the supplied content).* ### 1. The United Nations and the Fund agree to the foregoing pro- ### _31stissue - 1. The United Nations and the Fund agree to the foregoing pro- ### Agreement on liaison and administrative machinery - The United Nations and the Fund agree that the provisions set forth are intended to contribute to the maintenance of effective cooperation between the two organizations. - Each organization "agrees that it will establish within its own organization such administrative machinery as may be necessary to make the liaison, as provided for in this agreement, fully effective." - The arrangements apply, "as far as is appropriate, to relations between such branch or regional offices as may be established by the two organizations, as well as between their central machinery." ### Article XIII — Miscellaneous (United Nations–Fund Agreement) - The Secretary-General of the United Nations and the Managing Director of the Fund are authorized to make such supplementary arrangements as they shall deem necessary or proper to carry fully into effect the purposes of this agreement. - The agreement "shall be subject to revision by agreement between the United Nations and the Fund from the date of its entry into force." - Termination: "This agreement may be terminated by either party thereto on six months’ written notice to the other party, and thereupon all rights and obligations of both parties hereunder shall cease." - Entry into force: "This agreement shall come into force when it shall have been approved by the General Assembly of the United Nations and the Board of Governors of the Fund." ### United Nations Convention on the Privileges and Immunities of the Specialized Agencies — Overview and scope - Background: - General Assembly adopted a resolution on "13 February 1946" contemplating unification of privileges and immunities. - Resolution 179(II) adopted on "21 November 1947" approved the Convention and submitted it for acceptance and accession. - Editorial note: Executive Directors of the Fund accepted the standard clauses and approved Annex V with respect to the Fund on "April 11, 1949." The Annex became effective on "May 9, 1949." - Definitions (Article I, Section 1): - "Standard clauses" = provisions of Articles II to IX. - "Specialized agencies" explicitly include: - (a) The International Labour Organisation; - (b) The Food and Agriculture Organization of the United Nations; - (c) The United Nations Educational, Scientific and Cultural Organization; - (d) The International Civil Aviation Organization; - (e) The International Monetary Fund; - (f) The International Bank for Reconstruction and Development; - (g) The World Health Organization; - (h) The Universal Postal Union; - (i) The International Telecommunication Union; - (j) Any other agency in relationship with the United Nations in accordance with Articles 57 and 63 of the Charter. - Additional definitional points preserve the Convention’s scope (e.g., meanings of "Convention," "property and assets," "representatives of members," "meetings convened by a specialized agency," and "executive head"). ### Juridical personality and property, funds, assets (Articles II–III) - Article II, Section 3: - Specialized agencies "shall possess juridical personality" with capacity to: - (a) contract, - (b) acquire and dispose of immovable and movable property, - (c) institute legal proceedings. - Article III, Sections 4–10 (key privileges and immunities regarding property, funds and assets): - Section 4: Specialized agencies, their property and assets "shall enjoy immunity from every form of legal process except in so far as in any particular case they have expressly waived their immunity." "No waiver of immunity shall extend to any measure of execution." - Section 5: Premises are "inviolable." Property and assets "shall be immune from search, requisition, confiscation, expropriation and any other form of interference." - Section 6: Archives and all documents "shall be inviolable, wherever located." - Section 7: Without restriction by financial controls, regulations or moratoria: - (a) Agencies may hold funds, gold or currency of any kind and operate accounts in any currency; - (b) Agencies may freely transfer and convert currencies. - Section 8: Agencies must "pay due regard to any representations made by the Government of any State party" when exercising Section 7 rights. - Section 9: - (a) Agencies, their assets, income and other property "shall be exempt from all direct taxes;" caveat for charges for public utility services; - (b) Exempt from customs duties and prohibitions/restrictions on imports and exports for official use; imported articles not to be sold in the country except under agreed conditions; - (c) Exempt from duties and prohibitions/restrictions in respect of their publications. - Section 10: While not as a general rule claiming exemption from excise duties and taxes on sale, States parties should "whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax" for important official purchases. ### Communications, immunities of representatives, and officials (Articles IV–VI) - Article IV — Facilities in respect of communications (Sections 11–12): - Section 11: Agencies shall enjoy treatment "not less favorable" than that accorded to any Government including diplomatic mission regarding priorities, rates and taxes on mails, cables, telegrams, radiograms, telephotos, telephone and other communications, and press rates. - Section 12: "No censorship shall be applied to the official correspondence and other official communications of the specialized agencies." Agencies have the right to use codes and sealed bags with immunities equivalent to diplomatic couriers and bags. Security precautions may be agreed between a State party and an agency. - Article V — Representatives of members (Sections 13–17): - Section 13: Representatives at meetings and during journeys to/from meetings shall enjoy: - (a) Immunity from personal arrest or detention and seizure of personal baggage, and immunity from legal process in respect of words/actions in official capacity; - (b) Inviolability for all papers and documents; - (c) Right to use codes and receive courier/ sealed-bag correspondence; - (d) Exemption for themselves and spouses from immigration restrictions, aliens’ registration or national service obligations while visiting/ passing in exercise of functions; - (e) Same facilities as representatives of foreign Governments on temporary official missions regarding currency/exchange restrictions; - (f) Same immunities and facilities for personal baggage as comparable diplomatic mission members. - Section 14: Immunity from legal process for words/actions performed in discharge of duties continues after they are no longer engaged in those duties to secure freedom of speech and independence. - Section 15: Periods present in a member State for discharge of duties "shall not be considered as periods of residence" for taxation residence purposes. - Section 16: Privileges and immunities are to safeguard functions; the member has "the right but is under a duty to waive the immunity" of its representatives when the immunity would impede the course of justice and can be waived without prejudice to purpose. - Section 17: Sections 13–15 do not apply in relation to authorities of a State of which the person is a national or has been a representative. - Article VI — Officials (Sections 18–23): - Section 18: Each agency will specify categories of officials to which Articles VI and VIII apply and communicate these to States parties and the Secretary-General of the United Nations. Names of officials "shall from time to time be made known." - Section 19: Officials shall: - (a) Be immune from legal process in respect of words/actions in official capacity; - (b) Enjoy the same exemptions from taxation on salaries/emoluments as United Nations officials on the same conditions; - (c) Be immune, with spouses and dependents, from immigration restrictions and alien registration; - (d) Be accorded same exchange facilities as comparable diplomatic mission officials; - (e) Be given, with spouses and dependents, the same repatriation facilities in time of international crises as comparable diplomatic mission officials; - (f) Have the right to import free of duty their furniture and effects at first taking up post. - Section 20: Officials exempt from national service obligations provided names are placed on a list compiled by the executive head and approved by the State concerned; States shall grant temporary deferments when other officials are called up. - Section 21: The executive head (or acting official) shall be accorded, for self, spouse and minor children, privileges/immunities/exemptions/facilities accorded to diplomatic envoys in accordance with international law. - Section 22: Privileges and immunities are granted in the interest of agencies; agencies "shall have the right and the duty to waive immunity" of any official where immunity would impede justice and can be waived without prejudice to the agency. - Section 23: Each agency "shall co-operate at all times with the appropriate authorities of member States to facilitate the proper administration of justice" and prevent abuses connected with privileges, immunities and facilities. ### Abuses of privilege and removal/expulsion procedures (Articles VII–VIII highlights) - Article VII — Abuses of privilege (Sections 24–25): - Section 24: Where a State considers an abuse has occurred, consultations shall be held. If consultations fail, the question may be submitted to the International Court of Justice in accordance with Section 32. If the Court finds abuse, the affected State "shall have the right, after notification to the specialized agency in question, to withhold from the specialized agency concerned the benefits of the privilege or immunity so abused." - Section 25: - Paragraph 1: Representatives at meetings and officials "shall not be required by the territorial authorities to leave the country" on account of activities in their official capacity. However, for abuses committed outside official functions, they may be required to leave. - Paragraph 2: - (I) Representatives or those with Section 21 diplomatic immunity "shall not be required to leave the country otherwise than in accordance with the diplomatic procedure applicable to diplomatic envoys." - (II) For officials not covered by Section 21, no order to leave shall be issued other than with approval of the Foreign Minister of the country, "and such approval shall be given only after consultation with the executive head of the specialized agency concerned;" the executive head shall have the right to appear in expulsion proceedings on behalf of the person. - Article VIII — Laissez-passer (Section 26): - Officials of specialized agencies "shall be entitled to use the United Nations laissez-passer in conformity with administrative arrangements" to be concluded between the Secretary-General and competent agency authorities. The Secretary-General "shall notify each State party to this Convention of each administrative arrangement so concluded." *Selected pages excerpted from the source content unit.* ### Section 27 ### Section 27 ### Travel documents and facilities (Sections 27–30) - States parties to this Convention shall recognize and accept the United Nations laissez-passer issued to officials of the specialized agencies as valid travel documents. (Section 27) - Applications for visas, where required, from officials of specialized agencies holding United Nations laissez-passer when accompanied by a certificate that they are traveling on the business of a specialized agency, shall be dealt with as speedily as possible. In addition, such persons shall be granted facilities for speedy travel. (Section 28) - Similar facilities to those specified in Section 28 shall be accorded to experts and other persons who, though not the holders of United Nations laissez-passer, have a certificate that they are traveling on the business of a specialized agency. (Section 29) - The executive heads, assistant executive heads, heads of departments and other officials of a rank not lower than head of department of the specialized agencies, traveling on United Nations laissez-passer on the business of the specialized agencies, shall be granted the same facilities for travel as are accorded to officials of comparable rank in diplomatic missions. (Section 30) ### Settlement of disputes (Sections 31–32) - Each specialized agency shall make provision for appropriate modes of settlement of: - (a) Disputes arising out of contracts or other disputes of private character to which the specialized agency is a party; - (b) Disputes involving any official of a specialized agency who by reason of his official position enjoys immunity, if immunity has not been waived in accordance with the provisions of Section 22. (Section 31) - All differences arising out of the interpretation or application of the present Convention shall be referred to the International Court of Justice unless in any case it is agreed by the parties to have recourse to another mode of settlement. If a difference arises between one of the specialized agencies on the one hand, and a member on the other hand, a request shall be made for an advisory opinion on any legal question involved in accordance with Article 96 of the Charter and Article 65 of the Statute of the Court and the relevant provisions of the agreements concluded between the United Nations and the specialized agency concerned. The opinion given by the Court shall be accepted as decisive by the parties. (Section 32) ### Annexes and application to individual specialized agencies (Sections 33–40) - In their application to each specialized agency, the standard clauses shall operate subject to any modifications set forth in the final (or revised) text of the annex relating to that agency, as provided in Sections 36 and 38. (Section 33) - The provisions of the Convention in relation to any specialized agency must be interpreted in the light of the functions with which that agency is entrusted by its constitutional instrument. (Section 34) - Draft annexes I to IX are recommended to the specialized agencies named therein. In the case of any specialized agency not mentioned by name in Section 1, the Secretary-General of the United Nations shall transmit to the agency a draft annex recommended by the Economic and Social Council. (Section 35) - The final text of each annex shall be that approved by the specialized agency in question in accordance with its constitutional procedure. A copy of the annex as approved by each specialized agency shall be transmitted by the agency in question to the Secretary-General of the United Nations and shall thereupon replace the draft referred to in Section 35. (Section 36) - The Convention becomes applicable to each specialized agency when it has transmitted to the Secretary-General of the United Nations the final text of the relevant annex and has informed him that it accepts the standard clauses, as modified by this annex, and undertakes to give effect to Sections 8, 18, 22, 23, 24, 31, 32, 42 and 45 (subject to any modification of Section 32 necessary to make the final text of the annex consonant with the constitutional instrument of the agency) and any provisions of the annex placing obligations on the agency. The Secretary-General shall communicate to all Members of the United Nations and to other States members of the specialized agencies certified copies of all annexes transmitted to him under this section and of revised annexes transmitted under Section 38. (Section 37) - If, after transmission of a final annex under Section 36, any specialized agency approves any amendments thereto in accordance with its constitutional procedure, a revised annex shall be transmitted by it to the Secretary-General. (Section 38) - The provisions of this Convention shall not limit or prejudice privileges and immunities accorded by any State by reason of location of an agency's headquarters or regional offices; supplemental agreements between a State party and a specialized agency may adjust, extend, or curtail Convention provisions. (Section 39) - The standard clauses, as modified by the final or revised annex, shall be consistent with the constitutional instrument then in force of the agency; necessary amendments to the constitutional instrument shall have been brought into force before transmission of the final (or revised) annex. The Convention does not abrogate or derogate from any provisions of a specialized agency’s constitutional instrument or any rights or obligations the agency may have. (Section 40) ### Final provisions (Sections 41–49) - Accession to this Convention by a Member of the United Nations and (subject to Section 42) by any State member of a specialized agency shall be effected by deposit with the Secretary-General of the United Nations of an instrument of accession which shall take effect on the date of its deposit. (Section 41) - Each specialized agency shall communicate the text of this Convention together with the relevant annexes to those of its members which are not Members of the United Nations and shall invite them to accede thereto in respect of that agency by depositing an instrument of accession either with the Secretary-General of the United Nations or with the executive head of the specialized agency. (Section 42) - Each State party shall indicate in its instrument of accession the specialized agency or agencies in respect of which it undertakes to apply the provisions of this Convention. Subsequent written notifications to apply the Convention to further specialized agencies shall take effect on the date of receipt by the Secretary-General. (Section 43) - The Convention shall enter into force for each State party in respect of a specialized agency when it has become applicable to that agency in accordance with Section 37 and the State party has undertaken to apply the provisions of the Convention to that agency in accordance with Section 43. (Section 44) - The Secretary-General shall inform all Members of the United Nations, members of the specialized agencies, and executive heads of the specialized agencies, of the deposit of each instrument of accession received under Section 41 and of subsequent notifications received under Section 43. Executive heads shall inform the Secretary-General and the members of the agency concerned of any instrument of accession deposited with them under Section 42. (Section 45) - When an instrument of accession or subsequent notification is deposited on behalf of any State, that State will be in a position under its own law to give effect to the terms of this Convention, as modified by annexes relating to the agencies covered. (Section 46) - Obligations and suspension: - 1. Subject to paragraphs 2 and 3, each State party undertakes to apply the Convention in respect of each specialized agency covered by its accession or subsequent notification until a revised convention or annex becomes applicable and the State has accepted it. Acceptance of a revised annex shall be by notification addressed to the Secretary-General, taking effect on receipt. (Section 47.1) - 2. A State party which is not, or has ceased to be, a member of a specialized agency may notify the Secretary-General and the executive head of the agency that it intends to withhold from that agency the benefits of this Convention as from a specified date, not earlier than three months from receipt of the notification. (Section 47.2) - 3. Any State party may withhold the benefit of this Convention from any specialized agency which ceases to be in relationship with the United Nations. (Section 47.3) - 4. The Secretary-General shall inform all States parties of any notification transmitted under this section. (Section 47.4) - At the request of one-third of the States parties, the Secretary-General will convene a conference with a view to revision. (Section 48) - The Secretary-General shall transmit copies of this Convention to each specialized agency and to the Government of each Member of the United Nations. (Section 49) ### Annex V — International Monetary Fund (selected provisions) - In its application to the International Monetary Fund (the "Fund"), the Convention (including this annex) shall operate subject to the following provisions: - 1. Section 32 of the standard clauses shall only apply to differences arising out of the interpretation or application of privileges and immunities which are derived by the Fund solely from this Convention and are not included in those which it can claim under its Articles of Agreement or otherwise. - 2. The provisions of the Convention (including this annex) do not modify or amend or require the modification or amendment of the Articles of Agreement of the Fund or impair or limit any of the rights, immunities, privileges or exemptions conferred upon the Fund or any of its members, Governors, Executive Directors, alternates, officers or employees by the Articles of Agreement of the Fund, or by any statute, law or regulation of any member of the Fund or any political subdivision of any such member, or otherwise. - List of Participants to the UN Convention on Privileges and Immunities of the Specialized Agencies that Have Undertaken to Apply the Convention to the IMF as of December 31, 2006 is provided in the source document. The list includes Participants and their Application dates (examples as presented in the source): - Albania — 15 Dec 2003 - Algeria — 25 Mar 1964 - Argentina — 10 Oct 1963 - Australia — 9 May 1986 - Austria — 21 Jul 1950 - Bahrain — 17 Sep 1992 - Barbados — 19 Nov 1971 - Belarus — 27 Aug 1992 - Belgium — 14 Mar 1962 - Bosnia and Herzegovina — 1 Sep 1993 - Botswana — 5 Apr 1983 - Brazil — 22 Mar 1963 - Bulgaria — 24 Jan 2000 - Burkina Faso — 6 Apr 1962 - Cameroon — 30 Apr 1992 - Chile — 21 Sep 1951 - China — 30 Jun 1981 - Côte d'Ivoire — 4 Jun 1962 - Croatia — 12 Oct 1992 - Czech Republic — 22 Feb 1993 - Democratic Republic of the Congo — 8 Dec 1964 - Denmark — 25 Jan 1950 - Dominica — 24 Jun 1988 - Ecuador — 7 Jul 1953 - Egypt — 28 Sep 1954 - Estonia — 8 Oct 1997 - Finland — 31 Jul 1958 - France — 2 Aug 2000 - Gabon — 30 Nov 1982 - Gambia — 1 Aug 1966 - Germany — 10 Oct 1957 - Ghana — 9 Sep 1958 - Greece — 21 Jun 1977 - Guatemala — 30 Jun 1951 - Guinea — 29 Mar 1968 - Guyana — 13 Sep 1973 - Haiti — 16 Apr 1952 - Hungary — 19 Aug 1982 - Iceland — 17 Jan 2006 - India — 19 Oct 1949 - Indonesia — 8 Mar 1972 - Iran (Islamic Republic of) — 16 May 1974 - Iraq — 9 Jul 1954 - Ireland — 10 May 1967 - Italy — 30 Aug 1985 - Japan — 18 Apr 1963 - Kenya — 1 Jul 1965 - Kuwait — 7 Feb 1963 - Lao People's Democratic Republic — 9 Aug 1960 - Latvia — 19 Dec 2005 - Lesotho — 26 Nov 1969 - Libyan Arab Jamahiriya — 30 Apr 1958 - Lithuania — 10 Feb 1997 - Luxembourg — 20 Sep 1950 - Madagascar — 3 Jan 1966 - Malawi — 2 Aug 1965 - Mali — 24 Jun 1968 - Malta — 13 Feb 1969 - Montenegro — 23 Oct 2006 (succession) - Morocco — 3 Nov 1976 - Nepal — 28 Sep 1965 - Netherlands — 21 Jul 1949 - Nicaragua — 6 Apr 1959 - Niger — 15 May 1968 - Norway — 25 Jan 1950 - Pakistan — 7 Nov 1951 - Paraguay — 13 Jan 2006 - Philippines — 20 Mar 1950 - Poland — 11 Jun 1990 - Republic of Korea — 13 May 1977 - Romania — 23 Aug 1974 - Russian Federation — 29 Jun 1994 - Rwanda — 23 Jun 1964 - Saint Lucia — 2 Sep 1986 - Senegal — 2 Mar 1966 - Serbia — 12 Mar 2001 - Seychelles — 24 Jul 1985 - Slovakia — 28 May 1993 - Slovenia — 6 Jul 1992 - South Africa — 30 Aug 2002 - Spain — 26 Sep 1974 - Sweden — 12 Sep 1951 - Thailand — 19 Jun 1961 - The Former Yugoslav Republic of Macedonia — 11 Mar 1996 - Trinidad and Tobago — 19 Oct 1965 - Tunisia — 3 Dec 1957 - Uganda — 11 Aug 1983 - Ukraine — 25 Feb 1993 - United Arab Emirates — 11 Dec 2003 - United Republic of Tanzania — 10 Apr 1963 - Uruguay — 29 Dec 1977 - Uzbekistan — 18 Feb 1997 - Zimbabwe — 5 Mar 1991 - NOTES contained in the source provide historical accession context and specific reservations or declarations by some States (numbered notes reproduced in the source). * _31stissue - Section 27_* ### section in the front matter of this volume. ### C. The International Monetary Fund and the World Trade Organization ### General Council Decision and Approval - The Executive Board approves the proposed Agreement Between the International Monetary Fund and the World Trade Organization as set forth in EBD/96/85 (7/5/96) on the understanding that decisions taken by either party for the implementation of this Agreement will not prevent the effective application of this Agreement in accordance with its provisions. - Decision No. 11381-(96/105), November 25, 1996. - DECISION ADOPTED BY THE GENERAL COUNCIL CONCERNING AGREEMENTS BETWEEN THE WTO AND THE IMF AND THE WORLD BANK AT ITS MEETING ON 7, 8, AND 13 NOVEMBER 1996 (WT/L/194, 18 NOVEMBER 1996). ### Rationale and Mandate - Recalls the increasing linkages between aspects of economic policymaking within mandates of the WTO, the IMF and the World Bank and the call for greater coherence in the Marrakesh Agreement Establishing the World Trade Organization. - Recognizes the close collaborative relationship existing over the past several decades between the CONTRACTING PARTIES to the General Agreement on Tariffs and Trade and the IMF and the World Bank. - Notes the Director-General’s statement on Consultations and Coherence (WT/L/194/Add.1) and budgetary implications (WT/L/194/Add.2). ### Decisions by the General Council (selected points) - (1) Approves the proposed IMF Agreement (Annex 1 of WT/GC/W/43) and the World Bank Agreement (Annex II of WT/GC/W/43) and authorizes the Director-General to sign and implement them. - (2) Director-General shall inform Members and consult with them regularly on implementation; hold consultations at least two times per year including reports on: - coherence consultations between WTO Director-General and IMF Managing Director and World Bank President; - WTO observership in IMF and World Bank bodies and any IMF or World Bank observership in the Dispute Settlement Body (DSB); - written communications between organizations under the Agreement; - joint research or technical cooperation projects pursuant to the Agreements; - general scope of contacts with the IMF pursuant to paragraph 10 of the IMF Agreement and with the World Bank pursuant to paragraph 8 of the World Bank Agreement. - (3) Director-General invited to pursue consultations on Coherence provided for in paragraph 2 of each Agreement with a view to meeting Article III:5 of the Marrakesh Agreement; any conclusions to be submitted to the General Council for approval. ### Implementation and Interpretation (selected provisions) - (4)(a) Procedures for granting IMF observership in the DSB pursuant to paragraph 6 of the IMF Agreement: - Director-General shall convey the invitation of the DSB to the IMF to send a member of its staff as an observer to DSB meetings where matters of jurisdictional relevance to the IMF are to be considered. - For other DSB meetings or particular agenda items, Director-General may propose to the Chairman admission of IMF staff as an observer. - For other WTO bodies not specifically provided for or excluded, Director-General may propose to the Chairman admission of IMF or World Bank staff as observers where matters of common interest will be discussed. - (4)(b) Whenever the IMF wishes to submit its views to a panel on whether an exchange measure within its jurisdiction is consistent with the IMF’s Articles of Agreement, it shall submit those views by directing a letter to the Chairman of the DSB; the Chairman shall inform the panel chairman of the availability of this communication, which, unless the panel decides otherwise, shall remain confidential to the panel and to the parties to the dispute. - (4)(c) References to the WTO, the Fund or the World Bank (and not explicitly to their Secretariats or staff) are understood to refer to the decision-making bodies of the WTO, the IMF and the World Bank, respectively. - (4)(d) Documentation to be provided to the IMF and the World Bank in respect of dispute-settlement panels does not include documents submitted or prepared in the course of the work of panels, but only the panels’ final reports to the DSB. - (4)(e) Established competences and practices in budgetary matters will be preserved; Secretariat will keep the Committee on Budget, Finance and Administration duly informed of budgetary consequences of the Agreements. ### Reaffirmation and Scope - (5) General Council reaffirms importance of the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food Importing Developing Countries and notes that improved cooperation between WTO, IMF and World Bank should enhance governments’ ability to respond to issues addressed in that Decision. ### Fund–WTO Agreement — Preamble (selected headings and considerations) - CONSIDERING the growing interactions between economic policies arising from globalization. - RECOGNIZING the increasing linkages between economic policymaking within mandates of the Fund and the WTO and the call in the Marrakesh Agreement for greater coherence. - RECOGNIZING the close collaborative relationship between the Fund and the CONTRACTING PARTIES to the GATT and importance of continuing and strengthening such relationship. - HAVING REGARD to Article X of the Fund’s Articles of Agreement, Article III.5 of the Marrakesh Agreement, Declarations in the Marrakesh Agreement on Contribution of the WTO to Achieving Greater Coherence in Global Economic Policymaking and on the Relationship of the WTO with the Fund, and provisions of GATT 1994 and GATS concerning cooperation and consultation, including on exchange and trade matters. ### Main Agreement Provisions (by paragraph) - Paragraph 1: The Fund and the WTO shall cooperate in the discharge of their respective mandates in accordance with the provisions of this Agreement. - Paragraph 2: The Fund and the WTO shall consult with each other with a view to achieving greater coherence in global economic policymaking. - Paragraph 3: The Fund shall inform the WTO of any decisions approving restrictions on the making of payments or transfers for current international transactions, decisions approving discriminatory currency arrangements or multiple currency practices, and decisions requesting a Fund member to exercise controls to prevent a large or sustained outflow of capital. - Paragraph 4: Fund agrees to participate in consultations carried out by the WTO Committee on Balance-of-Payments Restrictions; existing procedures for Fund participation shall continue and may be adapted in accordance with paragraph 14. - Paragraph 5: Fund shall invite the WTO Secretariat to send an observer to ordinary meetings of the Executive Board of the Fund on general and regional trade policy issues and to discussions of the World Economic Outlook (WEO) when there is a significant trade content; Managing Director shall recommend additional invitations when consultations conclude matters of particular common interest. - Paragraph 6: WTO shall invite the Fund to send a member of its staff as an observer to specified WTO bodies (Ministerial Conference, General Council, Trade Policy Review Body, the three sectoral councils, Committee on Trade and Development, Committee on Regional Trade Agreements, Committee on Trade-Related Investment Measures, Committee on Trade and the Environment and their subsidiary bodies), excluding the Committee on Budget, Finance and Administration, the Dispute Settlement Body, and dispute settlement panels; WTO shall invite the Fund to send an observer to DSB meetings where matters of jurisdictional relevance to the Fund are to be considered and in other cases after consultation when of particular common interest. - Paragraph 7: Each organization shall make available in advance agendas and relevant documents for meetings to which they are invited pursuant to the Agreement; Fund shall make Executive Board agendas available at time of their circulation in the Fund; WTO shall make DSB agendas available at time of their circulation in the WTO. - Paragraph 8: Each organization may communicate its views in writing on matters of mutual interest to the other organization or any of its organs or bodies (excluding WTO dispute settlement panels) and such views shall become part of the official record; the Fund shall inform in writing the relevant WTO body (including dispute settlement panels) considering exchange measures within the Fund’s jurisdiction whether such measures are consistent with the Articles of Agreement of the Fund. - Paragraph 9: Director-General of the WTO and Managing Director of the Fund shall ensure cooperation between staffs and agree on procedures for collaboration, including access to databases, and exchanges of views on jurisdictional and policy issues. - Paragraph 10: Fund’s staff shall consult with the WTO Secretariat on issues of possible inconsistency between measures under discussion with a common member and that member’s obligations under the WTO Agreement; WTO Secretariat shall consult with the Fund’s staff on issues of possible inconsistency between measures under discussion with a common member and that member’s obligations under the Fund’s Articles of Agreement. - Paragraph 11: Fund shall provide the WTO, promptly after circulation to the Executive Board, for the confidential use of its Secretariat, with staff reports and related background staff papers on Article IV consultations and on use of Fund resources on common members and on Fund members seeking accession to the WTO, subject to the consent of the member. - Paragraph 12: WTO shall provide the Fund, for the confidential use of its management and staff, with Trade Policy Review Reports, summary records and reports of Councils, Bodies and Committees, and reports of WTO Members to these organs. - Paragraph 13: Each party shall ensure that any information communicated under this Agreement shall be used only within the limits specified by the other party. - Paragraph 14: Director-General of the WTO and the Managing Director of the Fund shall be responsible for implementation of the Agreement and shall make such arrangements as they deem appropriate. - Paragraph 15: Agreement shall be reviewed upon the request of either party and may be amended by mutual agreement. - Paragraph 16: Agreement may be terminated by either party by written notice and, unless otherwise agreed, shall terminate six months after receipt of such notice. - Paragraph 17: Following approval by the General Council of the WTO and the Executive Board of the Fund, this Agreement shall enter into force on the date of its signature. ### Entry into Force and Signature - To be added at time of signature: - Signed at Singapore on 9 December 1996 in duplicate. - For the World Trade Organization, Director-General. - For the International Monetary Fund, Managing Director. - Adopted by Decision No. 11381-(96/105), November 25, 1996. *Selected section from the front matter of the volume.* ### Section 2(b), 495 ### Section 2(b), 495 ### Article and legal references - Article XXX(c): definition of reserve tranche purchase; exclusion of purchases and holdings from CFF, 370, 744; exclusion of purchases and holdings from EFF, 744; exclusion of purchases and holdings from emergency assistance, 319; exclusion of purchases and holdings from SRF, 368, 745. - Article XXX(c)(iii): exclusion of purchases and holdings in credit tranches or under extended arrangements, 744. - Article XXX(f): freely usable currencies, 672, 746. - Article XXXI, Section 1: entry into force of Articles of Agreement, 3. - Article IV consultations and related consultation cycles referenced throughout (see Exchange of documents and Enhanced surveillance entries). ### Reserve tranche purchases and related facilities - Reserve tranche purchases are defined and discussed in connection with exclusions for multiple facilities: CFF (Compensatory Financing Facility), EFF (Extended Fund Facility), emergency assistance, SRF (Supplemental Reserve Facility). - Compensatory Financing Facility: access limits, 372; cereal import costs, 370, 376; decision, 370–79; interaction with emergency assistance for natural disasters, 318; estimated data, 372; export fluctuations, 372; extended arrangements, 371; general provisions, 370; indicative targets, 254, 255; concerns about overcompensation, 372, 375, 379, 380; phasing, 372; PRGF-ESF Trust and, 136; receipts from services, 374; repurchase expectations, 396; repurchase of overcompensation, legal interpretation, 375; repurchases, 396; reserve tranche purchases, 370; reserve tranche purchases, exclusion, 744; stand-by arrangements and, 309, 371. ### Borrowed Resources and investment by the Fund - Borrowed Resources Suspense Accounts: establishment, 492; investment by the Fund of currencies held in, 492–93. - Investment by Fund of currencies received by SFF Subsidy Account, 757. - Guidelines for borrowing by the Fund referenced, 493. ### Audit, governance, and accountability - Audit: external audit firm, 669. - By-Laws: Section 13, vote without meeting, 10, 15; Section 20, audits, 123, 156, 195, 200, 230, 237, 243, 247, 669, 756, 808; Section 22, compulsory withdrawal, 724, 727, 728. ### Currencies, SDRs, and valuation - Freely usable currencies referenced at multiple locations: 135, 143, 155, 241, 465, 672, 679, 746, 755. - SDR valuation basket and related matters: SDR valuation basket, 672–75; designated holders and prescribed holders of SDRs referenced for multiple institutions (Asian Development Bank, BIS, Bank of Central African States, East African Development Bank, East Caribbean Currency Authority, Eastern Caribbean Central Bank), pages 678–681. - Currencies: attribution of reduction of Fund’s holdings, 403–404; charges on Fund’s holdings in excess of quota, 405; composition of reserves, 549; data template on international reserves, 552; financial statement denomination, 549; General Resources Account, 383–86, 390, 406, 421–23; guidelines for operational budget allocation of currencies, review, 389; maintenance of value, 421–23; presently needed for making payments, 249; PRGF-ESF Trust loans, 143; repurchases, 397; reserve asset payments, 10, 19, 20; sale of currencies of members with outstanding purchases, 387, 389; specification by the Fund, 384–86; subscription to the Fund, ownership, 19; use in operational budgets, 383–86. ### Balance of payments, access, and related policies - Balance of payments need contexts: - Access policy, 343. - Compensatory Financing Facility, 370. - Conditionality, 250. - Emergency assistance, natural disasters, 318; post-conflict countries, 322. - Extended arrangements, 316. - Extended Fund Facility, 315. - Fund-supported programs, 251. - PRGF-ESF loans, 138. - Protracted balance of payments problems, 427. - Supplemental Reserve Facility, 365–70. - Balance of payments position: assessment of strength for purposes of designation plans, operational budgets and repurchases, 383–84. ### Conditionality, programs, and facilities - Conditionality: Bank-Fund collaboration, 610; benchmarks, 254, 255, 256; Compensatory Financing Facility, 370; consistency with WTO agreements, 622; consultation clauses, 253; emergency assistance (natural disasters and post-conflict), 320–23; emergency financing mechanism, 276, 277; financing assurance reviews, 255; first credit tranche, 287; floating tranches, 256; guidelines on conditionality, 250; individual circumstances of members, 250; letters of intent, 253; modalities, 253; outcomes-based, 252; ownership, 250, 273, 610–14; performance criteria, 254; relationship of performance criteria and phasing, 292; performance criteria with respect to external debt, change in coverage, 295; performance criteria with respect to foreign borrowing, 299; PRGF-ESF arrangements, 289; principles, 250; prior actions, 254, 260, 265, 290; program design, 251; program review, 254–57; streamlining, 289, 291; structural benchmarks, 253–57; Supplemental Reserve Facility, 369; waiver issues, 254, 256. - Emergency assistance: - Conversion to special policy, 318. - Natural disasters, 318, 320. - Post-conflict countries, 187, 325–30. - PRGF-HIPC Trust eligibility and qualification references, 187–89. - Repurchase procedures, 397. - Emergency financing mechanism (EFM), 276–80: conditions for activation, 279; early repurchase, 280. ### Exchange arrangements, controls, and multiple currency practices - Exchange arrangements: notification requirements, 23; exchange taxes and subsidies notification, 24; flexible arrangements require notification of significant decisions, 24; intervention, 24, 26, 27; multiple currency practices require prior Fund approval, 24. - Exchange contracts: unenforcability, Fund’s interpretation of Article VIII, Section 2(b), 495. - Exchange restrictions and controls: - Approval by Fund, 506. - Article VIII, Section 2, 3, and 4 obligations, 503–504. - Avoidance of escalation, 507. - Balance of payments reasons, 504, 505. - Transitional arrangements under Article XIV, 500–501, 504. - Retention quotas, 499–501. - Non-balance of payments reasons, 504. - Security reasons, 497–99. - Undue delays, 443, 505. - World Trade Organization reporting on Fund approval, 829. - Multiple currency practices and bilateralism: bilateralism and convertibility, 498–99; bilateral payments arrangements—extended arrangement, 314; stand-by arrangement, 310; three-month settlement rule, temporary exemption, 499. ### Cooperation with other international institutions - Exchange of documents with other international agencies: criteria and procedures for exchange, 628–30; Article IV consultation staff reports, 625, 630; Recent Economic Developments reports, 625, 630; technical assistance reports, 627; use of Fund resources staff papers, 626–27, 630. - Bank-Fund collaboration and World Bank interaction: conditionality, 610–14; country programs, 610; debt sustainability assessments, 617; Financial Sector Assessment Program, 91; IMF-World Bank Concordat, 592–603; observer status and procedures, 603–04. ### Surveillance, transparency, and data standards - Enhanced surveillance: annual and midyear consultation reports, 79–80; Article IV consultations, 80, 81; Article VIII obligations, 505; criteria and procedures, 86–87; Executive Board involvement, 88; midterm review, 79–80; quantified economic policy programs, 81; revised procedures, 80–82; confidentiality and staff report transmittal issues, 81–82, 88. - Data dissemination and standards: Data Dissemination Standard and Special Data Dissemination Standard references; Dissemination Standards Bulletin Board (DSBB) establishment, 537; certification requirement, 538; removal from DSBB, 537–39. - Transparency: Code of Good Practices on Transparency in Monetary and Financial Policies, 269; confidentiality protocols, FSAP Confidentiality Protocol, 99–103. *Source: Section 2(b), 495 from _31stissue - Section 2(b), 495* ### Section 3(c), meaning of, 633 ### Section 3(c), meaning of, 633 ### Appointment provisions - Appointment by members having five largest quotas, Article XII, 632 - Appointment of two additional directors, Article XII, Section 3(c), 632–33 ### Voting power and quota adjustment - Voting power, effect of adjustment of quota, 633 ### Procedural and related references in index - IMFC meetings participation, 767 - Procedural guidelines, 639–40 *Source: _31stissue - Section 3(c), meaning of, 633* ### Section 3(f), 386 ### Section 3(f), 386 ### Gold and SDRs - Gold: - designation of SDRs, 708–9 - gold pledge for use of ESAF Trust resources, 735–38, 738–39 - gold pledge for use of PRGF-ESF Trust resources under rights approach, modalities, 439–40 - acceptance of gold in payment for repurchases, 400 - gold, obligation to pay, 399, 401 - profits, final direct distribution for developing members through Trust Fund, 748 - Special Disbursement Account, use of proceeds of off-market sales, 789 - SDRs (Special drawing rights): - designation review rules, 707 - designation rules, revision, 710 - harmonization of holdings of SDRs, 708–709; harmonization of holdings, 385, 708 - SDR valuation basket: currency weights, 673; currency reference rates, 674; calculation of currency amounts, 672–74, 674–75; conversion into euro of deutsche mark and French franc, 675–76 - selection of currencies by the Fund, 384–86, 388, 389–90, 390–91 - SDR allocation: first basic period, 685; third basic period, 686; fourth basic period, report of Managing Director on, 786; allocations to new participants, third basic period, 691 - SDR as principal reserve asset, 787 - transfers of SDRs under Article V, Section 3(f), 386 - terms and conditions for accepting, holding, or using SDRs, 677 - holders prescribed by the Fund: African Development Bank, African Development Fund, Andean Reserve Fund, Arab Monetary Fund, Asian Development Bank, Bank for International Settlements, Bank of Central African States, Central Bank of West African States, East African Development Bank, East Caribbean Currency Authority, Eastern Caribbean Central Bank, European Central Bank, International Bank for Reconstruction and Development (World Bank), International Development Association, International Fund for Agricultural Development, Islamic Development Bank, Nordic Investment Bank, Swiss National Bank (termination of status), and others listed, 680–681 ### Governance, Surveillance, and Standards - Governance issues: - Article IV consultations, 71, 73 - coordination with bilateral donors and multilateral agencies, 74–76 - corruption, 66, 67, 69, 70 - identification of problems and technical issues, 73; technical assistance, 66, 73 - macroeconomic impact test for Fund involvement, 66, 72, 74 - policy advice, role of the Fund, 66–78, 550–568 - transparency, 66, 70 - use of Fund resources, 71–72 - Surveillance and collaboration: - Fund staff collaboration with the WTO, 620–26 - participation of Executive Directors and Managing Director in International Monetary and Financial Committee meetings, 768 - Interim Committee transformation to International Monetary and Financial Committee, 767–70 - Standards and codes: - Reports on Observance of Standards and Codes (ROSCs): assessment procedures, publication policies, and surveillance linkages, 647, 648, 655–657, 112–115 - Special Data Dissemination Standard (SDDS): purpose and framework, coverage, periodicity, timeliness, quality, flexibility options, subscription and review, 530–539; template on international reserves/foreign currency liquidity, 544 ### Conditionality, Performance Criteria, and Program Instruments - Guidelines and conditionality: - Guidelines on conditionality and corrective action, 250–57, 288; corrective action references in arrangement forms, 309–314 - Performance criteria: definition, coverage, phasing and relationship to performance criteria, 254, 292–94; external debt and foreign borrowing coverage and discount rate, 292–300 - Publication and confidentiality of program documents: Letters of Intent (LOIs), MEFPs, PINs, and publication policies, 647–659 - Program instruments and monitoring: - Policy Support Instrument (PSI): definition, eligibility, assessment criteria, misreporting handling, 125–132 - Post-Program Monitoring: applicability and relationship to PSI, 281–282 - Longer-term program engagement: definition and review, 286, 283 - Reviews under Fund arrangements: stand-by, extended, PRGF, lapse-of-time procedure, 306–318 ### PRGF / ESAF and Trusts - Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility (ESF) Trust: - establishment, administration, amendment, and transformation from ESAF to PRGF, 132, 155–157, 164–166 - access limits and review, 168 - Reserve Account and Loan Account details, 134–145, 144, 149, 150–152 - unit of account and media of payment: SDR, 135 - interest and loans: interest provisions and interest-free PRGF-HIPC Trust loans, 142–145, 193 - misreporting and noncomplying disbursements and related corrective actions, 143, 158–160 - modalities of gold pledge under rights approach and operational modalities, 439, 735 - HIPC and MDRI: - HIPC Initiative role and related Trusts: Trust for Special ESAF/PRGF Operations (ESAF-HIPC; PRGF-HIPC), decision and procedural references, 178–212, 186–196 - Multilateral Debt Relief Initiative (MDRI) and MDRI-I and MDRI-II Trusts: proposed decisions, eligibility, administration, investment of resources, amendments, completion and decision points, 221–238 ### Overdue Financial Obligations, Arrears, and Remedies - Overdue financial obligations to the Fund: - procedures and remedial measures: Annual Report, complaint by Managing Director, declaration of censure, declaration of ineligibility, declaration of noncooperation, compulsory withdrawal, suspension of voting rights, technical assistance suspension, strengthened cooperative strategy timelines, 721–742, 723–740 - effects on approval of arrangements (ESAF, ESF, PRGF, SAF) and on submission of requests for Fund resources, 716–718 - preferred creditor status of the Fund and related references, 204, 327, 718–724, 728, 731 - Rights approach and rights accumulation programs: - rights approach: arrears reduction, extension of period, gold pledge modalities, operational modalities, three-year period norm, PRGF-HIPC Trust eligibility and qualification, 735–743, 186–187 - Repurchase and repurchase expectations: - guidelines and failure consequences: assessment for designation plans and operational budgets, early repurchases, attribution of reductions in Fund holdings of currencies, special charges on overdue repurchases, and publication of failures, 383–406, 398–404, 663–665 ### Resources, Borrowing Arrangements, and Budgetary Rules - Resources and reserve positions: - gross reserve position assessment for designation plans, operational budgets, and early repurchases, 384–86, 388 - reserve tranche, reserve position, and administrative accounts, remuneration and attribution details, 21, 385, 744–745 - payment of reserve assets in connection with subscription, 19–22 - Borrowing arrangements: - New Arrangements to Borrow (NAB): entry into force, participants, credit arrangements, relationship with GAB, transferability of claims, 471–491 - General Arrangements to Borrow (GAB) references and Rule G-1, fiscal agency, 451, 483 - Operational budgets and rules: - guidelines for allocation of currencies and operational budget, Rule O-10, 386, 389–390 - Rules and Regulations cited: Rule I-6(4), Rule I-10, Rule O-2, Rule P-7, Rule P-9, Rule T-1, and others related to rates of charge, valuation of SDRs and currencies, and recording of SDR transactions, 368–419, 422, 451, 468, 483, 675, 696–706 ### Miscellaneous Operational and Legal Matters - Multiple currency practices and exchange restrictions: - approval criteria, policy history, consultation requirements, discrimination and simplification of complex rate systems, 504–519, 508–519 - import restrictions for balance of payments reasons in various arrangements, 309, 314, 332 - Immunities, privileges, and investigations: - Immunities and Privileges of Specialized Agencies, United Nations Convention, 800–817 - Investigation of Fund activities and cooperation procedures, archives and immunity of archives, 579–584, 580–582 - Publication and confidentiality: - publication policies for Article IV reports, LOIs, MEFPs, PRSPs, ROSCs, REDs, PINs, staff reports, and technical memoranda, 647–659, 652–657 *Extracted from Section 3(f), pages and index entries as provided in the source PDF.* ### Section 6(b), 384 ### _31stissue - Section 6(b), 384 ### SDRs and Currency Uses - Specification of currencies, 384–86, 390 - SDRs, use in operations and obligations: - use in PRGF loans, 143 - use in repurchases, 398 - use in loans, 699 - use in pledges, 699 - use in payment of Trust Fund obligations, 632, 747 - use in payment of Trust Fund obligations, 681 (duplicate listing under Trust Fund section) - use in PRGF-HIPC Trust operations or under an administered account, 684 - use in ESAF Trust operations or under an administered account, 683 - use in Structural Adjustment Facility operations, 682 - SDRs, use in operations, 432, 682, 683, 684 (Structural Adjustment Facility context) - SDRs, use in operations, 195, 684 (PRGF-HIPC Trust context) - SDRs, use in payment of Trust Fund obligations, 681 - SDRs, use in repurchases and transfers as security for the performance of financial obligations, 701 - use in swap operations, 703 - use in forward operations, 705 - use in donations, 706 - use in settlement of financial obligations, 696 - use in subsidy payment from SFF Subsidy Account, 682 - use in transfers of SDRs for purchases under Article V, Section 3(f), 386 - use in transfers as security for the performance of financial obligations, 701 - Valuation and exchange-rate treatment: - valuation basket, guidelines for calculation of currency amounts, 672 - valuation basket, guidelines for calculation of currency amounts, revised guidelines, 672 - valuation of US dollar for purposes of Rule O-2(a), 675 - value of SDR, method of collecting exchange rates for calculation for purposes of Rule O-2(a), 675 - U.S. dollar, weight in valuation basket, 673 - weight in SDR valuation basket, 673 - Termination and status issues: - termination of status as prescribed holder of SDRs, 681 ### Stand-by Arrangements, Access, and Conditionality - Stand-by arrangements general rules and features: - access to credit tranches, normally through, 287 - arrangements not international agreements, 253 - duration, normal, 287 - first credit tranche, 288 - conditionality guidelines, 250 - consultation clauses, 253, 309 - contractual connotation avoidance, 253 - performance criteria and phasing of purchases, relationship, 292 - phasing, 287, 288 - indicative targets, 294 - performance criteria with respect to external debt, 295, 299, 308 - performance criteria, accuracy of information, 266 - prior actions, accuracy of information, 265 - misreporting and noncomplying purchases, 261–64, 265 - noncomplying purchases, 263, 309 - waiver for nonobservance of performance criteria, 262, 265 - waiver of applicability of performance criteria, 265 - waiver of performance criteria applicability and nonobservance references: 158, 256, 265; nonobservance also 128, 158, 265, 266, 294 - form, stand-by arrangement, 306 - suspension of transactions under stand-by arrangements, 309 - ineligibility, effect on purchases under stand-by arrangement, 310 - resumption of purchases under stand-by arrangement after decision of formal ineligibility, 310 - ineligibility under Article V, Section 5, 393 - Specific procedural and remedial features: - Guidelines on Corrective Action, 309 - review, 306 - lapse of time procedure, reviews, 316 - test dates, 293 - uniform treatment of members, 251 - nondiscriminatory treatment of members, 251 - suspension of right to engage in transactions, 309 - suspension of exchange transactions, effect on General Arrangements to Borrow, 452 ### Facilities and Trusts (SAF, SRF, SFF, PRGF-HIPC, Trust Fund) - Structural Adjustment Facility (SAF): - access, potential, 427, 432 - amounts of assistance, 426 - commitment period, 427 - commitment period, new, 432 - disbursements, 428, 431 - eligible members list, 432 - income from investment and loans, 436 - interest, 429 - loans under Enhanced Structural Adjustment Facility (ESAF), 430 - protracted balance of payments problem, 221, 427 - purposes, 426 - qualification for assistance, 427 - resources, 426 - review, 435 - terms of loans, 429 - rights accumulation programs, and, 188 - Supplemental Reserve Facility (SRF): - availability through stand-by or extended arrangement), 367 - commitment period, 367 - contagion risk, 366 - phasing, 367 - rate of charge, 369 - repurchase, 368 - repurchase expectation, 368 - repurchases, installment periods, 368 - reserve tranche purchase, exclusion, 368 - sudden and disruptive loss of market confidence test, 366 - Supplementary Financing Facility (SFF) Subsidy Account: - Supplementary Financing Facility (SFF) Subsidy Account, 751 - Instrument to establishment, 750 - resources, 751 - investment, 752 - eligible members, 753 - subsidy amount, 753 - additional subsidy payments for May 1–June 30, 1990 and subsidy payments for July 1, 1990–June 30, 1991, 759 - means of subsidy payments, 758 - suspension of transfers and re-transfer of surplus, 758 - transfer from Special Disbursement Account, 751, 752, 758 - SDRs, use of, 682 - PRGF-HIPC Trust and PRGF-related arrangements: - Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and for Interim PRGF Subsidy Operations (PRGF-HIPC Trust) instrument to establish, 181–96 - administration of, 194 - amendment of, 196 - Annual Progress Report (APR), 184 - assistance amount, 189 - completion point, 182, 188, 190, 191, 192, 193, 203, 204, 205, 206 - contributions by other donors, 198 - contributions to, 234 - debt sustainability, 183, 187, 189, 191, 192, 203, 204, 213 - debt sustainability analysis, 182 - debt-to-exports ratio, 183, 192, 206 - debt-to-revenue ratio, 183 - decision point, 182, 187, 188, 189, 190, 201, 204, 209, 213, 214 - eligibility, 186, 213 - grace period on loans, 193 - grants and loans, 186 - Interim Poverty Reduction Strategy Papers (I-PRSPs), 177, 184, 211 - Interim Poverty Reduction Strategy Papers (I-PRSPs), publication, 647 - investment of resources, 185, 195, 198 - Joint Staff Advisory Note (JSAN), 184 - liquidation, 196 - maturity of loans, 192 - operation and liquidation, 196 - Paris Club, 183, 187, 189, 205, 210, 215 - performance-related conditions, 191, 198 - Poverty and Social Impact Analysis (PSIA), 178, 219 - Poverty Reduction Strategy Papers (PRSPs), 177, 184, 187, 188, 205, 209, 216 - purposes, 185 - qualification for assistance, 187 - retransfers authorized, 198 - SDRs, use in operations, 195, 684 - self-sustained operations, 183, 196, 208 - special charges on overdue interest and repayments, 408 - Special Disbursement Account, transfers from, 185 - subsidies for interim PRGF operations, 194 - terms of assistance, 192 - track record of performance, 188, 203, 205, 209, 213, 216 - transformation of ESAF-HIPC Trust to PRGF-HIPC Trust, 164 - completion point, 214; decision point, 214; eligibility and eligible members, 215; implementation status, 214; sunset clause, 215 and 197 - Trust Fund matters: - Trust Fund final direct distribution of profits, 748 - means of repayment by members on their indebtedness under loan agreement, 747 - overdue interest and repayments, 408 - SDRs, use in payment of Trust Fund obligations, 681 - special charges on overdue financial obligations, 407, 748 - termination and transfer of resources to Special Disbursement Account, 424, 748 - terms of repayment of final loan disbursement and amendment of Trust instrument, 750 - means of payment by members on indebtedness under Trust Fund loan agreements, 747 ### Surveillance, Transparency, and Publication - Surveillance scope and procedures: - ad hoc Article IV consultation, 30 - architecture of international financial system, 32 - balance-sheet analysis, 56 - capital flows, 27, 36 - consultation cycles, changes, 43 - coverage principles, 36 - data provision, 53 - financial sector soundness and vulnerability, 33 - policy dialogue with country authorities, 45 - principles for guidance of members, 26 - principles of Fund surveillance over exchange rate policies, 26 - procedures, 28, 40 - publicity, 665 - review of general implementation, two-year intervals, 32, 41, 53 - review, 2006, 53 - ROScs, 54, 57 - signaling, 51 - Special Data Dissemination Standard (SDDS), 56 - staff-monitored programs, 40 - three-month rule, 58 - timetable of procedures, 718 - use of staff resources, 52 - World Economic Outlook, 29 - public transmittal and publication aspects: - Staff reports on Article IV consultations: document exchange with WTO, 627; presumed publication, 659; publication, 647, 649, 652; transmittal to international agencies, 627, 629 - Staff reports on enhanced surveillance: transmittal by members to creditors, 31–32, 79, 88, 102 - Staff reports on use of Fund resources and post-program monitoring publication policy, 659 - Transparency and governance: - Transparency: foreign reserves management, 268; governance, 66; safeguards for use of Fund resources, 269; use of Fund resources, 647 - publication authorization required for certain documents, 647 ### Use of Fund Resources and Related Governance - Use of Fund resources overarching principles and procedures: - accordance with purposes of the Fund, 248 - authority of the Fund to use its resources Resolution, 763 - resolving problem of arrears, 248; arrears, resolving the problem of, 726 - capital transfers, 248, 442 - conditionality guidelines, 250–57, 287 - financing current account deficits, 248 - form, extended arrangement, 311 - ineligibility under Article V, Section 5, 393; postponement and limitation under Article V, Section 5, 393 - meaning of “consistent with the provisions of this Agreement” under Article V, Section 3, 248 - meaning of “represents,” 249; meaning of “represents” that a member has a need to make purchases, 249 - repayment expectation under PRGF-ESF Trust, failure to meet, 164 - resumption of purchases under extended arrangement after decision of formal ineligibility, 315 - safeguards, strengthening of, 266–71 - side letters, 257, 260 - suspension of transactions under extended arrangement, 314 - suspension of exchange transactions, effect on General Arrangements to Borrow, 452 ### Trade, WTO, and External Relations - Trade and WTO interactions: - Trade Integration Mechanism, 364 - trade-related balance of payments adjustments, 364 - structural maladjustments in trade, Extended Fund Facility, 301 - Trade restrictions: avoidance of escalation, 507, 779; emergency assistance, 318, 321; import restrictions for balance of payments reasons, extended arrangements, 314; import restrictions for balance of payments reasons, GATT, 505; import restrictions for balance of payments reasons, stand-by arrangements, 309; WTO involvement, 620 - World Trade Organization cooperation: balance of payments consultations, 620; coherence in global policymaking, 621; consistency of policy advice and obligations, 622; cross-conditionality, avoidance, 623; document exchange, 625; Fund staff observer at WTO meetings, 830; IMF-WTO Agreement, text, 828–32 ### Other Governance and Operational Items - Voting, suspension, and membership: - Suspension of membership, 724 - Suspension of voting rights, participation in International Monetary and Financial Committee, 768; suspension of voting rights references: 732, 730 - Voting power majority: compulsory withdrawal, 730; Eleventh General Review of Quotas, 10; SDR allocation, 787 - Technical assistance and cooperation: - Technical assistance: cooperation with Trusteeship Council, 796; exchange rate system simplification, 516; Framework Administered Account for, 120; members not cooperating with the Fund, 723, 724; post-conflict countries, 322; transmittal of reports to international agencies, 627 - Interactions with World Bank and United Nations: - World Bank collaboration: Bank-Fund collaboration, 78, 593, 603, 604, 605, 610; collaboration with Fund on corporate sector vulnerability analysis, 34; HIPC Initiative, 202, 209, 211; observer status in the Fund, 603, 604 - United Nations: agreement with the IMF, 793–99; Convention on the Privileges and Immunities of the Specialized Agencies, 800–817; exchange of documents with, 795 *Italic: Derived from _31stissue - Section 6(b), 384 (source PDF: _31stissue - Section 6(b), 384).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sd/2006/_31stissue.pdf_