Press Release: IMF Adopts a Decision on New Arrangements to Borrow
IMF News, January 27, 1997
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- Published: January 27, 1997
Overview
- The Executive Board of the International Monetary Fund (IMF) adopted a decision on New Arrangements to Borrow (NAB).
- Purpose: to make loans to the IMF when supplementary resources are needed to forestall or cope with an impairment of the international monetary system, or to deal with an exceptional situation that poses a threat to the stability of the system.
- Total amount available under the NAB: SDR 34 billion (about US$48 billion).
- Entry into force condition: adherence by potential participants with credit arrangements amounting to no less than SDR 28.9 billion (about US$41billion), including the five members or institutions with the largest credit arrangements.
- Duration: the decision will be in effect for five years and may be renewed.
Participants
- The 25 potential participants agreed on the NAB terms and conditions and will be prepared to make loans under those terms.
- Participants: Australia, Austria, Belgium, Canada, Denmark, the Deutsche Bundesbank, Finland, France, the Hong Kong Monetary Authority, Italy, Japan, Korea, Kuwait, Luxembourg, Malaysia, the Netherlands, Norway, Saudi Arabia, Singapore, Spain, the Sveriges Riksbank, the Swiss National Bank, Thailand, the United Kingdom and the United States.
Relationship with the General Arrangements to Borrow (GAB)
- The NAB does not replace the GAB; the GAB will remain in force.
- The NAB will be the facility of first and principal recourse when supplementary resources are needed.
- Amount available under the GAB: SDR 17 billion (about US$24 billion).
- Associated agreement with Saudi Arabia: SDR 1.5 billion (about US$2 billion).
- The maximum combined amount available under the GAB and NAB: SDR 34 billion (same as NAB).
Activation and Scope
- Credit arrangements under the NAB may be activated for:
- an IMF member that is a participant (or whose institution is a participant), or
- a member that is not a participant, under circumstances similar to those contemplated in the GAB, with an additional condition for GAB activation for nonparticipants.
- NAB to be guided by principles set out in paragraph 21: NAB is facility of first and principal recourse, with exceptions set out in paragraph 21(a)(i) and 21(a)(ii).
- Outstanding drawings and commitments under NAB and GAB shall not exceed SDR 34 billion.
Key Operational Rules (proposals, calls, and voting)
- Managing Director proposals:
- The Managing Director shall make proposals for calls only after consultation with Executive Directors and participants.
- A proposal must identify the prospective drawer, the amount, and the period during which the resources requested may be called.
- Calls:
- Unless otherwise specified, calls are proportional to each participant's credit arrangement.
- Circumstances permitting nonproportional calls are specified (insufficient available commitments or currency-type constraints).
- Voting on proposals:
- If unanimity is not reached among participants, acceptance requires an 80 percent majority of total credit arrangements of participants eligible to vote.
- Prospective drawers, their participating institutions, and participants that have notified they will not meet calls are ineligible to vote on that proposal.
- Participant constraints:
- A participant that determines it cannot meet calls because of present and prospective balance of payments and reserve position must notify the Fund and other participants.
- Calls may not be made on a participant not included in the Fund's quarterly operational budget for transfers of its currency, except with the participant's consent.
Repayment, Interest, and Use of Borrowed Currency
- Repayment:
- Subject to paragraph 11, the Fund shall repay participants five years after a transfer, unless the drawer is committed to repurchase earlier; repayment date may be earlier in that case.
- Repayment may be in the currency borrowed whenever feasible, in the participant's currency, in special drawing rights subject to Article XIX, Section 4 limits, or in other actually convertible currencies after consultation.
- Repayments credited against transfers in the order prescribed by paragraph 11(a).
- The Fund may repay in part or in full before the five-year date after consultation with participants.
- Paragraph 11(e) allows a participant to request early repayment on balance of payments grounds; the Fund shall give the overwhelming benefit of any doubt to the participant's representation.
- Repayment restores the amount that can be called under a participant's credit arrangement pro tanto.
- Interest:
- The Fund shall pay interest 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, or any higher rate agreed between the Fund and participants representing 80 percent of total credit arrangements.
- Interest accrues daily and shall be paid as soon as possible after each July 31, October 31, January 31, and April 30.
- Interest due may be paid in special drawing rights, the participant's currency, the currency borrowed, or other actually convertible currencies.
- Use of Borrowed Currency:
- Fund policies under Article V, Sections 3 and 7 on the use of general resources and stand-by/extended arrangements apply to purchases of currency borrowed by the Fund.
- Access to Fund resources by members continues to be determined by Fund policies and practices and does not depend on NAB borrowing.
Transferability, Evidence, and Reporting
- Evidence of indebtedness:
- On request, the Fund shall issue nonnegotiable instruments evidencing indebtedness to a participant; form to be agreed between Fund and participant.
- Transferability of claims (paragraph 13 and section B):
- Participants may not transfer claims except with prior consent of the Fund and on terms the Fund approves.
- The Fund consents in advance to transfers of outstanding claims under NAB to a participant in NAB on the terms and conditions set out in the Transferability of Claims section, including price to be agreed between transferee and transferor and Fund registration of transfers.
- Transferees acquire the right to request early repayment under paragraph 11(e) only if at the time of transfer they meet specified balance of payments and reserve position conditions.
Governance, Meetings, and Secretariat
- NAB participants agreed to meet once a year at the time of the Annual Meetings of the IMF to discuss macroeconomic and financial markets developments, especially those that could impact financial stability and lead to needs for supplementary resources.
- Chairmanship of the NAB grouping rotates annually in the English alphabetical order of the participants.
- IMF headquarters staff, under the direction of the chair, will provide secretariat support.
Period, Renewal, Amendments, and Withdrawal
- Period and renewal:
- The decision continues in existence for five years from its effective date.
- The Fund and participants shall review functioning and consult on modifications when considering renewal.
- The Fund shall adopt a decision on renewal and modification, if any, not later than twelve months before the end of the five-year period.
- Any participant may advise the Fund not less than six months before the end of the five-year period that it will withdraw its adherence to the decision as renewed.
- Amendment and withdrawal:
- Amendments during the period and renewal periods require a decision of the Fund and concurrence of participants representing 85 percent of total credit arrangements, except as provided in specified paragraphs.
- A participant that views an amendment as materially affecting its interests and that voted against it may withdraw adherence by giving notice within 90 days of adoption of the amendment.
- Withdrawal of adherence may be subject to limits and timing restrictions as specified.
Key Quantitative Facts (as stated)
- NAB total amount available: SDR 34 billion (about US$48 billion).
- Entry into force threshold: SDR 28.9 billion (about US$41billion), including the five largest credit arrangements.
- GAB amount: SDR 17 billion (about US$24 billion).
- Associated Saudi Arabia agreement: SDR 1.5 billion (about US$2 billion).
- GAB participants and amounts (in millions of SDRs) listed in the press release footnote:
- United States (4,250)
- Deutsche Bundesbank (2,380)
- Japan (2,125)
- France (1,700)
- United Kingdom (1,700)
- Italy (1,105)
- Swiss National Bank (1,020)
- Canada (892.5)
- Netherlands (850)
- Belgium (595)
- Sveriges Riksbank (382.5)
- Size of credit arrangement with Saudi Arabia in association with the GAB: SDR 1,500 million.
Press Release No. 97/5 — January 27, 1997; IMF Press Center — Press Release: IMF Adopts a Decision on New Arrangements to Borrow