Articles of Agreement of the International Monetary Fund
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Origins and Purpose
- Adopted at the United Nations Monetary and Financial Conference (Bretton Woods, New Hampshire) on July 22, 1944.
- Originally accepted by 29 countries; since adoption signed and ratified by a total of 190 Member countries.
- Purposes (Article I):
- (i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
- (ii) To facilitate the expansion and balanced growth of international trade and to contribute to high levels of employment and real income and development of productive resources.
- (iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
- (iv) To assist in establishing a multilateral system of payments for current transactions and in eliminating foreign exchange restrictions that hamper world trade.
- (v) To give confidence to members by making the general resources of the Fund temporarily available under adequate safeguards to correct balance of payments maladjustments.
- (vi) To shorten the duration and lessen the degree of disequilibrium in members' international balances of payments.
- Key functions of the IMF: surveillance of the international monetary system and members' economic and financial policies; provision of Fund resources to members in need; delivery of technical assistance and financial services.
- Amendments: Articles have been amended seven times, with the latest amendment adopted on December 15, 2010 (effective January 26, 2016).
Membership, Quotas, and Subscriptions
- Membership (Article II):
- Original members: countries represented at the Bretton Woods Conference whose governments accept membership before December 31, 1945.
- Other members: open to countries at times and on terms prescribed by the Board of Governors.
- Quotas and subscriptions (Article III):
- Each member assigned a quota expressed in special drawing rights.
- Subscription of each member equals its quota and shall be paid in full to the Fund at the appropriate depository.
- Quota adjustment review: Board of Governors shall at intervals of not more than five years conduct a general review and, if appropriate, propose adjustments.
- An eighty-five percent majority of the total voting power required for any change in quotas.
- A seventy percent majority of the total voting power required for certain decisions under Article III, Section 3(d).
- Schedule A: Selected quotas (In millions of United States dollars)
- Australia 200
- Belgium 225
- Bolivia 10
- Brazil 150
- Canada 300
- Chile 50
- China 550
- Colombia 50
- Costa Rica 5
- Cuba 50
- Czechoslovakia 125
- Denmark* *
- Dominican Republic 5
- Ecuador 5
- Egypt 45
- El Salvador 2.5
- Ethiopia 6
- France 450
- Greece 40
- Guatemala 5
- Haiti 5
- Honduras 2.5
- Iceland 1
- India 400
- Iran 25
- Iraq 8
- Liberia 0.5
- Luxembourg 10
- Mexico 90
- Netherlands 275
- New Zealand 50
- Nicaragua 2
- Norway 50
- Panama 0.5
- Paraguay 2
- Peru 25
- Philippine Commonwealth 15
- Poland 125
- Union of South Africa 100
- Union of Soviet Socialist Republics 1200
- United Kingdom 1300
- United States 2750
- Uruguay 15
- Venezuela 15
- Yugoslavia 60
- Notes: "*The quota of Denmark shall be determined by the Fund after the Danish Government has declared its readiness to sign this Agreement but before signature takes place."
Exchange Arrangements and Members' Obligations
- Article IV obligations:
- Members undertake to collaborate to assure orderly exchange arrangements and promote a stable system of exchange rates.
- Specific member undertakings include:
- (i) endeavor to direct economic and financial policies toward fostering orderly economic growth with reasonable price stability;
- (ii) seek to promote stability by fostering orderly underlying economic and financial conditions;
- (iii) avoid manipulating exchange rates to prevent effective balance of payments adjustment or to gain unfair competitive advantage;
- (iv) follow exchange policies compatible with the undertakings.
- Notification requirement: each member shall notify the Fund, within thirty days after the date of the second amendment of this Agreement, of the exchange arrangements it intends to apply and notify promptly of any changes.
- Par values (Schedule C):
- Members with par values must ensure spot exchange rates between currencies with par values do not differ from parity by more than four and one-half percent unless the Fund adopts another margin by an eighty-five percent majority of total voting power.
- A member shall not propose a change in par value except to correct or prevent fundamental disequilibrium and only after consultation with the Fund.
- Fund surveillance: the Fund shall exercise firm surveillance over members' exchange rate policies and adopt specific guiding principles, respecting domestic social and political policies.
Operations, Resources, and Repurchase/Charges
- Structure (Introductory Article; Articles V, XVI):
- Fund shall maintain a General Department and a Special Drawing Rights Department.
- Operations and transactions involving special drawing rights conducted through the Special Drawing Rights Department; other operations through the General Department (General Resources Account, Special Disbursement Account, Investment Account).
- Conditions governing use of general resources (Article V, Section 3):
- Purchases from the Fund subject to conditions including need, adherence to Agreement provisions, reserve tranche purchase criteria, and not causing Fund holdings of the purchasing member's currency to exceed two hundred percent of its quota.
- Repurchase obligations (Article V, Section 7):
- Members shall repurchase Fund holdings of their currency subject to policies; repurchase not later than five years after purchase date, with possible installments during years three to five.
- Fund may prescribe repurchase periods by an eighty-five percent majority; alterations by a seventy percent majority where applicable.
- Charges and remuneration (Article V, Sections 8–9):
- Service charge on purchases; service charge on reserve tranche purchases shall not exceed one-half of one percent.
- Fund may levy charges on average daily balances of a member's currency held in General Resources Account when certain thresholds are exceeded.
- A seventy percent majority of the total voting power required for determination of rates of charge and rate of remuneration.
- Remuneration rate shall be the same for all members and not more than, nor less than four-fifths of, the rate of interest under Article XX, Section 3.
- Use and sale of gold and Special Disbursement Account (Article V, Section 12(f)):
- Sales of gold held on August 31, 1975: proceeds equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold shall be placed in the General Resources Account; any excess held in the Special Disbursement Account.
- Special Disbursement Account may be used for: transfers to General Resources Account (by seventy percent majority), balance of payments assistance on special terms to developing members (by eighty-five percent majority), and distributions to developing members that were members on August 31, 1975 in proportion to their quotas on that date (by eighty-five percent majority).
Special Drawing Rights (SDR) Framework
- Authority and valuation (Article XV):
- Fund authorized to allocate special drawing rights in accordance with Article XVIII.
- Method of valuation determined by the Fund by a seventy percent majority; an eighty-five percent majority required for change in the principle of valuation or a fundamental change in application.
- Participants and holdings (Articles XVI–XVII):
- Membership in Fund gives right to participation in the Special Drawing Rights Department; participants deposit instrument undertaking all obligations to become participants.
- Separation of operations and assets between General Department and SDR Department maintained.
- Fund may hold SDRs in the General Resources Account.
- Allocation, designation, reconstitution, and operations (Articles XVIII–XIX):
- Basic periods for allocations/cancellations: five years in duration; allocations/cancellations take place at yearly intervals unless otherwise provided.
- Rates of allocation expressed as percentages of quotas; cancellations as percentages of net cumulative allocations.
- Designation principles (Article XIX, Section 5): participants subject to designation if balance of payments and gross reserve position sufficiently strong; designations to promote balanced distribution of holdings, reconstitution, and reduction of negative balances.
- Reconstitution rules in Schedule G or rules adopted by the Fund; seventy percent majority required to adopt/modify/abrogate reconstitution rules.
- Schedule M: Special one-time allocation (selected exact terms)
- Net cumulative allocation target of 29.315788813 percent of quota as of September 19, 1997 for participants as of that date.
- Allocation mechanics and adjustments specified in Schedule M, including treatment of participants joining within three months of membership and special provisions for the Federal Republic of Yugoslavia (Serbia/Montenegro) under Executive Board Decision No. 10237-(92/150).
- Fund shall not allocate SDRs under Schedule M to participants that have notified in writing prior to allocation their desire not to receive the allocation.
- SDRs allocated to participants with overdue obligations shall be deposited and held in an escrow account until overdue obligations discharged.
Governance, Organs, and Decision Rules
- Governance structure:
- Board of Governors, Executive Board, Managing Director, Council, and other organs referenced (Schedules D, etc.).
- Voting majorities (selected exact thresholds across Articles):
- Seventy percent majority of total voting power required for certain decisions (e.g., rates of charge, remuneration rate, adoption of certain policies, adoption/termination of rules under specified provisions).
- Eighty-five percent majority of total voting power required for major decisions: changes in quotas; adoption of par value margins; decisions to allocate or cancel SDRs under Article XVIII (except for decreases in allocation rates in Section 3); decisions to use certain operations and transactions under Article V, Section 12(c)–(e); and other specified actions.
- Council (Schedule D):
- Councillors appointed by members or groups of members with votes cast by an Executive Director; Councillor qualifications include Governor, Minister, or person of comparable rank.
- Council supervises management and adaptation of the international monetary system and considers proposals pursuant to Article XXVIII(a) to amend the Articles of Agreement.
- Councillors entitled to cast votes allotted under Article XII, Section 5; rules for restricted sessions, alternates, and procedures set out.
Schedules and Transitional Provisions
- Schedule A: Initial quotas (see quotas listed above).
- Schedule B: Transitional provisions relating to repurchase obligations, gold equivalence, repurchase timing, and sales of up to 25 million ounces of fine gold held on August 31, 1975 for members and for benefit of developing members.
- Gold equivalence: 0.888 671 gram of fine gold shall be equivalent to one special drawing right.
- Sales provisions include price equivalent at time of sale to one special drawing right per 0.888 671 gram of fine gold and rules on placing proceeds in General Resources Account and Special Disbursement Account.
- Schedule C: Par values (procedures for establishing, changing, terminating par values; margin of four and one-half percent unless Fund adopts another margin by eighty-five percent majority).
- Schedule K: Administration of liquidation (priority of liabilities; detailed apportionment and redemption rules with exact percentages and timeframes, including distribution rules tied to quotas as of August 31, 1975).
- Schedule L: Suspension of voting rights (effects on appointment of Governors, Councillors, Executive Directors; participation limitations and specific time limits such as thirty days and ninety days where applicable).
- Schedule M: Special one-time allocation of SDRs (see SDR section above for numerical specifics and escrow rules).
- Schedule H and other Schedules referenced for settlement procedures and operational details.
Numeric and Procedural Highlights (selection of exact figures and thresholds)
- Adoption date: July 22, 1944.
- Original accepting countries: 29.
- Total Member countries that have signed and ratified: 190.
- Latest amendment adopted: December 15, 2010 (effective January 26, 2016).
- Entry into force condition: signed on behalf of governments having sixty-five percent of total quotas in Schedule A; Agreement shall not enter into force before May 1, 1945.
- Deadline for original acceptance by countries represented at Bretton Woods: December 31, 1945.
- Quota examples (Schedule A, in millions of United States dollars): United States 2750; United Kingdom 1300; Union of Soviet Socialist Republics 1200; France 450; China 550; India 400; Canada 300; Netherlands 275; Australia 200; Brazil 150; Poland 125; Czechoslovakia 125; Yugoslavia 60; Mexico 90; Norway 50; New Zealand 50; Cuba 50; Chile 50; Colombia 50; Uruguay 15; Philippine Commonwealth 15; Venezuela 15; Luxembourg 10; Bolivia 10; Iceland 1; Liberia 0.5; Panama 0.5; Nicaragua 2; Paraguay 2; El Salvador 2.5; Honduras 2.5.
- SDR gold parity used in multiple provisions: one special drawing right per 0.888 671 gram of fine gold.
- Sale of gold under Schedule B: up to 25 million ounces of fine gold held on August 31, 1975 for members that agree to buy it and up to 25 million ounces for benefit of developing members.
- Repurchase timing rules: repurchase not later than five years after the date on which a purchase was made; possible installment period beginning three years and ending five years after the date of purchase.
- Service charge cap on reserve tranche purchases: shall not exceed one-half of one percent.
- Special one-time SDR allocation proportion under Schedule M: 29.315788813 percent of quota as of September 19, 1997 for participants as of that date.
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