Selected Decisions and Selected Documents of the IMF, Thirty- Eighth Issue -- General Arrangements to Borrow

Prepared by the Legal Department of the IMF
As updated as of February 29, 2016

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ARTICLE VII
Borrowing

GENERAL ARRANGEMENTS TO BORROW

Preamble

In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system, the main industrial countries have agreed that they will, in a spirit of broad and willing cooperation, strengthen the Fund by general arrangements under which they will stand ready to make loans to the Fund up to specified amounts under Article VII, Section 1 of the Articles of Agreement when supplementary resources are needed to forestall or cope with an impairment of the international monetary system. In order to give effect to these intentions, the following terms and conditions are adopted under Article VII, Section 1 of the Articles of Agreement.

Paragraph 1. Definitions

As used in this decision the term:

  • (i) “Articles” means the Articles of Agreement of the International Monetary Fund;

  • (ii) “credit arrangement” means an undertaking to lend to the Fund on the terms and conditions of this decision;

  • (iii) “participant” means a participating member or a participating institution;

  • (iv) “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;

  • (v) “participating member” means a member of the Fund that has entered into a credit arrangement with the Fund;

  • (vi) “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;

  • (vii) “call” means a notice by the Fund to a participant to make a transfer under its credit arrangement to the Fund’s account;

  • (viii) “borrowed currency” means currency transferred to the Fund’s account under a credit arrangement;

  • (ix) “drawer” means a member that purchases borrowed currency from the Fund in an exchange transaction or in an exchange transaction under a stand-by or extended arrangement;

  • (x) “indebtedness” of the Fund means the amount it is committed to repay under a credit arrangement.

Paragraph 2. Credit Arrangements

A member or institution that adheres to this decision undertakes to lend its currency to the Fund on the terms and conditions of this decision up to the amount in special drawing rights set forth in the Annex to this decision or established in accordance with paragraph 3(b).

Paragraph 3. Adherence

  • (a) Any member or institution specified in the Annex may adhere to this decision in accordance with paragraph 3(c).

  • (b) 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 to this decision, and, if the Fund shall so agree and no participant object, the member or institution may adhere in accordance with paragraph 3(c). When giving notice of its willingness to adhere under this paragraph 3(b) a member or institution shall specify the amount, expressed in terms of the special drawing right, of the credit arrangement which 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.

  • (c) A member or institution shall adhere to this decision by depositing with the Fund an instrument setting forth that it has adhered in accordance with its law and has taken all steps necessary to enable it to carry out the terms and conditions of this decision. On the deposit of the instrument 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

This decision shall become effective when it has been 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

The amounts of participants’ credit arrangements may be reviewed from time to time in the light of developing circumstances and changed with the agreement of the Fund and all participants.

Paragraph 6. Initial Procedure

When a participating member or a 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 that the exchange transaction or stand-by or extended arrangement is necessary in order to forestall or cope with an impairment of the international monetary system, and that the Fund’s resources need to be supplemented for this purpose, he shall initiate the procedure for making calls under paragraph 7.

Paragraph 7. Calls

  • (a) The Managing Director shall make a proposal for calls for an exchange transaction or for future calls for exchange transactions under a stand-by or extended arrangement only after consultation with Executive Directors and participants. A proposal shall become effective only if it is accepted by participants and the proposal is then approved by the Executive Board. Each participant shall notify the Fund of the acceptance of a proposal involving a call under its credit arrangement.

  • (b) The currencies and amounts to be called under one or more of the credit arrangements shall be based on the present and prospective balance of payments and reserve position of participating members or members whose institutions are participants and on the Fund’s holdings of currencies.

  • (c) Unless otherwise provided in a proposal for future calls approved under paragraph 7(a), 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.

  • (d) If a participant on which calls may be made pursuant to paragraph 7(a) for a drawer’s purchases under a stand-by or extended arrangement gives notice to the Fund that in the participant’s opinion, based on the present and prospective balance of payments and reserve position, calls should no longer be made on the participant or that calls should be for a smaller amount, the Managing Director may propose to other participants that substitute amounts be made available under their credit arrangements, and this proposal shall be subject to the procedure of paragraph 7(a). The proposal as originally approved under paragraph 7(a) shall remain effective unless and until a proposal for substitute amounts is approved in accordance with paragraph 7(a).

  • (e) When the Fund makes a call pursuant to this paragraph 7, the participant shall promptly make the transfer in accordance with the call.

Paragraph 8. Evidence of Indebtedness

  • (a) The Fund shall issue to a participant, on its request, nonnegotiable instruments evidencing the Fund’s indebtedness to the participant. The form of the instruments shall be agreed between the Fund and the participant.

  • (b) Upon repayment of the amount of any instrument issued under paragraph 8(a) and all accrued interest, the instrument shall be returned to the Fund for cancellation. If less than the amount of any such instrument is repaid, the instrument shall be returned to the Fund and a new instrument for the remainder of the amount shall be substituted with the same maturity date as in the old instrument.

Paragraph 9. Interest

  • (a) The Fund shall pay interest on its indebtedness at a rate equal to the combined market interest rate computed by the Fund from time to time for the purpose of determining the rate at which it pays interest on holdings of special drawing rights. A change in the method of calculating the combined market interest 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; provided that if a participant so requests at the time this agreement is reached, the change shall not apply to the Fund’s indebtedness to that participant outstanding at the date the change becomes effective.

  • (b) Interest shall accrue daily and shall be paid as soon as possible after each July 31, October 31, January 31, and April 30.

  • (c) 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 the use of its general resources and stand-by and extended arrangements, including those relating to the period of use, shall apply to purchases of currency borrowed by the Fund. Nothing in this decision shall affect the authority of the Fund with respect to requests for the use of its resources by individual members, and access to these resources by members 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

  • (a) Subject to the other provisions of this 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 for whose purchase participants make transfers is committed to repurchase at a fixed date earlier than five years after its purchase, the Fund shall repay the participants at that date. Repayment under this paragraph 11(a) or under paragraph 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. Repayments to a participant under paragraph 11(b) and (e) shall be credited against transfers by the participant for a drawer’s purchases in the order in which repayment must be made under this paragraph 11(a).

  • (b) Before the date prescribed in paragraph 11(a), the Fund, after consultation with a participant, may make repayment to the participant in part or in full. The Fund shall have the option to make repayment under this paragraph 11(b) in the participant’s currency, or 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, of the Articles of Agreement unless the participant agrees to accept special drawing rights above that limit in such repayment, or, with the agreement of the participant, in other currencies that are actually convertible.

  • (c) 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 the Fund is indebted to a participant as a result of transfers to finance a reserve tranche purchase by a drawer and the Fund’s holdings of the drawer’s currency that are not subject to repurchase are reduced as a result of net sales of that currency during a quarterly period covered by an operational budget, the Fund shall repay at the beginning of the next quarterly period an amount equivalent to that reduction, up to the amount of the indebtedness to the participant.

  • (d) Repayment under paragraph 11(c) shall be made in proportion to the Fund’s indebtedness to the participants that made transfers in respect of which repayment is being made.

  • (e) Before the date prescribed in paragraph 11(a) a participant may give notice representing that there is a balance of payments need for repayment of part or all of the Fund’s indebtedness and requesting such repayment. The Fund shall give the overwhelming benefit of any doubt to the participant’s representation. Repayment shall be made after consultation with the participant in the currencies of other members that are actually convertible, or made 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, notwithstanding the expectation that the participants will provide the necessary balance, 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. For all of the purposes of this paragraph 11 transfers under this paragraph 11(e) shall be deemed to have been made at the same time and for the same purchases as the transfers by the participant obtaining repayment under this paragraph 11(e).

  • (f) 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.

  • (g) 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 the drawer’s purchases.

  • (h) When any repayment is made to a participant, the amount that can be called for under its credit arrangement in accordance with this decision shall be restored pro tanto.

  • (i) The Fund shall be deemed to have discharged its obligations to a participating institution to make repayment in accordance with the provisions of this paragraph or to pay interest in accordance with the provisions of paragraph 9 if the Fund transfers an equivalent amount in special drawing rights to the member in which the institution is established.

Paragraph 12. Rates of Exchange

  • (a) 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.

  • (b) For all of the 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 under this decision shall be in writing or by rapid means of communication and shall be 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 shall not be necessary for the 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

  • (a) 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.

  • (b) 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 of the Fund 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

  • (a) 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 that may be decided pursuant to paragraph 19(b). When considering a renewal of this decision for the period following the five-year period referred to in this paragraph 19(a), the Fund and the participants shall review the functioning of this decision, including the provisions of paragraph 21.1

  • (b) This decision may be renewed for such period or periods 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 to the decision as renewed. Withdrawal of adherence in accordance with this paragraph 19(b) by a participant, whether or not included in the Annex, shall not preclude its subsequent adherence in accordance with paragraph 3(b).

  • (c) If this 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 the termination or expiration of the decision until repayment is completed. If a participant withdraws its adherence to this decision in accordance with 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) of the decision as of the date of the withdrawal shall nevertheless continue to apply to any indebtedness of the Fund under the former credit arrangement until repayment has been completed.

Paragraph 20. Interpretation

Any question of interpretation raised in connection with this decision which does not fall 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 the purpose of this paragraph 20 participants shall be deemed to include those former participants to which paragraphs 8 through 14, 17 and 18(b) continue to apply pursuant to paragraph 19(c) to the extent that any such former participant is affected by a question of interpretation that is raised.

Paragraph 21. Use of Credit Arrangements for Nonparticipants

  • (a) 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 the provisions of this decision relating to calls shall apply, except as otherwise provided in paragraph 21(b).

  • (b) The Managing Director may initiate the procedure for making calls under paragraph 7 in connection with requests referred to in paragraph 21(a) if, after consultation, he considers that the Fund faces an inadequacy of resources to meet actual and expected requests for financing that reflect the existence of 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 for calls pursuant to paragraph 21(a) and (b), the Managing Director shall pay due regard to potential calls pursuant to other provisions of this decision.

Paragraph 22. (Abrogated)2

Paragraph 23. Associated Borrowing Arrangements

  • (a) 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 the official institution undertakes to make loans to the Fund for the same purposes as, and on terms comparable to, those made by participants under this decision, 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. For the purposes of this decision such calls or requests shall be treated as if they were calls or requests in respect of a participant.

  • (b) Nothing in this decision shall preclude the Fund from entering into any other types of borrowing arrangements, including an arrangement between the Fund and a lender, involving an association with participants, that does not contain the authorizations referred to in paragraph 23(a).

ANNEX

Participants and Amounts of Credit Arrangements3

Amount in Special Drawing Rights
  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
17,000,000,000

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,

8733-(87/159), effective December 26, 1988,

10175-(92/129), October 28, 1992,

10176-(92/129), October 28, 1992,

11609-(97/112), November 19, 1997,

12879-(02/113), November 12, 2002,and

13997-(07/100),

November 15, 2007

Letter from Mr. Baumgartner, Minister of Finance, France to Mr. Dillon, Secretary of the Treasury, United States

December 15, 1961

Dear Mr. Secretary:

The purpose of this letter is to set forth the understandings reached during the recent discussions in Paris with respect to the procedure to be followed by the Participating Countries and Institutions (hereinafter referred to as “the participants”) in connection with borrowings by the International Monetary Fund of Supplementary Resources under credit arrangements which we expect will be established pursuant to a decision of the Executive Directors of the Fund.

This procedure, which would apply after the entry into force of that decision with respect to the participants which adhere to it in accordance with their laws, and which would remain in effect during the period of the decision, is as follows:

  • A. A participating country which has need to draw currencies from the International Monetary Fund or to seek a stand-by agreement with the Fund in circumstances indicating that the Supplementary Resources might be used, shall consult with the Managing Director of the Fund first and then with the other participants.

  • B. If the Managing Director makes a proposal for Supplementary Resources to be lent to the Fund, the participants shall consult on this proposal and inform the Managing Director of the amounts of their currencies which they consider appropriate to lend to the Fund, taking into account the recommendations of the Managing Director and their present and prospective balance of payments and reserve positions. The participants shall aim at reaching unanimous agreement.

  • C. If it is not possible to reach unanimous agreement, the question whether the participants are prepared to facilitate, by lending their currencies, an exchange transaction or stand-by ­arrangement of the kind covered by the special borrowing arrangements and requiring the Fund’s resources to be supplemented in the general order of magnitude proposed by the Managing Director, will be decided by a poll of the participants.

  • The prospective drawer will not be entitled to vote. A ­favorable decision shall require the following majorities of the participants which take part in the vote, it being understood that abstentions may be justified only for balance of payments reasons as stated in paragraph D:

    • (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 the decision in paragraph C is favorable, there shall be further consultations among the participants, and with the Managing Director, concerning the amounts of the currencies of the respective participants which will be loaned to the Fund in order to attain a total in the general order of magnitude agreed under paragraph C. If during the consultations a participant gives notice that in its opinion, based on its present and prospective balance of payments and reserve position, calls should not be made on it, or that calls should be for a smaller amount than that proposed, the participants shall consult among themselves and with the Managing Director as to the additional amounts of their currencies which they could provide so as to reach the general order of magnitude agreed under paragraph C.

  • E. When agreement is reached under paragraph D, each participant shall inform the Managing Director of the calls which it is prepared to meet under its credit arrangement with the Fund.

  • F. If a participant which has loaned its currency to the Fund under its credit arrangement with the Fund subsequently requests a reversal of its loan which leads to further loans to the Fund by other participants, the participant seeking such reversal shall consult with the Managing Director and with the other participants.

For the purpose of the consultative procedures described above, participants will designate representatives who shall be empowered to act with respect to proposals for use of the Supplementary Resources.

It is understood that in the event of any proposals for calls under the credit arrangements or if other matters should arise under the Fund decision requiring consultations among the participants, a consultative meeting will be held among all the participants. The representative of France shall be responsible for calling the first meeting, and at that time the participants will determine who shall be the Chairman. The Managing Director of the Fund or his representative shall be invited to participate in these consultative meetings.

It is understood that in order to further the consultations envisaged, participants should, to the fullest extent practicable, use the facilities of the international organizations to which they belong in keeping each other informed of the developments in their balances of payments that could give rise to the use of the Supplementary Resources.

These consultative arrangements, undertaken in a spirit of international cooperation, are designed to insure the stability of the international payments system.

I shall appreciate a reply confirming that the aforegoing represents the understandings which have been reached with respect to the procedure to be followed in connection with borrowings by the International Monetary Fund under the credit arrangements to which I have referred.

I am sending identical letters to the other participants—that is, Belgium, Canada, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom. Attached is a verbatim text of this letter in English. The French and English texts and the replies of the participants in both languages shall be equally authentic. I shall notify all of the participants of the confirmations received in response to this letter.

1 Ed. Note: The GAB has been renewed for periods of five years from December 26, 1988, 1993, 1998, 2003, 2008, and 2013 (the latest renewal was adopted by Decision No. 15262-(12/105) November 13, 2012).

2 Ed. Note: See Decision No. 10175-(92/129), October 28, 1992.

3 The Borrowing Agreement with Saudi Arabia under the General Arrangements to Borrow is reproduced in Selected Decisions and Documents of the IMF, 32nd Issue, pp. 474-82.

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