Selected Decisions and Selected Documents of the IMF, Thirty- Eighth Issue -- Supplementary Financing Facility: Subsidy Account—Instrument

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

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GENERAL
Subsidy Account

SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT—INSTRUMENT

To help fulfill its purposes, the International Monetary Fund (hereinafter called the Fund) has adopted this Instrument establishing the Supplementary Financing Facility Subsidy Account (hereinafter called the Account), which shall be governed by and administered in accordance with the terms of this Instrument.

Section 1. Purpose

The purpose of the Account shall be to reduce the cost to eligible developing members, in accordance with Section 8, of using the Fund’s resources under the policies of the Fund referred to in Section 7 of this Instrument.

Section 2. Resources

The 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 3. Donations

The Fund may accept donations of resources for the Account in such amounts and under such arrangements as may be agreed between the Fund and the respective donors, consistent with the provisions of this Instrument.

Section 4. Amounts Transferred from Special Disbursement Account

  • (a) Subject to (b) below, 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 to the Account shall be made as the amounts are received in the Special Disbursement Account.

  • (b) If, on the basis of reasonable estimates, the Executive Board determines at any time that amounts already transferred to the Account, together with the other assets available to the Account, are sufficient to carry out the operations and to meet the liabilities of the Account in full, it may authorize the suspension of further transfers from, and the re-transfer of any surplus back, to the Special Disbursement Account, provided that transfers shall be resumed, up to the total amount specified in (a), if this proves necessary to complete the operations of the Account and to discharge its liabilities in full.

Section 5. Borrowing

  • (a) The Fund may borrow resources for the Account on such terms and conditions as may be agreed between the Fund and the respective lenders, consistent with the provisions of this Instrument. In undertaking such borrowing, the Fund shall make every effort to obtain loans on concessionary terms. The aggregate amount of such borrowing, including the interest payable on the borrowing, shall not exceed the SDR 750 million that could be transferred to the Account from the Special Disbursement Account under Section 4.

  • (b) Payments of interest and repayments of the principal amount under each such loan shall be made exclusively from the resources of the Account. All resources of the Account shall be available for such payments, except that donations shall not be used for this purpose without the consent of the donor. Resources transferred to the Account from the Special Disbursement Account pursuant to Section 4 shall be applied, as necessary, to make payments due under such loans, including the interest payable thereon, in priority to other uses of such resources.

Section 6. Investment

Any balances of currency held in the Account and not immediately needed to carry out the operations or to meet the liabilities of the Account shall be invested promptly in accordance with Section 14.

Section 7. Authorized Subsidy

The Fund shall draw upon the resources of the Account, in such order as it may determine, to reduce the cost to eligible members of the periodic charges paid by them to the General Resources Account of the Fund on holdings of their currencies acquired by the Fund as a result of all purchases under the policies referred to below, in respect of the entire periods for which such charges were paid:

  • (a) under the Supplementary Financing Facility of the Fund established by Executive Board Decision No. 5508-(77/127), and

  • (b) under the policy on exceptional use of the Fund’s resources incorporated in Executive Board Decision No. 5732-(78/65), as amended by Executive Board Decision No. 5998-(79/1).

Section 8. Eligible Members

  • (a) Subject to (b) below, members eligible to receive a subsidy under Section 7 shall be those members 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 to receive a subsidy under Section 7 shall be 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 of the member with the highest per capita income in 1979 that was eligible to receive assistance from the Trust Fund, that member’s per capita income determined according to the same data.

Section 9. Calculation and Payment of the Subsidy

  • (a) The amount of the subsidy shall be calculated as a percentage per annum of the currency holdings referred to in Section 7 and, subject to Section 10, shall be determined by the Fund in the light of the resources available to the Account. The 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 from the Account.

  • (b) Eligible members that, in accordance with Section 8, 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 calculated pursuant to (a) above. All other eligible members shall receive a subsidy equal to one half of that amount.

  • (c) The amount of subsidy determined pursuant to (a) and (b) above 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 pursuant to Section 9 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) that may be made to cover deferred income and placements to the Special Contingent Account shall not be taken into consideration.

Section 11. Administration of the Account

The Account shall be administered by the Fund as Trustee. Subject to the provisions of this Instrument, the Fund in administering the Account shall apply the same rules and procedures as apply to operations and transactions in the General Resources Account of the Fund.

Section 12. Separation of Assets

  • (a) The resources of the Account shall be held separately from the resources of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Account.

  • (b) Except to the extent contemplated in Section 4, property and assets of the Fund held or administered in its other accounts shall not be available or used to discharge liabilities or to meet losses arising from the operations of the Account.

Section 13. Exchange of Resources

  • (a) Resources donated pursuant to Section 3 or loaned pursuant to Section 5 shall be paid in a freely usable currency, provided that a donor or lender which is a member or the fiscal agency of a member may, at its option, pay in the currency of the member. Amounts paid in a member’s currency shall, at the time of payment, be exchanged by the member for freely usable currency, if so requested by the Fund. Donations and loans may also be made available in special drawing rights in accordance with arrangements made by the Fund for the holding and use of such special drawing rights.

  • (b) The Fund may sell or exchange any of the resources of the Account, provided that balances of currencies held in the Account may be exchanged only with the concurrence of the issuers of such currencies.

Section 14. Authorized Investments

Investments pursuant to Section 6 may be made in any of the following: (a) marketable obligations issued by an international financial organization and denominated in special drawing rights or in the currency of a member of the Fund; (b) marketable obligations issued by a member or by a national official financial institution of a member and denominated in special drawing rights or in the currency of that member; and (c) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in special drawing rights 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.

Section 15. Administrative Expenses

In order to compensate the Fund for the expenses of carrying out the business of the Account, 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, on the basis of a reasonable estimate of its expenses, considers such variation to be appropriate.

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.

Section 17. Amendment

The Fund may amend the provisions of this Instrument, except this Section and Sections 1, 4, 5(b), 12, and 18, and 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 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, and 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.

Decision No. 6683-(80/185) G/TR,

December 17, 1980,

as amended by Decision Nos. 8523-(87/25) SBS, February 6, 1987,

and 8941-(88/122) SBS,

August 2, 1988

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