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Selected Decisions of theInternational Monetary Fund

and Selected Documents

Eighth IssueInternational Monetary Fund

Washington, D.C.May 10, 1976

©International Monetary Fund. Not for Redistribution

Second Printing September 1976, with corrections

Third Printing August 1977

Fourth Printing October 1978

Fifth Printing July 1979


PREFACE

This volume is the Eighth Issue of Selected Decisions of theInternational Monetary Fund and Selected Documents. It containsthe decisions, interpretations, and resolutions of the ExecutiveDirectors and the Board of Governors of the International Mone-tary Fund to which frequent reference is made in the currentactivities of the Fund. In addition, the volume contains certaindocuments relating to the Fund and the United Nations.

This issue contains most of the decisions that were publishedin earlier issues (September 1962, September 1963, January 1965,April 1970, July 1971, September 1972, and January 1, 1975) butnot decisions that have ceased to be effective or that are referredto less frequently than in the past. With few exceptions, the deci-sions in this volume are general in application and relate to obli-gations, policies, or procedures under the Articles of Agreement.Subject to these few exceptions, decisions that affect individualmembers are not included. Decisions of the Fund that are in-cluded in the By-Laws and the Rules and Regulations are generalin application but are not reproduced in this volume.

The Executive Directors have recommended a second amend-ment of the Articles of Agreement of the Fund, upon the adop-tion of which all of the decisions in this volume will have to bereviewed from the point of view of consistency with the Articlesas amended. A new edition of this collection will be issued assoon as possible after the effective date of the second amendment.

JOSEPH GOLDGeneral Counsel

andDirector, Legal Department

iii


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CONTENTS

Page

PREFACE iiiSELECTED DECISIONS OF THE EXECUTIVE DIRECTORS vSELECTED RESOLUTIONS OF THE BOARD OF GOVERNORS . . . xivSELECTED DOCUMENTS xvLIST OF DECISIONS BY NUMBER xviINTERPRETATIONS UNDER ARTICLE XVIII (a) xix

Selected Decisions of the Executive Directors

ARTICLE 111 SECTION 2

ADJUSTMENT OF QUOTAS (408-2) 3

ARTICLE III, SECTION 3

SUBSCRIPTIONS

Gold and Currency Subscribed to the Fund and Ac-counting by Members for Transactions with the Fund(170-3) 4

Net Official Holdings: Principles of Interpretation(298-3) 4


PAYMENTS WHEN QUOTAS ARE CHANGED

Interpretation (595-3) 8

ARTICLE IV, SECTION 2

PRODUCTION SUBSIDIES AND PREMIUM PRICES FOR GOLD

Statement of Policy Concerning Subsidies for GoldProduction (233-2) 9

Premium Gold Transactions: Statement to Members(75-(705)) 10

V


CONTENTS

PageARTICLE IV, SECTIONS 3, 4, 5, AND 8

PAR VALUES AND MARGINS

Foreign Exchange Dealings Based on Parity: Article IV,Section 3 (269-2) 13

Exchange Dealings and Margins Under Conditions ofIncreasing Convertibility (904-(59/32) ) 13

Central Rates and Wider Margins: A TemporaryRegime (3463-(71/126)) 14

Central Rates and Wider Margins: A TemporaryRegime—Revised Decision (4083-(73/104) ) 18

Guidelines for the Management of Floating ExchangeRates (4232-(74/67)) 21

Interpretation of Articles of Agreement (77-2) 30Purchase and Sale of Gold Within the Meaning of

Article IV, Section 4(b) (411-1) 31Changes in Par Values: Fundamental Disequilibrium

(278-3) 31Rates for Computations and Adjustment of the Fund's

Holdings of Currencies (3637-(72/41) G/S, asamended by 5074-(76/73) G/S) 32

Adjustment of Fund's Holdings of Currencies(4667-(7V82)) 33

ARTICLE V, SECTIONS 3, 4, AND 5

USE OF FUND'S RESOURCES AND STAND-BY ARRANGEMENTS

Interpretation of Articles of Agreement (71-2) 35Use of Fund's Resources for Capital Transfers (1238-

(61/43)) 35Use of Fund's Resources: Meaning of Article V, Sec-

tion 3(*) (i) (284-4) 35Use of Fund's Resources: Meaning of "Consistent with

the Provisions of This Agreement" in Article V,Section 3 (287-3) 36

vi


CONTENTS

Page

Extent of Drawing Rights: Meaning of Article V, Sec-tion 3(*) (Hi) (451-(55/52)} .................. 36

Use of Fund's Resources and Repurchases (702-

Increase in Credit Tranches Under the Fund's TranchePolicies (4934-(76/5)) ........................ 41

Stand-By Credit Arrangements (15 5- (52/57)) 42I. Use of Fund's Resources

and RepurchasesII. Stand-By Credit Arrange-

(270-(53/95)9 asamended by 876-(59/15) and U .51-(61/6)) 43ments

Stand-By Arrangements (876-(59/15)) 47Use of Fund's Resources and Stand-By Arrangements

(2603- (68/132)) 47Stand-By Arrangements: Refund of Charges (1345-

(62/23), as amended by 2620-(68/141)) 49Procedure for Purchases Under Stand-By Arrangements

(3006-(70/24)) 50Extended Fund Facility (4377-(74/ll4)9 4934-(76/5)) 50Charge for Extended Arrangements (4720-(75/114)) 54Use of Fund's Resources: Limitation and Ineligibility

Under Article V, Section 5 (284-3) 55Use of Fund's Resources: Postponement and Limita-

tion Under Article V, Section 5 (286-7 ) 55Use of Fund's Resources: Meaning of "Is Using" in

Article V, Section 5 (292-3) 56Currencies to Be Drawn and to Be Used in Repurchases(1371-(62/36)) 56

Compensatory Financing of Export Fluctuations (4912-

(75/207)) 62The Problem of Stabilization of Prices of Primary

Products (2772-(69/47), as amended by 4913-(75/207)) 66

vii

37(52/11))


CONTENTS

Page

Fourth International Tin Agreement: Buffer StockFinancing Facility (3179-(70/102), 3351-(71/5l)) 67

Gold Tranche Purchases Under Article V, Section 3 (d)(2836-(69/87)) 69

Gold Tranche Purchases and Buffer Stock FinancingFacility (3386-(71/83)) 70

Facility to Assist Members in Payments DifficultiesResulting from Initial Impact of Increased Costs ofImports of Petroleum and Petroleum Products (4241-(74/67), 4393-(74/121), 4^29- (74/1 ̂ 3)) 70

Gold Tranche and Purchases Under the Oil Facility(433 7-(74/102)) 76

Oil Facility for 1975 (4634-(7 5/47)) 76

Purchases Under the Oil Facility for 1975: Prior Useof Gold Tranche (4638-(75/47)) 78

Oil Facility for 1975: Review of Decision (4769-(75/133)) 78

Second Review (4874-(75/ISO)) 79

Third Review (4900-(75/198)) 80

Fourth Review (4954-(76/16)) 80

Final Review (4986-(76/47)) 81

Subsidy Account (4773-(7 5/136)) 81

Gold Collateral Transactions (1543-(63/39)) 83

Exchange Transactions Prior to the Establishment ofInitial Par Value (1687-(64/22)) 88

ARTICLE V, SECTION 6

SALES OF GOLD TO THE FUND

Sale of Gold to the Fund by Participant DesignatedUnder Article XXV, Section 5 (2916-(69/127)) . . . 89

viii


CONTENTS

PageARTICLE V, SECTION 7

REPURCHASE OBLIGATIONS

Effect of Payment of Gold Subscriptions on RepurchaseObligations (124-2) 90

Repurchase Obligations: Article V, Section 7(b)(447-5} 90

Repurchase Obligations: Article V, Section 7(c)(419-1) 91

Repurchase Obligations: Article V, Section 7(c)(iii)and (iv) and Schedule B, Paragraph l(d) and (e)(3049-(70/44)) 91

Voluntary Repurchases (7-(648)) 93Repurchase and Rule G-7 (ll9-(52/30)) 94Gold Payments Under Article V, Section 7(b) Amount-

ing to Less Than One Bar (4087-(73/105)) 94


FUTURE CHANGES IN CHARGES ON FUND'S HOLDINGS OFMEMBERS' CURRENCIES IN EXCESS OF QUOTA (4239-

(74/67)) 95

ARTICLE VI, SECTION 1

USE OF FUND'S RESOURCES FOR CAPITAL TRANSFERS

(See also page 35) 96


CONTROLS ON CAPITAL TRANSFERS (54l-(56/39)) 97

ARTICLE VII, SECTION 2

BORROWING

General Arrangements to Borrow (1289-(62/1)) 98First Renewal (1951-(65/54)) Ill

ix


CONTENTS

Page

Second Renewal (28^8-(69/96)) 112Third Renewal (4421-(74/132)) 112

General Arrangements to Borrow: Association ofSwitzerland (1712-(64/29)) 114

First Extension of Association of Switzerland (2377-(67/8-5)) 117

Second Extension of Association of Switzerland(3363-(71/60)) 119

Third Extension of Association of Switzerland (4858-(75/172)) 120

Borrowing in Connection with Oil Facility (4242-(74/67)) 122

Borrowing in Connection with Oil Facility for 1975(4635-(75/47)) 127

Amendments of Agreements with Lenders for the OilFacility

a. Borrowing (4916-(75/208)) 128b. Authorization to Make Calls (474l-(75/120),

4917-(75/208)) 128c. Order of Use (4918-(75/208)) 129d. Payment of Interest (4490-(74/140), 4636-

(75/47), 4919-(75/208)) 129

ARTICLE VIII SECTION 2(b)

UNENFORCEABILITY OF EXCHANGE CONTRACTS

Unenforceability of Exchange Contracts: Fund's Inter-pretation of Article VIII, Section 2(b) (446-4) 131

ARTICLE VIII AND ARTICLE XIV

PAYMENTS RESTRICTIONS

Payments Restrictions for Security Reasons: Fund Juris-diction (!44-(52/5l)) 133

X


CONTENTS

Page

Bilateralism and Convertibility (433-(55/42)) ....... 134Retention Quotas: Decision and Letter of Transmittal

(201-(53/29)) ............................... 135Discrimination for Balance of Payments Reasons (9-5-5-

(59/45)) ................................... 138Article VIII and Article XIV (1 034- (60/27)) ....... 139

PAYMENTS ARREARS (3153-(70/95)) .................. 142

PAYMENTS POLICIES

Consultations on Members' Policies in Present Circum-stances (4l34-(74/4)) ........................ 144

MULTIPLE CURRENCY PRACTICES

Statement to Members Transmitting Fund's Decisionson Multiple Currency Practices (237-2) .......... 145

Multiple Currency Practices (649- (^7/33)) ......... 152Multiple Currency Practices and Exchange Rates: Fund

Approval (3504-(71/134)) ................... 154

VOLUNTARY DECLARATION ON TRADE AND OTHER CUR-RENT ACCOUNT MEASURES (42 5 4- (74/7 5)) .......... 155

ARTICLE IX, SECTION 7

PRIVILEGE FOR COMMUNICATIONS

Interpretation of Article IX, Section 7 (534-3) ...... 158

ARTICLE XII, SECTION 3

EXECUTIVE DIRECTORS

Interpretation of Article XII, Sections 3(£)(i) and3(/) (2-1) 160

xi


CONTENTS

Page

Executive Directors: Article XII, Section 3(c) (574-2,as amended by 2620-(68/14l)) 160

Additional Appointed Directors (.597-4) 161Adjustment of Quota and Voting Power (180-5) 161


ESTABLISHMENT OF A GENERAL RESERVE FROM NET IN-COME (753-(58/17)) 162

ARTICLE XIV, SECTION 4

RESTRICTIONS ON PAYMENTS AND TRANSFERS: WITH-DRAWAL

Meaning of "Exceptional Circumstances" in ArticleXIV, Section 4 (117-1) 163

ARTICLE XV, SECTION 2

INTERPRETATION (343-(j54/47)) 164

ARTICLE XVII

AMENDMENTS OF THE ARTICLES OF AGREEMENT

Board of Governors Resolution No. 22-8: Report ofExecutive Directors and Proposed Amendment to theArticles of Agreement (2493-(68/74)) 165

Board of Governors Resolution No. 29-10: Report ofExecutive Directors and Proposed Second Amend-ment to the Articles of Agreement (5049-(76/5l)) . 166

ARTICLE XIX

MONETARY RESERVES AND OFFICIAL HOLDINGSNet Official Holdings: Principles of Interpretation

(298-3) 167

xii


CONTENTS

Page

BALANCES OF ARTICLE XIV CURRENCIES DEEMED CON-VERTIBLE IN ACCORDANCE WITH ARTICLE XIX (g)

Indonesian Rupiah (4291 -(74/88)) 171Spanish Peseta (4279-(74/83)) 171Venezuelan Bolivar (4392-(74/120)) 171

ARTICLE XX, SECTION 4(i)

USE OF FUND'S RESOURCES: POSTPONEMENT UNDERARTICLE XX, SECTION 4(/) (284-2) 172

ARTICLE XXV, SECTION 6(a)

PRINCIPLES AND PROCEDURES FOR RECONSTITUTION (3457-(71/121) G/S, as amended by 382.9-(72/144) S and 4330-(74/101) S; 3829-(72/144) S) 173

ARTICLE XXV, SECTION 7

USE OF SPECIAL DRAWING RIGHTS IN REPURCHASES ANDPAYMENT OF CHARGES

Exclusion of Special Drawing Rights: Financial YearEnding April 30, 1970 (2901 -(69/122) G/S) 175

Exclusion of Special Drawing Rights: Financial YearsEnding April 30, 1971 and 1972 (3034-(70/3£)) - - 175

Exclusion of Special Drawing Rights: Financial YearEnding April 30, 1970 (3032-(70/38) G/S) 176

Exclusion of Special Drawing Rights: Financial YearsEnding April 30, 1971 and 1972 (3320-(77/34)G/S) 176

Use of Special Drawing Rights in Repurchases OutsideArticle V, Section l(b) (2901 -(69/122) G/S, 3188-(70/106) G/S) 177

xiii


CONTENTS

Page

TRANSFER OF SPECIAL DRAWING RIGHTS HELD IN THE GEN-ERAL ACCOUNT TO PARTICIPANTS MAKING PURCHASESFROM THE FUND (34l4-(71/98) G/S) 178

ARTICLE XXV1 } SECTION 5

SPECIAL DRAWING ACCOUNT: PAYMENT OF INTEREST,CHARGES, AND ASSESSMENTS (3010-(70/25) G/S) 179

SCHEDULE B

CALCULATION OF REPURCHASE OBLIGATIONS

Calculation of Monetary Reserves (486-2) 180Calculation of Members' Repurchase Obligations:

Schedule B, Paragraph 3 (510-2) 181

GENERAL

FUND ASSISTANCE IN GOLD TRANSACTIONS

Members' Gold Transactions (103-(52/12)) 182Fund Assistance in Gold Transactions (3l6-(54/27)) . 182Fund Assistance in Gold Transactions (572-(56/55)) . 183Fund Assistance in Gold Transactions (1033-(60/26)) 183Fund Assistance in Gold Transactions (1116-(60/51)) 184

TRUST FUND (5069-(76/72)) 185

* * * *

Selected Resolutions of the Board of Governors

A. Review of Reconstitution Pursuant to Article XXV,Section 6(1?) of the Articles of Agreement (Reso-lution No. 28-2) 199

B. Prescription of the Bank for International Settle-ments as a Holder of Special Drawing Rights(Resolution No. 29-1) 203

xiv


CONTENTS

Page

C. Composite Resolution on the Work of the Ad HocCommittee on Reform of the International Mone-tary System and Related Issues and on a Programof Immediate Action (Resolutions Nos. 29-7,29-8, 29-9; 29-10) 207

D. Increases in Quotas of Members—Sixth GeneralReview (Resolution No. 31-2) 222

Selected Documents

A. Agreement Between the United Nations and theInternational Monetary Fund 227

B. United Nations Convention on the Privileges andImmunities of the Specialized Agencies, AnnexV, and List of Members Which Have Acceptedthe Convention with Respect to the Fund as ofMay 10, 1976 235

Index 259

X V


LIST OF DECISIONS

LIST OF

Number

2-171-2

117-1124-2

170-3180-5233-2237-2269-2278-3284-2284-3284-4286-1287-3292-3298-3408-2411-1419-1446-4447-5486-2510-2534-3574-2, as amended

by2620-(68/l4l)595-3597-4

7-(648)75-J705)

102-(52/ll)103-(52/12)

DECISIONS BY NUMBER

Page

16030,35

163904

1619

1451331

1725535553656

4,1673

3191

13190

180181158

1608

161931037

182

Number

119-(52/30)144-02/51)155-(52/57)201-(53/29)

Page

9413342

135270-(53/95), as amended

by876-(59/15)and1151-(6l/6)

3l6-(54/27)343-(54/47)433-(55/42)451-(55/52)54l-(56/39)572-(56/55)649-(57/33)753-(58/17) 876-(59/15), see also

270-(53/95)904-(59/32)

955-(59/45)1033- (60/26)

1034-(60/27)111 6- 1 60 / 5 1 ^

/1 151- (61/6), see 270-(53/95)

1238-(6l/43)1289-(62/l)

431821641343697

183152162

4713

138183139184

3598

1345-(62/23), as amendedby2620-(68/l4l)

1371-(62/36)

1543-(63/39)l687-(64/22)1712-(64/29)

49568388

114

xvi


LIST OF DECISIONS

Number

1951-(65/54)2377-(67/85)2493-(68/74)2603-(68/132)

Page

11111716547

2620-(68/141), see 574-2and 1345-(62/23)

2772-(69/47), as amendedby4913-(75/207) 66

2836-(69/87) 692858-(69/96) 1122901-(69/122) G/S 175,17729l6-(69/127) 893006-(70/24) 503010-(70/25) G/S 1793032-(70/38) G/S 1763034- (70/38) 1753049-(70/44) 913153-(70/95) 1423179-(70/102) 673188-(70/106) G/S 1773320-(71/34) G/S 1763351-(71/51) 683363-(71/60) 1193386-(71/83) 703414-(71/98) G/S 1783457-(71/12l) G/S, as

amended by 3829-(72/144) S and 4330-(74/101) S 173

^46^(11/126}, see also4083-(73/104) 14

3504-(71/134) 154

Number ?age

3637-(72/41) G/S, asamended by 5074-

(76/73) G/S 323829-(72/144) S, see also3457-(71/12l) G/S 174

4083-(73/104) 18

4087-(73/105) 944l34-(74/4) 144

4232-(74/67) 214239-(74/67) 954241-(74/67) 704242-(74/67) 122

4254-(74/75) 155

4279-(74/83) 1714291-(74/88) 1714330-(74/10l) S,see3457-(71/12l) G/S

4337-(74/102) 76

4377-(74/ll4) 504392-(74/120) 171

4393-(74/121) 754421-(74/132) 112

4490-(74/140) 129

4529-(74/153) 754634-(75/47) 76

4635-(75/47) 127

4636-(75/47) 1304638-(75/47) 784667-(75/82) 334720-(75/ll4) 54

474l-(75/120) 128

4769-(75/133) 78

xvii


LIST OF DECISIONS

Number

4773-(75/136)4858-(75/172)4874- (75/180)4900-(75/198)4912-(75/207)4913-(75/207), see2772- (69/47)

49l6-(75/208)4917-(75/208)

Page

81120

798062

128129

Number

4918-(75/208)4919-(75/208)4934- (76/5)4954-(76/l6)4986-(76/47)5049- (76/51)5069- (76/72)5074- (76/73) G/S, see3637-(72/4l) G/S

Page

129130

41,548081166185

xviii


INTERPRETATIONS

INTERPRETATIONS UNDER ARTICLE XVIII (*)

Page

Interpretation of Articles of Agreement (71-2) 30, 35Extent of Drawing Rights: Meaning of Article V, Sec-

tion $ (a) (iii) (451-(55/52)) 36Unenforceability of Exchange Contracts: Fund's Interpreta-

tion of Article VIII, Section 2(b) (446-4) 131Interpretation of Article IX, Section 7 (534-3) 158Interpretation of Article XII, Sections 3(£)(i) and 3(/)

(2-1) 160Interpretation of Article XV, Section 2 (343- (54/47) ) 164

xix




Selected Decisions of the

Executive Directors





Adjustment of Quotas

The first interval of five years, at the end of which the Fundshall review the quotas of the members in accordance with Arti-cle III, Section 2, began on the date when the Fund Agreement,in accordance with Article XX, Section 1, entered into force: i.e.on December 27, 1945.

Decision No. 408-2

March 11, 1949

[For Increases in Quotas of Members—Sixth General Review, see pages 222-24.]

Dec. 408-23



Subscriptions

GOLD AND CURRENCY SUBSCRIBED TO THE FUND AND ACCOUNT-ING BY MEMBERS FOR TRANSACTIONS WITH THE FUND

The following principles should be observed by members in re-flecting their participation in the Fund in their accounts:

(1) Gold and currency subscribed to the Fund are clearlywithin its unrestricted ownership. They do not belong in anyway to the subscriber.

(2) Although the accounting practices of a member are pri-marily its own concern, each member should prepare its ac-counts in such a way that misconceptions as to the ownershipof the gold and currency subscribed to the Fund would beavoided

Decision No. 170-3

May 20, 1947

NET OFFICIAL HOLDINGS: PRINCIPLES OF INTERPRETATION

In order to ensure the uniform application of the relevant Arti-cles of Agreement as they apply to determinations of members'net official holdings of gold and U.S. dollars for the purposes ofArticle III, Section 3(£) (ii), the Fund adopts or reaffirms the fol-lowing principles of interpretation for the indicated provisions ofthe Fund Agreement:

(a) Article III, Section 3(b): "Each member shall pay ingold, as a minimum, the smaller of

(i) twenty-five per cent of its quota; or

Dec. 298-3 4


SUBSCRIPTIONS

(ii) ten per cent of its net official holdings of gold andUnited States dollars as at the date when the Fund noti-fies members under Article XX, Section 4(#), that itwill shortly be in a position to begin exchange transac-tions.

Each member shall furnish to the Fund the data necessary todetermine its net official holdings of gold and United Statesdollars."

(1) The concept of "holdings" of gold or UnitedStates dollars involves the ownership of gold orUnited States dollars.

(2) A claim to gold or dollars, unsupported by title tothem, is not a "holding."

(3) "United States dollars" means "without limitationcoins, paper money, bank balances, bank accept-ances, and government obligations issued with amaturity not exceeding twelve months." This defi-nition appears in Article XIX (d) and has beenadopted by analogy in the calculation of net officialholdings. The government obligations referred tomust have been issued with an original maturitynot exceeding twelve months, and it does not suf-fice that a government obligation will simply ma-ture within twelve months from September 12,1946.

(4) Dollars drawn by a member under a loan and in itsownership, for example, because deposited in abank account which it owns, are part of its "hold-ings." Dollars which a member has not drawnunder a loan agreement or commitment and whichit does not yet own, although it may later get own-ership of them, are not a "holding."

(5) The usability of gold or dollars for the payment ofthe gold subscription is not necessary in order to

5 Dee. 298-3


SELECTED DECISIONS OF EXECUTIVE DIRECTORS

constitute "holdings." A member does not pay 10per cent of each item of gold or dollars, but theequivalent of 10 per cent of its total "holdings" ofgold and dollars. Thus, segregated dollar balancesare "holdings." So, too, are gold or dollars blockedunder wartime freezing arrangements if a memberhas title to them. This means, in the case of gold,that the member has title to specific gold (e.g., ear-marked gold) or to a fixed share of specific gold(e.g., one-quarter of earmarked gold). There is no"holding" if a member has merely a claim to uni-dentified gold (e.g., such looted gold as may bediscovered and restored to it) or to an uncertain' «,share of specific or unidentified gold (e.g., a shareof such looted gold as may be or has been re-covered, to be determined in proportion to allclaims).

(6) Under a pledge of gold or dollars, title remains inthe pledgor, for which reason pledged gold or dol-lars are the "holdings" of the pledgor.

(7) Since local law cannot override international obli-gations, gold or dollars are "holdings" eventhough inalienable under local law or allocated tosome special purpose.

(8) Gold must be valued in accordance with Article IV,Section 1.

(9) If a member had no "holdings" of gold or dollarson September 12, 1946, its total subscription willbe payable in its own currency.

(b) Article III, Section 3 (d}: "If the net official holdings of goldand United States dollars of any member as at the date re-ferred to in (£) (ii) above are not ascertainable because itsterritories have been occupied by the enemy, the Fund shallfix an appropriate alternative date for determining such

Dec. 298-3 6


SUBSCRIPTIONS

holdings. If such date is later than that on which the countrybecomes eligible under Article XX, Section 4(<r) or (;/), tobuy currencies from the Fund, the Fund and the membershall agree on a provisional gold payment to be made under(£) above, and the balance of the member's subscriptionshall be paid in the member's currency, subject to appropri-ate adjustment between the member and the Fund when thenet official holdings have been ascertained."

(1) Where a member was occupied by the enemy andits net official holdings of gold and United Statesdollars as of September 12, 1946, are not ascertain-able, the Fund may postpone the date as of whichthe calculation shall be made. This means thatsome later date may be substituted for Septem-ber 12, 1946, as the effective date for the purposesof Article III, Section 3 (£) (ii).

(2) The postponement must relate to the determinationof the whole of a member's net official holdings ofgold and U.S. dollars. That is to say, there cannotbe a postponement of only those items whose sta-tus on September 12, 1946, cannot be ascertained.

(<0*

(d)*

(e)*

Decision No. 298-3

April 14, 1948

* Reproduced on pages 167-70.

Dec. 298-37



Payments When Quotas Are Changed

INTERPRETATION

It is determined as a matter of interpretation that Art. Ill,Sec. 4, and not Art. Ill, Sec. 3, applies to all changes in quotas.

Decision No. 595-3

July 20, 1950

Dec. 595-3 8


ARTICLE IV, SECTION 2

Production Subsidies and Premium Prices for Gold

STATEMENT OF POLICY CONCERNING SUBSIDIES FOR GOLDPRODUCTION

The following statement of policy concerning subsidies for theproduction of gold is adopted, and the Managing Director isasked to send copies to members and release the statement forpublication on December 12.

The International Monetary Fund has a responsibility to seethat the gold policies of its members do not undermine orthreaten to undermine exchange stability. Consequently everymember which proposes to introduce new measures to subsidizethe production of gold is under obligation to consult with theFund on the specific measures to be introduced.

Under Article IV, Section 2, of the Articles of Agreement ofthe Fund members are prohibited from buying gold at a priceabove parity plus the prescribed margin. In the view of theFund, a subsidy in the form of a uniform payment per ouncefor all or part of the gold produced would constitute an in-crease in price which would not be permissible if the totalprice paid by the member for gold were thereby to become inexcess of parity plus the prescribed margin. Subsidies involvingpayments in another form may also, depending upon their na-ture, constitute an increase in price.

Under Article IV, Section 4(<#), each member of the Fund"undertakes to collaborate with the Fund to promote exchangestability, to maintain orderly exchange arrangements with othermembers, and to avoid competitive exchange alterations." Sub-sidies on gold production regardless of their form are inconsist-ent with Article IV, Section 4(^) if they undermine or threatento undermine exchange stability. This would be the case, for

Dec. 233-29



example, if subsidies were to cast widespread doubt on the uni-formity of the monetary value of gold in all member countries.

Subsidies which do not directly affect exchange stability may,nevertheless, contribute directly or indirectly to monetary insta-bility in other countries and hence be of concern to the Fund.

A determination by the Fund that a proposed subsidy is notinconsistent with the foregoing principles will depend upon thecircumstances in each case. Moreover, the Fund may find thatsubsidies which are justified at any one time may, because ofchanging conditions and changing effects, later prove to be in-consistent with the foregoing principles. In order to carry outits objectives, the Fund will continue to study, and to reviewwith its members, their gold policies and any proposedchanges, to determine if they are consonant with the provisionsof the Fund Agreement and conducive to a sound internationalpolicy regarding gold.

Decision No. 233-2

December 11, 1947

PREMIUM GOLD TRANSACTIONS: STATEMENT TO MEMBERS

The following statement should be communicated to membersand made public without delay:

In June 1947, the Fund issued a statement recommending toits members that they take effective action to prevent externaltransactions in gold at premium prices, because such transac-tions tend to undermine exchange stability and to impair mone-tary reserves. From time to time the Fund has reviewed its rec-ommendations and the effectiveness of the action taken by itsmembers.

Despite the improvement in the payments position of manymembers, sound gold and exchange policy of members contin-ues to require that to the maximum extent practicable, gold

Dee. 75-(705) 10


PRODUCTION SUBSIDIES AND PREMIUM PRICES FOR GOLD

should be held in official reserves rather than go into privatehoards. It is only as gold is held in official reserves that it canbe used by the monetary authorities to maintain exchange ratesand meet balance of payments needs.

However, the Fund's continuous study of the situation ingold-producing and -consuming countries shows that their posi-tions vary so widely as to make it impracticable to expect allmembers to take uniform measures in order to achieve theobjectives of the premium gold statement. Accordingly, whilethe Fund reaffirms its belief in the economic principles in-volved and urges the members to support them, the Fundleaves to its members the practical operating decisions involvedin their implementation, subject to the provisions of Art. IV,Sec. 2 and other relevant articles of the Articles of Agreementofthel.M.F.

The Fund will continue to collect full information aboutgold transactions, will watch carefully developments in thisfield and will be prepared in consultation with members toconsider problems relating to exchange stability and any otherproblems which may arise.

Decision No. 7J-(70J)

September 28, 1951

Statement of June 18, 1947 on Transactions in Goldat Premium Prices

The International Monetary Fund has given consideration tothe international gold transactions at prices substantially abovemonetary parity which have been taking place in various areas ofthe world. Because of the importance of this matter the Fund hasprepared this statement of its views.

A primary purpose of the Fund is world exchange stability andit is the considered opinion of the Fund that exchange stability

11 Dec. 75-(705)



may be undermined by continued and increasing external pur-chases and sales of gold at prices which directly or indirectly pro-duce exchange transactions at depreciated rates. From informationat its disposal, the Fund believes that unless discouraged thispractice is likely to become extensive, which would fundamentallydisturb the exchange relationships among the members of theFund. Moreover, these transactions involve a loss to monetary re-serves, since much of the gold goes into private hoards ratherthan into central holdings. For these reasons, the Fund stronglydeprecates international transactions in gold at premium pricesand recommends that all of its members take effective action toprevent such transactions in gold with other countries or with thenationals of other countries.

It is realized that some of these transactions are being con-ducted by or through non-member countries or their nationals.The Fund recommends that members make any representationswhich, in their judgment, are warranted by the circumstances tothe governments of non-member countries to join with them ineliminating this source of exchange instability.

The Fund has not overlooked the problems arising in connec-tion with domestic transactions in gold at prices above parity.The conclusion was reached that the Fund would not object atthis time to such transactions unless they have the effect of estab-lishing new rates of exchange or undermining existing rates ofother members, or unless they result in a significant weakening ofthe international financial position of a member which mightaffect its utilization of the Fund's resources.

The Fund has requested its members to take action as promptlyas possible to put into effect the recommendations contained inthis statement.

Dec. 75-1705) 12


ARTICLE IV, SECTIONS 3, 4, 5, AND 8

Par Values and Margins

FOREIGN EXCHANGE DEALINGS BASED ON PARITY: ARTICLE IV,SECTION 3

Dealings in paper money and coins are deemed to be "otherexchange transactions" within the meaning of Article IV, Sec-tion 3, whether or not the importation and exportation of suchmoney and coins to and from the country of origin are subject torestrictions. The dealings are in consequence subject to theprovisions of that Section. Members shall not permit transactionsin such paper money and coins within their territories in a manneror to an extent which will negate the par values agreed with theFund. Where transactions in fact have such an effect the Fundwill be obliged to intervene.

Decision No. 269-2

February 11, 1948

EXCHANGE DEALINGS AND MARGINS UNDER CONDITIONS OFINCREASING CONVERTIBILITY

The Fund does not object to exchange rates which are within 2per cent of parity for spot exchange transactions between a mem-ber's currency and the currencies of other members taking placewithin the member's territories, whenever such rates result fromthe maintenance of margins of no more than 1 per cent from par-ity for a convertible, including externally convertible, currency.

Decision No. 904-(59/32)

July 24, 1959

13 Dee. 904-159/32)



CENTRAL RATES AND WIDER MARGINS: A TEMPORARY REGIME *

Preamble

This decision is adopted by the Executive Directors in order toindicate practices that members may wish to follow in present cir-cumstances consistently with Article IV, Section 4 (a) and Boardof Governors Resolution No. 26-9, which called on all membersto collaborate with the Fund and with each other in order tomaintain a satisfactory structure of exchange rates within appro-priate margins. The decision is intended to enable members to ob-serve the purposes of the Fund to the maximum extent possibleduring the temporary period preceding the resumption of effec-tive par values with appropriate margins in accordance with theArticles.

Paragraph 1. Par Values and Wider Margins

(a) A member will be deemed to be acting in accordance withArticle IV, Section 4 (a) and Resolution No. 26-9 if it takes ap-propriate measures, consistent with the Articles, to permit spotexchange transactions between its currency and the currencies ofother members taking place within its territories only at rateswithin 2^4 per cent from the effective parity relationship amongcurrencies as determined by the Fund, provided that these mar-gins may be within 4% per cent from the said relationship ifthey result from the maintenance by the member of rates withinmargins of 2% per cent from the said relationship for spot ex-change transactions between its currency and its intervention cur-rency.

(b) A member that avails itself of wider margins under (a)above shall notify the Fund. Paragraphs 5 and 6 of this decisionshall then apply to the member.

* This decision was amended by Decision No. 4083-(73/104), November 7, 1973,which appears on pages 18-21.

Dec. 3463-171/126) 14



(c) A member's intervention currency means a currency whichthe member represents to the Fund that it stands ready to buyand sell in order to perform its obligations regarding exchangestability.

Paragraph 2. Central Rates

(a) A member which temporally does not maintain rates basedon a par value for its currency in accordance with Article IV, Sec-tion 3 and Decision No. 904-(59/32) but, by means of appropri-ate measures consistent with the Articles, maintains a stable rateas the basis for exchange transactions in its territories may com-municate to the Fund a rate for its currency for the purposes ofthis decision. This rate or a rate subsequently communicated inaccordance with this paragraph shall take effect as the centralrate for the purposes of this decision unless the Fund finds it un-satisfactory.

(b) A central rate for a member's currency may be communi-cated in gold, units of special drawing rights, or another mem-ber's currency.

Paragraph 3. Central Rates with Wider Margins

A member that communicates a central rate under paragraph2 (a) and avails itself of the wider margins of paragraph l(a) onthe basis of its central rate shall notify the Fund, and if the Fundhas not found the central rate unsatisfactory the member will bedeemed to be acting in accordance with Article IV, Section 4 (a)and Resolution No. 26-9 if it takes appropriate measures, consist-ent with the Articles, to permit spot exchange transactions be-tween its currency and the currencies of other members takingplace within its territories only at rates within 21/4 per cent fromthe central rate, provided that these margins may be within 4^

15 Dee. 3463-171/126)



per cent from the central rate if they result from the maintenanceby the member of rates within margins of 2% per cent from thecentral rate for spot exchange transactions between its currencyand its intervention currency. In addition, paragraphs 5 and 6shall apply.

Paragraph 4. Central Rates Without Wider Margins

If a member that communicates a central rate under paragraph2 (a) does not notify the Fund under paragraph 3 that it avails it-self of the wider margins of that paragraph, the member shalltake appropriate measures to ensure that the margins on eitherside of the central rate for exchange transactions between its cur-rency and the currencies of other members taking place within itsterritories shall be no wider than the equivalent of the margins ofArticle IV, Section 3 and Decision No. 904-(59/32).

Paragraph 5. Multiple Currency Practices and DiscriminatoryCurrency Arrangements

Notwithstanding paragraphs 1 and 3 above, no member shallpermit, except as approved or authorized under Article VIII, Sec-tion 3 or Article XIV, Section 2,

(i) a spread between the buying and selling rates for spot ex-change transactions between its currency and the curren-cies of other members in excess of 2 per cent, or

(ii) (1) a difference between buying or between selling ratesfor spot exchange transactions between its currencyand the currency of another member, or

(2) a relationship among the buying rates, or among theselling rates, for the currencies of other members,that the Fund regards as inconsistent with promotion

Dec. 3463-171/126) 16



of exchange stability, the maintenance of orderlyexchange arrangements with other members, and theavoidance of competitive exchange alterations.

Paragraph 6. Intervention

Appropriate measures for the purposes of paragraphs l(a),2(a), and 3 above shall include intervention by a member'sauthorities in the exchange markets within the member's terri-tories in order to maintain rates for spot exchange transactions inaccordance with this decision. In their intervention in exchangemarkets members shall refrain from actions incompatible with thepurposes of the Fund.

Paragraph 7. Members Maintaining Narrow Margins Againstan Intervention Currency

(a) A member will be deemed to be acting in accordance withArticle IV, Section 4 (a) and Board of Governors ResolutionNo. 26-9, if (a) the rate for its currency is maintained consistentlywith the Articles or the member's Membership Resolution, (b)the member permits transactions between its currency and itsintervention currency only within margins of 1 per cent of thesaid rate in terms of the intervention currency, and (c) the inter-vention currency is the currency of a member which maintainsrates within margins consistent with this decision.

(b) Subparagraph (a) shall apply to a member in respect ofthe separate currency of a territory under Article XX, Sec-tion 2(g) for which margins of 1 per cent are maintained fortransactions between the separate currency and the metropolitancurrency.

Decision No. 3463-(71/126)

December 18, 1971

17 Dec. 3463-171/126)



CENTRAL RATES AND WIDER MARGINS: A TEMPORARY REGIME—REVISED DECISION

Preamble

This decision is adopted by the Executive Directors in order toindicate practices that members may wish to follow in present cir-cumstances consistently with Article IV, Section 4 (a) and Boardof Governors Resolution No. 26-9, which called on all membersto collaborate with the Fund and with each other in order tomaintain a satisfactory structure of exchange rates within appro-priate margins. The decision is intended to enable members toobserve the purposes of <the Fund to the maximum extent possibleduring the temporary period preceding the resumption of effec-tive par values with appropriate margins in accordance with theArticles.

Paragraph 1. Par Values and Wider Margins

(a) A member will be deemed to be acting in accordance withArticle IV, Section 4(^) and Resolution No. 26-9 if it takes appro-priate measures, consistent with the Articles, to permit spotexchange transactions between its currency and an interventioncurrency, the issuer of which operates on the basis of a par valueor a central rate, only at rates within 2% per cent from the paritybetween the two currencies. If a central rate is in effect for theintervention currency, parity for the purpose of this paragraphshall be deemed to refer to the relationship between the parvalue of a member's currency and such central rate.

(b) A member that avails itself of wider margins under (a)above shall notify the Fund. Paragraphs 5 and 6 of this decisionshall then apply to the member.

(c) A member's intervention currency means a currency whichthe member represents to the Fund that it stands ready to buy

Dec. 4083-(73/J04) 18



and sell in order to perform its obligations regarding exchangestability.

Paragraph 2. Central Rates

(a) A member which temporarily does not maintain ratesbased on a par value for its currency in accordance with Arti-cle IV, Section 3 and Decision No. 904-(59/32) but, by means ofappropriate measures consistent with the Articles, maintains astable rate in terms of an intervention currency as the basis forexchange transactions in its territories may communicate to theFund a rate for its currency for the purposes of this decision.This rate or a rate subsequently communicated in accordance withthis paragraph shall take effect as the central rate for the pur-poses of this decision unless the Fund finds it unsatisfactory.

(b) A central rate for a member's currency may be communi-cated in gold, units of special drawing rights, or another mem-ber's currency.

Paragraph 3. Central Rates with Wider Margins

A member that communicates a central rate under paragraph2 (a) and avails itself of the wider margins of paragraph l(a) onthe basis of its central rate shall notify the Fund, and if the Fundhas not found the central rate unsatisfactory the member will bedeemed to be acting in accordance with Article IV, Section 4 (a)and Resolution No. 26-9 if it takes appropriate measures, consist-ent with the Articles, to permit spot exchange transactionsbetween its currency and an intervention currency only with mar-gins of 2% per cent of the central rate in terms of theintervention currency. In addition, paragraphs 5 and 6 shallapply.

19 Dec. 4083-173/104)



Paragraph 4. Central Rates Without Wider Margins

If a member that communicates a central rate under paragraph2 (a) does not notify the Fund under paragraph 3 that it availsitself of the wider margins of that paragraph, the member shalltake appropriate measures to ensure that spot exchange transac-tions within its territories between its currency and an interven-tion currency shall take place only within margins of 1 per centof the central rate in terms of the intervention currency.

Paragraph 5. Multiple Currency Practices and DiscriminatoryCurrency Arrangements

Notwithstanding paragraphs 1 and 3 above, no member shallpermit, except as approved or authorized under Article VIII, Sec-tion 3 or Article XIV, Section 2:

a difference in excess of 2 per cent between any two buyingor any two selling rates for spot exchange transactions betweenits currency and the currencies of other members; or

a spread in excess of 2 per cent between a buying and a sell-ing rate for spot exchange transactions between its currencyand the currency of another member.

Paragraph 6. Intervention

Appropriate measures for the purposes of paragraphs l(a),2(a), and 3 above shall include intervention by a member'sauthorities in the exchange markets within the member's terri-tories in order to maintain rates for spot exchange transactions inaccordance with this decision. In their intervention in exchangemarkets members shall refrain from actions incompatible with thepurposes of the Fund.

Dec. 4083-173/104) 20



Paragraph 7. Members Maintaining Narrow Margins Against anIntervention Currency

(a) A member will be deemed to be acting in accordance withArticle IV, Section 4 (a) and Board of Governors ResolutionNo. 26-9, if (a) the rate for its currency is maintained consist-ently with the Articles or the member's Membership Resolutionand (b) the member permits transactions between its currencyand an intervention currency only within margins of 1 per cent ofthe said rate in terms of the intervention currency.

(b) Subparagraph (a) shall apply to a member in respect ofthe separate currency of a territory under Article XX, Sec-tion 2(g) for which margins of 1 per cent are maintained fortransactions between the separate currency and the metropolitancurrency.

Paragraph 8. Review

This decision shall be reviewed from time to time as necessary.

Decision No. 4083-(73/104)

November 7, 1973

GUIDELINES FOR THE MANAGEMENT OF FLOATING EXCHANGERATES

The Executive Directors have discussed the attached memoran-dum entitled "Guidelines for the Management of FloatingExchange Rates." They recommend, pursuant to Article IV, Sec-tion 4(<#), that, in present circumstances, members should usetheir best endeavors to observe the guidelines set forth andexplained in the memorandum. Consultations with members withfloating currencies will be based on the memorandum. These

21 Dec. 4232-(74/67J



guidelines will be reviewed from time to time in order to makeany adjustments that may be appropriate.


June 13, 1974

Guidelines for the Management of Floating Exchange Rates

Introduction

There is widespread agreement that the behavior of govern-ments with respect to exchange rates is a matter of internationalconcern and a matter for consultation and surveillance in theFund. This is no less true when rates are floating than when theyare contained within fixed margins and are changed by par valueand central rate adjustments.

The Fund cannot legally authorize floating but it can exercisesurveillance over the manner in which members fulfill theirundertaking, under Article IV, Section 4(<#), ''to collaborate withthe Fund to promote exchange stability, to maintain orderlyexchange arrangements with other members, and to avoid competi-tive exchange alterations." The following guidelines, though notexhausting the possibilities of action by the Fund under this Arti-cle, are intended to provide criteria that members would observein performing their undertaking and that the Fund would observein exercising surveillance in present circumstances.

These guidelines are based on the assumption that in any situa-tion of floating it may be desirable (a) to smooth out very short-run fluctuations in market rates and (b) to offer a measure ofresistance to market tendencies in the slightly longer run,particularly when they are leading to unduly rapid movements inthe rate, and (c) to the extent that it is possible to form a reason-

Dec. 4232-174/67) 22



able estimate of the medium-term norm for a country's exchangerate, to resist movements in market rates that appear to be deviat-ing substantially from that norm. Guidelines of this kind are nec-essary, inter alia, in order to arrive at a clear conception of whatcompetitive exchange alteration is, and to provide safeguardsagainst it.

The guidelines also take into account:

(a) that national policies, including those relating to domesticstabilization, should not be subjected to greater constraints thanare clearly necessary in the international interest;

(b) that a degree of uncertainty necessarily attaches to anyestimate of a medium-term normal exchange rate, that this uncer-tainty is particularly great in present circumstances, and that onoccasion the market view may be more realistic than any officialview whether of the country primarily concerned or of an interna-tional body; and

(c) that in viewT of the strength of short-term market forces itmay at times be unavoidable to forego or curtail official interven-tion that would be desirable from the standpoint of exchange sta-bility if such intervention should involve an excessive drain onreserves or an impact on the money supply which it is difficult toneutralize.

The guidelines are intended to provide the basis for a mean-ingful dialogue between the Fund and member countries with aview to promoting international consistency during a period ofwidespread floating. They are termed guidelines rather than rulesto indicate their tentative and experimental character. Theyshould be adaptable to changing circumstances. No attempt ishere made to indicate the precise procedures through which theywould be implemented. These will be considered later, but theymust essentially rest on an intensification of the confidential inter-change between the member and the Fund.

In the application of the guidelines it is to be expected that, inview of the emphasis laid by the Committee of Twenty at their

23 Dec. 4232-174/67)



fifth (Rome) meeting on the importance in present circumstancesof avoiding competitive depreciation, particular attention wouldbe attached to departures from the guidelines in the direction ofdepreciation. Special consideration will also be given to the man-ner in which the guidelines should be applied by developingcountries, taking account of the stage of evolution of theirexchange markets and intervention practices.

The guidelines should be understood in the light of the com-mentary which follows.

The Guidelines

(1) A member with a floating exchange rate should interveneon the foreign exchange market as necessary to prevent or moder-ate sharp and disruptive fluctuations from day to day and fromweek to week in the exchange value of its currency.

(2) Subject to (3) (b), a member with a floating rate may act,through intervention or otherwise, to moderate movements in theexchange value of its currency from month to month and quarterto quarter, and is encouraged to do so, if necessary, where factorsrecognized to be temporary are at work. Subject to (l) and(3) (a), the member should not normally act aggressively withrespect to the exchange value of its currency (i.e., should not soact as to depress that value when it is falling, or to enhance thatvalue when it is rising).

(3) (a) If a member with a floating rate should desire to actotherwise than in accordance with (1) and (2) above in order tobring its exchange rate within, or closer to, some target zone ofrates, it should consult with the Fund about this .target and itsadaptation to changing circumstances. If the Fund considers thetarget to be within the range of reasonable estimates of themedium-term norm for the exchange rate in question, the memberwould be free, subject to (5), to act aggressively to move its rate

Dec. 4232-174/67) 24



towards the target zone, though within that zone (2) would con-tinue to apply.

(b) If the exchange rate of a member with a floating ratehas moved outside what the Fund considers to be the range ofreasonable estimates of the medium-term norm for that exchangerate to an extent the Fund considers likely to be harmful to theinterests of members, the Fund will consult with the member,and in the light of such consultation may encourage the member,despite 2 above, (i) not to act to moderate movements towardthis range, or (ii) to take action to moderate further divergencefrom the range. A member would not be asked to hold any par-ticular rate against strong market pressure.

(4) A member with a floating exchange rate would be encour-aged to indicate to the Fund its broad objective for the develop-ment of its reserves over a period ahead and to discuss thisobjective with the Fund. If the Fund, taking account of the worldreserve situation, considered this objective to be reasonable and ifthe member's reserves were relatively low by this standard, themember would be encouraged to intervene more strongly underGuideline (2) to moderate a movement in its rate when the ratewas rising than when it was falling. If the member's reserveswere relatively high by this standard it would be encouraged tointervene more strongly to moderate a movement in its rate whenthe rate was falling than when it was rising. In considering targetexchange rate zones under (3), also, the Fund would pay dueregard to the desirability of avoiding an increase over the mediumterm of reserves that were recognized by this standard to be rela-tively high, and the reduction of reserves that were recognized tobe relatively low.

(5) A member with a floating rate, like other members, shouldrefrain from introducing restrictions for balance of payments pur-poses on current account transactions or payments and shouldendeavor progressively to remove such restrictions of this kind asmay exist.

25 Dee. 4232-f74/67)



(6) Members with a floating rate will bear in mind, in inter-vention, the interests of other members including those of theissuing countries in whose currencies they intervene. Mutually sat-isfactory arrangements might usefully be agreed between theissuers and users of intervention currencies, with respect to theuse of such currencies in intervention. Any such arrangementsshould be compatible with the purposes of the foregoing guide-lines. The Fund will stand ready to assist members in dealing withany problems that may arise in connection with them.

Commentary

General

Certain of the terms used in the guidelines may be defined asfollows:

(i) "A member with a floating exchange rate" means a mem-ber whose currency is floating independently in the sense that it isnot pegged, within relatively narrow margins, to any other cur-rency or composite of currencies. Members whose currencies arepegged to particular floating currencies, or to composites of suchcurrencies, within these margins would be exempt from theseguidelines, though not from any general principles relating toadjustment. Members which, though their currencies are pegged toanother currency, change the peg frequently in the light of someformula relating, e.g., to price indices, would be expected to dis-cuss this formula and any changes therein with the Fund. Mem-bers whose currencies are pegged to a composite of other curren-cies (e.g., members whose effective rates are fixed) wouldlikewise be expected to discuss with the Fund the composite inquestion and any changes therein. Members whose currencies arefloating jointly under mutual intervention arrangements with rela-tively narrow margins would be exempted from the interventionguidelines so far as intervention in each other's currencies is con-

Dec. 4232-(74/67) 26



cerned, but would be held responsible to the Fund for theirexchange market intervention vis-a-vis the rest of the world. Asregards capital controls, official financing, and other measures toinfluence capital flows, each member belonging to such a groupwould be responsible for its measures judged in relation to itsoverall balance of payments situation.

(ii) ''Exchange market intervention" would normally be meas-ured by the movement of reserves, adjusted as appropriate forcompensatory official borrowing. Consideration might also begiven to including in the concept of intervention changes inofficial foreign exchange positions other than reserves.

(iii) "Action to influence an exchange rate" includes, besidesexchange market intervention, other policies that exercise a tem-porary effect on the balance of payments and hence on exchangerates, and that have been adopted for that purpose. Such policiesmay take the form of official forward exchange market interven-tion, official foreign borrowing or lending, capital restrictions,separate capital exchange markets, various types of fiscal inter-vention, and also monetary or interest rate policies. Monetary orinterest rate policies adopted for demand management purposesor other policies adopted for purposes other than balance of pay-ments purposes would not be regarded as action to influence theexchange rate.

(iv) Where the terms "exchange rate" or "exchange value"are employed with respect to any currency it is assumed that thesewould normally be expressed in terms of effective rates, i.e., thevalue of the currency would be measured relative to a representa-tive set of currencies rather than relative to its intervention cur-rency alone. The set chosen for this purpose should, in principle,vary from country to country, and the currencies in the set shouldbe weighted according to their importance to the country in ques-tion. The composition of the set might be based on trade andfinancial relationships or on trade relationships alone. If trade-

27 Dec. 4232-f74/67)



weighted, it might be derived from the Multilateral ExchangeRate Model, or based on bilateral trade relationships. In somecases the basket used for the valuation of the SDR might besatisfactory for this purpose also. In some cases, finally, the ratevis-a-vis a single currency might provide a satisfactory approxima-tion to an effective rate.

On Guideline (l)

Known large once-for-all or reversible transactions would belargely offset and their effects spread over time. In addition, inter-vention would be undertaken to moderate large day-to-day orweek-to-week movements in rates due to speculative or other fac-tors. Such intervention, if properly conducted, should tend to netout over time.

It is unlikely to be necessary for the issuer of the principalintervention currency itself to intervene from day to day in themanner described in this guideline.

On Guideline (3)

(i) The concept of a medium-term norm for an exchange rateis employed explicitly in (a) and implicitly in (b) of Guideline(3). By this is meant a rate that would tend to bring about equi-librium in the "underlying" balance of payments, i.e., in the over-all balance in the absence of cyclical and other short-term factorsaffecting the balance of payments, including government policieswhich are, or, on internationally accepted principles, ought to betemporary. If the member concerned so proposes and the Fundagrees, "equilibrium" could allow for an internationally appropri-ate rate of increase or decrease in the member's reserves. The"medium-term" might be considered to refer to a period of aboutfour years. Seasonal, speculative, and cyclical factors whoseeffects were reversible over such a period would be ignored.

Dee. 4232-174/67) 28



(ii) An advantage of conceiving medium-term norms or targetzones in terms of effective rates is that so long as the effectiverate remains constant the balance of trade or current payments ofthe floating country would not be greatly affected by changes inthe relative exchange rates of the currencies of other countries.This should reduce the frequency with which it would be neces-sary to change zone boundaries, or the magnitude of the changesinvolved. It would be open to a member if it so desired toexpress its target rate or zone not as one that is constant over timebut as one that is rising or falling at a certain rate or at a ratedependent, for example, on an index of relative price or costlevels.

(iii) Under Guideline (3) (b) the Fund would be authorizedto take the initiative in situations where it considered that a mem-ber's rate was likely to become harmful to the interests of mem-bers whether as a result of market forces or of action by themember. Recommendations to a member under this provisionwould be made by the Executive Directors, on a proposal by theManaging Director, but the Managing Director would not makesuch a proposal except after consultation with the member.

(iv) The greater the degree of uncertainty regarding the bal-ance of payments situation and prospects of a country the widerwould be the range of reasonable estimates of the medium-termnorm for its exchange rate, and the wider would be the deviationbeyond this range which would occur before the Fund wouldmake any suggestions under Guideline (3) (b). The Fund's rightto make suggestions under this guideline will, in any case, beexercised with restraint.

(v) In any suggestions the Fund might make under Guideline(3) (b), it would give a preference to liberalizing as opposed torestricting ways of exercising a given effect on exchange rates,but would bear in mind the distinction between capital controlsapplied for temporary balance of payments reasons and thoseapplied for other economic and social reasons.

29 Dec. 4232-174/67)



On Guideline (6)

This guideline would imply that in their use of their customaryreserve currencies members with a floating rate, while recognizingthe need of issuing countries for reasonable freedom of exchangerate movement, should not be precluded from intervening in amanner conformable with the guidelines. Among the problemsthat might arise regarding the use of intervention currencies, inthe resolution of which the Fund might be of service, are thoseregarding the circumstances in which a member might intervenein a currency other than its customary reserve currency, the prob-lem of interventions that move the value of the currency of inter-vention in an undesirable direction, and the problem of mutuallyoffsetting interventions.

INTERPRETATION OF ARTICLES OF AGREEMENT

[A member] has stated its intention to maintain full employ-ment and has requested an interpretation of the Articles ofAgreement as to whether steps necessary to protect a memberfrom unemployment of a chronic or persistent character, arisingfrom pressure on its balance of payments, shall be measures nec-essary to correct a fundamental disequilibrium.

The Executive Directors interpret the Articles of Agreement tomean that steps which are necessary to protect a member fromunemployment of a chronic or persistent character, arising frompressure on its balance of payments, are among the measures nec-essary to correct a fundamental disequilibrium; and that in eachinstance in which a member proposes a change in the par valueof its currency to correct a fundamental disequilibrium the Fundwill be required to determine, in the light of all relevant circum-stances, whether in its opinion the proposed change is necessaryto correct the fundamental disequilibrium.

Pursuant to Decision No. 71-2

September 26, 1946

Dec. 71-2 30



PURCHASE AND SALE OF GOLD WITHIN THE MEANING OFARTICLE IV, SECTION 4(£)

1.

2. . . . [A member] informed the Fund that exchange restric-tions in [specified nonmetropolitan territory] would be abolishedand the [territory's separate] currency would be made freely con-vertible into U.S. dollars, the local authorities freely buying andselling U.S. dollars in exchange for the [separate currency of theterritory] at the par value for the settlement of internationaltransactions. Such arrangements are deemed to constitute, in fact,the free purchase and sale of gold for the settlement of interna-tional transactions within the meaning of Article IV, Section 4(£),for the territory of [the specified nonmetropolitan area] insofaras the United States freely buys and sells gold for such purposeswithin the meaning of that Section.

Decision No. 411-1

March 18, 1949

CHANGES IN PAR VALUES: FUNDAMENTAL DISEQUILIBRIUM

The Fund has authority under Article IV, Section 5 (c) (ii) or(iii), to object to a change in par value proposed by a memberwhen the extent of the proposed change, in the judgment of theFund, is insufficient to correct a fundamental disequilibrium. TheExecutive Board recognizes, however, that the extent of thechange in par value, necessary to correct a fundamental disequi-librium, cannot be determined with precision and that in reachinga decision on a member's proposal to change its par value,whether during the transitional period or thereafter, the membershould be given the benefit of any reasonable doubt. In addition,due consideration should be given the views of the member

31 Dec. 278-3



regarding the political and social consequences of a change in parvalue greater than the one proposed.

Decision No. 278-3

March 1, 1948

RATES FOR COMPUTATIONS AND ADJUSTMENT OF THE FUND'SHOLDINGS OF CURRENCIES

The following decision is adopted in order to facilitate theconduct of the operations of the Fund involving currencies forwhich rates are not maintained within the margins under Arti-cle IV, Section 3 of the Articles or Executive Board DecisionNo. 904-(59/32).

1. Computations by the Fund under the Articles of Agreementrelating to a member's currency for which rates within the mar-gins of Article IV, Section 3 or Executive Board DecisionNo. 904-(59/32) are not maintained will be made on the basis ofthe representative rate for that currency under Rule O-3 wheneverthese calculations are made (i) for the purpose of a transactionwith the Fund involving the purchase or sale of that member'scurrency by another member, and (ii) for such other purposes asthe Fund may decide. Computations under this paragraph will bemade on the basis of the representative rate for the currency onthe day specified in paragraph 2 below.

2. For computations for the purpose of Article V, Sections 7(£)and 8(/) the rate shall be that at which the Fund values itsholdings of the currency on the day for which the computation ismade. For computations relating to other transactions, includingcomputations involving currency substituted pursuant to Sched-ule B, paragraph 1 (^/) and paragraph 1 of Executive Board Deci-sion No. 3049-(70/44), the rate shall be that of three businessdays before the value date of the transaction and, if this is notpossible, the rate of the day closest thereto that is practicable.

Dec. 3637-(72/41)G/S 32



3. Whenever a computation relating to a member's currency ismade on the basis of a representative rate in accordance with para-graph 1 above, the Fund will adjust all of its holdings of thecurrency on the basis of that rate, and such adjustment will takeeffect as of the day specified for the computation in paragraph 2above.

4. Whenever the Fund adjusts its holdings of a member's cur-rency in accordance with paragraph 3 above, the Fund shallestablish an account receivable or an account payable, as the casemay be, in respect of the amount of the currency payable by or tothe member under Article IV, Section 8. For the purpose ofapplying the provisions of the Articles as of any date, the Fund'sholdings of the currency will be deemed to be its actual holdingsplus the balance in any such account receivable or minus the bal-ance in any such account payable as of that date. Settlements ofaccounts receivable or payable shall be made promptly after eachApril 30 and at other times when requested by the Fund or themember.

5. The suspension of Rule O-3(i) pursuant to Paragraph II ofExecutive Board Decision No. 3537-(72/3) G/S is terminated.Executive Board Decision No. 3537-(72/3) G/S and ExecutiveBoard Decision No. 321-(54/32), as amended, are terminated.

6. This decision shall be reviewed as necessary.

Decision No. 3637-(72/4l) G/S,May 8, 1972, as amended by

Decision No. 5074-(76/73) G/S,

May 5, 1976

ADJUSTMENT OF FUND'S HOLDINGS OF CURRENCIES

1. The Fund shall adjust its holdings of currencies for whichcomputations are made pursuant to paragraph 1 (ii) of Executive

33 Dec. 4667-(75/32)



Board Decision No. 3637-(72/41) G/S on at least the followingoccasions:

(i) on each April 30;

(ii) at the close of the last business day of each month withrespect to the Fund's holdings of U.S. dollars; and

(iii) when a member requests the Fund to adjust the Fund'sholdings of its currency.

2. The adjustment of the Fund's holdings of a member's cur-rency shall be made at a rate for the currency in terms of specialdrawing rights determined in accordance with Rule O-3, providedthat if a rate under (c) (i) or (ii) of Rule O-3 is not communi-cated for the currency for any April 30 the adjustment shall bemade when a rate is so communicated.

3. For the purpose of adjustments, the Fund's holdings of acurrency shall, if agreed with the member, consist of the total ofthe balances of the currency as recorded on the Fund's books,plus the balance in any account receivable, or minus the balancein any account payable, in the currency, as of the date of adjust-ment.

4. The accounts payable to the Fund as of April 30, 1975 shallbe settled not later than March 31, 1976.


May 16, 1975

Dec. 4667-175/82) 34


ARTICLE V, SECTIONS 3, 4, AND 5

Use of Fund's Resources and Stand-By Arrangements

INTERPRETATION OF ARTICLES OF AGREEMENT

The Executive Directors of the International Monetary Fundinterpret the Articles of Agreement to mean that authority to usethe resources of the Fund is limited to use in accordance with itspurposes to give temporary assistance in financing balance of pay-ments deficits on current account for monetary stabilization opera-tions.

Pursuant to Decision No. 11-2

September 26, 1946

USE OF FUND'S RESOURCES FOR CAPITAL TRANSFERS

After full consideration of all relevant aspects concerning theuse of the Fund's resources, the Executive Directors decide byway of clarification that Decision No. 71-2 does not preclude theuse of the Fund's resources for capital transfers in accordancewith the provisions of the Articles, including Article VI.


July 28, 1961

USE OF FUND'S RESOURCES: MEANING OF ARTICLE V, SEC-TION 3(^) (i)

The word "represents" in Article V, Section 3(^)(i), means"declares." The member is presumed to have fulfilled the condi-tion mentioned in Article V, Section 3 (a) (i), if it declares that

35 Dec. 284-4



the currency is presently needed for making payments in that cur-rency which are consistent with the provisions of the Agreement.But the Fund may, for good reasons, challenge the correctness ofthis declaration, on the grounds that the currency is not "pres-ently needed" or because the currency is not needed for payment"in that currency," or because the payments will not be "consist-ent with the provisions of this Agreement." If the Fund con-cludes that a particular declaration is not correct, the Fund maypostpone or reject the request, or accept it subject to conditions.The phrase "presently needed" cannot be defined in terms of aformula uniformly applicable to all cases, but where there isgpod reason to doubt that the currency is "presently needed," theFund will have to apply the phrase in each case in the light of allthe circumstances.

Decision No. 284-4

March W, 1948

USE OF FUND'S RESOURCES: MEANING OF "CONSISTENT WITH THEPROVISIONS OF THIS AGREEMENT" IN ARTICLE V, SECTION 3

The phrase "consistent with the provisions of this Agreement"in Article V, Section 3, means consistent both with the provisionsof the Fund Agreement other than Article I and with the pur-poses of the Fund contained in Article I.

Decision No. 287-3

March 17, 1948

EXTENT OF DRAWING RIGHTS: MEANING OF ARTICLE V, SEC-TION 3(^)(iii)

The Executive Board, acting pursuant to Article XVIII (a) ofthe Fund Agreement, interprets the quantitative limit of twenty-

Dec. 45M55/52J 36


USE OF FUND S RESOURCES AND STAND-BY ARRANGEMENTS

five per cent of quota in relation to drawing rights under Arti-cle V, Section 3(tf) (iii) as follows:

Where the Fund's holdings of a member's currency are notless than seventy-five per cent of its quota, and to the extentthat such holdings would not be increased above two hundredper cent of its quota, the purchases which the member maymake during a period of twelve months ending on the date ofa proposed purchase shall be determined as follows:

(a) The total purchases shall not exceed twenty-five percent of its quota;

(b) Provided that, if the member has made purchasesduring the period, it may then purchase an amount equal tothe difference between twenty-five per cent of its quota andthe total of such purchases adjusted on the basis that arepurchase by the member or sale of its currency during theperiod is deducted from a previous, but not subsequent, pur-chase or purchases during the period.

Decision No. 451- (5'5/52)

August 24, 1955

USE OF FUND'S RESOURCES AND REPURCHASES

1. The Managing Director has made the following statementwhich should be the framework for his discussions with memberson use of the Fund's resources:

"The present proposals are designed to provide a practicalbasis for use of the Fund's resources in accordance with thepurposes of the Fund. When the proposals are agreed theywill, of course, have to be carried into effect through actualcases. Decisions will have to be made in accordance with theparticular circumstances, and in this manner a body of practicalcriteria will gradually be built up. However, even at the outset

37 Dec. J02-(52/M)



I think it must be clear that access to the Fund should not bedenied because a member is in difficulty. On the contrary, thetask of the Fund is to help members that need temporary help,and requests should be expected from members that are introuble in greater or lesser degree. The Fund's attitude towardthe position of each member should turn on whether the prob-lem to be met is of a temporary nature and whether the poli-cies the member will pursue will be adequate to overcome theproblem within such a period. The policies, above all, shoulddetermine the Fund's attitude.

"In addition, the Fund should pay attention to a member'sgeneral creditworthiness, particularly its record with the Fund.In this respect, the member's record of prudence in drawing, itswillingness to offer voluntary repayment when its situation per-mitted, and its promptness in fulfilling the obligation to trans-mit monetary reserves data and in discharging repurchase obli-gations would be important. I would expect that in the years tocome, with extended activities of the Fund, we shall be ablemore and more to rely on the Fund's own experience, thus pro-viding a further and most useful link between Fund drawingsand repurchases.

"After a period of relative inactivity of the Fund, it wouldbe too much to expect that we should be able to solve with onestroke the entire problem of access to the Fund's resources sothat each member would always know how any request wouldbe received by the Fund. We shall have to feel our way. Some-times a member may want to submit to the Fund a specificrequest for drawings, with adequate information as to the par-ticular situation which prompts the request. At other timesdiscussions between the member and the Fund may cover itsgeneral position, not with a view to any immediate drawing,but in order to ensure that it would be able to draw if, withina period of say 6 or 12 months, the need presented itself. TheFund itself might take the initiative in discussing with one ormore members transactions which it believes suitable for theFund and helpful to the members concerned. In cases where it

Dec. J02-f52/n) 38



would appear appropriate and useful, the Fund might arrangedrawings to deal with special short-run situations accompaniedby arrangements for repurchase in a period not exceeding 18months."

2. a. In view of the Executive Board's interpretation of Sep-tember 26, 1946, concerning the use of the Fund's resources, andconsidering especially the necessity for ensuring the revolvingcharacter of the Fund's resources, exchange purchased from theFund should not remain outstanding beyond the period reason-ably related to the payments problem for which it was purchasedfrom the Fund. The period should fall within an outside range ofthree to five years. Members will be expected not to request thepurchase of exchange from the Fund in circumstances, whef e, J;hereduction of the Fund's holdings of their currencies by an equiva-lent amount within that time cannot reasonably be envisaged.

b. The Fund has recently determined that when the chargeson the Fund's holdings of a member's currency in any brackethave reached a rate of 3% per cent per annum, the Fund and themember, in accordance with Article V, Section 8(^/) "shall con-sider means by which the Fund's holdings of the currency can bereduced" (EB Meeting 717, 11/19/51). In the course of consulta-tions arising from purchases of exchange taking place afterDecember 1, 1951, the Fund and the member will agree uponappropriate arrangements to ensure the reduction of the Fund'sholdings of the member's currency as soon as possible, with themaximum period to be permitted in any such agreed arrangementrequiring that within five years of each purchase made by themember there will be an equivalent repurchase of the Fund'sholdings unless they have otherwise been reduced.

c. With respect to each future purchase which raises theFund's holdings of the member's currency from not less than 75per cent to not more than 100 per cent of its quota, a memberwhose currency held by the Fund has not been otherwise reducedwithin three years will be requested by the Fund to agree uponan arrangement providing that within five years of each purchase

39 Dec. 102-152/11)



made by the member there will be an equivalent repurchase ofthe Fund's holdings unless they have otherwise been reduced.

d. When unforeseen circumstances beyond the member'scontrol would make unreasonable the application of the princi-ples set forth in paragraph 2 above, the Fund will consider exten-sions of time.

e. When requesting use of the resources of the Fund inaccordance with the arrangements described above, a member willbe expected to include in its authenticated request a statementthat it will comply with the above principles.

f. These -principles will be an essential element in any deter-mination by the Fund as to whether a member is using theresources of the Fund in accordance with the purposes of theFund.

3. Each member can count on receiving the overwhelming bene-fit of any doubt respecting drawings which would raise theFund's holdings of its currency to not more than its quota.*

4. The Managing Director should communicate with membersconcerning means to speed the collection and reporting of mone-tary reserves data and means to reduce the delays in reachingagreement under Rule 1-6 in cases where a repurchase obligationhas been computed. The Fund should also make it clear that animportant element in its judgment respecting the use of itsresources will be the cooperation of the member in helping tomake Article V, Section 7 effective, including the timely provisionof information and the facilitating of settlement.

5. This decision will be effective until December 31, 1953, andwill be reviewed by the Executive Board before that date.

Decision No. 102- (52/11) * *

February 13, 1952

* See, however, Article V, Section l>(d) and paragraph 32, Report by the Execu-tive Directors to the Board of Governors Proposing Amendment of the Articles ofAgreement, April 1968.

** Under Paragraph 1 of Decision No. 270-(53/95) adopted December 23, 1953,Decision No. 102-(5 2/11) was continued in effect.

Dec. 102-152/11) 40



General Policies on Use of the Fund's Resources: Tranche Policies

. . . The Fund's attitude to requests for transactions within the"first credit tranche"—that is, transactions which bring theFund's holdings of a member's currency above 100 per cent butnot above 125 per cent of its quota—is a liberal one, providedthat the member itself is making reasonable efforts to solve itsproblems. Requests for transactions beyond these limits requiresubstantial justification. They are likely to be favorably receivedwhen the drawings or stand-by arrangements are intended to sup-port a sound program aimed at establishing or maintaining theenduring stability of the member's currency at a realistic rate ofexchange.

Annual Report of the Executive Directors,

1962, p. 31. See also Annual Reports,

1953,1955,1959, and 1961.

INCREASE IN CREDIT TRANCHES UNDER THE FUND'S TRANCHEPOLICIES

Until the effective date of the second amendment of theArticles:

(i) for the purpose of the Fund's credit tranche policies, eachtranche shall be equal to 36.25 per cent of quota;

(ii) references to the "first credit tranche" in existing stand-byarrangements and letters of intent shall be understood tomean a tranche equal to 36.25 per cent of quota; and

("0*Decision No. 4934-(76/5)

January 19, 1976

* Reproduced on page 54.

4l Dec. 4934-(76/5J



STAND-BY CREDIT ARRANGEMENTS

The Fund is prepared to consider requests by members forstand-by arrangements designed to give assurance that, during afixed period of time, transactions up to a specified amount will bemade whenever a member requests and without further considera-tion of its position, unless the ineligibility provisions of the FundAgreement have been invoked. The following paragraphs setforth the general framework for stand-by arrangements:

1. Stand-by arrangements would be limited to periods of notmore than six months. They could be renewed by a new deci-sion of the Executive Board.

2. In considering the request for a stand-by arrangement ora renewal of a stand-by arrangement, the Fund would applythe same policies that are applied to requests for immediatedrawings, including a review of the member's position, policiesand prospects in the context of the Fund's objectives and pur-poses. The Fund would agree to a stand-by arrangement onlyfor a member that would be in a position to make purchases ofthe same amount of exchange from the Fund.

3. Such arrangements would cover the portion of the quotawhich a member would be allowed, under Article V, Section 3,to draw within the period provided in the arrangement. How-ever, this does not preclude the Fund from making stand-byarrangements for larger amounts on terms in accordance withArticle V, Section 4.

4. A charge of */4 of 1 per cent per annum would be paya-ble to the Fund at the time a stand-by arrangement is agreed.This charge would be payable in gold (or United States dollarsin lieu of gold) or the member's currency as specified for othercharges by Article V, Section 8 (/). In the event that a stand-byarrangement is renewed, a new charge at the rate of % of 1per cent per annum would be payable to the Fund.

5. A member having a stand-by arrangement would have theright to engage in the transactions covered by the stand-by

Dec. J55-(52/57l 42



arrangement without further review by the Fund. This right ofthe member could be suspended only with respect to requestsreceived by the Fund after: (a) a formal ineligibility, or (b) adecision of the Executive Board to suspend transactions eithergenerally (under Article XVI, Section 1 (a) (ii) ) or in order toconsider a proposal, made by an Executive Director or theManaging Director, formally to suppress or to limit the eligi-bility of the member.

6. In view of the policy of the Fund with respect to draw-ings within the so-called "gold tranche," it is not consideredlikely that members will request stand-by arrangements con-fined to transactions within the "gold tranche." Accordingly,the policy set forth in this decision is designed primarily todeal with stand-by arrangements for drawings beyond the"gold tranche." If at any time a member proposes a stand-byarrangement which would, in part or entirely, involve drawingswithin the "gold tranche," the Fund will reconsider the chargeset forth in paragraph 4 above as applied to "gold tranche"transactions.

7. This decision will be effective until December 31, 1953,and will be reviewed by the Executive Board before that date.


October 1, 1952

I. USE OF FUND'S RESOURCES AND REPURCHASES

II. STAND-BY CREDIT ARRANGEMENTS

I. Use of Fund Resources and Repurchases

The decision taken at Meeting 52/11 on February 13, 1952,relating to use of the Fund's resources and repurchases, shall con-tinue in effect subject to review by the Executive Board from timeto time as circumstances warrant.

43 Dec. 270-f53/95)



II. Stand-By Arrangements

The Fund is prepared to consider requests by members forstand-by arrangements designed to give assurance that, during afixed period of time, transactions up to a specified amount will bemade whenever a member requests and without further considera-tion of its position, unless the ineligibility provisions of the FundAgreement have been invoked. The following paragraphs setforth the general framework for stand-by arrangements:

1. Stand-by arrangements will be limited to periods of notmore than six months. They can be renewed by a new decisionof the Executive Board. If a member believes that the pay-ments problems it anticipates (for example, in connection withpositive programs for maintaining or achieving convertibility)can be adequately provided for only by a stand-by arrangementof more than six months, the Fund will give sympathetic con-sideration to a request for a longer stand-by arrangement in thelight of the problems facing the member and the measuresbeing taken to deal with them. With respect to stand-byarrangements for periods of more than six months, the Fundand the member might find it appropriate to reach under-standings additional to those set forth in this decision.

2. In considering the request for a stand-by arrangement orrenewal of a stand-by arrangement, the Fund will apply thesame policies that are applied to requests for immediate draw-ings, including a review of the member's position, policies andprospects in the context of the Fund's objectives and purposes.The Fund will agree to a stand-by arrangement only for amember that is in a position to make purchases of the sameamount of exchange from the Fund.

3. There will be specified in each stand-by arrangement thetransactions which may be made under that arrangement.

4. A member having a stand-by arrangement will have theright to engage in the transactions covered by the stand-by

Dec. 270-153/95) 44


USE OF FUNDS RESOURCES AND STAND-BY ARRANGEMENTS

arrangement without further review by the Fund. This right ofthe member can be suspended only with respect to requestsreceived by the Fund after: (a) a formal ineligibility, or (b) adecision of the Executive Board to suspend transactions eithergenerally (under Article XVI, Section I (a) (ii)) or in order toconsider a proposal, made by an Executive Director or theManaging Director, formally to suppress or to limit the eligi-bility of the member. When notice of a decision of formalineligibility or of a decision to consider a proposal is given pur-suant to this paragraph, purchases under this stand-by arrange-ment will be resumed only after consultation has taken placebetween the Fund and the member and agreement has beenreached on the terms for the resumption of such purchases.

5. (a) When a stand-by arrangement is entered into orrenewed, a charge of % of 1 per cent per anum will be payableto the Fund in advance for the period of the stand-by arrange-ment or renewal. For any additional drawing rights that arisein the course of a stand-by arrangement, a further charge willbe payable to the Fund in advance at the rate of % of 1 percent per annum calculated on the basis of the amount of theadditional drawing rights and the unexpired period of thestand-by arrangement.

(b) Charges for stand-by arrangements will be payable ingold, or U.S. dollars in lieu of gold, or in the member's cur-rency as specified for other charges by Article V, Section 8 (/).

(c) There will be credited against the service charge for atransaction under a stand-by arrangement the charges actuallypaid in respect of that amount under the stand-by arrangementand any stand-by arrangement which preceded it without inter-val at the rate of % of 1 per cent per annum and up to a max-imum of l/4 of 1 per cent on that amount, due allowance beingmade for any refunds under paragraph II.6 of this decision.For the purpose of calculating such credits and for the purposeof calculating refunds under (e) below, it shall be assumed

45 Dec. 270-(53/95)



that drawings are made in respect of drawing rights in theorder in which such drawing rights arose.

(d) In order to effect a credit against a service charge, theFund will repay the portion of the charge paid for a stand-byarrangement that is to be credited under (c) above and collectthe service charge in full.

(e) If a member notifies the Fund that it wishes to cancela stand-by arrangement, the Fund will repay to the member aportion of the charge. The portion repaid will represent thecharge for the period remaining unexpired at the date of can-cellation for the amount that could still be drawn under thestand-by arrangement at the date of cancellation for which themember has paid a charge.

(f) Repayment under (d) or (e) above of a charge paidfor a stand-by arrangement will be made in gold, U.S. dollars,and the member's currency in the same proportions as thecharge was paid.

6. The Fund will not levy the charge set forth in para-graph 5 above with respect to that part of the stand-by arrange-ment covering "gold tranche" transactions.*

To the extent that a charge has been levied on a part ofthe stand-by arrangement which falls into the gold tranche inthe course of the stand-by arrangement, the Fund will refundthe charge on that part for the unexpired period of the stand-by arrangement.

7. This decision shall continue in effect subject to reviewby the Executive Board from time to time as circumstanceswarrant.

Decision No. 270-(53/95),

December 23,1953, as amended by

Decisions Nos. 876-(59/15), April 27,1959,

andl!51-(6l/6), February 20,1961

* See paragraph III of Decision No. 2836-(69/87), September 15, 1969, page 69.

Dee. 270-(53/95) 46



STAND-BY ARRANGEMENTS

I

II. A stand-by arrangement shall provide for a fixed amountthat can be purchased under it augmented by amounts equivalentto repurchases in respect of drawings made under the stand-byarrangement or made at the time when the stand-by arrangementis entered into, unless when any such repurchase is made the mem-ber informs the Fund that it does not wish the stand-by arrange-ment to be augmented by the amount of that repurchase. Inexceptional circumstances, however, a stand-by arrangement mayprovide for purchases that increase the Fund's holdings of thecurrency of the member having the stand-by arrangement up to aspecified level, provided that the amounts the member may pur-chase shall in no case be increased by other members' purchasesof its currency.


April 21, 1959


The Executive Board has reviewed the Fund's policy withrespect to the use of its resources under stand-by arrangements(SM/68/128 and Supplements 1-4, SM/68/141) and agrees thatthe Fund shall be guided by the approach in the conclusions setforth in SM/68/128, Supplement 4 as revised.

Decision No. 2603-(68/132)*

September 20, 1968

* See also paragraph 4 of Decision No. 3153-(70/95), page 143.

47 Dee. 2603-(68/132)



Conclusions

In the light of experience over the past years and taking intoconsideration the necessity of adequate safeguards for the Fundand the need for flexibility while ensuring uniform and equitabletreatment of all members, it is proposed that Fund policies andpractices on the use of its resources, including tranche policies,shall continue to apply subject to the following:

1. Appropriate consultation clauses will be incorporated in allstand-by arrangements.

2. Provision will be made for consultation, from time to time,with a member during the whole period in which the member ismaking use of the Fund's resources beyond the first credit tranchewhether or not the use results from a stand-by arrangement.

3. Phasing and performance clauses will be omitted in stand-byarrangements that do not go beyond the first credit tranche.

4. Appropriate phasing and performance clauses will be usedin all stand-by arrangements other than those referred to in para-graph 3, but these clauses will be applicable only to purchasesbeyond the first credit tranche.

5. Notwithstanding paragraph 4, in exceptional cases phasingneed not be used in stand-by arrangements that go beyond thefirst credit tranche when the Fund considers it essential that thefull amount of the stand-by arrangement be promptly available.In these stand-by arrangements, the performance clauses will beso drafted as to require the member to consult the Fund in orderto reach understandings, if needed, on new or amended perform-ance criteria even if there is no amount that could still be pur-chased under the stand-by arrangements. This consultation willinclude a discussion by the Executive Directors which could cul-minate in a communication of their views to the member underArticle XII, Section 8.

6. Performance clauses will cover those performance criterianecessary to evaluate implementation of the program with a view

Dec. 2603-(68/132) 48



to ensuring the achievement of its objectives, but no others. Nogeneral rule as to the number and content of performance criteriacan be adopted in view of the diversity of problems and institu-tional arrangements of members.

7. In view of the character of stand-by arrangements, languagehaving a contractual flavor will be avoided in the stand-by docu-ments.

STAND-BY ARRANGEMENTS: REFUND OF CHARGES

(a) Refunds pursuant to Paragraph II.6 of Executive BoardDecision No. 270-(53/95), as amended, of charges paid forstand-by arrangements entered into before the date of this deci-sion will be calculated as of the date of each repurchase, drawingof the member's currency by other members, or increase of themember's quota, and will be based on the Fund's total holdingsof the member's currency as of the date of each such calculation.If no such repurchase, drawing or increase of quota has takenplace before the expiration of the stand-by arrangement the calcu-lation will be based on the Fund's holdings at the end of thequarters of the Fund's financial year and at the date of expira-tion.

(b) In determining the Fund's holdings of a member's cur-rency for the purposes of all calculations involving charges paya-ble for stand-by arrangements entered into after the date of thisdecision, no account will be taken of amounts, not in excess of Vioof 1 per cent of the member's quota, in a special account to meetadministrative expenses or amounts in sundry cash accounts.

Decision No. 1345-(62/23),

May 23) 1962, as amended by

Decision No. 2620- (68/141),

November 1, 1968

49 Dec. 1345-162/23)



PROCEDURE FOR PURCHASES UNDER STAND-BY ARRANGEMENTS

Upon receipt of a valid request for a purchase under a stand-byarrangement, the Executive Directors will be notified promptly,and, not later than the close of the first business day after thereceipt of the request, the Fund will instruct the appropriatedepository to make the transfer.


March 20, 1970

EXTENDED FUND FACILITY

I.

(i) The Executive Directors have been considering the estab-lishment of an extended facility for members that would enablethe Fund to give medium-term assistance in the special circum-stances of balance of payments difficulty that are indicated in thisdecision. The facility, in its formulation and administration, islikely to be beneficial for developing countries in particular.

(ii) The Executive Directors have noted the studies preparedby the staff, including SM/74/58 ("Extended Fund Facility,"March 8, 1974), and especially paragraphs 12 to 16 of that memo-randum, in which certain situations to which an extended facilitycould apply are described as follows:

"(a) an economy suffering serious payments imbalance relatingto structural maladjustments in production and trade andwhere prices and cost distortions have been widespread;

(b) an economy characterized by slow growth and an inher-ently weak balance of payments position which preventspursuit of an active development policy."

(iii) The Executive Directors have noted the support for anextended facility by the Committee of the Board of Governors on

Dee. 4377-(74/7?4J 50



the Reform of the International Monetary System and RelatedIssues.

(iv) Taking into account the considerations set forth above,and in particular the exceptional problems faced by some mem-bers, the Executive Directors have decided to establish a facilityin accordance with the terms set forth in Section II of this deci-sion for the purpose of giving such members medium-term assist-ance, consistently with Article I(v) and the other purposes of theFund, under extended arrangements.

II.

1. The Fund will be prepared to give special assistance tomembers to meet balance of payments deficits for longer periodsand in amounts larger in relation to quotas than has been thepractice under existing tranche policies. Such assistance will begiven in the form of extended arrangements in support of com-prehensive programs that include policies of the scope and char-acter required to correct structural imbalances in production,trade, and prices when it is expected that the needed improve-ment in the member's balance of payments can be achieved with-out policies inconsistent with the purposes of the Fund only overan extended period. The Fund will pay particular attention to thepolicy measures that the member intends to implement in orderto mobilize resources and improve the utilization of them and toreduce reliance on external restrictions, the time required forthese measures to have the intended effect on the balance of pay-ments, and such other factors as the Fund considers relevant tothe member's circumstances.

2. A member that contemplates making a request for anextended arrangement should consult the Managing Directorbefore making a request under this decision. A request by amember for an extended arrangement in order to deal with aproblem of the kind referred to in this decision will be met, sub-ject to paragraphs 3 and 4 below, if the Fund is satisfied that:

51 Dee. 4377-174/1141



(a) the solution of the member's balance of payments problemwill require a longer period than the period for which theresources of the Fund are available under existing tranchepolicies, and

(b) the member has presented:

(i) a program, setting forth the objectives and policiesfor the whole period of the extended arrangement,and adequate for the solution of the member's prob-lem; and

(ii) a detailed statement of the policies and measures forthe first twelve months constituting an initiation ofthe program referred to in (i) considered substantialin the member's circumstances,

with the understanding that, for each subsequent twelve-monthperiod, the member will present to the Fund a detailed statementof the progress made, and the policies and measures as in (ii)that will be followed, to further the realization of the objectivesof the program referred to in (i) with such modifications in themember's policies as might reasonably be considered necessary toassist it to achieve its objectives in changing circumstances.

3. Extended arrangements under this decision will be limitedto periods of not more than three years. Each arrangement willprescribe the total amount, and the annual installments withinthe total, available in accordance with the original or any modi-fied terms of the arrangement. Purchases in respect of eachinstallment will be phased over the period in which it is availableand will be subject to suitable performance clauses related to theimplementation of those policies that are necessary for achievingthe objectives of the program that the member has adopted as thebasis for an extended arrangement.

4. (a) Purchases outstanding under this decision will notexceed 140 per cent of the member's quota, or be allowed to raisethe Fund's holdings of the member's currency above 265* per

* See Decision No. 4934- (76/5), page 51

Dec. 4377-(74/114) 52



cent of the member's quota (excluding holdings obtained by theFund as a result of purchases under its decisions on the facilitiesrelating to compensatory financing, buffer stock financing, and theimpact of the increased cost of imports of petroleum and petro-leum products),

(b) In order to carry out the purposes of this decision, theFund will be prepared to grant any waiver of the conditions ofArticle V, Section 3 (a) (iii) when necessary to permit purchasesunder this decision or to permit purchases under other policiesthat would raise the Fund's holdings of a member's currencyabove the limits referred to in that provision because of purchasesoutstanding under this decision. In addition, subject to (a), theFund will apply its tranche policies to requests by a member forpurchases other than gold tranche purchases as if the Fund'sholdings of the member's currency did not include holdingsresulting from any purchases outstanding under this decision.

5. A member that has obtained an extended arrangementunder this decision will make repurchases corresponding to pur-chases under the extended arrangement, to the extent that suchpurchases are still outstanding, as soon as its balance of paymentsproblems have been overcome and, in any event, within an out-side range of four to eight years after each purchase. Not laterthan four years after the first purchase under the extendedarrangement the member will propose to the Fund a schedule ofrepurchases for all purchases outstanding under the extendedarrangement. Normally, schedules under this paragraph willprovide for repurchases in respect of each purchase in sixteenequal quarterly installments.

6. When purchases are made under extended arrangementsgranted pursuant to this decision, the Fund will so indicate in anappropriate manner.

7. The Fund will levy charges on holdings of a member's cur-rency resulting from purchases outstanding under this decision in

53 Dec. 4377-174/114)



accordance with Executive Board Decision No. 4378-(74/114),adopted September 13, 1974.

8. Except as otherwise provided in this or in any subsequentrelated decisions, extended arrangements shall be subject to theFund's decisions and policies on stand-by arrangements.

9. The Fund will review this decision in the light of experi-ence and developing circumstances when the total amount of pur-chases that could be made under extended arrangements is equiva-lent to two billion special drawing rights and in any event notlater than July 31, 1976.

Decision No. 4377-(74/114)

September 13, 1974

Until the effective date of the second amendment of the Arti-cles:

(0*(«)*(iii) the reference to 265 per cent of the member's quota in

paragraph 4(a) of Decision No. 4377-(74/114), adoptedSeptember 13, 1974, shall be replaced by "276.25 percent of the member's quota."

Decision No. 4934- (76/J)

January 19, 1976

CHARGE FOR EXTENDED ARRANGEMENTS

Under paragraph 8 of Decision No. 4377-(74/114), adoptedSeptember 13, 1974, the charge of % of 1 per cent per annumimposed by paragraph 5 (a) of Decision No. 270-(53/95),adopted December 23, 1953, as amended, shall be payable to the


Dec. 4720-(75/M4J 54



Fund in advance of each year of an extended arrangement on theamount that could be purchased during that year.

Decision No. 4720-(75/114}

July 2, 1975

USE OF FUND'S RESOURCES: LIMITATION AND INELIGIBILITYUNDER ARTICLE V, SECTION 5

The Fund has, in the case of a member which has had a pre-vious exchange transaction with the Fund, power to declare themember ineligible or limit its use of the resources of the Fund ifthe member is, in the opinion of the Fund, using the resources ofthe Fund in a manner contrary to the purposes of the Fund.

Decision No. 284-3

March 10, 1948

USE OF FUND'S RESOURCES: POSTPONEMENT AND LIMITATIONUNDER ARTICLE V, SECTION 5

If the Fund receives a request from a member to purchaseexchange and either, (l) the Fund is considering sending themember a report pursuant to Article V, Section 5 or (2) theFund finds when the request is before it that action pursuant tothat Section should be considered; then the Fund has the authority,pursuant to Article V, Section 5, of the Fund Agreement, to post-pone the transfer as permitted under the provisions of Rulesand Regulations G-3 for such time as may reasonably be neces-sary to decide the question of applying Article V, Section 5, and,if it decides to apply it, to prepare and send to the member areport and subject its use of the Fund's resources to limitations.Under such circumstances the limitations imposed will apply to

55 Dec. 286-7



the pending request for the purchase of exchange as well as tofuture requests.

Decision No. 286-1

March 15, 1948

USE OF FUND'S RESOURCES: MEANING OF "Is USING" INARTICLE V, SECTION 5

A member "is using" the resources of the Fund within themeaning of Article V, Section 5, where it is either actually dis-posing of the exchange purchased from the Fund, or, having pur-chased exchange from the Fund, the Fund's holdings of its cur-rency are in excess of 75 per cent of its quota.

Decision No. 292-3

March 30, 1948

CURRENCIES TO BE DRAWN AND TO BE USED IN REPURCHASES

The Board approves the statement entitled "Currencies to BeDrawn and to Be Used in Repurchases" [below], and this state-ment shall be incorporated in the Annual Report for 1962.

Decision No. 1371- (62/36)

July 20, 1962

Currencies to Be Drawn and to Be Used in Repurchases

From the beginning of the Fund's operations through 1957,drawings were overwhelmingly made in U. S. dollars. Starting in1958, however, the Fund has increasingly encouraged drawings in

Dee. 7371 -(62/36



other currencies, and this has been facilitated by the introductionof de facto convertibility for the currencies of the main industrialcountries. Since the same currencies have become formally con-vertible under Article VIII in February 1961, repurchases havealso begun to be made in these currencies.

Certain practices have been developed which take into accountthe new situation of the increasing number of currencies usablefor the transactions of the Fund. These practices are still in astate of evolution as increased experience is being gained. Thefollowing paragraphs set out what may be regarded as appropri-ate practices to be followed for the time being.

I. Procedure

When a substantial number of currencies other than the U. S.dollar became usable for drawings, the drawing countries beganto discuss with the Managing Director what currencies might bedrawn. It gradually became the practice that consultation shouldtake place between the drawing country and the Managing Direc-tor about the currencies to be drawn, and this practice has nowbecome established in connection with all stand-by arrangementsand drawings. Before giving advice to the drawing country, theManaging Director has got into contact with countries whose cur-rencies might be drawn, even in circumstances where speed inarranging the drawing was essential. These consultations and thecontacts with the countries concerned have thus become an inte-gral part of the procedure which has been evolved.

In addition, an attempt is being made to indicate from time totime the amounts likely to be drawn and what might be a properdistribution of drawings among different currencies. Since understand-by arrangements even fairly large drawings may be madesuddenly, such indications as will be given can only be tentativeand informal but they can, even so, serve a useful purpose in con-

57 Dee. 737M62/36J



tributing to the maintenance of close contact between the Manag-ing Director and the countries whose currencies may be drawn.

It has been concluded that the Fund has the legal authority tospecify the convertible currencies to be used in making repur-chases in discharge of obligations to repurchase that do not ariseunder Article V, Section 7(£), and that, accordingly, members arerequired to obtain the prior agreement of the Fund on the con-vertible currencies to be used in making such repurchases. Suchrepurchases must not increase the Fund's holdings of a member'scurrency beyond 75 per cent of that member's quota or decreasethe Fund's holdings of the repurchasing member's currency below75 per cent of that member's quota.

Until further notice, and in order to maintain conditions whichfoster repurchases and the revolving character of the Fund'sresources, the Fund will accept any convertible currency fulfillingthe conditions set forth in the last sentence above, provided thatthe repurchasing member has consulted the Managing Directoron the currencies, and the amounts of each, to be used by themember in making its repurchase. Before giving his advice, theManaging Director will consult with countries whose currenciescould be used in repurchase, and he will also attempt to giveadvance indications comparable to those relating to the currenciesto be drawn. In all of these consultations, the Managing Direc-tor's recommendations will be guided by the principles regardingthe currency composition of repurchases set out in Section IIbelow.

The preceding paragraph shall apply to those repurchase obli-gations outside Article V, Section 7(b) that are entered into afterJuly 20, 1962. Members that entered into such obligations beforethat date shall be invited to consult the Managing Director onthe currencies to be used in discharging these obligations, and theManaging Director will follow the procedure and be guided bythe considerations referred to in the preceding paragraph.

The Managing Director will notify the Executive Directors at

Dec. J37M62/36) 58



least two business days before any repurchase under the preced-ing paragraphs is carried out.

Where consultations with a country are referred to in this doc-ument they will normally be conducted with the Executive Direc-tor appointed or elected by such country.

II. Criteria for the Selection of Currenciesfor Drawings and Repurchases

The experience of the Fund in recent years has made it possi-ble to indicate the main considerations which govern the selectionof currencies for drawings and repurchases.

Drawings

With regard to the question of the selection of currencies for aparticular drawing or for drawings in general, account has beentaken of the balance of payments and reserve positions of thecountries whose currencies are considered for drawing, as well asof the Fund's holdings of these currencies.

It has been found in practice that weight has to be given to allthese three considerations, with some differentiation according tospecific circumstances, and perhaps most particularly according tothe size of the transaction or transactions involved.

During periods when aggregate drawings were moderate inamount, little difficulty was experienced in distributing thesedrawings among countries with reasonably satisfactory balance ofpayments positions on the basis of the level of these countries'reserves. When the volume of drawings has been large, it hasbeen necessary to give more importance to the relative balance ofpayments positions of the countries to be drawn upon, so as toprevent excessive declines in their primary reserves as a result ofFund sales of their currencies. In connection with large drawings,

59 Dec. 1371-(62/36;



in particular when they are associated with short-term capitalmovements, it is usually fairly easy to single out the countrieswhose reserves have benefited from an inflow of capital and todirect drawings more particularly toward the currencies of thesecountries.

By the attention thus given to the balance of payments posi-tion, the Fund has been able to arrange drawings in large meas-ure to offset movements of funds in the exchange markets, andthus contribute to the strengthening of the international paymentsposition. In considering a country's balance of payments position,seasonal fluctuations have not been allowed great weight, and theFund has avoided drawing prematurely the currency of a countrywhich is in the process of building up reserves from a relativelylow position.

In applying the third consideration, account has to be taken ofprevailing circumstances. For example, when the Fund's holdingsof a particular currency have become very low, this has precludedsubstantial sales of that currency irrespective of the balance of pay-ments and reserve position of the country concerned. In practice,the Fund has taken account of the level of its holdings of anycurrency well before the point of actual exhaustion, by gradu-ally—rather than abruptly—reducing its sales of that currencyon account of this factor.

Small drawings have normally been executed in one currencyonly, preferably the currency in which the drawing country holdsthe bulk of its reserves, even in circumstances where the paymentsposition of the reserve center drawn upon has not been strong.Somewhat larger drawings have usually been distributed overmore than one currency, but only exceptionally more than threeto five currencies have been involved in a single drawing unless ithas been a very large one. As far as possible, factors relevant tothe particular drawing country, such as closeness of trade andpayments relations, have been taken into account in the selectionof the currencies to be drawn.

Dec. /371-f62/36) 60



Repurchases

With regard to repurchases, the range of currencies is, as men-tioned in Section I above, limited to currencies that are formallyconvertible and of which the Fund's holdings are below 75 percent of the quota. As a result, repurchases in currencies have,until early 1961, been made almost exclusively in U.S. dollars.The U.S. dollar was also, in recent years, a currency that wasavailable in the exchange market at favorable rates which reflectedthe prevailing balance of payments position.

Increasingly, however, weight has been given, in suggesting theallocation of repurchases among the countries whose currenciescan be received in repurchase, to the Fund's holdings of thesecurrencies compared to quotas. It would seem from the point ofview of equity, and also with due regard to the liquidity positionof the Fund, that great weight should be given to this criterion.But consideration should also be given, when appropriate, to theprevailing balance of payments position. In the case of relativelysmall repurchases it has been found practical that they be made inthe currency in which a country holds its reserves, provided ofcourse that such currency can be received by the Fund.

III. Conversion

It has been the experience in the Fund that a country drawingone or more currencies, after consultation with the ManagingDirector, has often wanted to convert either the whole or part ofthe amount drawn in a particular currency into one or more othercurrencies depending upon the payments that country has to meetor the currencies it normally holds in its reserves. The conver-sions thus effected have made it possible for the drawing countryto meet its payments obligations and to strengthen its reserves inthe most effective manner.

In the case of drawings in dollars, sterling and moderate

61 D«c. 137]-(61/36)



amounts of certain other currencies, there has been no difficulty ineffecting conversion at the going rate by transactions in theexchange market. Since the currencies drawn have generally beenstrong currencies for which there is a demand in the market, suchconversion has generally been carried out without any disturbanceto the market. For several currencies, arrangements have oftenbeen made between central banks, i.e., between the central banksin the drawing country and in the country whose currency isdrawn, which provide for direct conversion into the latter's mainreserve currency at the prevailing market rate without any com-mission being charged. In certain cases, however, especially whenthe amounts involved have been large, consideration has beengiven to the fact that conversion on the market would haveaffected exchange rates, and in some cases an allowance for thishas been made. A preference has been indicated by two centralbanks for conversion at par, especially for large drawings.

In accordance with normal central banking procedure, when-ever a country desires conversion of a currency it is drawing, itwould get in touch with the central bank of the country drawnupon in order to reach an understanding on the most convenientway to arrange such conversion. When conversion has presenteda country with difficulties, the assistance of the Managing Direc-tor has been sought in order to arrive at an appropriate solution.

The practices outlined above for drawings can, mutatismutandis, be applied when a country needs to obtain a currency inorder to make a repurchase from the Fund with that currency.

The Fund will keep the practices with respect to conversion asdescribed above under study, and will re-examine them in thelight of further experience.

COMPENSATORY FINANCING OF EXPORT FLUCTUATIONS

Executive Board Decision No. 1477-(63/8), adopted Febru-ary 27, 1963, as amended by Executive Board Decision No. 2192-

Oee. 4972-(75/207) 62



(66/81), adopted September 20, 1966, is amended to read as fol-lows:

1. The financing of deficits arising out of export shortfalls,notably those of primary exporting member countries, has alwaysbeen regarded as a legitimate reason for the use of Fundresources, which have been drawn on frequently for this purpose.The Fund believes that such financing helps these members tocontinue their efforts to adopt adequate measures toward thesolution of their financial problems and to avoid the use of tradeand exchange restrictions to deal with balance of payments prob-lems, and that this enables these members to pursue their pro-grams of economic development with greater effectiveness.

2. The Fund has reviewed its policies to determine how itcould more readily assist members, particularly primary exporters,encountering payments difficulties produced by temporary exportshortfalls, and has decided that such members can continue toexpect that their requests for drawings will be met where theFund is satisfied that

(a) the shortfall is of a short-term character and is largelyattributable to circumstances beyond the control of themember; and

(b) the member will cooperate with the Fund in an effort tofind, where required, appropriate solutions for its balanceof payments difficulties.

3. Drawings outstanding under this decision may amount to 75per cent of the member's quota provided that (i) except in thecase of shortfalls resulting from disasters or major emergencies,such drawings will not be increased by a net amount of morethan 50 per cent of the member's quota in any 12-month period,and (ii) requests for drawings which would increase the draw-ings outstanding under this decision beyond 50 per cent of themember's quota will be met only if the Fund is satisfied that themember has been cooperating with the Fund in an effort to find,where required, appropriate solutions for its balance of paymentsdifficulties.

63 Dee. 4972-(75/207)



4. The existence and amount of an export shortfall for thepurpose of any drawing under this decision shall be determinedwith respect to the latest 12-month period preceding the drawingrequest for which the Fund has sufficient statistical data, providedthat the Fund may allow a member to draw in respect of a short-fall for a 12-month period ending not later than six months afterthe latest month for which the Fund has sufficient statistical data.

5. In order to identify more clearly what are to be regarded asexport shortfalls of a short-term character, the Fund, in conjunc-tion with the member concerned, will seek to establish reasonableestimates regarding the medium-term trend of the member'sexports based partly on statistical calculation and partly onappraisal of export prospects.

6. The shortfall for the purposes of this Decision shall be theamount by which the member's export earnings in the shortfallyear are less than the average of the member's export earningsfor the five-year period centered on the shortfall year. In comput-ing the five-year average, earnings in the two post-shortfall yearswill be deemed to be equal to earnings in the two pre-shortfallyears multiplied by the ratio of the sum of earnings in the mostrecent three years to that in the three preceding years. If theFund considers that the result of the computations under the pre-vious sentence is not reasonable, the Fund, in conjunction withthe member, will use an estimate based on a judgmental forecast.When the Fund allows a member to draw under the proviso inparagraph 4 above, the Fund may use such methods of estimatingexports during the period for which sufficient statistical data arenot available as it considers reasonable.

7. Any member requesting a drawing under this decision willbe expected to represent that it will make a repurchase corre-sponding to the drawing in accordance with the principles ofExecutive Board Decision No. 102-(52/ll), adopted February 13,1952, as renewed by Executive Board Decision No. 270-(53/95),adopted December 23, 1953. Approximately one year and twoyears after a drawing by a member under this decision, the Fund,

Dec. 4912-175/207) 64



after consultation with the member, may recommend to the mem-ber that, in view of an improvement in its balance of paymentsand reserve position, it should make a repurchase in respect of apart or all of the outstanding drawing. The Fund will expect themember to repurchase in accordance with the recommendation.

8. A member requesting a drawing under the proviso in para-graph 4 above will also be expected to represent that, if theamount drawn on the basis of partially estimated data exceedsthe amount that could have been drawn for the full 12-monthperiod under paragraph 6 above, the member will make a promptrepurchase in respect of the outstanding drawing, in an amountequivalent to the excess.

9. Whenever the Fund's holdings of a member's currencyresulting from a drawing under this decision are reduced by themember's repurchase or otherwise, the member's access to thisfacility, in accordance with its terms, will be restored pro tanto.

10. When drawings are made under this decision, the Fundwill so indicate in an appropriate manner. Within 18 monthsfrom the date of any drawing made under the Fund's tranchepolicies or under the extended Fund facility, a member mayrequest that all or part of the amount outstanding be reclassifiedand treated, for all purposes of this decision, as a drawing madeunder this decision. The Fund will agree to such a request if atthe time of the drawing under the tranche policies or theextended Fund facility the member could have met the require-ments for a drawing of an equal amount under this decision.

11. In order to implement the Fund's policies in connectionwith compensatory financing of export shortfalls, the Fund willbe prepared to waive the limit on the Fund's holdings of 200 percent of quota, where appropriate. In particular, the Fund will beprepared to waive this limit (i) where a waiver is necessary topermit compensatory drawings to be made under this decision or(ii) to the extent that drawings in accordance with this decisionare still outstanding.

65 Dee. 49I2-(75/207)



Moreover, the Fund will apply its tranche policies to drawingrequests by a member as if the Fund's holdings of the member'scurrency were less than its actual holdings of that currency by theamount of any drawings outstanding under this decision.

12. The Fund will review the formula in paragraph 6 not laterthan March 31, 1977, and will review this decision as a wholewhen experience and developing circumstances make this desir-able. The Fund will review this decision in any event whenever(i) drawings under this decision in any 12-month period exceedSDR 1.5 billion or (ii) outstanding drawings under this decisionexceed SDR 3.0 billion.

Decision No. 4912-(75/207)

December 24,

THE PROBLEM OF STABILIZATION OF PRICES OF PRIMARYPRODUCTS

1. The Executive Board, having considered the staff study on"The Problem of Stabilization of Prices of Primary Products,"decides that the Fund will be prepared to extend assistance tomembers in connection with the financing of international bufferstocks of primary products in accordance with the principles andsubject to the quantitative limits set forth in Chapter III, Sec-tion 2, and Annex A of Part II of the study.

2. In accordance with paragraph 1 above, the total of pur-chases outstanding pursuant to paragraph 1 of this decision shallnot exceed 50 per cent of quota.

3. In order to carry out the purposes of this decision, the Fundwill be prepared to waive the limit on purchases that raise theFund's holdings above 200 per cent of quota, where appropriate.

4. When purchases are made pursuant to paragraph 1 of thisdecision, the Fund will so indicate in an appropriate manner.

Dec. 2772-(69/47J 66



5. A member requesting a purchase pursuant to paragraph 1 ofthis decision will be expected to represent that it will make arepurchase corresponding to the purchase (i) in accordance withthe principles of Executive Board Decision No. 102-(52/ll) ofFebruary 13, 1952, as renewed by Executive Board DecisionNo. 270-(53/95) of December 23, 1953, or (ii) if the interna-tional buffer stock for the financing of which the purchase wasmade makes distributions in currency to the member at an earlierdate, when these distributions are made and to the extent thereof.

6. In view of the Fund's purposes which include the facilita-tion of "the expansion and balanced growth of internationaltrade," the Fund, in its consultations with members, will payincreased attention to their policies in the commodity field.

Decision No. 2772-(69/47),

June 25, 1969, as amended by

Decision No. 4913-(75/207},

December 24, 1975

FOURTH INTERNATIONAL TIN AGREEMENT: BUFFER STOCKFINANCING FACILITY

(i) The Fund, having considered the text of the FourthInternational Tin Agreement, as adopted by the UN TinConference on May 15, 1970, finds that the terms of thisAgreement relating to the international tin buffer stock to beestablished under the Agreement are consistent with the princi-ples referred to in Executive Board Decision No. 2772-(69/47)of June 25, 1969. The Fund expects that an amount equal tonot less than one third of the compulsory contributions due onentry into force of the Agreement under Article 21 (a) (ii) ofthe Agreement will be met from financing other than the useof the Fund's resources under Executive Board DecisionNo. 2772-(69/47).

67 Dec. 3J79-(70/?02)



(ii) In view of (i) above, the Fund will meet, subject to theprovisions of Executive Board Decision No. 2772-(69/47), amember's requests for purchases in connection with the financ-ing by the member of that part of its compulsory contributionto the buffer stock established under the Fourth InternationalTin Agreement which the member has been called upon tomake under Article 21 of the Agreement and which is in excessof one third of the member's compulsory contribution dueunder Article 21 (a) (ii) of the Agreement.

(iii) The staff will keep the Executive Directors informedon the operation of the buffer stock and other developments inconnection with the Fourth International Tin Agreement byreports that will be made at least once a year, and the Fundmay make such review of this Decision as is appropriate in thelight of these reports.

Decision No. 3179-(70/102)

November 25, 1970

In applying the provisions of E.B. Decision No. 3179-(70/102), dated November 25, 1970, the Fund decides that, forthe purpose of determining the appropriate use of Fund resourcesunder the Decision, any initial contribution made in the form oftin metal under Article 21 (a) (ii) of the Fourth International TinAgreement shall be regarded as equivalent to contributions incash, valued at the floor price ruling on entry into force of theAgreement.

Decision No. 3351 -(71/51)

June 21, 1971

Dec. 3351-(71/51) 68



GOLD TRANCHE PURCHASES UNDER ARTICLE V, SECTION 3 (d)

I. The procedure for gold tranche purchases under the Articlesof Agreement as amended will be as follows:

(a) Upon receipt of a request, the Executive Directors willbe notified as soon as possible but not later than on the firstbusiness day after the receipt of the request. The notificationwill include a statement that a decision along the followinglines will be recorded in the minutes of the next ExecutiveBoard meeting:

[Member] is making a gold tranche purchase in an amountequivalent to in [currencies], pursuant toits request dated The Fund notes [member's]request, including its representation in accordance withArticle V, Section 3 (#)( i ) , and its statement that it willcomply with the principles set forth in Executive Board Deci-sion No. 102-(52/11), adopted February 13, 1952.

(b) Not later than the close of the first business day afterthe receipt of the request, the Fund will instruct the appropri-ate depository to make the transfer.

(c) If a request is made for a purchase in both the goldtranche and credit tranches, the procedure for purchases in thecredit tranches will be followed unless the member requeststhat the gold tranche procedure be followed for the goldtranche portion of the request.

II. Pursuant to Article XIX (;) the Fund decides that purchasesand holdings under policies on the use of the Fund's resources forcompensatory financing of export fluctuations shall be excludedfor the purposes of the definition of gold tranche purchases inthat provision.

III. In stand-by arrangements the amount made available shallbe expressed as follows:

For a period of one year from ,[member] will have the right, after making full use of any

69 Dec. 2836-169/87)



gold tranche that it may have, to make purchases from theFund in the currencies of other members in exchange for itsown currency in an amount equivalent tomillion, etc.

IV. No service charge shall be payable in respect of any pur-chases made after July 27, 1969, to the extent that it is a goldtranche purchase.


September 15, 1969

GOLD TRANCHE PURCHASES AND BUFFER STOCK FINANCINGFACILITY

The Executive Directors will not challenge a member's repre-sentation under Article V, Section 3(^/ ) ( i ) made in connectionwith a request for a purchase under paragraph 1 of ExecutiveBoard Decision No. 2772-(69/47), adopted June 25, 1969, if thepurchase is a gold tranche purchase.


August 6. 1971

FACILITY TO ASSIST MEMBERS IN PAYMENTS DIFFICULTIESRESULTING FROM INITIAL IMPACT OF INCREASED COSTS OFIMPORTS OF PETROLEUM AND PETROLEUM PRODUCTS

1. For a period ending on December 31, 1975, the Fund willbe prepared to make resources available to members in accord-ance with this decision in order to assist them to meet the impacton their balances of payments of increases in the prices of petro-leum and petroleum products. Resources made available underthis decision will be supplementary to any assistance that mem-

Oec. 4241 -(74/67) 70



bers may obtain under other policies on the use of the Fund'sresources.

2. (a) Requests for purchases under this decision by a memberwill be met by the Fund, subject to the limits in (b) and (c)below, if the Fund is satisfied (i) that the member needs assis-tance because of increases in the cost of its imports of petroleumand petroleum products in 1974 and because it has a balance ofpayments need, and (ii) that the member is following policiesnot inconsistent with the understandings set forth in Paragraph 2of the Rome Communique of the ad hoc Committee of the Boardof Governors on Reform of the International Monetary Systemand Related Issues and in Executive Board Decision No. 4134-(74/4). The Fund shall assess each request in order to determinewhether, and the extent to which, the member has such a balanceof payments need. In making this assessment the Fund shall takeinto account the ability of the member to reduce this need, partic-ularly through an inflow of capital, including an increase in aidon concessionary terms, or by increased exports to oil exportingcountries, or to meet this need by some use of its reserves. Forthe purposes of this decision, any assistance made available to amember other than under this decision shall be deemed to financefirst the part of the member's deficit that is not attributable to theincreased cost of imports of petroleum and petroleum products.

(b) The total of a member's purchases outstanding underParagraph 2 of this decision shall not exceed the smaller of (i)the increase in the cost of the member's net imports of petroleumand petroleum products over the cost of its imports of these com-modities in 1972, calculated in accordance with Paragraph 1 ofthe Attachment to this decision, minus an amount equivalent to10 per cent of the member's reserves at the end of 1973, adjustedfor variability of exports in accordance with Paragraph 2 of theAttachment to this decision, and (ii) 75 per cent of the member'squota.

(c) The total of a member's purchases outstanding underParagraph 2 of this decision shall not exceed 35 per cent of the

71 Dec. 4241-(74/67)



amount referred to in (b) above prior to any decision that theFund may take under Paragraph 8.

3. On the request of a member, the Fund may make an appro-priate adjustment in the total amount of outstanding purchasesthat a member may make under Paragraph 2(b) above if theFund is satisfied that this amount should be higher because themember's imports of petroleum and petroleum products in 1972were abnormally low because of exceptional circumstances.

4. In order to carry out the purposes of this decision, the Fundwill be prepared to grant any waiver of the conditions of Arti-cle V, Section 3(^) (iii) when necessary to permit purchases underthis decision or to permit purchases under other policies thatwould raise the Fund's holdings of a member's currency abovethe limits referred to in that provision because of purchases out-standing under this decision. In addition, the Fund will apply itstranche policies to requests by a member for purchases other thangold tranche purchases as if the Fund's holdings of the member'scurrency did not include holdings resulting from any purchasesoutstanding under this decision.

5. (a) A member that has made a purchase under this deci-sion will be expected to cooperate with the Fund in order to findappropriate solutions for its balance of payments problem. Forthis purpose the member will consult with the Fund during theyear and subsequently during the period in which it has purchasesoutstanding under this decision, thereby affording the Fund anopportunity to ascertain whether the member's policies are condu-cive to balance of payments adjustment and to repurchase inaccordance with (d) below.

(b) Before submitting a request for a purchase under thisdecision for 1975, a member will be expected to consult the Fundon its balance of payments prospects and policies, including theeffect on the balance of payments of the policies it has adoptedor intends to adopt in relation to the oil problem.

(c) A member requesting a purchase under this decision

Dec. 4241 -174/67) 72



will be expected to represent that it is following policies consist-ent with the understandings set forth in Paragraph 2 of theRome Communique of the ad hoc Committee of the Board ofGovernors on Reform of the International Monetary System andRelated Issues and that, while the purchase is outstanding, itwill refrain (i) from imposing new, and from intensifying exist-ing, restrictions on current international payments inconsistentlywith its obligations under the Fund's Articles of Agreement and(ii) from imposing new, or intensifying existing, restrictions oncurrent international transactions without prior consultation withthe Fund.

(d) A member requesting a purchase under this decisionwill be expected to represent that it will make a repurchase corre-sponding to the purchase, to the extent that it is still outstanding,as soon as the balance of payments problem for which the pur-chase was made has been overcome and, in any event, in sixteenequal quarterly installments to be completed not later than sevenyears after the purchase, and that it will make repurchases underthis decision, other than those accruing under Article V, Sec-tion 7 (£) , in the media specified by the Fund at the time of therepurchase. The Fund will specify the media of repurchase con-sistently with the Articles and after consultation with members.The Fund will pay due regard to these consultations and will beguided by a policy of specifying for repurchase the media in whichit will make repayments in accordance with the terms of borrow-ing agreements.

6. The Fund will indicate in an appropriate manner whichpurchases by a member are made pursuant to this decision.

7. The Fund will levy charges on holdings of a member's cur-rency resulting from purchases outstanding under this decision inaccordance with Executive Board Decision No. 4238-(74/67) ofJune 13, 1974.

8. Not later than September 15, 1974, the Executive Directorswill review developments since the adoption of this decision in

73 Dec. 4241 -(74/67)



order to decide, in the light of the Fund's existing and prospec-tive liquidity, (i) whether purchases under the decision in excessof the limit specified in 2(c) above shall be permitted and (ii)on any adaptations that should be made in the provisions of thisdecision, including changes in the period that is taken as the basisfor calculating the amount of imports of petroleum and petro-leum products and in the amount representing the increase in thecost of these products. A further review will be conducted notlater than December 31, 1974 in order to decide whether and onwhat terms to permit purchases with respect to the impact on thebalance of payments of the increased cost of imports of petro-leum and petroleum products in 1975. The Executive Directorswill review this decision at any other time if they consider itappropriate to do so.

Decision No. 4241 -(74/67)

June 13, 1974

Attachment

1. The increase in the cost of a member's net imports of petro-leum and petroleum products referred to in Paragraph 2(b) (i) ofthe decision will be taken to be equal to the SDR equivalent ofUS$5.50 (at 1 SDR equals US$1.20635) multiplied by the vol-ume in barrels of the member's net imports (i.e., imports lessexports) of these commodities in 1972.

2. The adjustment for variability of exports referred to in Para-graph 2 (b ) ( i ) of the decision will be made by deducting fromthe member's reserves at the end of 1973 an amount equal totwice the root mean squared proportional deviation of export val-ues from a centered five-year moving average (using export seriesgenerally covering the period 1955-71), multiplied by the SDRvalue of exports in 1972. If the deduction results in a negativefigure, the maximum amount that the member could purchaseunder Paragraph 2 ( b ) ( i ) of the decision would equal the

Dec. 4241 -(74/67) 74



increase in the cost of its imports of petroleum and petroleumproducts, calculated in accordance with paragraph 1 of this attach-ment.

1. The Executive Directors have reviewed Executive BoardDecision No. 424l-(74/67), adopted June 13, 1974, in accordancewith Paragraph 8 of that Decision.

2. The total of a member's purchases under Paragraph 2 ofExecutive Board Decision No. 4241-(74/67) shall not exceed,prior to any decision that the Fund may take under Paragraph 8of that Decision pursuant to the review to be conducted not laterthan December 31, 1974, 90 per cent of the amount shown underOption D in Table 5 of SM/74/220, of September 11, 1974.

3. The Executive Directors shall review this Decision by Decem-ber 2, 1974 and, taking account of the amounts then availableunder loan agreements, decide on the extent to which total pur-chases by a member under Paragraph 2 of Executive Board Deci-sion No. 4241-(74/67) may be increased beyond the amountreferred to in Paragraph 2 of this Decision, up to the amountshown under Option D in Table 4 of SM/74/220, of Septem-ber 11, 1974.

Decision No. 4393-(74/121}

September 20, 1974

1. The Executive Directors have reviewed Executive BoardDecision No. 4393-(74/121), adopted September 20, 1974, inaccordance with paragraph 3 of that Decision.

2. The Fund will be prepared to make resources available tomembers in accordance with Decision No. 4241-(74/67), withrespect to their balance of payments deficits in 1974, in amountsthat do not exceed the amount shown under Option D in Table 4

75 Dec. 4529-174/153)



of SM/74/220 of September 11, 1974, provided the Fund hasreceived from a member before February 28, 1975 a statement ofits intention to request a purchase. . . .

Decision No. 4529-(74/153)

December 6, 1974

GOLD TRANCHE AND PURCHASES UNDER THE OIL FACILITY

Purchases may be made by a member under Executive BoardDecision No. 4241-(74/67) only after the member has used anygold tranche that it may have.

Decision No. 4337-(74/102)

August 14, 1974

OIL FACILITY FOR 1975

1. (a) The Executive Directors have reviewed Executive BoardDecision No. 4241-(74/67), adopted June 13, 1974, in accor-dance with Paragraph 8 of that decision, considered SM/75/72Revision 1, and decided that the Fund will be prepared to makeresources available to assist members to meet the impact of thebalance of payments in 1975 of the increases in costs of importsof petroleum and petroleum products that occurred in recentyears. Requests for purchases under this decision will be met, ifthey are in accordance with the terms of this decision and withparagraphs 2(a), 4, 5, and 6 of Decision No. 4241-(74/67).

(b) A member wishing to make a request under this deci-sion shall submit, not later than the close of business on Febru-

Dec. 4634-175/47) 76



ary 27, 1976, or such earlier date as the Fund may decide, a state-ment of its intention to make the request.

2. (a) The total of a member's outstanding purchases withrespect to the increased cost of petroleum and petroleum productsin 1975 shall not exceed the amount shown in the table in Attach-ment II,* or the amount as recomputed with revised data on thebasis of the formula set out in Attachment II.

(b) The total of a member's purchases outstanding underthis decision shall not exceed 30 per cent of the amount referredto in paragraph 2 (a) above as shown in the table in AttachmentII prior to any increase that the Fund may adopt under para-graph 7.

3. On the request of a member, the Fund may make an appro-priate adjustment in the amount referred to in paragraph 2 (a)above if the Fund is satisfied that this amount should be higherbecause the member's imports of petroleum and petroleum prod-ucts in 1972 or 1973 were abnormally low as the result of excep-tional circumstances.

4. A member, when indicating its intention to request a pur-chase under the facility, shall describe its policies to achievemedium-term solutions to its balance of payments problems. Accessto the facility will be subject to an assessment by the Fund ofthe adequacy of these policies. In addition, the member shalldescribe any measures to conserve oil or to develop alternativesources of energy that it has taken or proposes to take in thelight of its economic situation.

5. Not earlier than April 1, 1976 the Fund, after consultationwith a member, may recommend that the member make a repur-chase with respect to purchases under this decision because itsgross reserves at the end of 1975 exceed the level at the end of1973 or 1974, whichever is the lower.

6. The Fund will levy charges on holdings of a member's cur-rency resulting from purchases outstanding under this decision in

* Not included in this volume.

77 Dec. 4634-f75/47;



accordance with Executive Board Decision No. 4637-(75/47),*adopted April 4, 1975.

7. The Executive Directors intend to review this decision dur-ing July 1975 and at such other times as they may determine inorder to decide whether changes should be made in this decision,including what further proportion of the amount referred to inparagraph 2 (a) of this decision may be made available to mem-bers from time to time in light of the Fund's existing and pro-spective liquidity.

Decision No. 4634-(75/47),

April 4, 1975

PURCHASES UNDER THE OIL FACILITY FOR 1975: PRIOR USE OFGOLD TRANCHE

Executive Board Decision No. 4337-(74/102), adoptedAugust 14, 1974 shall be amended by including after the words"Executive Board Decision No. 424l-(74/67)" the words "andExecutive Board Decision No. 4634-(75/47)."


April 4, 1975

OIL FACILITY FOR 1975: REVIEW OF DECISION

1. The Executive Directors have reviewed Executive BoardDecision No. 4634-(75/47), adopted April 4, 1975 in accordancewith paragraph 7 of that Decision.

2. The total of a member's purchases outstanding under Deci-sion No. 4634-(75/47) shall not exceed 50 per cent of theamount referred to in paragraph 2 (a) of that Decision as shownin the table in the Attachment** to this Decision prior to any fur-

* See Rule I -4(f ) , (g), and (h) in By-Laws, Rules and Regulations (Thirty-ThirdIssue, July 15, 1975).

** Not included in this volume.

Dec. 4769-(75/733) 78



ther increase that the Fund may adopt under paragraph 7 of thatDecision.

3. Paragraph 5 of Decision No. 4634-(75/47) is amended toread:

Not earlier than April 1, 1976 the Fund, after consultationwith a member, may recommend that the member make a repur-chase with respect to purchases under this decision becauseits gross reserves at the end of 1975 exceed the level at the endof 1973 or 1974, whichever is lower, but for a member thatdid not make a purchase under the facility with respect to1974, the level of gross reserves at the end of 1975 will becompared to the level at the end of 1974.

4. The next review by the Executive Directors in accordancewith paragraph 7 of Decision No. 4634-(75/47) will be held notlater than October 31, 1975.

Decision No. 4769-(75/133)

July 28, 1975

Second Review

1. The Executive Directors have reviewed Executive BoardDecision No. 4634-(75/47) adopted April 4, 1975 in accordancewith paragraph 7 of that Decision.

2. A further review by the Executive Directors will be held notlater than December 31, 1975.

Decision No. 4874-(1'5/ISO)

November 24, 1975

79 Dee. 4874-175/180)



Third Review


2. A further review by the Executive Directors will be held notlater than February 11, 1976.

Decision No. 4900-(75/198}

December 16,1975

Fourth Review


2. Paragraph l(b) of Decision No. 4634-(75/47) is amendedto read:

A member wishing to make a request under this decisionshall submit, not later than the close of business on March 12,1976, a statement of its intention to make the request.

3. The total of a member's purchases outstanding under Deci-sion No. 4634-(75/47) shall not exceed the percentage of theamount referred to in paragraph 2 (a) of that Decision as deter-mined by the Fund after the close of business March 12, 1976.

4. The final review by the Executive Directors to establish thepercentage under paragraph 3 above will be held not later thanMarch 17, 1976.


February 11, 1976

Dec. 4954-(76/J6J 80



Final Review

1. The Executive Directors have made the final review ofExecutive Board Decision No. 4634-(75/47), adopted April 4,1975 in accordance with Executive Board Decision No. 4954-(76/16), adopted February 11, 1976.

2. In accordance with Decision No. 4954-(76/16) and takingaccount of the statements by members received before the closeof business on March 12, 1976 of their intentions to request pur-chases, the Fund determines that for each such member theamount of the final purchase under Decision No. 4634-(75/47)shall not exceed the amount shown in column 6 of the table inthe Attachment* to this Decision.


March 18, 1976

SUBSIDY ACCOUNT

In order to help fulfill the purposes of the Fund as stated inArticle I of the Articles of Agreement, including the promotionof cooperation between members and the Fund and among mem-bers on international monetary problems, the Fund will establisha Subsidy Account in cooperation with members to assist thosemembers that are most seriously affected by the current situationto meet the cost of using resources made available through theFund's oil facility for 1975. The Subsidy Account will be subjectto the following provisions.

1. The Managing Director is authorized (i) to make arrange-ments to establish a Subsidy Account in the name of the Inter-national Monetary Fund with such depositories of the Fund asmay be necessary, to be operated in accordance with the sameadministrative procedures as those that the Fund applies in oper-


81 D»c. 4773-(75/136)



ating its other accounts; and (ii) to take all measures necessary toimplement this Decision.

2. The Subsidy Account will consist of currency deposited bydonors on the basis of this Decision, securities in which currencyin the Account is invested, currency representing the income ofinvestment, and the proceeds of disinvestment. In contributing tothe Subsidy Account, a donor may make a single deposit or mayinform the Fund of its intention to make periodic deposits. Thedonor will specify the procedure that it intends to follow in mak-ing deposits and will consult the Fund on any subsequentchanges.

3. (a) Payments will be made from the Subsidy Account toeach of the members listed in Annex A* that have made pur-chases under Executive Board Decision No. 4634-(75/47) (here-inafter referred to as the recipients).

(b) Payments, after meeting any expenses, will be made assoon as is practicable after the end of each financial year of theFund and will be calculated as a percentage per annum of theaverage daily balances of the Fund's holdings of the currency ofeach recipient in excess of its quota outstanding under ExecutiveBoard Decision No. 4634-(75/47) during the year. The percent-age applicable will be the same for all recipients during a givenfinancial year. To the extent that it proves financially possible,the Fund will equalize the percentages payable to all recipientsduring the period of payments under this Decision.

4. Currency held in the Subsidy Account may be invested ingovernment securities issued by members, subject to the approvalof the government in whose securities the investment is made.

5. The assets and records of the Subsidy Account will be keptseparate from the assets and records of all other Accounts of theFund and will be audited at the time of the annual audit of theFund by the committee selected under Section 20 of the Fund'sBy-Laws. The property and assets of the Fund held in other


Dec. 4773-175/136) 82



Accounts will not be used to discharge liabilities or meet lossesarising out of administration of the Subsidy Account; nor will theassets in the Subsidy Account be used to discharge liabilities ormeet losses incurred in the administration of other Accounts.

6. (a) If the Executive Directors find that the Subsidy Accountis no longer necessary or that its purpose cannot be carried out,the Account will be terminated.

(b) If any assets remain in the Subsidy Account on the dateof its termination, the amount will be divided among the donorsthat have made deposits in it in proportion to their contributions.

7. If the Fund amends paragraph 3 or Annex A of this Deci-sion, a donor (i) will be entitled to request and obtain the returnof an amount equivalent to that part of its contribution that hasnot been used, to the same extent that it could obtain repaymentunder paragraph 6(b) of this Decision in the event that the Sub-sidy Account were terminated; and (ii) may cancel any notice ofintention to make further deposits that it has given in accordancewith paragraph 2 of this Decision. Calculations under this para-graph will be made as of the date of receipt by the Fund of therequest or cancellation.

8. The Executive Directors will review this Decision annually.

Decision No. 4773-(75/136)

August 1, 1975

GOLD COLLATERAL TRANSACTIONS

Where the Fund decides in exceptional circumstances to enterinto a gold collateral transaction with a member because thiswould promote the purposes of the Fund and give the memberthe opportunity, in consultation with the Fund, to adopt policies,during the period referred to in (a) below, that would be consis-

83 Dec. 1543-163/39)



tent with the policies and practices of the Fund on the use of itsresources:

(a) the period for repurchase of the Fund's holdings of themember's currency resulting from the transaction, to theextent that they are not otherwise reduced, shall normally notexceed six months after the transfer of exchange by theFund;

(b) the repurchase shall be made with gold or convertible cur-rencies acceptable to the Fund in accordance with its Deci-sion of July 20, 1962;

(c) the provisions of the pledge agreement shall be on the linesof those set forth in the draft letter annexed to SM/63/30.

Decision No. 1543- (63/39)

July 1, 1963

Draft Letter to Member Entering into a GoldCollateral Transaction

Dear Sir:

On , the Fund decided to enter into an exchangetransaction with in an amount equivalent toUS$ secured by the pledge of gold as collateral, [andgranted the necessary waiver under Article V, Section 4,] subjectto the conditions set forth in this letter. The amount of ,equivalent to US$ and , equivalent toUS$ , will be transferred to your account(s) after thesteps set forth in Section B below have been taken.

Section A

1. The collateral for the transaction shall consist of gold barscontaining fine gold having a value not less than $

Dec. 1543-163/39) 84



calculated on the basis of US$35 per troy ounce of fine gold. Thefine gold content will be determined to the satisfaction of theFund and at your expense.

2. The gold bars will be transferred by you by way of pledgeat a gold depository selected by you from among the Fund's golddepositories (Federal Reserve Bank of New York, New York;the Bank of England, London; Banque de France, Paris; theReserve Bank of India, Nagpur, India). You will irrevocablyinstruct the depository in accordance with the attached exhibit thatthe gold is to be transferred to, earmarked, and held in a specialaccount in the name of and for the sole account of the Inter-national Monetary Fund, that the special account shall be at thesole order of the Fund, and that the depository shall accept andact upon any and all instructions of the Fund with respect to partor all of the gold in the special account. The Fund will arrangewith the depository for-the establishment of the special account.The depository will not be informed that the gold is held underpledge to the Fund.

3. You will represent to the Fund that the gold is free fromany claims, liens or encumbrances in favor of any other party andsubject to paragraph 9 below will remain free therefrom duringthe pledge. You will further represent to the Fund that underyour law the gold may be freely pledged and disposed of as pro-vided in this letter.

4. The gold will continue to be owned by you. Accordingly,the Fund will enter the gold on its books in your name, and willnot show the gold in its books or accounts as owned by the Fund.

5. Not later than the repurchase date, namely the close ofbusiness six months after the value date for transfer of theexchange by the Fund to your account(s), you will repurchase theFund's holdings of your currency resulting from the transaction,to the extent that such holdings are not otherwise reduced, withgold in the special account if you so request or with other gold orconvertible currencies acceptable to the Fund in accordance withthe Fund's Decision of July 20, 1962.

85 Dec. 1543-(63/39)



6. On any reduction at any time of the Fund's holdings ofyour currency resulting from the transaction otherwise than byrepurchase with gold in the special account, the Fund will, on yourrequest, release to you or to your order at the depository goldfrom the special account in an amount not exceeding the equiva-lent of the reduction, provided that the amount of gold remain-ing in the special account shall not be less than the equivalent ofthe outstanding balance of the transaction.

7. To the extent that the Fund's holdings of your currencyresulting from the transaction have not been reduced by the closeof business on the repurchase date, the Fund will give you noticeof the balance due and payable by way of repurchase in respectof the transaction, and you will complete such repurchase withgold in the special account if you so request or other gold or con-vertible currencies acceptable to the Fund in accordance with theFund's Decision of July 20, 1962 not later than the close of busi-ness thirty days after the repurchase date. In the absence of suchrepurchase by the close of business thirty days after the repur-chase date, repurchase will be effected with gold in the specialaccount on the instructions of the Fund and without the need forfurther notice or request to you.

8. Where repurchase is effected with gold in the specialaccount pursuant to paragraph 5 or 7, the gold in the specialaccount will be transferred, on the instructions of the Fund, to theordinary gold account of the Fund at the depository, which goldshall then be deemed to have been transferred by you to the Fundand shall thereupon be owned by the Fund free from any claim,including any right of redemption. Any surplus balance of goldbeyond the full amount of the repurchase will be returned to youbut any balance less than one bar will be held under earmark foryou pursuant to Rule 1-1 of the Fund's Rules and Regulations.

9. At any time before the repurchase date or the close of busi-ness thirty days after the repurchase date, you may, after consult-ing the Fund, arrange for the sale of the gold in the specialaccount, and the Fund will be prepared to give appropriate

Dec. 1543-(63/39) 86



instructions to facilitate the sale, provided that on or before theclose of business thirty days after the repurchase date the Fund'sholdings of your currency resulting from the transaction will berepurchased with gold or convertible currencies acceptable to theFund in accordance with the Fund's Decision of July 20, 1962,and provided further that the gold will not be released frompledge before such repurchase is effected.

10. All charges and costs connected with or resulting from thetransfer to the special account (including without limitationtransportation, earmarking, and holding), release, and redelivery,as well as converting the gold into good delivery bars if deemednecessary by the Fund under paragraph 1 above or if the gold istransferred to the Fund's ordinary gold account by way of repur-chase will be borne by you.

Section B

The transfer of currencies pursuant to the transaction agreedby the Fund will be made by the Fund after the Fund has receivedfrom you:

(i) acceptance of all of the conditions of this letter; and

(ii) a copy of the instructions referred to in Section A 2above; and

(iii) the representations referred to in Section A 3 above; and,in addition, has received from the depository:

(iv) confirmation that the depository has established the spe-cial account, earmarked the gold, and will act in accor-dance with Section A 2 above; and

(v) information satisfactory to the Fund as to the fine goldcontent of the bars.

Very truly yours,

International Monetary Fund

By:

87 Dec. 1543-163/39)



EXCHANGE TRANSACTIONS PRIOR TO THE ESTABLISHMENT OFINITIAL PAR VALUE

(a) Where the Fund prescribes the conditions and amount ofan exchange transaction by a member before the establishment ofan initial par value, the member will be required to complete thepayment of its subscription on the basis of a provisional rate ofexchange for its currency proposed by the member and agreed bythe Fund.

(b) In deciding whether to permit exchange transactionsbefore the establishment of an initial par value, the Fund, inaccordance with the last sentence of Article I, will be guided bythe purposes of the Articles; the Fund will encourage members tofollow policies leading to the establishment of realistic exchangerates and to the adoption at the earliest feasible date of effectivepar values, and will take into account the efforts that are beingmade to achieve this objective. However, the Fund will give theoverwhelming benefit of any doubt to requests for exchangetransactions within the gold tranche and members can expect thatrequests for drawings will be met where they are made in accor-dance with paragraph 5 of E.B. Decision No. 1477-(63/8),adopted February 27, 1963.


April 22, 1964

Dec. 1687-( 64/22) 88



Sales of Gold to the Fund

SALE OF GOLD TO THE FUND BY PARTICIPANT DESIGNATEDUNDER ARTICLE XXV, SECTION 5

If a participant wishes to obtain currency by the sale of gold tothe Fund in order to discharge the participant's obligation underArticle XXV, Sections 4 and 5 of the Articles of Agreement, theFund will not levy a handling charge under Rule 1-8 of the Rulesand Regulations or collect the costs referred to in Rule G-7.

Decision No. 2916-(69/127)

December 30, 1969

89 Dee. 2976-(69/727)



Repurchase Obligations

EFFECT OF PAYMENT OF GOLD SUBSCRIPTIONS ON REPURCHASEOBLIGATIONS

RESOLVED:

. . . that, for the purpose of the repurchase obligations pre-scribed by Article V, Section 7, increases and decreases in themonetary reserves of a member shall not be considered if theyoccur on or before the latest date on which the member's sub-scription must be paid in accordance with this Resolution; andthe payment of subscriptions, whether actually made before orafter such latest date for payment, shall not be regarded asresulting in a decrease in monetary reserves.

Decision No. 124-2

January 22, 1947

REPURCHASE OBLIGATIONS: ARTICLE V, SECTION

Whenever a member uses its monetary reserves to repurchaseits currency from the Fund in accordance with the provisions ofArticle V, Section l(b) (i) or (ii), the resulting reduction in itsmonetary reserves and in the Fund's holdings of its currency mustbe regarded as having occurred, for the purpose of calculatingsubsequent repurchase obligations under the same provisions ofthe Fund Agreement, at the end of the financial year of the Fund

Dec. 447-5 90



in respect of which the obligation to make the repurchase arose.Members shall be informed of the foregoing.

Decision No. 447-5

June 17,1949

REPURCHASE OBLIGATIONS: ARTICLE V, SECTION 7(c)

In the application of the repurchase obligations of the FundAgreement the limits specified in Article V, Section 7(c), applysolely as of the end of the financial year for which the repurchaseobligations are calculated.

Decision No. 419-1

April 11, 1949

REPURCHASE OBLIGATIONS: ARTICLE V, SECTION 7(<r)(iii) AND(iv) AND SCHEDULE B, PARAGRAPH 1 (d) AND (e)

1. If the repurchase which a member is required to makeunder Article V, Section 7(£), would exceed the limit specified inArticle V, Section 7(r) (iii), the member may use any convertiblecurrency in making the repurchase pursuant to Schedule B, Para-graph 1 ( d ) , provided that at the time of discharge the repurchasewill not increase the Fund's holdings of any member's currencybeyond 75 per cent of that member's quota, and provided furtherthat the member making the repurchase has consulted the Manag-ing Director on the currencies, and the amount of each, to beused in the repurchase. The consultations by the Managing Direc-tor and the currency composition of repurchases shall be based onthe statement entitled "Currencies to Be Drawn and to Be Usedin Repurchases" (approved by Executive Board Decision No. 1371-(62/36), adopted July 20, 1962).

91 Dec. 3049-(70/44)



2. If a repurchase required under Article V, Section 7(b),would exceed the limit specified in Article V, Section l(c) (iv),the portion of the repurchase obligation which is to be paidforthwith and the portion which is to be repurchased at the endof the subsequent financial year or years in accordance with Para-graph 1 (e) of Schedule B, shall be determined as follows:

(a) If the member's monetary reserves have not increased (i)the excess amount shall be distributed proportionatelyamong the types of monetary reserve (gold, special draw-ing rights, and convertible currencies taken as a whole) inwhich the repurchase obligation has been calculated, and(ii) the currencies and amount of each to be paid forth-with shall be determined by the Fund in the light of theprinciples of Section II of the statement entitled "Curren-cies to Be Drawn and to Be Used in Repurchases" (ap-proved by Executive Board Decision No. 1371-(62/36),adopted July 20, 1962), taking into account also the oper-ational convenience of the member and of the Fund;

(b) If the member's monetary reserves have increased themember may, at its option, elect to pay the amount pay-able forthwith either in accordance with the principles setforth in (a) above or in accordance with (c) below;

(c) If the member's monetary reserves have increased duringthe year (i) the amount to be paid forthwith shall be dis-tributed proportionately among the media which haveincreased, up to one half of the increase in monetaryreserves, (ii) any remainder of the amount to be paidforthwith shall be distributed among the member's remain-ing holdings of monetary reserves, and (iii) the bal-ance of the repurchase obligation shall be discharged atthe end of the subsequent financial year or years in thetypes of monetary reserve determined in accordance withthe provisions of Schedule B.

3. In the calculations of monetary reserves and repurchase obli-

Oec. 3049-(70/44) 92



gations under Article V, Section 7(£), and Schedule B, Article V,Section 7(f)( iv) , and Schedule B, Paragraph !(*), shall beapplied before Article V, Section l(c) (iii), and Schedule B, Para-graph 1 (d).


May 20, 1970

VOLUNTARY REPURCHASES

(1) Subject to paragraph 3 below, a member may offer involuntary repurchase, and the Fund has the power toaccept, if it so decides, gold or convertible currencies tothe extent that (a) the Fund's holdings of the convertiblecurrency of a member which is offered would not beincreased above 75% of the quota of that member, and (b)the Fund's holdings of the repurchasing member's cur-rency would not be decreased below 75% of its quota.

(2) As a matter of legal interpretation it is determined thatthe consent of the member whose currency is offered involuntary repurchase is not necessary as a condition pre-cedent to the acceptance by the Fund of such currency.

(3) Where a member has an accrued and undischarged repur-chase obligation under Art. V, Sec. 7(£), and Schedule Bin respect of any financial year of the Fund, the membermust discharge the obligation in accordance with thoseprovisions; provided, however, that the payment of cur-rency under those provisions may be combined with thesale of gold to the Fund for the currency under Art. V,Sec. 6(a).

Decision No. 7- (648)

March 8,1951

93 Dee. 7-f648)



REPURCHASE AND RULE G-7

Until further notice, where a member has an accrued repur-chase obligation in currency under Art. V, Sec. 7(£), and Sched-ule B and discharges part or all of that obligation by a sale ofgold to the Fund for that currency under Art. V, Sec. 6(a), asprovided in paragraph 3 of the decision of the Executive Boardat EBM 648 (3/8/51), such gold shall be purchased by the Fundwithout collecting the estimated costs of later possible conversionof the gold into that currency as permitted under Rule G-7 of theRules and Regulations, it being understood that the existingrequirements as to the form and delivery of such gold wouldremain in effect.

Decision No. 119-(52/30}

June 2, 1952

GOLD PAYMENTS UNDER ARTICLE V, SECTION l(b) AMOUNTINGTO LESS THAN ONE BAR

If a payment due under Article V, Section 7(b) includes anamount of gold equal to less than one standard bar, such amountshall not be collected.

Decision No. 4087-(73/105)

November 9, 1973

Dec. 4087-(73/705) 94



Future Changes in Charges on Fund's Holdings ofMembers' Currencies in Excess of Quota

Changes in any schedule of charges levied under Article V,Section 8(c), (<^), and (e) shall apply to all holdings subject tothe schedule that are obtained by the Fund after the date of thisdecision.


June 13, 1974

93 Dec. 4239-(74/67)



Use of Fund's Resources for Capital Transfers

[See Interpretation Pursuant to Decision No. 71-2, adopted Sep-tember 26, 1946 and Decision No. 1238-(61/43), adoptedJuly 28, 1961, page 35.]

96



Controls on Capital Transfers

The report of the Committee on Interpretation on controls oncapital transfers (EBD/56/71, 7/11/56) is approved and the fol-lowing conclusions are adopted:

Subject to the provisions of Article VI, Section 3 concerningpayments for current transactions and undue delay in transfersof funds in settlement of commitments:

(a) Members are free to adopt a policy of regulating cap-ital movements for any reason, due regard being paid to thegeneral purposes of the Fund and without prejudice to theprovisions of Article VI, Section 1.

(b) They may, for that purpose, exercise such controls asare necessary, including making such arrangements as maybe reasonably needed with other countries, without approvalof the Fund.


July 25, 1956

97 Dec. 547-(56/39)


ARTICLE VII, SECTION 2

Borrowing

GENERAL ARRANGEMENTS TO BORROW *

Preamble

In order to enable the International Monetary Fund to fulfillmore effectively its role in the international monetary system inthe new conditions of widespread convertibility, including greaterfreedom for short-term capital movements, the main industrialcountries have agreed that they will, in a spirit of broad and will-ing cooperation, strengthen the Fund by general arrangementsunder which they will stand ready to lend their currencies to theFund up to specified amounts under Article VII, Section 2 of theArticles of Agreement when supplementary resources are neededto forestall or cope with an impairment of the international mon-etary system in the aforesaid conditions. In order to give effect tothese intentions, the following terms and conditions are adoptedunder Article VII, Section 2 of the Articles of Agreement.

Paragraph 1. Definitions

As used in this Decision the term:

(i) "Articles" means the Articles of Agreement of the Inter-national Monetary Fund;

(ii) "credit arrangement" means an undertaking to lend tothe Fund on the terms and conditions of this Decision;

(iii) "participant" means a participating member or a partic-ipating institution;

* See letter from Minister of Finance of France to Secretary of the Treasury ofthe United States, pages 109-11.

Dec. 1289-162/1) 93


BORROWING

(iv) "participating institution" means an official institutionof a member that has entered into a credit arrangement withthe Fund with the consent of the member;

(v) "participating member" means a member of the Fundthat has entered into a credit arrangement with the Fund;

(vi) "amount of a credit arrangement" means the maximumamount expressed in units of its currency that a participantundertakes to lend to the Fund under a credit arrangement;

(vii) "call" means a notice by the Fund to a participant tomake a transfer under its credit arrangement to the Fund'saccount;

(viii) "borrowed currency" means currency transferred tothe Fund's account under a credit arrangement;

(ix) "drawer" means a member that purchases borrowedcurrency from the Fund in an exchange transaction or in anexchange transaction under a stand-by arrangement;

(x) "indebtedness" of the Fund means the amount it iscommitted to repay under a credit arrangement.

Paragraph 2. Credit Arrangements

A member or institution that adheres to this Decision under-takes to lend its currency to the Fund on the terms and conditionsof this Decision up to the amount in units of its currency setforth in the Annex to this Decision or established in accordancewith Paragraph 3 (b).

Paragraph 3. Adherence

(a) Any member or institution specified in the Annex mayadhere to this Decision in accordance with Paragraph 3(c).

(b) Any member or institution not specified in the Annex thatwishes to become a participant may at any time, after consulta-tion with the Fund, give notice of its willingness to adhere to thisDecision, and, if the Fund shall so agree and no participant

99 Dec. J289-(62/7)



object, the member or institution may adhere in accordance withParagraph 3 (c). When giving notice of its willingness to adhereunder this Paragraph 3(b) a member or institution shall specifythe amount, expressed in terms of its currency, of the creditarrangement which it is willing to enter into, provided that theamount shall not be less than the equivalent at the date of adher-ence of one hundred million United States dollars of the weightand fineness in effect on July 1, 1944.

(c) A member or institution shall adhere to this Decision bydepositing with the Fund an instrument setting forth that it hasadhered in accordance with its law and has taken all steps neces-sary to enable it to carry out the terms and conditions of thisDecision. On the deposit of the instrument the member or institu-tion shall be a participant as of the date of the deposit or of theeffective date of this Decision, whichever shall be later.

Paragraph 4. Entry into Force

This Decision shall become effective when it has been adheredto by at least seven of the members or institutions included in theAnnex with credit arrangements amounting in all to not less thanthe equivalent of five and one-half billion United States dollarsof 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 bereviewed from time to time in the light of developing circum-stances and changed with the agreement of the Fund and all par-ticipants.

Paragraph 6. Initial Procedure

When a participating member or a member whose institution isa participant approaches the Fund on an exchange transaction orstand-by arrangement and the Managing Director, after consulta-tion, considers that the exchange transaction or stand-by arrange-ment is necessary in order to forestall or cope with an impair-

Dee. 1289-(62/1 100


BORROWING

ment of the international monetary system, and that the Fund'sresources need to be supplemented for this purpose, he shall initi-ate the procedure for making calls under Paragraph 7.

Paragraph 7. Calls

(a) The Managing Director shall make a proposal for callsfor an exchange transaction or for future calls for exchangetransactions under a stand-by arrangement only after consultationwith Executive Directors and participants. A proposal shallbecome effective only if it is accepted by participants and the pro-posal is then approved by the Executive Directors. Each partici-pant shall notify the Fund of the acceptance of a proposalinvolving a call under its credit arrangement.

(b) The currencies and amounts to be called under one ormore of the credit arrangements shall be based on the presentand prospective balance of payments and reserve positions of par-ticipating members or members whose institutions are participantsand on the Fund's holdings of currencies.

(c) Unless otherwise provided in a proposal for future callsapproved under Paragraph 7(a), purchases of borrowed currencyunder a stand-by arrangement shall be made in the currencies ofparticipants in proportion to the amounts in the proposal.

(d) If a participant on which calls may be made pursuantto Paragraph 7 (a) for a drawer's purchases under a stand-byarrangement gives notice to the Fund that in the participant's opin-ion, based on the present and prospective balance of paymentsand reserve position, calls should no longer be made on the par-ticipant or that calls should be for a smaller amount, the Manag-ing Director may propose to other participants that substituteamounts be made available under their credit arrangements, andthis proposal shall be subject to the procedure of Paragraph 7(a).The proposal as originally approved under Paragraph 7 (a) shallremain effective unless and until a proposal for substituteamounts is approved in accordance with Paragraph 7 (a).

101 Dec. J289-(62/J)



(e) When the Fund makes a call pursuant to this Paragraph 7,the participant shall promptly make the transfer in accordancewith the call.

Paragraph 8. Evidence of Indebtedness

(a) The Fund shall issue to a participant, on its request, non-negotiable instruments evidencing the Fund's indebtedness to theparticipant. The form of the instruments shall be agreed betweenthe Fund and the participant.

(b) Upon repayment of the amount of any instrument issuedunder Paragraph 8 (a) and all accrued interest, the instrumentshall be returned to the Fund for cancellation. If less than theamount of any such instrument is repaid, the instrument shall bereturned to the Fund and a new instrument for the remainder ofthe amount shall be substituted with the same maturity date as inthe old instrument.

Paragraph 9. Interest and Charges

(a) The Fund shall pay a charge of one-half of one per centon transfers made in accordance with Paragraph 7 (e).

(b) The Fund shall pay interest on its indebtedness at the rateof one and one-half per cent per annum. In the event that thisbecomes different from a basic rate determined as follows:

the charge levied by the Fund pursuant to Article V, Section8 (a) plus the charge levied by the Fund pursuant to Article V,Section 8(<r) (i), as changed from time to time under Article V,Section 8(<?), during the first year after a purchase of exchangefrom the Fund, minus one-half of one per cent,

the interest payable by the Fund shall be changed by the sameamount as from the date when the difference in the basic ratetakes effect. Interest shall be paid as soon as possible after July 31,October 31, January 31, and April 30.

(c) Interest and charges shall be paid in gold to the extent

Dec. 1289-(62/l) 102


BORROWING

that this can be effected in bars. Any balance not so paid shall bepaid in United States dollars.

(d) Gold payable to a participant in accordance with Para-graph 9(b) or Paragraph 11 shall be delivered at any gold depos-itory of the Fund chosen by the participant at which the Fundhas sufficient gold for making the payment. Such delivery shall befree of any charges or costs for the participant.

Paragraph 10. Use of Borrowed Currency

The Fund's policies and practices on the use of its resourcesand stand-by arrangements, including those relating to the periodof use, shall apply to purchases of currency borrowed by theFund.

Paragraph 11. Repayment by the Fund

(a) Subject to the other provisions of this Paragraph 11, theFund, five years after a transfer by a participant, shall repay theparticipant an amount equivalent to the transfer calculated inaccordance with Paragraph 12. If the drawer for whose purchaseparticipants make transfers is committed to repurchase at a fixeddate earlier than five years after its purchase, the Fund shallrepay the participants at that date. Repayment under this Para-graph 11 (a) or under Paragraph ll(c) shall be, as determined bythe Fund, in the participant's currency whenever feasible, or ingold, or, after consultation with the participant, in other curren-cies that are convertible in fact. Repayments to a participantunder the subsequent provisions of this Paragraph 11 shall becredited against transfers by the participant for a drawer's pur-chases in the order in which repayment must be made under thisParagraph 11 (a).

(b) Before the date prescribed in Paragraph 11 (a), the Fund,after consultation with a participant, may make repayment to theparticipant, in part or in full, with any increases in the Fund'sholdings of the participant's currency that exceed the Fund's

103 Dec. 1289-(62/1)



working requirements, and participants shall accept such repay-ment.

(c) Whenever a drawer repurchases, the Fund shall promptlyrepay an equivalent amount, except in any of the following cases:

(i) The repurchase is under Article V, Section 7(£) and canbe identified as being in respect of a purchase of currency otherthan borrowed currency.

(ii) The repurchase is in discharge of a commitment enteredinto on a purchase of currency other than borrowed currency.

(iii) The repurchase entitles the drawer to augmented rightsunder a stand-by arrangement pursuant to Section II of Deci-sion No. 876-(59/15) of the Executive Directors, providedthat, to the extent that the drawer does not exercise such aug-mented rights, the Fund shall promptly repay an equivalentamount on the expiration of the stand-by arrangement.

(d) Whenever the Fund decides in agreement with a drawerthat the problem for which the drawer made its purchases hasbeen overcome, the drawer shall complete repurchase, and theFund shall complete repayment and be entitled to use its holdingsof the drawer's currency below 75 per cent of the drawer's quotain order to complete such repayment.

(e) Repayment under Paragraph ll(c) and (d) shall be madein the order established under Paragraph 11 (a) and in proportionto the Fund's indebtedness to the participants that made transfersin respect of which repayment is being made.

(f) Before the date prescribed in Paragraph 11 (a) a partici-pant may give notice representing that there is a balance of pay-ments need for repayment of part or all of the Fund's indebted-ness and requesting such repayment. The Fund shall give theoverwhelming benefit of any doubt to the participant's representa-tion. Repayment shall be made after consultation with the partici-pant in the currencies of other members that are convertible infact, or made in gold, as determined by the Fund. If the Fund's

Dec. 1289-162/U 104


BORROWING

holdings of currencies in which repayment should be made arenot wholly adequate, individual participants shall be requested,and will be expected, to provide the necessary balance under theircredit arrangements. If, notwithstanding the expectation that theparticipants will provide the necessary balance, they fail to do so,repayment shall be made to the extent necessary in the currencyof the drawer for whose purchases the participant requestingrepayment made transfers. For all of the purposes of this Para-graph 11, transfers under this Paragraph 11 (f) shall be deemedto have been made at the same time and for the same purchasesas the transfers by the participant obtaining repayment under thisParagraph l l (f) .

(g) All repayments to a participant in a currency other thanits own shall be guided, to the maximum extent practicable, bythe present and prospective balance of payments and reserve posi-tions of the members whose currencies are to be used in repay-ment.

(h) The Fund shall at no time reduce its holdings of a draw-er's currency below an amount equal to the Fund's indebtednessto the participants resulting from transfers for the drawer's pur-chases.

(i) When any repayment is made to a participant, the amountthat can be called for under its credit arrangement in accordancewith this Decision shall be restored pro tanto but not beyond theamount of the credit arrangement.

Paragraph 12. Rates of Exchange

(a) The value of any transfer shall be calculated as of thedate of the transfer in terms of a stated number of fine ounces ofgold or of the United States dollar of the weight and fineness ineffect on July 1, 1944, and the Fund shall be obliged to repay anequivalent value.

(b) For all of the purposes of this Decision, the equivalent incurrency of any number of fine ounces of gold or of the United

105 Dec. 7289-(62/7)



States dollar of the weight and fineness in effect on July 1, 1944,or vice versa, shall be calculated at the rate of exchange at whichthe Fund holds such currency at the date as of which the calcula-tion is made; provided however that the provisions of DecisionNo. 321-(54/32) of the Executive Directors on Transactions andComputations Involving Fluctuating Currencies, as amended byDecision No. 1245-(61/45) and Decision No. 1283-(61/56),shall determine the rate of exchange for any currency to whichthat decision, as amended, has been applied.

Paragraph 13. Transfer ability

A participant may not transfer all or part of its claim to repay-ment under a credit arrangement except with the prior consent ofthe Fund and on such terms and conditions as the Fund mayapprove.

Paragraph 14. Notices

Notice to or fcy a participating member under this Decisionshall be in writing or by cable and shall be given to or by thefiscal agency of the participating member designated in accor-dance with Article V, Section 1 of the Articles and Rule G-l ofthe Rules and Regulations of the Fund. Notice to or by a partici-pating institution shall be in writing or by cable and shall begiven to or by the participating institution.

Paragraph 15. Amendment

This Decision may be amended during the period prescribed inParagraph 19 (a) only by a decision of the Fund and with theconcurrence of all participants. Such concurrence shall not be nec-essary for the modification of the Decision on its renewal pur-suant to Paragraph 19 (b).

Paragraph 16. Withdrawal of Adherence

A participant may withdraw its adherence to this Decision inaccordance with Paragraph 19 (b) but may not withdraw within

Dec. 1289-(62/l) 106


BORROWING

the period prescribed in Paragraph 19 (a) except with the agree-ment of the Fund and all participants.

Paragraph 17. Withdrawal from Membership

If a participating member or a member whose institution is aparticipant withdraws from membership in the Fund, the partici-pant's credit arrangement shall cease at the same time as thewithdrawal takes effect. The Fund's indebtedness under the creditarrangement shall be treated as an amount due from the Fundfor the purpose of Article XV, Section 3, and Schedule D of theArticles.

Paragraph 18. Suspension of Exchange Transactions and Liqui-dation

(a) The right of the Fund to make calls under Paragraph 7and the obligation to make repayments under Paragraph 11 shallbe suspended during any suspension of exchange transactionsunder Article XVI of the Articles.

(b) In the event of liquidation of the Fund, credit arrange-ments shall cease and the Fund's indebtedness shall constitute lia-bilities under Schedule E of the Articles. For the purpose of Para-graph 1 (a) of Schedule E, the currency in which the liability ofthe Fund shall be payable shall be first the participant's currencyand then the currency of the drawer for whose purchases trans-fers were made by the participant.

Paragraph 19. Period and Renewal

(a) This Decision shall continue in existence for four yearsfrom its effective date.

(b) This Decision may be renewed for such period or periodsand with such modifications, subject to Paragraph 5, as the Fundmay decide. The Fund shall adopt a decision on renewal andmodification, if any, not later than twelve months before the endof the period prescribed in Paragraph 19(a). Any participant may

107 D«c. J289-f62/7J



advise the Fund not less than six months before the end of theperiod prescribed in Paragraph 19 (a) that it will withdraw itsadherence to the Decision as renewed. In the absence of suchnotice, a participant shall be deemed to continue to adhere to theDecision as renewed. Withdrawal of adherence in accordancewith this Paragraph 19 (b) by a participant, whether or notincluded in the Annex, shall not preclude its subsequent adherencein accordance with Paragraph 3 (b).

(c) If this Decision is terminated or not renewed, Paragraphs 8through 14, 17 and 18 (b) shall nevertheless continue to applyin connection with any indebtedness of the Fund under creditarrangements in existence at the date of the termination or expira-tion of the Decision until repayment is completed. If a partici-pant withdraws its adherence to this Decision in accordance withParagraph 16 or Paragraph 19(b), it shall cease to be a partici-pant under the Decision, but Paragraphs 8 through 14, 17 and18 (b) of the Decision as of the date of the withdrawal shallnevertheless continue to apply to any indebtedness of the Fundunder the former credit arrangement until repayment has beencompleted.

Paragraph 20. Interpretation

Any question of interpretation raised in connection with thisDecision which does not fall within the purview of Article XVIIIof the Articles shall be settled to the mutual satisfaction of theFund, the participant raising the question, and all other partici-pants. For the purpose of this Paragraph 20 participants shall bedeemed to include those former participants to which Paragraphs 8through 14, 17 and 18 (b) continue to apply pursuant to Para-graph 19 (c) to the extent that any such former participant isaffected by a question of interpretation that is raised.

Dec. 1289-(62/l) 108


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1.2.3.4.5.6.7.8.9.

10.

Participants and

ANNEX

Amounts of Credit

United States of America US$Deutsche BundesbankUnited KingdomFranceItalyJapanCanadaNetherlandsBelgiumSveriges Riksbank

DM£NFLitYenCan$f.BFSKr

Arrangements

Units ofParticipant's

Currency

2,000,000,0004,000,000,000

357,142,8572,715,381,428

343,750,000,00090,000,000,000

216,216,000724,000,000

7,500,000,000517,320,000

Decision No. 1289- (62/1) *

January 5,1962

* As amended, with respect to the Annex, effective August 1, 1962 (Decision No. 1362-(62/32), July 9, 1962) and effective October 12, 1962 (Decision No. l4l5-(62/47), Septem-ber 19, 1962).

The General Arrangements to Borrow entered into force on October 24, 1962.

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

December 15, 1961

Dear Mr. Secretary:

The purpose of this letter is to set forth the understandings reached during therecent discussions in Paris with respect to the procedure to be followed by theParticipating Countries and Institutions (hereinafter referred to as "the partici-pants") in connection with borrowings by the International Monetary Fund ofSupplementary Resources under credit arrangements which we expect will beestablished pursuant to a decision of the Executive Directors of the Fund.

This procedure, which would apply after the entry into force of that decision withrespect to the participants which adhere to it in accordance with their laws, andwhich 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 Inter-national Monetary Fund or to seek a stand-by agreement with the Fund in circum-stances indicating that the Supplementary Resources might be used, shall consultwith the Managing Director of the Fund first and then with the other participants.

109 Dee. 1289-162/1)



B. If the Managing Director makes a proposal for Supplementary Resources tobe lent to the Fund, the participants shall consult on this proposal and inform theManaging Director of the amounts of their currencies which they consider appro-priate to lend to the Fund, taking into account the recommendations of the Manag-ing Director and their present and prospective balance of payments and reserve posi-tions. The participants shall aim at reaching unanimous agreement.

C. If it is not possible to reach unanimous agreement, the question whether theparticipants are prepared to facilitate, by lending their currencies, an exchangetransaction or stand-by arrangement of the kind covered by the special borrowingarrangements and requiring the Fund's resources to be supplemented in the generalorder of magnitude proposed by the Managing Director, will be decided by a pollof the participants.

The prospective drawer will not be entitled to vote. A favorable decision shallrequire the following majorities of the participants which take part in the vote,it being understood that abstentions may be justified only for balance of paymentsreasons 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 consulta-tions among the participants, and with the Managing Director, concerning theamounts of the currencies of the respective participants which will be loaned tothe Fund in order to attain a total in the general order of magnitude agreed underparagraph 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, callsshould not be made on it, or that calls should be for a smaller amount than thatproposed, the participants shall consult among themselves and with the ManagingDirector as to the additional amounts of their currencies which they could provideso as to reach the general order of magnitude agreed under paragraph C.

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

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

For the purpose of the consultative procedures described above, participants willdesignate representatives who shall be empowered to act with respect to proposalsfor use of the Supplementary Resources.

It is understood that in the event of any proposals for calls under the creditarrangements or if other matters should arise under the Fund decision requiringconsultations among the participants, a consultative meeting will be held among allthe participants. The representative of France shall be responsible for calling thefirst meeting, and at that time the participants will determine who shall be the

Dec. 7289-(62/U 110


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Chairman. The Managing Director of the Fund or his representative shall beinvited to participate in these consultative meetings.

It is understood that in order to further the consultations envisaged, participantsshould, to the fullest extent practicable, use the facilities of the international organi-zations to which they belong in keeping each other informed of the developmentsin their balances of payments that could give rise to the use of the SupplementaryResources.

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

I shall appreciate a reply confirming that the foregoing represents the under-standings which have been reached with respect to the procedure to be followedin connection with borrowings by the International Monetary Fund under the creditarrangements 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. Attachedis a verbatim text of this letter in English. The French and English texts and thereplies of the participants in both languages shall be equally authentic. I shallnotify all of the participants of the confirmations received in response to this letter.

First Renewal

1. Executive Board Decision No. 1289-(62/1), as amended byExecutive Board Decision No. 1362-(62/32) and Executive BoardDecision No. 1415-(62/47) (General Arrangements to Borrow)is hereby renewed for a period of four years, and referencestherein to "the period prescribed in Paragraph 19(a)" shall beunderstood to include the period of this renewal.

2. Within two years from the effective date of this renewal,the Fund and the participants will initiate a review of the GeneralArrangements to Borrow to be completed before the end of thesecond year; this review shall consider, in the light of existing cir-cumstances and past experience, the operation of the GeneralArrangements to Borrow and the need, if any, for amendment ormodification.


October 15, 1965

111 Dec. J951-(65/54)



Second Renewal

Executive Board Decision No. 1289-(62/l), as amended, on theGeneral Arrangements to Borrow, is hereby renewed for a periodof five years from October 24, 1970, and references therein to"the period prescribed in Paragraph 19(a)" shall be understoodto include the period of this renewal.

Decision No. 2858- (69/96)

October 17, 1969

Third Renewal

A. Executive Board Decision No. 1289-(62/1), as amended, onthe General Arrangements to Borrow, is hereby renewed for aperiod of five years from October 24, 1975 subject to the follow-ing modifications:

1. Paragraph 9(b) shall be made to read as follows:

The Fund shall pay interest on its indebtedness at the ratesat which it levies charges on segments of its holdings of cur-rency resulting from purchases for which it borrowed andincurred the indebtedness, provided that the rate of interest shallbe not less than four per cent per annum on any part of theFund's indebtedness. Interest shall be paid as soon as possibleafter July 31, October 31, January 31, and April 30.

2. Paragraph 9(c) shall be made to read as follows:

Interest and charges shall be paid, as determined by the Fund,in gold, or in special drawing rights, or in the participant's cur-rency, or in other currencies that are actually convertible.

3. The third sentence of Paragraph 11 (a) shall be made toread as follows:

•Repayment under this Paragraph 11 (a) or under Paragraph

ll(c) shall be, as determined by the Fund, in the participant's

Dec. 4421 -(74/7 32) 112


BORROWING

currency whenever feasible, or in gold, or special drawingrights, or, after consultation with the participant, in other cur-rencies that are actually convertible.

4. The third sentence of Paragraph ll(f) shall be made toread as follows:

Repayment shall be made after consultation with the partici-pant in the currencies of other members that are actually con-vertible, or made in gold, or special drawing rights, as deter-mined by the Fund.

5. The following shall be inserted in the Decision asParagraph ll(j):

The Fund shall be deemed to have discharged its obligationsto a participating institution to make repayment in accordancewith the provisions of this Paragraph or to pay interest andcharges in accordance with the provisions of Paragraph 9 if theFund transfers an equivalent amount in special drawing rightsto the member in which the institution is established.

B. Reference in Executive Board Decision No. 1289-(62/1), asamended, to "the period prescribed in Paragraph 19 (a)" shallbe understood to include the period of the renewal under thisDecision.

C. The modifications of Executive Board Decision No. 1289-(62/1), as amended, that are set forth in section A above shallbecome effective prior to October 24, 1975 as amendments pur-suant to Paragraph 15 of the Decision upon receipt of the con-currence of all participants in these modifications in accordancewith that Paragraph.

Decision No. 4421 -(74/132)

October 23, 1974

113 Dec. 4421-(74/132)



GENERAL ARRANGEMENTS TO BORROW: ASSOCIATION OFSWITZERLAND*

The understandings set forth in the letter which the SwissAmbassador to the United States proposes to send to the ManagingDirector (EBD/64/73, Attachment I) are acceptable to the Fundand the Managing Director is authorized to send the letter[below].


June 8, 1964

* Exchange of letters between the Ambassador of Switzerland to the United Statesand the Managing Director of the Fund

June 11, 1964

The Managing DirectorInternational Monetary Fund19th and H Streets, N.W.Washington, D.C. 20431

Sir:

I have the honor to refer to Mr. Jacobsson's letter of December 14, 1961 to thePresident of the Swiss Confederation and to conversations between representativesof the Swiss Confederation and the International Monetary Fund (hereinafterreferred to as "the Fund") concerning the way in which the Swiss Confederationcould be associated with the Fund's General Arrangements to Borrow, and thus con-tribute to the objectives of those Arrangements. The General Arrangements toBorrow (hereinafter referred to as "the General Arrangements") are those set forthin Decision No. 1289-(62/1) of January 5, 1962, of the Fund's Executive Direc-tors, as amended by Decision No. 1362-(62/32) of July 9, 1962 and DecisionNo. !4l5-(62/47) adopted on September 19, 1962.

In the light of the views that have been exchanged, the Swiss Federal Council,on behalf of the Swiss Confederation, is prepared to be associated with theGeneral Arrangements as follows:

(1) The Swiss Confederation is prepared to make resources available to partici-pants in the General Arrangements in accordance with this letter and in amountsnot exceeding an outstanding total equivalent to 865,000,000 Swiss francs.

(2) The Swiss confederation will be prepared to consider the conclusion ofagreements (hereinafter referred to as "implementing agreements") with any of

D*«. 1712^(64/29) 114


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the participants in the General Arrangements if requested by such participants. Theimplementing agreements will prescribe the terms and conditions in accordance withwhich the Swiss Confederation will make resources available to the participant orthe Swiss Confederation and the participant will make resources available to eachother, which shall be on the basis of reciprocal terms if required. Immediately onthe conclusion of an implementing agreement, or of any amendment of an imple-menting agreement, the Swiss Confederation will provide the Managing Directorwith a copy thereof.

(3) Whenever the Managing Director of the Fund initiates the procedure andmakes a proposal for calls pursuant to Paragraphs 6 and 7 of the General Arrange-ments for the benefit of a participant that has entered into or enters into an imple-menting agreement, he may propose to the Swiss Confederation, after consultationwith the Swiss Confederation, that it shall make a specified amount of resourcesavailable to the participant, which amount shall be in accordance with the imple-menting agreement with that participant. If the proposal for calls becomes effectiveunder Paragraph 7 of the General Arrangements, the Swiss Confederation will makethe specified amount of resources available to the said participant in accordancewith this letter and with the terms and conditions of the implementing agreement.If, however, the Swiss Confederation gives notice to the Managing Director that inits opinion, based on its present and prospective balance of payments and reserveposition, it should not make resources available in accordance with this proposal,or should make available a smaller amount than that proposed, the Swiss Con-federation will not be obliged to make any such resources available or more resourcesthan it represents to the Managing Director that it should make available.

(4) If the Swiss Confederation makes resources available to a participant other-wise than in accordance with the procedure of paragraph (3) , the Swiss Confedera-tion, after consultation with the Managing Director, may deem such resources tobe or to have been made available pursuant to this letter, provided that at the dateof such deeming Switzerland has entered into an implementing agreement with thatparticipant, that at the date of such deeming a proposal for calls for the benefit ofthat participant is in effect under Paragraph 7 of the General Arrangements andprovided that the terms and conditions for repayment to Switzerland accord or aremade to accord with paragraph (5 ).

(5) The effect of the terms and conditions for the timing of repayment ofresources made available by Switzerland pursuant to this letter will correspond, tothe maximum extent practicable, with the repayment provisions of Paragraph 11of the General Arrangements.

(6) The Fund may, at the request of a party to an implementing agreement,make any determination, or use its good offices, to facilitate the operation of animplementing agreement, subject, however, to paragraph (9).

(7) Whenever the Swiss Confederation makes resources available pursuant toparagraph (3) or deems resources to be or to have been made available pursuantto paragraph (4), the Swiss Confederation will inform the Managing Director ofthe amount in terms of Swiss francs thus made available. The Swiss Confederationwill inform the Managing Director of the amount in terms of Swiss francs of therepayment of any resources made available pursuant to paragraph (3) or (4).

115 Dec. 1712-164/29)



(3) The Swiss Confederation and the Fund will provide each other with thegeneral information necessary to facilitate the operation of this letter and imple-menting agreements.

(9) The Fund does not accept any responsibility or liability, whether as guarantoror otherwise, in connection with this letter or with respect to the performance ofthe terms and conditions of an implementing agreement.

(10) This letter will remain effective for four years from October 24, 1962,provided that the Swiss Confederation may rescind this letter, with immediateeffect, within one month after an amendment of the General Arrangements becomeseffective pursuant to Paragraph 15 of the General Arrangements. This letter maybe amended or rescinded at any time if the Swiss Confederation and the Fund shallso agree.

(11) Any question of interpretation or application of these understandings willbe settled to the mutual satisfaction of the Swiss Confederation and the Fund.

(12) For the purposes of this letter, references to participants shall be deemedto include the official institution of a participant with which an implementing agree-ment is made, even though such institution is not a "participating institution"under the General Arrangements.

(13) All communications by or to the Swiss Confederation pursuant to thisletter shall be made by or to the Swiss Bank.

I propose that, if this letter is approved by the International Monetary Fund, thisletter and your reply constitute an agreement between the Swiss Federal Counciland the International Monetary Fund, which shall enter into force on the date ofyour reply. I hereby declare that the Swiss Confederation has taken all stepsnecessary to implement the exchange of letters.

Accept, Sir, the assurances of my highest consideration.

/s/A. ZEHNDER

Ambassador of Switzerland

Dec. J7J2-(64/29) 116


BORROWING

June 11,1964Sir:

I am pleased to acknowledge receipt of your letter of June 11, 1964.

I have been authorized to inform you that the understandings set forth in yourletter are accepted by the International Monetary Fund. Accordingly, your letterand this reply constitute an agreement between the International Monetary Fundand the Swiss Federal Council, which will enter into force on the date of this reply.


Very truly yours,/s/

PIERRE-PAUL SCHWEITZERManaging Director

His ExcellencyAlfred ZehnderAmbassador of Switzerland2900 Cathedral Avenue, N.W.Washington, D.C. 20008

First Extension of Association of Switzerland*

The Fund agrees to the extension until October 23, 1970 of theAgreement of June 11, 1964 between the Swiss Confederationand the International Monetary Fund and authorizes the Manag-ing Director to exchange with the Ambassador of Switzerland tothe United States letters in the form [below].


November 17, 1967

* Exchange of letters between the Managing Director of the Fund and theAmbassador of Switzerland to the United States

November 22, 1967

Sir:

I have the honor to refer to the letters exchanged between the Ambassador ofSwitzerland to the United States and the Managing Director of the InternationalMonetary Fund on June 11, 1964 constituting the agreement for the association ofthe Swiss Confederation with the Fund's General Arrangements to Borrow.

117 Dec. 2377-(67/85)



It is my understanding that, in view of the renewal for four years of the GeneralArrangements to Borrow until October 23, 1970, the Swiss authorities are preparedto extend the period of the agreement between Switzerland and the Fund until thesame date. Accordingly, I have been authorized to propose, on behalf of the Fund,that the agreement be extended until October 23, 1970.

If such an extension is acceptable to the Swiss Federal Council, I propose thatthis letter and your reply indicating the concurrence of the Swiss Federal Councilshould constitute an agreement between the Swiss Federal Council and the Interna-tional Monetary Fund.



P.-P. SCHWEITZERManaging Director

His ExcellencyFelix SchnyderAmbassador of Switzerland2900 Cathedral Avenue, N.W.Washington, D.C. 20008

November 26, 1967

Sir,

I am pleased to acknowledge receipt of your letter of Wednesday, November 22,1967.

I have been authorized by the Swiss Federal Council to inform you that the SwissFederal Council, on behalf of the Swiss Confederation, agrees to the extension untilOctober 23, 1970 of the agreement for the association of the Swiss Confederationwith the International Monetary Fund's General Arrangements to Borrow under theexchange of letters of June 11, 1964, as proposed in your letter. Accordingly, yourletter and this reply constitute an agreement between the International MonetaryFund and the Swiss Federal Council.


The Ambassador of Switzerland:/s/

FELIX SCHNYDER


Dee. 2377-f67/85; 118


BORROWING

Second Extension of Association of Switzerland*

The Fund agrees to the extension until April 30, 1974 of theAgreement of June 11, 1964 between the Swiss Federal Counciland the International Monetary Fund and authorizes the ActingManaging Director to exchange with the Ambassador of Switzer-land to the United States letters in the form [below].


July 7, 1971

* Exchange of letters between the Acting Managing Director of the Fundand the Ambassador of Switzerland to the United States

July?, 1971

Sir:

I have the honor to refer to the agreement for the association of the Swiss Con-federation with the Fund's General Arrangements to Borrow under the exchange ofletters of June 11, 1964, which was subsequently extended until October 23, 1970.

It is my understanding that, in view of the second renewal of the GeneralArrangements to Borrow, the Swiss authorities are prepared to extend the periodof the agreement between the Swiss Federal Council and the Fund until April 30,1974, which is the date of expiration of the Federal Decree of October 4, 1963authorizing the association of the Swiss Confederation with the General Arrange-ments to Borrow. Accordingly, I have been authorized to propose, on behalf of theFund, that the agreement be extended until April 30, 1974.

If such an extension is acceptable to the Swiss Federal Council, I propose thatthis letter and your reply indicating the concurrence of the Swiss Federal Councilshould constitute an agreement between the Swiss Federal Council and the Inter-national Monetary Fund.



FRANK SOUTHARD, JR.Acting Managing Director


119 Dee. 3363-(7J/60)



July 7, 1971The Acting Managing DirectorInternational Monetary Fund19th and H Streets, N.W.Washington, D.C. 20431

Sir:

I am pleased to acknowledge receipt of your letter of July 7, 1971.

I have been authorized by the Swiss Federal Council to inform you that theSwiss Federal Council, on behalf of the Swiss Confederation, agrees to the extensionuntil April 30, 1974 of the agreement for the association of the Swiss Confederationwith the International Monetary Fund's General Arrangements to Borrow underthe exchange of letters of June 11, 1964, as proposed in your letter. Accordingly,your letter and this reply constitute an agreement between the International Mone-tary Fund and the Swiss Federal Council.


Very truly yours,The Ambassador of Switzerland:

/s/FELIX SCHNYDER

Third Extension of Association of Switzerland*

The Fund agrees to the extension until October 23, 1980 of theAgreement of June 11, 1964 between the Swiss Federal Counciland the International Monetary Fund and authorizes the Manag-ing Director to exchange with the Ambassador of Switzerland tothe United States, letters in the form [below].

Decision No. 4858-(75/172)

November 5, 1975

* Exchange of letters between the Ambassador of Switzerland to theUnited States and the Managing Director of the Fund

November 5, 1975

Sir:

I have the honor to refer to the agreement for the association of the SwissConfederation with the Fund's General Arrangements to Borrow under the exchangeof letters of June 11, 1964, which was subsequently extended until October 23, 1970and April 30, 1974.

Dec. 4858-(75/J72) 120


BORROWING

It is my understanding that, in view of the third renewal of the General Arrange-ments to Borrow for a period of five years from October 24, 1975 and the FederalDecree of March 20, 1975 authorizing the continuation of the association of theSwiss Confederation, the Swiss authorities are prepared to extend the period of theagreement between the Federal Council and the Fund concerning the associationof the Swiss Confederation with the General Arrangements to Borrow. Accordingly,I have been authorized to propose, on behalf of the Fund, that the agreement beextended until October 23, 1980.

If such an extension is acceptable to the Swiss Federal Council, I propose thatthis letter and your reply indicating the concurrence of the Swiss Federal Councilshould constitute an agreement between the Swiss Federal Council and the Inter-national Monetary Fund.


Very truly yours,A/

H. JOHANNES WITTEVEENManaging Director


Washington, D.C.November 5, 1975

Sir:

I am pleased to acknowledge receipt of your letter of November 5, 1975.

I have been authorized by the Swiss Federal Council to inform you that theSwiss Federal Council, on behalf of the Swiss Confederation, agrees to theextension until October 23, 1980 of the agreement for the association of the SwissConfederation with the International Monetary Fund's General Arrangements toBorrow under the exchange of letters of June 11, 1964, as proposed in your letter.Accordingly, your letter and this reply constitute an agreement between the Inter-national Monetary Fund and the Swiss Federal Council.



FELIX SCHNYDERThe Ambassador of Switzerland


121 Dee. 4858-(75/J72)



BORROWING IN CONNECTION WITH OIL FACILITY

1. The International Monetary Fund deems it appropriate inaccordance with Article VII, Section 2(i) to replenish its holdingsof currencies by borrowing to the extent that resources are neededin respect of purchases under the facility established by ExecutiveBoard Decision No. 4241-(74/67), adopted June 13, 1974.

2. A number of members, or institutions within their territo-ries, have indicated their intention to lend to the Fund for thepurposes of the facility. In order to enable the Fund to borrow inaccordance with these intentions, the draft letter set out in theAnnex to this Decision is adopted as the basis for terms and con-ditions to ,be incorporated in the agreement with each lenderunder Article VII, Section 2(i) of the Articles of Agreement.The terms and conditions may be adapted for good reason, suchas domestic legal requirements or the character of the lendinginstitution. Each letter setting forth the terms and conditions to beproposed shall be submitted to the Executive Directors for theirapproval.

3. In determining the amounts to be called, the Fund will takeinto account the proportion of the unutilized balance of eachlender's commitment to the total of unutilized balances under theagreements and the balance of payments and reserve position andprospects of a lender or of the member country in which it issituated.

4. If the Fund decides to make repayments in accordance withParagraph 5 (b) (i) (B) of the draft letter set out in the Annex tothis Decision, repayments will be made to lenders in proportionto the amounts the Fund is committed to repay to each lender.

5. The Fund shall use its best efforts to ensure that currenciesborrowed in accordance with this Decision will be transferred onthe same day to purchasers under the facility referred to in Para-graph 1 above and that amounts corresponding to repurchasesidentified in accordance with Paragraph 5 (b) (i) (A) of the draft

Dec. 4242-(74/67J 122


BORROWING

letter set out in the Annex to this Decision will be repaid to lend-ers on the same day as the repurchase.


June 13, 1974

ANNEX

[Your Excellency] [Dear Sir]

In accordance with Article VII, Section 2(i) of the Articlesof Agreement of the International Monetary Fund, hereinafterreferred to as "the Articles," and pursuant to Executive BoardDecision No. 4241-(74/67), adopted June 13, 1974, ExecutiveBoard Decision No. 4242-(74/67), adopted June 13, 1974, andExecutive Board Decision No. [borrowing-individual lender],adopted , I have been authorized to propose onbehalf of the International Monetary Fund, hereinafter referredto as "the Fund," that [the lender] agree to lend to the Fund accall during the period ending December 31, 1975 [currency of thelender] [United States dollars] in amounts that in total do notexceed the equivalent of . million special drawing rights(SDR ) on the following terms and conditions:

1. All amounts under this agreement shall be expressed interms of special drawing rights. For all the purposes of thisagreement, the value of a currency in terms of special drawingrights shall be calculated at the rate for the currency as deter-mined by the Fund in accordance with Rule O-3 of the Fund'sRules and Regulations in effect when the calculation is made,unless Paragraph 7 applies.

2. (a) Calls under this agreement shall be made only (i) inrespect of purchases under the facility established by ExecutiveBoard Decision No. 4241-(74/67), adopted June 13, 1974, here-inafter referred to as "the facility," or (ii) in order to repay a

123 Dec. 4242-J74/67)



borrowing by the Fund from another lender in connection withthe facility when repayment is requested by that lender because ofa balance of payments need.

(b) When a call is made, [the lender] shall transfer to theFund's account with [the lender] [the depository for the currencyof the lender] [the Federal Reserve Bank of New York] withintwo business days after the call an amount of [its currency][United States dollars] equivalent to the amount of the call at therate for the currency as determined by the Fund in accordance withRule O-3 of the Fund's Rules and Regulations. [On request, [thelender] shall convert its currency when sold by the Fund intoUnited States dollars at the rates for the two currencies as deter-mined by the Fund in accordance with Rule O-3 of the Fund'sRules and Regulations.]

3. The Fund shall issue to [the lender] on its request a non-negotiable instrument evidencing the amount, expressed in specialdrawing rights, that the Fund is committed to repay under thisagreement. Upon repayment of the amount of any instrumentand all accrued interest, the instrument shall be returned to theFund for cancellation. If less than the amount of any such instru-ment is repaid, the instrument shall be returned to the Fund and anew instrument for the remainder of the amount shall be substi-tuted with the same maturity date as in the old instrument.

4. The Fund shall pay interest quarterly at an annual rate ofseven per cent on the amount it is committed to repay under thisagreement.

5. (a) Subject to the other provisions of this Paragraph 5, theFund shall repay [the lender] an amount equivalent to any trans-fer pursuant to a call under Paragraph 2(b) in eight equal semi-annual installments to commence after three years and to be com-pleted not later than seven years after the date of the transfer.

(b) The Fund may repay [the lender] in advance of therepayments required by Paragraph 5 (a): (i) to the extent that (A)a repurchase is identified as made in respect of a purchase under

Dec. 4242-174/67) 124


BORROWING

the facility for which the Fund has borrowed from [the lender],or (B) repayment is necessary in the opinion of the Fund in orderto enable repurchases to be made by members with currency, or(C) [the lender] agrees to receive repayment; or (ii) before adecision to make uniform proportionate changes in the par valuesof the currencies of all members becomes effective.

(c) If at any time [the lender] represents that there is abalance of payments need for repayment of part or all of theamount the Fund is committed to repay under this agreement andrequests such repayment, the Fund, in deciding whether to makerepayment, shall give the overwhelming benefit of any doubt tothe representation.

(d) Repayments under Paragraph 5(b) and (c) shall dis-charge the installments prescribed by Paragraph 5 (a) in theorder in which they become due.

6. The Fund shall consult [the lender] in order to agree themeans in which payment of interest and repayment will be made,but, if agreement is not reached, the Fund shall have the option tomake payment or repayment in the currency of the lender, thecurrency borrowed, or [special drawing rights or United Statesdollars, or both].

7. If the Fund decides to make a change in the way in whichthe value of the unit of special drawing rights is determined, (i)[the lender] shall have the option to have the unit of value ofthe special drawing right in effect under Rule O-3 before thechange continue to apply for the purposes of this agreement; (ii)the Fund shall have the option to repay any amounts it is com-mitted to repay, and to make repayment on the basis of the unitof value of the special drawing right in effect under Rule O-3before the change.

8. [The lender] may transfer all or part of its claim to repay-

ment under this agreement with the prior consent of the Fund andon terms and conditions acceptable to the Fund.

125 Dee. 4242-174/67)



9. [If [the lender] withdraws from the Fund, [the lender's]agreement to lend shall terminate and the amount that the Fundis committed to repay under this agreement shall be repaid inaccordance with the terms of this agreement, provided that repay-ment shall be made, at the option of the Fund, in the currency of[the lender] or in United States dollars, or in such other currencyas may be agreed with [the lender].] [If the member country inwhich [the lender] is situated withdraws from the Fund, [thelender's] agreement to lend shall terminate, and the amount thatthe Fund is committed to repay under this agreement shall berepaid in accordance with the terms of this agreement, providedthat repayment shall be made, at the option of the Fund, in thecurrency of that member or in United States dollars, or in suchother currency as may be agreed with [the lender].]

10. In the event of liquidation of the Fund the amounts theFund is committed to repay to [the lender] shall be immediatelydue and payable as liabilities of the Fund under Paragraph 1 ofSchedule E of the Articles. For the purpose of Paragraph l(a)of Schedule E the currency in which the liability is payable shallbe, at the option of the Fund, [the currency borrowed] [thecurrency of the lender if it differs from that currency] or UnitedStates dollars or any other currency agreed with [the lender].

11. Any question of interpretation of this agreement that doesnot fall within the purview of Article XVIII of the Articles shallbe settled to the mutual satisfaction of [the lender] and the Fund.

If the foregoing proposal is acceptable to [the lender], thiscommunication and your reply shall constitute an agreementbetween [the lender] and the Fund, which shall enter into forceon the date on which the Fund receives your reply.

Very truly yours,

H. JOHANNES WITTEVEENManaging Director

Dec. 4242-174/67) 126


BORROWING

BORROWING IN CONNECTION WITH OIL FACILITY FOR 1975

1. The International Monetary Fund deems it appropriate inaccordance with Article VII, Section 2(i) to replenish its holdingsof currency by borrowing, in addition to the amounts committedduring 1974 and still unused, amounts not in excess of the equiv-alent of SDR 5 billion to the extent that purchases are madeunder the facility established by Executive Board Decision No.424l-(74/67), adopted June 13, 1974, as extended by ExecutiveBoard Decision No. 4634-(75/47), adopted April 4, 1975.

2. The provisions of Paragraphs 2, 3, 4, and 5 of ExecutiveBoard Decision No. 4242-(74/67) shall continue to apply exceptas modified by Paragraphs 3 and 4 below.

3. The following changes shall be made in the draft standardletter set out in the Annex to Decision No. 4242- (74/67) :

(a) In the preambular paragraph,

(i) reference shall be made to the 1975 decisions on theoil facility and borrowing for 1975;

(ii) the words "during the period ending December 31,1975" shall be replaced by "during the period endingMarch 31, 1976."

(b) In the first sentence of Paragraph 2(b) the words "twobusiness days" shall be replaced by "three business days."

(c) In Paragraph 4,

(i) the annual rate of interest of "seven per cent" shallbe replaced by "seven and one-quarter per cent";

(ii) the following sentence shall be added: "No otherfee, charge, or commission shall be paid to, orimposed by, [the lender] with respect to any aspectof a call under this agreement including a transfer or aconversion pursuant to a call under Paragraph 2(b)."

127 Dee. 4635-175/47)



4. All unutilized balances under commitments agreed during1974 shall be called before any calls are made under agreementsmade during 1975.


April 4, 1975

AMENDMENTS OF AGREEMENTS WITH LENDERS FOR THE OILFACILITY

a. BorrowingThe following change shall be made in the draft standard let-

ter set out in the Annex to Decision No. 4242-(74/67), asamended by Decision No. 4635-(75/47), adopted April 4, 1975.In the preambular paragraph the words "during the period end-ing March 31, 1976" shall be replaced by "during the period end-ing May 31, 1976."

Decision No. 4916-(75/208)

December 24, 1975

b. Authorization to Make CallsThe Managing Director is authorized to make calls under

agreements to borrow entered into pursuant to Executive BoardDecision No. 4635-(75/47), adopted April 4, 1975, in accordancewith paragraph 3 of Executive Board Decision No. 4242-(74/67),adopted June 13, 1974, to meet requests to purchase that areauthorized by the Executive Directors under the facility establishedby Executive Board Decision No. 4241-(74/67), adopted June 13,1974. The Managing Director shall inform the Executive Direc-tors promptly of any calls that he has made.

Decision No. 4741-(75/120)

July 11} 1975

Dec. 4741-(75/120 128


BORROWING

Executive Board Decision No. 4741-(75/120), adopted July 11,1975 is amended by including after the words "Executive BoardDecision No. 4635-(75/47), adopted April 4, 1975" the words"and Executive Board Decision No. 4916-(75/208), adoptedDecember 24, 1975."

Decision No. 4917-(75/208)

December 24, 1975

c. Order of UseCalls shall continue to be made under outstanding agreements

in accordance with paragraph 3 of Executive Board DecisionNo. 4242-(74/67) of June 13, 1974, except that calls shall bemade first on amounts available only through March 31, 1976 ifnecessary in order to utilize all these amounts before that date.

Decision No. 4918-(75/208)

December 24, 1975

d. Payment of InterestThe Managing Director shall make arrangements for consulta-

tions to agree the means in which payment of interest will bemade under the agreements to borrow entered into pursuant toExecutive Board Decision No. 4242-(74/67), adopted June 13,1974. Payment of interest shall be made in accordance with thepolicy and procedure set forth in EBS/74/394. The ExecutiveDirectors shall be informed promptly of the interest paid and theassets used.

Decision No. 4490- ( 74/140)

November 6, 1974

129 D««. 4490-(74/MO)



Executive Board Decision No. 4490-(74/140), adopted Novem-ber 6, 1974 shall be amended by including after the words"Executive Board Decision No. 4242-(74/67), adopted June 13,1974" the words "and Executive Board Decision No. 4635-(75/47), adopted April 4, 1975."


April 4,1975

Executive Board Decision No. 4490-(74/140), adopted Novem-ber 6, 1974, as amended, shall be further amended by includingafter the words "and Executive Board Decision No. 4635-(75/47), adopted April 4, 1975" the words "and as amended byExecutive Board Decision No. 4918-(75/208), adopted Decem-ber 24, 1975."

Decision No. 4919-(75/208)

December 24, 1975

Dee. 49?9-(75/208J 130


ARTICLE VIII, SECTION 2(b)

Unenforceability of Exchange Contracts

UNENFORCEABILITY OF EXCHANGE CONTRACTS: FUND'S INTER-PRETATION OF ARTICLE VIII, SECTION 2(b)

The following letter shall be sent to all members:

The Board of Executive Directors of the InternationalMonetary Fund has interpreted, under Article XVIII of theArticles of Agreement, the first sentence of Article VIII, Sec-tion 2(£), which provision reads as follows:

Exchange contracts which involve the currency of anymember and which are contrary to the exchange control regu-lations of that member maintained or imposed consistentlywith this Agreement shall be unenforceable in the territoriesof any member.

The meaning and effect of this provision are as follows:

1. Parties entering into exchange contracts involvingthe currency of any member of the Fund and contrary toexchange control regulations of that member which aremaintained or imposed consistently with the Fund Agree-ment will not receive the assistance of the judicial oradministrative authorities of other members in obtainingthe performance of such contracts. That is to say, the obli-gations of such contracts will not be implemented by thejudicial or administrative authorities of member countries,for example by decreeing performance of the contracts orby awarding damages for their non-performance.

2. By accepting the Fund Agreement members haveundertaken to make the principle mentioned above effec-tively part of their national law. This applied to all mem-bers, whether or not they have availed themselves of thetransitional arrangements of Article XIV, Section 2.

131 Dec. 446-4



An obvious result of the foregoing undertaking is that if aparty to an exchange contract of the kind referred to in Arti-cle VIII, Section 2 (£) seeks to enforce such a contract, the tribunalof the member country before which the proceedings arebrought will not, on the ground that they are contrary to thepublic policy (ordre public} of the forum, refuse recognitionof the exchange control regulations of the other member whichare maintained or imposed consistently with the Fund Agree-ment. It also follows that such contracts will be treated asunenforceable notwithstanding that under the private interna-tional law of the forum, the law under which the foreignexchange control regulations are maintained or imposed is notthe law which governs the exchange contract or its perform-ance.

The Fund will be pleased to lend its assistance in connectionwith any problem which may arise in relation to the foregoinginterpretation or any other aspect of Article VIII, Section 2(£).In addition, the Fund is prepared to advise whether particularexchange control regulations are maintained or imposed con-sistently with the Fund Agreement.

Decision No. 446-4

June 10, 1949

Dec. 446-4 132



Payments Restrictions

PAYMENTS RESTRICTIONS FOR SECURITY REASONS: FUND JURIS-DICTION

Art. VIII, Sec. 2(a), in conformity with its language, appliesto all restrictions on current payments and transfers, irrespectiveof their motivation and the circumstances in which they areimposed. Sometimes members impose such restrictions solely forthe preservation of national or international security. The Funddoes not, however, provide a suitable forum for discussion of thepolitical and military considerations leading to actions of this kind.In view of the fact that it is not possible to draw a precise linebetween cases involving only considerations of this nature andcases involving, in whole or in part, economic motivations andeffects for which the Fund does provide the appropriate forum fordiscussion, and the further fact that the Fund must exercise thejurisdiction conferred by the Fund Agreement in order to performits duties and protect the legitimate interests of its members, thefollowing policy decision is taken:

1. A member intending to impose restrictions on paymentsand transfers for current international transactions that are notauthorized by Art. VII, Sec. 3(£) or Art. XIV, Sec. 2 of theFund Agreement and that, in the judgment of the member, aresolely related to the preservation of national or internationalsecurity, should, whenever possible, notify the Fund beforeimposing such restrictions. Any member may obtain a decisionof the Fund prior to the imposition of such restrictions by soindicating in its notice, and the Fund will act promptly on itsrequest. If any member intending to impose such restrictionsfinds that circumstances preclude advance notice to the Fund, itshould notify the Fund as promptly as circumstances permit,but ordinarily not later than 30 days after imposing such

133 Dec. 744-(52/51J



restrictions. Each notice received in accordance with this decisionwill be circulated immediately to the Executive Directors. Unlessthe Fund informs the member within 30 days after receivingnotice from the member that it is not satisfied that such restric-tions are proposed solely to preserve such security, the membermay assume that the Fund has no objection to the imposition ofthe restrictions.

2. The Fund will review the operation of this decisionperiodically and reserves the right to modify or revoke, at anytime, the decision or the effect of the decision on any restric-tions that may have been imposed pursuant to it.

Decision No. 144- (52/51)

August 14, 1952

BILATERALISM AND CONVERTIBILITY

1. This decision records the Fund's views on the use of bilat-eral arrangements.

2. Fund policies and attitude on bilateral arrangements whichinvolve the use of exchange restrictions and represent limitationson a multilateral system of payments are an integral part of itspolicy on restrictions. This policy aims at the elimination of for-eign exchange restrictions and the earliest possible establishmentof a multilateral system of payments in respect of current transac-tions between members. The Fund's policies and procedures onsuch restrictions rest on Articles I, VIII and XIV of the FundAgreement.

3. Certain members have already taken steps to reduce theirdependence on bilateral arrangements, but many members stilluse them. The Fund welcomes the reduced reliance on thesearrangements and believes that the improvement in the interna-tional payments situation makes it less necessary for members torely on such arrangements. The Fund urges the full collaboration

Dec. 433-(S5/42) 134



of all its members to reduce and to eliminate as rapidly as prac-ticable reliance on bilateralism. In this respect the Fund recom-mends close cooperation of those who plan to make their curren-cies convertible in the near future. Unless this policy isenergetically pursued by all countries, both convertible and incon-vertible, there is serious risk that widespread restrictions, particu-larly of a discriminatory character, will persist. Moreover, thepersistence of bilateralism may impede the attainment and main-tenance of convertibility. This \vhole problem is one not only forcountries which maintain bilateral arrangements but also forother countries whose domestic and foreign economic policiesmay adversely affect the balance of payments of other members.

4. The Fund will have discussions with its members on theirneed to retain existing bilateral arrangements or their ability tofacilitate the reduction of bilateral arrangements by other coun-tries. During the coming year, the Fund will explore with allcountries which are parties to bilateral arrangements which involvethe use of exchange restrictions the need for the continuation ofthese arrangements, the possibilities of their early removal, andways and means, including the use of the Fund's resources, bywhich the Fund can assist in this process. In its examination of thejustification for reliance on such bilateral arrangements the Fundwill, without excluding other considerations, have particularregard to the payments position and prospects of the membersconcerned.


June 22, 1955

RETENTION QUOTAS: DECISION AND LETTER OF TRANSMITTAL

In concluding consultations on restrictions on current paymentsand transfers as required under Article XIV of the Fund Agree-ment, the Fund postponed consideration of retention quotas and

135 Dec. 207-(53/29)



similar practices through which some members have sought toimprove their earnings of specific currencies. The Fund has nowexamined these practices more fully than was possible at the con-sultations referred to above. The Fund has extended thisexamination to cover the terms of reference of the resolutionadopted on September 9, 1952, by the Board of Governors andhas come to the following conclusions:

1. Members should work toward and achieve as soon as fea-sible the removal of these retention quotas and similar prac-tices, particularly where they lead to abnormal shifts in tradewhich cause unnecessary damage to other countries. Membersshould endeavor to replace these practices by more appropriatemeasures leading to currency convertibility

2. The Fund will enter into consultation with each of themembers concerned with a view to agreeing on a program forthe implementation of 1 above, including appropriate attentionto timing of any action which may be decided upon.

3. The Fund does not object to those practices which, bytheir nature, can be regarded as devices designed solely to sim-plify the administration of official exchange allocations.

The Managing Director is asked to send the following letter toall members in transmitting the foregoing decision on retentionquotas and similar practices:

The Fund has made a detailed study concerning retentionquotas and other similar practices pursuant to the resolutionpassed at the Seventh Session of the Board of Governors inMexico in September 1952. I am pleased to transmit herewith adecision of the Executive Board of the Fund based on thisstudy.

The Fund has concluded that these practices stem fromwidespread difficulties presently existing in the internationalpayments position of many countries. The Fund's considerationof this subject has shown that what is referred to as ''retentionquotas and similar practices" covers a wide range of exchange

136Dec. 20?-(53/29)



measures. Certain practices under this heading may be unobjec-tionable from the point of view of Fund policies. Other prac-tices in this category, however, appear to result in adverseeffects on exchange stability and to cause unnecessary damage tomember countries. They also may lead to the adoption of retalia-tory measures. The interest of the Fund in these mattersclearly follows from the terms of Article VIII containing thegeneral obligations of members with respect to the avoidanceof exchange restrictions, discriminatory currency arrangementsand multiple currency practices, and Article XIV dealing withthese exchange measures during the transitional period.

In dealing with retention quotas and similar practices, theBoard has not intended to change existing Fund standards andprocedures with respect to exchange restrictions, discriminatorycurrency arrangements and multiple currency practices. Specifi-cally, there was no intention to affect the existing requirementsof prior consultation and approval with respect to measures ofthis character. Those requirements, so far as they concern mul-tiple currency practices, were communicated to members in theFund's letter of December 19, 1947 (Appendix II of theFund's Annual Report of 1948). Accordingly, it is expectedthat members intending to maintain, introduce or enlarge thoseretention quotas and similar practices which constitute exchangerestrictions, multiple currency practices or discriminatory cur-rency arrangements will act in accordance with existing Fundrequirements.

The decision recognizes that it is not practicable to deal withall of these practices on a general basis. The Fund, therefore,wishes to deal with these arrangements on a case-to-case basis.We shall communicate as quickly as practicable with membersusing these practices. We are confident that members willcooperate in these individual discussions in order to enable theFund to reach appropriate conclusions.


May 4, 1953

Dec. 207-(53/29)137



DISCRIMINATION FOR BALANCE OF PAYMENTS REASONS

The following decision deals exclusively with discriminatoryrestrictions imposed for balance of payments reasons.

In some countries, considerable progress has already been madetowards the elimination of discriminatory restrictions; in others,much remains to be done. Recent international financial develop-ments have established an environment favorable to the elimina-tion of discrimination for balance of payments reasons. There hasbeen a substantial improvement in the reserve positions of theindustrial countries in particular and widespread moves to externalconvertibility have taken place.

Under these circumstances, the Fund considers that there is nolonger any balance of payments justification for discrimination bymembers whose current receipts are largely in externally convert-ible currencies. However, the Fund recognizes that where such dis-criminatory restrictions have been long maintained, a reasonableamount of time may be needed fully to eliminate them. But thistime should be short and members will be expected to proceedwith all feasible speed in eliminating discrimination against mem-ber countries, including that arising from bilateralism.

Notwithstanding the extensive moves toward convertibility, asubstantial portion of the current receipts of some countries isstill subject to limitations on convertibility, particularly in pay-ments relations with state-trading countries. In the case of thesecountries the Fund will be prepared to consider whether balanceof payments considerations would justify the maintenance ofsome degree of discrimination, although not as between countrieshaving externally convertible currencies. In this connection theFund wishes to reaffirm its basic policy on bilateralism as statedin its decision of June 22, 1955.


October 23, 1959

138Dec. 955-(59/45J




There has been in recent years a substantial improvement inthe balance of payments and the reserve positions of a number ofFund members which has led to important and widespread movesto the external convertibility of many currencies. Most interna-tional transactions are now carried on with convertible currencies,and many countries have progressed far with the removal ofrestrictions on payments. In consequence of these developments, itseems likely that a number of members of the Fund either havereached or are nearing a position in which they can consider thefeasibility of formally accepting the obligations of Article VIII,Sections 2, 3, and 4. Previous decisions taken by the Fund, suchas those on multiple currency practices, bilateral arrangements,discriminatory restrictions maintained for balance of paymentspurposes, and payments restrictions for security reasons, indicatethe Fund's attitude on these matters. The present decision hasbeen adopted as an additional guide to members in pursuance ofthe purposes of the Fund as set forth in Article I of the Articlesof Agreement.

1. Article VIII provides in Sections 2 and 3 that members shallnot impose or engage in certain measures, namely restrictions onthe making of payments and transfers for current internationaltransactions, discriminatory currency arrangements, or multiplecurrency practices, without the approval of the Fund. The guid-ing principle in ascertaining whether a measure is a restriction onpayments and transfers for current transactions under Article VIII,Section 2, is whether it involves a direct governmental limi-tation on the availability or use of exchange as such. Members indoubt as to whether any of their measures do or do not fallunder Article VIII may wish to consult the Fund thereon.

2. In accordance with Article XIV, Section 3, members may atany time notify the Fund that they accept the obligations of Arti-cle VIII, Sections 2, 3, and 4, and no longer avail themselves of thetransitional provisions of Article XIV. Before members give notice

139 Dec. T034-(60/27)



that they are accepting the obligations of Article VIII, Sections 2,3, and 4, it would be desirable that, as far as possible, they elimi-nate measures which would require the approval of the Fund, andthat they satisfy themselves that they are not likely to needrecourse to such measures in the foreseeable future. If members,for balance of payments reasons, propose to maintain or introducemeasures which require approval under Article VIII, the Fundwill grant approval only where it is satisfied that the measures arenecessary and that their use will be temporary while the memberis seeking to eliminate the need for them. As regards measuresrequiring approval under Article VIII and maintained or intro-duced for nonbalance of payments reasons, the Fund believes thatthe use of exchange systems for nonbalance of payments reasonsshould be avoided to the greatest possible extent, and is preparedto consider with members the ways and means of achieving theelimination of such measures as soon as possible. Members havingmeasures needing approval under Article VIII should find it usefulto consult with the Fund before accepting the obligations ofArticle VIII, Sections 2, 3, and 4.

3. If members at any time maintain measures which are subjectto Sections 2 and 3 of Article VIII, they shall consult with theFund with respect to the further maintenance of such measures.Consultations with the Fund under Article VIII are not otherwiserequired or mandatory. However, the Fund is able to providetechnical facilities and advice, and to this end, or as a means ofexchanging views on monetary and financial developments, thereis great merit in periodic discussions between the Fund and itsmembers even though no questions arise involving action underArticle VIII. Such discussions would be planned between theFund and the member, including agreement on place and timing,and would ordinarily take place at intervals of about one year.

4. Fund members which are contracting parties to the GATTand which impose import restrictions for balance of paymentsreasons will facilitate the work of the Fund by continuing to sendinformation concerning such restrictions to the Fund. This will

140Dec. 1034-(60/27)



enable the Fund and the member to join in an examination of thebalance of payments situation in order to assist the Fund in itscollaboration with the GATT. The Fund, by agreement withmembers which are not contracting parties to the GATT andwhich impose import restrictions for balance of payments reasons,will seek to obtain information relating to such restrictions.


June 1, I960

141 Dec. 1034-(60/27)


Payments Arrears

The Executive Board has reviewed the Fund's policy withrespect to payments arrears. The Fund shall be guided by theapproach in the conclusions set forth [below].


October 26, 1970

Conclusions

1. Undue delays in the availability or use of exchange for cur-rent international transactions that result from a governmentallimitation give rise to payments arrears and are payments restric-tions under Article VIII, Section 2(a), and Article XIV, Sec-tion 2. The limitation may be formalized, as for instance com-pulsory waiting periods for exchange, or informal or ad hoc.

2. The need for the Fund to define its policy on paymentsarrears is emphasized by the fact that restrictions resulting in pay-ments arrears arising from informal or ad hoc measures do particu-lar harm to a country's international financial relationships becauseof the uncertainty they generate. This uncertainty is particularlyharmful to the smooth functioning of the international paymentssystem and has pronounced adverse effects on the creditworthinessof the debtor country which may extend beyond the period of theexistence of the restrictions.

3. In the light of these considerations it is believed that theFund should aim in consultation reports at a more systematictreatment of restrictions on payments and transfers for currentinternational transactions that produce payments arrears. In allcases where payments arrears arise from a governmental limita-tion on, or interference with, the availability of foreign exchangeat the time a payment for a current international transaction fallsdue, or with the timely transfer of the proceeds of such transac-tions, the payments arrears should be treated in the consultationpapers as evidence of a payments restriction requiring approval in

142Dec. 3153-170/95)


PAYMENTS ARREARS

Article VIII or Article XIV consultation decisions. The staff, inthe consultation discussions, will have to establish whether pay-ments arrears exist by ascertaining whether there has been a sub-stantial delay beyond that usually required for ascertaining thebona fides of exchange applications or the time that can beregarded as normally required for the administrative processing ofapplications for exchange. If payments arrears exist and approvalof the restriction giving rise to them is requested by the member,the member should be expected to submit a satisfactory programfor their elimination. Approval if given should be only for a tem-porary period and generally with a fixed terminal date. Becauseof the difficulty in surveillance, approval should be wherever fea-sible in terms of the level of arrears outstanding. The programfor the elimination of the payments arrears should provide for amaximum permissible delay to which a payment or transfer couldbe subjected, together with a phased reduction in the outstandinglevel.

4. Fund financial assistance to members having paymentsarrears should be granted on the basis of performance criteria orpolicies with respect to the treatment of arrears similar to the cri-teria or policies described in the preceding paragraph for theapproval of the payments restrictions. In general, the understand-ings should provide for the elimination of the payments arrearswithin the period of the stand-by arrangement. Such understand-ings should be based on the concept of a given level of paymentsarrears and should be reflected in the performance criteriaincluded in stand-by arrangements in the higher credit tranches.To support the policies designed to deal with arrears the letter ofintent should include a statement that there would be no imposi-tion of new restrictions or increase in the level of delayed pay-ments. Where Fund financial assistance is being provided, but onlythrough the first credit tranche, the adoption of a viable programdirected toward the elimination of the payments arrears shouldbe an important factor in considering whether the country wasmaking reasonable efforts to redress its international financial situ-ation.

143 Dee. 3153-170/95)


Payments Policies

CONSULTATIONS ON MEMBERS' POLICIES IN PRESENT CIRCUM-STANCES

1. The Committee on Reform of the International MonetarySystem and Related Issues on January 18, 1974 reviewed importantrecent developments and agreed that, in the present difficult cir-cumstances, all members, in managing their international pay-ments, must avoid the adoption of policies which would merelyaggravate the problems of other members. Accordingly, the Com-mittee stressed the importance of avoiding competitive deprecia-tion and the escalation of restrictions on trade and payments; andemphasized the importance of pursuing policies that would sustainappropriate levels of economic activity and employment, whileminimizing inflation. It was also recognized that recent develop-ments would create serious payments difficulties for many develop-ing countries. The Committee agreed that there should be theclosest international cooperation and consultation in pursuit ofthese objectives.

2. The Executive Directors call on all members to collaboratewith the Fund in accordance with Article IV, Section 4(#), witha view to attaining these objectives. The consultations of the Fundon the policies that members are following in present circum-stances will be conducted with a view to the attainment of theseobjectives.


January 23, 1974

Dec. 4134-174/4) 144


Multiple Currency Practices

STATEMENT TO MEMBERS TRANSMITTING FUND'S DECISIONS ONMULTIPLE CURRENCY PRACTICES

The letter to members concerning multiple currency practicesand the accompanying statement of the Fund's decisions withrespect to such practices are agreed as revised (Executive BoardDocument No. 235, Revision 2) and shall be sent without delayto all members. The texts of earlier decisions on the same subjectare modified as necessary to correspond with the agreed state-ment.

Decision No. 237-2

December 18, 1947

Letter to Members

December 19,1947

To All Members:

During the past several months the Fund has been giving spe-cial consideration to multiple currency practices. I am writing toall of the members today in order to acquaint them with theresults of our considerations. Enclosed is a memorandum contain-ing the pertinent decisions taken by the Executive Board. Theseset forth the general lines of the Fund's policies toward multiplecurrency practices which the Fund has adopted to date, togetherwith the obligations of the members and the jurisdiction of theFund upon which the development of Fund policy will necessarilybe based.

We intend, as rapidly as may be possible under the circum-stances, to discuss with each member now engaging in a multiplecurrency practice how this general policy will be applied to its

145 Dec. 237-2



individual problems. In the meantime, all of the members arerequested to be guided by the enclosed memorandum and to ini-tiate with the Fund discussions of any pressing problems whichmay arise.

Sincerely yours,

GUTT

Managing Director

Multiple Currency Practices

This memorandum contains the decisions the Fund has so fartaken concerning its policies toward multiple currency practices,and clarification of its jurisdiction with respect to such practices.

The exchange systems of the members who engage in multiplecurrency practices are frequently complex. For this reason variousdifficulties will be involved in the modification and removal ofthe practices, and the policy of the Fund in this regard mustdevelop progressively as its consultations with the members con-cerned reveal problems which might otherwise be overlooked.The policies set forth below have been agreed as a basis for theinitiation of discussions with the members affected:

I. Policies

A. General

1. Consultation. There should be continuing consultation onmultiple currency practices between the Fund and the membersconcerned. Members should, as a minimum, consult the Fundbefore introducing a multiple currency practice, before makinga change in any of the multiple rates of exchange, beforereclassifying transactions subject to different rates, and before

Dec. 237-2 146



making any other type of significant change in their exchangesystems.

2. Stability and Restrictions. In most cases multiple currencypractices are both systems of exchange rates and restrictions onpayments and transfers for current international transactions.Whenever it is inconvenient to deal with both aspects of suchmultiple currency practice simultaneously, priority should begiven to those features which affect exchange stability andorderly exchange arrangements among members.

3. Removal. Early steps should be taken toward the removalof multiple currency practices which are clearly not necessaryfor balance of payments reasons. In such cases, ample timeshould be provided for members to take the necessary stepsand to install appropriate substitutes where necessary.

The Fund will encourage members engaging in multiplecurrency practices for balance of payments reasons to establishas soon as possible conditions which would permit theirremoval, with the general objective of seeking removal notlater than the end of the transitional period.

Where complete removal by the end of the transitionalperiod proves impossible, the Fund will assist the membersconcerned to eliminate the most dangerous aspects of theirmultiple currency practices and to exercise reasonable controlover those retained.

B. Specific Practices

1. Fixed Exchange Rates. When a multiple currency systemincludes fixed exchange rates, members should consult with theFund on any changes in their practices, whether such changesconcern the rates of exchange or the classification of transac-tions subject to particular practices. Should the step contem-plated by a member be a part of a program made in agreement

14? Dec. 237-2



with the Fund, the member could, of course, act without priorconsultation.

When a multiple rate system is used for restrictions oncurrent and capital transactions, the elimination of the restric-tion on current transactions would be highly commendableeven though restrictions on capital transactions might have tobe retained.

2. Taxes on Exchange Drafts. The use by members of taxeson exchange drafts resulting in an unusually large differencebetween buying and selling rates for a currency is not in accordwith the objectives of the Fund Agreement and the Fund shall,in consultation with members concerned, seek the eliminationof such practices as rapidly as practicable.

3. Fluctuating Rates of Exchange.

(a) Free Markets. When a multiple currency practiceincludes a free market with a fluctuating rate, the membershould agree with the Fund on the scope of the transactionspermitted to take place in that market. Any changes in thescope of these transactions should, of course, be subject toagreement with the Fund. The objective should be to elimi-nate the fluctuations in the free market as soon as suchaction is reasonably practicable. When it is not reasonablypracticable to eliminate such fluctuations, the Fund willencourage members to exclude current transactions from thefree market to the extent that this would be reasonable inthe circumstances of each case.

(b) The Auction System.

(i) The purpose for which an auction system is to beused should be agreed with the Fund and any change inits scope should be agreed with the Fund. The fewer the

Dec. 237-2 148



transactions subject to the auction rate, and the less essen-tial the goods involved, the better.

(ii) Depending upon the circumstances, the monetaryauthorities should undertake to keep the auction rate sta-ble, or to maintain it within certain limits, or to makeevery effort to prevent brisk fluctuations.

(iii) Wherever auction rates exist or are proposed, thecircumstances should be examined in order to determinewhether a fixed rate should be substituted for the auctionrate.

(iv) If, as is usually the case where an auction systemexists, a reduction of the money supply is desirable, theproceeds of the auction market should be directed towardthis end.

II. Jurisdiction of the Fund

Multiple currency practices, besides being in most cases restric-tive practices, also constitute systems of exchange rates. Sinceexchange stability depends on effective rates, the general purposesof the Fund and the members' undertakings of Article IV, Sec-tion 4(^) "to collaborate with the Fund to promote exchange sta-bility, to maintain orderly exchange arrangements with othermembers, and to avoid competitive exchange alterations" are fun-damental considerations in an interpretation of the rights andobligations of members under Article XIV, Section 2 or Arti-cle VIII, Section 3, to maintain, introduce, or adapt multiple cur-rency practices. Subject to these general principles, the followingconclusions are agreed with respect to the Fund's jurisdiction andthe obligations of members.*

* These conclusions concerning the Fund's jurisdiction and the obligation ofmembers apply to all members including those for whose currencies par valueshave not been established.

149 Dee. 237-2



A. Practices Subject to Article Vlll, Section 3

1. Maintenance. A member maintaining multiple currencypractices at the time the Agreement entered into force, if itdoes not take advantage of Article XIV, is required by Arti-cle VIII, Section 3, to consult with the Fund for their pro-gressive removal or obtain the Fund's approval for theirmaintenance.

2. Introduction. Members that have not been occupied bythe enemy, and former enemy-occupied members which havenot taken advantage of the transitional arrangements, whetheror not they have existing multiple rate practices, may introducea new practice only under Article VIII, Section 3, which pro-vides expressly for the necessity of approval by the Fund.

3. Adaptation. If a multiple currency practice is in force byvirtue of Article VIII, Section 3, the member may change oradapt such practice only after consulting with the Fund andobtaining its approval.

4. Re classification. Members maintaining multiple currencypractices under Article VIII, Section 3, may reclassify commod-ities subject to the practices only after consultation with theFund and Fund approval.

B. Practices Subject to Article XIV, Section 2

1. Restrictive Nature. Multiple currency practices, whenapplied to current international transactions, constitute a typeof restriction on payments and transfers for current interna-tional transactions for the purposes of Article XIV, Section 2.

2. Representations by the Fund. The following language inArticle XIV, Section 4 of the Fund Agreement:

"The Fund may, if it deems such action necessary in excep-tional circumstances, make representations to any memberthat conditions are favorable for the withdrawal of any par-ticular restriction, or for the general abandonment of restric-

150Dec. 237-2



tions, inconsistent with the provisions of any other article ofthis Agreement."

(a) applies at any time after the entry into force of theFund Agreement and

(b) gives to the Fund the power to determine what ismeant by "in exceptional circumstances."

3. Maintenance. Members may maintain multiple currencypractices during the transitional period under the provisions ofArticle XIV, Section 2, but only if the maintenance of suchpractices is necessary for settling members' balance of pay-ments in a manner which does not unduly encumber their accessto the resources of the Fund. Members are under a duty towithdraw such practices as soon as they are able without themto settle their balance of payments in a manner which will notunduly encumber their access to the resources of the Fund.Moreover, under Section 4 of Article XIV, the Fund has cer-tain powers to make representations in exceptional circum-stances, of which it is the judge, that conditions are favorablefor the withdrawal of any particular restriction. The Fund mayexercise this power even if a particular restriction is justifiedfor balance of payments reasons, if the conditions are favor-able for the substitution of some practice which is not inconsis-tent with the purposes of the Agreement.

4. Introduction. Only former enemy-occupied members,which are availing themselves of the transitional provisions,and then whether or not they have existing multiple currencypractices, may introduce a new multiple currency practice underArticle XIV, Section 2, provided the Fund agrees with themember that the practice is necessary and does not find that itis inconsistent with the purposes of the Fund Agreement orwith Article IV, Section 4 ( a ) .

5. Adaptation. A member maintaining multiple currencypractices under Article XIV may adapt the existing restrictions,provided such action is consistent with the obligations of Arti-

151 Dec. 237-2



cle IV, Section 4 (a) and the Fund is satisfied that the adapta-tion is dictated by "changing circumstances." A duty to consultwith and obtain the approval of the Fund before changing thepractice is implicit in both Article IV, Section 4(^) and in Arti-cle XIV, Section 2. The Fund has the power under Arti-cle XIV, Section 4, to represent in exceptional circumstancesthat circumstances are favorable to withdrawal of a proposal tochange an existing multiple currency practice.

6. Reclassification. A member maintaining multiple currencypractices under Article XIV may reclassify commodities subjectto such practices, under the power to adapt restrictions in Sec-tion 2 of Article XIV, and under the same conditions, pro-vided, however, that under the existing restrictions the effectiverates are other than parity.

C. Exchange Taxes

When a tax affects an obligation undertaken by the members ofthe Fund, the relationship between the tax and the obligation isof direct concern to the Fund and subject to its jurisdiction. When-ever exchange taxes are used to modify par values, create multiplecurrency practices, or introduce restrictive exchange controls, theyare subject to the Fund's jurisdiction. The Fund has authority todeal with these exchange matters irrespective of the official deviceor procedure involved.

D. Rates Differing from Parity by More than One Per Cent

An effective buying or selling rate which, as the result of officialaction, e.g. the imposition of an exchange tax, differs from parityby more than one per cent, constitutes a multiple currency prac-tice.


I. The Executive Board has considered the staff paper on the"Review of Fund Policies on Multiple Currency Practices"

152Dec. 649-f57/33)



(SM/57/2, Rev. 1, 5/3/57) and is in agreement with the generalapproach of the paper.

II. Unification of the exchange rates in multiple rate systems isa basic objective of the Fund, and it is satisfying to record thatseveral of the members which had followed such practices havebeen successful in achieving this objective, and that others havemade considerable progress in this direction.

III. In reviewing the experience of the past ten years as sum-marized in the staff report, the Fund draws special attention tothe fact that complex multiple rate systems damage the econo-mies of countries maintaining them and harm other countries.These complex systems are difficult to administer, and involvefrequent changes, discrimination, export subsidization, a consider-able spread between rates, and undue differentiation betweenclasses of imports.

IV. The Executive Board concludes that it is necessary and fea-sible to make more rapid progress in simplifying complex multi-ple rate systems, to remove those aspects of existing systemswhich adversely affect the interests of other members, and toavoid existing systems becoming more complex. Accordingly thefollowing decision is taken:

1. Early and substantial steps should be taken to simplifycomplex multiple rate systems. The Fund will not approve suchsystems unless the countries maintaining them are making rea-sonable progress toward simplification and ultimate eliminationof such systems, or are taking measures or adopting programswhich seem likely to result in such progress.

2. As opportunity arises the Fund will continue to press forsimplification in all cases where there is clear evidence that themultiple currency system in question is damaging to othermembers. It will in addition be reluctant to approve changes inmultiple rate systems which make them more complex.

3. To assist members to simplify and eliminate complex ratesystems the Fund wishes to intensify its collaboration with

153 Dee. 649-(57/33)



them. The Fund stands ready to meet members' requests fortechnical assistance in the preparation of economic programsand measures directed toward exchange simplification. Thesemay in some cases include arrangements in other directions,especially in the fiscal and trade fields. If the Fund considersthe proposed exchange simplification and related economic pro-grams or measures to be adequate and appropriate, it will givesympathetic consideration, if requested, to the use of itsresources.


June 26, 1957

MULTIPLE CURRENCY PRACTICES AND EXCHANGE RATES: FUNDAPPROVAL

1. If a rate for a member's currency is maintained consistentlywith the member's Membership Resolution as a fixed number ofunits per U.S. dollar, any change in the gold equivalent of thatrate resulting solely from maintenance of the same number ofunits per U.S. dollar shall be deemed to be agreed in accordancewith the Membership Resolution.

2. If a rate for a member's currency has been maintained,approved, or authorized under the Articles as a fixed number ofunits per U.S. dollar, any change in the gold equivalent of thatrate resulting solely from maintenance of the same number ofunits per U.S. dollar shall be deemed to be approved for theremaining period of any approval of the original practice alreadygranted.

Decision No. 3504-(71/134)

December 23, 1971

Dec. 3504-171/134) 154


Voluntary Declaration on Trade and Other CurrentAccount Measures

1. The ad hoc Committee of the Board of Governors onReform of the International Monetary System and Related Issues,in the detailed statement issued at the end of its sixth and finalmeeting in Washington on June 12—13, 1974, stressed the impor-tance of avoiding the escalation of restrictions on trade and pay-ments for balance of payments purposes and invited members tosubscribe on a voluntary basis to the Declaration concerning tradeand other current account measures for balance of payments pur-poses annexed to its statement. The Executive Directors associatethemselves with this invitation.

2. The letter from the Managing Director to members request-ing them to inform the Fund whether they subscribe to the Dec-laration concerning trade and other current account measures forbalance of payments purposes, as set forth [below] shall be sentwithout delay to all members.


June 26, 1974

Letter to Members

Sir:

The ad hoc Committee of the Board of Governors of the Inter-national Monetary Fund on Reform of the International Mone-tary System and Related Issues, in a statement issued at the endof its sixth and final meeting in Washington on June 12—13,1974, has stressed the importance of avoiding the escalation ofrestrictions on trade and payments for balance of payments pur-poses and has invited members of the Fund "to subscribe on avoluntary basis to the Declaration concerning trade and othercurrent account measures for balance of payments purposes"annexed to the Committee's statement.

155 Dec. 4254-174/75)



The Executive Directors of the Fund associate themselves withthe invitation of the ad hoc Committee and have asked that Isend the text of the Declaration for consideration by the authori-ties of all members.

The text of the Declaration is enclosed with this letter.

I shall be grateful if members will consider subscribing to thisDeclaration and will inform me whether they do subscribe to it.

Very truly yours,

H. JOHANNES WITTEVEEN

Managing Director

Declaration

A. A member of the Fund that subscribes to this Declarationrepresents thereby that, in addition to observing its obligationswith respect to payments restrictions under the Articles of Agree-ment of the Fund, it will not on its own discretionary authorityintroduce or intensify trade or other current account measures forbalance of payments purposes that are subject to the jurisdictionof the GATT, or recommend them to its legislature, without aprior finding by the Fund that there is balance of payments justi-fication for trade or other current account measures.

B. A member that subscribes to this Declaration will notify theFund as far in advance as possible of its intention to impose suchmeasures. If circumstances preclude the Fund from making thefinding referred to in A above promptly after such notification,the member may nevertheless impose such measures, but willwithdraw the measures, within such a period as may be fixed bythe Fund in consultation with the member concerned, if the Fundfinds that there is no balance of payments justification for tradeor other current account measures.

Dec. 4254-174/75) 156


VOLUNTARY DECLARATION ON TRADE

C. In arriving at the findings referred to above, the ExecutiveDirectors are requested to take into account the special circum-stances of developing countries.

D. In connection with this Declaration arrangements will bemade for continuing close coordination between the Fund and theGATT.

E. This Declaration shall become effective among subscribingmembers when members having 65 per cent of the total votingpower of members of the Fund have accepted it, and shall expiretwo years from the date on which it becomes effective unless it isrenewed.

157 Dee. 4254-174/75)


ARTICLE IX, SECTION 7

Privilege for Communications

INTERPRETATION OF ARTICLE IX, SECTION 7

WHEREAS the Executive Director for the [member concerned]has raised certain questions of interpretation of the provisions ofSection 7 of Article IX of the Articles of Agreement of the Fundas to the treatment to be accorded by a member of the Interna-tional Monetary Fund to official communications of the Fund,which questions of interpretation are set forth below;

WHEREAS the said Executive Director has requested that theExecutive Directors, in accordance with Article XVIII of saidArticles, decide such questions of interpretation;

Now THEREFORE, the Executive Directors hereby decide suchquestions of interpretation as follows:

Question No. 1:

Does Section 7 of Article IX of the Articles of Agreementof the Fund apply to rates charged for official communica-tions of the Fund ?

Decision on Question No. 1:

Yes. Section 7 of Article IX applies to rates charged forofficial communications of the Fund.

Question No. 2:

If a member exercises regulatory powers over the ratescharged for communications, is it relieved of the obligationof Section 7, Article IX, by reason of the fact that the facili-ties for transmitting communications are privately owned oroperated or both ?

Dec. 534-3 158


PRIVILEGE FOR COMMUNICATIONS


No. A member which exercises regulatory powers over therates charged for communications is not relieved of its obli-gation under Section 7 of Article IX by reason of the factthat the facilities for transmitting such communications areprivately owned or operated or both.

Question No. 3:

Is the member's obligation under Section 7 of Article IXsatisfied if official communications of the Fund may be sentonly at rates.which exceed the rates accorded the officialcommunications of other members in comparable situations?For example, would the obligation of member "a", underSection 7 of Article IX, be satisfied if the rate charged theFund for its official communications from the territory ofmember "a" to the territory of member "b" exceeds the ratecharged member "b" for its official communications from theterritory of "a" to that of "b" ?


No. The obligation of a member under Section 7 of Arti-cle IX is not satisfied if official communications of the Fundmay be sent only at rates which exceed the rates accordedthe official communications of other members in comparablesituations. For example, the obligation of member "a",under Section 7 of Article IX, would not be satisfied if therate charged the Fund for its official communications fromthe territory of member "a" to the territory of member "b"exceeds the rate charged member "b" for its official commu-nications from the territory of "a" to that of "b".

Decision No. 534-3

February 20, 1950

159 Dee. 534-3



Executive Directors

INTERPRETATION OF ARTICLE XII, SECTIONS 3(£) (i) AND 3(/)

The request for interpretation of the Articles of Agreementreferred to the Executive Directors by Resolution No. 7 of theBoard of Governors was considered. . . . It was unanimouslyagreed that Sections 3(£) (i) and 3(/) of Article XII should beinterpreted to mean that any member having one of the five larg-est quotas at the date of the regular election or at any datebetween regular elections shall be entitled to appoint an ExecutiveDirector who will hold office until the next regular election with-out prejudice to the right of a subsequently admitted member toappoint a Director if it has one of the five largest quotas.

Decision No. 2-1

May 8, 1946

EXECUTIVE DIRECTORS: ARTICLE XII, SECTION 3(<r)

Art. XII, Sec. 3(<r), should be understood as providing that thetwo members entitled to appoint additional directors are deter-mined by the largest absolute amounts by which 75% of mem-bers' quotas exceed the average holdings by the Fund of theircurrencies during the two years preceding an election of directors,provided, of course, that they are not already entitled to appointdirectors under Art. XII, Sec. 3 (b) (i).

In the calculation of average holdings under the provision, theFund's special accounts for administrative purposes should not beincluded unless they exceed %o of one per cent of the member'squota nor will sundry cash accounts be included. A member

Dec. 574-2 160


EXECUTIVE DIRECTORS

should not be entitled to the benefit of Art. XII, Sec. 3(f) wherethe average holdings of its currency by the Fund have beenreduced below 75% of its quota solely because of expenditures bythe Fund for administrative purposes or because of the exclusionof the special accounts for administrative purposes from the cal-culation of average holdings.

Decision No. 574-2,

May 18,1950, as amended by

Decision No. 2620-(68/l4l),

November 1, 1968

ADDITIONAL APPOINTED DIRECTORS

The phrase "the preceding two years" as used in Art. XII,Sec. 3(f), shall be deemed to be the two-year period ending on theJuly 31 preceding the dates of regular biennial elections of Exec-utive Directors. However, this decision shall be reconsidered ifsuch regular elections are held in other months than September.

Decision No. 597-4

July 28, 1950

ADJUSTMENT OF QUOTA AND VOTING POWER

A change in the quota of a member between regular biennialelections will change by the same amount the voting power ofthe elected Executive Director who casts the votes of the member.

Decision No. 180-5

June 25, 1947

161 Dec. 180-5



Establishment of a General Reserve from Net Income

On April 30, 1958 and at the end of each month thereafteruntil further action by the Executive Directors or Board of Gov-ernors, the net income of the Fund shall be transferred provision-ally to a General Reserve. At the next Annual Meeting it shall berecommended to the Board of Governors that it note withapproval the establishment of the General Reserve and theallocation to such reserve of the net income for the fiscal yearended April 30, 1958.


April 14, 1958

Dec. 753-158/17) 162


ARTICLE XIV, SECTION 4

Restrictions on Payments and Transfers: Withdrawal

MEANING OF "EXCEPTIONAL CIRCUMSTANCES" IN ARTICLE XIV,SECTION 4

The following language in Article XIV, Section 4 of the FundAgreement:

'The Fund may, if it deems such action necessary in excep-tional circumstances, make representations to any member thatconditions are favorable for the withdrawal of any particularrestriction, or for the general abandonment of restrictions,inconsistent with the provisions of any other article of thisAgreement."

(a) applies at any time after the entry into force of theFund Agreement and

(b) gives to the Fund the power to determine what ismeant by "in exceptional circumstances."

Decision No. 117-1

January 6, 1947

163 Dec. 717-7


ARTICLE XV, SECTION 2

Interpretation

In response to the request of the Government of [a member],and after having considered the arguments put forward by thatGovernment, the Executive Directors, acting pursuant to ArticleXVIII (a) of the Fund Agreement, interpret Article XV, Sec-tion 2 as follows:

Action may be taken by the Fund to require a member towithdraw when the following conditions have been met:

1. The member has been declared ineligible to use theresources of the Fund pursuant to Article XV, Section 2 (a);

2. A reasonable time has passed since the member wasdeclared ineligible to use the resources of the Fund pursuantto Article XV, Section 2 (a), whether or not a fixed period oftime had been prescribed in connection with such action, andthe member persists in failing to fulfill its obligations;

3. The member has been informed in reasonable time ofthe complaint against it and given an adequate opportunityto state, both orally and in writing, any fact or legal argu-ment relevant to the issue before the Fund.


August 11, 1954

The Board of Governors confirmed the foregoing decision on September 28, 1954.

Dee. 343-(54/47) 164


ARTICLE XVII

Amendments of the Articles of Agreement

BOARD OF GOVERNORS RESOLUTION No. 22-8: REPORT OF EXECU-TIVE DIRECTORS AND PROPOSED AMENDMENT TO THE ARTI-CLES OF AGREEMENT*

I. Pursuant to Resolution No. 22-8 of the Twenty-SecondAnnual Meeting, the Executive Directors:

(a) Adopt the Report entitled Establishment of a FacilityBased on Special Drawing Rights in the InternationalMonetary Fund and Modifications in the Rules andPractices of the Fund;

(b) Propose the introduction in the Articles of Agreementof the modifications set forth in the Proposed Amend-ment attached to the Resolution in Annex A to theReport; and

(c) Recommend the adoption by the Board of Governors ofthe Resolution in Annex A to the Report.


April 16, 1968

* For the Report of the Executive Directors, see Annual Report of the ExecutiveDirectors, 1968, pages 129-74.

165 Dec. 2493-168/74)



BOARD OF GOVERNORS RESOLUTION No. 29-10: REPORT OFEXECUTIVE DIRECTORS AND PROPOSED SECOND AMENDMENTTO THE ARTICLES OF AGREEMENT*

I. Pursuant to Resolution No. 29-10 of the Board of Governorsat the 1974 Annual Meeting the Executive Directors:

(a) adopt the Report of the Executive Directors to the Boardof Governors on the Proposed Second Amendment of theArticles of Agreement of the International Monetary Fund;

(b) propose the introduction in the Articles of Agreement ofthe modifications included in the Proposed Second Amend-ment attached to the Resolution in Part IV of the Report;and

(c) recommend the adoption by the Board of Governors ofthe Resolution in Part IV of the Report.


March 24,1976

* For the Report of the Executive Directors, see Proposed Second Amendment tothe Articles of Agreement of the International Monetary Fund: A Report by theExecutive Directors to the Board of Governors, March 1976.

Dec. 5049-f76/57 J 166


ARTICLE XIX

Monetary Reserves and Official Holdings

NET OFFICIAL HOLDINGS: PRINCIPLES OF INTERPRETATION

In order to ensure the uniform application of the relevant Arti-cles of Agreement as they apply to determinations of members'net official holdings of gold and U.S. dollars for the purposes ofArticle III, Section 3(£) (ii), the Fund adopts or reaffirms the fol-lowing principles of interpretation for the indicated provisions ofthe Fund Agreement:

00*

(b)'

(c) Article XIX(b): "The official holdings of a membermeans central holdings (that is, the holdings of its Trea-sury, central bank, stabilization fund, or similar fiscalagency)."

(1) "Central holdings" are confined to holdings owned bythe institutions set forth in Article XIX(£).

(2) The term "similar fiscal agency" means an institutionwhich performs an important function or functionssimilar to those normally performed by a Treasury, orcentral bank, or stabilization fund.

(3) No distinction is made among the departments of acentral bank or other central institution as specified inArticle XIX(£). No distinction is made on the basisof the use to which gold or dollars may be put by anyof the institutions covered by Article XIX(£). That isto say, all gold or dollars owned by such institutionsare central holdings.

* Reproduced on pages 4-7.

167 Dec. 298-3



(d) Article XIX (c) : "The holdings of other official institutionsor other banks within its territories may, in any particularcase, be deemed by the Fund, after consultation with themember, to be official holdings to the extent that they aresubstantially in excess of working balances; provided thatfor the purpose of determining whether, in a particularcase, holdings are in excess of working balances, there shallbe deducted from such holdings amounts of currency due toofficial institutions and banks in the territories of membersor nonmembers specified under (;/) below."

(1) "Other official institutions" and "other banks" areofficial institutions and banks not embraced by Arti-cle XIX(£). "Other official institutions" are those rep-resenting a member anywhere. "Other banks" arebanks within its territories.

(2) "Working balances" must be determined in the lightof all the facts of the individual case, and no rigidrule can be formulated for their measurement. Thegeneral idea is that a working balance is one which isnecessary to meet the requirements of its owner, takinginto account normal receipts and payments, for aperiod not unreasonably protracted.

(3) No deduction may be made from central holdings onthe ground that they are said to represent, in whole orin part, "working balances," for example, becausethere are no commercial banks or because the holdingsof commercial banks are alleged by the member to beinadequate for working purposes.

(4) Gold or dollars owned by "other official institutions"and "other banks" may be included in a member's offi-cial holdings, after consultation with the member, tothe extent that they are substantially in excess of"working balances."

(5) The proviso in Article XIX(c) declares that in deter-mining whether the holdings of other official institu-

Dec. 298-3 168


MONETARY RESERVES AND OFFICIAL HOLDINGS

tions and other banks are substantially in excess ofworking balances, certain deductions shall be made.These deductions are in respect of liabilities arisingfrom the holdings of the currency of the memberwhose official holdings are being calculated. Such lia-bilities must be owed by that member's official institu-tions and banks to the official institutions of and banksin the territories of countries which were members ofthe Fund on September 12, 1946.

(e) Article XIX (ti)\ "For the purpose of calculating gold sub-scriptions under Article III, Section 3, a member's netofficial holdings of gold and United States dollars shallconsist of its official holdings of gold and United Statescurrency after deducting central holdings of its currency byother countries and holdings of its currency by other officialinstitutions and other banks if these holdings carry specifiedrights of conversion into gold or United States currency."

(1) Article XIX (h} establishes the only deduction fromgross official holdings. That is to say, gross officialholdings are the total of gold and dollars which amember owns; net official holdings are those holdingsminus the one deduction which Article XIX (/?) estab-lishes.

(2) A deduction cannot be made under Article XIX(£) inthe calculation of a member's net official holdingsunless the following conditions are satisfied:

(a) There is a holding of the member's currency.

(b) There is a right of conversion of the currency intogold or U.S. dollars exercisable by virtue only ofthe holdings of the currency and not, for exam-ple, by reason of forward exchange contracts.

(c) The right of conversion is exercisable at theoption of the holder of the currency and not at theoption of the member whose currency is held.

169 Dec. 298-3



(d) The option is exercisable by the central or otherofficial institutions or other banks in the territoriesof other countries, and not by the member's ownofficial institutions or by banks in the territories inrespect of which it has accepted the Agreement inaccordance with Article XX, Section 2(g). "Othercountries" embraces all countries, and not simplymember countries or nonmember countries whichhave been specified under Article XIX (d).

(e) The right of conversion was in existence on Sep-tember 12, 1946 (or any later date substitutedunder Article III, Section 3 (^)). However, theright of conversion need not have been exercisableon that date, but may be exercisable at any timethereafter.

(3) Liabilities payable in gold or dollars where the condi-tions of Article XIX(/?) as set forth in 2 above are nototherwise met, e.g., where the creditor's right to goldor dollars is not attached to a holding of the currencyof the member whose net official holdings are beingcalculated, are not deductible under Article XIX(/?).

Decision No. 298-3

April 14, 1948

NOTE: For currency liabilities (Article XIX(<?) of the original Articles of Agree-ment) , see previous issues of Selected Decisions of the Executive Directors.

Dec. 298-3 170


Balances of Article XIV Currencies Deemed Convertiblein Accordance with Article XIX (gr)

INDONESIAN RUPIAH

After consultation with Indonesia, the Fund, pursuant to Arti-cle XIX ( g ) , deems official holdings of balances of Indonesianrupiahs by other members to be holdings of convertible currencyfor the purpose of the calculation of monetary reserves.

Decision No. 4291 -(74/88)

July 18, 1974

SPANISH PESETA

After consultation with Spain, the Fund, pursuant to ArticleXIX (g), deems official holdings of balances of Spanish pesetasby other members to be holdings of convertible currency for thepurpose of the calculation of monetary reserves.


July 12, 1974

VENEZUELAN BOLIVAR

After consultation with Venezuela, the Fund, pursuant to Arti-cle XIX (g), deems official holdings of balances of Venezuelanbolivares by other members to be holdings of convertible currencyfor the purpose of the calculation of monetary reserves.

Decision No. 4392-(74/120)

September 18, 1974

171 Dee. 4392-174/120)


ARTICLE XX, SECTION 4(/)

Use of Fund's Resources: Postponement UnderArticle XX, Section 4(f)

The Fund has, in the case of a member which has had no pre-vious exchange transaction with the Fund, the power to postponeexchange transactions with it if its circumstances are such that, inthe opinion of the Fund, they would lead to the use of theresources of the Fund in a manner contrary to the purposes of theAgreement or prejudicial to the Fund or its members. This powerdid not lapse as of the date the Fund began exchange transac-tions.

Decision No. 284-2

March 10, 1948

Dec. 284-2 172


ARTICLE XXV, SECTION 6 (a)

Principles and Procedures for Reconstitution

1. For the purposes of Rule P-2 and without prejudice to anyfuture decisions on allocations or cancellations of special draw-ing rights, it shall be assumed that an allocation of special draw-ing rights will be made on January 1, 1972, in accordance withBoard of Governors Resolution No. 24-12, and that no alloca-tions or cancellations will be made thereafter. This assumptionshall be subject to review at any time and shall be reviewed notlater than December 31, 1972.

2. Pursuant to Article XXV, Section 2(b) (ii), the Fund pre-scribes that a participant may obtain special drawing rights fromanother participant in a transaction with that other participantthat would promote reconstitution under Article XXV, Sec-tion 6(a) and Schedule G, paragraph I ( a ) . The maximum amountthat may be obtained in that way shall be the single amount mostrecently notified to the participant under Rule P-3 unless that sin-gle amount has been calculated for acquisition in the final monthof a reconstitution period, in which case the participant mayacquire the amount calculated by the Fund as necessary to pro-mote reconstitution, taking into account the proposed date ofacquisition. These maximum amounts will be reduced by anyacquisition of SDRs other than by way of allocation subsequent

to the date the calculation is made.

3. Pursuant to Article XXV, Section 7(/), a participant thatmakes a purchase from the Fund under Article V, Section 3, mayobtain special drawing rights from the Fund through the GeneralAccount in that purchase to the extent of any need it has toacquire special drawing rights in order to promote reconstitution

Dec. 3457-f77/I2M G/S173



under Article XXV, Section 6 (a) and Schedule G, para-graph I (a).

Decision No. 3457-(71/121) G/S,

December 3, 1971, as amended

by Decisions Nos. 3829-(72/144) S,

December 15, 1972, and 4330-

(74/101) S, August 9,1974

Calculations under Schedule G-l(^)(ii) shall continue to bebased on the assumption set forth in paragraph 1 of ExecutiveBoard Decision No. 3457-(71/121) G/S, adopted December 3,1971, that no further allocations or cancellations of special draw-ing rights will be made, but this assumption shall be reviewedimmediately after the date on which the Managing Directormakes a proposal under Article XXIV, Section 4.

This decision shall be reviewed not later than June 30, 1974.

Decision No. 3829-(72/l44) S

December 15, 1972

Dec. 3829-172/144) S 174


ARTICLE XXV, SECTION 7

Use of Special Drawing Rights in Repurchases andPayment of Charges

EXCLUSION OF SPECIAL DRAWING RIGHTS: FINANCIAL YEARENDING APRIL 30, 1970

1. For the first allocation of special drawing rights, increasesin monetary reserves resulting from allocations of special drawingrights during the financial year ending April 30, 1970, shall notbe taken into account in calculating monetary reserves andincreases in them during that year.

2.*3.*4.*

Decision No. 2901 -(69/122) G/S

December 18, 1969

EXCLUSION OF SPECIAL DRAWING RIGHTS: FINANCIAL YEARSENDING APRIL 30, 1971 AND 1972

Increases in monetary reserves resulting from allocations ofspecial drawing rights during the financial years ending April 30,1971 and 1972 shall not be taken into account in calculatingmonetary reserves and increases in them during those years.


April 29, 1970


175 Dec. 3034-(70/38)



EXCLUSION OF SPECIAL DRAWING RIGHTS: FINANCIAL YEAR END-ING APRIL 30,1970

Paragraph 1 of Executive Board Decision No. 2901-(69/122)G/S, adopted December 18, 1969 shall be applied in accordancewith the following Rule:

In calculating monetary reserves and increases in them for thepurpose of Article V, Section l(b) and Schedule B for theFund's financial year ending April 30, 1970, the lowest amountof special drawing rights held by a participant in the periodJanuary 1 to April 30, 1970 shall be excluded from the calcula-tion.

Decision No. 3032-(70/38) G/S

April 29, 1970

EXCLUSION OF SPECIAL DRAWING RIGHTS: FINANCIAL YEARSENDING APRIL 30, 1971 AND 1972

Executive Board Decision No. 3034-(70/38) adopted April 29,1970 shall be applied in accordance with the following rule:

In calculating monetary reserves and increases in them for thepurposes of Article V, Section 7(£), and Schedule B for eachof the Fund's financial years ending April 30, 1971 and 1972,(l) a use of special drawing rights by a participant in theperiod January 1 to April 30 shall be considered first to consti-tute a use pro tanto of the special drawing rights held by theparticipant immediately before the latest allocation, and (2) ifthe participant's use exceeds the amount of special drawingrights held at the time of the allocation, the lowest amount ofspecial drawing rights held by the participant in the periodJanuary 1 to April 30 shall be excluded from the calculation.


April 21, 1971

176Dec. 3320-(7J/34) G/S


USE OF SPECIAL DRAWING RIGHTS

USE OF SPECIAL DRAWING RIGHTS IN REPURCHASES OUTSIDEARTICLE V, SECTION 7(b)

I*

2. Members are authorized to discharge with special drawingrights any repurchases outside Article V, Section 7(£).

3. Members are authorized to use, at their option, specialdrawing rights to settle all charges payable to the GeneralAccount.

4. Paragraphs 2 and 3 of this decision, including the amountsand proportions permitted thereunder, shall be subject to reviewin 1970 as soon as experience warrants.

Decision No. 2901 -(69/122) G/S**

December 18, 1969

Paragraphs 2 and 3 of Executive Board Decision No. 2901-(69/122) G/S adopted December 18, 1969, including theamounts and proportions permitted thereunder, shall be subject toreview before December 31, 1971, if experience should so war-rant, or, in any event, before the end of the first basic period.


December 2, 1970

* Reproduced on page 175.* * No change was made as a result of the review of this decision by Decision

No. 3835-(72/146) G/S, December 20, 1972.

177 D»c. 3788-(70/?06) G/S


Transfer of Special Drawing Rights Held in the GeneralAccount to Participants Making Purchases

from the Fund

When a member which is a participant in the Special DrawingAccount consults in accordance with Executive Board DecisionNo. 1371-(62/36), adopted July 20, 1962, on Currencies to BeDrawn and to Be Used in Repurchases, the Managing Directormay propose that the participant request the purchase of specialdrawing rights not in excess of the amount which he shall indi-cate, for immediate use by the participant in a transaction underArticle XXV, Section 2 (a).

Decision No. 3414-( 71/98) G/S

September 10, 1971

D»c. 3414-171/98) G/S 178


ARTICLE XXVI, SECTION 5

Special Drawing Account: Payment of Interest,Charges, and Assessments

Participants in the Special Drawing Account that are obligatedand entitled, in accordance with Article XXVI, Section 5, toobtain special drawing rights in a transaction with the Fund con-ducted through the General Account in order to pay any chargeor assessment, and do not wish to use gold, may use any converti-ble currency acceptable to the Fund in repurchases, provided thatthe participant has consulted the Managing Director on the cur-rencies and the amounts of each to be used to acquire the specialdrawing rights.


March 25, 1970

179 Dec. 30KM70/25) G/S


SCHEDULE B

Calculation of Repurchase Obligations

CALCULATION OF MONETARY RESERVES

1

2. [A member has contended] that, in calculating its monetaryreserves as of April 30, 1948, a sum greater than [the amountcalculated by the staff] should have been deducted as the pro-ceeds of a long-term or medium-term loan contracted during thefinancial year ending on that date. . . . It is determined that thededuction . . . calculated by the staff was correctly made, basedon the following principles which are adopted:

(a) Before any exclusion of the proceeds of long-term ormedium-term loans can be made under Schedule B, para-graph 3, of the Fund Agreement, it is necessary to identify thatpart of a member's holdings which can be regarded as repre-senting the proceeds of such loans.

(b) Where the loan can be spent only for a specific project orpurpose, the proceeds can be regarded as unspent only to theextent that the special project or purpose has not been com-pleted and paid for. The formality of payment of the proceedsinto a special or general account would not as a rule be consid-ered a significant factor.

(c) Where the loan is not contracted for a special project orpurpose, the proceeds of that loan which may be deductedshould, as a rule of thumb, and in the absence of other evi-dence of identification, be determined as follows: (1) themember's lowest holdings of the currency in question betweenthe date of receipt of the proceeds of the loan and the end ofthe financial year shall be determined, (2) the part of suchlowest holdings which shall be excluded will be the proportion

Dec. 486-2 180


CALCULATION OF REPURCHASE OBLIGATIONS

which the proceeds of the loan bear to the sum of the mem-ber's holdings of the currency as of the date of receipt of theproceeds of the loan plus other receipts in the same currencybetween that date and the day of the lowest holdings.

Decision No. 486-2

October 1, 1949

CALCULATION OF MEMBERS' REPURCHASE OBLIGATIONS:SCHEDULE B, PARAGRAPH 3

In applying the provisions of Schedule B, paragraph 3 to thecalculation of members' repurchase obligations, the followingprinciples shall govern (Staff Memorandum No. 413, 12/8/49and Supplement 1,12/13/49) :

1. Where exclusions have been made at the end of one yearfor holdings which are the proceeds of long-term or medium-term loans contracted during the year or for holdings whichhave been transferred or set aside for the repayment of a loanduring the subsequent year, the exclusion continues to be madein the monetary reserve figures for the beginning of the suc-ceeding year.

2. Where an exclusion has been made in respect of currencywhich became convertible during the year, this currency isincluded in the monetary reserve figures for the beginning ofthe subsequent year.

3. If the member indicates that certain holdings are the pro-ceeds of loans or currency set aside, the reasonable implicationis that the member wishes paragraph 3 to apply to such hold-ings. If the member does not provide such data, the implicationis that it is not taking advantage of the provision.

Decision No. 510-2

December 16, 1949

181 Dec. 570-2


GENERAL

Fund Assistance in Gold Transactions

MEMBERS' GOLD TRANSACTIONS

The Executive Board approves the Managing Director's con-tinuing to assist members by bringing governmental buyers andsellers of gold into contact. If there is a demand, the functionmay be performed as a regular service on the basis outlined inSM/52/6(2/7/52). It is understood that initially the servicecharge will be '%2 per cent for each partner in a completed trans-action, and that the charge will be reviewed later on the basis ofexperience.


February 21, 1952


The Executive Board approves the extension of the Fund'sservice in bringing buyers and sellers of gold into contact, on thebasis outlined in SM/52/6(2/7/52), to cases in which one of theparties to the gold transaction is a member and the other is oneof the following nonmembers or international organizations:

SwitzerlandBank for International SettlementsInternational Bank for Reconstruction

and Development

* The decision lists certain countries which formerly were nonmembers but arepresently members.

*

182D»c. 316-(54/27)



In accordance with the foregoing, therefore, gold transactionsunder the service would always involve a member as buyer orseller, and all parties would be either governmental or interna-tional organizations.


May 27, 1954


1. The Executive Board approves the following extensions ofthe Fund's service in bringing buyers and sellers of gold into con-tact, on the basis outlined in SM/52/6(2/7/52):

(a) the International Finance Corporation is added to the listof parties in the decision adopted at EBM/54/27(5/27/54);

(b) the service shall apply to gold transactions between aninternational organization covered by the service and any otherparty covered by the service.


November 21, 1956


The Inter-American Development Bank is added to the list ofparties in the decisions adopted at Executive Board Meetings54/27(5/27/54) and 56/55(11/21/56).


May 20, I960

Dec. 7033-(60/26J183




The International Development Association is added to the listof parties in the decisions adopted at Executive Board Meetings54/27(5/27/54), 56/55(11/21/56), and 60/26(5/25/60).

Decision No. 1116- (60/51)

December 8, I960

DM. 77J6-(60/57J 184


Trust Fund

1. The Executive Directors of the International Monetary Fund(the "Fund") adopt the Instrument to Establish the Trust Fund(the 'Instrument") that is annexed to this Decision.

2. The objective of the Trust Fund (the "Trust") will be toprovide balance of payments assistance on concessional terms tothe members listed in Annex A* to the Instrument that qualify forassistance in either or both of the periods July 1, 1976 throughJune 30, 1978 and July 1, 1978 through June 30, 1980.

3. The Fund will review the Instrument, and in particular thelist, and the criteria of eligibility for inclusion, in Annex A, beforeJanuary 1, 1978. The following provisions of the Instrument maynot be modified: Section I, Paragraphs 1 and 2(c); Section II,Paragraphs 4(d) and 5(a); Section III, Paragraphs 1, 2, and 3;Section IV, Paragraph 1; and Section V, Paragraph 2. Any modifi-cation will affect only loans made after the effective date of themodification, provided that the Fund may decide that any mod-ification that is favorable to eligible members will apply to thefuture performance of obligations under loans already made.

4. The amounts in excess of the capital value that are availablefrom the sales of gold made after the second amendment pursuantto paragraph l(b) of Schedule B of the Articles, as amended,will continue to be used to provide balance of payments assistancein accordance with the Instrument for the benefit of the memberslisted in Annex A.

5. The audit committee selected under Section 20 of the Fund'sBy-Laws will audit the financial records and transactions of theTrust. The audit will relate to the period representing the fiscalyear of the Fund.


185 Otc. 5069-176/71)



6. The expenses of conducting the business of the Trust willbe paid by the Fund from the General Account, which will bereimbursed annually by the Trust on the basis of a reasonableestimate of these expenses by the Fund.

7. The Fund may decide that the Trustee will undertake otheractivities in connection with the distribution of the profits fromthe sale of gold for the benefit of developing countries inaccordance with paragraph 6(3) of the Communique of theInterim Committee of the Board of Governors of the Fund onthe International Monetary System dated August 31, 1975 that canappropriately be carried out through the Trust, provided that theactivities are consistent with the purposes of the Fund and are notinconsistent with any provision of the Instrument.


May 5, 1976

Instrument to Establish the Trust Fund

Introductory Section

In order to help fulfill the purposes of the International Mone-tary Fund (the "Fund") as stated in Article I of the Articles ofAgreement, including the promotion of cooperation on interna-tional monetary matters between its members and the Fund andamong the members of the Fund, there shall be established aTrust Fund (the "Trust"), which shall be administered by theFund as Trustee. The Trust shall be governed by and administeredin accordance with the provisions of this Instrument.

186Dec. 5069-(76/72)


TRUST FUND

Section I. Purposes and Resources of the Trust

Paragraph 1. Purposes

The Trust shall assist in fulfilling the purposes of the Fund byproviding additional balance of payments assistance on conces-sional terms to support the efforts of eligible members that qualifyfor assistance to carry out programs of balance of paymentsadjustment.

Paragraph 2. Resources

(a) The resources of the Trust shall consist of gold and cur-rencies sold, donated, or lent to the Trust, income from invest-ments and loans, and the proceeds of repayment of loans or ofdisinvestment.

(b) A transferor may make a single transfer of resources tothe Trust or transfers of resources from time to time during theperiod in which the Trust is providing balance of paymentsassistance. The Trustee shall invite transferors of resources toinform it of the form in which, and the procedures by which, theywill make transfers.

(c) A transferor of resources that makes a transfer associatedwith the sale of gold by the Fund shall be understood to haveagreed that the transfer is an irrevocable transfer within themeaning of Section IV, Paragraph 1 and Section V, Paragraph 2.

Section II. Operations of the Trust

Paragraph 1. Form of balance of payments assistance

Balance of payments assistance shall be provided to eligiblemembers that qualify for assistance for the first period July 1, 1976

187 Dee. 5069-(76/72J



through June 30, 1978 or for the second period July 1, 1978through June 30, 1980, or for both periods, in the form of loanson terms consistent with this Instrument.

Paragraph 2. Eligible members

Eligible members shall be those members of the Fund that arelisted in Annex A. An eligible member shall qualify for assistanceif it satisfies the conditions of Paragraph 3 of this Section.

Paragraph 3. Conditions for assistance

(a) An eligible member shall consult the Managing Directorof the Trustee before making a request for assistance.

(b) Before approving a request, the Trustee shall be satisfiedthat the member has a need for balance of payments assistance("need") and is making a reasonable effort to strengthen itsbalance of payments position. The need of a member shall beassessed on the basis of the member's balance of payments posi-tion, its reserve position, and developments in its reserves.

(c) A member shall be deemed to be making a reasonableeffort within the meaning of subparagraph (b) of this Paragraphif the member has presented to the Fund, in connection with astand-by arrangement or extended arrangement granted by theFund or in connection with a purchase from the Fund in the credittranches, a program for twelve months that,

(i) for the first period in Paragraph 1 of this Section, fallspredominantly within that period, i.e., begins not earlierthan January 1, 1976 or not later than December 1, 1977;and

(ii) for the second period in Paragraph 1 of this Section,falls predominantly within that period, i.e., begins notearlier than January 1, 1978 or not later than Novem-ber 30, 1979.

Dec. 5069-176/72) 188


TRUST FUND

A program for one period in Paragraph 1 of this Section shallnot include any months included in a program submitted in con-nection with a request for the other period.

(d) The Fund, in considering a member's program as describedin subparagraph (c) of this Paragraph, shall assess, in accordancewith subparagraph (b) of this Paragraph, the need of the memberduring the twelve months of the program. This assessment shallbe deemed to determine the need of the member for assistancefrom the Trust during the period in Paragraph 1 of this Sectionwithin which the program falls, provided that the extent of theneed assessed in connection with one program may be increasedon the basis of an assessment made in connection with anotherprogram during the same period.

(e) If a member that wishes to qualify for assistance does notcome within subparagraph (c) of this Paragraph, it shall presentto the Trustee, when requesting assistance, a program for twelvemonths as required by subparagraph (c), and shall satisfy theTrustee that the program is in accordance with subparagraph (b)of this Paragraph. In making its determination under subpara-graph (b) of this Paragraph, the Trustee shall apply the criteriaapplied by the Fund to a request for a purchase in the first credittranche. The Trustee shall assess the members need when theprogram is presented.

(f) The assessment of a member's need and the finding thatthe member is making a reasonable effort to strengthen its balanceof payments position shall not be re-examined during the twelvemonths of the program for which the assessment and finding weremade. There shall be no re-examination in connection with dis-bursements made after the twelve months with respect to theperiod in Paragraph 1 of this Section for which the assessmentand finding were made unless the Trustee determines that themember's circumstances have changed substantially in that period.In any re-examination, the Trustee shall give the member thebenefit of any reasonable doubt in arriving at a new assessment of

189 0*c. 5069-(76/72)



the member's need or a new finding with respect to its effort tostrengthen its balance of payments position during that period.Repurchases in respect of the use of the Fund's resources will betaken into account in determining the extent of a member's need.

(g) In considering a program in support of a request for assis-tance in the second period in Paragraph 1 of this Section, and indetermining whether the member is making a reasonable effortwithin the meaning of subparagraph (b) of this Paragraph, theTrustee shall take into account the progress made by the membertoward strengthening its balance of payments position under aprogram in the first period.

Paragraph 4. Terms and conditions of loans from the Trust

(a) The terms and conditions of a loan to a member shallprescribe that it shall repay each disbursement under the loan inten eqaal semiannual installments, which shall begin not laterthan the end of the first six months of the sixth year, and be com-pleted at the end of the tenth year, after the date of the disburse-ment.

(b) Interest shall be charged at the rate of one-half of oneper cent per annum on the outstanding balance of a loan andshall be paid in semiannual installments.

(c) Loans shall be expressed in special drawing rights, and thevalue of a currency in terms of the special drawing right shall bedetermined in accordance with the regulations of the Fund ineffect on the date for which the calculation is made.

(d) Toward the end of the period of five years after the firstdisbursement under the first loan made under this Instrument, theTrustee shall review, in the light of circumstances and on the basisof uniform criteria, the repayment terms of outstanding loans.

(e) On the request of a member when repayment of an install-

D«c. 5069-(76/72) 190


TRUST FUND

ment is due under a loan, the Trustee may reschedule the repay-ment if the Trustee finds that repayment on the due date wouldresult in serious hardship for the member, provided that therescheduling would not impair the ability of the Trust to meetits liabilities.

Paragraph 5. Amounts available for disbursement

(a) The amounts available for disbursement in respect of aperiod in Paragraph 1 of this Section shall be (i) the amountsrealized by the Trust from the sales of one-half of the gold to bemade available to the Trust, whether or not sold during theperiod, and any income from the investment of the proceeds ofthese sales, and (ii) the amounts of other transfers of resourcesto the Trust and other income of the Trust received during theperiod. The amount available for disbursement in respect of aperiod shall be expressed for all eligible members that qualify forassistance during that period as the same percentage of their quotasin effect on December 31, 1975 or to which they had consentedbefore that date. No member shall receive disbursements in excessof its need.

(b) Interim disbursements may be made from time to time inrespect of a period in Paragraph 1 of this Section. The last install-ment in respect of a period shall be made as soon as practicableafter the end of the period.

Section IIL Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee.Except as otherwise required by the provisions of this Instrument

191 Dec. 5069-(76/72J



or as determined by the Trustee, the Trust shall be administeredin accordance with the same rules and procedures, includingadministrative rules and procedures, that apply to operations andtransactions on the account of the Fund.

(b) The Trustee, acting through its Managing Director, isauthorized (i) to make arrangements to establish special accountsin the name of the International Monetary Fund, which shall beaccounts of the Fund as Trustee, with such depositories of theFund as the Trustee deems necessary or expedient, and (ii) totake all other administrative measures that the Trustee deemsnecessary or expedient in order to carry out the purposes of thisInstrument.

(c) Decisions and other actions taken by the Fund as Trusteeshall be identified as taken in that capacity.

Paragraph 2. Separation of assets and accounts

(a) The resources and records of the Trust shall be keptseparate from the assets and records of all other Accounts of theFund.

(b) The Trustee may postpone disbursement of an amount ofthe proceeds of the sale of gold that it deems necessary for use asworking capital in the administration of the Trust.

(c) The resources of the Trust shall be used only in accordancewith this Instrument and shall not be used to discharge liabilitiesor to meet losses incurred by the Fund in the administration of itsother Accounts. The property and assets of the Fund held in itsother Accounts shall not be used to discharge liabilities or to meetlosses arising out of administration of the Trust.

(d) The audit committee selected under Section 20 of theFund's By-Laws shall audit the financial records and transactionsof the Trust. The audit shall relate to the fiscal year of the Fund.

Dec. 5069-f76/72) 192


TRUST FUND

Paragraph 3. Reimbursement of expenses

The General Account of the Fund shall be reimbursed annuallyby the Trust in respect of the expenses of conducting the businessof the Trust that are paid from the General Account. Reimburse-ment shall be made on the basis of a reasonable estimate of theseexpenses by the Fund.

Paragraph 4. Investment and other operations and transactions

(a) The Trustee may invest balances of currency held by theTrust in marketable obligations of international financial organi-zations or in marketable obligations issued by, and denominatedin the currency of, the country whose currency is used to make theinvestment, provided that the concurrence is obtained of thecountry whose currency is used for investment.

(b) The Trustee may sell or exchange any of the resources ofthe Trust or use any of the resources, other than gold, as securityfor any loans to the Trust, provided that the concurrence isobtained of the members whose currencies are exchanged.

(c) The Trustee may establish such reserves for the purposesof the Trust as it deems appropriate.

(d) The Trustee shall discharge any obligations undertakenin connection with transfers that were not irrevocable within themeaning of Section I, Paragraph 2(c), and subject thereto maytransfer to the Special Disbursement Account of the Fund anyamounts received in the repayment of loans.

Section IV. Annual Report and Modifications

Paragraph 1. Modifications

If Paragraph 1 of Section II or the list of eligible members inAnnex A is modified, a transferor may declare that it will make

193 Dec. 5069-f76/72J



no further transfers to the Trust, and shall be entitled to requestand obtain the return of an amount equivalent to that part of itstransfer that has not been used. The unused part to which it shallbe entitled shall be that proportion of the total of all unusedamounts represented by its transfers in relation to all other trans-fers. No part of this Paragraph 1 shall apply to transfers that areirrevocable transfers under Section I, Paragraph 2(c).

Paragraph 2. Report

The Trustee shall report on the operation of the Trust in theannual report of the Executive Directors of the Fund to the Boardof Governors of the Fund and shall include in that annual reportthe report of the audit committee on the Trust.

Section V. Period of Operation and Liquidation

Paragraph 1. Period of operation

The Trust established by this Instrument shall remain in effectfor as long as is necessary to conduct and to wind up the businessof the Trust.

Paragraph 2. Liquidation

When a decision is taken to liquidate the Trust, the resourcesof the Trust shall be used first to pay administrative expenses,and then to discharge the terms of transfers other than irrevocabletransfers. The remainder of the resources, if any, shall be trans-ferred to the Fund before, and to the Special DisbursementAccount of the Fund after, the second amendment of the Articlesof the Fund.

Dee. 5069-(76/72) 194


TRUST FUND

Section VI. Other Activities of the Trust

The Trustee may undertake other activities in connection withthe distribution of the profits from the sale of gold for the benefitof developing countries in accordance with paragraph 6(3) of theCommunique of the Interim Committee of the Board of Governorsof the Fund on the International Monetary System datedAugust 31, 1975 that can appropriately be carried out throughthe Trust, provided that the activities are consistent with thepurposes of the Fund and are not inconsistent with any provisionof the Instrument.

195 Dec. 5069-(76/72)




Selected Resolutions of the Board of Governors




A. Review of Reconstitution Pursuant to Article XXV,Section 6 ( fe) of the Articles of Agreement

Resolved:

The Board of Governors, having received a report from theExecutive Directors on the rules for reconstitution set out inSchedule G of the Articles of Agreement, and having reviewedthe rules for reconstitution in accordance with Article XXV, Sec-tion 6(£) and Article XXVII (a) (i), hereby resolves to make nochanges at this time in the rules set forth in Schedule G of theArticles of Agreement.

Resolution No. 28-2

December 18, 1972

Special Drawing Account: A Report by the Executive Directors tothe Board of Governors on the Rules for Reconstitution

1. Under Article XXV, Section 6(b) of the Fund's Articles ofAgreement the rules for reconstitution set out in Schedule G mustbe reviewed before the end of the first and each subsequent basicperiod. In accordance with Article XXVII, Section (a) (i) thesereviews are to be conducted by the Board of Governors. As aresult of such a review the Fund may modify existing rules, oradopt new rules, or take a decision to abrogate all rules for re-constitution. The adoption of new or modified rules, or the abro-gation of existing rules, requires a majority of 85 per cent ofthe total voting power of participants in the Special DrawingAccount.

2. The review under Article XXV, Section 6(£) must be com-pleted by December 31, 1972, when the first basic period ends.The Executive Directors have considered the rules for reconstitu-tion set out in Schedule G and are submitting this report to the

199 ***. 28-2


SELECTED RESOLUTIONS OF BOARD OF GOVERNORS

Board of Governors. The Executive Directors recommend theadoption of the resolution set forth [above].

3. Under paragraph I (a) (i) of Schedule G a participant's netuse of its special drawing rights must be such that the average ofits daily holdings over a five-year period will not be less than 30per cent of the average of its daily net cumulative allocation ofspecial drawing rights over the same period. Under paragraphl(£) of Schedule G participants are also required to pay dueregard to the desirability of pursuing over time a balanced rela-tionship between their holdings of special drawing rights andtheir holdings of other reserve assets.

4. In accordance with Schedule G, paragraph l(#)(ii), theFund has been making monthly calculations for each participantsince December 31, 1971 so as to ascertain whether and to whatextent it has a need to obtain special drawing rights in order tomaintain the required average holding of 30 per cent. As a resultof a decision by the Executive Directors taken on December 3,1971, a participant with a need to reconstitute its holdings of spe-cial drawing rights pursuant to Schedule G, paragraph 1 (a) hasbeen permitted to obtain from another participant, or from theGeneral Account against gold or currency acceptable to the Fund,the full amount of special drawing rights indicated by the calcu-lations as necessary to achieve the required average. Moreover,the Executive Directors decided that any participant that needs toreconstitute its holdings under this provision may obtain specialdrawing rights from the Fund when making a purchase in theGeneral Account in accordance with the Fund policies on the useof its resources. A number of participants have taken the initia-tive to obtain special drawing rights from the General Account,and by October 31, 1972 a total of SDR 96.7 million had beenobtained by participants to promote reconstitution under theseprocedures, of which SDR 38.0 million was obtained against thecurrencies of other members and SDR 58.7 million against partici-pants' own currencies in connection with purchases in the Gen-eral Account. It has not proved necessary for any participant to

ft*. 28-2 200


REVIEW OF RECONSTITUTION

be made subject to designation to promote reconstitution pursuantto Article XXV, Section 5 (a) (ii).

5. Reconstitution was incorporated in the provisions relating tothe Special Drawing Account for several reasons: to discouragethe prolongation of balance of payments deficits which alloca-tions of special drawing rights might otherwise permit, the use ofspecial drawing rights for longer-term financing, and the dispro-portionate use by participants of special drawing rights becauseof a preference for the retention of other reserve assets. A con-trasting view advanced at the time of the drafting of the amend-ment of the Articles was that a legal obligation to reconstitutecould not easily be reconciled with the view that special drawingrights should be endowed with the character of a reserve asset.Experience with the operation of the Special Drawing Account ingeneral, and with the reconstitution provisions in particular, hasbeen relatively short and has been affected by exceptional devel-opments in the international monetary system, including markedincreases in other reserves for a wide range of participants. Thus,it is difficult to draw firm conclusions from experience as towhether or not an obligation to reconstitute is an important ele-ment in safeguarding the special drawing rights scheme.

6. There is a widespread opinion among Executive Directorsthat, as the requirement to maintain average holdings of specialdrawing rights at a level of 30 per cent of average allocationsover five-year periods constitutes a constraint on the use of specialdrawing rights, its abrogation would enhance their character as areserve asset. It is, however, the view of the Executive Directorsthat, under the prevailing uncertainty as to the nature of thereform of the international monetary system and the future role ofthe various assets in reserves, the decision whether to abrogate ormodify the rules of Schedule G should better be postponed. Atthe time this Schedule was adopted it was envisaged that the firstbasic period would cover five years, which would have allowedlonger experience, even under the present system. Under Arti-cle XXV, Section 6(1?) the rules for reconstitution must be

201 Res. 28-2



reviewed again before the end of the next basic period and it isexpected that at that stage the future role of special drawing rightsin a reformed monetary system will have become clearer, thusproviding a firmer basis for consideration of the modification orabrogation of the rules of reconstitution.

7. In the light of these considerations, the Executive Directorsrecommend that the Board of Governors adopt the [above] reso-lution.

Kes. 28-2 202


B. Prescription of the Bank for International Settle-ments as a Holder of Special Drawing Rights

WHEREAS the Bank for International Settlements, by a letterdated September 12, 1973, applied to be permitted under Arti-cle XXIII, Section 3, of the Articles of Agreement of the Interna-tional Monetary Fund to accept, hold, and use special drawingrights in certain transactions with participants; and

WHEREAS pursuant to Section 25 of the By-Laws of the Fund,the Executive Directors, after consultation with the Representa-tives of the Bank for International Settlements, have recom-mended that the Bank for International Settlements be prescribedas a holder on the terms and conditions set forth in this Resolu-tion; and

WHEREAS the Bank for International Settlements has indicatedits concurrence in the proposed terms and conditions;

Now, THEREFORE, the Board of Governors, having consideredthe recommendations of the Executive Directors, hereby RESOLVESthat: The Bank for International Settlements is prescribed as aholder of special drawing rights on the following terms and con-ditions:

1. Definitions: As used in this Resolution:

(a) "Fund" means the International Monetary Fund.

(b) "Bank" means the Bank for International Settlements.

(c) "Participant" means a participant in the Special Draw-ing Account of the Fund.

(d) "Articles" mean the Articles of Agreement of the Fund.

(e) "Article" refers to an identified provision of the Arti-cles.

(f) "Need to use special drawing rights" means need asdefined in Article XXV, Section 3 (a}.

203 Res. 29-7



2. Application of General Provisions: The provisions of theArticles, By-Laws, Rules and Regulations, and decisions ofthe Fund that apply to all holders shall apply under thisResolution.

3. Acceptance, Holding, and Use by the Bank:

(a) Acceptance: The Bank may accept special drawingrights and provide currency in a transaction in agree-ment with a participant, which agreement includes anundertaking by the Bank and participant that the Bankwill use the same amount of special drawing rights toobtain currency from that participant within a period ofup to six months.

(b) Holding: The Bank may hold special drawing rightsaccepted in accordance with (a) above or received fromthe Fund as interest on its holdings of special drawingrights.

(c) Use: The Bank may use special drawing rights to obtaincurrency in a transaction in agreement with a partici-pant:

(i) to fulfill the Bank's undertaking assumed inaccordance with paragraph 3 (a) above; or

(ii) after consultation with the Fund, to dispose ofspecial drawing rights when the Bank finds that aparticipant has failed to carry out the agreementreferred to in paragraph 3 (a) above; and

(iii) to dispose of special drawing rights received fromthe Fund as interest on the Bank's holdings of spe-cial drawing rights.

The Bank shall return special drawing rights to a participantwhich is required to accept them in accordance with para-graph 4 (a) (ii).

(d) Exchange rates: In all transactions under this Resolutionthe rules which determine the exchange rates applicable

*•«. 29-j 204


BIS AS HOLDER OF SPECIAL DRAWING RIGHTS

to participants under the Articles at the time of eachtransfer of special drawing rights shall also apply to theBank.

4. Use and Acceptance by Participants:

(a) Use:

(i) A participant that represents to the Fund that ithas a need to use special drawing rights may enterinto a transaction in accordance with paragraph3 (a) above by giving notice to the Fund.

(ii) The Fund shall not challenge the representation in(a) (i) above. The Fund, however, may require theparticipant to accept special drawing rights fromthe Bank, for currency acceptable to the Bank, tothe extent the Fund later finds that the participantdid not have a need to use special drawing rights.

(b) Acceptance: A participant may accept special drawingrights in accordance with paragraph 3 (c) above. A par-ticipant shall accept special drawing rights from theBank and provide currency as required under (a) (ii)above.

5. Information and Recording: The Fund shall inform theBank of all matters relevant to the acceptance, holding, anduse of special drawing rights by the Bank. The Bank and theparticipant shall inform the Fund promptly of the facts nec-essary to record any transaction in which the Bank accepts oruses special drawing rights.

6. Consultation and Review: The Bank and the Fund willremain in close consultation with respect to this Resolution.The Executive Directors shall review this Resolution at leastonce every three years and submit any recommendation thatthey consider appropriate to the Board of Governors.

7. General Undertaking of Bank: The Bank undertakes, in its

205 *,s. 29-1



acceptance, holding, and use of special drawing rights, tocollaborate with the Fund in order to facilitate the effectivefunctioning of the Special Drawing Account and the properuse of special drawing rights in accordance with the Articlesand this Resolution.

8. Annual Report: The Executive Directors shall discuss theoperation of this Resolution in their annual report as part oftheir review of the operation of the Special Drawing Account.

9. Suspension: During any period in which a suspension underArticle XXIX, Section 1, is in effect, transactions under thisResolution shall be suspended unless the Executive Directorsdecide otherwise.

10. Termination: The prescription hereunder may be terminatedeither by the Bank, or by the Fund on the decision of theExecutive Directors, by transmitting a notice in writing to theFund or the Bank at its principal office. Termination shallbecome effective on the date the notice is received. After ter-mination the Bank may hold, receive, and use special draw-ing rights only in accordance with paragraphs 3 (b), (c), and(d), above, and participants may accept special drawingrights from the Bank under paragraph 4(b) above.

11. Adherence to Terms and Conditions:(a) The Bank may adhere to this Resolution within six

months of the effective date of this Resolution, whichdate shall be the date of its adoption by the Board ofGovernors.

(b) Adherence hereunder shall be in the form of a letter tothe Fund, acknowledging these terms and conditionsand bearing signatures which legally commit the Bank.*

Resolution No. 29-1

January 21, 1974

* The Bank for International Settlements adhered to this Resolution in accordancewith paragraph 11 above by letter dated January 30, 1974.

*•>. 29-j 206


C. Composite Resolution on the Work of the Ad HocCommittee on Reform of the International Monetary

System and Related Issues and on a Program ofImmediate Action

The Board of Governors having noted:

That the ad hoc Committee on Reform of the InternationalMonetary System and Related Issues, which was established atthe Board's 1972 Annual Meeting to advise and report withrespect to all aspects of reform of the international monetarysystem, has now concluded its work; and

That the Chairman of the ad hoc Committee has transmittedits final report ("Report to the Board of Governors of the Inter-national Monetary Fund by the Committee on Reform of theInternational Monetary System and Related Issues") accompaniedby an "Outline of Reform" (hereinafter referred to as the Out-line), consisting of Part I ("The Reformed System"), whichrecords the outcome of the Committee's discussions and indicatesthe general direction in which the Committee believes the systemcould evolve, and Part II ("Immediate Steps"), which sets outthe steps that the Committee agrees should be taken immediately;and

That the Executive Directors have been studying various aspectsof the international monetary system and in accordance withthe Committee's recommendations on immediate steps in theReport and Outline have adopted certain decisions;

Now, THEREFORE, the Board of Governors hereby takes thefollowing actions:

Resolutions Nos. 29-7, 29-8, 29-9, 29-10

October 2,1974

207 *•$. 29-7 fo 29-10



First Resolution (No. 29-7):

Final Report of the Ad Hoc Committee on Reform of theInternational Monetary System and Related Issues

The Board of Governors hereby RESOLVES as follows:

1. The Board of Governors notes the report of the ad hocCommittee on Reform of the International Monetary System andRelated Issues.

2. The Board expresses its deep appreciation to the Committeeand its Chairman, to the Deputies and their Chairman, and to theBureau upon the conclusion of their work on international mone-tary reform for the valuable contribution that they have madeboth in indicating the general direction in which the internationalmonetary system could evolve in the future and in proposingimmediate steps and other measures on which members could col-laborate in an evolutionary process of reform.

3. The Committee shall cease to exist on October 2,1974.

Second Resolution (No. 29-8):

Establishment of an Interim Committee of the Board ofGovernors on the International Monetary System

WHEREAS the Committee of the Board of Governors of theInternational Monetary Fund on Reform of the InternationalMonetary System and Related Issues has referred to the desira-bility of establishing by amendment of the Articles of Agreement apermanent and representative Council with appropriate powers;and

WHEREAS it is desirable, pending the establishment of theCouncil, to establish an Interim Committee of the Board of Gov-

ft«s. 29-8 208


COMPOSITE RESOLUTION

ernors on the International Monetary System with an advisoryrole, and with a composition similar to that of the Council; and

WHEREAS it is desirable that the Interim Committee shall comeinto existence when the Committee on Reform of the Inter-national Monetary System and Related Issues ceases to exist;

Now, THEREFORE, the Board of Governors hereby RESOLVES asfollows:

1. Composition of the Interim Committee

(a) There shall be established an Interim Committee of theBoard of Governors on the International Monetary System. Themembers of the Committee shall be governors of the Fund, min-isters, or others of comparable rank. Each member of the Fundthat appoints an executive director and each group of members ofthe Fund that elected an executive director on or after the dateon which the last regular election took place shall appoint

(i) one member of the Committee, and not more than

(ii) seven associates.

Each member of the Committee and each associate shall serveuntil a new appointment is made.

(b) Members of the Committee, associates, and executivedirectors or in their absence their alternates, shall be entitled toattend meetings of the Committee, unless the Committee decidesto hold a more restricted session. Each member of the Fund thatappoints an executive director and each group of members of theFund referred to in (a) above may designate an alternate to par-ticipate in the place of the member of the Committee at anymeeting when he is not present. Participation in respect of eachitem on the agenda of a meeting shall be limited to one person,who shall be a member of the Committee, an associate, or an ex-ecutive director.

(c) The Committee shall select a Chairman, who shall servefor such period as the Committee determines. The Chairman ofthe Board of Governors, or a governor designated by him, shall

209 *•«. 29-«



convene the first meeting of the Committee and shall preside overit until a Chairman has been selected.

(d) The Managing Director shall be entitled to participatein all meetings of the Committee, and may designate a represent-ative to participate in his place at any meeting when he is notpresent. The Managing Director or his representative may beaccompanied normally by not more than two members of thestaff, unless the Committee decides to hold a restricted session.

2. Representation of Members Not Entitled to Appoint aMember of the Committee

A member of the Fund not entitled to appoint a member ofthe Committee may send a representative to participate in anymeeting of the Committee when a request made by, or a matterparticularly affecting, that member is under consideration. TheCommittee shall determine, upon request by the member, whethera matter under consideration particularly affects the member.

3. Terms of Reference

The Committee shall advise and report to the Board of Gover-nors with respect to the functions of the Board of Governors in:

(i) supervising the management and adaptation of the in-ternational monetary system, including the continuingoperation of the adjustment process, and in this con-nection reviewing developments in global liquidity andthe transfer of real resources to developing countries;

(ii) considering proposals by the Executive Directors toamend the Articles of Agreement; and

(iii) dealing with sudden disturbances that might threatenthe system.

In addition, the Committee shall advise and report to theBoard of Governors on any other matters on which the Board ofGovernors may seek the advice of the Committee.

R.s. 29-« 210



In performing its duties, the Committee shall take account ofthe work of other bodies having specialized responsibilities inrelated fields.

4. Procedures

(a) The Committee shall meet ordinarily three or four timesa year. The Chairman may call meetings after consulting themembers of the Committee, and shall consult the members of theCommittee on calling a meeting if so requested by any memberof the Committee.

(b) A quorum for any meeting of the Committee shall betwo thirds of the members of the Committee.

(c) Meetings of the Committee shall be held within themetropolitan area in which the Fund has its principal office, or atsuch other places as the Committee may provide or, in theabsence of such provision, as the Chairman shall determine afterconsulting the members of the Committee.

(d) Appropriate arrangements shall be made for the effec-tive coordination of the work of the Committee and of the Exec-utive Directors. The Secretary of the Fund shall serve as the Sec-retary of the Committee.

(e) In reporting any recommendations or views of theCommittee, the Chairman shall seek to establish a sense of themeeting. In the event of a failure to reach a unanimous view, allviews shall be reported, and the members holding such views

shall J)e identified. Reports of the Committee shall be made avail-able to the Executive Directors.

(f) The Committee may invite observers to attend duringthe discussion of an item on the agenda of a meeting, and may

determine any aspect of its procedure that is not established bythis Resolution.

211 Jt«s. 29-4



Third Resolution (No. 29-9):

Establishment of Joint Ministerial Committee of the Boards ofGovernors of the Bank and the Fund on the Transfer of

Real Resources to Developing Countries

WHEREAS the Committee of the Board of Governors of theInternational Monetary Fund on Reform of the InternationalMonetary System has recommended the establishment of a jointministerial committee of the Boards of Governors of the Inter-national Monetary Fund (the Fund) and the International Bankfor Reconstruction and Development (the Bank) to carry for-ward the study of the broad question of the transfer of realresources to developing countries and to recommend measures tobe adopted in order to implement its conclusions;

WHEREAS it is desirable to consider the question of the transferof real resources to developing countries in relation to existingor prospective arrangements among countries, including thoseinvolving international trade and payments, the flow of capital,investment, and official development assistance;

WHEREAS the said Committee has invited the Managing Direc-tor of the Fund to discuss with the President of the Bank thepreparation of appropriate parallel draft resolutions on the estab-lishment of such a joint ministerial committee for adoption by therespective Boards of Governors of the Fund and Bank;

WHEREAS pursuant to such discussions the President of theBank and the Managing Director of the Fund have proposed tothe Executive Directors of the Bank and Fund, respectively, andthe Executive Directors of the Fund have approved the submis-sion of this Draft Resolution to the Board of Governors of theFund and the Executive Directors of the Bank have approved thesubmission of a parallel Draft Resolution to the Board of Gover-nors of the Bank;

R«s. 29-9 212



WHEREAS the Committee as envisaged would be helpful inproviding a focal point in the structure of international economiccooperation for formation of a comprehensive overview ofdiverse international activities in the development area, for effi-cient and prompt consideration of development issues, and forcoordination of international efforts to deal with problems offinancing development; and

WHEREAS the Board of Governors of the Bank is consideringthe said parallel resolution;

Now, THEREFORE, the Board of Governors hereby RESOLVES:

1. Establishment and Composition of Joint Ministerial Com-mittee

(a) There is established a Joint Ministerial Committee ofthe Boards of Governors of the Bank and Fund on the Transferof Real Resources to Developing Countries (hereinafter calledthe Development Committee).

(b) The members of the Development Committee shall begovernors of the Bank, governors of the Fund, ministers, or othersof comparable rank.

(c) The members of the Development Committee shall beappointed in turn for successive periods of two years by the mem-bers of the Bank and the members of the Fund. The members ofthe Bank shall appoint the members of the Committee for thefirst period of two years, which shall run from the date of theadoption of this Resolution until the date of the regular electionof executive directors in 1976.

(d) Each member government of the Bank or the Fund, asthe case may be, that appoints an executive director and eachgroup of member governments of the Bank or of the Fund, asthe case may be, that elects an executive director shall appointone member of the Development Committee and up to seven asso-ciates, and, for any meeting when the member of the Commit-tee is not present, may appoint an alternate with full power toact for the member at such meeting.

213 Res. 29-9



(e) Each member and associate shall serve until a newappointment is made by the member government or member gov-ernments of the Bank or the Fund, as the case may be, that areentitled to make the appointment or until the next succeedingregular election of executive directors, whichever is earlier.

2. Chairman

The Development Committee shall select a Chairman fromamong its members, who shall serve for such period as the Com-mittee determines. The Chairman of the Boards of Governors ofthe Bank and the Fund, or a governor designated by him shallconvene the first meeting of the Committee and shall preside overit until the Chairman has been selected.

3. Meetings

(a) Members of the Development Committee, associates,and the executive directors of the Bank and the Fund, or in theirabsence their alternates, shall be entitled to participate in meet-ings of the Committee, unless the Committee decides to hold asession restricted to members, the President of the Bank, and theManaging Director of the Fund. Participation in respect of eachitem on the agenda of a meeting shall be limited to one person inrespect of each member government or group of member govern-ments that appoint a member of the Committee.

(b) The President of the Bank and the Managing Directorof the Fund shall be entitled to participate in all meetings of theDevelopment Committee, and each may designate a representa-tive to participate in his place at any meeting when he is notpresent. Each may be accompanied normally by two members ofhis staff, at any unrestricted session of the Committee.

(c) The Development Committee shall invite the heads ofother international financial or economic organizations, as well asother persons, to attend or participate in meetings of the Commit-tee relating to their areas of responsibility.

Res. 29-9 214



4. Terms of Reference

(a) The Development Committee shall maintain an over-view of the development process and shall advise and report tothe Boards of Governors of the Bank and the Fund on all aspectsof the broad question of the transfer of real resources to develop-ing countries, and shall make suggestions for consideration bythose concerned regarding the implementation of its conclusions.The Committee shall review, on a continuing basis, the progressmade in fulfillment of its suggestions.

(b) The Development Committee shall establish a detailedprogram of work, taking account of the topics listed in Annex 10of the Outline of Reform. The Committee in carrying out itswork shall bear in mind the need for coordination with otherinternational bodies.

(c) The Development Committee shall give urgent attentionto the problems of (i) the least developed countries and (ii)those developing countries most seriously affected by balance ofpayments difficulties in the current situation.

5. Procedures

(a) The Development Committee shall meet at the time ofthe annual meetings of the Boards of Governors of the Bank andthe Fund and, in addition, as often as required. The Chairmanmay call meetings after consulting the members of the Committeeand shall consult them on calling a meeting if so requested byany member of the Committee.

(b) A quorum for any meeting of the Development Com-mittee shall be two thirds of the members of the Committee.

(c) The Development Committee may establish subcommit-tees or working groups from time to time.

(d) The Committee shall appoint an Executive Secretarywho 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 maxi-

215 Res. 29-9



mum extent feasible, shall be responsible to the Committee forcarrying out the work directed by the Committee.

(e) Appropriate arrangements shall be made for the coordi-nation of the work of the Development Committee and the workof the Executive Directors of the Bank and the Fund.

(f) The President of the Bank and the Managing Directorof the Fund shall arrange to carry out technical work requestedby the Committee and provide administrative support for theCommittee within the competence of their organizations.

(g) The Committee may request assistance from interna-tional organizations or other bodies or individuals in connectionwith the preparation of its work.

(h) In reporting any suggestions or views of the Develop-ment Committee, the Chairman shall seek to establish a sense ofthe meeting. In the event of a failure to reach a unanimous view,all views shall be reported, and the members holding such viewsshall be identified.

(i) The Development Committee shall report not less thanonce a year to the Boards of Governors on the progress of itswork and may publish such other reports as it deems desirable tocarry out its purposes.

(j) The Development Committee may determine any aspectof its procedure that is not established by this Resolution.

6. Administrative Costs

The Bank and the Fund shall make such financial appropria-tions, in equal proportions, as are necessary for carrying out thework of the Development Committee.

7. Review

At the end of two years from the effective date of this Resolu-tion, the Boards of Governors of the Fund and the Bank shallreview the performance of the Committee, and shall take suchaction as they deem appropriate.

Res. 29-9 216



Fourth Resolution (No. 29-10):

Other Immediate Steps

The Board of Governors hereby RESOLVES as follows:

1. Need for Immediate Steps

The Board of Governors notes the view of the Committee onReform of the International Monetary System and Related Issues(hereinafter referred to as the Committee) that it will be sometime before a reformed system can be finally agreed and fullyimplemented, and it endorses the Committee's proposal that, inthe interim period, the Fund and its members should pursue thegeneral objectives set out in paragraph 1 of the Outline adoptedby the Committee and should observe, so far as they are applica-ble, the principles contained in Part I of the Outline. The Boardnotes that in Part II of the Outline the Committee proposes that anumber of steps should be taken immediately to begin an evolu-tionary process of reform and to help meet the current problemsfacing both developed and developing members. The Board ofGovernors endorses the proposals of the Committee and theCommittee's calls upon members to collaborate with the Fundand with each other to give effect to those proposals.

2. The Adjustment Process

The Board of Governors notes that the Committee has recog-nized that in the interim period, with the prospect of significantchanges in the structure of balances of payments in the world,there is need for close international consultation and for surveil-lance of the adjustment process. The Board endorses the Commit-tee's recommendation that members should be guided in theiradjustment action by the general principles set out in paragraph 4of the Outline. The Board endorses the Committee's call to mem-bers to cooperate with one another and with international institu-tions, during the current period of exceptional and widespreadpayments imbalances, to find orderly means to deal with these

217 Res. 29-10



imbalances without adopting policies that would aggravate theproblems of other members, and to promote equilibrating capitalflows. In this connection, the Board of Governors welcomes Deci-sion No. 4241-(74/67), adopted by the Executive Directors onJune 13, 1974, to establish a facility in the Fund to assist mem-bers in meeting the initial impact of the increase in the cost of oilimports.

The Fund shall exercise surveillance of the adjustment processthrough 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 setout in paragraphs 5-10 of the Outline, and subject for the timebeing to the following provisos, namely that:

(a) the Fund shall seek to gain further experience in theuse of the objective indicators, including reserve indicators, on anexperimental basis, as an aid in assessing the need for adjust-ment, but shall not use such indicators to establish any presump-tive or automatic application of pressures;

(b) determination of what is a disproportionate movementin reserves shall be made in the light of the broad objectives ofmembers for the development of their reserves over a periodahead, as discussed with the Fund; and

(c) the pressures that may be applied to members in largeand persistent imbalance shall continue to be those at presentavailable to the Fund.

3. Exchange Rates

The Board of Governors notes that the Committee has stressedthat, during the interim period, exchange rates will continue tobe a matter for international concern and consultation, and hasattached particular importance to the avoidance of competitivedepreciation or undervaluation. The Board endorses these viewsand notes with satisfaction that in accordance with the Commit-tee's recommendation the Executive Directors have taken Deci-

R«. 29-10 218



sion No. 4232-(74/67), adopted June 13, 1974, on guidelines forthe management of floating exchange rates during the presentperiod of widespread floating.

4. Controls

The Board of Governors endorses the Committee's recommen-dation that, during the interim period, countries should be guidedby the principles set out in paragraphs 14-17 of the Outline in re-lation to controls and to cooperative action to limit disequilibrat-ing capital flows. The Board endorses the Committee's view thatparticular importance must be attached to avoiding the escalationof restrictions on trade and payments for balance of paymentspurposes during the interim period. The Board endorses the invi-tation to members to subscribe on a voluntary basis to the Decla-ration concerning trade and other current account measures forbalance of payments purposes attached to the Committee's finalcommunique, and requests members to consider subscribing to theDeclaration if they have not already done so. The Board noteswith satisfaction that the Executive Directors are developing thenecessary procedures in connection with the Declaration, and aremaking arrangements for continuing close cooperation with theCONTRACTING PARTIES to the General Agreement on Tariffs andTrade.

5. Global Liquidity

The Board of Governors endorses the Committee's call tomembers 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. In accord-

ance with the Committee's recommendation, the Fund shall assess

global reserves and take decisions on the allocation and cancella-

tion 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 para-

graph 19 of the Outline and, if they are judged to show an exces-

219 Res. 29-70



sive increase, the Fund shall consider with the members concernedwhat steps might be taken to secure an orderly reduction.

In accordance with the Committee's recommendation, the Fundshall give consideration to substitution arrangements.

In accordance with the Committee's recommendation, the Fundshall give further study to arrangements for gold in the light ofthe agreed objectives of reform.

6. Valuation of the Special Drawing Right

The Board of Governors notes with satisfaction that, followingthe Committee's recommendation concerning the interim valua-tion and interest rate of the special drawing right, the ExecutiveDirectors have taken the following decisions on these ques-tions: 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. 426l-(74/78) S,* adopted July 1, 1974. Thesedecisions provide for an interim valuation of the special drawingright without prejudice to the method of valuation to be adoptedin a reformed system.

7. The Special Interests of Developing Countries

The Committee has recognized the serious difficulties that arefacing many developing members, and has agreed that theirneeds for financial resources will be greatly increased. It hasurged all members with available resources to make every effortto supply these needs on appropriate terms. To this end, theCommittee has called upon members with available resources andupon development finance institutions to make arrangements toincrease the flow of concessionary funds, and to give considera-tion to various measures including the redistribution of aid effortin favor of members in greatest need, interest subsidies, andshort-term debt relief on official loans in the special circumstancesof members without access to financial markets. The Board of

* Annual Report, 1974, pages 116-18, 119.

Res. 29-10 220



Governors notes with satisfaction that, following the Committee'srecommendation, the Executive Directors have taken DecisionNo. 4377-(74/ll4), adopted September 13, 1974, to establish anew facility in the Fund under which developing members in par-ticular are likely to receive balance of payments finance forlonger periods and in amounts larger in relation to quota thanhas been the practice under existing tranche policies. The Boardnotes that the Committee is not unanimous on the question of es-tablishing a link between development assistance and the alloca-tion of special drawing rights and invites the Interim Committeeestablished by the Second Resolution to consider the possibilityand modalities of establishing such a link simultaneously with thepreparation by the Executive Directors of draft amendments ofthe Articles of Agreement, which it is envisaged would be pre-sented for the approval of the Board by February 1975.

8. General Review of Quotas

The Board of Governors endorses the Committee's request tothe Executive Directors to complete, as soon as possible, theirwork on the current general review of quotas, and in doing so tobear in mind the general purposes of the reform.

9. Amendments to the Articles of Agreement

The Board of Governors notes that certain of the immediatesteps recommended in Part II of the Outline require amendmentof the Articles of Agreement, and that, following the Commit-tee's recommendation in paragraph 41 of the Outline, the Execu-tive Directors have begun their consideration of draft amend-ments of the Articles of Agreement to give effect to this Part ofthe Outline or as otherwise desired.

The Board requests the Executive Directors to transmit anydraft amendments that they prepare pursuant to paragraph 41 ofthe Outline to the Interim Committee for consideration in accor-dance with paragraph 3(ii) of the Second Resolution and, ifagreed, for presentation to the Board of Governors for itsapproval.

221 Res. 29-70


D. Increases in Quotas of Members—Sixth General Review

WHEREAS the Executive Directors have considered the adjust-ment of the quotas of members in accordance with the Resolutionof the Board of Governors of the International Monetary Fund atits 1975 Annual Meeting:

That the Board of Governors, having noted the report of theExecutive Directors entitled ''Increases in Quotas of Members—Sixth General Review," dated August 22, 1975, and havingendorsed the understandings reached so far by the InterimCommittee on this subject, continues its review under Article III,Section 2 and requests the Executive Directors to complete aspromptly as possible their work on this matter on increasesin individual quotas and on the mode of payment of subscrip-tions in respect of them and to submit appropriate proposals tothe Board of Governors, after consideration of them by theInterim Committee;

WHEREAS the Executive Directors have submitted to the Boardof Governors a report entitled "Increases in Quotas of FundMembers—Sixth General Review" containing recommendationson increases in the quotas of individual members of the Fund;and

WHEREAS th£ Interim Committee of the Board of Governorson the International Monetary System has endorsed the recom-mendations contained in the report of the Executive Directors;and

WHEREAS the Executive Directors have been requested to pre-pare and submit to the Board of Governors as soon as possibleproposals to amend the Articles of Agreement of the Fund, in-cluding a proposal for the modification of the provisions relatingto the payment of increases in quotas; and

WHEREAS the Executive Directors have recommended the adop-tion of the following Resolution of the Board of Governors,

Res. 31-2 222


INCREASES IN QUOTAS—SIXTH GENERAL REVIEW

which Resolution proposes increases in the quotas of members ofthe Fund as a result of the sixth general review of quotas anddeals with certain related matters, by vote without meeting pur-suant to Section 13 of the By-Laws of the Fund;

NOW, THEREFORE, the Board of Governors hereby RESOLVESthat:

1. The International Monetary Fund proposes that, subject tothe provisions of this Resolution, the quotas of members of theFund shall be increased to the amounts shown against theirnames in the Annex * to this Resolution, provided that any mem-ber may consent to an increase in its quota that is smaller than theone shown in the Annex, and may consent thereafter to furtherincreases up to the amount shown against its name in the Annexnot later than the date prescribed by or under paragraph 5 below.Each increase shall be a whole number in millions of specialdrawing rights.

2. A member's increase in quota as proposed by this Resolu-tion shall not become effective unless the member has notified theFund of its consent to the increase not later than the date pre-scribed by or under paragraph 5 below and has paid the increasein quota in full, provided that no increase in quota shall becomeeffective before (i) the effective date of the second amendment ofthe Articles or (ii) the date of the Fund's determination thatmembers having not less than three fourths of the total of quotason February 19, 1976 have consented to increases in their quotas,whichever is the later of these dates.

3. A member shall pay twenty-five per cent of the increase inspecial drawing rights, the currencies of other members specified,with their concurrence, by the Fund, or in the member's own cur-rency, and shall pay the balance of the increase in its own cur-rency.


223 Res. 31-2



4. A member shall, within six months after the date of theadoption of this Resolution, make arrangements satisfactory tothe Fund for the use of the member's currency in the operationsand transactions of the Fund in accordance with its policies, pro-vided that the Executive Directors may extend the period withinwhich such arrangements shall be made.

5. Notices in accordance with paragraph 2 above shall be exe-cuted by a duly authorized official of the member and must bereceived in the Fund not later than one month after the effectivedate of the second amendment of the Articles, provided that theExecutive Directors may extend this period as they may deter-mine.

6. Each member shall pay to the Fund the increase in its quotawithin sixty days after (a) the date on which it notifies the Fundof its consent or (b) the effective date of the second amendmentof the Articles or (c) the date of the Fund's determination underparagraph 2(ii) above, whichever is latest.

7. The seventh general review of quotas shall be completed byFebruary 9, 1978.

Resolution No. 31-2

March 22, 1976

*.s. 31-2 224


Selected Documents




A. Agreement Between the United Nations and theInternational Monetary Fund *

Article I

GENERAL

1. This agreement, which is entered into by the United Nationspursuant to the provisions of Article 63 of its Charter, and by theInternational Monetary Fund (hereinafter called the Fund), pur-suant to the provisions of Article X of its Articles of Agreement,is intended to define the terms on which the United Nations andthe Fund shall be brought into relationship.

2. The Fund is a specialized agency established by agreementamong its member governments and having wide internationalresponsiblities, as defined in its Articles of Agreement, in eco-nomic and related fields within the meaning of Article 57 of theCharter of the United Nations. By reason of the nature of itsinternational responsibilities and the terms of its Articles ofAgreement, the Fund is, and is required to function as, an inde-pendent international organization.

3. The United Nations and the Fund are subject to certain nec-essary limitations for the safeguarding of confidential materialfurnished to them by their members or others, and nothing in thisagreement shall be construed to require either of them to furnishany information the furnishing of which would, in its judgment,constitute a violation of the confidence of any of its members oranyone from whom it shall have received such information, orwhich would otherwise interfere with the orderly conduct of itsoperations.

* The Agreement came into force November 15, 1947.

227


SELECTED DOCUMENTS

Article II

RECIPROCAL REPRESENTATION

1. Representatives of the United Nations shall be entitled toattend, and to participate without vote in, meetings of the Boardof Governors of the Fund. Representatives of the United Nationsshall be invited to participate without vote in meetings especiallycalled by the Fund for the particular purpose of considering theUnited Nations point of view in matters of concern to the UnitedNations.

2. Representatives of the Fund shall be entitled to attend meet-ings of the General Assembly of the United Nations for purposesof consultation.

3. Representatives of the Fund shall be entitled to attend, andto participate without vote in, meetings of the committees of theGeneral Assembly, meetings of the Economic and Social Council,of the Trusteeship Council and of their respective subsidiary bod-ies, dealing with matters in which the Fund has an interest.

4. Sufficient advance notice of these meetings and their agendashall be given so that, in consultation, arrangements can be madefor adequate representation.

Article III

PROPOSAL OF AGENDA ITEMS

In preparing the agenda for meetings of the Board of Gover-nors, the Fund will give due consideration to the inclusion in theagenda of items proposed by the United Nations. Similarly, theCouncil and its commissions and the Trusteeship Council willgive due consideration to the inclusion in their agenda of itemsproposed by the Fund.

228


UNITED NATIONS—FUND AGREEMENT

Article IV

CONSULTATION AND RECOMMENDATIONS

1. The United Nations and the Fund shall consult togetherand exchange views on matters of mutual interest.

2. Neither organization, nor any of their subsidiary bodies,will present any formal recommendations to the other withoutreasonable prior consultation with regard thereto. Any formalrecommendations made by either organization after such consulta-tion will be considered as soon as possible by the appropriateorgan of the other.

Article V

EXCHANGE OF INFORMATION

The United Nations and the Fund will, to the fullest extentpracticable and subject to paragraph 3 of article I, arrange forthe current exchange of information and publications of mutualinterest, and the furnishing of special reports and studies uponrequest.

Article VI

SECURITY COUNCIL

1. The Fund takes note of the obligation assumed, under para-graph 2 of Article 48 of the United Nations Charter, by such of

229


SELECTED DOCUMENTS

its members as are also Members of the United Nations, to carryout the decisions of the Security Council through their action inthe appropriate specialized agencies of which they are members,and will, in the conduct of its activities, have due regard for deci-sions of the Security Council under Articles 41 and 42 of theUnited Nations Charter.

2. The Fund agrees to assist the Security Council by furnishingto it information in accordance with the provisions of article V ofthis agreement.

Article VII

ASSISTANCE TO THE TRUSTEESHIP COUNCIL

The Fund agrees to co-operate with the Trusteeship Council inthe carrying out of its functions by furnishing information andtechnical assistance upon request, and in such other similar waysas may be consistent with the Articles of Agreement of the Fund.

Article VIII

INTERNATIONAL COURT OF JUSTICE

The General Assembly of the United Nations hereby author-izes the Fund to request advisory opinions of the InternationalCourt of Justice on any legal questions arising within the scopeof the Fund's activities other than questions relating to the rela-

230



tionship between the Fund and the United Nations or any spe-cialized agency. Whenever the Fund shall request the Court foran advisory opinion, the Fund will inform the Economic andSocial Council of the request.

Article IX

STATISTICAL SERVICES

1. In the interests of efficiency and for the purpose of reducingthe burden on national Governments and other organizations, theUnited Nations and the Fund agree to co-operate in eliminatingunnecessary duplication in the collection, analysis, publication anddissemination of statistical information.

2. The Fund recognizes the United Nations as the centralagency for the collection, analysis, publication, standardizationand improvement of statistics serving the general purposes of in-ternational organizations, without prejudice to the right of theFund to concern itself with any statistics so far as they may beessential for its own purposes.

3. The United Nations recognizes the Fund as the appropriateagency for the collection, analysis, publication, standardizationand improvement of statistics within its special sphere, withoutprejudice to the right of the United Nations to concern itselfwith any statistics so far as they may be essential for its own pur-poses.

4. (a) In its statistical activities the Fund agrees to give fullconsideration to the requirements of the United Nations and ofthe specialized agencies.

(&) In its statistical activities the United Nations agrees togive full consideration to the requirements of the Fund.

231


SELECTED DOCUMENTS

5. The United Nations and the Fund agree to furnish eachother promptly with all their non-confidential statistical informa-tion.

Article X

ADMINISTRATIVE RELATIONSHIPS

1. The United Nations and the Fund will consult from time totime concerning personnel and other administrative matters ofmutual interest, with a view to securing as much uniformity inthese matters as they shall find practicable and to assuring themost efficient use of the services and facilities of the two organi-zations. These consultations shall include determination of themost equitable manner in which special services furnished by oneorganization to the other should be financed.

2. To the extent consistent with the provisions of this agree-ment, the Fund will participate in the work of the Co-ordinationCommittee and its subsidiary bodies.

3. The Fund will furnish to the United Nations copies of theannual report and the quarterly financial statements prepared bythe Fund pursuant to section 7 (a) of article V of its Articles ofAgreement. The United Nations agrees that, in the interpretationof paragraph 3 of Article 17 of the United Nations Charter itwill take into consideration that the Fund does not rely for itsannual budget upon contributions from its members, and that theappropriate authorities of the Fund enjoy full autonomy in decid-ing the form and content of such budget.

4. The officials of the Fund shall have the right to use thelaissez-passer of the United Nations in accordance with specialarrangements to be negotiated between the Secretary-General ofthe United Nations and the competent authorities of the Fund.

232



Article XI

AGREEMENTS WITH OTHER ORGANIZATIONS

The Fund will inform the Economic and Social Council of anyformal agreement which the Fund shall enter into with any spe-cialized agency, and in particular agrees to inform the Council ofthe nature and scope of any such agreement before it is con-cluded.

Article XII

LIAISON

1. The United Nations and the Fund agree to the foregoingprovisions in the belief that they will contribute to the mainte-nance of effective co-operation between the two organizations.Each agrees that it will establish within its own organization suchadministrative machinery as may be necessary to make the liaison,as provided for in this agreement, fully effective.

2. The arrangements provided for in the foregoing articles ofthis agreement shall apply, as far as is appropriate, to relationsbetween such branch or regional offices as may be established bythe two organizations, as well as between their central machinery.

233


SELECTED DOCUMENTS

Article XIII

MISCELLANEOUS

1. The Secretary-General of the United Nations and the Man-aging Director of the Fund are authorized to make such supple-mentary arrangements as they shall deem necessary or proper tocarry fully into effect the purposes of this agreement.

2. This agreement shall be subject to revision by agreement be-tween the United Nations and the Fund from the date of itsentry into force.

3. This agreement may be terminated by either party theretoon six months' written notice to the other party, and thereuponall rights and obligations of both parties hereunder shall cease.

4. This agreement shall come into force when it shall havebeen approved by the General Assembly of the United Nationsand the Board of Governors of the Fund.

234


B. United Nations Convention on the Privileges andImmunities of the Specialized Agencies and Annex V*

Whereas the General Assembly of the United Nations adoptedon 13 February 1946 a resolution contemplating the unification asfar as possible of the privileges and immunities enjoyed by theUnited Nations and by the various specialized agencies; and

Whereas consultations concerning the implementation of theaforesaid resolution have taken place between the United Nationsand the specialized agencies;

Consequently, by resolution 179(11) adopted on 21 November1947, the General Assembly has approved the following Conven-tion, which is submitted to the specialized agencies for acceptanceand to every Member of the United Nations and to every otherState member of one or more of the specialized agencies foraccession.

* The Convention was adopted by the United Nations General Assembly onNovember 21, 1947. The Executive Directors of the Fund accepted the standardclauses of the Convention and approved Annex V with respect to the Fund onApril 11, 1949. The Annex became effective on May 9, 1949, when it was receivedby the United Nations.

235


SELECTED DOCUMENTS

Article I

DEFINITION AND SCOPE

Section 1

In this Convention:

(i) The words "standard clauses" refer to the provisions ofarticles II to IX.

(ii) The words "specialized agencies" mean:

(a) The International Labour Organisation;

(£) The Food and Agriculture Organization of theUnited Nations;

( c ) The United Nations Educational, Scientific and Cul-tural Organization;

(<^) The International Civil Aviation Organization;

(tf) The International Monetary Fund;

(/) The International Bank for Reconstruction andDevelopment;

(g) The World Health Organization;

(/?) The Universal Postal Union;

(/) The International Telecommunication Union; and

(;') Any other agency in relationship with the UnitedNations in accordance with Articles 57 and 63 of the Charter.

(iii) The word "Convention" means, in relation to anyparticular specialized agency, the standard clauses as modifiedby the final (or revised) text of the annex transmitted by thatagency in accordance with sections 36 and 38.

(iv) For the purposes of article III, the words "property andassets" shall also include property and funds administered by aspecialized agency in furtherance of its constitutional functions.

236


UN CONVENTION

(v) For the purposes of articles V and VII, the expression"representatives of members*' shall be deemed to include allrepresentatives, alternates, advisers, technical experts and secre-taries of delegations.

(vi) In sections 13, 14, 15 and 25, the expression "meetingsconvened by a specialized agency" means meetings: (l) of itsassembly and of its executive body (however designated), and(2) of any commission provided for in its constitution; (3) ofany international conference convened by it; and (4) of anycommittee of any of these bodies.

(vii) The term "executive head" means the principal execu-tive official of the specialized agency in question, whether des-ignated "Director-General" or otherwise.

Section 2

Each State party to this Convention in respect of any special-ized agency to which this Convention has become applicable inaccordance with section 37 shall accord to, or in connexion with,that agency the privileges and immunities set forth in the stan-dard clauses on the conditions specified therein, subject to anymodification of those clauses contained in the provisions of thefinal (or revised) annex relating to that agency and transmittedin accordance with sections 36 or 38.

Article II

JURIDICAL PERSONALITY

Section 3

The specialized agencies shall possess juridical personality.They shall have the capacity (a) to contract, (b) to acquire and

237


SELECTED DOCUMENTS

dispose of immovable and movable property, (c) to institutelegal proceedings.

Article 111

PROPERTY, FUNDS AND ASSETS

Section 4

The specialized agencies, their property and assets, whereverlocated and by whomsoever held, shall enjoy immunity fromevery form of legal process except in so far as in any particularcase they have expressly waived their immunity. It is, however,understood that no waiver of immunity shall extend to any mea-sure of execution.

Section 5

The premises of the specialized agencies shall be inviolable.The property and assets of the specialized agencies, whereverlocated and by whomsoever held, shall be immune from search,requisition, confiscation, expropriation and any other form of inter-ference, whether by executive, administrative, judicial orlegislative action.

Section 6

The archives of the specialized agencies, and in general alldocuments belonging to them or held by them, shall be inviola-ble, wherever located.

238


UN CONVENTION

Section 7

Without being restricted by financial controls, regulations ormoratoria of any kind:

(a) The specialized agencies may hold funds, gold or cur-rency of any kind and operate accounts in any currency;

(£) The specialized agencies may freely transfer their funds,gold or currency from one country to another or within anycountry and convert any currency held by them into any othercurrency.

Section 8

Each specialized agency shall, in exercising its rights under sec-tion 7 above, pay due regard to any representations made by theGovernment of any State party to this Convention in so far as itis considered that effect can be given to such representations with-out detriment to the interests of the agency.

Section 9

The specialized agencies, their assets, income and other prop-erty shall be:

(a) Exempt from all direct taxes; it is understood, however,that the specialized agencies will not claim exemption fromtaxes which are, in fact, no more than charges for public utilityservices;

(&) Exempt from customs duties and prohibitions and re-strictions on imports and exports in respect of articles importedor exported by the specialized agencies for their official use; itis understood, however, that articles imported under such ex-emption will not be sold in the country into which they wereimported except under conditions agreed to with the Govern-ment of that country;

239


SELECTED DOCUMENTS

(r) Exempt from duties and prohibitions and restrictions onimports and exports in respect of their publications.

Section 10

While the specialized agencies will not, as a general rule,claim exemption from excise duties and from taxes on the sale ofmovable and immovable property which forms part of the price tobe paid, nevertheless when the specialized agencies are makingimportant purchases for official use of property on which suchduties and taxes have been charged or are chargeable, Statesparties to this Convention will, whenever possible, make appro-priate administrative arrangements for the remission or return ofthe amount of duty or tax.

Article IV

FACILITIES IN RESPECT OF COMMUNICATIONS

Section 11

Each specialized agency shall enjoy, in the territory of eachState party to this Convention in respect of that agency, for itsofficial communications, treatment not less favourable than thataccorded by the Government of such State to any other Govern-ment, including the latter's diplomatic mission, in the matter ofpriorities, rates and taxes on mails, cables, telegrams, radiograms,telephotos, telephone and other communications, and press ratesfor information to the press and radio.

Section 12

No censorship shall be applied to the official correspondenceand other official communications of the specialized agencies.

240


UN CONVENTION

The specialized agencies shall have the right to use codes andto dispatch and receive correspondence by courier or in sealedbags, which shall have the same immunities and privileges as dip-lomatic couriers and bags.

Nothing in this section shall be construed to preclude theadoption of appropriate security precautions to be determined byagreement between a State party to this Convention and a special-ized agency.

Article V

REPRESENTATIVES OF MEMBERS

Section 13

Representatives of members at meetings convened by a special-ized agency shall, while exercising their functions and duringtheir journeys to and from the place of meeting, enjoy the fol-lowing privileges and immunities:

(a) Immunity from personal arrest or detention and fromseizure of their personal baggage, and in respect of words spo-ken or written and all acts done by them in their official capac-ity, immunity from legal process of every kind;

(£) Inviolability for all papers and documents;

(c) The right to use codes and to receive papers or corre-spondence by courier or in sealed bags;

(;/) Exemption in respect of themselves and their spousesfrom immigration restrictions, aliens' registration or nationalservice obligations in the State which they are visiting orthrough which they are passing in the exercise of their func-tions;

241


SELECTED DOCUMENTS

(e) The same facilities in respect of currency or exchangerestrictions as are accorded to representatives of foreign Gov-ernments on temporary official missions;

(/) The same immunities and facilities in respect of theirpersonal baggage as are accorded to members of comparablerank of diplomatic missions.

Section 14

In order to secure for the representatives of members of thespecialized agencies at meetings convened by them complete free-dom of speech and complete independence in the discharge oftheir duties, the immunity from legal process in respect of wordsspoken or written and all acts done by them in discharging theirduties shall continue to be accorded, notwithstanding that thepersons concerned are no longer engaged in the discharge of suchduties.

Section 15

Where the incidence of any form of taxation depends uponresidence, periods during which the representatives of membersof the specialized agencies at meetings convened by them arepresent in a member State for the discharge of their duties shallnot be considered as periods of residence.

Section 16

Privileges and immunities are accorded to the representativesof members, not for the personal benefit of the individuals them-selves, but in order to safeguard the independent exercise of theirfunctions in connexion with the specialized agencies. Conse-quently, a member not only has the right but is under a duty towaive the immunity of its representatives in any case where, in

242


UN CONVENTION

the opinion of the member, the immunity would impede thecourse of justice, and where it can be waived without prejudice tothe purpose for which the immunity is accorded.

Section 17

The provisions of sections 13, 14 and 15 are not applicable inrelation to the authorities of a State of which the person is anational or of which he is or has been a representative.

Article VI

OFFICIALS

Section 18

Each specialized agency will specify the categories of officialsto which the provisions of this article and of article VIII shallapply. It shall communicate them to the Governments of allStates parties to this Convention in respect of that agency and tothe Secretary-General of the United Nations. The names of theofficials included in these categories shall from time to time bemade known to the above-mentioned Governments.

Section 19

Officials of the specialized agencies shall:

(a) Be immune from legal process in respect of words spo-ken or written and all acts performed by them in their officialcapacity;

Enjoy the same exemptions from taxation in respect ofthe salaries and emoluments paid to them by the specialized

243


SELECTED DOCUMENTS

agencies and on the same conditions as are enjoyed by officialsof the United Nations;

(f) Be immune, together with their spouses and relativesdependent on them, from immigration restrictions and alienregistration;

(d} Be accorded the same privileges in respect of exchangefacilities as are accorded to officials of comparable rank of dip-lomatic missions;

(e) Be given, together with their spouses and relativesdependent on them, the same repatriation facilities in time ofinternational crises as officials of comparable rank of diplomaticmissions;

(/) Have the right to import free of duty their furnitureand effects at the time of first taking up their post in the coun-try in question.

Section 20

The officials of the specialized agencies shall be exempt fromnational service obligations, provided that in relation to theStates of which they are nationals, such exemption shall be con-fined to officials of the specialized agencies whose names have, byreason of their duties, been placed upon a list compiled by theexecutive head of the specialized agency and approved by theState concerned.

Should other officials of specialized agencies be called up fornational service, the State concerned shall, at the request of thespecialized agency concerned, grant such temporary deferments inthe call-up of such officials as may be necessary to avoid interrup-tion in the continuation of essential work.

Section 21

In addition to the immunities and privileges specified in sec-tions 19 and 20, the executive head of each specialized agency,

244


UN CONVENTION

including any official acting on his behalf during his absencefrom duty, shall be accorded in respect of himself, his spouse andminor children, the privileges and immunities, exemptions andfacilities accorded to diplomatic envoys, in accordance with inter-national law.

Section 22

Privileges and immunities are granted to officials in the inter-ests of the specialized agencies only and not for personal benefitof the individuals themselves. Each specialized agency shall havethe right and the duty to waive the immunity of any official inany case where, in its opinion, the immunity would impede thecourse of justice and can be waived without prejudice to theinterests of the specialized agency.

Section 23

Each specialized agency shall co-operate at all times with theappropriate authorities of member States to facilitate the properadministration of justice, secure the observance of police regula-tions and prevent the occurrence of any abuses in connexion withthe privileges, immunities and facilities mentioned in this article.

Article VII

ABUSES OF PRIVILEGE

Section 24

If any State party to this Convention considers that there hasbeen an abuse of a privilege or immunity conferred by this Con-vention, consultations shall be held between that State and the

245


SELECTED DOCUMENTS

specialized agency concerned to determine whether any suchabuse has occurred and, if so, to attempt to ensure that no repeti-tion occurs. If such consultations fail to achieve a result satisfac-tory to the State and the specialized agency concerned, the ques-tion whether an abuse of a privilege or immunity has occurredshall be submitted to the International Court of Justice in accor-dance with section 32. If the International Court of Justice findsthat such an abuse has occurred, the State party to this Conven-tion affected by such abuse shall have the right, after notificationto the specialized agency in question, to withhold from the spe-cialized agency concerned the benefits of the privilege or immu-nity so abused.

Section 25

1. Representatives of members at meetings convened by spe-cialized agencies, while exercising their functions and duringtheir journeys to and from the place of meeting, and officialswithin the meaning of section 18, shall not be required by theterritorial authorities to leave the country in which they are per-forming their functions on account of any activities by them intheir official capacity. In the case, however, of abuse of privilegesof residence committed by any such person in activities in thatcountry outside his official functions, he may be required to leaveby the Government of that country provided that:

2. (I) Representatives of members, or persons who are enti-tled to diplomatic immunity under section 21, shall not berequired to leave the country otherwise than in accordance with thediplomatic procedure applicable to diplomatic envoys accreditedto that country.

(II) In the case of an official to whom section 21 is not appli-cable, no order to leave the country shall be issued other thanwith the approval of the Foreign Minister of the country in ques-tion, and such approval shall be given only after consultationwith the executive head of the specialized agency concerned; and,

246


UN CONVENTION

if expulsion proceedings are taken against an official, the execu-tive head of the specialized agency shall have the right to appearin such proceedings on behalf of the person against whom theyare instituted.

Article VIII

LAISSEZ-PASSER

Section 26

Officials of the specialized agencies shall be entitled to use theUnited Nations laissez-passer in conformity with administrativearrangements to be concluded between the Secretary-General ofthe United Nations and the competent authorities of the special-ized agencies, to which agencies special powers to issue laissez-passer may be delegated. The Secretary-General of the UnitedNations shall notify each State party to this Convention of eachadministrative arrangement so concluded.

Section 27

States parties to this Convention shall recognize and accept theUnited Nations laissez-passer issued to officials of the specializedagencies as valid travel documents.

Section 28

Applications for visas, where required, from officials of special-ized agencies holding United Nations laissez-passer, when accom-panied by a certificate that they are travelling on the business ofa specialized agency, shall be dealt with as speedily as possible.In addition, such persons shall be granted facilities for speedytravel.

247


SELECTED DOCUMENTS

Section 29

Similar facilities to those specified in section 28 shall beaccorded to experts and other persons who, though not the holdersof United Nations laissez-passer, have a certificate that they aretravelling on the business of a specialized agency.

Section 30

The executive heads, assistant executive heads, heads of depart-ments and other officials of a rank not lower than head of depart-ment of the specialized agencies, travelling on United Nationslaissez-passer on the business of the specialized agencies, shall begranted the same facilities for travel as are accorded to officialsof comparable rank in diplomatic missions.

Article IX

SETTLEMENT OF DISPUTES

Section 31

Each specialized agency shall make provision for appropriatemodes of settlement of:

(a) Disputes arising out of contracts or other disputes ofprivate character to which the specialized agency is a party;

(£) Disputes involving any official of a specialized agencywho by reason of his official position enjoys immunity, ifimmunity has not been waived in accordance with the provisionsof section 22.

248


UN CONVENTION

Section 32

All differences arising out of the interpretation or applicationof the present Convention shall be referred to the InternationalCourt of Justice unless in any case it is agreed by the parties tohave recourse to another mode of settlement. If a difference arisesbetween one of the specialized agencies on the one hand, and amember on the other hand, a request shall be made for an advi-sory opinion on any legal question involved in accordance withArticle 96 of the Charter and Article 65 of the Statute of theCourt and the relevant provisions of the agreements concludedbetween the United Nations and the specialized agency con-cerned. The opinion given by the Court shall be accepted as deci-sive by the parties.

Article X

ANNEXES AND APPLICATION TO INDIVIDUALSPECIALIZED AGENCIES

Section 33

In their application to each specialized agency, the standardclauses shall operate subject to any modifications set forth in thefinal (or revised) text of the annex relating to that agency, asprovided in sections 36 and 38.

Section 34

The provisions of the Convention in relation to any specializedagency must be interpreted in the light of the functions withwhich that agency is entrusted by its constitutional instrument.

249


SELECTED DOCUMENTS

Section 35

Draft annexes I to IX are recommended to the specializedagencies named therein. In the case of any specialized agency notmentioned by name in section 1, the Secretary-General of theUnited Nations shall transmit to the agency a draft annex recom-mended by the Economic and Social Council.

Section 36

The final text of each annex shall be that approved by the spe-cialized agency in question in accordance with its constitutionalprocedure. A copy of the annex as approved by each specializedagency shall be transmitted by the agency in question to theSecretary-General of the United Nations and shall thereuponreplace the draft referred to in section 35.

Section 37

The present Convention becomes applicable to each specializedagency when it has transmitted to the Secretary-General of theUnited Nations the final text of the relevant annex and hasinformed him that it accepts the standard clauses, as modified bythis annex, and undertakes to give effect to sections 8, 18, 22, 23,24, 31, 32, 42 and 45 (subject to any modification of section 32which may be found necessary in order to make the final text ofthe annex consonant with the constitutional instrument of theagency) and any provisions of the annex placing obligations onthe agency. The Secretary-General shall communicate to all Mem-bers of the United Nations and to other States members of thespecialized agencies certified copies of all annexes transmitted tohim under this section and of revised annexes transmitted undersection 38.

250


UN CONVENTION

Section 38

If, after the transmission of a final annex under section 36, anyspecialized agency approves any amendments thereto in accor-dance with its constitutional procedure, a revised annex shall betransmitted by it to the Secretary-General of the United Nations.

Section 39

The provisions of this Convention shall in no way limit orprejudice the privileges and immunities which have been, or mayhereafter be, accorded by any State to any specialized agency byreason of the location in the territory of that State of its head-quarters or regional offices. This Convention shall not be deemedto prevent the conclusion between any State party thereto and anyspecialized agency of supplemental agreements adjusting the pro-visions of this Convention or extending or curtailing the privi-leges and immunities thereby granted.

Section 40

It is understood that the standard clauses, as modified by thefinal text of an annex sent by a specialized agency to the Secretary-General of the United Nations under section 36 (or anyrevised annex sent under section 38), will be consistent with theprovisions of the constitutional instrument then in force of theagency in question, and that if any amendment to that instrumentis necessary for the purpose of making the constitutional instru-ment so consistent, such amendment will have been brought intoforce in accordance with the constitutional procedure of thatagency before the final (or revised) annex is transmitted.

The Convention shall not itself operate so as to abrogate, orderogate from, any provisions of the constitutional instrument ofany specialized agency or any rights or obligations which theagency may otherwise have, acquire, or assume.

251


SELECTED DOCUMENTS

Article XI

FINAL PROVISIONS

Section 41

Accession to this Convention by a Member of the UnitedNations and (subject to section 42) by any State member of a spe-cialized agency shall be effected by deposit with the Secretary-General of the United Nations of an instrument of accessionwhich shall take effect on the date of its deposit.

Section 42

Each specialized agency concerned shall communicate the textof this Convention together with the relevant annexes to those ofits members which are not Members of the United Nations andshall invite them to accede thereto in respect of that agency bydepositing an instrument of accession to this Convention inrespect thereof either with the Secretary-General of the UnitedNations or with the executive head of the specialized agency.

Section 43

Each State party to this Convention shall indicate in its instru-ment of accession the specialized agency or agencies in respectof which it undertakes to apply the provisions of this Convention.Each State party to this Convention may by subsequent writtennotification to the Secretary-General of the United Nations under-take to apply the provisions of this Convention to one or morefurther specialized agencies. This notification shall take effect onthe date of its receipt by the Secretary-General.

252


UN CONVENTION

Section 44

This Convention shall enter into force for each State party tothis Convention in respect of a specialized agency when it hasbecome applicable to that agency in accordance with section 37 andthe State party has undertaken to apply the provisions of theConvention to that agency in accordance with section 43.

Section 45

The Secretary-General of the United Nations shall inform allMembers of the United Nations, as well as all members of thespecialized agencies, and executive heads of the specialized agen-cies, of the deposit of each instrument of accession received undersection 41 and of subsequent notifications received under section43. The executive head of a specialized agency shall inform theSecretary-General of the United Nations and the members of theagency concerned of the deposit of any instrument of accessiondeposited with him under section 42.

Section 46

It is understood that, when an instrument of accession or a sub-sequent notification is deposited on behalf of any State, this Statewill be in a position under its own law to give effect to the termsof this Convention, as modified by the final texts of any annexesrelating to the agencies covered by such accessions or notifica-tions.

Section 47

1. Subject to the provisions of paragraphs 2 and 3 of this sec-tion, each State party to this Convention undertakes to apply thisConvention in respect of each specialized agency covered by itsaccession or subsequent notification, until such time as a revised

253


SELECTED DOCUMENTS

convention or annex shall have become applicable to that agencyand the said State shall have accepted the revised convention orannex. In the case of a revised annex, the acceptance of Statesshall be by a notification addressed to the Secretary-General ofthe United Nations, which shall take effect on the date of itsreceipt by the Secretary-General.

2. Each State party to this Convention, however, which is not,or has ceased to be, a member of a specialized agency, may ad-dress a written notification to the Secretary-General of the UnitedNations and the executive head of the agency concerned to theeffect that it intends to withhold from that agency the benefits ofthis Convention as from a specified date, which shall not be ear-lier than three months from the date of receipt of the notifica-tion.

3. Each State party to this Convention may withhold the bene-fit of this Convention from any specialized agency which ceasesto be in relationship with the United Nations.

4. The Secretary-General of the United Nations shall informall member States parties to this Convention of any notificationtransmitted to him under the provisions of this section.

Section 48

At the request of one-third of the States parties to this Conven-tion, the Secretary-General of the United Nations will convene aconference with a view to its revision.

Section 49

The Secretary-General of the United Nations shall transmitcopies of this Convention to each specialized agency and to theGovernment of each Member of the United Nations.

254


ANNEX V

International Monetary Fund

In its application to the International Monetary Fund (herein-after called "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 dif-ferences arising out of the interpretation or application of priv-ileges and immunities which are derived by the Fund solelyfrom this Convention and are not included in those which itcan 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 amend-ment of the Articles of Agreement of the Fund or impair orlimit any of the rights, immunities, privileges or exemptionsconferred upon the Fund or any of its members, Governors,Executive Directors, alternates, officers or employees by theArticles of Agreement of the Fund, or by any statute, law orregulation of any member of the Fund or any political subdivi-sion of any such member, or otherwise.

255


SELECTED DOCUMENTS

List of Members Which Have Accepted the UN Conventionon Privileges and Immunities of the Specialized Agencies

with Respect to the Fund as of May 10, 1976.

Country Elective Date

Algeria March 25,1964Argentina .October 10, 1963Austria July 21, 1950Barbados .November 19, 1971Belgium March 14, 1962

Brazil March 22, 1963Chile September 21, 1951Denmark January 25, 1950Ecuador July 7, 1953Egypt October 18, 1954

Finland July 31, 1958Gambia, The August 1, 1966Germany, Federal Republic of October 10, 1957Ghana September 9, 1958Guatemala June 30, 1951

Guinea March 29, 1968Guyana September 13,1973Haiti April 16, 1952India October 19,1949Indonesia March 8, 1972

Iran May 16,1974Iraq July 9, 1954Ireland May 10, 1967Ivory Coast June 4, 1962Japan April 18,1963

256


UN CONVENTION

Country

KenyaKuwaitLaosLesothoLibyan Arab Republic (Libya)

LuxembourgMadagascarMalawiMaliMalta

NepalNetherlandsNicaraguaNigerNorway

PakistanPhilippinesRomaniaRwandaSenegal

SpainSwedenTanzaniaThailandTrinidad and Tobago

TunisiaUpper VoltaYugoslaviaZaire (Democratic Republic

of Congo)

257

Effective Date

Julyl, 1965February 7, 1963August 9, I960November 26, 1969April 30, 1958

September 20, 1950January 3, 1966August 2, 1965June 24, 1968February 13, 1969

September 28, 1965July 21, 1949April 6, 1959May 15, 1968January 25, 1950

November 7, 1951March 20, 1950August 23, 1974June 23, 1964March 2, 1966

September 26, 1974September 12, 1951April 10, 1963June 19, 1961October 19, 1965

December 3, 1957April 6, 1962November 23, 1951

December 8, 1964




INDEX(* indicates Decision as amended)

Accounting by members for transactions with theFund

Accounts :General Account:

Accounts receivable or payable, establish-ment for adjustment of currency hold-ings

General Reserve, establishment from net in-come

Payment of expenses of conducting businessof Trust Fund and reimbursement

Special account, gold collateral transactionsTransactions to obtain special drawing

rights to pay charges or assessments . . . .Transfer of SDKs to participants making

purchases from Fund

Use of special drawing rights to settle allcharges

Special Drawing Account (see also Exchangerates, Representative rates; Special drawingrights) :

Participant designated under Article XXV,Section 5, sale of gold to Fund

Payment of interest, charges, and assess-ments

Review of rules for reconstitutionSubsidy AccountTrust Fund, special accounts

Articles of Agreement:Amendments

FirstSecond

Article I, purposes of the Fund

Article III, Section 2, adjustment of quotas

259

DecisionNo. Pdgt

170-3 4

*3637-(72/4l)G/S 334667-(75/82) 34

753-(58/17) 162

5069- (76/72) 186, 1931543-(63/39) 85

3010-(70/25)G/S 179

3414-(71/98)G/S 178B/G Res. 28-2 200

2901-(69/122)G/S 1773188-(70/106)G/S177

29l6-(69/127) 89

3010-(70/25)G/S 179B/G Res. 28-2 1994773-(75/136) 815069-(76/72) 192

2493-(68/74) 1655049-(76/51) 166B/G Res. 29-8 210B/G Res. 29-10 221

287-3 36433-(55/42) 134

1034-(60/27) 139l687-(64/22) 884377-(74/ll4) 514773-(75/136) 815069-(76/72) 186408-2 3

A


SELECTED DECISIONS OF THE IMF

Article III, Section 3, subscription paymentsArticle III, Sections 3 and 4, changes in quotas . .Article IV, Section 1, gold valueArticle IV, Section 2, price of gold

Article IV, Section 3, margins

Article IV, Section 4 (a), exchange stabilitymargins

members' policies

multiple currency practicesArticle IV, Section 4(£), purchase and sale of gold.Article IV, Section 5, changes in par values

Article IV, Section 8, maintenance of gold value ofFund assets

Article V, Section 1, borrowing arrangementsArticle V, Section 3O), "consistent with the provi-

sions of this Agreement," meaning . . .gold tranche purchasesmeaning of Section 3(#)(i)meaning of Section 3(tf)(iii)stand-by arrangementsuse of Fund's resources

waivers under

Article V, Section 3(X), gold tranche purchases. . . .Article V, Section 4, gold collateral transactions . . . .

stand-by arrangementswaivers under

Article V, Section 5, limitation on use

"is using," meaningArticle V, Section 6, repurchase obligation

sales of gold to Fundvoluntary repurchase

Article V, Section 7, repurchase obligations

Article V, Section 7(£), borrowing arrangements. . .computationsgold payments of less than one barrepurchase obligations

260

DecisionNo. Page

298-3 4, 6, 7, 167595-3 8298-3 675-(705) 11

233-2 9269-2 13904-(59/32) 13

3463-(71/126) 15*3637-(72/4l)G/S 324083-(73/104) 19

233-2 93463-(71/126) 14, 174083-(73/104) 18,214l34-(74/4) 1444232-(74/67) 22

237-2 152411-1 31

71-2 30278-3 31

*3637-(72/4l)G/S 331289-(62/l) 106

287-3 363386-(71/83) 70

284-4 35451-(55/52) 36155-(52/57) 42102-(52/ll) 37

2836- (69/87) 69424l-(74/67) 724377-(74/ll4) 532836- (69/87) 691543-(63/39) 84155-(52/57) 42

1543-(63/39) 84284-3 55286-1 55292-3 56119-(52/30) 94

29l6-(69/127) 897-(648) 93

124-2 90102-(52/ll) 40

1289-(62/l) 104*3637-(72/4l)G/S 324087-(73/105) 94

447-5 907-(648) 93

119-(52/30) 941371-(62/36) 58


INDEX

Article V, Section 7 (b) (continued):repurchase obligations (continued)

Article V, Section 7(V), repurchase obligations

Article V, 8(#), (c), and (e), borrowing arrange-ments

Article V, Section 8(V), (<0» and ( t f ) , charges . . . .Article V, Section 8(^), consultation to reduce Fund's

holdingsArticle V, Section 8(/), rates for computations . . . .

stand-by arrangements

Article VI, Section 1, use of Fund's resources

Article VI, Section 3, controls on capital transfers. .Article VII, Section 2, borrowing

Article VII, Section 3(£), security restrictionsArticle VIII, retention quotas

bilateralismArticle VIII and Article XIVArticle VIII, Section 2 ( a ) , security restrictions

payments restrictionsArticle VIII, Section 2(£), unenforceability of ex-

change contractsArticle VIII, Section 3, discrimination

multiple currency practices

Article IX, Section 7, privilege for communications.Article XII, Sections 3(£)(i) and 3(/)Article XII, Section 3(O, "the preceding two years,"

meaningadditional appointed Executive Direc-

torsArticle XII, Section 5, voting power of Executive Di-

rectorsArticle XII, Section 6, establishment of a General Re-

serve from net incomeArticle XII, Section 8Article XIV, retention quotas

Articles VIII and XIVbilateralism

Article XIV, Section 2, multiple currency practices . .

261

DecisionNo. Page

3032-(70/38)G/S 1763049-(70/44) 913320-(71/34)G/S 176

419-1 913049-(70/44) 91

1289-(62/l) 1024239-(74/67) 95

102-(52/ll) 39*3637-(72/4l)G/S 32

155-02/57) 42*270-O3/95) 45

71-2 3554l-(56/39) 97

1238-(6l/43) 3554l-(56/39) 97

1289-(62/l) 984242-(74/67) 1224635-(75/47) 127

l44-(52/51) 133201-(53/29) 137433-(55/42) 134

1034-(60/27) 139l44-(52/51) 133

3153-(70/95) 142

446-4 131955-(59/45) 138237-2 150649-(57/33) 153

3463-(71/126) 164083-(73/104) 20

534-3 1582-1 160

597-4 161

*574-2 160

180-5 161

753-(58/17) 1622603-(68/132) 48

201-(53/29) 1351034-(60/27) 139433-05/42) 134237-2 150

3463-(71/126) 164083-(73/104) 20



Article XIV, Section 2 (continued) :security restrictionspayments restrictionstransitional arrangements

Article XIV, Section 3Article XIV, Section 4

Article XV, Section 2Article XV, Section 3, borrowing arrangements. . . .Article XVI, Section 1, stand-by arrangements

borrowing arrangementsArticle XVIII(^), list of interpretations underArticle XIX(£), (r), and (h), net official holdings. .Article XIX(V)Article XIX (#), currencies deemed convertible . . . .

Article XIX (;)Article XX, Section 2 (g)

Article XX, Section 4Article XX, Section 4(/)Article XXV, Section 2, special drawing rights ob-

tained by participant

Article XXV, Section 5, sale of gold to Fund by par-ticipant designated

Article XXV, Sections 6(a) and 7(/)Article XXV, Section 6(£), review of rules for re-

constitutionArticle XXVI, Section 5, piayment of interest,

charges, and assessmentsSchedule B

Schedule DSchedule E

262

DecisionNo. Page

!44-(52/51) 1333153-(70/95) 142446-4 131

1034- (60/27) 139237-2 150117-1 163343-(54/47) 164

1289-(62/l) 107155-(52/57) 43

*270-(53/95) 451289-(62/l) 107

xix

298-3 167298-3 5, 170

4279-(74/83) 1714291-(74/88) 1714392-(74/120) 1712836-(69/87) 69298-3 170

3463-(71/126) 174083-(73/104) 21

298-3 5, 7284-2 172

3414-(71/98)G/S 178*3457-(71/121)G/S 173

29l6-(69/127) 89*3457-(71/121)G/S 173

B/G Res. 28-2 199

3010-(70/25)G/S 179486-2 180510-2 181

7-(648) 93119-(52/30) 94

3032-(70/38)G/S 1763049- (70/44) 913320-(71/34)G/S 176

*3637-(72/4l)G/S 325069-(76/72) 1851289-(62/l) 1071289-(62/l) 1074242-(74/67) 126


INDEX

Articles of Agreement (continued} :Schedule G

Auction system (see also Multiple currency prac-tices)

Audit:Subsidy AccountTrust Fund

B Balance of payments position:Assessment of need for assistance from Trust

FundCurrency composition of drawings and repur-

chasesDiscrimination for balance of payments reasons .

Bank for International Settlements:Fund assistance in gold transactionsPrescription as holder of special drawing rights .

Bilateralism

Borrowing by the Fund:General Arrangements to Borrow

Renewals

Switzerland, association of

In connection with oil facility

Authorization to make calls

Calls, orderInterest payment

Buffer stocks, international, financingFourth International Tin Agreement

Gold tranche purchases

C Capital transfers:Controls by members

RestrictionsUse of Fund's resources for

Central banks, conversion of currency

263

DecisionNo. Page

*3457-(71/121)G/Sl733829-(72/l44)S 174B/G Res. 28-2 199

237-2 148

4773-(75/136) 825069-(76/72) 185, 192

5069-(76/72) 188

1371-(62/36) 59955-(59/45) 138

3l6-(54/27) 182B/G Res. 29-1 203

433-(55/42) 134955-(59/45) 138

1289-(62/l) 981951-(65/54) HI2858-(69/96) 1124421-(74/132) 1121712-(64/29) 1142377-(67/85) 1173363-(71/60) 1194858-(75/172) 1204242-(74/67) 1224635-(75/47) 12749l6-(75/208) 1284741. (75/120) 1284917-(75/208) 1294918-(75/208) 1294490- (74/140) 1294636-(75/47) 1304919-(75/208) 130

*2772-(69/47) 663179-(70/102) 673351-(71/51) 683386-(71/83) 70

54l-(56/39) 974232-(74/67) 29B/G Res. 29-10 219

237-2 1481238-(6l/43) 351371-(62/36) 62



"Central holdings," meaningCentral rates

"Changing circumstances," adaptation of multiplecurrency practices

Charges :Extended Fund facility

Future changesGeneral Arrangements to Borrow

Gold sales to Fund for payment of repurchaseobligations

Gold tranche purchases, no service charge afterJuly 27, 1969

Gold transactions of membersLevel for reduction of Fund's holdings pursuant

to Article V, Section S(d)Oil facility

Payment in special drawing rights

Stand-by arrangements

RefundTrust Fund loans, interest

Coins, dealings deemed "other exchange transac-tions" within meaning of Article IV, Sec-tion 3 (see also Margins)

Committee on Reform of the International MonetarySystem and Related Issues

Agreement that members avoid policies affectingother members

Final report and terminationGuidelines for floating rates, applicationRome Communique, member policies not incon-

sistent with when requesting purchase underoil facility

Support of extended Fund facilityVoluntary Declaration on Trade and Other Cur-

rent Account MeasuresCommodities (see also Compensatory financing. . . ) :

Buffer stock financingTin

Export shortfallsReclassification where subject to multiple cur-

rency practicesCommunications, privilege for

264

DecisionNo. Page

298-3 1673463-(71/126) 144083-(73/104) 18

237-2 152

4377-(74/ll4) 534720-(75/ll4) 544239-(74/67) 951289-(62/l) 1024421-(74/132) 112

119-(52/30) 94

2836-(69/87) 70103-(52/12) 182

102-(52/ll) 39424l-(74/67) 734634-(75/47) 772901-(69/122)G/S 1773010-(70/25)G/S 1793188-(70/106)G/S 177

155-(52/57) 42*270-(53/95) 45

*1345-(62/23) 495069-(76/72) 190

269-2 13

B/G Comp. Res. 207

4134- (74/4) 144B/G Res. 29-7 2084232-(74/67) 23

424l-(74/67) 71, 734377- (74/114) 50

4254-(74/75) 155

*2772- (69/47) 663179-(70/102) 673351-(71/51) 684912-(75/207) 63

237-2 150, 152534-3 158


INDEX

Compensatory financing of export fluctuationsGold tranche purchases

"Consistent with the provisions of this Agreement,"meaning in Article V, Section 3

Consultations with members:Bilateral arrangementsCommodity field, attention to policiesCurrencies to be drawn and to be used in

repurchases

Exchange measures needing approval underArticle VIII

External transactions in goldFloating exchange ratesGold production subsidiesMembers' policies in present circumstances . . . .Multiple currency practicesPeriodic discussions under Article VIIIPurchases under oil facilityReduction in Fund's holdingsRetention quotasStand-by arrangements:

Clauses includedResumption of purchases

Whether measure is exchange restriction

Convertibility:Acceptance of obligations of Article VIII, Sec-

tions 2, 3, and 4Approval of exchange restrictionsBalances of Article XIV currencies deemed con-

vertible under Article XIX ( g ) :Indonesian rupiahSpanish pesetaVenezuelan bolivar

BilateralismConsultation with FundConvertible currency marginsCredit arrangements; see Borrowing by the FundCurrencies to be drawn and to be used in

repurchases

DiscriminationExclusion of currencies recently made convertible

in calculation of repurchase obligationsMultiple currency practices; see Multiple cur-

rency practicesRestrictions for security reasonsRetention quotas

Credit tranches; see Tranche policies

265

DecisionNo.

4912-(75/207)2836-(69/87)

287-3

433-(55/42)2772-(69/47)

1371-(62/36) 53049- (70/44)

1034-(60/27)75-(705)

4232-(74/67)233-2

4l34-(74/4)237-2

1034-(60/27)424l-(74/67)

102-(52/ll)201-(53/29)

2603-(68/132)*270-(53/95)1034-(60/27)

1034-(60/27)1034-(60/27)

4291-(74/88)4279-(74/83)4392-(74/120)433-(55/42)

1034-(60/27)904- (59/32)

1371-(62/36)3049- (70/44)3414-(71/98)G/S955-09/45)

510-2

!44-(52/51)201-(53/29)

Page

6269

36

13567

>7, 5891

14011229

1441461407239

136

4845

139

139139

171171171134139

13

5691

178138

181

133136



Creditworthiness, factor in determining use of Fund'sresources

Currencies {see also Convertibility; Investment):Adjustment of Fund's holdings

Arrangements for use in operations and transac-actions of Fund

Conversion

Convertible, use to obtain special drawing rightsto pay charges or assessments

Intervention

Payment of subscriptions for quota increases . . .Subscribed to the Fund, ownershipTo be drawn and to be used in repurchases ....

Value dates for transfers

D Development Committee; see Joint Ministerial Com-mittee . . .

Discriminatory currency arrangements

Discriminatory practices imposed for balance of pay-ments reasons (see also Exchange restric-tions)

Drawings; see Use of Fund's resources

E Enemy-occupied, former, members, introduction ofmultiple currency practices

Enemy-occupied territories, former, determination ofnet official holdings

"Exceptional circumstances," meaning in ArticleXIV, Section 4

Exchange contracts, unenforceabilityExchange control regulations, Fund prepared to

advise whether maintained or imposed con-sistently with Fund Agreement

Exchange controls on capital transfersExchange dealings based on parityExchange dealings under conditions of increasing

convertibilityExchange markets:

Conversion in; see Currencies, ConversionIntervention

266

DecisionNo. Pdg?

102-(52/ll) 38*270-(53/95) 43

*3637-(72/4l)G/S 324667-(75/82) 33

B/G Res. 31-2 224298-3 169119-(52/30) 94

1371-(62/36) 61

3010-(70/25)G/S 1793463-(71/126) 15, 17

4083-(73/104)18, 19,21B/G Res. 31-2 223

170-3 41371-(62/36) 563049- (70/44) 913414-(71/98)G/S 178

*3637-(72/4l)G/S 32

3463-(71/126) 164083-(73/104) 20

955-(59/45) 138

237-2 150, 151

298-3 7

117-1 163237-2 150, 151446-4 131

446-4 13254l-(56/39) 97269-2 13

904-(59/32) 13

3463-(71/126) 174083-(73/104) 20,214232-(74/67) 24,27


INDEX

Exchange rates (see also Margins; Par values):Borrowing arrangements by FundCentral rates, temporary regime

Computations and adjustment of Fund's hold-ings of currencies

Effective ratesFloating, guidelines

Fluctuating:Multiple currency practices (fixed and fluc-

tuating rates)

Scope of transactions to be agreed withFund

Free marketsFund approvalProvisional, for payment of subscription in case

of exchange transaction prior to establishmentof initial par value

Representative rates under Rule O-3, computa-tions of members' currency for which marginsare not maintained

Unification in multiple rate systems a basicobjective of Fund

Exchange restrictions:ApprovalAvoidance of escalation

Avoidance of useBilateralismCapital transactions; see Capital transfersConsultations with FundDiscriminationGuiding principle of whether measure is a

restriction on payments and transfers forcurrent international transactions

IntroductionMaintenanceMember with floating rateMultiple currency practices

Retention quotasSecurity reasons; see Payments restrictionsTransitional arrangements under Article XIV,

obligations under Article VIII, Sections 2, 3,and 4

Withdrawal

267

DecisionNo. i

1289-(62/l)3463-(71/126)4083-(73/104)

*3637-(72/4l)G/S4667-(75/82)4232-(74/67)4232-(74/67)B/G Res. 29-10

237-2649-(57/33)904-(59/32)

237-2237-2

3504-(71/134)

l687-(64/22)

*3637-(72/4l)G/S4667-(75/82)

649-(57/33)

1034-(60/27)4l34-(74/4)4254-(74/75)4912-(75/207)433-(55/42)

1034-(60/27)955-(59/45)

1034-(60/27)1034- (60/27)1034- (60/27)4232-(74/67)

237-2649-(57/33)201-(53/29)

1034-(60/27)117-1

Page

1051418

32342721

219

14715213

148148154

88

3234

153

14014415563

134

140138

13914014025

147153135

139163



Exchange stability:External transactions in gold at premium prices.

Fund statement of June 18, 1947Floating exchange ratesGold subsidiesMultiple currency practicesObligation of members

Exchange systems, avoidance of use for nonbalance

Exchange taxesExchange transactions (for purchases of exchange

from the Fund, see Use of Fund's resources):Fluctuating rates of exchange"Other," dealings in paper money and coins. ..Prior to establishment of initial par value

Executive Directors:Additional appointed, meaning of "the preceding

two years" in Article XII, Section 3(f)Appointment by members having 5 largest

quotasConsultations on currency composition of draw-

ings and repurchasesDetermination of members entitled to appoint

under Article XII, Section 3(OParticipation in meetings of Development Com-

mitteeParticipation in meetings of Interim Committee.Prompt notification of request for purchase

under stand-by arrangementReview of oil facility; see Oil facilityTo receive reports on operation of buffer stock

and developments under Fourth InternationalTin Agreement

Voting power, effect of quota changesExport shortfalls, financing; see Compensatory

financing of export fluctuationsExtended Fund facility

Assistance from Trust FundCharge

Financial year, application to repurchase obliga-tions

Floating rates; see Exchange ratesFluctuating rates of exchange; see Exchange ratesFree markets; see Exchange rates

268

F419-1447-5

7-(648)

919093

DecisionNo. Page

75-(705) 1011

4232-(74/67) 22233-2 9237-2 147

3463-(71/126) 15, 17

1034-(60/27)237-2 148

237-2269-2

l687-(64/22)

597-4

2-1

1371-(62/36)

*574-2

B/G Res. 29-9B/G Res. 29-8

3006- (70/24)

3179-(70/102)180-5

4377-(74/ll4)4912-(75/207)4934-(76/5)5069-(76/72)4377-(74/ll4)4720-(75/ll4)

140, 152

1481388

161

160

59

160

214209

50

68161

506554

1885354


INDEX

Full employment, maintenance; see Fundamentaldisequilibrium

Fund resources, use; see Use of Fund's resourcesFundamental disequilibrium:

Change in par valueCorrection by change in par valueFull employmentMeasures necessary to correct, interpretation of

Articles of Agreement

General Account; see AccountsGeneral Agreement on Tariffs and Trade

General Arrangements to Borrow; see Borrowingby the Fund

General Reserve; see Accounts, General AccountGold (see also Subscriptions):

Consultations re external transactions inDistribution of profits from sale for benefit of

developing countriesHandling charge, sale to Fund by participant

designated under Article XXV, Section 5 . . .Looted, claim by members not a "holding"....Net official holdings of membersPayment of interest and charges under General

Arrangements to BorrowPayment of stand-by charges

Payments of less than one barPledge agreement for gold collateral trans-

actionsPremium prices, transactions

Fund statement of June 18, 1947Purchase or sale for settlement of international

transactionsSale, amounts available to Trust FundSale to Fund by participant designated under

Article XXV, Section 5Sale to Fund in discharge of repurchase obliga-

tion—Rule G-7Sale, transfer of profits to Trust FundStudy of arrangements in light of agreed objec-

tives of international monetary reformSubscribed to Fund, ownershipSubsidies for production, members' obligation to

consult FundTransactions at premium prices; see Premium

prices, above

269

DecisionNo. Page

71-2278-3

71-2

71-2

303130

30

1034-(60/27)4254-(74/75)B/G Res. 29-10

75-(705)

5069- (76/72)

29l6-(69/127)298-3298-3

1289-(62/l)155-(52/57)

*270-(53/95)4087-(73/105)

1543-(63/39)75-(705)

233-2

411-15069-(76/72)

29l6-(69/127)

119-(52/30)5069- (76/72)

B/G Res. 29-10170-3

233-2

140156219

11

186

896

4, 167

102424594

83109

11

31191

89

94187

2204

9

G



DecisionNo. Pdge

Gold (continued):Transactions of members, Fund assistance 103-(52/12) 182

316-(54/27) 182572-(56/55) 183

1033-(60/26) 1831116- (60/51) 184

Gold tranche transactions (see also Use of Fund'sresources):

Buffer stock financing facility 3386-(71/83) 70Charges under stand-by arrangements 155-(52/57) 43

*270-(53/95) 46Compensatory financing of export fluctuations. . 2836-(69/87) 69Members given overwhelming benefit of doubt. 102-(52/11) 40Prior to establishment of initial par value 1687-(64/22) 88Prior to use of oil facility 4337-(74/102) 76

4638-(75/47) 78Procedure for drawings 2836-(69/87) 69Repurchase 102-(52/ll) 40Service charge, elimination 2836-(69/87) 70

H "Holding" of gold or United States dollars, mean-ing 298-3 5

Holdings of the Fund; see Currencies; Repurchases

I Import restrictions imposed for balance of paymentsreasons, GATT members 1034-(60/27) 140

Income, net, of the Fund, establishment of GeneralReserve from 753-(58/17) 162

Ineligibility; see Stand-by arrangements; Use ofFund's resources; Withdrawal from member-ship

Interest:Charge on loans from Trust Fund 5069-(76/72) 190Payment on Fund indebtedness under General

Arrangements to Borrow 1289-(62/1) 1024421-(74/132) 112

Payment on Fund indebtedness under oil facility 4242-(74/76) 1244490-(74/l40) 1294635-(75/47) 1274636-(75/47) 1304919-(75/208) 130

Special drawing rights 3010-(70/25)G/S 179Interim Committee of the Board of Governors on

the International Monetary System, establish-ment B/G Res. 29-8 208

International Monetary Fund:Administration of Trust Fund 5069-(76/72) 191Agreement with United Nations 227

270


INDEX

DecisionNo. Page

International Monetary Fund {continued):UN Convention on Privileges and Immunities,

application to Fund 255members which have accepted with respect

to Fund 256International monetary system, reform B/G Comp. Res. 207International Tin Agreement, Fourth, Fund's buffer

stock financing facility 3179-(70/102) 673351-(71/51) 68

Intervention; see Currencies; Exchange markets"Is using," meaning in Article V, Section 5 292-3 56Investment:

Currencies held in Subsidy Account 4773-(75/136) 82Currency balances held by Trust Fund 5069-(76/72) 193

J Joint Ministerial Committee of the Boards of Gov-ernors of the Bank and the Fund on theTransfer of Real Resources to DevelopingCountries, establishment B/G Res. 29-9 212

M Managing Director:Arrangements for consultations on payment of

interest on loans under oil facility 4490-(74/140) 1294636-(75/47) 1304919-(75/208) 130

Authority to establish Subsidy Account 4773-(75/136) 81Authority to make calls under borrowing ar-

rangements for oil facility 474l-(75/120) 1284917-(75/208) 129

Consultation by eligible member to requestassistance from Trust Fund 5069-(76/72) 188

Consultation on currencies and amounts to beused in acquiring special drawing rights . . . . 3010-(70/25)G/S 179

Consultation with member contemplating re-quest under extended Fund facility 4377-(74/114) 51

Consultations on currencies to be drawn andused in repurchases 1371-(62/36) 57, 58

3049-(70/44) 91Initiation of procedure for calls under General

Arrangements to .Borrow 1289-(62/l) 1011712-(64/29) 115

Participation in meetings of Development Com-mittee B/G Res. 29-9 214

Participation in meetings of Interim Committee. B/G Res. 29-8 210Margins (see also Exchange rates) :

Exchange rates for spot exchange transactionsin a convertible currency 904-(59/32) 13

Maintenance against intervention currency . . . . 3463-(71/126) 174083-(73/104) 21

271



DecisionNo. Page

Margins (continued):"Other exchange transactions" (paper money

and coins) 269-2 13Price of gold 75-(705) 10

233-2 9Rates differing from parity by more than 1 per

cent constitute multiple currency practices. .. 237-2 152Rates not maintained, within margins under

Article IV, Section 3 *3637-(72/41 )G/S 32Spot exchange transactions 904-(59/32) 13

3463-(71/126) 144083-(73/104) 18

Wider, temporary regime . 3463- (71/126) 144083-(73/104) 18

Monetary reserves of members:Calculation 486-2 180

510-2 1813049-(70/44) 92

Exclusion of special drawing rights 2901-(69/122)G/S 1753034-(70/38) 1753032-(70/38)G/S 1763320-(71/34)G/S 176

Data, means to speed collection and reporting. . 102-(52/11) 40Effect of payment of gold subscriptions 124-2 90Importance of gold holdings 75-(705) 11Use in repurchases under Article V, Section 7(£) 447-5 90

Monetary stabilization operations, use of Fund'sresources 71-2 35

Money; see Paper moneyMultiple currency practices (see also Exchange rates;

Exchange restrictions):Auction systemFixed rates 237-2 145Fluctuating rates 649-(57/33) 152Fund approval 3504-(71/134) 154Margin for spot exchange transactions 904- (59/32) 13Rates differing from parity by more than 1 per

cent 237-2 152Temporary regime of central rates and wider

margins 3463-(71/126) 164083-(73/104) 20

Net official holdings of members, principles of inter-pretation 298-3 4, 167

O "Official holdings of a member," meaning 298-3 167Oil facility 424l-(74/67) 70

4393-(74/121) 754529-(74/153) 75

272

N


INDEX

DecisionNo. Page

Oil facility {continued) :1975 facility 4634-(75/47) 76

Review of decision 4769-(75/133) 784874-(75/180) 794900-(75/198) 804954-(76/l6) 804986-(76/47) 81

Subsidy Account to assist members mostseriously affected by situation 4773-(75/136) 81

Borrowing 4242-(74/67) 1224490-(74/l40) 1294635-(75/47) 1274636-(75/47) 130474l-(75/120) 12849l6-(75/208) 1284917-(75/208) 1294918-(75/208) 1294919-(75/208) 130

Prior use of gold tranche 4337-(74/102) 764638-(75/47) 78

"Other official institutions" and "other banks,"meaning 298-3 168

P Paper money, dealings deemed "other exchangetransactions" within meaning of Article IV,Section 3 269-2 13

Par values (see also Central rates; Margins) :Change to correct a fundamental disequili-

brium 71-2 30278-3 31

Exchange transactions prior to establishment ofinitial par value l687-(64/22) 88

Extent of change 278-3 31Fund's authority 278-3 31

Payments arrears 3153-(70/95) 142Payments policies of members 4134-(74/4) 144Payments restrictions (see also Exchange restric-

tions; Payments arrears):For security reasons, Fund jurisdiction 144-(52/51) 133Withdrawal or general abandonment 117-1 163

Petroleum; see Oil facility"Presently needed," meaning in Article V, Section

3(*) (i) 284-4 36Prior agreement of Fund; see RepurchasesPrior notice to Fund, imposition of payments restric-

tions for security reasons 144-(52/51) 133Purchase transactions; see Use of Fund's resources

Q Quotas:Adjustment, first interval of five years 408-2 3

273



DecisionNo. Page

Quotas (continued):Change:

Effect on voting power of elected Execu-tive Director 180-5 161

Payment 595-3 8Increases B/G Res. 31-2 222Relation to drawing rights 451-(55/52) 37Review, firstReview, sixth general B/G Res. 29-10 221

B/G Res. 31-2 222

Rates for official communications of Fund 534-3 158Rates of exchange; see Exchange rates; Multiple cur-

rency practicesReconstitution of special drawing rights, procedures *3457-(71/121)G/S 173

3829-(72/l44)S 174B/G Res. 28-2 199

Refunds; see Stand-by arrangements, ChargesRepayment by Fund of borrowed currency 1289-(62/1) 103

1712-(64/29) 1154242-(74/67) 1244421-(74/132) 113

Representative rates; see Exchange rates"Represents," meaning in Article V, Section 3(<*)(i) 284-4 35Repurchase obligations:

Application at end of financial year in whichcalculated 419-1 91

Calculation 486-2 180510-2 181

Effect of payment of subscriptions 124-2 90Exceeding limit specified in Article V, Section

7(c) 3049-(70/44) 91Gold payments less than one bar 4087-(73/105) 94Relation to Rule G-7 119-(52/30) 94Repayment within period of 3 to 5 years 102-(52/11) 39Use of monetary reserves for repurchases under

Article V, Section l(b) 447-5 90Repurchases:

Augmentation of stand-by arrangement byequivalent amount 876-(59/15) 47

Buffer stock financing *2772-(69/47) 67Currency borrowed by Fund 1289-(62/l) 104Currency composition ' 1371-(62/36) 56, 61

3049-(70/44) 91Drawings under compensatory financing deci-

sion 4912-(75/207) 64Exclusion of special drawing rights 2901-(69/122)G/S 175

3032-(70/38)G/S 1763034-(70/38) 1753320-(71/34)G/S 176

Extended Fund facility 4377-(74/ll4) 53

274

R

408-2 3


INDEX

DecisionNo. Pdge

Repurchases (continued):Gold collateral transactions 1543-(63/39) 84Of Fund's holdings 102-(52/ll) 37

*270-(53/95) 43Oil facility 424l-(74/67) 73

4634-(75/47) 77Prior agreement of Fund needed 1371-(62/36) 58Sale of gold to Fund—Rule G-7 119-(52/30) 94Use of special drawing rights 2901-(69/122)G/S 177

3188-(70/106)G/S 177Voluntary 7-(648) 93

Reserve, General, of the Fund; see Accounts, GeneralAccount

Reserve position of members, consideration in cur-rency composition of drawings and repur-chases 1371-(62/36) 59

Restrictions; see Exchange restrictions; Paymentsrestrictions

Retention .quotas 201-(53/29) 135Rule G-7, sale of gold to Fund in discharge of

repurchase obligation 119-(52/30) 94Rule O-3, rates for computations and adjustment of

Fund's holdings of currencies *3637-(72/4l)G/S 334667-(75/82) 34

Rule P-2, reconstitution, allocation of SDRs *3457-(71/121)G/S 173

S Schedules B, D, E, G; see Articles of AgreementSecurities; see InvestmentSecurity, payments restrictions imposed for 144-(52/51) 133"Similar fiscal agency," meaning 298-3 167Special Drawing Account; see AccountsSpecial drawing rights:

Assumption with respect to allocations or can-cellations *3457-(71/121)G/S 173

3829-(72/l44) 174Exclusion in calculating monetary reserves. . . . 2901-(69/122)G/S 175

3032-(70/38)G/S 1763034-(70/38) 1753320-(71/34)G/S 176

Holder, Bank for International Settlements B/G Res. 29-1 203Interim valuation B/G Res. 29-10 220Loans from Trust Fund expressed in 5069-(76/72) 190Obtained in transaction through General Ac-

count to pay charges or assessments 3010-(70/25)G/S 179Obtained to promote reconstitution *3457-(71/121)G/S 173Review of rules for reconstitution B/G Res. 28-2 199Transfer to participants making purchases from

Fund 3414-(71/98)G/S 178Use in payment of 25 per cent of quota

increases B/G Res. 31-2 223Use in repurchases and payment of charges 2901-(69/122)G/S 177

3188-(70/106)G/S177

275



DecisionNo. Page

Special drawing rights (continued):Valuation, change, application in borrowing

under oil facility 4242-(74/67) 125Valuation for adjustment of member's currency

holdings 4667-(75/82) 34Spot exchange transactions 904-(59/32) 13

3463-(71/126) 144083-(73/104) 18

Stabilization of prices of primary products *2772-(69/47) 66Fourth International Tin Agreement: buffer

stock financing 3179-(70/102) 673351-(71/51) 68

Stand-by arrangements:Amounts 155-(52/57) 42

*270-(53/95) 44876-(59/15) 47

Assistance to member from Trust Fund 5069-(76/72) 188Augmentation by amounts of repurchases . . . . 876-(59/15) 47Avoidance of contractual language 2603-(68/132) 49Cancellation, repayment of portion of charge.. *270-(53/95) 46Charges 155-(52/57) 42

*270-(53/95) 45Refund *1345-(62/23) 49

Consultation, phasing and performance clauses. . 2603-(68/132) 48Currency borrowed by the Fund 1289-(62/l) 104Currency composition of drawings 1371-(62/36) 57Extended Fund facility, relationship 4377-(74/ll4) 54First credit tranche, increase 4934-(76/5) 41Gold tranche drawings 155-(52/57) 43

*270-(53/95) 462836-(69/87) 69

Ineligibility 155-(52/57) 43*270-(53/95) 44

Payments arrears, performance criteria 3153-(70/95) 143Period 155-(52/57) 42

*270-(53/95) 44Phasing and performance clauses 2603-(68/132) 48Policies and procedures 155-(52/57) 42

*270-(53/95) 432603-(68/132) 47

Procedures for purchases under 3006-(70/24) 50Renewal 155-(52/57) 42

*270-(53/95) 44Suspension of rights to engage in drawings. .. . 155-(52/57) 43

*270-(53/95) 45Subscriptions (see also Net official holdings of mem-

bers):Currency, payment on basis of provisional ex-

change rate for exchange transaction prior toestablishment of initial par value 1687-(64/22) 88

Gold:Calculation 298-3 4, 169

276


INDEX

DecisionNo. PAR?Subscriptions (continued): 6

Gold (continued):Effect of payment on repurchase obliga-

tions 124-2 90Payments for quota increases 595-3 8

Gold and currency, ownership by Fund 170-3 4Payment of quota increases B/G Res. 31-2 223

Subsidy Account 4773-(75/136) 81Switzerland:

Association with General Arrangements toBorrow 1712-(64/29) 114

Extensions 2377-(67/85) 1173363-(71/60) 1194858-(75/172) 120

Party to gold transactions with Fund members. 316-(54/27) 182

Technical assistance, Fund ready to meet requestsin preparation of economic programs andmeasures for exchange simplification 649-(57/33) 154

Tin Agreement, Fourth International; see Bufferstocks

Trade, Voluntary Declaration 4254-(74/75) 155B/G Res. 29-10 219

Tranche policies (see also Gold tranche) 412603-(68/132) 482836-(69/87) 69424l-(74/67) 724377-(74/ll4) 51,534912-(75/207) 65,66

Increase in credit tranches 4934-(76/5) 41Purchases on concessional terms 5069-(76/72) 188

Transfers, restrictions on; see Exchange restrictions;Payments restrictions

Transitional provisions of Article XIV 1034-(60/27) 139237-2 147, 151117-1 163

Trust Fund 5069-(76/72) 185

Unenforceability; see Exchange contractsUnited Nations:

Agreement with International Monetary Fund.. 227Convention on the Privileges and Immunities of

the Specialized Agencies 235U.S. dollars, determination of net official holdings

of members 298-3 4, 167"United States dollars," holdings of, interpretation. 298-3 5United States, purchase or sale of gold within mean-

ing of Article IV, Section 4 ( b ) 411-1 31Use of Fund's resources (see also Borrowing by the

Fund; Charges; Stand-by arrangements):Application of same policy to stand-by arrange-

ments as to requests for immediate drawings 155-(52/57) 42*270-(53/95) 44

277

T

U



DecisionNo. Page

Use of Fund's resources (continued) :Authority to use resources of Fund 71-2 35Balance of payments deficit on current account 71-2 35Buffer stock facility as applied to Fourth Inter-

national Tin Agreement 3179-(70/102) 673351-(71/51) 68

Buffer stock financing *2772-(69/47) 66Capital transfers 1238-(6l/43) 35Conditions in Article V, Section 3 (a)(i) 284-4 35Concessional terms; see Trust Fund"Consistent with the provisions of this Agree-

ment" in Article V, Section 3, meaning . . . . 287-3 36Credit tranches, increase 4934-(76/5) 41Currency borrowed by the Fund 1289-(62/1) 103Currency composition of drawings 1371-(62/36) 56Drawing policies in connection with compensa-

tory financing of export fluctuations 4912-(75/207) 62Drawing rights, meaning of 25 per cent of

quota 451-(55/52) 36Exchange transactions prior to establishment of

initial par value l687-(64/22) 88Extended Fund facility 4377-(74/114) 50

4912-(75/207) 654934-(76/5) 54

"First credit tranche" 41Gold collateral transactions 1543-(63/39) 83"Gold tranche" drawings 102-(52/11) 40

155-(52/57) 43*270-(53/95) 461687-(64/22) 882836-(69/87) 693386-(71/83) 704337-(74/102) 764638-(75/47) 78

In accordance with purposes of Fund 102-(52/11) 37, 40Ineligibility:

Effect on purchases under stand-by arrange-ment 155-(52/57) 42

*270-(53/95) 44Under Article V, Section 5 284-3 55Under Article XV, Section 2(a) 343-(54/47) 164

"Is using" in Article V, Section 5, meaning . .. 292-3 56Limitation under Article V, Section 5 284-3 55

286-1 55Monetary stabilization 71-2 35Oil facility; see Oil facilityPeriod of use 102-(52/ll) 39

155-(52/57) 42*270-(53/95) 43

Policy 102-(52/ll) 37155-(52/57) 42

*270-(53/95) 43649-(57/33) 154

278


INDEX

DecisionNo. Page

Use of Fund's resources (continued) :Postponement:

Limitation under Article V, Section 5 . . . . 286-1 55Under Article XX, Section 4 (/) 284-2 172

"Presently needed" in Article V, Section3O) (i), meaning 284-4 36

Prior to establishment of initial par value 1687-(64/22) 88Purchases under stand-by arrangements, pro-

cedure 3006-(70/24) 50"Represents" in Article V, Section 3( r f ) ( i ) ,

meaning 284-4 35Requests from members proposing appropriate

and adequate exchange simplification and re-lated economic programs to be given sympa-thetic consideration 649-(57/33) 154

Resumption of purchases under a stand-byarrangement after decision of formal ineligi-bility or to consider such a proposal *270-(53/95) 45

Suspension of exchange transaction, effect onborowing arrangements 1289-(62/1) 107

Suspension of transactions under stand-byarrangements 155-(52/57) 43

*270-(53/95) 45Temporary assistance in financing balance of

payments deficits 71-2 35Tranche policies 41

2603-(68/132) 482836-(69/87) 69424l-(74/67) 724377-(74/ll4) 534912-(75/207) 654934-(76/5) 415069-(76/72) 188

Transfer of SDRs in General Account to par-ticipants 3414-(71/98)G/S 178

Waiver of 200 per cent of quota limit *2772- (69/47) 664912-(75/207) 65

Waiver of conditions of Article V, Section3(«) ("0 424l-(74/67) 72

4377-(74/ll4) 53

V Voluntary Declaration on Trade and Other CurrentAccount Measures 4254-(74/75) 155

B/G Res. 29-10 219Voting power, elected Executive Directors, effect of

change in quota 180-5 161

W Withdrawal from membership 343-(54/47) 164Effect on participant in borrowing arrangement 1289-(62/1) 107Lender to oil facility 4242-(74/67) 126

"Working balances," meaning 298-3 168

279


International Monetary Fund, Washington, D.C. 20431, U.S.A.Telephone number: 202 477 7000

Cable address: Interfund
