International Monetary Fund

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OutlineOutline

What is the IMF and what does it do? What is the IMF and what does it do? What are the legal implications of What are the legal implications of membership in the IMF?membership in the IMF?

1. Purposes 1. Purposes

2. Membership and Governance2. Membership and Governance

2. Financial Structure 2. Financial Structure

3. Functions 3. Functions Surveillance Surveillance Financing Financing Technical ServicesTechnical Services

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Introduction Introduction The IMF is an intergovernmental institution established The IMF is an intergovernmental institution established

by an international treaty in 1945 to create a framework by an international treaty in 1945 to create a framework for international economic cooperation focusing on for international economic cooperation focusing on balance of payment problems and the stability of balance of payment problems and the stability of currencies.currencies.

We will consider the legal implications of membership We will consider the legal implications of membership in the IMF under the following broad categories: in the IMF under the following broad categories: Quotas and participation in the decision making Quotas and participation in the decision making

process process Cooperation in the area of exchange arrangements Cooperation in the area of exchange arrangements

and exchange rate policies aimed at promoting and exchange rate policies aimed at promoting stability of international monetary and financial stability of international monetary and financial system system

Provision of information to the FundProvision of information to the Fund Use of Fund resources Use of Fund resources

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Purposes of the IMF are set out in Article I of Purposes of the IMF are set out in Article I of the Articles of Agreement: the Articles of Agreement: (i) (i) To promote international monetary cooperation To promote international monetary cooperation

through a through a permanentpermanent

(ii) (ii) To facilitate the expansion and balanced To facilitate the expansion and balanced growth of growth of international trade...international trade...

(iii) To promote exchange stability... (iii) To promote exchange stability...

(iv) To assist in the establishment of a multilateral (iv) To assist in the establishment of a multilateral system of system of paymentspayments

(v) (v) To make the general resources of the Fund To make the general resources of the Fund temporarily temporarily available to members for balance of available to members for balance of payments purposes payments purposes under adequate under adequate safeguards... safeguards...

(vi) In accordance with the above, to shorten the (vi) In accordance with the above, to shorten the duration and duration and lessen the degree of lessen the degree of disequilibrium in the international disequilibrium in the international balances of balances of payments of memberspayments of members

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Membership and GovernanceMembership and Governance Article II, Section 2Article II, Section 2

Membership in the IMF is not conditional on membership in Membership in the IMF is not conditional on membership in other organizations (e.g., UN, the World Bank)other organizations (e.g., UN, the World Bank)

Terms of membership – the policy is that new members should Terms of membership – the policy is that new members should not have permanent rights and obligations that differ from not have permanent rights and obligations that differ from those of original membersthose of original members

Membership is open to an applicant who:Membership is open to an applicant who: (a) is a “country” within the attributes of statehood defined by (a) is a “country” within the attributes of statehood defined by

international law,international law, (b) is (b) is willing and able to perform the obligations of membershipwilling and able to perform the obligations of membership

contained in the Articles, and contained in the Articles, and (c) accepts the terms of a Membership Resolution of the Board of (c) accepts the terms of a Membership Resolution of the Board of

Governors. Governors.

Domestic legislation is not a valid defense for not observing Domestic legislation is not a valid defense for not observing membership obligationsmembership obligations

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Any member may request an interpretation of the Articles of Any member may request an interpretation of the Articles of Agreement pursuant to the provisions of Article XXIXAgreement pursuant to the provisions of Article XXIX

Members can voluntarily withdraw from the Fund. Members can voluntarily withdraw from the Fund. Article XXVI: “Article XXVI: “Any member may withdraw from the Fund at any time by Any member may withdraw from the Fund at any time by

transmitting a notice in writing to the Fund at its principal office. transmitting a notice in writing to the Fund at its principal office. Withdrawal shall become effective on the date such notice is received.” Withdrawal shall become effective on the date such notice is received.”

WithdrawalWithdrawal can also be compulsory. Procedures are outlined in can also be compulsory. Procedures are outlined in Article XXVI, Section 2:Article XXVI, Section 2: Failure to fulfill obligations may result in ineligibility to use Failure to fulfill obligations may result in ineligibility to use

Fund resources;Fund resources; Suspension of voting rights;Suspension of voting rights; Decision by the Board of Governors by a majority having 85 Decision by the Board of Governors by a majority having 85

percent of the total voting power on withdrawal from percent of the total voting power on withdrawal from membershipmembership

Upon withdrawal settlements are made between the Fund and Upon withdrawal settlements are made between the Fund and the member upon agreement or as prescribed by the Articles the member upon agreement or as prescribed by the Articles of Agreement of Agreement

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IMF Organization ChartIMF Organization Chart

International Monetary and Financial Committee

Board of Governors Joint IMF-World Bank Development Committee

Executive BoardIndependent

Evaluation Office

Managing Director

Deputy Managing Directors

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Board of GovernorsBoard of Governors

Highest policy making body of the IMF: All powers “Highest policy making body of the IMF: All powers “not not conferred directly on the Board of Governors, the conferred directly on the Board of Governors, the Executive Board or the Managing Director shall be Executive Board or the Managing Director shall be vested in the Board of Governorsvested in the Board of Governors” (Article XII, §2(a)) ” (Article XII, §2(a))

May delegate to the Executive Board the exercise of any of May delegate to the Executive Board the exercise of any of its powers, except those directly conferred to itits powers, except those directly conferred to it

One governor and one alternate governor One governor and one alternate governor appointed by each memberappointed by each member

Usually finance ministers or central bank heads Usually finance ministers or central bank heads Weighted voting--cast the number of votes allotted to the Weighted voting--cast the number of votes allotted to the

member appointing himmember appointing him

Governors elect one of the governors as chairmanGovernors elect one of the governors as chairman Not in continuous session; meets once a year—Annual Not in continuous session; meets once a year—Annual

MeetingsMeetings May establish committees (e.g., International Monetary May establish committees (e.g., International Monetary

and Financial Committee (IMFC), joint World Bank-IMF and Financial Committee (IMFC), joint World Bank-IMF Development Committee)Development Committee)

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The Executive BoardThe Executive Board

Responsible for conducting the business of the IMF and for Responsible for conducting the business of the IMF and for exercising the powers delegated to it by the Board of Governorsexercising the powers delegated to it by the Board of Governors

Sits in continuous session, meeting as often as the business of Sits in continuous session, meeting as often as the business of the IMF may requirethe IMF may require

24 Executive Directors with the Managing Director as the 24 Executive Directors with the Managing Director as the ChairmanChairman

5 appointed by the 5 members with the largest quotas5 appointed by the 5 members with the largest quotas (currently US, Japan, Germany, UK and France) and 19 (currently US, Japan, Germany, UK and France) and 19 elected elected by the other membersby the other members

The elected Directors serve for two-year termsThe elected Directors serve for two-year terms Board of Governors, by an 85 percent majority of the total Board of Governors, by an 85 percent majority of the total

voting power, may increase or decrease the number of voting power, may increase or decrease the number of Executive Directors in the second categoryExecutive Directors in the second category

Each director shall appoint an alternateEach director shall appoint an alternate

Weighted voting structure - each Executive Director casts the Weighted voting structure - each Executive Director casts the number of votes allotted to members that he or she represents. number of votes allotted to members that he or she represents. Most decisions of the Executive Board require only a simple Most decisions of the Executive Board require only a simple majority of the votes cast; some require either 70% or 85% of the majority of the votes cast; some require either 70% or 85% of the total voting power total voting power

Voting is rare - most decisions are taken by consensus. The Voting is rare - most decisions are taken by consensus. The Chairman ascertain the sense of the meeting in lieu of a formal Chairman ascertain the sense of the meeting in lieu of a formal vote. Any Executive Director may require a formal vote. vote. Any Executive Director may require a formal vote.

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The Managing Director, Staff, Independent The Managing Director, Staff, Independent Evaluation Office Evaluation Office

Chairman of the Executive Board and chief of the Chairman of the Executive Board and chief of the operating staff operating staff

Selected by the Executive BoardSelected by the Executive Board May not be selected from among the governors or the May not be selected from among the governors or the

Executive Directors Executive Directors Term of 5 years, but shall cease to hold office when so Term of 5 years, but shall cease to hold office when so

decided by the Executive Boarddecided by the Executive Board Conducts ordinary business of the IMF under the Conducts ordinary business of the IMF under the

direction of the Executive Boarddirection of the Executive Board Subject to general control of the Executive Board, Subject to general control of the Executive Board,

responsible for organization, appointment and dismissal responsible for organization, appointment and dismissal of staffof staff

Staff of the IMF are International civil servants Staff of the IMF are International civil servants Independent Evaluation Office (IEO). Conducts Independent Evaluation Office (IEO). Conducts

objective and independent evaluations on issues objective and independent evaluations on issues relevant to the Fund’s mandate.relevant to the Fund’s mandate.

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3. Financial structure 3. Financial structure Sources of Fund financing: Sources of Fund financing:

(a) members’ quota subscriptions (currently about $305 billion);(a) members’ quota subscriptions (currently about $305 billion);

(b) borrowing to supplement the resources available from quotas (b) borrowing to supplement the resources available from quotas (e.g., General Arrangements to Borrow (GAB) since 1962; New (e.g., General Arrangements to Borrow (GAB) since 1962; New Arrangements to Borrow (NAB) in 1997);Arrangements to Borrow (NAB) in 1997);

(c) Income from investments (Article XII, Section 6(f)(i)).(c) Income from investments (Article XII, Section 6(f)(i)).

(a) Members’ quotas (a) Members’ quotas Each member of the FundEach member of the Fund is assigned a quota is assigned a quota which broadly which broadly

determined by its economic position relative to other members determined by its economic position relative to other members (economic considerations include the member’s GDP, volume of (economic considerations include the member’s GDP, volume of current account transactions, and official reserves)current account transactions, and official reserves)

Determines a member’s : (i) maximum financial commitment to the Determines a member’s : (i) maximum financial commitment to the IMF, (ii) voting power in the IMF, (iii) size of its access to financial IMF, (ii) voting power in the IMF, (iii) size of its access to financial resources and (iv) share in any allocation of “Special Drawing Rights” resources and (iv) share in any allocation of “Special Drawing Rights” (SDR) (SDR)

Quotas are reviewed every 5 years to determine whether any Quotas are reviewed every 5 years to determine whether any adjustments are needed in light of the growth of the world economy adjustments are needed in light of the growth of the world economy and changes in individual countries’ economic positions. The and changes in individual countries’ economic positions. The Thirteenth general review is to be completed by January 30, 2008.Thirteenth general review is to be completed by January 30, 2008.

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Members must pay subscription equal to their quotas. Members must pay subscription equal to their quotas. Up to 25 percent must be paid in reserve assets Up to 25 percent must be paid in reserve assets specified by the IMF (foreign currencies acceptable to specified by the IMF (foreign currencies acceptable to the IMF or SDRs); the balance may be paid in the the IMF or SDRs); the balance may be paid in the member’s own currencymember’s own currency

Voting power of each memberVoting power of each member Each member has 250 votes (referred to as “basic votes”) Each member has 250 votes (referred to as “basic votes”)

plus one vote per 100,000 SDRs of quota. Significance of plus one vote per 100,000 SDRs of quota. Significance of the basic votes have diminished from their original level of the basic votes have diminished from their original level of 11 percent of total votes to approximately 2 percent 11 percent of total votes to approximately 2 percent because of quota increasesbecause of quota increases

A member’s quota cannot be changed without its A member’s quota cannot be changed without its consent (Article III, Section 2(d))consent (Article III, Section 2(d))

If a member consents to a reduction of its quota, the If a member consents to a reduction of its quota, the Fund shall within 60 days pay to the member an amount Fund shall within 60 days pay to the member an amount equal to the reduction (Article III, Section 3(c))equal to the reduction (Article III, Section 3(c))

Over time some member’s quota’s and representation in Over time some member’s quota’s and representation in the Fund got out of line with the members’ relative the Fund got out of line with the members’ relative positions in the world economy. Thus the need for positions in the world economy. Thus the need for reform of quota and voice.reform of quota and voice.

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IMF members with largest quota shares IMF members with largest quota shares (as of April 2007)(as of April 2007)

MemberMember Quota share Quota share (%)(%)

Votes (% of Votes (% of totaltotal))

United StatesUnited States 17.1417.14 16.8316.83

JapanJapan 6.146.14 6.046.04

GermanyGermany 6.006.00 5.905.90

FranceFrance 4.954.95 4.874.87

United United KingdomKingdom

4.954.95 4.874.87

ItalyItaly 3.263.26 3.213.21

Saudi ArabiaSaudi Arabia 3.223.22 3.173.17

ChinaChina 3.733.73 3.673.67

CanadaCanada 2.942.94 2.892.89

RussiaRussia 2.742.74 2.702.70

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4. Functions of the IMF4. Functions of the IMF Purposes stated in Article I translate into three main functions:Purposes stated in Article I translate into three main functions:

(a)(a) surveillance, surveillance,

(b)(b) financial assistance,financial assistance,

(c)(c) technical assistancetechnical assistance

(a) Surveillance(a) Surveillance

Legal Basis: Article IV of the Articles of Agreement “Obligations Regarding Legal Basis: Article IV of the Articles of Agreement “Obligations Regarding Exchange Arrangements”. Article IV focuses on exchange arrangements and Exchange Arrangements”. Article IV focuses on exchange arrangements and exchange rates. exchange rates.

Article IV, Section 1 requires members to Article IV, Section 1 requires members to “collaborate with the Fund and “collaborate with the Fund and other members to assure orderly exchange arrangements and to other members to assure orderly exchange arrangements and to promote a stable system of exchange ratespromote a stable system of exchange rates” and requires each member to: ” and requires each member to:

Direct its economic and financial policies toward the objective of fostering orderly Direct its economic and financial policies toward the objective of fostering orderly economic growtheconomic growth

Seek to promote stability by fostering orderly underlying economic and financial Seek to promote stability by fostering orderly underlying economic and financial conditions and an orderly monetary systemconditions and an orderly monetary system

Avoid manipulating exchange rates or the international monetary system in order Avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or gain an unfair competitive to prevent effective balance of payments adjustment or gain an unfair competitive advantageadvantage

Follow exchange policies compatible with the undertaking of the aboveFollow exchange policies compatible with the undertaking of the above

The purpose of surveillance is to enable the Fund to oversee (i) the international The purpose of surveillance is to enable the Fund to oversee (i) the international monetary system to ensure its effective operation (multilateral surveillance, e.g., monetary system to ensure its effective operation (multilateral surveillance, e.g., World Economic Outlook, Global Financial Stability Report, multilateral World Economic Outlook, Global Financial Stability Report, multilateral consultations) and (ii) member’s’ compliance with the obligations specified under consultations) and (ii) member’s’ compliance with the obligations specified under Article IV, Section 1 (bilateral surveillance).Article IV, Section 1 (bilateral surveillance).

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Under Article IV, Section 2 members Under Article IV, Section 2 members have the right to have exchange have the right to have exchange arrangements of their choice consistent with the purposes of the arrangements of their choice consistent with the purposes of the Fund and the obligations under Article IV, Section 1Fund and the obligations under Article IV, Section 1 . Each members . Each members shall notify the Fund of its exchange arrangements and of any changes in shall notify the Fund of its exchange arrangements and of any changes in exchange arrangements. exchange arrangements.

Under Article IV, Section 3, the Fund must “exercise firm surveillance over the Under Article IV, Section 3, the Fund must “exercise firm surveillance over the exchange rate policies of members and shall adopt specific principles for the exchange rate policies of members and shall adopt specific principles for the guidance of all members with respect to those policies: guidance of all members with respect to those policies:

principles provide by the Fund shall respect the domestic social and political principles provide by the Fund shall respect the domestic social and political policies of members, and policies of members, and

in applying these principles the Fund shall pay due regard to the circumstances in applying these principles the Fund shall pay due regard to the circumstances of members.of members.

Principles for the guidance of members’ policies were adopted by the Board, Principles for the guidance of members’ policies were adopted by the Board, Decision - Decision No. 13919-(07/51), adopted on June 15, 2007, on Decision - Decision No. 13919-(07/51), adopted on June 15, 2007, on Bilateral Surveillance Over Member's Policies, replaced the 1977 Decision. Bilateral Surveillance Over Member's Policies, replaced the 1977 Decision.

The Fund conducts surveillance on an ongoing basis, including through regular The Fund conducts surveillance on an ongoing basis, including through regular reviews of member’s economic policies, known as Article IV consultations. reviews of member’s economic policies, known as Article IV consultations. Increasingly, Article IV consultation reports are published. Increasingly, Article IV consultation reports are published.

Members Members shall provide information to the Fundshall provide information to the Fund as required under Article as required under Article IV, Section 3 and Article VIII, Section 5. In practice, the Fund has relied on IV, Section 3 and Article VIII, Section 5. In practice, the Fund has relied on Article VIII to obtain information. Article VIII to obtain information.

Surveillance also deals with exchange restrictions and multiple currency Surveillance also deals with exchange restrictions and multiple currency practices – obligations under Article VIII practices – obligations under Article VIII

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(b) Financing (b) Financing

Article I(v) – “Article I(v) – “To give confidence to members by making the general To give confidence to members by making the general resources of the Fund temporarily available to them under adequate resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments..maladjustments in their balance of payments.. .”.”

IMF financing can only be provided to deal with balance of payments problems; IMF financing can only be provided to deal with balance of payments problems; cannot be provided for other purposes or specific projects. The requested use of cannot be provided for other purposes or specific projects. The requested use of the resources must be consistent with the provisions of the Articles and policies the resources must be consistent with the provisions of the Articles and policies adopted under the Articles.adopted under the Articles.

IMF financing from the GRA does not take the form of loans, but rather the IMF financing from the GRA does not take the form of loans, but rather the member receiving assistance “purchases” the currencies of other members member receiving assistance “purchases” the currencies of other members that have strong balances of payments positions or SDRs with its own currency. that have strong balances of payments positions or SDRs with its own currency. Fund arrangements are not international agreements.Fund arrangements are not international agreements.

IMF’s resources are only meant for temporary use (“revolving” character) – a IMF’s resources are only meant for temporary use (“revolving” character) – a member is required to repurchase its currency within a specified period of timemember is required to repurchase its currency within a specified period of time . .

IMF financing is provided under adequate safeguards IMF financing is provided under adequate safeguards

Only if a member is prepared to take the steps necessary to address its Only if a member is prepared to take the steps necessary to address its balance of payments difficultiesbalance of payments difficulties

Achieved through the member implementing a program of economic Achieved through the member implementing a program of economic reform that deals with problemreform that deals with problem

Member can purchase the reserve tranche subject to representation of Member can purchase the reserve tranche subject to representation of balance of payments need which cannot be challenged ex-ante by the balance of payments need which cannot be challenged ex-ante by the Fund and free from conditionality, charges, or repurchase obligationsFund and free from conditionality, charges, or repurchase obligations

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IMF financing is subject to access limits – provided on the basis of quota and the IMF financing is subject to access limits – provided on the basis of quota and the amount of access is normally subject to maximum limits specified by the IMFamount of access is normally subject to maximum limits specified by the IMF

IMF makes financial resources available to members in accordance with policies it IMF makes financial resources available to members in accordance with policies it adopts. Special policies may be adopted for special balance of payment problems adopts. Special policies may be adopted for special balance of payment problems to assist members to solve their problems in a manner consistent with the to assist members to solve their problems in a manner consistent with the provisions of the Articles of Agreement (Article V, Section 3). Examples of policies: provisions of the Articles of Agreement (Article V, Section 3). Examples of policies: policy on stand-by arrangements, extended Fund facility, supplemental reserve policy on stand-by arrangements, extended Fund facility, supplemental reserve facility, emergency natural disaster and emergency post conflict assistance).facility, emergency natural disaster and emergency post conflict assistance).

A member can walk away from the arrangement/program and repay outstanding A member can walk away from the arrangement/program and repay outstanding Fund resources at any time.Fund resources at any time.

Conditionality seeks to ensure that IMF resources are provided to assist the Conditionality seeks to ensure that IMF resources are provided to assist the member in resolving its balance of payments problems in a manner that is member in resolving its balance of payments problems in a manner that is consistent with the Articles and establishes adequate safeguards for the consistent with the Articles and establishes adequate safeguards for the temporary use of IMF resources.temporary use of IMF resources.

Principle of uniform treatment - the use of IMF resources is based on the uniform Principle of uniform treatment - the use of IMF resources is based on the uniform and nondiscriminatory treatment of members.and nondiscriminatory treatment of members.

Members must provide the Fund with information necessary for it to carry out its Members must provide the Fund with information necessary for it to carry out its functions (Article VIII, Section 5).functions (Article VIII, Section 5).

The Fund also provides concessional financing to qualifying members under the The Fund also provides concessional financing to qualifying members under the Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility (ESF). (ESF).

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Some other obligations under the Articles of Some other obligations under the Articles of Agreement Agreement

Article V, Section 3(e): Obligations to ensure exchange of Article V, Section 3(e): Obligations to ensure exchange of members’ currencies for freely usable currencies members’ currencies for freely usable currencies

Article VIII, Section 5: Obligation to Furnish Information Article VIII, Section 5: Obligation to Furnish Information

The IMF relies on information provided by members in order to carry The IMF relies on information provided by members in order to carry out its mandate and functions effectively. IMF acts “as a centre for the out its mandate and functions effectively. IMF acts “as a centre for the collection and exchange of information on monetary and financial collection and exchange of information on monetary and financial problems”.problems”.

The procedures for obtaining data from members are founded onThe procedures for obtaining data from members are founded on a a cooperative approach and trust in members to provide the required cooperative approach and trust in members to provide the required information accurately. information accurately.

Information is important for effective surveillance and ensuring that Information is important for effective surveillance and ensuring that the IMF’s resources are used for their intended purposes. Section 5(a) the IMF’s resources are used for their intended purposes. Section 5(a) requires members to provide the IMF with the information “necessary” requires members to provide the IMF with the information “necessary” for its activities; thus Article VIII, Section 5 applies both in the context for its activities; thus Article VIII, Section 5 applies both in the context of use of the IMF resources and surveillance.of use of the IMF resources and surveillance.

.. The required minimum of data is listed in Article VIII, Section 5. The list was The required minimum of data is listed in Article VIII, Section 5. The list was

expanded by Executive Board Decision No. 13183-(04/10), January 4, 2004 on expanded by Executive Board Decision No. 13183-(04/10), January 4, 2004 on Strengthening the Effectiveness of Article VIII, Section 5Strengthening the Effectiveness of Article VIII, Section 5

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Obligation to provide information is continuous, not just limited to Obligation to provide information is continuous, not just limited to provision of data at time of Article IV consultationsprovision of data at time of Article IV consultations

Obligation is not absolute, must take into account varying abilities of members to provide information—defense of capacity; “benefit of any doubt” given to member in assessing its ability to provide information (Article VIII, Section 5(b)):

Section 5(b) only calls for information to be furnished “in as Section 5(b) only calls for information to be furnished “in as detailed and accurate a manner as is practicable and, so far as detailed and accurate a manner as is practicable and, so far as possible, to avoid mere estimates”.possible, to avoid mere estimates”.

Not in such detail that affairs of individuals or corporations are Not in such detail that affairs of individuals or corporations are disclosed.disclosed.

International investment position (IIP): so far as it is possible to International investment position (IIP): so far as it is possible to furnish this information.furnish this information.

No breach of obligation if failure to provide information/accurate No breach of obligation if failure to provide information/accurate information is due to lack of capacity.information is due to lack of capacity.

Whether a member has capacity is determined on a case-by-case Whether a member has capacity is determined on a case-by-case basis.basis.

Members have an ongoing obligation to improve their reporting Members have an ongoing obligation to improve their reporting systems and the accuracy of information provided.systems and the accuracy of information provided.

Section 5(c) deals mostly with the IMF’s authority to enter into Section 5(c) deals mostly with the IMF’s authority to enter into voluntary arrangements with members “to obtain further voluntary arrangements with members “to obtain further information”. information”.

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Article VIII, Section 2: members shall not, without the approval of the Article VIII, Section 2: members shall not, without the approval of the Fund, impose restrictions on the making of payments and transfers for Fund, impose restrictions on the making of payments and transfers for current international transactionscurrent international transactions

Payments for current transactions means payments which are not Payments for current transactions means payments which are not for the purpose of transferring capital (Article XXX) for the purpose of transferring capital (Article XXX)

The Fund may approve exchange restrictions and multiple currency The Fund may approve exchange restrictions and multiple currency practices under certain circumstances (e.g., if necessary (imposed practices under certain circumstances (e.g., if necessary (imposed for BOP reasons), temporary and non-discriminatory, if imposed for for BOP reasons), temporary and non-discriminatory, if imposed for national security reasons)national security reasons)

Article VIII, Section 3: members shall not, without Fund’s approval, Article VIII, Section 3: members shall not, without Fund’s approval, engage, or permit any of its fiscal agencies to engage in, any engage, or permit any of its fiscal agencies to engage in, any discriminatory currency arrangements or multiple currency practices. discriminatory currency arrangements or multiple currency practices. Exception – transitional arrangements under Article XIV.Exception – transitional arrangements under Article XIV.

Article VIII, Section 4: obligation on convertibility of foreign-held Article VIII, Section 4: obligation on convertibility of foreign-held balancesbalances

Article XIV allows members to avail themselves of transitional Article XIV allows members to avail themselves of transitional arrangements before accepting obligations of Article VIII, Sections 2,3 arrangements before accepting obligations of Article VIII, Sections 2,3 and 4. A member may “maintain and adapt to changing circumstances and 4. A member may “maintain and adapt to changing circumstances the exchange restrictions that were in effect on the date on which it the exchange restrictions that were in effect on the date on which it became a member” but should make efforts to remove those became a member” but should make efforts to remove those restrictions as soon as they can.restrictions as soon as they can.

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Article VIII, Section 7: members shall collaborate with the Fund Article VIII, Section 7: members shall collaborate with the Fund and with other members to ensure that the members’ policies and with other members to ensure that the members’ policies with respect to reserve assets shall be consistent with the with respect to reserve assets shall be consistent with the objectives of promoting better international surveillance of objectives of promoting better international surveillance of international liquidityinternational liquidity

Article IX: members shall grant certain privileges and immunities Article IX: members shall grant certain privileges and immunities to the Fund, its officers and employees, premises, property, to the Fund, its officers and employees, premises, property, assets and archives assets and archives

Article XI: relations with non-members. Members cannot engage Article XI: relations with non-members. Members cannot engage in transactions or cooperate with non-members or with persons in in transactions or cooperate with non-members or with persons in non-member territories if such transactions or cooperation is non-member territories if such transactions or cooperation is contrary to the provisions of the Articles of Agreementcontrary to the provisions of the Articles of Agreement

Article XII, Section 8: the Fund may, by a 70 percent majority of Article XII, Section 8: the Fund may, by a 70 percent majority of the total voting power, decide to publish a report made to a the total voting power, decide to publish a report made to a member regarding its monetary or economic conditions and member regarding its monetary or economic conditions and developments which directly tend to produce a serious developments which directly tend to produce a serious disequilibrium in the international balance of payment of disequilibrium in the international balance of payment of members. members.

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(c) Technical assistance(c) Technical assistance

Services provided under Article V, Section 2(b) shall not impose any Services provided under Article V, Section 2(b) shall not impose any obligation on a member without its consentobligation on a member without its consent

Administration of the Poverty Reduction and Growth Facility and Administration of the Poverty Reduction and Growth Facility and Exogenous Shocks Facility (PRGF-ESF) Trust (1987) and PRGF-HIPC Trust Exogenous Shocks Facility (PRGF-ESF) Trust (1987) and PRGF-HIPC Trust are examples of financial services provided under this Articleare examples of financial services provided under this Article

The PRGF is a concessional lending facility for low-income members (annual The PRGF is a concessional lending facility for low-income members (annual interest rate of 0.5 percent, loan maturity stretching from five-and-a-half to interest rate of 0.5 percent, loan maturity stretching from five-and-a-half to 10 years)10 years)

Resources from the PRGF-HIPC Trust are used for debt relief operationsResources from the PRGF-HIPC Trust are used for debt relief operations

Other examples of technical assistance: in fiscal area (drafting of tax or Other examples of technical assistance: in fiscal area (drafting of tax or budget legislation); in statistics (helping to set a framework for collection budget legislation); in statistics (helping to set a framework for collection and analysis of data); banking sector reform (banking laws, supervision and analysis of data); banking sector reform (banking laws, supervision matters, financial sector restructuring); law reform (judicial reform). matters, financial sector restructuring); law reform (judicial reform). Mainly in support of private sector development.Mainly in support of private sector development.

Reports on Observance of Standards and Codes (ROSCs):Reports on Observance of Standards and Codes (ROSCs):

summarize countries’ observance of certain internationally recognized summarize countries’ observance of certain internationally recognized standards and codes. The Fund has recognized 12 areas and associated standards and codes. The Fund has recognized 12 areas and associated standards: accounting; auditing; anti-money laundering and countering the standards: accounting; auditing; anti-money laundering and countering the financing of terrorism (AML/CFT); banking supervision; corporate financing of terrorism (AML/CFT); banking supervision; corporate governance; data dissemination; fiscal transparency; insolvency and governance; data dissemination; fiscal transparency; insolvency and creditor rights; insurance supervision; monetary and financial policy creditor rights; insurance supervision; monetary and financial policy transparency; payments systems; securities regulation; and AML/CFT;transparency; payments systems; securities regulation; and AML/CFT;

are prepared and published at the request of the member country. are prepared and published at the request of the member country.

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Financial Sector Assessment Program (FSAP): a joint IMF and World Bank Financial Sector Assessment Program (FSAP): a joint IMF and World Bank effort introduced in May 1999 aimed at increasing the effectiveness of effort introduced in May 1999 aimed at increasing the effectiveness of efforts to promote the soundness of financial systems in member efforts to promote the soundness of financial systems in member countries. countries.

The FSAP forms the basis of Financial System Stability Assessments The FSAP forms the basis of Financial System Stability Assessments (FSSAs), in which IMF staff address issues of relevance to IMF (FSSAs), in which IMF staff address issues of relevance to IMF surveillance, including risks to macroeconomic stability stemming surveillance, including risks to macroeconomic stability stemming from the financial sector from the financial sector

Current challenge – better incorporate financial sector work into Current challenge – better incorporate financial sector work into Fund surveillanceFund surveillance

Technical services are provided by the IMF staff under the authority of Technical services are provided by the IMF staff under the authority of the Managing Directorthe Managing Director