IV. International financial organizations
2. International Monetary Fund (IMF)
Article VIII: General Obligations of Members
o Section 2. Avoidance of restrictions on current payments
(a) …no member shall, without the approval of the Fund, impose restrictions on the making of payments and transfers for current international transactions.
o Section 3. Avoidance of discriminatory currency practices o Section 4. Convertibility of foreign-held balances
o Section 5. Furnishing of information
o Section 6. Consultation between members regarding existing international agreements
o Section 7. Obligation to collaborate regarding policies on reserve assets b) IMF Quotas
• Quota subscriptions are a central component of the IMF’s financial resources.
• Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. weighted average of
GDP (weight of 50 percent) based on market exchange rates (weight of 60 percent) - PPP exchange rates (40 percent)
openness (30 percent),
economic variability (15 percent), and international reserves (5 percent).
• quota determines its
maximum financial commitment to the IMF, voting power,
bearing on its access to IMF financing.
• Countries with the biggest quotas: USA (16.5%), EU27 (29.4%), China (6%), Russia (2.6%) Reading: http://www.imf.org/external/np/exr/facts/quotas.htm
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http://www.imf.org/external/np/sec/pr/2011/pdfs/quota_tbl.pdf
Source: IMF website
c) Fundraising and lending
Fundraising (reading: https://www.imf.org/external/np/exr/facts/gabnab.htm):
o General Arrangements to Borrow (GAB)
IMF to borrow specified amounts of currencies from 11 industrial countries (or their central banks), under certain circumstances.
GAB Participants and Credit Amounts (SDR million):
Source: IMF website
o New Arrangements to Borrow: 1995 G-7 Halifax Summit 5000
10001500 20002500 30003500 40004500
Belgium Canada Germany France Italy Japan Netherlands Sweden Switzerland United Kingdom United States Saudi Arabia
Original GAB (1962-1983) Enlarged GAB (1983–2018)
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Collecting funds from donor countries when 85 percent of total credit arrangements of participants eligible to vote (every 6 month since March 11, 2011)
NAB Participants and Credit Amounts (SDR million):
Source: IMF website
IMF lending programs (reading: http://www.imf.org/external/np/exr/facts/howlend.htm) o Stand-by Arrangements (SBA)
short-term balance of payments problems
typically 12–24 months, and repayment is due within 3¼-5 years of disbursement
precautionary - option if conditions deteriorate o Extended Arrangements (EFF)
medium- and longer-term balance of payments problems
require fundamental economic reforms
3-4 years, repayment is due within 4½–10 years o Flexible Credit Line (FCL)
for countries with very strong fundamentals, policies, and track records of policy implementation
1-2 years
o Precautionary and Liquidity Line (PLL)
countries with sound fundamentals and policies, and a track record of implementing such policies
may face moderate vulnerabilities
not require the substantial policy adjustments
6M-1-2Y
o The Extended Credit Facility (ECF)
For Low-income countries
interest rate is reviewed every two years (0% until the end of 2014)
medium-term support
protracted balance of payments problems 0,00
10000,00 20000,00 30000,00 40000,00 50000,00 60000,00 70000,00 80000,00
Australia Austria Chile Portugal Israel Belgium Brazil Canada China Cyprus Denmark Germany Finland France Greece Hong Kong India Ireland Italy Japan South-Korea Kuwait Luxembourg Malaysia Mexico Netherlands New Zealand Norway Pilipinas Poland Russian Federation Saudi Arabia Singapore South Africa Spain Sweden Switzerland Thailand United Kingdom United States
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grace period of 5½ years, and a final maturity of 10 years.
o Standby Credit Facility (SCF)
short-term balance of payments needs d) SDR
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The SDR serves as the unit of account of the IMF and some other international organizations. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
Currency Weight (in percent) since 2015 o U.S. dollar 41.73%
o Euro 30.93%
o Chinese renminbi 10.92%
o Japanese yen 8.33%
o Pound sterling 8.09%
SDR interest rate: Determined weekly based on a weighted average of representative interest rates on short-term government debt instruments in the money markets of the SDR basket currencies, with a floor of 5 basis points.
e) CEESE and IMF (1989-2009)
After the fall of the communist regime in 1989, countries in Central and East Europe started their transition towards a market economy and to regain their economic links towards the western side of the European Economy. Meanwhile, they were facing with a deep recession as they had to consolidate their former planned economy. These institutional changes were made under severe funding condition and under the necessity of privatization of state owned enterprises.
1982
o Hungary joins the IMF
1984
o The IMF approves an SDR 297 million for Hungary
1986
o Poland joins the IMF
1988
o The IMF approves an SDR 165 million for Hungary
1989
o The collapse of the communist regimes in the region o The IMF approves an SDR 50 million for Hungary
1990
o The Paris Club and Poland sign a debt rescheduling agreement
o The IMF approves an SDR 160 million compensatory and contingency financing facility for Hungary
o Czechoslovakia joins the IMF o Bulgaria joins the IMF
1991
o The IMF approves an SDR 1.1 billion extended fund facility for Hungary o The IMF approves an SDR 279 million stand-by facility for Bulgaria o The IMF approves an SDR 380.5 million stand-by facility for Romania o The IMF approves an SDR 1.2 billion extended fund facility for Poland.
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o The Paris Club reaches an agreement with Poland on debt reduction and with Bulgaria on debt rescheduling
1992
o SDR 236 million stand-by arrangement for Czechoslovakia o SDR 155 million stand-by arrangement for Bulgaria o Lithuania, Latvia, Estonia joins the IMF
o SDR 314 million stand-by arrangement for Romania o Slovenia succeeds to the IMF membership
1993
o Czech Republic and Slovakia succeed to the IMF membership o SDR 476 million stand-by credit for Poland
o SDR 177 million stand-by credit for the Czech Republic
o The IMF approves an SDR 405 million stand-by credit for Slovakia o SDR 25.9 million systemic transformation facility for Lithuania.
o SDR 11.6 million stand-by credit for Estonia o SDR 22.9 million stand-by credit for Latvia
1994
o SDR 69.7 million stand-by credit for Bulgaria
o The Paris Club and Bulgaria sign a debt rescheduling agreement
o Lithuania, Latvia, Estionia accepts the IMF’s Article VIII obligations regarding the liberalization of capital movements
o SDR 132 million stand-by credit for Romania
o The London Club and Bulgaria sign a debt reduction (nearly 50%) agreement o The IMF approves an SDR 96.5 million stand-by credit for Slovakia
o The IMF approves an SDR 545 million stand-by credit for Poland
o The London Club and Poland sign a debt reduction (nearly 50%) and rescheduling agreement
o Czech Republic finances its public debt on market basis (IMF loans repaid)
1995
o SDR 14 million stand-by credit for Estonia.
o SDR 27.5 million stand-by credit for Latvia.
o Poland, Slovenia, Czech Republic and Slovakia accepts the IMF’s Article VIII obligations o Poland finances its public debt on market basis (IMF loans repaid)
1996
o Hungary accepts the IMF’s Article VIII obligations o SDR 264.2 million stand-by credit for Hungary o SDR 30 million stand-by credit for Latvia o SDR 400 million stand-by credit for Bulgaria o SDR 14 million stand-by credit for Estonia
1997
o SDR 479.5 million credit for Bulgaria
o SDR 301.5 million stand-by credit for Romania o SDR 33 million stand-by credit for Latvia o SDR 16.1 million stand-by credit for Estonia
1998
o Romania and Bulgaria accepts the IMF’s Article VIII obligations o SDR 627.6 million extended fund facility for Bulgaria
o Hungary finances its public debt on market basis (IMF loans repaid)
1999
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o SDR 400 million stand-by credit for Romania o SDR 33 million stand-by credit for Latvia
2000
o SDR 29.3 million stand-by credit for Estonia o SDR 61.8 million stand-by credit for Lithuania
o Slovakia finances its public debt on market basis (IMF loans repaid)
2001
o SDR 33 million stand-by credit for Latvia
o SDR 86.5 million stand-by arrangement for Lithuania o SDR 300 million stand-by credit for Romania
2002
o SDR 240 million stand-by credit for Bulgaria
2004
o The EU10 (Czechia, Hungary, Poland, Slovakia, Slovenia, Estonia, Latvia and Lithuania) joins the European Union.
o SDR 250 million stand-by arrangement for Romania o SDR 100 million stand-by arrangement for Bulgaria
2007
o Romania and Bulgaria joins the EU
2008
o to avert a deepening of financial market pressures in Hungary, the
IMF approves an SDR 10.5 billion stand-by arrangement, and the
European Council approves a EUR 6.5 billion loan o to stabilize the Latvian economy,
the IMF approves an SDR 1.5 billion stand-by arrangement.
European Council approves a EUR 3.1 billion loan.
Scandinavian, Baltic and Eastern European countries provide bilateral financial assistance
2009
o sharp drop in Romanian capital inflows,
IMF approves an SDR 11.4 billion stand-by arrangement
European Council approves a EUR 5 billion loan
o SDR 13.7 billion arrangement under the flexible credit line for Poland
2013
o Hungary finances its public debt on market basis (IMF loans repaid)
2016
o Romania finances its public debt on market basis (IMF loans repaid)
2017
o Poland Ends the Two-Year €8.24 Billion Flexible Credit Line Arrangement with the IMF Literature:
OeNB (2009): 1989–2009 Twenty Years of East-West Integration: Hopes and Achievements.
https://www.oenb.at/en/Publications/Economics/Focus-on-European-Economic-Integration.html
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