NAC files, lot 60 D 137, “Documents”

The Acting Secretary of the National Advisory Council on International Monetary and Financial Problems (Willis) to the Council

Document No. 1365
  • Subject:
  • Standby Arrangements1 in the Fund
[Page 312]

The attached draft Fund decision has been agreed by the Staff Committee as the basis for Council discussion of this subject. Underlined material represents additions,2 and bracketed material deletions, that would be proposed by the U.S. Executive Director. The bracketed numbers 2 and 1 represent the proposed reversal of the order of the first two numbered paragraphs.


International Monetary Fund Stand-By Arrangements

draft decision

The Fund is prepared to consider requests by members for stand-by arrangements designed to give assurance that, during a fixed period of time, transactions up to a specified amount will be made whenever a member requests and without further consideration of its position, unless the ineligibility provisions of the Fund Agreement have been invoked. The following paragraphs set forth the general framework for stand-by arrangements:

[2] 1.
In considering the request for a stand-by arrangement or a renewal of a stand-by arrangement, the Fund would apply the same policies that are applied to requests for immediate drawings, including consideration of the performance of the member in making progress in achieving the objectives and purposes of the Fund and in carrying out agreed programs of action. The Fund would agree to a stand-by arrangement only for a member that would be in a position to make purchases of the same amount of exchange from the Fund.
[1] 2.
Stand-by arrangements would [generally] be limited to periods of not more than six months, but could be renewed by a new decision of the Executive Board.
Such arrangements would cover not more than the portion of the quota which a member would be allowed, under Article V, Section 3, to draw within the period provided in the arrangement. This does not preclude the Fund from making stand-by arrangements for larger amounts on terms in accordance with Article V, Section 4.
A charge of ⅛ of 1% would be payable to the Fund at the time a stand-by arrangement is agreed. This charge would be payable in gold (or United States dollars in lieu of gold) or the member’s currency as specified for other charges by Article V, Section 8 (f). In [Page 313] the event that a stand-by arrangement is renewed, an additional charge of ⅛ of 1% would be payable to the Fund.
A member having a stand-by arrangement would have the right to engage in the transactions covered by the stand-by arrangement without further review by the Fund. This right of the member could be suspended only with respect to requests received by the Fund after: (a) a formal ineligibility, or (b) a decision of the Executive Board to suspend transactions generally or in order to consider a proposal, made by an Executive Director or the Managing Director, that might lead to a formal ineligibility.3

  1. A standby arrangement is essentially a decision of the IMF by which a member is assured that on request he will be able to purchase from the Fund currencies of other Fund members during a specified period and up to a specified amount. For an extensive analysis of standby arrangements, see Joseph Gold, The Stand-By Arrangements of the International Monetary Fund: A Commentary on Their Formal, Legal, and Financial Aspects (Washington, 1970).
  2. Printed here in italics.
  3. For discussion of the draft decision at the 196th meeting of the NAC, see the minutes of that meeting, infra.