IMF's Financial Resources and Liquidity Position,
1997 - February 1999

The IMF's Financial Resources and Liquidity Position:
Explanatory Note

The accompanying table summarizes the IMF's financial resource and liquidity position expressed in SDRs, the IMF's unit of account. The following items are included:

1. Total resources
   The IMF's total resources increased substantially as a result of the payments of quota increases during the month of February by 139 members. The largest component of the IMF's resources is its holdings of members' currencies. Under the Articles of Agreement, the IMF's gold is valued at SDR 35 per ounce and thus gold holdings amount to SDR 3.6 billion. (At the market price on February 26, 1999--US$286.80 a fine ounce--the holdings would be valued at SDR 21.7 billion, about US$30 billion.) The IMF's holdings of gold are not readily usable because a decision to sell gold requires a majority of 85 percent of the total voting power in the Executive Board. Holdings of SDRs currently amount to SDR 7.3 billion; "other assets" (SDR 0.3 billion) reflects sundry assets (such as building and receivables) net of sundry payables. In addition to the IMF's own resources, SDR 11.1 billion remained, at end-February, usable under the activations of the General Arrangements to Borrow (GAB) agreed on July 20, 1998 and the New Arrangements to Borrow (NAB) agreed on December 2, 1998 (see V. below).

2. Non-usable resources
   Resources that are considered non-usable to finance the IMF's ongoing operations and transactions are (i) its holdings of gold, (ii) the currencies of members that are using IMF resources and are therefore, by definition, in a weak balance of payments or reserve position, (iii) the currencies of other members with relatively weak external positions, and (iv) the "other assets" noted above. The use of IMF credit by a member increases the IMF's non-usable resources and reduces its usable resources by equivalent amounts.

3. Usable resources
   These consist of (i) holdings of the currencies of members considered by the Executive Board to have a sufficiently strong balance of payments and reserve position for their currencies to be used in transactions, (ii) holdings of SDRs, and (iii) any unused amounts under credit lines already activated (such as under the GAB/NAB). Amounts committed under arrangements, which reflect undrawn balances committed under operative stand-by and extended arrangements, other than precautionary arrangements, are deducted from the total of usable resources, as are one-half of the amounts committed under precautionary arrangements. Minimum working balances required for the IMF to be able to make payments that must be made in specified currencies are also deducted. The Executive Board has decided that such balances be set at 10 percent of the quotas of members deemed sufficiently strong for their currencies to be used.

4. Net uncommitted usable resources (resources available to meet reserve tranche purchases and new commitments)
   Currently usable resources minus resources already committed under existing arrangements and working balances as described above. This amount represents the resources available to meet requests for use of reserve positions in the IMF and new requests for use of IMF resources (see footnote to table).

5. Balances available under the General Arrangements to Borrow (GAB) and the New Arrangements to Borrow (NAB)
   The IMF since October 1962 has entered into General Arrangements to Borrow (GAB) from the major industrial countries. Under the GAB, which has 11 adherents, and the Associated Agreement with Saudi Arabia, the IMF can borrow a total of up to SDR 18.5 billion when supplementary resources are needed to forestall or cope with an impairment of the international monetary system. The GAB was activated in July 1998 for an amount of SDR 6.3 billion (of which SDR 1.4 billion has been drawn). In November 1998 the New Arrangements to Borrow (NAB) entered into effect. The NAB, which has 25 participants, does not replace the GAB. The maximum amount of resources available to the IMF under the NAB and GAB combined is SDR 34 billion. The NAB is to be the first and principal recourse in the event of a need to provide supplementary resources to the IMF. The NAB was activated in December 1998 for an amount of SDR 9.1 billion (of which SDR 2.9 billion has been drawn). Following the quota increase and the improvement in the IMF's liquidity position, it has been agreed that in early March these two activations will be terminated after consultation with the participants in the GAB and NAB, and the IMF will repay the outstanding borrowing.

6. Liquid liabilities
   The IMF's liquid liabilities consist of (i) reserve tranche positions of members, which a member acquires when the IMF uses the member's currency in its operations and through reserve assets paid by the member in connection with quota payments, and (ii) the amount of outstanding borrowing by the IMF, e.g., under the GAB/NAB. Both reserve tranche positions and outstanding lending under the GAB/NAB (together called reserve positions of members in the IMF) are part of members' international reserves. The IMF cannot challenge a request by a member to draw on its reserve position in the IMF when developments in its balance of payments or its reserve position make this necessary and the IMF must be in a position to meet such requests. As of end-February, reserve tranche positions amount to SDR 60.7 billion, and outstanding borrowing, under the GAB/NAB, amounts to SDR 4.3 billion (out of total authorized calls of SDR 15.4 billion). The vast bulk of liquid liabilities reflects credit extended by the IMF, amounting to SDR 58.3 billion on February 28, 1999.

7. Liquidity ratio
   The liquidity ratio is a measure of the IMF's liquidity position, represented by the ratio of its net uncommitted usable resources to its liquid liabilities.