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

The financial resources covered in this note are a pool of currencies and other assets in the General Resources Account (GRA) that are built up from members' fully paid capital subscriptions in the form of quotas. These resources are used in the IMF's regular operations. They do not include resources from the Trust Fund, the ESAF Trust, the PRGF Trust, and the PRGF-HIPC Trust, which are used in the IMF's concessional lending.

1. Total resources
   These comprise IMF's holdings of members' currencies, SDRs, gold, and "other assets" (such as buildings and receivables). The IMF holds 103.4 million fine ounces of gold, valued on its balance sheet at SDR 5.9 billion on the basis of an average historical acquisition cost. As mandated by the IMF's Articles of Agreement, gold acquired prior to 1978 is valued at SDR 35 per ounce, the "official" price used at that time in dealings among central banks. Gold acquired since 1978 (13 million ounces) is valued at the market price in effect at the time of acquisition.
   
   
2. Non-usable resources
   Resources that are considered non-usable to finance the IMF's ongoing operations and transactions. They comprise (i) its gold holdings, (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.
   
   Credit outstanding represents the largest portion of non-usable currencies. 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 the financing of IMF transactions (see Financial Transactions), (ii) holdings of SDRs, and (iii) unused amounts, if any, under credit lines already activated, such as under the General Arrangements to Borrow and New Arrangements to Borrow (GAB/NAB).
   
   
4. Undrawn balances under arrangements
   Amounts committed under arrangements but not yet disbursed. This includes amounts committed under all arrangements (see Lending Arrangements), including arrangements considered precautionary and Contingent Credit Lines. The Contingent Credit Line facility is designed differently from other IMF financial arrangements, because commitments under this facility are agreed with countries that are not facing balance of payments difficulties. As such, undrawn balances under Contingent Credit Line arrangements are much less likely to be drawn down by the relevant member country than other IMF financial arrangements.
   
   
5. Uncommitted usable resources
   Usable resources less the full amount of undrawn balances under existing arrangements.
   
   
6. Repurchases one-year forward
   Repurchases (repayments) by member countries during the coming one-year period. These repurchases add to the supply of the IMF's usable resources. It is assumed that repurchases would be made on an expectations basis for SRF and CCL, and on an obligations basis under all other facilities (see How We Lend).
   
   
7. Prudential balance
   The prudential balance is intended to safeguard the liquidity of creditors' claims and take account of the potential erosion of the IMF's resource base. The prudential balance is set at 20 percent of the quotas of members that issue the currencies that are used in the financing of IMF transactions and any amounts activated under borrowing arrangements. The prudential ratio of 20 percent as decided by the IMF's Executive Board reflects historical experience and judgments on the indicative level of uncommitted usable resources that the IMF would normally not use to make financial commitments. The prudential ratio also applies to activated amounts under the GAB/NAB, if any, since borrowing under the IMF's standing borrowing arrangements represents a liquid claim on IMF resources. The prudential balance does not represent a rigid minimum and IMF resources could on a strictly temporary basis, fall below this level.
   
   
8. One-year forward commitment capacity (FCC)
   A measure of the resources available for new financial commitments in the coming year. The FCC is equal to uncommitted usable resources plus repurchases one-year forward minus the prudential balance. The FCC accounts fully for actual IMF financing commitments, including commitments under arrangements that are considered precautionary and under Contingent Credit Lines, and thus treats undrawn balances under all financial arrangements in the same way. In assessing IMF liquidity on the basis of the FCC, the actual resources available may be larger to the extent that commitments are not fully disbursed. The FCC has been published since December 2002. For historical estimates of the FCC see the Chart IMF One-Year Forward Commitment Capacity, 1990 to present.

• Potential GAB/NAB borrowing equals total amount of borrowing available under GAB/NAB net of activated amounts. The total amount of borrowing available under the IMF's two borrowing arrangements, the GAB and the NAB, is SDR 34 billion (see Borrowing Arrangements). Activated borrowed resources are always considered to be fully committed and should be deducted from the total amount available under GAB/NAB.
  
  
• Liquid liabilities consist of (i) reserve tranche positions, which a member acquires when the IMF uses the member's currency to provide credit to other members and through reserve assets paid by the member in connection with quota payments, and (ii) the amount of any outstanding borrowing by the IMF, e.g., under the GAB/NAB. The bulk of liquid liabilities reflects credit extended by the IMF.
  
  
• Liquidity ratio is the traditional measure of the IMF's liquidity position. It is defined as the ratio of the IMF's net uncommitted usable resources to its liquid liabilities (for an explanation, see IMF's Financial Resources and Liquidity Position 2000 - October 2002 or Financial Organization & Operations).