Section 2: Australia's interactions with the International Monetary Fund


Part 1: Australia’s relations with the International Monetary Fund


Australia became a member of the IMF in 1947. The International Monetary Agreements Act 1947 formalised Australia’s IMF membership. The Act contains provisions, which have been updated through time, to enable Australia to meet any obligations that may arise by virtue of its IMF membership. A brief outline of these provisions, along with an indication of whether the provision was used during 2012-13, is included in Table 2.1.

The IMF was established to promote growth and prosperity. The IMF’s purpose (set out in Article I of its Articles of Agreement) is to: promote international monetary cooperation; facilitate the expansion of trade contributing to employment growth; promote exchange rate stability to avoid competitive devaluation; assist in the establishment of a multilateral system of payments; and make resources available to members to reduce the costs of balance of payments adjustments.

The IMF achieves its mandate by: conducting surveillance over the economic policies of members and providing policy advice to assist members in achieving key domestic objectives; providing technical assistance and training to members, enabling them to build the expertise required to implement sound economic policies; and providing temporary financing to members experiencing balance of payments difficulties to reduce the cost associated with significant economic adjustment.

Table 2.1: Activation of International Monetary Agreements Act 1947 Provisions in 2012-13
Section of the Act Description of the provision Provision activated
Section 5A The Treasurer may provide the RBA with a written direction to exchange SDRs or foreign currency on the Commonwealth’s behalf. There is a standing direction to the RBA to this effect.
Section 6 — Authority to borrow Provides the Treasurer with the authority to borrow funds in order to meet obligations as members of the IMF, World Bank, and NAB. The provision was activated during 2012-13 as a result of financial transactions with the IMF.
Section 7 — Issue of securities Provides the Treasurer with the authority to settle obligations by issuing non-negotiable and non-interest bearing securities, should it be acceptable to the IMF and World Bank. This provision was not exercised during 2012-13.
Section 8 — Payment of charges Provides Australia with the authority to pay service and interest charges on any borrowing. The provision was not exercised during 2012-13.
Section 8A — Appropriation for purposes of SDR Department Provides the Treasurer with the authority to pay any obligations that arise due to Australia’s membership of the SDR department. The provision was exercised during 2012-13 to pay the quarterly interest charges on Australia’s SDR holdings and the annual assessment fee.
Section 8B — Appropriation for the purposes of the NAB Provides the Treasurer with the authority to meet its obligations under the NAB. Australia’s total commitment in 2012-13 under the NAB was SDR 4.37 billion. The provision was activated during 2012-13 as a result of a transaction under the NAB.
Section 8C — Financial assistance by Australia in support of Fund programs Provides the Treasurer with the authority to enter into a loan or currency swap arrangement with a member who has received an IMF support package. The provision was not used during 2012-13.
Section 8CAA — Appropriation for the purposes of the IMF bilateral loan agreement Provides the Treasurer with the authority to borrow for payments to meet drawings made by the IMF under a bilateral loan agreement entered into by Australia and the IMF. The provision was not used during 2012-13.

Australia’s representation

Board of Governors

The Board of Governors is the highest authority within the IMF and consists of one Governor and one Alternate Governor for each member country. During 2012-13, the then Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, had been Australia’s Governor of the IMF until 27 June 2013, when Australia was represented by the Hon. Chris Bowen MP, Treasurer of the Commonwealth of Australia. Since 7 March 2011, Dr Martin Parkinson, Secretary to the Treasury, has been Australia’s Alternate Governor of the IMF.

Member countries cast votes as required throughout the year. The Australian Governor’s votes on IMF resolutions during 2012-13 are noted in Table 2.2.

Table 2.2: Australian Governor’s votes on IMF resolutions 2012-13
Resolution Title Adoption date Australian Governor’s vote
Rules for 2012 Election of Executive Directors to the IMF 26 July 2012 Supported
Remuneration of IMF and World Bank Executive Directors and Alternate Executive Directors 30 July 2012 Supported
Activation period for NAB — 1 October 2012 to 31 March 2013 27 September 2012 Supported
2012 Election of Executive Directors to the IMF for Australia’s constituency 12 October 2012 Supported Mr Jong-Won Yoon
Activation period for NAB — 1 April 2013 to 30 September 2013 29 March 2013 Supported

International Monetary and Financial Committee

The International Monetary and Financial Committee (IMFC) advises the Board of Governors on the functioning and performance of the international monetary and financial system. Its 24 members represent the full IMF membership under the same constituency arrangements as apply in the IMF Executive Board (see below). International institutions, including the World Bank, also participate as observers in its meetings.

The IMFC meets twice a year, usually in September or October in conjunction with the full Governors’ Meeting (the ‘Annual Meetings’), and in March or April (the ’Spring Meetings’).

The then Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, represented the constituency, of which Australia is a member, at the IMFC meetings held on 13 October 2012. The Korean Deputy Prime Minister and Minister of Strategy and Finance represented the constituency at the IMFC meeting on 20 April 2013.

Executive Board

The Executive Board conducts the day-to-day business of the IMF and determines matters of policy under the overall authority of the Board of Governors. Executive Direc
tors are appointed or elected by member countries or groups of countries.

The Board consists of 24 Executive Directors. Eight countries have single-member constituencies and appoint or elect their own Executive Director: the United States, Japan, Germany, France, the United Kingdom, China, Saudi Arabia and the Russian Federation. The remaining Executive Directors represent multi-member constituencies. During 2012-13, the constituency of which Australia is a member (the Asia and the Pacific constituency) comprised: Australia, Kiribati, the Republic of Korea, Marshall Islands, Federated States of Micronesia, Mongolia, New Zealand, Palau, Papua New Guinea, Samoa, Seychelles, Solomon Islands, Tuvalu, Uzbekistan, and Vanuatu.

As of June 2013, Australia’s constituency held 3.62 per cent of the voting power in the IMF, and Australia independently held 1.31 per cent.

The Executive Director is supported by an Alternate Executive Director and a number of senior advisors and/or advisors from various countries represented in the constituency. While the Executive Director may speak on behalf of individual members of the constituency, in the event of a formal vote in the Executive Board, all votes of the constituency must be cast as a bloc.

Mr Chris Legg of Australia represented our constituency as Executive Director from 1 November 2010 to 31 October 2012. Mr Jong-Won Yoon of Korea succeeded Mr Legg as Executive Director on 1 November 2012. As at June 2013 Mr Ian Davidoff of Australia was the Alternate Executive Director.

The Treasury, with input from the Reserve Bank of Australia (RBA) and other agencies as appropriate, provides briefing to the Executive Director on key issues being discussed by the Board.

Australia’s Article IV consultation

In accordance with Article IV of its Articles of Agreement, the IMF conducts regular discussions with the authorities of member countries on economic policies and conditions.

Australia’s 2012 Article IV consultation included a visit by IMF staff from 6 to 20 September 2012. During their visit they spoke to the then Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, and met with senior Treasury officials, the Governor of the RBA and senior RBA officials. They also met with officials from other agencies in the Treasury portfolio including the Productivity Commission and the Australian Prudential Regulation Authority, and representatives from the business community and unions.

The 2012 Article IV staff report for Australia was released on 15 November 2012 and is available at

Part 2: Australia’s shareholding in the International Monetary Fund and financial transactions

A member’s shareholding in the IMF is determined by its allocated quota which broadly reflects its weight in the global economy. Australia’s quota as at 30 June 2013 was SDR 3,236.4 million. During 2012-13, Australia held 1.36 per cent of total IMF quota. A member’s voting power in IMF decisions is also largely determined by its quota, with one vote allocated for each SDR 100,000 of quota.

Australia’s financial transactions with the International Monetary Fund

Australia’s financial transactions with the IMF in 2012-13 comprised:

  • payments of SDR charges and an annual assessment fee for Australia’s allocation of SDRs;
  • receipts of interest on Australia’s SDR holdings;
  • receipts of remuneration for Australia’s contribution to IMF reserves; and
  • transfers and receipts to facilitate Australia’s contribution to the IMF’s Financial Transaction Plan (FTP) and the NAB, reflecting the borrowing and repayments of other members.

These transactions are described in the following sections.

Special Drawing Rights charges, interest and assessment fee

The SDR is an international reserve asset created by the IMF to supplement the existing official reserves of member countries. The SDR also serves as the unit of account of the IMF. Its value is based on a basket of key international currencies (the US dollar, euro, Japanese yen and pound sterling).

SDRs are allocated to member countries in proportion to their IMF quotas. Each member country may choose to hold more or fewer SDRs than its net cumulative allocation.

Australia’s cumulative allocation of SDRs as at 30 June 2013 was SDR 3,083.2 million while its actual SDR holdings were SDR 2,926.5 million. Australia’s SDR allocation is held by the RBA, having been sold to the RBA by the Commonwealth in exchange for Australian dollars.

The IMF levies charges on the SDRs that have been allocated to each member and pays interest on the SDRs that are held by each member. Charges and interest payments are accrued daily at the same rate of interest and paid quarterly. The rate of interest on SDR holdings is calculated weekly and is based on a weighted average of representative interest rates on short-term debt in the money markets of the SDR basket of currencies.

In 2012-13, the Australian Government paid charges of SDR 2.7 million (A$3.9 million) on net cumulative allocations, and the RBA received SDR 2.6 million (A$3.7 million) interest on its holdings (Table 2.3).

In addition, the IMF levies an annual assessment fee to cover the cost of operating the SDR Department. The fee is determined according to participants’ net cumulative SDR allocations. Australia’s annual assessment fee for the IMF’s financial year ending 30 April 2013 was SDR 17,353 (A$26,040) (Table 2.3).


Remuneration is interest paid by the IMF to Australia for the use of its funds. It is earned on the proportion of a member’s currency (25 per cent of its quota) that was paid in SDRs and is held by the IMF, and on money lent out under the FTP. The amount of a member’s reserves held by the IMF can change frequently through the year. It increases when the IMF calls on the member to contribute some of its currency to lend to other members, and decreases when borrowing members make repayments to the IMF that are then returned to the member.

Remuneration is accrued daily and paid quarterly, and the rate of remuneration is equal to the SDR interest rate minus an adjustment for burden-sharing (if applicable). Australia received remuneration payments in 2012-13 totalling SDR 788,948 (A$1.2 million) (Table 2.3).

The IMF’s burden-sharing mechanism makes up for the loss of income to the IMF from unpaid charges by member countries. Resources collected from members under the burden-sharing mechanism are refundable to them as arrears cases are resolved, or as may be decided by the IMF. Thus, resources collected for unpaid charges are refunded when these charges are eventually settled. The burden-sharing rate was only positive (at 0.01per cent) for periods of the July (May-Jul 2012), January (Nov 2012-Jan 2013) and April (Feb-Apr 2013) quarters.

Maintenance of Value of International Monetary Fund Quota

During 2012-13, Australia’s quota remained at SDR 3,236.4 million. Part of this is held in reserve by the IMF in SDRs (this part is relevant for remuneration purposes) and part is held in Australia — a combination of non-interest bearing promissory notes and cash amounts held at the RBA — in Australian dollars.

The exchange rate for transactions between the Australian dollar and SDR amounts fluctuates in accordance with market exchange rates. Consequently, the SDR value of the part of Australia’s IMF quota held in Australian dollars is subject to change. Under the IMF’s Articles of Agreement, members are required to maintain the value of their quota in terms of SDRs. The adjustment required to maintain the SDR value of the quota is called the &lsqu
o;Maintenance of Value’ adjustment, and is settled annually following the close of the IMF’s financial year on 30 April.

During the IMF’s financial year from 1 May 2012 to 30 April 2013, the value of the Australian dollar in terms of the SDR appreciated by 3.1 per cent. This meant that fewer Australian dollars were required to meet Australia’s obligation to maintain the value of its quota in terms of SDRs. Thus, Australia had a Maintenance of Value receivable of A$59.6 million for the IMF’s 2012-13 financial year. This financial transaction was settled in May 2013.

Table 2.3 Australia’s transactions with the IMF in 2012-13 (cash basis)(a)
  Amount in SDRs Amount in A$
Interest on RBA SDR Holdings    
For 3 months ending July 2012 863,839 1,231,943
For 3 months ending October 2012 581,252 852,151
For 3 months ending January 2013 495,163 738,939
For 3 months ending April 2013 614,362 921,912
Total interest received 2,554,616 3,744,944
Charges on SDR Allocation    
For 3 months ending July 2012 905,575 1,291,465
For 3 months ending October 2012 609,050 892,904
For 3 months ending January 2013 517,685 772,549
For 3 months ending April 2013 647,040 970,948
Total charges paid 2,679,350 3,927,866
Annual Assessment Fee paid to SDR Department 17,353 26,040
Remuneration for Australian holdings at the IMF    
For 3 months ending July 2012 274,599 391,613
For 3 months ending October 2012 184,688 270,764
For 3 months ending January 2013 133,456 199,158
For 3 months ending April 2013 196,205 294,425
Total Remuneration received 788,948 1,155,960
Maintenance of Value transaction for 2012-2013   59,607,428

(a) The totals may differ from the sum of the amounts shown due to rounding.

Lending related transactions and Australia’s reserve position in the IMF

The IMF manages its lending of quota resources through the FTP. This is the mechanism through which the IMF selects the members whose currencies are to be used in IMF lending transactions and allocates the financing of those lending transactions among members included in the plan. Currencies of members included in the FTP can be used both for transfers (loans) from the IMF to borrowing members and for receipts (repayments) from borrowing members. Only currencies of IMF members with sufficiently strong balance of payments and reserve positions — such as Australia — are selected for use in the FTP.

In 2012-13, Australia was involved in both the transfer and receipt side of the FTP, with one transfer (loan) of A$37.3 million, and two receipt (repayment) transactions totalling A$69.9 million. Table 2.4 provides details of individual FTP transactions and resulting reserve position.

Table 2.4 Australia’s reserve position in the IMF 2012-13(a)
Date Description Debit(SDRs) Debit(A$) Credit(SDRs) Credit(A$)
Reserve position as at 30 June 2012       1,101,159,187 1,632,314,241
13 Jun 2013 FTP with Greece (loan)     24,000,000 37,278,890
21 Jun 2013 FTP receipt (repayment) 27,132,500 43,687,124    
25 June 2013 FTP receipt (repayment) 16,000,000 26,247,193    
Reserve position as at 30 June 2013 1,082,026,687 1,754,258,572

(a) Because Australia’s reserve position is denominated in SDRs and AUD/SDR exchange rates vary during the year, when expressed in Australian dollars, the 30 June 2013 reserve position does not exactly reflect summation of the opening position and transactions during the year.

As noted previously, FTP transactions (and any transfers for administrative purposes) directly impact on Australia’s reserve position at the IMF. With the value of receipts outweighing the value of transfers during 2012-13, the amount of Australia’s reserves held by the IMF fell during the year, from SDR 1,101.2 million to SDR 1,082.0 million. This reserve position forms part of Australia’s liquid international reserves because, subject to the representation of a balance of payments need, Australia can convert its SDR-denominated reserve asset into useable currency by drawing on the IMF.

In addition to FTP related transactions during 2012-13, Australia also contributed lending under the expanded NAB. The NAB was activated twice during 2012-13, on 1 October 2012 and 1 April 2013, following approval by NAB participants, including Australia, with each activation period lasting six months. This follows from the NAB activation on 1 April 2011, 1 October 2011, and 1 April 2012, each for a period of six months.

In 2012-13, Australia was involved in both the transfer (loan) and receipt (repayment) sides of the NAB. Australia made four transfers (with two transfers to Greece) which totalled A$185.4 million. Aust
ralia received a total of A$30.1 million from two repayments. Table 2.5 provides details of individual NAB transactions.

Table 2.5 Australia’s NAB Transactions 2012-13
Date Description Debit(SDRs) Debit(A$) Credit(SDRs) Credit(A$)
6 Nov 2012 NAB receipt (repayment) 4,300,000 6,346,545    
14 Nov 2012 NAB with Portugal (loan)     74,000,000 108,387,588
18 Jan 2013 NAB with Greece (loan)     29,300,000 42,663,296
23 Jan 2013 NAB receipt (repayment) 6,160,000 8,998,901    
3 May 2013 NAB with Jamaica (loan)     9,600,000 14,029,283
4 Jun 2012 NAB with Greece (loan)     13,100,000 20,348,061
25 Jun 2013 NAB receipt (repayment) 9,020,000 14,796,855    
Net NAB payments for 2012-13 106,520,000 155,285,927

In addition, the Australian Government earns interest on any money lent under the NAB, at the same SDR rate that is used to calculate remuneration, and pay SDR charges. Like remuneration and charges, NAB interest is accrued daily and settled quarterly. For 2012-13, the Australian Government received interest payments on its outstanding NAB loans of SDR 417,556 (A$613,119) (Table 2.6).

Table 2.6 Interest on NAB Borrowings for 2012-13 (cash basis)(a)
  Amount in SDRs Amount in A$
For 3 months ending July 2012 130,998 186,820
For 3 months ending October 2012 88,101 129,161
For 3 months ending January 2013 85,369 127,438
For 3 months ending April 2013 113,088 169,700
Total interest received 417,556 613,119

(a) The totals may differ from the sum of the amounts shown due to rounding.

Part 3: Key activities of the International Monetary Fund

In 2012-13, the IMF continued to assist members to adjust to the changing nature of the global economy by identifying systemic risks and designing strong policies to respond to threats to domestic and global stability through assessments in its various multilateral and bilateral surveillance products and active engagement with its member countries. In addition, the Fund continued its reform of surveillance activities and closely monitored and encouraged the implementation of the 2010 IMF Quota and Governance Reform package.

Several innovations to the Fund’s surveillance framework came to fruition in 2012-13, following the recommendations of the 2011 Triennial Surveillance Review. Three important upgrades include the new Integrated Surveillance Decision, as well as the launch of a Pilot External Sector Report and Spillover Report. These initiatives bring together the bilateral and multilateral perspectives of the Fund’s policy advice, sharpening the Fund’s analysis of spillovers and cross-border effects, and focusing on the stability of the international monetary system as a whole.

In light of on-going economic instability, the IMF continued to push for the completion of an agreement to double IMF quotas, from SDR 238.4 billion to SDR 476.8 billion, which also includes a corresponding roll-back of credit arrangements under the NAB. In addition, to help strengthen the global financial safety net, Fund members made additional pledges to boost the Fund’s borrowed resources through bilateral loan and note purchase agreements, bringing the total to more than US$461 billion.

Demand for Fund resources remained strong throughout 2012-13 due to the environment of uncertainty from the on-going crisis and financial market volatility. Five non-concessional financing arrangements were approved by the Executive Board, for a gross total of SDR 75.1 billion, with more than 90 per cent of new gross commitments allocated to two successor arrangements under the Flexible Credit Line (FCL) for Mexico and Poland. For the Fund’s low-income members, nine countries had arrangements approved or augmented with support from the PRGT. At the end of the Fund’s financial year, there were a total of 62 countries with outstanding concessional financing under the PRGT.

Further information on these activities is provided below.


Under its Articles of Agreement, the IMF is responsible for overseeing the international monetary system and monitoring the economic and financial policies of its 188 (as of 30 April 2013) member countries, an activity known as surveillance. Effective surveillance involves identifying possible risks to domestic and external stability and providing independent, objective and persuasive assessments and advice to policymakers at the national, regional and global levels.

During the 2012-13 financial year, the IMF continued its reform agenda to strengthen surveillance, with recommendations of the 2011 Triennial Surveillance Review (and subsequent progress report released in November 2012) providing the strategic direction for reforms. The IMF continued its spillover analysis with a second Spillover Report which examines the external impacts of domestic policies in the five largest systemic economies comprising China, the Euro Area, Japan, the United Kingdom and the United States. The Fund also released a Pilot External Sector Report which provides a multilaterally consistent analysis of the external positions of major w
orld economies, focussing on detailed examinations of current accounts, reserves, capital flows, and external balance sheets.

In July 2012, the IMF Executive Board took a significant step toward modernizing the legal framework underpinning IMF surveillance and addressing the priorities of the 2011 Triennial Surveillance Review by adopting a Decision on bilateral and multilateral Surveillance — known as the Integrated Surveillance Decision (ISD). The new ISD has facilitated better integration of bilateral, multilateral and financial sector surveillance.

In addition, to ensure appropriate coverage of financial issues, in September 2012, the IMF Executive Board endorsed a new Financial Surveillance Strategy that proposes concrete and prioritised steps to further strengthen financial surveillance.

Further, the Fund established a new product, the Managing Director’s Global Policy Agenda, which pulls together the key findings and policy advice from the Fund’s multilateral reports and defines a future agenda for the Fund and its members.

IMF Resourcing

It is important that the IMF has sufficient resources to lend to its members. In October 2010, G20 Finance Ministers announced agreement on a doubling of IMF quotas from SDR 238.4 billion to SDR 476.8 billion, which when effective, will increase Australia’s quota from SDR 3.24 billion to SDR 6.57 billion. This quota increase will come into effect following the implementation of the 2010 IMF Quota and Governance Reform.

The October 2010 agreement to double IMF quotas included a commitment to a corresponding roll-back of credit arrangements under the NAB. The combination of the doubling of quotas and corresponding roll-back of NAB credit arrangements will strengthen the IMF’s resource base by reducing the Fund’s reliance on voluntary borrowing arrangements such as the NAB.

In December 2011, agreement was reached by the IMF Executive Board that the NAB would be rolled back from SDR 370 billion to SDR 182 billion, in line with the increase in the quotas of NAB participants. This agreement, which will take effect at the same time as the doubling of quotas, will reduce Australia’s credit line to the IMF under the NAB from SDR 4.37 billion to SDR 2.22 billion. Enabling legislation to implement the IMF Executive Board decision received Royal Assent on 25 September 2012.

As the effects of the global financial crisis continue to play out, it is important that confidence is maintained in the ability of the IMF to meet the potential financing needs of its members. To this end, at the IMF-World Bank Spring Meetings in April 2012 and subsequently IMF members have announced commitments to temporarily increase the resources available to the Fund through bilateral loan and note purchase agreements totalling more than US$461 billion.

Australia entered into a bilateral loan agreement with the IMF on 13 October 2012 to lend SDR 4.61 billion. The enabling legislation for the loan agreement received Royal Assent on 28 June 2013. The loan has a term of two years and may be extended for an additional one year by the IMF notifying Australia of an extension and a further additional year with the consent of Australia.

IMF role in low-income countries

The IMF continues to provide support to LICs, in the form of technical assistance and financial programs. As a core function of the IMF, technical assistance reinforces member capacities in the fiscal, legal, monetary/financial markets, and statistics areas. Efforts this financial year focused on helping countries manage the near-term implications of weak world growth, turbulence in Europe, and continued volatility in financial markets. The IMF’s concessional lending facilities enable the IMF to assist LICs to maintain or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. The IMF lends through these facilities to eligible members under highly concessional terms. They are flexible and specifically tailored to the increasing diversity of LICs and their needs.

In September 2012, the Executive Board endorsed the use of further windfall profits from gold sales to fund an increase in concessional lending capacity for LICs. Australia has agreed to this second decision and will return its share in the second distribution to support concessional lending for LICs. Further, in April 2013, Australia returned its entire share from the first distribution of windfall profits from gold sales to the PRGT.

In April 2013, the IMF reviewed the framework for eligibility to use concessional resources through the PRGT. Special provisions were made that allow microstates, many of whom are Australia’s regional neighbours and with whom we share a constituency, to be eligible for concessional financing. Cumulative access limits to the Rapid Credit Facility (RCF), a facility that provides emergency assistance to LICs facing urgent balance of payment needs, were also increased.

IMF Quota and Governance Reform

Throughout 2012-13, Australia has been a strong proponent of full implementation of the 2010 IMF Quota and Governance Reform. Once ratified, the reform package will double total IMF quotas to approximately SDR 476.8 billion, shift more than 6 per cent of quota shares to dynamic emerging market and developing economies and to under-represented, and will protect the quota shares of the poorest members of the Fund. In addition, the 2010 reforms will lead to an all-elected Executive Board, advanced European countries committed to reducing their combined representation on the Board by two chairs, and there will be further scope for appointing second Alternate Executive Directors for large multi-country constituencies.

In 2013, Australia, in its position as a co-chair of the International Financial Architecture Working Group, monitored and encouraged prompt implementation of the 2010 Reform by the G20 members. In addition, Australia is a strong advocate of further IMF reform following the implementation of the 2010 Reform, and has actively supported the timely completion of the comprehensive 15th General Review of Quotas, which is due for completion by January 2014.