Section 2. Objectives

The objectives of the Fund are:

(a) to encourage and assist members to:

(i) avoid unilateral measures which would restrict international trade or other current account transactions, or which would artificially stimulate visible and current invisible exports, and

(ii) follow appropriate domestic and international economic policies, including adequate balance-of-payments policies and cooperative policies to promote increased production and conservation of energy;

(b) to serve for a limited period, in view of current economic conditions, to supplement, in exceptional cases, other sources of credit to which members encountering serious economic difficulties have had recourse; and

(c) to ensure that the risks on loans by the Fund to members are shared equitably among all members, in proportion to their quotas and subject to the limits of their quotas, however the loans are financed.

All decisions under this Agreement shall be guided by these objectives.

Article II
MEMBERSHIP

Membership of the Fund shall be open to member countries of the OECD which become parties to this Agreement in accordance with the provisions of Article XXIII.

Article III

QUOTAS AND LIABILITY OF MEMBERS

Section 1. Establishment of quotas

(a) Each member shall have a quota in the amount listed for that member in the table in the Annex to this Agreement, the total of the quotas listed being 20 billion Special Drawing Rights (hereinafter called “SDR”).

(b) Quotas shall be established in terms of SDR, the method of valuation of SDR being that provided for in Article XIV.

Section 2. Liability of members

A member's quota shall determine the maximum financial liability of that member to meet the obligations incurred by the Fund.

Article IV

LIABILITY OF THE FUND AND OF THE OECD

Section 1. Liability of the Fund

The financial liability of the Fund shall not exceed its own assets and the funds which members are obliged to provide to it pursuant to the provisions of this Agreement.

Section 2. Liability of the OECD

The OECD shall bear no liability for the acts or omissions of the Fund.

Section 1. Lending authority

Article V
LOANS

Except as otherwise provided in this Agreement, the operations of the Fund shall be limited to making loans to members from funds provided under Articles VII, VIII and IX. The authority to make loans under this Article shall continue in existence for two years from the entry into force of this Agreement.

Section 2. Eligibility for loans

(a) A member that requests a loan from the Fund shall represent to the Governing Committee that it:

(i) is encountering serious external financial difficulties;

(ii) has made the fullest appropriate use of its reserves and has made best efforts to obtain capital, on reasonable terms, from other sources; and (iii) has made the fullest appropriate use of other multilateral facilities. (b) The Governing Committee shall satisfy itself that the member applying to the Fund for a loan meets the eligibility requirements in paragraph (a) of this Section and that such member's policies are consistent with the objectives of the Fund specified in Section 2(a) of Article I.

Section 3. Amounts, terms and conditions of loans

(a) The amounts of loans shall be established in accordance with the provisions of Article VI, Section I.

(b) Loans shall have a maturity of not more than seven years.

(c) Conditions relating to economic policies needed:

(i) to redress the external financial situation of the member which receives a loan from the Fund (hereinafter called the "borrower") over an appropriate period and

(ii) for the fulfillment of the objectives of the Fund shall be agreed between the borrower and the Fund at the time the loan is granted.

(d) The Governing Committee may decide that a loan be made available in installments and that the availability of each such installment be subject to the agreement of the Governing Committee that conditions established under paragraph (c) of this Section have been complied with.

(e) The borrower shall undertake to use the funds received by it in accordance with the objectives of the Fund. The Governing Committee shall keep the economic policies of the borrower, as well as the implementation of the conditions referred to in paragraph (c) of this Section, under review.

The rate of interest payable on loans made by the Fund shall be determined by the Governing Committee in the light of conditions at the time the loan is made, having due regard to the interest rate paid by the Fund on the related financing, and shall not be less than the latter rate.

(g) The Governing Committee may impose a service charge adequate to cover the cost incurred in making a loan.

Section 4. Prepayments

(a) If there is provision to this effect in the loan agreement between the borrower and the Fund, and to the extent that lenders to the Fund which have provided the financing of the loan accept prepayment:

(i) a borrower may prepay all or part of the outstanding balance of any loan;

(ii) a borrower whose balance-of-payments situation has substantially improved since it was granted a loan may be required under a decision of the Governing Committee, taken by a two-thirds majority vote, excluding the votes of the borrower, to prepay its loan in whole or in part.

(b) The Fund shall use any prepayments made in accordance with paragraph (a) of this Section to make prepayment to the lenders to the Fund which accept such prepayment, in proportion to their shares in the financing of the loan concerned.

Article VI

DECISIONS TO MAKE LOANS

Section 1. Decision procedures

(a) A request from a member for a loan from the Fund shall be considered by the Governing Committee on the basis of a proposal prepared by the Advisory Board.

(b) The granting of a loan shall require a single decision by the Governing Committee on the following matters, taken together:

(i) the eligibility of the prospective borrower;

(ii) the conditions of the loan, referred to in Article V, Sections 3(c) and (d);

(iii) the amount and maturity of the loan;

(iv) the method or methods of financing the loan; and

(v) the basis on which shall be determined the interest rates to be paid to members on funds to be made available through direct financing and to be charged on funds loaned to the borrower.

(c) If, following the granting of the loan, the outstanding balance of loans made by the Fund to the borrower would:

(i) not exceed the borrower's quota, the decision to grant the loan shall require a two-thirds majority;

(ii) Exceed the borrower's quota, but amount to not more than 200 percent of that member's quota, the decision to grant the loan shall require a 90 percent majority;

(iii) exceed 200 percent of the borrower's quota, the decision to grant the loan shall require a unanimous vote.

(d) Each of the majorities specified in sub-paragraphs (i), (ii) and (iii) of paragraph (c) of this Section shall be fulfilled with respect to:

(i) all members, excluding the prospective borrower; and

(ii) the members called to provide financing, in the case where the financing takes the form of direct financing or the provision of individual undertakings under Article VIII.

Section 2. Exclusion from calls for balance-of-payments reasons

Prior to the decision under Section 1 of this Article:

(a) a member may represent to the Governing Committee that a call under Article VIII should not be made upon that member, because of its present or prospective balance-of-payments situation; and

(b) the Governing Committee shall decide, by a two-thirds majority vote, excluding the votes of the member making such representation and those of the borrower, whether the member making the representation shall be excluded from the call.

Section 3. Loan agreement

(a) The Governing Committee shall determine the final text of the loan agreement, specifying the precise financial terms and the date or dates on which all transfers arranged under this Article shall be made effective. This determination shall require acceptance by members with the same amount of voting power as provided under paragraphs (c) and (d) of Section 1 of this Article.

(b) In the event that all negotiations for market borrowing by the Fund have not been completed as of the above date or dates, such negotiations may continue until completed on satisfactory terms.

Section 1. Methods of financing

Article VII
FINANCING

The Fund may use the following two methods, in the light of the circumstances and conditions prevailing in financial markets at the time, to finance the loans which it grants:

(a) calls on members to provide individual commitments in the form, at their option, of

(i) direct financing or

(ii) an individual undertaking for borrowing by the Fund; and

(b) calls on all members to provide a collective undertaking for borrowing by the Fund.

Section 2. Definition of the undertaking for borrowing by the Fund

For the purposes of this Agreement, the undertaking of a member for borrowing by the Fund (hereinafter called the "undertaking") shall mean the commitment of the member to stand ready, upon an instruction from the Fund under Article XIII, to transfer funds to the Fund in the amount of the undertaking. By such undertaking a member shall not incur any liability to a third party.

Section 3. Definition of calls

A call shall mean a notice by the Fund to a member:

(a) requiring the member

(i) to transfer an amount of funds to the Fund, in the case of calls under Article VIII, Section 1(a), and Article XIII, Sections 4 and 5(b), or

(ii) to provide to the Fund the undertaking referred to in Section 2 of this Article, in the case of calls under Article VIII, Sections 1(b) and 3(a), Article IX, Section 1(b), and Article XIII, Section 1(b); and

(b) specifying the total amount drawn on the member's quota as a result of the call, including any amount, additional to that referred to in paragraph (a) of this Section, determined under Article VIII, Section 3(b).

Section 4. Principle of proportionality

(a) Calls on members to provide direct financing, or an individual undertaking, or to participate in a collective undertaking, and calls to transfer

funds pursuant to Article XIII shall be proportional to the quotas of the members called, subject to paragraph (b) of this Section, Article X, Section 3(b), and Article XIII, Section 5(b).

(b) A member may agree to provide direct financing, or an individual undertaking, or to participate in a collective undertaking, in a higher proportion than that specified in paragraph (a) of this Section, but not in excess of its uncalled quota.

Section 5. Currency of transfer

(a) All transfers of funds to the Fund shall be in an actually convertible currency. Such transfers may be in the form of notes or letters of credit payable by the member on demand.

(b) For the purposes of this Agreement, an "actually convertible currency" shall mean the currency of a member which the Governing Committee determines is convertible into the currencies of other members for the purposes of the Fund's operations.

Section 6. Borrowing by the Fund

(a) Borrowing by the Fund under the provisions of this Agreement will be done within the territories of members. Such borrowing may be in domestic financial markets, including public institutions, or in international financial markets, or from international institutions.

(b) When borrowing in domestic or international financial markets, the Fund shall, apart from having obtained any necessary legal authorizations, take due account of market conditions and other relevant factors. A member in whose territory the borrowing is to take place shall give favorable consideration to any proposal by the Fund to borrow in international financial markets. The Fund, before borrowing in a member's domestic market, shall have obtained the member's authorization and, before borrowing in international financial markets, shall, if so requested, have obtained the authorization of the member in whose currency the borrowing is to take place.

(c) Subject to paragraph (b) of this Section, members shall make best efforts to assure that financial institutions within their territories are eligible to purchase securities issued by the Fund.

Section 7. Statement to be placed on securities

Every security issued by the Fund shall bear on its face a conspicuous statement to the effect that it is not an obligation of any government.

Section 8. Evidence of indebtedness

When a member transfers funds to the Fund as a result of a call or instruction from the Fund, the Fund shall issue to the member an instrument evidencing its indebtedness to that member in respect of the amount transferred. Such instrument shall be transferred only on terms and conditions approved by the Governing Committee.

Article VIII

FINANCING BY INDIVIDUAL COMMITMENTS

Section 1. Financing obligations

If the Fund makes a call for an individual commitment, a member shall discharge its obligations by:

(a) transferring funds to the Fund, in the case of direct financing, or, at its option,

(b) providing an individual undertaking for borrowing by the Fund, in the name of the Fund, which shall include the allowance relating to the payment of interest and other charges determined in accordance with Section 3(a) of this Article.

Section 2. Conditions for individual undertakings

(a) Where a member provides an undertaking under Section 1(b) of this Article, the Fund shall seek to raise the requisite funds in international or domestic financial markets in accordance with the provisions of Article VII, Section 6(b). If the Fund is unable to raise the requisite funds on this basis within a reasonable period of time on terms reasonably comparable to those available to a borrower of good name, or otherwise acceptable to the Fund, a member offering an individual undertaking shall allow borrowing by the Fund, it having consulted the member concerned, in that member's currency

and in its domestic financial market, including borrowing from public institutions, up to the amount of that undertaking.

(b) The Fund shall be liable for repayment of borrowing under an individual undertaking provided in accordance with Section 1(b) of this Article only to the extent of the undertaking, and neither the assets of the Fund nor the quotas of other members shall be drawn upon for the purpose of making interest payments or principal repayments as a result of such borrowing.

Section 3. Allowance relating to interest payments and other charges

Where the calls under this Article include calls to provide an individual undertaking:

(a) The Governing Committee shall determine, for each member that provides such an undertaking, an adequate allowance in respect of interest payments and other charges on the borrowing by the Fund, which shall be included in that member's undertaking.

(b) The Governing Committee shall determine the member, among those providing an individual undertaking, for which the allowance determined under paragraph (a) of this Section is highest in proportion to its quota share in the financing of the loan. The call on each other member shall include an amount, additional to the direct financing or individual undertaking provided by it, such that the quotas of all members called upon to provide the financing, in whatever form, shall be drawn down by an amount which represents the same proportion of their quota share in the financing of the loan as in the case of the member with the highest proportion determined above.

Section 4. Reduction of an individual undertaking

As repayments of principal are made by the Fund with respect to borrowing on an individual undertaking, the member's undertaking shall be reduced in the proportion which the repayment represents of the outstanding balance of such borrowing by the Fund.

Section 5. Early repayment of individual commitments

The Governing Committee may decide, by a two-thirds majority vote, to repay before maturity direct financing and borrowing under individual undertakings, with the agreement of all the members that provided the financing. In order to obtain the funds for such repayments, the Fund may borrow on a collective undertaking pursuant to the provisions of Article IX.

Article IX

RTAKI

BORROWING ON THE COLLECTIVE UNDERTAKING OF MEMBERS

Section 1. Financing obligations

(a) The Fund may borrow on a collective undertaking to obtain funds required for the purposes of Article V, Article VIII, Section 5, and Article X, Section 3.

(b) Calls to provide a collective undertaking shall be made on all members and, except when decided otherwise under Article VII, Section 4(b), shall be made in proportion to their quotas. Such calls shall require each member to provide an undertaking in respect of:

(i) its quota share in the amount borrowed by the Fund;

(ii) the allowance relating to interest payments and other charges, under Section 2 of this Article; and

(iii) the provision for risk sharing, under Section 3 of this Article.

Section 2. Allowance relating to interest payments and other charges

The Governing Committee shall determine an adequate allowance relating to interest payments and other charges on the borrowing by the Fund which shall be the same proportion of each member's quota share in the financing of the loan.

Section 3. Provision for risk sharing

The Governing Committee shall determine the provision for risk sharing, the amount of which shall represent the same percentage for each member, not exceeding 50 percent, of the sum of the amounts specified in Section 1(b)(i) and (ii) of this Article. However, a member may agree to a higher amount.