§ Mr. BurnsTo ask the Chancellor of the Exchequer what is the procedure for the United Kingdom to make a response to a call by the International Monetary Fund 703W under its general arrangements to borrow in respect of a currency stabilisation fund for Russia; and what financial provision is made.
§ Mr. NelsonIn the event of an agreement by the IMF executive board to an activation of the general arrangements to borrow—GAB—the United Kingdom would meet its obligations by setting up a line of credit under which the IMF could borrow up to an agreed amount of sterling. Loans to the IMF would be made from the National Loans Fund—NLF—under the International Monetary Fund Act 1979, as amended by the International Monetary Arrangements Act 1983. Under the terms of the GAB the IMF is obliged to repay any borrowing once the terms of the loan expires—a maximum of five years. Conditions also exist under which repayment can take place, at either the IMF or the lender's instigation, before that time.
Under the GAB decision, loans made to the IMF are matched by a liquid claim on the IMF, and consequently do not add to public expenditure. Loans under the GAB are denominated in special drawing rights—SDRs—although payment would be made in sterling and are remunerated at the IMF's SDR interest rate. The International Monetary Fund Act 1979 provides for foreign exchange and interest rate gains and losses on loans to be for the account of the NLF. Any such gains or losses would not score as public expenditure, though any difference between the cost of borrowing by the NLF and the interest received would score in the central Government borrowing requirement and the public sector borrowing requirement.