This Report concerns three proposed International Monetary Fund (IMF) treaty actions:
the Renewal of the New Arrangements to Borrow;
the Loan Agreement between Australia and the International Monetary Fund; and
the Borrowing Agreement between the Government of Australia and the International Monetary Fund as Trustee of the Poverty Reduction and Growth Trust.
The three proposed treaties are the result of an unusual confluence of circumstances.
In January 2020, the IMF set in motion a series of reforms to the mechanisms it uses to obtain loans from member states in the event of a financial crisis. These reforms are due to come into force in January 2021 if a sufficient number of member states agree.
Since then, the IMF has experienced a significant increase in demand for its services as a result of the economic damage caused by the COVID-19 pandemic.
The New Arrangements to Borrow (NAB) was established by the IMF following the Global Financial Crisis with the intention of allowing the IMF to access funds additional to those raised through membership subscription. Australia is a signatory to the current NAB, which is expected to be replaced by the proposed Renewal of the New Arrangements to Borrow under consideration here.
In addition to the NAB, the IMF has entered into bilateral loan agreements (referred to as BBAs) with 40 member states, including Australia. BBAs are activated upon the depletion of funds obtained by the IMF under the NAB.
The proposed new NAB and the proposed new BBA, considered together, result in a direct transfer of commitments by member states from one IMF funding mechanism to another. The new NAB and the new BBA will not increase Australia’s commitment to the IMF. They will shift some of Australia’s existing commitment from the BBA to the NAB.
The IMF also maintains a number of Trusts that rely on bilateral contributions from member states that are used for specific purposes. One of those is the Poverty Reduction and Growth Trust (PRGT), which is being used to provide emergency financing at concessional rates to low income member states to boost their capacity to cope with COVID-19 and its associated economic damage. Australia has agreed to contribute funds to the PRGT for the first time.
The COVID-19 pandemic and its economic impact is exactly the type of occurrence the IMF exists to mitigate. The IMF’s work will directly benefit Australia by supporting economic recovery where Australian goods and services are sold.
The Committee supports and recommends the ratification of all three proposed treaties.
The Report also details the Committee’s consideration of a minor treaty action, the deemed acceptance by Australia of an amendment to the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, which will add a new Annex VII. Annex VII establishes a Compliance Committee which will consider individual and systemic issues of compliance and recommend measures to identify and address non-compliance to the Convention’s Conference of Parties.