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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
INTERNATIONAL MONETARY AGREEMENTS AMENDMENT
(NEW ARRANGEMENTS TO BORROW) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Scott Morrison MP)
Table of contents
Glossary ................................................................................................. 1
General outline and financial impact....................................................... 3
Chapter 1 New Arrangements to Borrow ....................................... 5
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
IMA Act International Monetary Agreements Act 1947
IMF International Monetary Fund
NAB New Arrangements to Borrow
SDR Special Drawing Rights
1
General outline and financial impact
New Arrangements to Borrow
The Bill amends the International Monetary Agreements Act 1947
(IMA Act) to provide a standing appropriation and authority to borrow for
payments to meet drawings made by the International Monetary Fund
(IMF) under the decision to renew the New Arrangements to Borrow
(NAB).
The decision to renew the NAB is effective from 17 November 2017 to
16 November 2022.
Date of effect: Schedule 1 to the Bill implementing the NAB renewal will
commence on the later of 17 November 2017 and the day after this Bill
receives Royal Assent.
Proposal announced: These amendments have not been previously
announced.
Financial impact: The Bill would have an indirect impact on the
underlying cash balance if the agreement is activated and funds are
provided. This impact arises where the Australian Government's lending
to the IMF increases Australia's own borrowing requirement and where
the interest payable on any money borrowed by Australia to meet an IMF
drawdown differs from the interest paid by the IMF in regard to that
drawdown.
The IMF can only seek to activate the NAB when additional funds are
required to support its lending to member countries.
The maximum amount of Australia's lending commitment to the IMF is
Special Drawing Rights (SDR) 2.22 billion (around A$4.05 billion) under
the NAB.
The SDR is an international reserve asset created by the IMF and is
defined by a basket of currencies (the US dollar, euro, Chinese renminbi,
Japanese yen and British pound sterling). The IMF can allocate SDRs to
its member countries in proportion to their IMF quotas. Countries holding
SDRs can exchange them for any of the currencies in the basket. The
value of the SDR is determined daily by the IMF and the Australian dollar
to SDR exchange rate is available on the Reserve Bank of Australia's
website.
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International Monetary Agreements Amendment (New Arrangements to Borrow) Bill 2017
The NAB will be included in the Australian Government's Budget papers
as a quantifiable contingent liability.
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- paragraphs
1.20 to 1.23.
Compliance cost impact: Nil.
4
Chapter 1
New Arrangements to Borrow
Outline of chapter
1.1 Schedule 1 to this Bill amends the IMA Act to allow Australia to
continue its obligations under the NAB for a further five years.
Context of amendments
1.2 The NAB is a multilateral borrowing agreement between the
IMF and a number of its members that allows the IMF to borrow from
those members, when supplementary resources are required to address an
impairment of the international monetary system. Australia is a founding
member of the NAB and has participated since it formally commenced
in 1998.
1.3 The IMF Executive Board decision made in November 2012 to
renew the NAB for a five-year period will expire on 16 November 2017.
1.4 On 4 November 2016, the IMF Executive Board decided to
renew the NAB for a period of a further five years, commencing on
17 November 2017.
1.5 The amendments ensure that the current standing appropriation
and authority to borrow continue to apply for payments to the IMF in
order for Australia to meet its obligations under the renewed NAB.
Summary of new law
1.6 The amendments allow the standing appropriation and authority
to borrow to continue to apply for payments to the IMF under the renewed
NAB. The IMF Executive Board's decision to renew the NAB becomes
effective on 17 November 2017.
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International Monetary Agreements Amendment (New Arrangements to Borrow) Bill 2017
Comparison of key features of new law and current law
New law Current law
The NAB is renewed for a period of The NAB will expire on
five years, commencing 16 November 2017.
17 November 2017.
The Consolidated Revenue Fund is The Consolidated Revenue Fund is
appropriated for payments made for appropriated for payments made for
drawings by the IMF under the NAB, drawings by the IMF under the NAB.
as amended by the 4 November 2016
decision to renew.
The Treasurer may borrow amounts The Treasurer may borrow amounts
required to be paid by Australia to required to be paid by Australia to
meet its obligations under the NAB, meet its obligations under the NAB.
as amended by the 4 November 2016
decision to renew.
Detailed explanation of new law
1.7 Schedule 1 to this Bill allows the standing appropriation and
authority to borrow to continue to apply for payments to the IMF under
the renewed NAB. The IMF Executive Board's decision to renew the
NAB becomes effective on 17 November 2017.
1.8 The NAB provides that the IMF may make drawings up to the
equivalent of SDR 2.22 billion (around A$4.05 billion) for lending
commitments made under the NAB.
1.9 The IMF may only make such lending commitments when the
NAB is activated. This requires agreement, from the participant countries
that make up 85 per cent of the total credit committed under the NAB and
the IMF Executive Board, that the quota resources available to the IMF
for lending are not sufficient for its lending needs.
1.10 The Treasurer must be satisfied that a payment is required to
meet Australia's obligations under the NAB before directing the payment
to be made. Once the Treasurer gives the direction, the amounts are
appropriated from the Consolidated Revenue Fund (see section 8B of the
IMA Act).
1.11 The Treasurer may also borrow amounts that are required to be
paid by Australia to meet its obligations under the NAB (see section 6 of
the IMA Act).
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New Arrangements to Borrow
1.12 The definition of New Arrangements to Borrow is amended to
include the IMF Executive Board's decision on 4 November 2016 to
renew the NAB for a further five-year period. [Schedule 1, items 1 and 2,
section 3 definition of 'New Arrangements to Borrow']
1.13 This enables the standing appropriation and authority to borrow
to continue to apply in order to meet Australia's obligations under the
NAB between 17 November 2017 and 16 November 2022.
1.14 The IMF Executive Board's decision and the resulting text of
the NAB are expected to be included in the Australian Treaties Library
once they have been tabled in Parliament.
1.15 Until then, the proposed decision, with a consolidated text of the
NAB that illustrates the modifications to the current text of the NAB, can
be accessed through the IMF's Press Release No. 16/502 published on its
website (https://www.imf.org).
1.16 Minor technical changes were subsequently made to the
consolidated illustrative text of the NAB, which do not affect the
operation of the NAB. The Secretariat of the NAB within the IMF notified
the participants of the NAB of those changes, which will be reflected in
the NAB to be tabled in Parliament.
Consequential amendments
1.17 Schedule 4 to the IMA Act currently reproduces the text of the
NAB.
1.18 As the text of the NAB as renewed is expected to be included in
the Australian Treaties Library, Schedule 4 of the IMA Act will no longer
be necessary and is repealed. [Schedule 1, items 3 and 4, section 3 definition of
'New Arrangements to Borrow' and Schedule 4]
Application and transitional provisions
1.19 From the later of 17 November 2017 and the day after this Bill
receives Royal Assent, the standing appropriation and authority to borrow
for payments to the IMF will be available to meet drawings under the
renewed NAB .
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International Monetary Agreements Amendment (New Arrangements to Borrow) Bill 2017
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
International Monetary Agreements Amendment (New Arrangements to
Borrow) Bill 2017
1.20 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.21 The Bill is to provide a standing appropriation and authority to
borrow for payments to the IMF to meet drawings under the renewed
NAB from the later of 17 November 2017 and the day after this Bill
receives Royal Assent.
Human rights implications
1.22 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.23 This Bill is compatible with human rights as it does not raise any
human rights issues.
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