Precautionary Stand-By Agreement

On 21 November 2011, Hungary requested a second (precautionary) financial aid from the EU and the IMF due to deteriorating financing conditions. The Ecofin Council approved the principle of the application. Problems related to respect for independent institutions (particularly the Central Bank) have delayed the opening of negotiations. “The three-year stand-by agreement will support the public authorities` goal of moving towards a more dynamic, sustainable and inclusive economy. The precautionary nature of the agreement will provide insurance against external shocks. The authorities are embarking on a sustainable fiscal path, supported by the budgetary rule, while leaving room for critical spending on improving infrastructure and social spending. These objectives must be accompanied by measures to improve tax administration and modernize wealth taxation. Finally, the negotiations from 17 to 25 July 2012 were limited to an official round, as Hungary was able to finance itself through the international market and did not ask for additional support. It raised $3.25 billion in 2013 and was able to repay all repayments of the 2008-2010 confirmation agreement (equivalent to an EU-BoP programme).

Commitment fees. For appropriations committed in all SBAs, a commitment fee is levied at the beginning of each 12-month period on amounts that could be drawn during the period (15 basis points for amounts committed up to 115% of the ratio, 30 basis points for amounts committed above 115% and up to 575% of the quota and 60 basis points for amounts greater than 575% of the quota). These royalties are reimbursed on a pro-rata basis if the amounts are deducted during the relevant period. Therefore, if the country borrows the entire amount committed under an SBA, the commitment fee is fully repaid. However, reimbursement is not made as part of a precautionary SBA under which countries do not travel. The Armenian authorities have indicated that they will review the agreement as a precautionary measure and that they do not intend to use the new SBA unless shocks generate balance-of-payments needs. In addition to shock insurance, the agreement will support the authorities` efforts to strengthen the economic foundations and political framework. It will also contribute to the effective implementation of structural reforms, including governance and improving the business climate.

In the event of an economic crisis, countries often need financial resources to help them overcome their balance-of-payments problems. Since its inception in June 1952, the IMF Confirmation Agreement (SBA) has been the lending instrument of emerging and developed countries. The SBA was revalued in 2009, along with the fund`s broader framework, to be more flexible and meet the needs of Member States. Conditions have been streamlined and simplified and more resources have been released upstream. The reform also allows for wider access to wider access on the basis of a precautionary basis. A precautionary fit. Countries that are in high need for funding and do not intend to use authorized amounts, but retain the ability to do so when they need them, have precautionary measures to ensure high access. 2002-2008: At the end of 2002, the Ukrainian Cabinet of Ministers decided that continued cooperation with the IMF, without credit, should continue on the basis of the one-year “precautionary preparation” programme approved by the IMF`s Executive Board on 29 March. In 2004 and granted the possibility of obtaining new loans from the IMF and obtaining a reserved loan of SDR 411.6 million (30% of the Ukrainian quota) if payments from the country`s foreign exchange reserves are allocated. TBILISI (Reuters) – The International Monetary Fund has approved a three-year confirmation agreement for Armenia of $248.2 million to support structural reforms and improve the business environment.