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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
INTERNATIONAL MONETARY AGREEMENTS AMENDMENT (FINANCIAL ASSISTANCE) BILL
2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Assistant Treasurer and Minister for Competition Policy and Consumer
Affairs, the Hon Chris Bowen MP)
Table of contents
General outline and financial impact 1
Do not remove section break.
International Monetary Agreements Amendment (Financial Assistance) Bill
2009
The purpose of this Bill is to amend the International Monetary
Agreements Act 1947 (IMA Act) to establish a framework for
Australia to provide financial assistance to a country in support
of World Bank or Asian Development Bank programs.
The Bill will enable the Treasurer, on behalf of Australia, to
enter into agreements to lend money or enter into currency swaps in
circumstances where the World Bank or the Asian Development Bank
requests Australia to provide assistance in support of a World Bank
or Asian Development Bank program, and where at least one other
country or organisation has provided or intends to provide
assistance to the recipient country in response to the same or a
similar World Bank or Asian Development Bank program. Agreements
must provide for Australia to be able to require early repayment in
the event of the suspension, or premature termination, of the World
Bank or Asian Development Bank program.
The proposed amendment is based closely on provisions currently in
the IMA Act. The IMA Act currently contains a provision that
enables the Treasurer to lend money or enter into a currency swap
with a country in support of an International Monetary Fund (IMF)
program. These arrangements were put in place in 1998, through the
IMA Amendment Act 1998, with the purpose to establish a framework
for the provision of financial assistance by Australia in support
of IMF programs. This amendment would enable loans or currency
swaps to be provided as part of a package prepared by the IMF, the
World Bank or the Asian Development Bank.
Amending the IMA Act to include World Bank and Asian Development
Bank programs will ensure Australia is able to quickly respond to
requests to participate in international cooperation efforts
especially during times of crisis.
The Bill provides for the Treasurer to release publicly and table
in each House of the Parliament a national interest statement
relating to an agreement entered into under the Bill. Statements
will include a description of the nature and terms of an agreement
and set out why it is in the national interest having regard, in
particular, to foreign policy, trade and economic interests. Some
aspects of agreements may not be able to be made public. For
example, details of interest rates charged could, if made public,
have an impact on other loan-raising activities by the borrowing
country. However, the Bill provides for as much detail as
practicable to be included in national interest statements. When
tabled, national interest statements will be referred to the Joint
Standing Committee on Foreign Affairs, Defence and Trade for
inquiry and report.
Date of effect: The amendments in this Bill will apply from the
date it receives Royal Assent.
Proposal announced: On 10 December 2008, the Prime Minister
announced that Australia will provide US$1 billion to Indonesia as
a standby loan to help mitigate the effects of the global financial
crisis, should Indonesia need it.
Financial impact: The Bill appropriates the funds required for such
loan or currency swap agreements to which it applies. The standby
loan facility could result in a loan being provided to Indonesia of
up to US$1 billion over the 2009 and 2010 calendar years. The
extent of other financial assistance under the Bill will depend on
what requests are made of Australia and agreed by the Government in
the future. The impact on the budget of financial assistance will
depend on the nature of the transactions and terms and conditions
of the arrangements.
Loans and the repayment of loans themselves do not impact on the
underlying cash balance but do impact on the headline cash balance
if they are made for policy purposes. Interest received or
interest paid on loans impact on the underlying cash balance (and
therefore the headline cash balance). Non-repayment of loans
can impact fiscal balance, underlying cash balance and headline
cash balance, depending on the circumstances under which they
occur.
In the case of the Indonesia loan, if the loan is drawn down by
Indonesia, the loan itself and the repayment of the loan will have
no impact on the underlying cash balance. In addition there will
be no net impact on the underlying cash balance. There will be an
upfront reduction in the fiscal balance and an improvement in
fiscal balance annually over the life of the loan (which will be
equal to the original reduction resulting in no net impact over the
life of the loan).
Compliance cost impact: No significant additional compliance costs
are expected to result from entry into force of this Bill.
Notes on Individual Clauses
Clause 1 - Short title
1. This clause provides the short title by which the Act may be cited.
Clause 2 - Commencement
2. This clause provides that the proposed amendments will commence on
the day on which the Act receives the Royal Assent.
Clause 3 - Schedule(s)
3. This clause makes it clear that the International Monetary
Agreements Act 1947 is amended or repealed as set out in the
applicable items in the Schedule concerned, and any other item in a
Schedule to this Act has effect according to its terms.
Schedule 1 - Amendments
Item 1 - Title
4. This item expands the title of the Act to cover provisions in
relation to Australia's support of the World Bank organisations and
the Asian Development Bank and their programs that may not be
covered by the existing title.
Item 2 - Subsection 3(1)
5. Defines the Asian Development Bank.
Item 3 - Subsection 3(1)
6. Defines the organisations that constitute the World Bank.
Item 4 - Section 8CA
7. Sub-section 8CA(1) specifies circumstances in which the Minister,
on behalf of Australia, may agree to provide financial assistance
to a recipient country in support of World Bank or Asian
Development Bank programs.
8. Sub-section 8CA(2) specifies that if Australia intends to provide
financial assistance in response to a World Bank program, the
condition in paragraph 1(b) would not be satisfied if the only
other contributor is another World Bank organisation.
9. Sub-section 8CA(3) ensures that any agreement must allow Australia
to require early repayment should the World Bank or
Asian Development Bank suspend or terminate its program for the
recipient country.
10. Sub-section 8CA(4) provides appropriation for payments under, or in
connection with, agreements made under sub-section 8CA(1).
11. Sub-section 8CA(5) provides that transactions undertaken under the
legislation are not liable to any Commonwealth, State or Territory
taxation.
Item 5 - Subsection 8D(1)
12. Subsection 8D(1) requires the Minister to publicly release and
table a national interest statement relating to an agreement made
under section 8CA.