Bretton Woods Agreement Act, 2018 (1961)

Prologue

This Act is made to Enable Nepal to Become a Member of the International Monetary Fund and of the International Bank for Reconstruction and Development by Acceptance of the International Agreements for the Establishment and Operation of the Fund and the Bank.

The Date of Authentication and Publication is 2018.4.5(20 July 1961). The totals of 4 amendments were made in this act. Their purpose was to agree on a system of economic order and international cooperation that would help countries recover from the devastation of the war and foster long-term global growth.

Provisions and Features

Section 2e provides “Special Drawing Rights” means the rights of the Fund to draw moneys from the special account with the Fund to be distributed between among the member states (Bhagidar) in order to meet the requirements of international liquidity.

Obligation to provide currency

Section 4A provides that In the event of the need of a member using the special drawing rights in such a circumstance as may be specified by the Fund pursuant to Section 4 of Article 19 of the Fund Agreement, and as set out in Schedule 13, the Minister for Finance It shall provide freely convertible currency on behalf of the Government of Nepal  provides that if freely convertible currencies are demanded in consonance with the Fund Agreement, the Minister for Finance may, on behalf of the Government of Nepal, provide such currencies.

The Minister for Finance may, on behalf of the Government of Nepal, raise loans by the creation and issue of non- interest-bearing and non-negotiable notes or bonds in the name of the Nepal Rastra Bank.

Power to issue promissory notes

Section 5 provides that The Minister for Finance may, on behalf of the Government of Nepal, create non-interest bearing and non- negotiable notes or bonds/conditions as set forth in Section 4 of Article 3 15 of the Fund Agreement, as set out in Schedule-3 and as set forth in Section12 of Article 5 of the Bank Agreement, as set out in Schedule-4, in such forms as he or she thinks fit and issue them in the name of the Fund or the Bank, and the payments of the notes or bonds so created shall be paid out of the Consolidated Fund of the Government of Nepal,

Section 10 provides’ that if any amendment is made to any matter contained in any Schedule of this Act of the Fund Agreement and the Bank Agreement, the Government of Nepal may accordingly amend the Schedule of this Act, by publishing a notification in the Nepal Gazette, from time to time.

Schedule 1(2) provides that by accepting membership in the Bank, Nepal shall subscribe to 100 shares of the capital stock of the Bank at the par value of $100,000 per share.

Section 5 provides that before accepting membership in the Bank, Nepal shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Article as contemplated by paragraph 6 (d) and (e) of this Resolution, and Nepal shall furnish to the Bank such information in respect of such action as the Bank may request.

Schedule 2(3) provides the subscription of Nepal shall be equal to its quota. Nepal shall pay in gold, as a minimum, three and half percent of its quota. The balance of the subscription shall be paid in the currency of Nepal.

As mentioned in section 7 Before accepting membership in the Fund, Nepal shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contemplated by paragraph 8 (a) and (b) of this Resolution, and Nepal shall furnish to the Fund such information in respect of such action as the Fund may request.

Schedule 6(b) provides that the Fund may hold other assets, including gold, in the depositories designated by the five members having the largest quotas and in such other designated depositories as the Fund may select. Initially, at least one-half of the holdings of the Fund shall be held in the depository designated by the member in whose territories the Fund has its principal office and at least Forty per cent shall be held in the depositories designated by the remaining four members referred to above.

However, all transfers of gold by the Fund shall be made with due regard to the costs of transport and anticipated requirements of the Fund. In an emergency the Executive Directors may transfer all or any part of the Fund’s gold holdings to any place where they can be adequately protected.

Schedule 8, section-2 provides that the Fund shall possess full juridical personality, and in particular, the capacity:

• to contract;
• To acquire and dispose of immovable and movable property;
• To institute legal proceedings.

Similarly, Section 8 provides that All governors, executive directors, alternates, members of the Board, agents appointed pursuant to Section 3(j) of Article 12 of the Agreement and advisors of any person mentioned above, 24 and officers and employees of the Fund:

• shall be immune from legal process with respect to acts performed by them in their official capacity except when the Fund waives this immunity;
• not being local nationals, shall be granted the same immunities from immigration restrictions, alien registration requirements and national service obligations and the same facilities as regards exchange restrictions as are accorded by members to the representatives, officials, and employees of comparable rank of other members;
• shall be granted the same treatment in respect of travelling facilities as is accorded by members to representatives, officials and employees of comparable rank of other members.

Article 19, Section 5  Designation of participants to provide currency : (a) The Fund shall ensure that a participant will be able to use its special drawing rights by designating participants to provide currency for specified amounts of special drawing rights for the purposes of Sections 2(a) and 4 of this Article. Designations shall be made in accordance with the following general principles supplemented by such other principles as the Fund may adopt from time to time:

A participant shall be subject to designation if its balance of payments and gross reserve position is sufficiently strong, but this will not preclude the possibility that a participant with a strong reserve position will be designated even though it has a moderate balance of payments deficit. Participants shall be designated in such manner as will promote over time a balanced distribution of holdings of special drawing rights among them.

Participants shall be subject to designation in order to promote reconstitution under Section 6(a) of this Article, to reduce negative balances in holdings of special drawing rights, or to offset the effect of failures to fulfill the expectation in Section 3(a) of this Article.

Epilogue

The Bretton Woods Agreement and System created a collective international currency exchange regime that lasted from the mid-1940s to the early 1970s. The Bretton Woods System required a currency peg to the U.S. dollar which was in turn pegged to the price of gold. Stabilizing the  international exchange rates was the primary objective of the agreement.