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International Monetary Agreements Amendment (Financial Assistance) Bill 2009

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(Circulated by the authority of the

Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon Chris Bowen MP)


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General outline and financial impact............................................................ 1


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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

1.1                   This clause provides the short title by which the Act may be cited.

Clause 2 — Commencement

1.2                   This clause provides that the proposed amendments will commence on the day on which the Act receives the Royal Assent.

Clause 3 — Schedule(s)

1.3                      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.

S chedule 1 — Amendmen ts

Item 1 — Title

1.4                   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)

1.5                   Defines the Asian Development Bank. 

Item 3 — Subsection 3(1)

1.6                   Defines the organisations that constitute the World Bank.

Item 4 — Section 8CA

1.7                   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. 

1.8                   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. 

1.9                   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. 

1.10               Sub-section 8CA(4) provides appropriation for payments under, or in connection with, agreements made under sub-section 8CA(1).

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)

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.