Opinion of the European Central Bank of 5 September 2024 on the increase of Romania’s quota in the International Monetary Fund (CON/2024/30)

OPINION OF THE EUROPEAN CENTRAL BANK of 5 September 2024 on the increase of Romania’s quota in the International Monetary Fund (CON/2024/30) Introduction and legal basis

On 5 August 2024 the European Central Bank (ECB) received a request from Banca Națională a României (BNR) for an opinion on a draft law on accepting the increase of Romania’s membership quota in the International Monetary Fund (IMF) (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and Article 2(1), third indent, of Council Decision 98/415/EC , as the draft law relates to BNR. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The purpose of the draft law is to increase Romania’s quota in the IMF. On 15 December 2023, the IMF Board of Governors finalised the Sixteenth General Review of Quotas and agreed to a 50 % increase in quotas while maintaining the existing relative quota shares. The quotas are expected to increase by 238.6 billion Special Drawing Rights (SDR) to SDR 715.7 billion. The Board of Governors’ resolution also states that the IMF’s lending capacity should be maintained and its dependence on borrowed funds reduced. This is to be achieved by reducing the New Arrangements to Borrow (NAB) and phasing out bilateral borrowing agreements. The IMF member countries have until 15 November 2024 to agree to a corresponding increase in their quotas. This increase comes into force only when (1) IMF member countries that together hold no less than 85 % of the previous quota funds have agreed to the increase and (2) the participants under the NAB agree to a reduction in the NAB. 1.2 The draft law incorporates the IMF quota increase into Romanian law. In particular, the draft law provides that the Romanian Parliament accepts the increase of Romania’s quota in the IMF from SDR 1 811.4 million to SDR 2 717.1 million. The draft law provides that the quota increase of SDR 905.7 million is to be paid as follows: SDR 226.4 million, representing 25 % of the increase, in SDR; and SDR 679.3 million, representing 75 % of the increase, in national currency (RON), in the IMF No. 1 Account with BNR, which will be reflected in BNR’s financial statement. The draft law also states that BNR is to be responsible for the implementation of its provisions. The ECB understands that, in

accordance with Law No 312/2004 on the BNR Statute (hereinafter the ‘BNR Statute’), BNR exercises rights and fulfils obligations incumbent on Romania in its capacity as an IMF member and BNR sets and maintains international reserve assets, which are made up of, inter alia, any other worldwide acknowledged reserve assets, including the right to purchase from the IMF within the reserve tranche, as well as the SDR holdings . In addition, the legislation regulating Romania’s participation in the IMF provides that from July 1996, all of Romania’s rights and obligations resulting from transactions with the IMF are to be reflected in BNR’s financial statements .

2. Monetary financing prohibition

Article 123(1) of the Treaty prohibits the national central banks (NCBs) from granting overdraft facilities or any other type of credit facility to public authorities and bodies of the Member States. Article 1 of Council Regulation (EC) No 3603/93 defines ‘other type of credit facility’, inter alia, as ‘any financing of the public sector’s obligations vis-à-vis third parties’. However, Article 7 of Regulation (EC) No 3603/93 provides that the financing by NCBs of obligations falling upon the public sector vis-à-vis the IMF is not regarded as a credit facility within the meaning of Article 123(1) of the Treaty. The fourteenth recital of Regulation (EC) No 3603/93 sets out the rationale behind this exemption, stating that it is appropriate to authorise the financing by the NCBs of obligations falling upon the public sector vis-à-vis the IMF because such financing results in ‘claims which have all the characteristics of reserve assets’. Therefore, the exemption set out in Article 7 of Regulation (EC) No 3603/93 should be interpreted in line with that rationale. As the payment by BNR of the proposed increase of Romania’s IMF quota would result in claims which have all the characteristics of reserve assets, the draft law complies with the monetary financing prohibition .

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 5 September 2024.

[signed]

The President of the ECB

Christine LAGARDE