Legislative Basis
Congress in the Gold Reserve Act of 1934 appropriated to
the ESF $2 billion out of the increment resulting from a
reduction in the weight of the gold dollar. Section 7 of
the Bretton Woods Agreements Act of 1945 made the ESF's
operations permanent. This Act also directed the Secretary
to pay $1.8 billion from the ESF to the IMF in partial payment
of the initial U.S. quota subscription in the IMF, thereby
reducing the ESF's appropriated capital to the level of
$200 million. An amendment to the Bretton Woods Agreements
Act (passed in 1962) provided that any currencies or gold
purchased by the United States from the IMF may be transferred
from the Treasury General Account to the ESF and administered
as part of the ESF.
The ESF statute requires the Secretary to "report
each year to the President and the Congress on the operation
of the fund [the ESF]." As part of the annual report
by the Secretary to the President and the Congress on the
operations of the ESF, Treasury includes an audit report
of the ESF. The audit is performed by Treasury's Office
of the Inspector General.
The Special Drawing Rights Act of 1968 likewise provided
that any SDRs allocated by the IMF or otherwise acquired
by the United States are resources of the ESF. In accordance
with the Act, SDRs can be "monetized" (i.e., converted
into dollars) through the issuance of Special Drawing Rights
Certificates (SDRCs) by the Secretary to the Federal Reserve
System in an amount not to exceed the dollar value of the
ESF's SDR holdings. The dollar proceeds of such monetizations
are assets of the ESF, and the SDRCs are a counterpart liability
of the ESF.
In 1977, the Gold Reserve Act was amended to state that
no loan or credit to a foreign government or entity can
be extended by the ESF for more than six months in any twelve-month
period, unless the President provides a written determination
to the Congress that "unique or emergency circumstances"
necessitate a term greater than six months.
Pursuant to this legislation and the underlying Congressional
intent, Treasury has developed since the mid-1970s policy
criteria to govern ESF credits, such as a requiring an assured
source of repayment. Also, Treasury has often linked the
availability of ESF financing to a borrower's use of the
credit facilities of the IMF, both to support the IMF's
role and to strengthen assurances that there will be timely
repayment of ESF financing.