The Arab Monetary Fund (AMF) was created on April 27, 1976, at Rabat, Morocco, by the Economic Council of the League of Arab States. The AMF Agreement went into effect on February 13,1977. The first meeting of the fund's Board of Governors was held in April of that year. The AMF came about largely as a result of soaring oil prices in the early 1970s. Oil-producing Arab nations created the AMF with money from oil sales in order to provide low-interest loans to less prosperous Arab nations so as to ease their balance of payment problems. The AMF soon expanded its programs to provide funds for pan-Arab development projects. The AMF is an agency of the Arab League, an umbrella organization encompassing a variety of programs and activities in the Arab world. Current members of the AMF are: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen.

AMF objectives are to achieve among its member states the elimination of payments and trade restrictions, the stabilization of exchange rates, the development of capital markets, the correction of payment imbalance through short and medium term loans, the coordination of monetary policies, the lessening of restrictions on trade, and the encouragement of capital flows. The fund aggressively lends money for pan-Arab development projects and coordinates many of the international aspects of Arab economic activity. The AMF sponsors banking and monetary policy seminars and advises member states on long-range economic planning through its Economic Policy Institute. The AMF also eases internal economic problems of member countries, such as commodity price fluctuations, that result from high oil prices.

Arab Monetary Fund policy is set by a Board of Governors consisting of a governor and a deputy governor from each member state. Each country is also represented by an alternate governor. Both the governor and alternate governor are appointed for five years. The day-to-day operations of the AMF are controlled by a director general and eight financial and economic professionals who make up the Board of Directors. A director general serves as the chairman of the Board of Directors and is appointed to that position by the Board of Governors, likewise for a five-year term. The directors serve for three years and come from member countries.

The unit of account of the AMF is the Arab Accounting Dinar which is the equivalent of three International Monetary Fund Special Drawing Rights. Authorized capital of the AMF is 600 million Arab Accounting Dinars (SDR 1,800 million.) The Board of Governors has the authority to increase capital and may borrow twice the amount of its capital.

The amount of money lent by the AMF varies greatly from year to year. In 1989 the fund lent almost $290 million but in 1990 lent only $67 million. Total loans outstanding are nearly $2.5 billion. The fund is sometimes threatened by defaults on loans and in 1993 Iraq, Somalia, and Sudan faced suspension for this reason.

An important part of the AMF is the Arab Trade Financing Program (ATFP) which was established by the AMF Board of Governors in 1989 with capitalization of $500 million. The AMF holds a 50 percent stake in the ATFP, with an additional 20 percent held by the Arab Fund for Economic & Social Development. The balance is held by various central banks, Arab commercial banks, and other financial institutions. The purpose of the ATFP is to promote trade amongst the Arab countries and foster the competitiveness of Arab exports through financially attractive lines of credit. Part of the ATFP program is the Intra-Arab Trade Information Network, which is allied with the United Nations Development Programme and the International Trade Center.

In 1995 the AMF, the International Finance Corporation, and IBCA (a leading European credit-rating agency) formed the Inter-Arab Rating Company (IARC). IARC then established rating agencies in various Arab countries. IARC started with authorized capitalization of $5 million. IARC officers hope that this credit-rating agency will strengthen financial markets in the Middle East and North Africa and enhance information on the creditworthiness of debt issuers.

SEE ALSO : Arab Common Market ; Arab Maghreb Union ; Arab World, Doing Business in the

[ Michael Knes ]


Arab Monetary Fund. "Arab Monetary Fund (AMF)." Abu Dhabi: Arab Monetary Fund, 1997. Available from .

Arab Trade Financing Program. "Arab Trade Financing Program." Abu Dhabi: Arab Trade Financing Program. Available from .

Clements, Frank. Arab Regional Organizations. New Brunswick, NJ: Transaction Publishers, 1992.

Joseph, L. "IFC Joins Forces with Arab Monetary Fund and IBCA to Launch Inter-Arab Rating Company." 1995. Available from .

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