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SPECIALIZED AGENCIES AND THE IAEA

WORLD BANK GROUP

International Bank for Reconstruction and Development and International Development Association

The membership of IBRD (World Bank) rose to 127 and that of IDA to 116 when New Zealand joined IDA and Grenada and Papua New Guinea joined both organizations during 1975.

The IBRD approved 122 loans totalling $4.37 billion in 51 countries in fiscal 1975, while IDA extended 68 credits totalling $1.58 billion to 39 countries. IBRD'S disbursements rose by 33% to $2.0 billion and IDA's by 42% to $1.0 billion.

IDA commitments rose because additional resources were received under the terms of the Fourth Replenishment. These resources amount to approximately $4.5 billion over the 3-year period 1975-77. The Fourth Replenishment became effective in January 1975 when the United States officially notified IDA of its participation with a 33% share ($1.5 billion). Under the agreement reached by 24 member nations in Nairobi in September 1973, the Fourth Replenishment could become effective only after 12 donor members had given official notification of their contributions, and when the amount of contributions notified reached $3.5 billion, or 80% of the total. At the seventh special session of the General Assembly Secretary Kissinger stated that the United States would join with others in a substantial fifth replenishment of the resources of IDA provided that the oil exporting countries also made a significant contribution. During the 30th General Assembly, the United States joined in the adoption by consensus of a resolution calling on member nations to support such a replenishment of the IDA. (See also p. 105 .)

The IBRD has recourse to borrowings in international capital markets for its financial resources. The Bank's borrowing rose to $3.5 billion in fiscal year 1975 compared to $1.85 billion in fiscal year 1974. Within these totals the share of the petroleum exporting countries was $1,904 million in fiscal year 1975 compared with $ 565 million the previous year.

At the request of the Joint Ministerial Committee of the Boards of Governors of the World Bank and the International Monetary Fund on the Transfer of Real Resources to Developing countries, the IBRD studied the feasibility of establishing a "third window" to provide development assistance on terms intermediate between

those of the Bank and IDA. The Bank response to the Committee's proposal was affirmative because it believed a new source of capital resources was necessary during this period of economic uncertainty. The third window is to be an intermediate lending facility whose terms are softened by the availability of interest subsidies. Contributions are to be made in the form of grants. The IBRD Board of Executive Directors took no final action on this proposed facility before the end of the fiscal year.

The Bank continued to expand its assistance to the least developed countries. The expansion was in line with the policy of providing more assistance to the poorest countries and people. Their needs took on special urgency given the current economic situation. The poorest countries accounted for 38% of total IBRD and IDA commitments.

More than half of all Bank and IDA operations for agriculture, involving commitments of nearly $1 billion, were for rural development projects designed specifically to increase the productivity of the rural poor. Including education projects and rural roads projects with those in the agricultural sector, the Bank's commitments to rural development totaled over $1 billion. The Bank's rural development projects are designed to benefit large numbers of rural poor, while earning an economic rate of return at least equal to the opportunity cost of capital; they are comprehensive in their approach to small-scale agriculture, and provide for a balance between direct production and other components; and they have a low enough cost per beneficiary so that they might be extended to other areas, given the availability of additional resources.

While the IBRD has not directly forwarded conventional health infrastructure projects it has initiated project lending in a number of areas that directly affect health, whether through the provision of project components, or through the overall project itself. These areas include population, nutrition, education, rural development, irrigation, and drainage. In addition, the Bank has decided that, within the context of its present lending program, it will systematically analyze the health consequences of the projects it supports

The Bank also completed major policy papers in the housing and urban transportation sectors and concluded that its activities in these sectors would be concentrated in cities where authorities demonstrate a willingness to consider and implement bold measures to adapt their policies to the mounting pressures of rapid urban growth.

Combined development lending by the IBRD and IDA in fiscal year 1975 focused on the following principal areas:

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The membership of the IFC remained at 100 throughout 1975.

An affiliate of the World Bank, the IFC encourages the development of private enterprise in the developing countries by lending to and making direct equity investment in private business activities. Since a major contribution to economic development can come from the private sector, the IFC is an essential complement to the lending operations of the IBRD and IDA. The IFC also develops local and regional, capital markets and promotes privately owned development finance corporations. These efforts help increase investment opportunities and the availability of capital in order to broaden the ownership of private enterprise.

IFC's total subscriptions in fiscal 1975 were $107.3 million, of which the United States subscribed $35.2 million, or 32.8%. Besides capital subscriptions, the IFC obtains funds from repayments of investments, sales of equity and loan investments, net income, and borrowing. During fiscal year 1975, the IFC borrowed $42.7 million from the IBRD and received $93.7 million from sales of loans and equity investments. At the seventh special session of the General Assembly, Secretary Kissinger called for a major expansion of the IFC to help the developing countries find new potential sources of capital for their investment needs.

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IFC investment commitments totalled $211.7 million in fiscal year 1975, of which over $190.6 million was for loans and nearly $21.1 million for equity investments. Some of the 1975 investments were for iron and steel plants in Argentina, India, Mexico, and Turkey; development finance institutions in Ecuador, Pakistan, and Turkey; manufacturing enterprises in Cameroon, Korea, Paraguay, and Zambia; and cement plants in Brazil, Colombia, and Turkey.

INTERNATIONAL MONETARY FUND

The membership of the IMF rose to 128 in 1975 with the accession of Grenada and Papua New Guinea. The quotas of these new members brought total Fund quotas to 29.2114 billion Special Drawing Rights (SDR'S). The U.S. quota of SDR 6.7 billion represented 22.94% of total quotas.

No additional SDR's were issued in 1975.

During 1975 the Fund experienced a continued heavy demand for foreign exchange to help its members meet balance of payments needs. Drawings from the Fund totaled the equivalent of SDR 4.7 billion, as compared with SDR 4.1 billion in 1974. Drawings from the IMF Oil Facility, established in 1974 to assist members in meeting the impact of the increase in oil import costs, made up SDR 3.0 billion of this amount.

Quota Review

In 1975 the IMF continued its quinquennial review of quotas. Agreement was reached that, in order to enable the Fund to deal more effectively with the expanded needs of its members, total quotas should be increased to SDR 39 billion. The distribution of the increases among members would involve a doubling of the share of the major oil exporters as a group, while the combined share of the other developing countries would be held constant. Thus the collective share of the industrialized and other developed countries would be reduced somewhat. Agreement had been reached on recommending individual quotas by yearend; these recommendations were to be endorsed in January 1976 by the IMF's Interim Committee and presented to the Board of Governors for approval early in 1976. The quota changes would not take effect until the second amendment of the IMF Articles of Agreement (see below) had become effective.

In connection with the agreement on quotas, it was also agreed that (1) the Fund's holdings of each member country's currency would be made usable in the IMF operations and transactions in accordance with its policies, and that (2) as part of the comprehensive amendment, 25% of the increase in member quotas would be

paid in SDR, or, if the Board of Governors so prescribed, in currencies of other members or in the member's own currency. This latter provision would replace the present 25% "gold" portion of the quota subscription.

Finally, as part of the proposed amendments, the majority of voting power required for future amendments and certain other important decisions would be raised to 85%. The United States supported this proposed change.

Amendments

In 1975 the IMF Executive Directors and Interim Committee worked toward completion of work on a comprehensive package of amendments to the Articles of Agreement of the IMF. By yearend, agreement was nearly complete, and the Interim Committee was to meet in Jamaica in January 1976 to resolve a few remaining issues and give its final approval to what will be the second amendment of the Articles. After that, the amendments will need to be submitted to the Board of Governors for their formal approval, and finally to the individual members for whatever legislative ratification may be required.

The amendment package as it was emerging at yearend is a comprehensive general revision of the Fund Articles designed to update and simplify the Fund, making it more reflective of current realities, and allowing it to be adaptable and responsive to changing needs in the years ahead.

Included are numerous provisions streamlining the operation of the Fund's general account and SDR account. The two central elements of the amendment package, however, are (1) new provisions in the Articles concerning exchange-rate arrangements, and (2) provisions that remove gold from its central place in the IMF system.

The new exchange-rate provisions are based on the U.S. - French understanding reached at the November meet. ing of the heads of government of the United States, the United Kingdom, France, Germany, Japan, and Italy in Rambouillet, France. A new Article IV will replace the obsolete par value arrangements of the present Articles. It in effect legalizes current exchange-rate practices, including floating rates, allowing wide latitude to individual countries in the choice of exchange-rate arrangements best suited to their own circumstances, so long as they fulfill certain general obligations to follow internationally appropriate policies. In so doing, it focuses attention on the need to achieve underlying stability as a prerequisite to exchange-rate stability. The new Article provides for a possible future return to a general system of par

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