55. OPERATIONS OF THE INTERNATIONAL MONETARY FUND DURING THE PERIOD JULY 1-DECEMBER 31, 1960: Report of the National Advisory Council on International Monetary and Financial Problems, Submitted September 13, 1961 (Excerpt)10

FIFTEENTH ANNUAL MEETING OF THE INTERNATIONAL MONETARY FUND

The Fifteenth Annual Meeting of the Boards of Governors of the International Monetary Fund and the International Bank for Reconstruction and Development and the Fourth Annual Meeting of the Board of Governors of the International Finance Corporation, were held in Washington, D.C., September 26 through September 30, 1960. The U.S. delegation was headed by the Secretary of the Treasury, Robert B. Anderson (U.S. Governor of the three institutions) and Under Secretary of State Douglas Dillon (U.S. Alternate Governor). Under Secretary of the Treasury Julian B. Baird, Assistant Secretary of the Treasury and U.S. Executive Director of the International Bank, T. Graydon Upton, and Special Assistant to the Secretary of the Treasury and U.S. Executive Director of the Fund, Frank_A. Southard, Jr. served as temporary U.S. Alternate Governors. The delegation also included Representatives Brent Spence and William B. Widnall, and members of the National Advisory Council.

President Eisenhower sent a message of welcome to the Governors at the opening session 11 and referred to the significant contribution of the Fund to financial stability and sound practices in the field of foreign exchange, and to the important roles of the International Bank, the newly established International Development Association, 12 and the International Finance Corporation in promoting economic development in the less-developed member countries.

In his statement at the opening joint session, Secretary Anderson referred to the progress achieved in setting up the International Development Association and expressed the hope that, in addition to collective action, other effective measures would be devised by the economically stronger countries to provide a larger measure of capital funds for investment in less-developed areas on satisfactory terms.13 In presenting the Annual Report of the Fund to the Board of Governors, the Managing Director of the Fund, Per Jacobsson, reviewed the activities and policies of the Fund during the year as well as the important domestic and international financial developments of selected countries, and noted that the amount of financial assistance granted by the Fund during the period was on a smaller scale than in the 3 preceding years, reflecting an improvement in the overall monetary situation, especially in many of the industrial countries with

10

H. Doc. 241, 87th Cong., Sept. 14, 1961, pp. 2-8. Part II of the NAC report. "Text in the Department of State Bulletin, Oct. 17, 1960, pp. 607–608. "See ante, doc. 50.

13

For the text of Secretary Anderson's statement made Sept. 26, 1960, see the Department of State Bulletin, Oct. 17, 1960, p. 607.

larger drawing rights on the Fund. He referred to some problems of a general nature which were discussed at the preceding Annual Meeting the desirability of elimination of discrimination and the acceptance by additional member countries of all the obligations of Article VIII.14 He noted that the greater part of world trade now was being transacted in externally convertible currencies and that substantial progress had been made in the elimination of restrictions, especially with respect to the dollar area. He said it was clear that the establishment of external convertibility had given new vigor to the working of the world's exchange markets and to the international banking system. The Managing Director concluded that "although we are still confronted with many important and difficult problems, especially in relation to the less-developed countries, our resources are more ample and our methods of cooperation more developed, and there are good reasons to expect that these problems will be solved through continued individual efforts and effective international cooperation."

In the course of the review of the Fund's Annual Report by the Governors, Secretary Anderson agreed with the general conclusion that the policies of the Fund relating to the use of its resources continued to be appropriate and beneficial.15 He stated that although the international financial system had functioned efficiently in financing trade and permitting increased freedom in the movement of shortterm funds among a widening group of convertible currencies, there was a common obligation on the part of all the industrial countries, especially those which were generating large balance-of-payments surpluses, to share in the task of providing long-term capital to the less-developed areas of the free world. In this context, he welcomed the formation of the Development Assistance Group, as a committee representing members of the prospective new Organization for Economic Cooperation and Development, to coordinate and facilitate the flow of development assistance to less-developed countries.16 In reference to the U.S. balance of payments, the Secretary indicated that the United States had not yet achieved its objective of reasonable equilibrium in its external accounts, and that it intended to work toward that goal "by resolute adherence to domestic and foreign economic and financial policies which will maintain the dollar at its existing gold parity as a sound and reliable currency." 17

The Board of Governors approved amendments to the Rules and Regulations, reviewed the financial statements and audit report for the 1960 fiscal year and the administrative budget for the fiscal year ending April 30, 1961, and conducted the eighth regular election of Executive Directors. The Board also approved the applications for membership of Nepal and the Federation of Nigeria, under the usual

"Of the Articles of Agreement of the IMF; text in A Decade of American Foreign Policy: Basic Documents, 1941-1949, pp. 273-304.

15

For the text of this statement by Secretary Anderson made Sept. 28, 1960, see the Department of State Bulletin, Oct. 17, 1960, pp. 611-616.

16 See post, doc. 136.

17 See post, docs. 378–380.

terms and conditions, with quotas of $7.5 million and $50 million, respectively, approved the allocation to the General Reserve of $14.1 million, the net income of the Fund for the 1960 fiscal year, and a special increase from $66 million to $120 million in the quota of Yugoslavia in the Fund.

At the closing joint session, the Governor for Thailand was elected Chairman for the coming year, and it was agreed to hold the Sixteenth Annual Meeting of the Board of Governors in Vienna, Austria, during September 1961, jointly with the Meetings of the International Bank and the International Finance Corporation.

MEMBERSHIP AND QUOTAS

Although there was no change in the membership of the Fund in the period under review, formal applications for membership were pending from 8 additional countries, and quota increases totaling $361.5 million for 16 countries became effective during this period.18 As of December 31, 1960, 65 members representing 93.99 percent of the Fund's quotas on January 31, 1959, had consented to increases of quotas which had been approved by the Board of Governors in February and April 1959. Of this number, 63 had paid their increased subscriptions, either in full or to the extent of the first of the installments which were authorized by the Board of Governors. As a result of these increases, the aggregate of Fund quotas of the 68 members on December 31, 1960, amounted to $14,740.7 million. (See appendix table C-1.) 19

PAR VALUES

A change in the par value of the Turkish lira, and the establishment of an initial par value for the Uruguayan peso became effective during the current period. In August, the Fund concurred in a proposal of the Government of Turkey for a change in the par value of the Turkish lira from 2.8 to 9 liras per U.S. dollar. In October, an initial par value for the Urugayan peso of 7.40 pesos per U.S. dollar was established by agreement between the Government of Uruguay and the Fund.

As indicated in table 1, the Fund in the half year under review sold the equivalent of $149 million in foreign currencies to 12 member countries in exchange for their own currencies. This compares with $131 million in the preceding 6-month period and $116 million in the second half of 1959. With the exception of a $2 million transaction with Iceland, all sales (members' drawings) were made to countries in Asia and Africa ($96.4 million) and Latin America ($50.2 million), and ranged in amount from drawings of $500,000 by Bolivia and $1 million by Paraguay, to drawings of $27.3 million by Egypt, $32.5

18

In March 1961, Portugal and the Federation of Nigeria became members of the Fund with quotas of $60 million and $50 million, respectively.

in source text.]

[Footnote

million by Iran, and $35 million by Argentina. In calendar 1960, as in the preceding year, drawings were substantially less than repurchases. Through December 31, 1960, 41 countries had drawn the equivalent of $3,684 million from the Fund. Approximately one-half this amount was utilized by countries in Europe. Of total drawings, the equivalent of $481 million involved currencies other than U.S. dollars, an increase of $173 million since December 31, 1958.

TABLE 1.-International_Monetary Fund currency sales and repayments,1 through Dec. 31, 1960, by area and country

TABLE 1.-International Monetary Fund currency sales and repayments,1 through Dec. 31, 1960, by area and country-Continued

1 Includes repayments by repurchase of previous drawings plus other countries' drawings. The latter amounted to $285.4 million on Dec. 31, 1960. Excludes members' repurchases on subscription account which totalled $243.2 million on that date.

• Former member.

NOTE.-Detail will not necessarily add to totals due to rounding.

Source: International Monetary Fund.

Currency repayments

In the 6-month period under review, 15 countries repurchased the equivalent of $408 million of their currencies held by the Fund. (See table 1.) The two largest transactions were those of the United Kingdom and France, which together accounted for $357 million, or over 87 percent, of the total. The United Kingdom repurchase had the effect of completing repayment of a drawing of $561.5 million agreed with the Fund in December 1956.20 The repurchase by France likewise resulted in the repayment of drawings made by France under stand-by arrangements agreed with the Fund in 1956 ($262.5 million) and 1958 ($131.2 million).21 In addition to the repurchases of the United Kingdom and France, seven countries in Latin America repurchased a total of $31.5 million, and four countries in Asia and Africa repurchased $16.4 million of their currencies held by the Fund. As of December 31, 1960, total repayments amounted to the equivalent of $2,817 million, consisting of repurchases of $2,531.4 million and of $285.4 million in other countries' drawings which have the effect of repurchases. In October 1960, outstanding drawings from the Fund's resources fell below $1 billion for the first time since March 1957. By December 31, 1960, this figure was further reduced to $867 million.

"See American Foreign Policy: Current Documents, 1956, p. 246.

21 See ibid. and ibid., 1958, p. 222.