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Recent Activity: International Monetary Fund

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1966
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THE ACTIVITIES of the International Monetary Fund reached near-record levels in 1965, with more member countries than ever before using the Fund’s resources and outstanding drawings rising to a new peak of nearly $4.4 billion. As the year closed, there were clear prospects that the Fund’s own financial position would be strengthened early in the new year as members began to pay into the Fund additional subscriptions of gold and local currency to meet the requirements of their quota increases.

New drawings were made by 23 members during 1965 for a total of $2,434 million—a figure only slightly lower than the record $2,478 million drawn from the Fund in 1961. By the end of 1965, aggregate drawings on the Fund since it began operations in March 1947 had increased to nearly $11.5 billion, and the number of countries that had used its resources had risen to 59. Burundi, New Zealand, and Panama made their first drawings on the Fund last year.

The largest single transaction during the year was a drawing of $1.4 billion by the United Kingdom in May, following a similar drawing of $1 billion by that member at the end of 1964. In the two drawings, the Fund provided the United Kingdom with the equivalent of $2.4 billion made up of 12 currencies. The equivalent of $820 million was made available from the Fund’s own currency holdings, the equivalent of $650 million from sales of the Fund’s gold, and the equivalent of $930 million in currencies borrowed from 8 members participating in the General Arrangements to Borrow.

Under the terms of the General Arrangements to Borrow, which became effective in October 1962, 10 industrial members agreed to lend their currencies to the Fund, for a total amount of $6 billion, if needed to forestall or cope with an impairment of the international monetary system. The Arrangements were for an original term of four years, but in September 1965 it was agreed that they should be extended from October 1966 for a further four years, with provision for a review of their workings prior to October 1968. The borrowings made in connection with the U.K. drawings are the only occasions on which the Arrangements have been used.

The only other industrial member that used the Fund’s resources in 1965 was the United States. For many years the U.S. dollar was the principal currency drawn from the Fund, and it was not until February 1964 that the United States itself used the Fund’s resources. The initial U.S. drawing was for the equivalent of $125 million, but subsequent transactions had raised the cumulative total of U.S. drawings to $960 million by the end of last year. However, even while the United States was drawing on the Fund, the U.S. dollar continued to be drawn from the Fund by other members, notably by the United Kingdom to the extent of $400 million but also in smaller amounts by various developing countries. As a result, U.S. net drawings on the Fund had been reduced to $383 million by the end of 1965.

Last year saw a sharp increase in the drawings made by developing countries. Nineteen such countries, including eight in Latin America and seven on the continent of Africa, drew a total of $487 million during 1965, compared with $181 million and $282 million drawn in 1964 and 1963, respectively. The largest drawings by developing countries last year included $200 million by India, $75 million by Brazil, $57 million by Pakistan, and $36 million by Chile. The Fund also approved during the year stand-by arrangements in support of economic stabilization programs for 20 developing countries. At the end of 1965, undrawn balances under these arrangements totaled $280 million.

During 1964 and 1965, total drawings on the Fund reached $4.4 billion. Both in terms of the number of members using the Fund and in the amount of financial assistance provided, this was the most active two-year period in the Fund’s history. As a result, the Fund’s holdings of the main currencies used in drawings were reduced to low levels, even though repayments in several currencies were substantial. Despite sales of the Fund’s gold and the borrowing of currencies, the Fund’s holdings of the 11 currencies, excluding the U.S. dollar and pound sterling, which have been used repeatedly in drawings in recent years, had fallen to $1.1 billion by December 31, 1965. On that date, holdings of Austrian schillings were as low as 3.6 per cent of quota, Belgian francs were 28.5 per cent, Canadian dollars 44.8 per cent, deutsche mark 7-5 per cent, French francs 18.2 per cent, Italian lire 4.2 per cent, Japanese yen 57.9 per cent, and Netherlands guilders 32 per cent.

Proposals for increasing members’ quotas in the Fund, approved by the Board of Governors in March 1965, were expected to become effective early in 1966 when countries with more than two thirds of the total quotas in the Fund had consented to their individual quota increases. (See “Fund Quotas Will Be Increased to $21 Billion,” Finance and Development, Vol. II, No. 4, December 1965.)

Much of the Fund’s activity over the past year was associated with its program of annual consultations with individual members and technical assistance for members requesting it in the fields of fiscal and monetary policy and exchange reform. The IMF Institute, which was established in 1964, expanded its activities during 1965 when it organized courses in English and French for officials of ministries of finance and central banks. The staff of the Fund assembled information on the progress of the world economy, much of which was made generally available through the Fund’s publications, and conducted studies on a variety of financial problems for the attention of the Executive Board.

DRAWINGS BY MEMBERS DURING THE FOURTH QUARTER OF 1965
MemberMonthAmount

($ million)
ChileNovember6.00 *
Costa RicaNovember1.00 *
EcuadorNovember3.00 *
HaitiOctober, December1.75 •
IndiaOctober25.00 *
LiberiaDecember1.80 *
New ZealandNovember62.00 *
SomaliaOctober1.40 *
TunisiaNovember2.80*
Total drawings in the fourth quarter of 1965:104.75
Total net drawings at the end of the fourth quarter of 1965:4,354.10

Drawings made under stand-by arrangements.

Drawings made under stand-by arrangements.

STAND-BY ARRANGEMENTS APPROVED DURING THE FOURTH QUARTER OF 1965
MemberMonthAmount

($ million)
ColombiaDecember *36.5
El SalvadorOctober20.0
GuatemalaDecember *15.0
HondurasDecember *10.0
TunisiaNovember5.6
Total87.1

Effective January 1, 1966.

Effective January 1, 1966.

STAND-BY ARRANGEMENTS

(As at December 31, 1965) In millions of U.S. dollars

Citation: 3, 1; 10.5089/9781616352813.022.A012

USE OF FUND’S RESOURCES

(As at December 31, 1965)

Citation: 3, 1; 10.5089/9781616352813.022.A012

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