Journal Issue
Finance & Development, September 1976

Fund activity: Jacques de Larosière is the new Managing Director; Fund in the Witteveen years; previous MDs; Fund transactions during first half of 1978; Annual Meetings of the Fund and the Bank, Washington, D.C., September 25–28; selected data on Fund holdings and commitments; gold auctions; The 1978 Per Jacobsson Lecture; value of SDR set

International Monetary Fund. External Relations Dept.
Published Date:
September 1978
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Jacques de Larosière is new Managing Director

Mr. Jacques de Larosière de Champfeu, of France, has been appointed Managing Director and Chairman of the Board of Executive Directors of the International Monetary Fund. He assumed his duties at the Fund on June 17, 1978, succeeding Mr. H. Johannes Witteveen, of the Netherlands, whose service ended on June 16, 1978.

Mr. de Larosière, 48, was Director of the French Treasury since 1974. He represented his Government at many international conferences as well as on the boards of major industrial and financial concerns. Education at the University of Paris with degrees in Arts and Law, and at the Political Studies Institute of Paris and National School of Administration preceded his designation as an Inspecteur des Finances in the French civil service.

Following assignments to the French Embassies in London (1962) and in Algeria (1963), Mr. de Larosière joined the Department of External Finances in the Ministry of Economy and Finance in 1963. He was subsequently transferred to the Treasury where he became Assistant Director in 1967 and Deputy Director in 1971. While on these assignments, he chaired the Economic Development Review Committee of the Organization for Economic Cooperation and Development (OECD) and was in charge of the development assistance programs managed by the Ministry of Economy and Finance. He was Personal Assistant and Director of the Cabinet Office of Mr. Valéry Giscard d’Estaing, Minister of Economy and Finance, January-May 1974.

Alternate Governor of the Fund for France since 1974, Mr. de Larosière has participated in the work of the Committee of Twenty on International Monetary Reform and the Interim Committee, as well as in that of the Development Committee on the Transfer of Real Resources to Developing Countries. He has been Chairman of the Deputies of the Group of Ten since September 1976, and has served on Economic Policy and Development Assistance Committees of the OECD.

Mr. de Larosière has represented the French Government on the Boards of Règie Nationale des Usines Renault, Banque National de Paris, Compagnie Nationale Air France, Société Nationale des Chemins de Fer Français, Soctété Nationale Industrielle Aérospatiale, Caisse Nationale des Télécommunications, Banque de France, Crédit National, Comptoir des Entrepreneurs, and Crédit Foncier de France.

The Fund during the Witteveen years

Mr. H. Johannes Witteveen ended his term as Managing Director of the Fund on June 16, 1978. He had been Managing Director of the Fund since September 1, 1973.

During Mr. Witteveen’s tenure of almost five years there was an unprecedented increase in the use of the Fund’s resources, accompanied by a number of important changes in the form of the Fund’s financing of members’ balance of payments deficits. By the end of his term in office, members cumulative purchases from the Fund since the beginning of its operations amounted to SDR 48.2 billion (including undrawn balances under stand-by arrangements), reflecting an increase of SDR 23.1 billion since Mr. Witteveen became the Fund’s Managing Director. In all the preceding years cumulative purchases had amounted to SDR 25.1 billion.

This large-scale expansion in the use of the Fund’s resources, which began in 1974, was partly financed through the Fund’s own resources and by borrowing SDR 8.6 billion, including SDR 6.9 billion borrowed under the oil facilities in effect in 1974, 1975, and part of 1976. These funds raised the gross cumulative total of borrowed resources to SDR 11 billion by June 6, 1978. In addition, the Fund almost doubled the number of currencies it uses in its transactions, thereby spreading the financing of Fund activities more widely among its membership. Additional resources were made available to members by liberalizing their access to the compensatory financing facility in 1975.

In terms of the volume of resources made available to members, the peak of the Fund’s financial activity was achieved in 1976, approximately midway in Mr. Witteveen’s term of office, when total purchases from the Fund amounted to SDR 7 billion, including an unprecedented SDR 2.3 billion made available to members through compensatory financing purchases and more than SDR 2.1 billion through oil facility purchases. Total repurchases were SDR 1,272.0 million in that year. The previous peak was in 1968 when total drawings were almost half those in 1976. Thereafter, the oil facility was terminated and compensatory financing purchases declined sharply, only partly offset by a near-doubling of credit tranche purchases, from SDR 1,477.6 million in 1976 to an unprecedented SDR 2,895.2 million in 1977.

In addition to the provision of a high level of balance of payments assistance to members, with extensive drawings under both the Fund’s regular tranche policies and the compensatory financing and oil facilities, Mr. Witteveen’s term of office was marked by progress in major policy matters affecting the Fund’s structure and operations, including:

  • The successful completion of the work on the Second Amendment to the Fund’s Articles of Agreement, culminating in its acceptance by members and its entry into force on April 1, 1978. (See “Some first effects of the Second Amendment” by Joseph Gold in this issue, and “The Second Amendment of the Fund’s Articles of Agreement: a general view,” I and II by Mr. Gold in the March and June issues of Finance & Development.)

  • The completion of the Sixth General Review of Quotas, culminating in the consent of members to quota increases that will raise the total of Fund quotas from SDR 29.2 billion to SDR 39.0 billion when all members will have consented to the full increase proposed for them. The successful conclusion of the Sixth General Review of Quotas cleared the way for the initiation of the Seventh General Review of Quotas.

  • The agreement on the principles for the guidance of members with respect to their exchange rate policies and on procedures for Fund surveillance over those policies.

  • The enlargement of the General Arrangements to Borrow and the activation of these Arrangements in connection with drawings under stand-by arrangements made by two industrial countries.

  • The initiation of the Fund’s gold sales, both to the market through auctions and for distribution to members.

  • The establishment and initiation of operations by the Trust Fund whose resources—gold and currencies sold, donated, or lent to it, income from investments and loans, and the proceeds from repayments of loans—are to be used to provide additional balance of payments assistance on concessional terms in support of the efforts of eligible developing members that qualify for assistance to carry out programs of balance of payments adjustment. (See “The operation of the Trust Fund” by D. Gupta in this issue.)

  • The approval of stand-by arrangements for members for periods of more than one year, as well as a major review of the Fund’s financial position and changes in the rates of charges paid by members for the use of the Fund’s resources.

  • The establishment of the Fund’s oil facility, financed by borrowings from 16 members, and Switzerland. Total borrowings by the Fund in connection with the oil facility amounted to SDR 6.9 billion and final purchases from the Fund by members were made under the facility in the first half of May 1976.

  • The work on the establishment of a supplementary financing facility of a temporary nature (the so-called Witteveen facility) that would enable the Fund to expand its financial assistance to those members that in the next several years will face payments imbalances that are large in relation to their economies and quotas in the Fund.

Aldo Zanzi

Previous Managing Directors
Camille Gutt, Belgian1946–51
Ivar Rooth, Swedish1951–56
Per Jacobsson, Swedish1956–63
Pierre-Paul Schweitzer, French1963–73
H. Johannes Witteveen, Dutch1973–78

Fund transactions in first half of 1978

Total purchases from the Fund by its members in the first six months of 1978 amounted to SDR 532.22 million, of which SDR 237.75 million was purchased under the compensatory financing facility. Purchases under the reserve and credit tranches during that period were SDR 98.57 million and SDR 181.91 million, respectively. Total repurchases in the six months ending June 30, 1978 were SDR 2,267.9 million. By way of comparison, total repurchases in all of 1977 amounted to SDR 2,939.4 million, while purchases in that year were SDR 3,424.4 million.

There were 17 stand-by arrangements in effect at the end of June 1978. The total amount approved under these stand-by arrangements was SDR 5,057.20 million, and the undrawn balance available at the end of June 1978 was SDR 3,101.64 million, subject to phasing of the amounts. Purchases in June were SDR 73.56 million, and repurchases in that month were SDR 379.36 million. During June the Fund also made the third payment under the subsidy account to 18 member countries for an amount totaling the equivalent of SDR 24.95 million. The first two subsidy payments totaling the equivalent of SDR 41.3 million were made to the same members in 1976 and 1977. The subsidy account was established by the Fund’s Executive Directors in 1975 to assist the Fund’s most seriously affected members to meet the cost of using the oil facility. The subsidy account is funded by contributions from 24 members and Switzerland.

Fund holdings of gold and SDRs, and commitments as at June 30, 1978(In millions of SDRs)
Holdings in the General Resources Account
Special drawing rights1,332.1
Stand-by arrangementsAmount



Sri Lanka93.0055.0038.00
United Kingdom3,360.002,250.0011,720.00
Western Samoa0.730.73
Extended Arrangements

Includes augmentation by repurchase equivalent to SDR 610 million.

First phase through June 30, 1979 of a three-year arrangement totaling SDR 200 million.

Third phase through July 6, 1978 of a three-year arrangement totaling SDR 67.2 million.

Second phase through December 31, 1978 of a three-year arrangement totaling SDR 518 million.

Includes augmentation by repurchase equivalent to SDR 100 million.

Third phase through December 31, 1978 of a three-year arrangement totaling SDR 217 million.

Includes augmentation by repurchase equivalent to SDR 38.749 million.

Includes augmentation by repurchase equivalent to SDR 610 million.

First phase through June 30, 1979 of a three-year arrangement totaling SDR 200 million.

Third phase through July 6, 1978 of a three-year arrangement totaling SDR 67.2 million.

Second phase through December 31, 1978 of a three-year arrangement totaling SDR 518 million.

Includes augmentation by repurchase equivalent to SDR 100 million.

Third phase through December 31, 1978 of a three-year arrangement totaling SDR 217 million.

Includes augmentation by repurchase equivalent to SDR 38.749 million.

Gold auctions in 2nd quarter of 1978; procedures reviewed by EDs

The Fund awarded 1,519,600 fine ounces of gold to competitive bidders in the three monthly gold auctions held for the benefit of developing countries during the second quarter of 1978. In addition, 925,200 fine ounces of gold were awarded to member countries submitting noncompetitive bids.

Awards to competitive bidders were made at the prices actually bid in each of the auctions; average prices in the three auctions ranged from US$177.92 (April 5 auction) an ounce to US$183.09 (June 7 auction) an ounce. Competitive bids were received for a total of 5,543,400 ounces in the three auctions.

Awards of 925,200 fine ounces of gold to noncompetitive bidders were made at the average auction price of US$183.09 an ounce in the June 7 auction. As previously announced, developing member countries entitled to receive directly a share of the profits on gold sales conducted by the Fund were given the option to submit noncompetitive bids for up to that part of 25 million ounces that corresponds to their share of total Fund quotas on August 31, 1975.

Net of payment for the capital value of the gold (equivalent to SDR 35 an ounce) the second quarter gold sales yielded US$333.3 million for the benefit of developing countries. This raised the total accrued from all auctions held before the end of June 1978 and from the proceeds of the sales to non-competitive bidders to about US$1.51 billion.

During May the Executive Directors of the Fund reviewed, in the light of the experience gained in the first two years of the sales program and of the amendment of the Articles of Agreement, the policies and procedures used in gold sales for the benefit of developing countries. They agreed on the terms and conditions for the auctions to be held during the next 12 months. Consistent with the understanding on gold sales reached in May 1976, the Fund will also entertain non-competitive bids from the authorities of developing countries that wish to acquire gold in this way.

With a few exceptions, the modalities for the auctioning of gold to the private market in competitive bidding will remain unchanged. The auctions will continue to be held on the first Wednesday of each month, the minimum bid will remain at 1,200 ounces, a deposit of the higher of US$10 a fine ounce or US$25,000 will continue to be required, delivery as in the past will be at one of the Fund’s major gold depositories, and as hitherto payment will have to be completed approximately seven business days after the auction. It is planned from now on to conduct all auctions on the bid price method. In view of the amendment of the Articles of Agreement, monetary authorities of member countries are no longer prohibited from submitting bids, and terms and conditions for the auctions to be held in the forthcoming months do not restrict such participation in the auctions. The Fund will monitor official gold transactions in the light of the objective of reducing gradually the role of gold in the international monetary system.

Value of SDR set

The Fund recently made an important change in the calculation of the amounts of each of the 16 currencies that will determine the value of the special drawing right (SDR). Effective July 1, 1978, the value of the SDR will be the sum of the values of the following currencies:

U.S. dollar0.40
Deutsche mark0.32
Japanese yen21
French franc0.42
Pound sterling0.050
Italian lira52
Netherlands guilder0.14
Canadian dollar0.070
Belgian franc1.6
Saudi Arabian riyal0.13
Swedish krona0.11
Iranian rial1.7
Australian dollar0.017
Spanish peseta1.5
Norwegian krone0.10
Austrian schilling0.28

On March 31, 1978, the Fund adopted a decision to adapt the composition of the basket of 16 currencies that determines the value of the SDR on the basis of statistics for the period 1972–76, and to revise the percentage weights assigned to each currency in the basket. On June 30, 1978, the Fund made the calculations necessary to convert these weights into units of each of the 16 currencies, as set out above, so that the value of the SDR in terms of any currency was exactly the same on that day under the revised valuation basket as under the previous valuation basket.

Fund-Bank Annual Meetings

The 1978 Annual Meetings of the Boards of Governors of the International Monetary Fund and of the World Bank will be held at the Sheraton Park Hotel in Washington, D.C. from September 25–28. The meetings will last four days, one day less than heretofore. Tengku Razaleigh Hamzah, Finance Minister of Malaysia, will be Chairman of the Joint Meetings this year.

The Interim Committee of the Fund Board of Governors is scheduled to meet on Sunday, September 24. The Joint Development Committee is scheduled to meet on Saturday, September 23 and Wednesday afternoon, September 27.

Separate reports on the Fund and the Bank meetings will be published in our December issue.

The 1978 Per Jacobsson Lecture

The 1978 Per Jacobsson Lecture will be held in Washington on September 24, 1978, immediately before the Annual Meetings of the Fund and the Bank Gabriel Hauge. Chairman of the Board of Manufacturers Hanover Trust Company, and Erik Hoffmeyer, Governor of the Danmarks National Bank, will speak on “The International Capital Market and the International Monetary System”. Lord Roll of Ipsden will act as commentator.

A report on the lecture will be found in the next issue of Finance & Development.

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