Abstract

Article IV, Section 8(b), provides that a member shall pay additional currency to the Fund equal to the reduction in the gold value of the member’s currency held by the Fund not only when the par value of the member’s currency is reduced but also when there is no formal change in par value, but the Fund determines that the foreign exchange value of the member’s currency has depreciated to a significant extent within the member’s territories. In this way, provision is made for the maintenance of the gold value of the Fund’s holdings of a member’s currency when there is a de facto depreciation of the currency in exchange transactions in the member’s territories. The par values of the currencies of members are fixed, directly or indirectly, in terms of gold, and therefore there is a fixed relationship between the par values of any two currencies. Exchange transactions involving the two currencies in the territories of the two members must be based on this fixed relationship and must not deviate from it by more than narrow margins that are consistent with the Articles.12 If, notwithstanding the provisions of the Articles, exchange transactions do deviate from the fixed relationship by a significant amount in excess of these margins, the deviation may occur because there has been a depreciation in the market value of one currency in relation to other currencies.