This paper presents Selected Decisions and Selected Documents’ Third Issue of the IMF. Dealings in paper money and coins are deemed to be ‘other exchange transactions’ within the meaning of Article IV, Section 3, whether or not the importation and exportation of such money and coins to and from the country of origin are subject to restrictions. The IMF does not object to exchange rates which are within 2 percent of parity for spot exchange transactions between a member's currency and the currencies of other members taking place within the member's territories, whenever such rates result from the maintenance of margins of no more than 1 percent from parity for a convertible, including externally convertible, currency. The Executive Directors interpret the Articles of Agreement to mean that steps which are necessary to protect a member from unemployment of a chronic or persistent character, arising from pressure on its balance of payments, are among the measures necessary to correct a fundamental disequilibrium; and that in each instance in which a member proposes a change in the par value of its currency to correct a fundamental disequilibrium the IMF will be required to determine, in the light of all relevant circumstances, whether in its opinion the proposed change is necessary to correct the fundamental disequilibrium.
The first interval of five years, at the end of which the Fund shall review the quotas of the members in accordance with Article III, Section 2, began on the date when the Fund Agreement, in accordance with Article XX, Section 1, entered into force: i.e. on December 27, 1945.
In order to ensure the uniform application of the relevant Articles of Agreement as they apply to determinations of members’ net official holdings of gold and U.S. dollars for the purposes of Article III, Section 3(b) (ii), the Fund adopts or reaffirms the following principles of interpretation for the indicated provisions of the Fund Agreement:
The Fund has examined certain problems relating to the adjustment of its holdings of fluctuating currencies and to transactions and computations involving such currencies and has come to the following conclusions:
Dealings in paper money and coins are deemed to be “other exchange transactions” within the meaning of Article IV, Section 3, whether or not the importation and exportation of such money and coins to and from the country of origin are subject to restrictions. The dealings are in consequence subject to the provisions of that Section. Members shall not permit transactions in such paper money and coins within their territories in a manner or to an extent which will negate the par values agreed with the Fund. Where transactions in fact have such an effect the Fund will be obliged to intervene.
WHEREAS the Executive Director for the [member concerned} has raised certain questions of interpretation of the provisions of Section 7 of Article IX of the Articles of Agreement of the Fund as to the treatment to be accorded by a member of the International Monetary Fund to official communications of the Fund, which questions of interpretation are set forth below;
Until further notice, where a member has an accrued repurchase obligation in currency under Art. V, Sec. 7(b), and Schedule B and discharges part or all of that obligation by a sale of gold to the Fund for that currency under Art. V, Sec. 6(a), as provided in paragraph 3 of the decision of the Executive Board at EBM 648 (3/8/51), such gold shall be purchased by the Fund without collecting the estimated costs of later possible conversion of the gold into that currency as permitted under Rule G-7 of the Rules and Regulations, it being understood that the existing requirements as to the form and delivery of such gold would remain in effect.
The word “represents” in Article V, Section 3(a) (i), means “declares.” The member is presumed to have fulfilled the condition mentioned in Article V, Section 3(a) (i), if it declares that the currency is presently needed for making payments in that currency which are consistent with the provisions of the Agreement. But the Fund may, for good reasons, challenge the correctness of this declaration, on the grounds that the currency is not “presently needed” or because the currency is not needed for payment “in that currency,” or because the payments will not be “consistent with the provisions of this Agreement.” If the Fund concludes that a particular declaration is not correct, the Fund may postpone or reject the request, or accept it subject to conditions. The phrase “presently needed” cannot be defined in terms of a formula uniformly applicable to all cases, but where there is good reason to doubt that the currency is “presently needed,” the Fund will have to apply the phrase in each case in the light of all the circumstances.