1. This agreement, which is entered into by the United Nations pursuant to the provisions of Article 63 of its Charter, and by the International Monetary Fund (hereinafter called the Fund), pursuant to the provisions of Article X of its Articles of Agreement, is intended to define the terms on which the United Nations and the Fund shall be brought into relationship.
Pursuant to Article XVIII, Section 2(d), it is decided that members that have, or will, become participants in the Special Drawing Rights Department between January 1, 1978 and December 31, 1978 and have informed the Fund that they wish to receive allocations of special drawing rights during the third basic period shall receive allocations in accordance with the Resolution of the Board of Governors on allocations of special drawing rights for the third basic period.
After consultation with the European Monetary Cooperation Fund, the representative rate for the ECU in terms of the SDR under Article XIX, Section 7(a) and Rule O–2 shall be obtained by using the reciprocal of the U.S. dollar equivalent of the ECU as calculated and published by the European Commission and the SDR equivalent of one US. dollar as calculated and published by the Fund for the same day. If both these rates for the U.S. dollar are not available for the same day, the rates for the next preceding day on which both rates are available will be used. The rate determined by this method shall be applied in connection with a transfer of SDRs as part of the settlement of a member’s debt with the European Monetary Cooperation Fund. The European Monetary Cooperation Fund and the Fund will consult concerning any change in the method of calculating the representative rate for the ECU in terms of the SDR.
Pursuant to Article XXX(f), and after consultation with the members concerned, the Fund determines that until further notice the deutsche mark, French franc, Japanese yen, pound sterling, and U.S. dollar are freely usable currencies.
That the Executive Directors of the International Monetary Fund are invited, at the request of the Governor for the United States of America, to interpret the Articles of Agreement, pursuant to Article XVIII*(a), as to whether the authority of the Fund to use its resources extends beyond current monetary stabilization operations to afford temporary assistance to members in connection with seasonal, cyclical, and emergency fluctuations in the balance of payments of any member for current transactions, and whether the Fund has authority to use its resources to provide facilities for relief, reconstruction, or armaments, or to meet a large or sustained outflow of capital on the part of any member.**
The Executive Directors of the International Monetary Fund interpret the Articles of Agreement to mean that authority to use the resources of the Fund is limited to use in accordance with its purposes to give temporary assistance in financing balance of payments deficits on current account for monetary stabilization operations.
In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system, the main industrial countries have agreed that they will, in a spirit of broad and willing cooperation, strengthen the Fund by general arrangements under which they will stand ready to make loans to the Fund up to specified amounts under Article VII, Section 1 of the Articles of Agreement when supplementary resources are needed to forestall or cope with an impairment of the international monetary system. In order to give effect to these intentions, the following terms and conditions are adopted under Article VII, Section 1 of the Articles of Agreement.
During the discussions on the World Economic Outlook, Directors touched on the issue of military spending in the context of the need to raise global savings and to help meet new investment demands. The scale of global resources devoted to military spending—estimated at nearly 5 percent of world GDP—underscores its importance. In the more recent discussion on Military Expenditure and the Role of the Fund, most Directors indicated that as military expenditures can have an important bearing on a member’s fiscal policy and external position, information about such expenditures may be necessary to permit a full and internally consistent assessment of the member’s economic position and policies. At the same time, Directors emphasized that national security, and judgments regarding the appropriate level of military expenditures required to assure that security, were a sovereign prerogative of national governments and were not in the domain of the work of the Fund.