Membership
Afghanistan became a member of the Fund on July 14, 1955, with a quota of $10 million, and Korea on August 26, 1955, with a quota of $12.5 million. Both members have paid 25 per cent of their quotas in gold. On December 21, 1955, the Government of Viet-Nam applied for membership in the Fund.
As noted in the Annual Report for 1955, Czechoslovakia ceased to be a member of the Fund as of the close of business on December 31, 1954. Discussions in Washington concerning a settlement of accounts between Czechoslovakia and the Fund led to an agreement signed on June 23, 1955, according to which Czechoslovakia will pay to the Fund an amount of 113,242.206 fine ounces of gold (US$3,963,477.21) in settlement of all accounts. Payment will be made in gold or, at the option of Czechoslovakia, in U. S. dollars at the par value in effect at the time of payment. Czechoslovakia undertook to make 12 equal semiannual payments, the first due on January 2, 1956 and the last on July 2, 1961, and to pay interest from January 1, 1955, at the rate of 2½ per cent per annum on the unpaid portion of the amount payable. Czechoslovakia has the right to make earlier payments, and the agreement provides for a rebate of interest in the amount of two tenths of 1 per cent per annum for each full year by which complete payment precedes July 2, 1961. The first installment under this agreement was paid on January 2, 1956.
There are now 58 members of the Fund and the aggregate of quotas is US$8,750.5 million. The members of the Fund, their quotas, voting power, Governors, and Alternate Governors as of April 30, 1956 are shown in Appendix III. Changes in membership of the Board of Governors during the year are shown in Appendix IV. The Executive Directors of the Fund and their voting power are shown in Appendix V. Changes in membership of the Executive Board are shown in Appendix VI.
Review of Quotas
The Executive Board completed its quinquennial review of quotas required by Article III, Section 2, of the Articles of Agreement in January 1956, and did not propose any general revision.
Investment of Fund Assets
The Fund’s income has been less than its operating expenses, a situation which in recent years has reflected the reduced need of members to draw on the Fund, in view of the improvement in the international payments and reserve positions of many members. Accordingly, during the past year, discussions were resumed as to the possibility of investing some of the Fund’s assets, which had been under consideration from time to time in the past. The discussions concentrated on the sale of a limited portion of the Fund’s gold for the purpose of investing the proceeds so as to produce a supplemental income. The investment contemplated was in short-term U. S. Government securities, because the greater part of the Fund’s administrative expenditure has been and will continue to be in U. S. dollars.
The Executive Board concluded that there was authority under the Articles of Agreement to sell a limited portion of the Fund’s gold to the United States for the purpose of investing the proceeds in U. S. Treasury bills having not more than 93 days to run. The conditions for making this investment were set forth in an interpretation under Article XVIII. One of these conditions is that the Fund will be able to reacquire the same amount of gold as is sold for investment, and that the United States will sell this amount of gold to the Fund at the U. S. selling price at the time of sale to the Fund. In accordance with its commitment under the Articles of Agreement of the Fund, the United States would maintain the gold value of the U. S. Treasury bills in which the Fund invests. It was decided that, with the assurance that the United States would resell gold to the Fund on demand, the Fund would sell approximately, but not more than, $200 million of gold to the United States for the Fund’s investment program. The interpretations and operating decisions are reproduced in Appendix VII.
The Fund received the assurance from the United States and, accordingly, steps were taken to initiate the investment program. As of April 30, 1956, an amount of gold equivalent to $50 million had been sold and invested in U. S. Treasury bills.
Operations Relating to Restrictions and Discrimination
As reported in Chapter V, the Fund examined during the year the problem of bilateralism and undertook studies of discriminatory restrictions and of the Hague Club. The Fund also consulted with 32 members still maintaining restrictions under Article XIV. In each case it recommended policies and measures which the Fund believes should be adopted in order to conform more completely and as rapidly as possible with its objectives. In the 1956 series of consultations which has already begun, the general procedures of previous years are being followed.
In accordance with the practice of previous years, the Fund was consulted in 1955 by the Contracting Parties to the General Agreement on Tariffs and Trade (GATT) in connection with their consultations with five governments on the discriminatory aspects of import restrictions being applied in order to safeguard balances of payments and monetary reserves. The Fund also transmitted to the Contracting Parties the results of its Article XIV consultations with governments which were participants in GATT consultations, together with background material on the countries concerned. The Fund Mission to the Tenth Session of the Contracting Parties, which was held from October 27 to December 3, 1955, cooperated with the working party of the Contracting Parties in these consultations.
During the past year, the Fund reviewed some of its procedures and operating policies in respect of changes in multiple rate systems. Simplified procedures for the approval of changes in multiple rate systems, which do not appear to involve competitive depreciation, exchange subsidization, or harmful discrimination, were broadened. These simplified procedures will not be applied to proposed changes where the appropriateness of giving approval is open to doubt, or where a commodity is involved on which tariff rates are bound under the GATT.
Technical Assistance and Training Program
During the year under review, members of the Fund staff visited 42 member countries for purposes of consultation, technical assistance, or the exchange of views and information. Three members of the staff were granted leave without pay to undertake special assignments.
The Fund’s training program, initiated in 1951, was intended, in the first place, to provide nationals of member countries with technical training related to activities with which the Fund is especially concerned, for example, the collection and presentation of balance of payments data. The number of persons who have participated in these programs is now close to 100, from 48 member countries. In the program that started in September 1955, there are 17 participants from 17 member countries. The training program has proved useful for its original purpose; but also, by disseminating a clearer understanding of the Fund’s purposes and procedures, it has made a valuable contribution to the general relations of the Fund with its members. Several former trainees now fill positions of considerable responsibility in their own countries; the knowledge and experience gained by trainees at the Fund may be expected to prove of increasing value, as time goes on, both to member countries and to the Fund as a whole.
Information
The Fund’s program of publications during the year included the Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1955 (Tenth Annual Report), the Sixth Annual Report on Exchange Restrictions, Volume 6 of the Balance of Payments Yearbook, Volume IV, No. 3 and Volume V, No. 1 of Staff Papers, the monthly International Financial Statistics, and the weekly International Financial News Survey. Direction of International Trade is published jointly with the International Bank for Reconstruction and Development and the Statistical Office of the United Nations. The Fund also makes available to each member a large amount of systematic analytical material dealing with important trends in its economy and in the economies of other countries.
Relations with Other International Organizations
Close relations have been maintained between the Fund and the International Bank for Reconstruction and Development, the United Nations and its regional and technical bodies, and other international agencies, particularly the Organization for European Economic Cooperation (OEEC), the Contracting Parties to the General Agreement on Tariffs and Trade (GATT), and the Bank for International Settlements. The objectives and activities of the OEEC and the European Payments Union are closely related to those of the Fund, and efforts are constantly being made to ensure that the Fund’s relations with them will be effective and fruitful. The attainment of the Fund’s objectives also requires, especially in the long run, as much harmonization as possible by its members between commercial policies and exchange and monetary policies. Collaboration between the Fund and the Contracting Parties aims at establishing consistent courses of policy with respect to restrictions in international trade and payments. The procedures for collaboration are continually under review in order to arrive at the most effective working relationship.
Administration
At the end of the fiscal year, the Fund staff numbered 419, including 7 temporary employees and 7 on extended leave. During the year, there was a net reduction of 9. The turnover was moderate, with 48 new appointments involving nationals of 17 countries. Continuous attention is paid to the importance of recruiting staff on as wide a geographical basis as possible, subject to the paramount importance of securing the highest standards of efficiency and of technical competence. In the past year, the number of countries represented on the staff increased from 40 to 43.
The administrative budget approved by the Executive Directors for the period May 1, 1956 to April 30, 1957 is presented in Appendix VIII. Estimated income is expected to cover administrative expenditures during the fiscal year. A tabulation comparing the budget with actual expenditures for the fiscal years 1955 and 1956 and a comparative statement of income are attached.
The Executive Board requested the Governments of Australia, Colombia, and France to nominate members of the Audit Committee. The following nominations were made and confirmed: Mr. Lindsay G. D. Farmer, Chief Auditor in New York for the Commonwealth of Australia; Mr. Alfonso Llano, Sub-Secretary and Assistant to the General Manager of the Banco de la República, Bogotá, Colombia; and Mr. Hubert Davost, Inspector of Finance in the Ministry of Economic and Financial Affairs, Paris, France. The report of the Committee is submitted separately. Appendix IX gives the Auditors’ Certificate, together with the audited Balance Sheet as of April 30, 1956, the audited Statement of Income and Expenditure, with supporting schedules, and audited financial statements of the Staff Retirement Fund.