International Monetary Fund
Published Date:
September 1952
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1. The Managing Director has made the following statement which should be the framework for his discussions with members on use of the Fund’s resources:

“The present proposals are designed to provide a practical basis for use of the Fund’s resources in accordance with the purposes of the Fund. When the proposals are agreed they will, of course, have to be carried into effect through actual cases. Decisions will have to be made in accordance with the particular circumstances, and in this manner a body of practical criteria will gradually be built up. However, even at the outset I think it must be clear that access to the Fund should not be denied because a member is in difficulty. On the contrary, the task of the Fund is to help members that need temporary help, and requests should be expected from members that are in trouble in greater or lesser degree. The Fund’s attitude toward the position of each member should turn on whether the problem to be met is of a temporary nature and whether the policies the member will pursue will be adequate to overcome the problem within such a period. The policies, above all, should determine the Fund’s attitude.

“In addition, the Fund should pay attention to a member’s general credit-worthiness, particularly its record with the Fund. In this respect, the member’s record of prudence in drawing, its willingness to offer voluntary repayment when its situation permitted, and its promptness in fulfilling the obligation to transmit monetary reserves data and in discharging repurchase obligations would be important. I would expect that in the years to come, with extended activities of the Fund, we shall be able more and more to rely on the Fund’s own experience, thus providing a further and most useful link between Fund drawings and repurchases.

“After a period of relative inactivity of the Fund, it would be too much to expect that we should be able to solve with one stroke the entire problem of access to the Fund’s resources so that each member would always know how any request would be received by the Fund. We shall have to feel our way. Sometimes a member may want to submit to the Fund a specific request for drawings, with adequate information as to the particular situation which prompts the request. At other times discussions between the member and the Fund may cover its general position, not with a view to any immediate drawing, but in order to ensure that it would be able to draw if, within a period of say 6 or 12 months, the need presented itself. The Fund itself might take the initiative in discussing with one or more members transactions which it believes suitable for the Fund and helpful to the members concerned. In cases where it would appear appropriate and useful, the Fund might arrange drawings to deal with special short-run situations accompanied by arrangements for repurchase in a period not exceeding 18 months.”

2.a. In view of the Executive Board’s interpretation of September 26, 1946, concerning the use of the Fund’s resources, and considering especially the necessity for ensuring the revolving character of the Fund’s resources, exchange purchased from the Fund should not remain outstanding beyond the period reasonably related to the payments problem for which it was purchased from the Fund. The period should fall within an outside range of three to five years. Members will be expected not to request the purchase of exchange from the Fund in circumstances where the reduction of the Fund’s holdings of their currencies by an equivalent amount within that time cannot reasonably be envisaged.

b. The Fund has recently determined that when the charges on the Fund’s holdings of a member’s currency in any bracket have reached a rate of 3½ per cent per annum, the Fund and the member, in accordance with Article V, Section 8 (d) “shall consider means by which the Fund’s holdings of the currency can be reduced” (EB Meeting 717, 11/19/51). In the course of consultations arising from purchases of exchange taking place after December 1, 1951, the Fund and the member will agree upon appropriate arrangements to ensure the reduction of the Fund’s holdings of the member’s currency as soon as possible, with the maximum period to be permitted in any such agreed arrangement requiring that within five years of each purchase made by the member there will be an equivalent repurchase of the Fund’s holdings unless they have otherwise been reduced.

c. With respect to each future purchase which raises the Fund’s holdings of the member’s currency from not less than 75 per cent to not more than 100 per cent of its quota, a member whose currency held by the Fund has not been otherwise reduced within three years will be requested by the Fund to agree upon an arrangement providing that within five years of each purchase made by the member there will be an equivalent repurchase of the Fund’s holdings unless they have otherwise been reduced.

d. When unforeseen circumstances beyond the member’s control would make unreasonable the application of the principles set forth in paragraph 2 above, the Fund will consider extensions of time.

e. When requesting use of the resources of the Fund in accordance with the arrangements described above, a member will be expected to include in its authenticated request a statement that it will comply with the above principles.

f. These principles will be an essential element in any determination by the Fund as to whether a member is using the resources of the Fund in accordance with the purposes of the Fund.

3. Each member can count on receiving the overwhelming benefit of any doubt respecting drawings which would raise the Fund’s holdings of its currency to not more than its quota.

4. The Managing Director should communicate with members concerning means to speed the collection and reporting of monetary reserves data and means to reduce the delays in reaching agreement under Rule 1-6 in cases where a repurchase obligation has been computed. The Fund should also make it clear that an important element in its judgment respecting the use of its resources will be the co-operation of the member in helping to make Article V, Section 7 effective, including the timely provision of information and the facilitating of settlement.

5. This decision will be effective until December 31, 1953, and will be reviewed by the Executive Board before that date.

February 13, 1952

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