II Activities and Policies of the Fund, 1958-59

International Monetary Fund
Published Date:
September 1959
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Fund Membership and Quotas

DURING the past fiscal year two countries became members of the Fund, Spain on September 15, 1958, with a quota of $100 million, and Libya on September 17, 1958, with a quota of $5 million. With the merging of Egypt and Syria into a single state, the United Arab Republic has become a single member of the Fund with one quota. The total membership of the Fund is now 68.

The quota of the Philippines was increased on January 30, 1959, from $15 million to $50 million. The aggregate quotas of Fund members thus became $9,228 million.

The members of the Fund, their quotas, voting power, Governors, and Alternate Governors as of April 30, 1959 are listed in Appendix I, and changes in membership of the Board of Governors in Appendix II. The Executive Directors and Alternate Executive Directors of the Fund and their voting power are shown in Appendix III, and changes in the membership of the Executive Board in Appendix IV.

Increasing the Fund’s Resources

At the Thirteenth Annual Meeting of the Board of Governors of the Fund in New Delhi in October 1958, it was resolved “That the Executive Directors promptly consider the question of enlarging the resources of the Fund through increases in quotas and that, if, having regard to views expressed by Governors and considering all other aspects of the matter, they find that action to carry out such increases would be desirable, they submit an appropriate proposal to the Board of Governors for action either at a meeting of the Board or by vote without a meeting, as the Executive Directors may determine.” After thoroughly examining the question, the Executive Directors submitted a Report to the Board of Governors on December 22, 1958. The Report stated, in the first place, that the need for an increase in the Fund’s resources arose from the tasks which, under its Articles of Agreement, it has to perform in an expanding world economy. Experience had shown that financial assistance by the Fund tends to be concentrated in periods marked by exceptional strains in the world’s monetary system. Major economic and financial pressures would often affect several countries more or less at the same time, so that the calls on the Fund’s resources might be of substantial proportions in a relatively short period. The experience of the Fund in recent years had shown that it must remain prepared for diverse contingencies, many of which cannot be clearly defined in advance. At the end of November 1958, the Fund’s holdings of gold and U.S. dollars amounted to $2.3 billion. If commitments under stand-by arrangements, totaling $0.8 billion, are deducted, the balance of gold and U.S. dollars was $1.5 billion, compared with $3.5 billion at the end of September 1956. The fact that in the light of past experience the Fund’s resources at the time of the Report could not be considered adequate to meet sudden calls upon them was given added force by the need of the Fund always to maintain enough liquid resources to give its members confidence that in the Fund they have a second line of reserves. The hope was expressed that a way might be found so that the currencies of the main industrial countries other than the United States could be drawn from the Fund, even though these currencies are not fully convertible for Fund purposes; but it was also stressed that the Fund must be prepared to meet situations in which its holdings of gold and convertible currencies would be of decisive importance. Account had to be taken of the fact that in the last decade the volume of world trade had nearly doubled, and that the rise in dollar prices since 1944 had correspondingly reduced the real value of the Fund’s resources. Moreover, the expansion of trade and the greater freedom of international payments, including capital movements, may intensify the effects of any sudden change in confidence in a major currency. The Fund’s members must be assured that it is adequately equipped to take the strains of crisis and adversity. The Executive Directors accordingly concluded that it was highly desirable to enlarge the Fund’s resources through increases in quotas, and recommended a general increase of 50 percent in members’ quotas as a reasonable basis for action by the Board of Governors.

In view of the position in world trade of Canada, the Federal Republic of Germany, and Japan, and their recent relative economic growth, increases beyond 50 percent in the quotas of these countries were also recommended as appropriate and highly desirable, particularly as such increases would enlarge the Fund’s holdings of currencies likely to be drawn by other members. For Canada, the recommended increase would raise its quota to $550 million, for the Federal Republic of Germany, to $787.5 million, and for Japan, to $500 million. A general 50 percent increase, together with these three special increases, would increase the resources of the Fund by the equivalent of $5.1 billion, including gold payments of nearly $1.3 billion. The Fund’s holdings of gold and U.S. dollars would be doubled from $2.3 billion to $4.6 billion, and its holdings of gold and of the six currencies so far drawn from the Fund would be increased by 75 percent, from $4.7 billion to $8.2 billion.

At the same time the Board of Executive Directors recommended additional quota increases for a number of members with small quotas for which it had been indicated at the time of the second quinquennial review of quotas in January 1956 that requests for increases in quotas would be sympathetically considered. Since that time it has been the practice of the Executive Directors to recommend, and of the Board of Governors to agree to, increases in accordance with the following formula:

Quotas below $5 million could be raised to $7.5 million;

Quotas of $5 million and above but below $10 million could be raised to $10 million;

Quotas of $10 million and above but below $15 million could be raised to $15 million;

Quotas of $15 million and above but below $20 million could be raised to $20 million.

As reported in recent Annual Reports, the quotas of 8 members have already been increased in terms of this formula. In addition, a special increase, which is reported above, was granted to the Philippines. The Executive Directors recommended in December 1958 that each of the 24 other countries with quotas less than $20 million should be given the opportunity

(i) to increase its present quota by 50 percent, or

(ii) to accept a quota equal to the amount available under the small quota formula increased by 50 percent, or

(iii) to accept a quota of such amount between (i) and (ii) as it might choose.

The members to which this recommendation applies are Afghanistan, Bolivia, Burma, Ceylon, Costa Rica, Ethiopia, Ghana, Guatemala, Iceland, Iraq, Jordan, Korea, Lebanon, Libya, Luxembourg, Panama, Saudi Arabia, the Sudan, Thailand, Tunisia, the United Arab Republic (in respect of the Syrian Region), Uruguay, Venezuela, and Viet-Nam.

The Executive Directors recommended that in all cases the additional subscriptions of members consenting to an increase of quota should be paid as to 25 percent in gold and the balance in the member’s currency. Before the quota increase can become effective, payment of both portions of the additional subscription must be made, even by those members which have not yet been required to pay their original subscriptions. However, since the prompt payment in gold of 25 percent of the quota increase might cause hardship in some countries, special facilities for payment were provided in these cases. The Executive Directors stated further that the policies and practices governing the use of the Fund’s resources, which had successfully stood the test of practical application, should not be changed as a consequence of the increases in quotas recommended by them.

The plan for increasing the Fund’s resources was closely related to the plan undertaken at the same time for increasing the authorized capital of the International Bank for Reconstruction and Development. Any member consenting to an increase in its Fund quota was expected to request a corresponding increase in its subscription to the capital of the Bank, and the general increase in each institution was made contingent upon the increase in the other.

The Resolutions submitted to the Board of Governors in order to make these recommended quota increases effective are reproduced in Appendix V. For their adoption affirmative votes were required from Governors representing members having at least 80 percent of the present quotas in the Fund. When voting was completed on February 2, 1959, affirmative votes had been received from Governors representing countries with more than 99 percent of the present quotas. It then remained for each member country to complete the procedures necessary to accept the increase in quota offered to it and to make the required payments to the Fund. None of the increases becomes effective unless the Fund determines that members having not less than 75 percent of the total of quotas on January 31, 1959 have consented to increases, and members have been requested to notify the Fund of their consent by September 15, 1959. At the time of writing this Annual Report, members with 47.3 percent of the present quotas in the Fund had informed the Fund of their consent to the recommended quota increases, and many other members had initiated the legislation necessary to enable their Governments to take a similar step.

While the Report on a general increase of Fund quotas was under consideration by the Executive Directors, the Fund also received requests from 14 members for quota increases that exceeded the recommended increases described above. These requests, from Argentina, Brazil, Ceylon, Cuba, Denmark, Ghana, Iran, Israel, Mexico, Norway, Saudi Arabia, Thailand, Turkey, and Venezuela, were subsequently further considered by the Executive Directors, who on February 24, 1959 adopted a Report and Resolution for submission to the Board of Governors which recommended additional increases for these members. The Resolution, upon which the Governors were invited to vote not later than April 6, 1959, is reproduced in Appendix VI. Affirmative votes were cast for all of these recommended increases by Governors representing members having more than 96 percent of the present quotas in the Fund. The members concerned are also required to notify the Fund of their consent to the proposed increases not later than September 15, 1959.

Use of the Fund’s Resources

During the financial year from May 1, 1958 to April 30, 1959, total repurchases, equivalent to $537.3 million, substantially exceeded total purchases from the Fund, equivalent to $263.5 million (Table 1). Whereas record sales of currency by the Fund had been reported in the preceding two years, 1958-59 was a record year for repurchases, the number of members repurchasing being greater than in any previous year and the amount repurchased being almost double the repurchases in any previous year. These repurchases occurred, on the one hand, because the reserve positions of several members, particularly some of the industrial countries, improved, and, on the other hand, because repayments to which some members had committed themselves either at the time of their purchases from the Fund or at a later date became due. Repurchases were effected by 5 members in Europe, 5 in Latin America, 3 in the Far East, and 1 in the Middle East. Belgium, Denmark, Israel, Japan, the Netherlands, and Nicaragua made repurchases in full and thereby reduced the Fund’s holdings of each of their currencies to 75 percent of quota, and the United Kingdom made a substantial partial repurchase.

Table 1.Summary of Fund Transactions, Fiscal Years Ended April 30, 1948-59(In U.S. dollars)
Total Stand-By

Arrangements in Force

at End of Fiscal Year
Total Purchases by

Total Repurchases

by Members
19571,1 14,047,648.761,212,280,00075,038,810.14

The improvements in reserve position which led to extensive repurchases from the Fund were also sufficient in Western Europe to permit the important steps for the establishment of external convertibility to be taken without any new calls being made on the Fund’s resources. Accordingly there was a considerable shift in the directions in which the Fund made its resources available. The total amount of currency purchased by Fund members during the last fiscal year was the fourth highest since the Fund began its operations. But while the amount involved in these purchases or in stand-by arrangements entered into or renewed was 24 percent less than in the previous year, the number of members concerned in these activities fell short of last year’s total by only one. Of these members 13 were in Latin America, 3 in Europe, 2 in the Far East, and 2 in Africa. Only one of the members purchasing exchange from the Fund during the year is an industrial country, nearly all the Fund’s transactions being with countries whose exchange receipts come almost entirely from the export of primary products.

With the exception of the purchases by Cuba, the Philippines, the Sudan, and Turkey, all the purchases during the past fiscal year were under stand-by arrangements which had been made in either the current or the preceding year. The number, 14, of these arrangements entered into or renewed was greater than in any previous financial year of the Fund. The increasing use of standby facilities may be taken as proof that members have found them a useful instrument when they are considering the form of financial assistance that will be most effective in helping them overcome temporary balance of payments difficulties. Three members, El Salvador, Pakistan, and the United Kingdom, have been content to arrange an assured line of credit with the Fund which has not, in fact, been utilized to purchase foreign exchange. Other members have made purchases in support of intentions and programs that they have outlined to the Fund. Three stand-by arrangements expired during the past year without having been utilized fully or at all, and were not renewed since the members’ reserve positions had improved so far that this type of assistance was no longer required.

The support that the Fund has been able to give to comprehensive stabilization programs through the financial resources made available to members has again been of particular interest. As in previous years, additional financing was procured by some members from other sources, such as commercial banks and government agencies, mainly in the United States. In such interrelated financial operations, account can be taken of the diversity of purposes for which external financing is appropriate and for which, therefore, financial assistance may properly be drawn from several sources. At the same time each agency or institution concerned with the operation will form its own judgment, in the light of its own principles, of the adequacy of the stabilization program that the country proposes to adopt. Argentina, Turkey, Mexico, and Chile are among the countries that have negotiated “parallel arrangements” of this kind during the past year.

Argentina’s stand-by of $75 million was arranged in December 1958 in support of a program that included exchange, fiscal, and credit reforms. At the same time, an exchange agreement for $50 million was made with the U.S. Treasury; balance of payments loans of $78.5 million were procured from the Export-Import Bank of Washington and U.S. commercial banks; and development loans of $125 million were granted by the Export-Import Bank and the U.S. Development Loan Fund.

No stand-by arrangement was made with Turkey, but it purchased US$12.5 million and the equivalent of $12.5 million in deutsche mark from the Fund in support of a program of farreaching fiscal, credit, and exchange measures presented simultaneously to the Fund, the Organization for European Economic Cooperation (OEEC), and the U.S. Government. The OEEC countries and the European Payments Union furnished credits equivalent to $100 million and U.S. agencies another $234 million, and negotiations for the postponement of certain debts resulted in an agreement for their repayment over a period of twelve years.

The Fund’s support in the form of a six-month stand-by for $90 million was requested by Mexico when it adopted budgetary and credit measures to strengthen confidence in its currency. At the same time Mexico reaffirmed its determination to maintain the stability and convertibility of the Mexican peso. The resources made available by the Fund were augmented by a credit of $100 million from the Export-Import Bank; at the time of the stand-by Mexico also had available reserves amounting to $360 million and a stabilization credit of $75 million from the U.S. Treasury.

When the Fund agreed to a renewal of its stand-by arrangement with Chile, the balance available was increased by $2.5 million, to $8.1 million, in support of new policy measures adopted in order to terminate inflation in Chile. This program was also supported by loans of $28.9 million to be administered by the Export-Import Bank and $53 million from U.S. commercial banks granted in May 1959. In addition, the U.S. Treasury increased the amount in its exchange agreement with Chile from $10 million to $15 million. The Export-Import Bank also stated that it was preparing to complete studies involving prospective credits of about $25 million to private companies in Chile.

In order to meet the need for funds for the implementation of their stabilization programs and for the maintenance of convertible currencies free of restrictions, twelve-month stand-by arrangements with the Fund were entered into by Haiti for $5 million and by Honduras for $4.5 million. In Honduras the seasonal decline in international reserves was an additional justification for support by the Fund. When Nicaragua was faced with the probability that the seasonal decline in its reserves would be aggravated by lower prices for coffee and by considerable difficulty in marketing its cotton crop, the Fund agreed to a six-month stand-by arrangement for $7.5 million.

The Fund’s policy and practice in respect of the use of its resources, which have been described in recent Annual Reports, have remained unaltered. Members are given the overwhelming benefit of the doubt in relation to requests for transactions within the “gold tranche,” i.e., the portion of the quota which can be regarded as equivalent to the gold subscription. The Fund’s attitude to requests for transactions within the first credit tranche, that is, transactions that bring the Fund’s holdings of a member’s currency above 100 percent but not above 125 percent of quota, is a liberal one, provided that the member itself is also making reasonable efforts to solve its problems. Requests for transactions beyond these limits require substantial justification. They are likely to be favorably received when the drawings or stand-bys are intended to support a sound program aimed at establishing or maintaining the enduring stability of the member’s currency at a realistic rate of exchange. In accordance with all the principles outlined above, the Fund has in appropriate cases continued to receive from members seeking to purchase exchange or to enter into stand-by arrangements declarations of intent as to the policies that would be followed.

The principles underlying the Executive Board’s decision of February 13, 1952, as set forth in the Annual Report for 1952, are now well understood and supported by members of the Fund. According to these principles, exchange is purchased from the Fund to meet temporary balance of payments difficulties, and the purchase should not remain outstanding beyond a period reasonably related to the payments problem in respect of which it has been made. The period involved should normally fall within an outside range of three to five years. Thus the revolving character of the Fund’s resources would be assured, and they would not become frozen. One half of the members that have made repurchases have in fact done so within three years of the drawing.

As a result of repurchases the Fund’s holdings of U.S. dollars, the currency which hitherto has been most in demand, were increased by $254.7 million in the financial year ended April 30, 1959. In 1957 they had been replenished by sales of gold amounting to $600 million. The Fund’s holdings of gold were increased by repurchases and other payments in the financial year under review by the equivalent of $114.5 million. On April 30, 1959 the Fund held gold and U.S. dollars equivalent to $2,502.8 million. However, commitments under stand-by arrangements, which had amounted to $884.3 million at the end of April 1958, had increased by the end of April 1959 to $1,132.8 million, so that during the year the Fund’s liquidity position improved only slightly. Some of the unutilized drawing rights under stand-by arrangements may not be exercised by members, and some members may draw in other currencies. Furthermore, a substantial volume of repurchases will mature in the remaining months of 1959 and in 1960. However, the most important factor determining the Fund’s long-term liquidity position is the proposed increase of the Fund’s resources, which is described earlier in this chapter. If consent is given to all the quota increases recommended in December 1958 and February 1959, the total resources of the Fund will be increased by $5.8 billion (including additional gold payments of $1.44 billion), to the equivalent of $i5 billion. The substantial addition to the Fund’s liquid resources which this increase makes possible and the flow of repurchases will together greatly strengthen the second line of reserves available to members faced with temporary balance of payments difficulties.

Fund Transactions

The Fund’s operations in the year ended April 30, 1959 are presented in summary form in Table 2 (purchases of currency), Table 3 (stand-by arrangements), and Table 4 (repurchases of currency).

Table 2.Purchases of Currency from the Fund, Fiscal Year Ended April 30, 1959
MemberSterlingDeutsche MarkU.S. DollarsTotal Equivalent

in U.S. Dollars
FranceDM 126,000,00036,250,00066,250,000
Union of South Africa4,000,00011,200,000
Total£5,785,714-5-9DM 178,500,000$204,817,042.67$263,517,042.67
Table 3.Fund Stand-By Arrangements with Members, Fiscal Year Ended April 30, 1959(In millions of U.S. dollars)
MemberDate of

Date of

AmountAmount Available

April 30, 1959
ArgentinaDec. 19, 1958Dec. 18, 195975.0056.50
BoliviaDec. 29, 1957Feb. 28, 19593.50
BrazilJune 3, 1958June 2, 195937.50
ChileApril 1, 1958March 31, 195910.00
April 1, 1959Dec. 31, 19598.108.10
ColombiaJune 19, 1957June 18, 195825.00
June 19, 1958June 18, 195915.0020.00
El SalvadorOct. 1, 1958March 31, 19597.50
FranceJan. 31, 1958Jan. 30, 1959131.25
HaitiJuly 14, 1958July 13, 19595.002.21
HondurasNov. 12, 1957May 11, 19583.75
Jan. 29, 1959Jan. 28, 19604.503.25
MexicoMarch 5, 1959Sept. 4, 195990.0067.50
NicaraguaSept. 15, 1958March 14, 19597.50
PakistanDec. 8, 1958Dec. 7, 195925.0025.00
ParaguayJuly 30, 1957July 29, 19585.50
July 30, 1958July 29, 19591.501.25
PeruFeh. 10, 1958Feb. 28, 195925.00
March 1, 1959Feb. 29, 196013.0010.50
Union of South AfricaApril 8, 1958April 7, 195925.00
United KingdomDec. 22, 1957Dec. 21, 1959738.53938.531

The amount of $738.53 million originally available to the United Kingdom under its stand-by arrangement was increased by a repurchase of $200 million during 1959, since stand-by arrangements in force at that time permitted drawing rights to be augmented by any repurchase.

The amount of $738.53 million originally available to the United Kingdom under its stand-by arrangement was increased by a repurchase of $200 million during 1959, since stand-by arrangements in force at that time permitted drawing rights to be augmented by any repurchase.

Table 4.Repurchases of Currency from The Fund, Fiscal Year Ended April 30, 1959(In U.S. dollars)
MemberU.S. DollarsGoldTotal
United Kingdom200,000,000.00200,000,000.00

Netherlands repurchases include Can$5,864.71 paid at Bank of Canada, which is equivalent to US$6,049.99 at the current rate of exchange (Can$0.969375 per U.S. dollar).

In addition, Turkey substituted gold for dollars in respect of previous repurchases in the amount of $4,101,483.50.

Netherlands repurchases include Can$5,864.71 paid at Bank of Canada, which is equivalent to US$6,049.99 at the current rate of exchange (Can$0.969375 per U.S. dollar).

In addition, Turkey substituted gold for dollars in respect of previous repurchases in the amount of $4,101,483.50.

The currencies sold by the Fund during the past year include not only U.S. dollars but also deutsche mark and sterling. Of the 32 exchange transactions during the year, drawings under stand-by arrangements number 28 and account for 76 percent of the total currency sold. The Fund made extensive use of the power conferred by Article V, Section 4, to waive the limitation of a member’s drawings to 25 percent of its quota in any twelvemonth period and thus to permit drawings beyond this amount. All exchange transactions during the year involved the granting of a waiver except the purchase by the Philippines and the stand-bys of Chile and Pakistan. Since the first waiver was granted in August 1953, only 18 requests for Fund drawings have not required the use of a waiver.

Of the stand-by arrangements entered into or renewed during the past fiscal year, 3 were for a period of six months, 1 was for a period of nine months, and 9 were for a full year.

Since the beginning of its operations, i.e., from March 1, 1947 until April 30, 1959, the Fund’s resources have been used by 37 members. Drawings have been made by 15 members in Latin America, 9 in Continental Europe, 5 in the Middle East, 5 in the Far East, and 5 in the sterling area. The total amount of the Fund’s exchange transactions is equivalent to US$3,279.7 million.

A summary of all Fund transactions for the period March 1, 1947 to April 30, 1959 is given in Table 5, with further details added in Appendix VII. Of the currencies purchased from the Fund the greatest demand has been for U.S. dollars, 91 percent of the total sales of exchange having been made in this currency. There have also been sales of sterling, Belgian francs, deutsche mark, Canadian dollars, and Netherlands guilders.

During the entire period of the Fund’s activities, 31 members that had drawn on the Fund repurchased their currencies from the Fund with gold and convertible currencies to the equivalent of $1,512.9 million. When sales of currencies of members that had previously drawn from the Fund and the settlement payments by Czechoslovakia after its withdrawal are taken into account, the amount of outstanding purchases on April 30, 1959 is equivalent to $1,538 million. The periods during which the amounts drawn were outstanding on April 30, 1959 are as follows:


in millions of

U.S. dollars
Number of


12 months or less261.6415
13 to 18 months141.406
19 to 24 months255.337
25 to 30 months729.478
31 to 36 months86.184
37 to 48 months24.502
49 to 60 months15.001
More than 60 months24.403

All purchases by present members made prior to May 1953 have been fully reversed. Of the 32 members which paid less than 25 percent of their original subscription in gold, 16 have repurchased a total of $140.5 million in excess of any previous transactions they may have had with the Fund; their repurchases have had the effect of putting these members into a position comparable to that of members whose original gold subscriptions equaled 25 percent of quota.

The Fund levies charges on its holdings of a member’s currency in excess of its quota. Since the beginning of its operations, 35 members have incurred such charges. Currently 21 members are paying charges on balances in excess of quota, the amount incurred during the year under review totaling $23.8 million, compared with $15.6 million during the previous year. Three members are at present paying part of the charges in their own currency in accordance with the provision of the Fund Agreement permitting such payment if a member’s monetary reserves are less than half its quota.

Table 5.Summary of Fund Transactions from the Beginning of Operations to April 30, 1959(In millions of U.S. dollars)
MemberCurrencies Purchased

by Fund
Currencies Sold by

Repurchases by

Costa Rica1.22.1
El Salvador2.52.5
Germany, Federal Republic of68.945.1
Union of South Africa46.210.0
United Arab Republic
United Kingdom861.5207.9312.0
United States2,971.6
Total23 279.73,279.71,657.0

On the basis of the settlement with Czechoslovakia, an amount of $4.3 million has been offset against the drawing of $6 million, the remainder to be paid in installments not later than July 2, 1961.

Totals may not equal sums of items because of rounding.

On the basis of the settlement with Czechoslovakia, an amount of $4.3 million has been offset against the drawing of $6 million, the remainder to be paid in installments not later than July 2, 1961.

Totals may not equal sums of items because of rounding.

Service charges on drawings, which amounted to $3.3 million in the year ended April 30, 1958, totaled $1.3 million in the past financial year.

Fund Charges

The revised schedule of Fund charges which has been in effect since January 1, 1954 was extended by the Executive Board until April 30, 1960. At the last review of the schedule of charges, on April 27, 1959, it was decided that, when agreement is reached under the Fund’s Rules for repurchase within three to five years after a drawing in accordance with the Executive Board’s decision of February 13, 1952,1 the rate charged by the Fund should not increase beyond 5 percent per annum. Where an agreement permits the reduction of the Fund’s holdings of a member’s currency over a period longer than five years, the Fund may apply higher maximum rates. At the same time, it was provided that stand-by charges will be paid in advance for the period for which the stand-by arrangement is agreed. Under the earlier rule, a member drawing within the first six months of a twelve-month stand-by arrangement received credit for the stand-by charge only for the six-month period, that is, for 1/8 of 1 percent paid in respect of the amount purchased. Under the new rule, full credit of 1/4 of 1 percent will be given. Consistently with this decision a total of $326,947.98 paid in stand-by charges by 7 members was refunded to them. The Executive Board’s decision of April 27, 1959 is reproduced in Appendix VIII.

Computation of Monetary Reserves

Monetary reserves data as of April 30, 1958 have been received from 61 members. Five members have so far not submitted the reports required by the Fund Agreement; however, none of these members can have a repurchase obligation.

The Fund and Exchange Restrictions

Most of the members of the Fund continue to maintain exchange restrictions under Article XIV of the Fund Agreement and are required annually to consult the Fund concerning such restrictions. In the year ended April 30, 1959, consultations were completed with 40 member countries. Fund staff members visited 39 of the member countries concerned; the other consultation was held at the Fund’s headquarters in Washington.

As in the past, a large part of the activities of the Executive Board and the management and staff of the Fund in the year under review was related to these consultations, in which the Fund has continued to use the procedures of earlier years. Each consultation is treated as an individual matter, and the Fund takes account of the particular circumstances which face a member at the time of the consultation. This individual approach means that for different countries different aspects of the financial position may be emphasized, and while the broad principles to be applied do not vary, the details of the advice given by the Fund are necessarily not identical in all countries.

These annual consultations are one of the ways by which the Fund and its members collaborate to achieve the Fund’s objectives. The periodic surveys of the restrictions that still remain and the Fund’s reviews of the justification for their maintenance, together with the advice given by the Fund in connection with the consultations, have played a part in the progress made in recent years in the simplification of exchange systems and the reduction of restrictions. The Article XIV consultations have also sometimes been associated with requests for stand-by arrangements or drawings from the Fund in support of general economic stabilization programs or other endeavors to protect the currencies of its members. During the last five years, many countries have simplified their exchange systems, and, in not a few, complicated systems involving elaborate exchange rate structures have completely disappeared. At present, multiple rate systems which may properly be described as complex are maintained by fewer than 10 members of the Fund. Similar progress has been made toward eliminating bilateral payments arrangements. Details of the more important changes made in the last year, as well as of the progress recorded in other directions—including the decisions to adopt external convertibility—are set forth elsewhere in this Report. The progress made provides a foundation upon which, in the coming year, the Fund will seek to establish even greater freedom of international payments and further simplification and stability in the exchange systems of its members.

In particular, the implications of the recent establishment of external convertibility by many members of the Fund require special attention. As this Report is written, the Fund is reviewing its general policies relating to the simplification of exchange systems, the reduction of exchange restrictions, and the elimination of discrimination, including the discrimination involved in bilateral payments arrangements. Some of the issues involved in this review have been examined in the Tenth Annual Report on Exchange Restrictions. Such a review is timely and necessary in the present situation where much the largest part of the trade of the world is conducted in currencies freely interchangeable at official exchange rates. As always, the Fund will, in applying its policies, take account of the necessity for dealing with the special problems with which individual member countries may be faced. It may be expected, however, that as a broad principle the Fund will, both in its periodic consultations and generally, request its members to take advantage of the newly created situation so that further real progress will be made toward those basic objectives.

Cooperation with Other International Organizations

In addition to its special relationship with the International Bank for Reconstruction and Development, the Fund has maintained close contacts with the United Nations, the Contracting Parties to the General Agreement on Tariffs and Trade (GATT), the Organization for European Economic Cooperation (OEEC), and the Bank for International Settlements.

Closer coordination between the work of the OEEC and of the Fund in recent years has increased the effectiveness of both institutions. They have collaborated in the provision of financial assistance in connection with some of the “parallel arrangements” described above, first for France in January 1958 and later, during the fiscal year covered in this Report, for Turkey.

During the year under review, the Contracting Parties to the GATT initiated the first of a series of annual and biennial consultations with countries on the maintenance of quantitative restrictions to protect the balance of payments. These consultations are required under the revised articles of the General Agreement which came into effect late in 1957. In accordance with the revised rules, a broad general review of outstanding quantitative restrictions was initiated in 1958, and the first annual consultations with 14 countries were scheduled for 1959. Biennial consultations with about 16 countries whose economies are at an early stage of development are scheduled to begin in 1960.

The Fund, on invitation from the Contracting Parties, cooperated on a technical basis in the preparation of the survey of the restrictions that were being maintained, and it is also engaged in consultation with the Contracting Parties in connection with their 1959 schedule of consultations with individual countries. Representatives of the Fund attend the meetings of the working parties assigned to carry out the review and consultations, and the Fund provides the Contracting parties with the results of its Article XIV consultations with the countries concerned, and with other relevant material.

The relation thus established between the Fund’s periodic consultations and those conducted by the Contracting Parties carries forward the collaboration which has always marked the work of these two bodies. The Fund welcomes these opportunities for collaboration, since the objectives of the two organizations, the freeing of trade transactions and the freeing of exchange transactions, are complementary.

Close liaison has been maintained with the United Nations and its various regional and technical bodies, through direct working relations with the staffs of these agencies, the preparation of studies and reports on subjects within the Fund’s field of competence, and official participation in their meetings. Fund representatives have attended meetings of the General Assembly of the United Nations; of the Economic Commissions for Asia and the Far East, for Europe, for Latin America, and for Africa; and of the UN Administrative Committee on Coordination and its subsidiary bodies. The Managing Director of the Fund presented a report on the Fund’s activities and on general monetary developments at the 27th Session of the UN Economic and Social Council in April 1959.

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