Chapter

III International Payments Relations and Their Background in 1959-60

Author(s):
International Monetary Fund
Published Date:
September 1960
Share
  • ShareShare
Show Summary Details

Industrial Production, Prices, and Employment

World industrial production (outside the U.S.S.R. and associated countries), which in 1958 had been about 2.5 per cent less than in 1957, resumed its growth in 1959, and for the whole year exceeded its previous peak in 1957 by more than 7 per cent. The renewed expansion in 1959 was shared by all industrial countries; it was most striking in Japan, where the cessation of growth in 1958 was followed by a rise in industrial production of 24 per cent, supported by a substantial rise in both domestic investment and exports.

Expansion in European industrial activity differed widely from country to country. The greatest increases took place in countries where production had not declined from 1957 to 1958, but in all industrial countries, except Belgium, production in 1959 was higher than in 1957 (Table 6). In many of the industrial countries in continental Europe, the initial impulse to recovery and resumed growth was given by a marked rise in residential construction, in response to declining interest rates and fiscal measures, and by increased public investment expenditures. In the United Kingdom, an increase in consumer expenditures, aided by monetary and fiscal policies, was a strategic factor. Rising exports and inventory investment contributed in varying degrees in most countries. Increased investment in equipment sustained or accelerated the expansion only at a later stage. In the United States, production in 1959 was affected by a prolonged steel strike during the second half of the year. After a rise of 26 per cent between the lowest point of the recession in April 1958 and June 1959, industrial production (seasonally adjusted) declined by almost 7 per cent between June and October 1959, but subsequently expanded again until in January 1960 it was 28 per cent greater than in April 1958. In the early months of 1960, industrial activity in several countries expanded less rapidly than before, and in a few the rate of production remained unchanged.

Table 6.Percentage Changes in Industrial Production, Manufacturing Employment, Cost of Living, and Wages, Selected Countries, 1958, 1959, and First Quarter 1960
Industrial ProductionManufacturing EmploymentCost of LivingWages
Maximum variation1
Average variation2
1957-581958-59195819591960, 1st Quarter195819591960, 1st Quarter195819591960, 1st Quarter195819591960, 1st Quarter
Austria63411–13212657
Belgium-Luxembourg–1011–7310–7–31121524
Canada–511–186–51221333
Denmark11538815733348….
France11234161–2114741086
Germany, Federal Republic of113371314313757
Italy2131119–2….33523
Japan–641124332913113–166
Netherlands–414914–313213524
Norway–58–3513–3….43595
Sweden–4938–2–14514644
United Kingdom–312–159–1531332
United States–1222–7138–745312344
Sources: Based on data from International Monetary Fund, International Financial Statistics; United Nations, Monthly Bulletin of Statistics; and Organization for European Economic Cooperation, General Statistics.

Percentage changes in industrial production (seasonally adjusted) from highest quarter of 1957 to lowest quarter of 1958 and from lowest quarter of 1958 to last quarter of 1959 (for the United States, to second quarter of 1959).

Percentage changes in averages compared with the corresponding period of previous year.

Sources: Based on data from International Monetary Fund, International Financial Statistics; United Nations, Monthly Bulletin of Statistics; and Organization for European Economic Cooperation, General Statistics.

Percentage changes in industrial production (seasonally adjusted) from highest quarter of 1957 to lowest quarter of 1958 and from lowest quarter of 1958 to last quarter of 1959 (for the United States, to second quarter of 1959).

Percentage changes in averages compared with the corresponding period of previous year.

The recovery of production was achieved with very little upward price movement. In all the industrial countries shown in Table 6, the cost of living had risen when industrial activity declined or slowed down from 1957 to 1958, but, except in France and the United States, where there were moderate increases, wholesale prices declined or remained unchanged. On the other hand, during the upswing in activity from 1958 to the last quarter of 1959, the cost of living in several countries rose less than during the preceding period of declining or slackening production, while wholesale prices tended to edge upward. From mid-1958 to mid-1959, the cost of living actually declined in Italy, and in the United States it remained unchanged. In several European countries, moderate increases in the cost of living during the upswing in activity were associated with rising foodstuff prices following a drought, whereas in the United States, large supplies of certain commodities brought a decline in food prices.

Price movements during the upswing were moderate, largely because in most countries the mild recession, coming after a period of heavy capital spending, had left considerable unused capacity that permitted substantial increases in output without undue pressure on prices, and also because there was a tendency for labor costs per unit of output to fall. In several industrial countries, such as France, Italy, and the United States, wages rose less during the recovery and expansion phase than during the downswing or slowing down in activity. While fiscal and monetary policies were adapted to current requirements, governments showed restraint in expanding over-all demand, and this helped to discourage expectations of further inflationary developments. Moreover, in the face of increasing international competition, businessmen tended to adopt more cautious price policies. The very moderate recovery in the prices of some primary products and the continued decline in others were also factors favorable to stability in the general price level.

With a few exceptions, wages in general rose somewhat less than the fairly substantial increases in productivity. In most industrial countries, the rise in manufacturing employment during the upswing was smaller than the rise in industrial production, and also smaller, except in Denmark and the United Kingdom, than the decline during the previous downswing or slackening of activity. Indeed, in Austria and Canada, manufacturing employment changed little during the upswing, while in France and Sweden it continued to decline. Thus, in most of the industrial countries, with the exception of Austria, Denmark, Germany, and Italy, the available resources of unemployed labor (seasonally adjusted) were still higher toward the end of 1959 than in the first half of 1957, and in several countries there was still spare industrial capacity as well. However, in a few countries, such as France, Germany, and the United Kingdom, increases in certain wage rates in early 1960 indicated that pressure might develop for a rise in the general wage level.

Financial Policies in the Industrial Countries

The financial policies of the industrial countries in 1959, as in other recent years, had to be put into effect in the context of increasing freedom for foreign exchange transactions. At the same time, attention continued to be paid to contracyclical policy; while the determination and the administration of policy were beset by many difficulties, a remarkable measure of success was, by and large, achieved in the attainment of both economic growth and price stability. This success was facilitated by the substantial increases in the gold and foreign exchange reserves of most industrial countries during 1958, which made possible a wider margin of discretion in the determination of domestic policy.1

In 1959, indeed, the international environment to which financial policy had to be adapted underwent a marked change. After they had established external convertibility at the end of 1958, a number of countries further liberalized their international payments on both current and capital account and took steps which permitted freer play for market forces in their exchange markets. As a result of these measures, the scope for international movements of commercial bank funds and other private capital in response to financial incentives was widened, and a closer degree of interdependence was thus established between the capital and money markets of the industrial countries. These conditions made the conduct of monetary management more complex and, in the consideration of national policies, called for closer attention to what was being done in other countries.

The varying positions in which the industrial countries found themselves in the trade cycle during the period under review were important factors in determining their choice of monetary and fiscal measures. Fiscal policies designed to stimulate demand during the recession could be reversed only gradually, but rising tax receipts resulting from increases in personal income and business profits tended in many countries to make the realized fiscal deficits smaller than had been forecast. With the acceleration of private economic activity and increasing credit demands, the remaining expansionary effects of fiscal operations had to be offset by greater monetary restraint than would have been necessary in the absence of this heritage from the recession. There were, however, significant variations among countries in the timing and the degree of these demand pressures and of the monetary measures designed to keep them under control.

In many countries in continental Europe, and in Japan, the upswing gathered strength in early 1959 under conditions of monetary ease brought about in part by an accumulation of gold and foreign exchange reserves, which added to bank liquidity and tended to lower interest rates (Table 7). In the United Kingdom, where the impact on bank liquidity of the increase in reserves was more than offset by substantial increases in the holdings of government obligations by the public, and in Belgium, where private demand for credit continued to be depressed until the latter part of 1959, the authorities took certain fiscal and monetary steps to stimulate economic expansion. In the United States and Canada, on the other hand, where recovery was being supported by massive government deficits, the authorities had already shifted from monetary ease to neutrality and subsequently to restraint by the second half of 1958. This policy was continued in 1959, although in the United States the Federal Reserve System began to permit a slight easing in the net liquidity position of member banks in September 1959. The comparative restraint of U.S. credit policy was appropriate in relation both to the maintenance of internal stability and to the changes in the U.S. external payments position.

Table 7.Market Interest Rates, Selected Countries, 1958, 1959, and 1960(In per cent per annum)
195819591960
Dec.Mar.JuneSept.Dec.Mar.
United States
Treasury bill rate2.812.853.254.044.573.44
Government bond yield (medium-term)3.693.944.474.945.074.32
Government bond yield (long-term)3.803.924.094.264.274.08
Canada
Treasury bill rate3.494.305.115.505.123.01
Government bond yield (long-term)4.764.885.085.615.605.32
United Kingdom
Treasury bill rate3.163.303.453.483.614.59
Government bond yield (short-term)4.304.064.144.304.274.92
Government bond yield (long-term)4.894.824.834.854.995.28
Industrial bond yield6.025.955.986.005.966.07
Australia
Government bond yield (short-term)4.234.004.003.933.954.14
Government bond yield (long-term)4.934.894.894.904.934.94
New Zealand
Government bond yield4.884.864.924.804.754.84
Union of South Africa
Treasury bill rate3.683.533.493.443.283.46
National Finance Corporation (deposit) rate3.503.383.243.183.083.23
Government bond yield5.255.255.255.255.255.25
Belgium
Treasury bill rate2.502.252.252.253.503.75
Government bond yield4.294.284.274.274.224.26
Denmark
Government bond yield5.225.135.265.475.605.67
France
Government bond yield5.445.395.335.255.035.17
Call money rate, private6.074.363.674.054.074.17
Germany, Federal Republic of
Call money rate2.572.632.472.693.824.28
Fixed-interest securities yield (total)15.625.35.35.46.06.4
Italy
Government bond yield5.805.405.335.375.365.28
Netherlands
Treasury bill rate2.261.681.821.662.522.33
Government bond yield4.314.074.084.104.214.30
Norway
Government bond yield4.684.704.644.554.574.59
Sweden
Government bond yield4.274.264.244.274.444.44
Industrial bond yield5.075.065.025.385.235.65
Switzerland
Government bond yield3.002.853.223.163.253.27
Sources: International Monetary Fund, International Financial Statistics; Central Statistical Office, Monthly Digest of Statistics (London); Institut National de la Statistique et des Etudes Economiques, Bulletin Mensuel de Statistique (Paris); Skandinaviska Banken, Quarterly Review (Stockholm); and Deutsche Bundesbank, Monatsberichte.

Securities placed during month of issue.

January 1959.

Sources: International Monetary Fund, International Financial Statistics; Central Statistical Office, Monthly Digest of Statistics (London); Institut National de la Statistique et des Etudes Economiques, Bulletin Mensuel de Statistique (Paris); Skandinaviska Banken, Quarterly Review (Stockholm); and Deutsche Bundesbank, Monatsberichte.

Securities placed during month of issue.

January 1959.

During the course of 1959, several countries where activity was expanding rapidly found it necessary to take some steps to forestall excessive pressure on domestic resources. In Denmark, starting in February, successive measures were taken by the Government to limit the amount of building and construction work; the National Bank also absorbed liquidity through its open market operations. The Swedish authorities recommended in July that the commercial banks should comply with new increased liquidity ratios. In September, the official discount rate was raised in Germany and in Denmark, and reserve requirements for banks were introduced in Japan, although at an extremely low percentage of deposits. These initial measures were generally moderate, but they proved to be the prelude to policies of progressively increasing restraint which, together with developments in the money markets of the United States, also affected other industrial countries.

As the year progressed, some of the factors which had contributed to high liquidity and declining interest rates in 1958 ceased to operate, or began to work in the opposite direction. There was a rise in private demand for credit, in contrast to the decline in 1958, and the accumulation of reserves slowed down or was reversed in many countries. In the United States, the United Kingdom, and Canada, commercial banks sold large amounts of their holdings of government securities in order to be able to satisfy the credit demands of the private sector. As a result of these developments, market interest rates in most countries tended to rise in the course of the year, and especially during the second half (Table 7). This rise was particularly marked in the United States, Canada, Germany, and Denmark; in the United Kingdom, it was mitigated by official open market operations. In France and Italy, in contrast, where interest rates had been comparatively high, a rise in liquidity continued to be generated by the large increase of foreign reserves and helped to reduce interest rates and to bring them more into line with those prevailing abroad.

In the United States, market long-term interest rates rose above the statutory ceiling for government long-term bonds in September and, as part of the pressure on long-term rates was therefore shifted to the short-term market, the rates on short-term Treasury bills rose above those in the money markets of the United Kingdom and several European continental countries. In Germany, interest rates also rose further in response both to increased demand for credit and to the monetary measures taken by the authorities, including a further increase of the official discount rate by 1 per cent in October. As these measures tended to have countervailing effects on international payments and also conflicted with the announced objective of encouraging capital exports, the German authorities took specific steps to stimulate an outflow of funds and to discourage an inflow. There was, however, some tendency toward a short-term capital movement both to Germany and to the United States from other financial centers in which interest rates did not rise as rapidly. During the last quarter of 1959 and in early 1960, several other countries in Western Europe raised their discount rates, in most cases with the double purpose of forestalling an outflow of short-term funds and restraining domestic credit demand. In Belgium, however, the main objective in raising the discount rate and other official interest rates was to check the outflow of funds. On the other hand, in order to encourage capital exports and thus to reduce domestic liquidity without bringing direct pressure on interest rates, the Swiss authorities deliberately refrained from raising the discount rate.

In the United Kingdom, it seemed likely by early 1960 that demand would continue to increase considerably; mainly for this reason, the bank rate was raised in January, and the authorities subsequently modified their operations in government securities to permit long-term rates to rise. As a consequence, there was a reduction of the interest rate differential between the United Kingdom and other financial centers, which in the last quarter of 1959 had induced some movement of short-term funds from London and a weakening in the sterling exchange rate. This tendency was further strengthened by the marked decline in U.S. interest rates in early 1960. As a result of these and other factors, and in particular of seasonal influences, the U.K. gold and foreign exchange reserves increased in February-April, and the sterling exchange rate improved.

During the first months of 1960, several countries in Western Europe, such as Germany and Denmark, continued to intensify their internal restrictive policies, and others cautioned banks against undue credit expansion or took specific measures to curb bank credit. In April, the U.K. authorities introduced further measures for the restraint of credit. At the same time, there were indications of an easing of monetary stringency in the United States, where a decline in net borrowed reserves of member banks contributed to a fall in short-term interest rates, and in June, several Federal Reserve Banks reduced their discount rate. The German authorities also raised the discount rate while at the same time taking further steps to discourage an inflow of foreign funds. A little later, the bank rate was raised in the United Kingdom to 6 per cent, and other restraints on bank credit were made more rigorous.

Fiscal policies in the recovery period varied considerably from country to country, in part no doubt because of differences in the strength and the timing of the upswing. When the expansion in activity accelerated, fiscal policies proved more often than not to be less quickly reversible than monetary policies. Indeed, in several countries the inevitable lag between the planning and the execution of public expenditure projects resulted in continued increases in public outlays at a time when the strength of other demand factors had already generated a high rate of expansion. The “built-in” stabilizing effects of variations in unemployment compensation payments were limited because in most industrial countries employment rose much less than production. On the other hand, the rise in demand was less than it otherwise would have been, because of increases in tax revenue associated with rising incomes and production. In Belgium, the Government in June 1959 laid down the principle of functional finance according to which budget deficits on current account during recessions would be offset by current surpluses during periods of high economic activity. While in 1959 the current budget showed a deficit, the Government, in view of the upturn in economic activity, presented a balanced budget for 1960. The Government is also presently slowing down the rate at which contracts for public investments are allocated. These, however, are not expected to decrease substantially before the end of 1960. In Italy, public works expenditures were maintained, and tax concessions and grants for investment were made for the benefit of new industries. The variations in timing of the recession and recovery are reflected in the fact that during 1959 and early 1960 fiscal deficits were reduced in some countries, especially the United States, while deficits increased or surpluses declined in a number of other countries. In Denmark, a surplus in the fiscal year 1958-59 was followed by a larger one in 1959-60.

The budgets presented by most governments for 1960 were designed to support the increasing tendency toward restraint already indicated in their monetary policies. Increased revenues were projected in most countries, with tax rates substantially unchanged. In some countries which still had excess productive capacity, some tax reliefs were proposed.

Main Trends in World Trade

The upswing in economic activity in the industrial countries in 1959 was accompanied by a renewed expansion of world trade. The value of world exports, which had fallen by 5 per cent from 1957 to 1958, was slightly above the 1957 peak (Table 8). Prices for the year as a whole were again slightly below those of the preceding year. The volume of trade in 1959 was about 6 per cent higher than in 1957 and about 8 per cent higher than in 1958. The exports of primary producing countries rose by about the same proportion as those of industrial countries, in both volume and value. The volume of trade, which had risen relatively more than world industrial production from 1955 to 1957, and had declined by about the same proportion from 1957 to 1958, rose slightly less than world industrial production from 1958 to 1959.

Table 8.Value of World Trade, 1957-59
Value, f.o.b.

(billion U.S. dollars)
Percentage Change from

Preceding Year
195719581959195719581959
World exports199.594.499.98–56
Exports of United States219.516.416.412–16
Exports of other manufacturing
countries341.741.645.4109
Exports of primary producing
countries4,538.336.438.14–55
Trade of manufacturing countries
With each other
Total29.227.231.211–715
Exports of United States6.65.05.219–244
Exports to United States3.33.75.251240
Trade between other manufacturing
countries19.318.520.810–413
With primary producing countries
Exports of United States12.811.211.19–12–1
Exports of other manufacturing
countries17.617.717.89
Exports of primary producing
countries5
To United States9.69.29.82–47
To other manufacturing countries16.916.217.22–46
With Soviet area
Exports of manufacturing countries1.51.81.71815–3
Exports of Soviet area61.61.71.95514
Trade of primary producing countries
with Soviet area
Exports of primary producing
countries1.31.31.530012
Exports of Soviet area61.41.61.5212–5
Sources: Based on data from International Monetary Fund, International Financial Statistics; and Statistical Office of the United Nations, International Monetary Fund, and International Bank for Reconstruction and Development, Direction of International Trade.

Excluding exports of the Soviet area and Mainland China, and U.S. military exports.

Nonmilitary exports.

Countries exporting mainly manufactured products, viz., the United Kingdom, Austria, Belgium-Luxembourg, Denmark, France, the Federal Republic of Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, and Japan.

Countries exporting mainly primary products and semimanufactures, i.e., all countries other than those classified as “manufacturing countries,” and excluding the Soviet area and Mainland China. See Tables 10, 16, 18, and 20.

1959 figures partly estimated.

Including an estimate for Mainland China based on import statistics of trading partners.

Sources: Based on data from International Monetary Fund, International Financial Statistics; and Statistical Office of the United Nations, International Monetary Fund, and International Bank for Reconstruction and Development, Direction of International Trade.

Excluding exports of the Soviet area and Mainland China, and U.S. military exports.

Nonmilitary exports.

Countries exporting mainly manufactured products, viz., the United Kingdom, Austria, Belgium-Luxembourg, Denmark, France, the Federal Republic of Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, and Japan.

Countries exporting mainly primary products and semimanufactures, i.e., all countries other than those classified as “manufacturing countries,” and excluding the Soviet area and Mainland China. See Tables 10, 16, 18, and 20.

1959 figures partly estimated.

Including an estimate for Mainland China based on import statistics of trading partners.

The increase in world trade was brought about mainly by rising demand in the industrial countries. The volume of imports of those countries rose somewhat more than their industrial production. The aggregate imports of primary producing countries, however, were held in check by the domestic financial policies and restrictions adopted as a result of the decline in their reserves in the two preceding years. With a substantial decline in export receipts, the reduction in their imports in 1958 had not been large enough to reverse the outflow of reserves. The volume of imports of primary producing countries was about the same in 1959 as in 1958, and slightly smaller than in 1957, while the volume of imports of industrial countries rose by about 12 per cent from 1957 to 1959.

The volume of U.S. imports rose from 1958 to 1959 by nearly 20 per cent, but there was no increase in U.S. exports. For other industrial countries as a group, the volume of both imports and exports increased by about 10 per cent (Table 9). For the primary producing countries together, there was an increase in exports but not in imports. The independent countries of the sterling area benefited from rising export prices, and though in some of them the volume of imports fell, the aggregate volume of imports for the group was maintained; the volume of imports into the Latin American countries whose export prices were generally substantially lower than in 1958 was reduced.

Table 9.Changes in Volume of Exports and Imports, in Terms of Trade, and in Volume and Unit Value of Manufactured Exports of Countries Exporting Mainly Manufactured Products, 1958 and 1959(Percentage changes from previous year)
Volume of

Exports
Volume of

Imports
Terms

of Trade1
Volume of

Manufactured

Exports
Unit Value of

Manufactured

Exports
1958195919581959195819591958195919581959
Italy622118–24192–3
France520–1–241826–2–8
Japan82202–20225275721–7
Germany, Federal Republic of41472081413–1
Netherlands814–613221020–1–4
Belgium-Luxembourg213–112–2214–4–3
Switzerland–212–91451–3121–2
Norway11923….….….….
Sweden–1925459–1
Denmark97821661014–1–5
Austria–4721151….….….….
United Kingdom–4477–442
United States3–16–141952–12–413
Total4–481261–110–1–1
Total, excluding United States4211–11061314–1–2
Sources: Data on volume of imports and exports and terms of trade are from International Monetary Fund, International Financial Statistics. Data on manufactured exports, except for Denmark and Japan, were supplied by the Statistical Office of the United Nations; figures for Denmark were estimated from data published in Statistiske Efterretninger; Japanese figures for unit value of manufactured exports show changes in unit value of total exports, and volume figures were derived from value of manufactured exports deflated by this series.

Export price index divided by import price index.

Estimated from value and price data.

Nonmilitary exports.

Changes in weighted averages of countries listed. Changes in terms of trade derived from average export and import unit values implied by changes in volume and value of exports and imports.

Sources: Data on volume of imports and exports and terms of trade are from International Monetary Fund, International Financial Statistics. Data on manufactured exports, except for Denmark and Japan, were supplied by the Statistical Office of the United Nations; figures for Denmark were estimated from data published in Statistiske Efterretninger; Japanese figures for unit value of manufactured exports show changes in unit value of total exports, and volume figures were derived from value of manufactured exports deflated by this series.

Export price index divided by import price index.

Estimated from value and price data.

Nonmilitary exports.

Changes in weighted averages of countries listed. Changes in terms of trade derived from average export and import unit values implied by changes in volume and value of exports and imports.

Divergent trends in the volume of trade gave rise to marked changes in the balance of trade between different groups of countries. The primary producing countries as a group improved their trade balance both with the United States and with the other industrial countries. The greater part of the deterioration in the trade balance of the United States, however, resulted from the virtual disappearance of its former large export surplus with other industrial countries. The decline in this surplus was greater than the decline in the surplus of the other industrial countries in their trade with the primary producing countries and with the Soviet area. The exports of the industrial countries to the Soviet area, which had grown rapidly in earlier years, fell slightly in 1959.

In some respects, however, the trade of the United States and of the other industrial countries as a group developed in 1959 along similar lines. The volume of imports of both the United States and the other industrial countries from nonindustrial countries rose somewhat less rapidly than their industrial production, but their imports from industrial countries rose much faster. Neither from the United States nor from the other industrial countries as a group was there any significant increase in the volume of exports to primary producing countries.

The greater growth of U.S. imports may be explained partly by the relatively greater expansion in the U.S. economy from 1958 to 1959—the rise in industrial production in the United States, 13 per cent, was almost twice the average increase in the other industrial countries—partly by the sharp increase in steel imports which was a result of the steel strike, and partly by a growing tendency in the United States to substitute imported finished goods for domestic products.

The rapid increase in U.S. demand for the exports of other industrial countries was an important element in their expansion. U.S. imports from industrial countries rose by 40 per cent, compared with an increase of 10 per cent in the corresponding imports of other industrial countries, and the rise in these U.S. imports accounted for nearly 40 per cent of the growth in exports from Western European countries and Japan. The fact that the proportion of total U.S. exports that is sold in primary producing countries is normally higher than that of the exports of most other industrial countries also helps to explain why U.S. exports expanded less than those of other industrial countries from 1958 to 1959. There was, however, a pronounced fall in the U.S. share in exports to Western Europe and Japan. This was to some extent due to the relatively low level of demand for investment goods in those countries in the early part of the year, the effects of the U.S. steel strike, and postponements of foreign purchases of U.S. cotton. However, part of this fall—as well as part of the great increase in U.S. imports—was probably due to a tendency to substitute finished manufactures from Europe and Japan for U.S. products as the former became more competitive in quality and design, price, and delivery dates.

The fact that U.S. export prices of manufactures increased slightly from 1957 to 1959, whereas the average export prices of most other countries’ manufactures declined—French prices in particular fell by more than 10 per cent in consequence of devaluation—appears to indicate some relative weakening of the U.S. competitive position. These divergent movements may also be attributable in part to differences in composition between U.S. exports and those of other competing countries.

The United States was the only industrial exporter that did not increase the volume of its total exports and of its exports of manufactures from 1958 to 1959 (Table 9). The exports of the United Kingdom rose by 4 per cent; this was less than the average rate for other industrial countries, in part because the United Kingdom, like the United States and Japan, has in recent years sold only about one third of its exports to industrial countries, compared with an average of two thirds for other industrial countries. France, Italy, and Japan expanded their exports by about 20 per cent, and the Federal Republic of Germany, the Netherlands, and Belgium-Luxembourg by about 14 per cent. The rapid growth in French exports resulted mainly from improved competitiveness following the devaluation of the franc and measures to stabilize the economy. Since Japan’s main market in industrial countries is in the United States, its exports were especially stimulated by the great expansion of U.S. import demand; and more than half of the increase in Japan’s exports occurred in its trade with the United States. Japan was also one of the three industrial exporters—the others were Germany and the Netherlands—whose exports to primary producing countries were greater in 1959 than in 1958; those of the United Kingdom and Belgium-Luxembourg were reduced.

The rapid expansion of world trade continued in the first quarter of 1960, when the volume of world exports was about one sixth higher than in the same period of 1959. The value of U.S. nonmilitary exports rose by about 20 per cent, and of the exports of other industrial countries by more than 25 per cent; the value of the exports of the primary producing countries rose by only about half the latter rate. The largest increase was again in trade between the industrial countries, but in contrast to the development between 1958 and 1959, U.S. imports rose much less rapidly than those of other industrial countries. The fact that U.S. exports to other industrial countries expanded much more than the exports of these countries to the United States was the main cause of a substantial improvement in the U.S. trade balance.

Prices and Export Receipts in the Primary Producing Countries

The steady decline in the general level of prices of primary products, which started early in 1957 and continued for about two years, was reversed in the second quarter of 1959, and through the rest of the year there was a moderate increase. The average for 1959 as a whole was much the same as in 1958. There were, however, substantial and divergent movements in the prices of major groups and of individual commodities. Expanding demand in industrial countries strengthened the prices of a number of industrial raw materials, but, as in 1958, the major role in determining the prices of individual commodities was played by supply factors. For a number of foodstuffs and for some raw materials, the effects of ample and rising supplies outweighed those of expanding demand and led to further price declines.

Prices of coffee continued to weaken through most of the year, as the 1959-60 crop, like that of 1958-59, again vastly exceeded annual consumption. The International Coffee Agreement, renewed in September 1959 with the participation of France and Portugal, as well as the cooperation of the United Kingdom and Belgium, on behalf of their affiliated African territories, again mitigated the downward trend of prices by means of export quotas and the withholding of stocks. Average prices of Brazilian and African coffee were some 23 per cent lower in 1959 than in 1958; the decline in the prices of mild varieties, supplies of which are less excessive, was some 12 per cent. The impact of lower prices on export receipts was outweighed, or at least partly offset, for a number of countries by a greater volume of exports, largely in response to restocking demand in the United States and some European markets. Receipts from exports of all the major coffee exporters taken together were slightly higher in 1959 than in 1958 (Table 10).

Table 10.Trade of Primary Producing Countries, 1 1957-59(Value figures in billions of U.S. dollars)
Percentage Change

from Previous Year3
195719581959219581959
Exports f.o.b.
Countries exporting mainly
Coffee2.42.22.2–101
Other tropical foods43.23.33.21–1
Other agricultural products57.06.16.7–1311
Metals and rubber3.22.63.3–1726
Petroleum6.66.86.63–4
Other major countries13.713.213.9–35
All other countries62.22.22.2–2–1
Total38.336.438.1–55
Imports c.i.f.45.442.542.3–6
Source: Based on data from International Monetary Fund, International Financial Statistics.

The grouping of countries is based on that in Tables 16, 18, and 20, with the following additions: exporters of other tropical foods—China (Taiwan) and Jamaica; exporters of petroleum—Netherlands Antilles; other major countries—Canada and Yugoslavia.

Partly estimated.

Calculated before rounding.

Cocoa, tea, sugar (cane), bananas, oilseeds, and vegetable oils.

Textile fibers, livestock products, grain, and tobacco.

That is, primary producing countries not shown in Tables 16, 18, and 20 or referred to in footnote 1.

Source: Based on data from International Monetary Fund, International Financial Statistics.

The grouping of countries is based on that in Tables 16, 18, and 20, with the following additions: exporters of other tropical foods—China (Taiwan) and Jamaica; exporters of petroleum—Netherlands Antilles; other major countries—Canada and Yugoslavia.

Partly estimated.

Calculated before rounding.

Cocoa, tea, sugar (cane), bananas, oilseeds, and vegetable oils.

Textile fibers, livestock products, grain, and tobacco.

That is, primary producing countries not shown in Tables 16, 18, and 20 or referred to in footnote 1.

After a sharp rise between 1957 and 1958, cocoa prices fell in the second half of 1959 when a large crop provided ample supplies. The average price was some 20 per cent lower in 1959 than in the year before; for cocoa, as for coffee, however, a larger volume of exports partly offset the effect of lower prices on export receipts. The volume of tea exports from India and Ceylon declined somewhat, with the average price changing comparatively little from 1958 to 1959. Greatly increased production of sugar in both exporting and net importing areas was largely responsible for the weakening of sugar prices through most of 1959; the annual average was some 15 per cent below that for 1958 and some 8-9 per cent below the floor price adopted under the International Sugar Agreement. Quota reductions by the Sugar Council in mid-1959 and purchases by the U.S.S.R. in the third quarter helped to strengthen the price later in the year. While the supply of coconut and palm-kernel oils was reduced by a short crop in the Philippines and lack of transport facilities in Indonesia, strong demand for these oils raised prices from 1958 to 1959 by some 20 per cent.

The major exporters of livestock products were favored by recovery in demand and higher prices for wool; a sharp increase of butter prices, which followed a reduction of supplies, and of certain meat prices contributed further to the rise in their export earnings. Cotton prices, which had been declining through 1958, remained fairly stable during 1959, though the average was considerably below that of 1958. The effect of stronger demand on cotton prices was counteracted by the early announcement of the U.S. decision to increase the subsidy on cotton exports, effective August 1. Several exporting countries, however, sold greater quantities, and earned more from their cotton exports, than in 1958. Wheat prices remained fairly stable; but rice prices declined as a consequence of larger crops in major exporting and importing countries. A larger volume of rice exports raised Burma’s export receipts above 1958 earnings. The value of Thailand’s exports of rice fell, but increased earnings from rubber raised the total value of its exports.

The largest gains in export prices and earnings accrued to exporters of metals and rubber (Table 10). Lead was the only nonferrous metal whose price did not increase, as large stocks in producing countries kept the market depressed. For other metals, as well as for rubber, the effect of strong demand was intensified by supply developments. Prices of tin, output of which was restricted under the terms of the international agreement, and of zinc, which was subject to some voluntary curtailment of production, increased by 7-8 per cent. Copper output, in spite of an expansion of capacity in recent years, was again held back by strikes in a number of countries; in the first part of the year, production in Canada declined, and in the second half, U.S. output was much reduced and there were also strikes in Chile. The resulting shortages, combined with rising import demand, were responsible for a sharp increase in copper prices—some 20 per cent from 1958 to 1959. Settlement of the U.S. strikes and expansion of output starting early in 1960 were followed by some price reduction in the first quarter of the year.

The scope for expanding natural rubber output in response to rising demand is comparatively narrow. Production was only about 5 per cent higher in 1959 than in the preceding year, and prices were some 25 per cent above those of 1958.

The rapid expansion of petroleum production over the last few years, exceeding the growth of demand, led to a scaling down of prices early in 1959 by nearly 10 per cent. Thus, despite some further expansion in the volume of their exports, the receipts of exporters of petroleum declined by about 4 per cent, after a continuous rise during the previous six years.

Price declines during 1959 were largely concentrated on the major export commodities of Latin America; average Latin American export prices were some 5-6 per cent below those in 1958, and despite some increase in volume, export receipts tended to decline. Average export prices for the overseas sterling area countries, on the other hand, rose by about 2-3 per cent; this, in addition to a considerable expansion in volume, accounted for an increase from 1958 to 1959 of some 10 per cent in the export earnings of the overseas sterling area. Average export prices for most other primary exporting areas showed little change.

These movements in export prices were largely responsible for divergent developments in the terms of trade of the major primary producing areas in relation to the industrial countries. The prices paid by primary producers for their imports did not change much: there was a slight increase in the prices of imports from the United States and some decline in those from Western Europe. Inasmuch as Latin American imports originate largely in the United States, the deterioration in Latin America’s terms of trade caused by lower export prices was somewhat intensified by the increased prices of their imports. The improvement of the overseas sterling area’s terms of trade was due mainly to the increase in their export prices; the prices of their imports scarcely changed at all.

Financial Policies in the Less Industrialized Countries1

Many of the less industrialized countries were able in 1959 to bring to an end the drain on their international reserves that had been going on for some time, or actually to enlarge their reserve holdings. Although the deterioration in the terms of trade of primary producers in 1958 and earlier years had been a contributing factor, the rather persistent decline in their reserves also resulted from expansionary financial policies, which in some countries were reflected in large and continuous budget deficits. In many countries, credit expansion was used to finance development. Structural defects in the fiscal system were also a source of financial weakness. Moreover, the authorities in several countries had burdened the monetary system with the financing of commodity stocks withheld from export markets. In some countries, excess demand, stimulated by credit expansion, had led to a rise in imports or a capital outflow rather than to any marked increase in domestic prices. In other countries, a substantial expansion of credit resulted in significant price increases, even though part of the excess demand was absorbed by rising imports. Often a low level of international reserves meant that severe restrictions had to be placed on imports, and most of the effects of credit expansion were therefore concentrated upon domestic prices. On the other hand, foreign financial assistance enabled many countries to maintain imports at a higher level than would otherwise have been possible, and hence to finance development expenditure, to the extent of such assistance, without drawing on reserves.

Monetary and fiscal policies were a major factor in halting or reversing the outflow of reserves in 1959. These policies reduced credit expansion and government expenditures, and tended to reduce the rate of monetary expansion; the resulting improvement in the balance of payments was an offsetting factor, and in a number of countries a rise in foreign reserves was the main source of continued monetary expansion (Table 11). Some countries merely reduced their rate of credit creation, whereas others reduced total credit. Colombia, Honduras, and Israel reduced the Government’s net indebtedness to the monetary system, and Nicaragua contracted credit to the private sector. In addition to firmer domestic financial policies, cost restrictions on imports, arising from devaluation or increased duties and taxes, often helped to strengthen reserves, and in some countries more restrictive direct limitations were also placed on imports. In a few countries, such as Argentina, Mexico, and Pakistan, a revival of confidence led to a return of private capital, and thus to a further augmentation of official reserves.

Table 11.Factors Affecting Changes in Money Supply, Selected Primary Producing Countries, 1958 and 19591
Change in Net

Foreign Assets
Change in Net

Domestic Assets
Net Government

Borrowing from

Banking System2
Bank Credit to

Private Sector
Other3
Percentage

Change in

Money Supply
As percentage of money supply at beginning of year
195819591958195919581959195819591958195919581959
Argentina4643–7653373433822–1912
Bolivia328–1271521122031
Brazil2142–2–123436202126–4–3
Burma19151257101323–731–16
Ceylon310–9–181228123432–3–8
Colombia211146175–4–213483
Dominican Republic26–15–2–828–7631874–17
Ecuador–11327–36–9815–2–9
Honduras–13–1431312–4–273–3
India37–5285191015–12–10
Indonesia551864149–2339–181122–1–27
Israel1510219–61–7–62522–24–15
Korea35–110125–2–13113622–15
Mexico716–7714915951–6–1
Nicaragua–31–9136–122185–23–1–7
Pakistan55–287–374–7
Paraguay199–6–1525244951516
Peru724–317107151725–7–15
Philippines96–15101105411–4–15
United Arab Republic, Egyptian Region–64–5–5–19–15614–6–10
Venezuela10–5–32–28422341171615–15–9
Source: Based on data from International Monetary Fund, International Financial Statistics.

The figures for net foreign assets and net government borrowing from the banking system have been adjusted in order to eliminate the effect of changes in the net IMF position.

Monetary system’s claims on government, including official entities and development banks, less government deposits. Changes in advance import deposits counterpart funds, and exchange profits are treated as reflecting government operations. For the United Arab Republic, Egyptian Region, changes in counterpart funds are included in “other”.

Sum of the remaining items shown in the monetary survey (published in International Financial Statistics)—usually unclassified assets, less quasi-money, capital, and unclassified liabilities.

Source: Based on data from International Monetary Fund, International Financial Statistics.

The figures for net foreign assets and net government borrowing from the banking system have been adjusted in order to eliminate the effect of changes in the net IMF position.

Monetary system’s claims on government, including official entities and development banks, less government deposits. Changes in advance import deposits counterpart funds, and exchange profits are treated as reflecting government operations. For the United Arab Republic, Egyptian Region, changes in counterpart funds are included in “other”.

Sum of the remaining items shown in the monetary survey (published in International Financial Statistics)—usually unclassified assets, less quasi-money, capital, and unclassified liabilities.

The reserve improvements attained are particularly noteworthy, because in only a few countries, e.g., Chile, Indonesia, the Philippines, and the Federation of Malaya, was there any marked rise in exports. In many of the other countries, export earnings rose only moderately or declined. Even where exports rose, imports generally did not rise correspondingly. Developments in foreign trade tended to have an adverse effect on government revenues, which in many of the less industrialized countries come mainly from taxes related to exports and imports.

As in previous years, progress toward the attainment of external and internal balance required stronger and more comprehensive measures in countries where there had been prolonged domestic price inflation than in countries where credit creation had been reflected mainly in a decline in foreign reserves. In any economy that has been subjected for a long period to continuous inflation, there are likely to be serious distortions in the structure of production which present difficult problems when the effort is made to restore equilibrium. The expectations that develop in such circumstances tend to make the economy less ready for adaptation to conditions of price stability, and therefore constitute a considerable obstacle to the enforcement of stabilization policies. The problem is also frequently aggravated by institutional arrangements, such as the linking of wage rates to changes in the cost of living index during preceding months, and the pressure for compensating adjustments from groups which have fallen behind in the progressive rise of money incomes. Despite these difficulties, a number of countries made considerable progress in carrying out their stabilization plans. Developments during the last year in Argentina, Chile, Colombia, and Peru are noted in Chapter IV of this Report, and the stabilization programs adopted by Spain and Iceland have been described in Chapter II. Saudi Arabia’s financial rehabilitation program of 1958 was continued through 1959. A budgetary surplus, together with profits from free market exchange operations, made possible the repayment in full of the Government’s debt to the Saudi Arabian Monetary Agency. Currency in circulation and wholesale prices declined, foreign exchange reserves increased, and the free market exchange rate appreciated. In several other countries, such as India, the Philippines, and Pakistan, the authorities moderated their expansionary financial policies, and this helped to strengthen their balance of payments positions in 1959. Developments in these countries are described in greater detail in Chapter IV.

A few of the less industrialized countries, however, suffered setbacks in 1959, or their financial situation continued to deteriorate. Pressure on the reserves of several countries with a fair degree of internal price stability, including most of the Central American Republics, was aggravated by the continuing fall in their export prices. Honduras nevertheless increased its reserves in 1959 by limiting imports by restrained monetary and fiscal policies. In the Dominican Republic and Haiti, disinflationary fiscal operations were also undertaken in late 1959 and early 1960 in accordance with their stabilization programs. In Ceylon, a further decline in foreign reserves, despite a moderate rise in export prices and earnings, accompanied a much higher rate of net government borrowing from the monetary system. In Indonesia, a drastic monetary reform in August brought about a sharp reduction in the money supply, which had continued to increase rapidly in the first half of the year. Credit expansion was, however, resumed, so that by the end of the year money supply was nearly at the pre-reform level. Part of the rise in money supply was attributable to the increase in international reserves, reflecting higher rubber exports and reduced imports, the latter resulting mainly from continuing severe quantitative restrictions. In Venezuela, substantial cash deficits of the Government, arising in part from repayment of debts to the private sector which had been discounted abroad, resulted in a continued decline in foreign reserves. Moreover, in the second half of 1959 there was also a flight of private capital. The resulting drain on the liquidity of the banking system caused not only a contraction of bank credit to the private sector, but also increased recourse to the central bank by the commercial banks, despite an increase in the discount rate. In view of these developments, the authorities in March 1960 decided to reduce government expenditures and central bank lending and also secured a stand-by arrangement with the Fund. In Brazil, the Government’s increasing reliance on the monetary system for the financing of development expenditures and the stockpiling of coffee markedly increased the inflationary pressures on the economy. Money and prices rose at much higher rates than in previous years, but a corresponding depreciation of the exchange rates for imports and a moderate rise in export earnings checked the deterioration in the payments position.

Several of the less industrialized countries took specific steps in early 1960 to increase the effectiveness of some of the instruments of monetary policy. Peru introduced Treasury bills bearing interest at the rate of 10 per cent, designed to facilitate the short-term financing of government operations without recourse to the central bank. In Argentina, the rates on Treasury bills were freed as part of a program intended to encourage the holding of savings in the form of financial assets. In Ghana and Nigeria, the issue of Treasury bills was initiated, mainly in order to provide an alternative to the customary investment of short-term funds in foreign financial centers. The newly established central bank of the Federation of Malaya began in 1959 to undertake operations in Treasury bills, and established maximum deposit rates and minimum reserve requirements for commercial banks. In India in early 1960, reserve requirements against increases in deposits, in addition to the existing basic reserve requirements, were implemented for the first time.

Balance of Payments and Reserve Developments

The balance of payments relations of the world in 1959 contrasted sharply in several important respects with those of 1958. (The consequences for reserves of these changes are summarized in Table 12.) Countries exporting mainly primary products had in the aggregate a balance of payments surplus approaching $1 billion in contrast to a deficit of about the same size in 1958. The deficit of the United States, measured by the outflow of gold and the change in liquid dollar liabilities to official and banking institutions, rose from more than $2.8 billion to $3.4 billion (or from $3.5 billion to $3.8 billion, if changes in liquid dollar liabilities to other foreigners are also taken into account; see Table 21). The net position of the United Kingdom measured by reserves net of sterling balances, which had improved by $0.6 billion in 1958, deteriorated by somewhat less in 1959 (Table 22). The accumulation of official reserves and bank assets by industrial exporting countries in continental Europe, which had reached about $3 billion in 1958, was about the same in 1959, although there were important shifts in the positions of individual countries. These countries and the United Kingdom together had a large surplus with the United States as well as with the rest of the world in both 1958 and 1959. The over-all surplus of Japan, which had been almost $0.5 billion in 1958, did not change much in 1959. The salient features in the balance of payments of a number of selected individual countries are examined in greater detail in Chapter IV.1

Table 12.Official Gold and Foreign Exchange Reserves, 1956-59(In billions of U.S. dollars)
1956195719581959
Countries’ reserves at end of year
United States122.0622.8620.5819.51
Germany, Federal Republic of24.295.646.325.01
Italy1.311.532.323.29
United Kingdom2.172.373.102.75
Other exporters of industrial products7.436.598.589.35
Exporters of primary products18.1517.4116.5516.88
Total official reserves55.4156.4057.4556.79
Composition of countries’ reserves at end of year
Gold336.1037.3638.0737.85
U.S. dollars8.568.198.489.23
Credit balances in EPU1.091.271.37
Currency deposits with BIS
0.260.270.500.51
Sterling9.407.036.706.97
Other, including net errors and omissions2.282.332.23
Source of change in countries’ reserves during year
Gold transactions with IMF
Subscriptions–0.02–0.06–1.20
Sales to United States0.600.30
Repayments and other–0.07–0.09–0.17
Gold transactions with BIS and EPU/EF0.050.190.18
Other net additions to world official gold stocks0.700.670.68
Production0.981.051.12
Soviet sales0.260.210.25
Consumption in industry and arts, and private
hoarding4–0.54–0.59–0.69
Total gold1.260.71–0.225
Foreign exchange transactions with IMF
Drawings0.980.340.18
Repurchases–0.01–0.27–0.44
Credit balances in EPU0.180.10–1.37
Countries’ surpluses (deficits –) with United
States settled in U.S. dollars–1.220.600.98
Other foreign exchange transactions6–0.20–0.430.21
Total foreign exchange–0.270.34–0.44
Total gold and foreign exchange0.991.05–0.66
Of which transactions with IMF1.48–0.08–1.34
Sources: International Monetary Fund, International Financial Statistics, and Fund staff estimates.

Gold reserves.

Including assets of “limited usability.”

Including gold deposits with the BIS.

Calculated as a residual; the entries thus include net errors and omissions.

Details do not add to total because of rounding.

Including changes in official holdings of currencies other than the U.S. dollar (mainly sterling), deposits with the BIS and other financial assets (excluding EPU credit balances) held as reserves, and net errors and omissions.

Sources: International Monetary Fund, International Financial Statistics, and Fund staff estimates.

Gold reserves.

Including assets of “limited usability.”

Including gold deposits with the BIS.

Calculated as a residual; the entries thus include net errors and omissions.

Details do not add to total because of rounding.

Including changes in official holdings of currencies other than the U.S. dollar (mainly sterling), deposits with the BIS and other financial assets (excluding EPU credit balances) held as reserves, and net errors and omissions.

The improvement in the balance of payments of the primary producing countries was due both to higher export earnings and to the comparative stability of imports, which were kept in check by greater restraint in monetary and fiscal policies and, in some countries, by more stringent restrictions. The general improvement was shared by many of the individual countries. In 1958 Australia and India each had an over-all deficit of more than $200 million; in 1959 the over-all balance of payments position of each improved by about $350 million. In 1958, the official gold and foreign exchange holdings of most Latin American countries either declined or did not change, and several of them, including Brazil and Chile, supplemented their reserves by borrowing abroad. In 1959, on the other hand, there were substantial improvements in the balance of payments of several Latin American countries, especially Argentina and Mexico. There was, however, again a substantial decrease in the reserves of Venezuela.

The change in the over-all balance of payments of the United States from 1957 to 1958 had resulted mainly from a decline in U.S. exports. There was no further change in U.S. exports in 1959, but U.S. imports rose steeply, so that the trade balance again deteriorated. There were also important changes in the volume and character of capital movements. The net outflow of U.S. private and bank capital decreased by $0.5 million, and the inflow of foreign private capital increased by an equal amount; consequently, the net outflow on these accounts was reduced by $1.0 billion. Net U.S. Government lending fell by $0.6 billion, mainly as a result of advance repayments on long-term loans.

While in 1958 most of the industrial countries other than the United States were in over-all balance of payments surplus, surpluses in 1959 were concentrated in a few countries. Although the aggregate current account surplus for these countries was about $5.0 billion in both years, that of the United Kingdom fell by almost $0.6 billion, Belgium’s surplus declined by $216 million, that of Germany by about $165 million, and that of Japan by about $90 million. On the other hand, France’s surplus rose by well over $1 billion (excluding transactions with the franc area and in nonmonetary gold), and Italy’s balance on these transactions increased by $200 million. There were also marked shifts in these balances classified according to region. For the industrial countries other than the United States, the current surplus with the United States rose by roughly $1.0 billion, and though their current surplus with the rest of the world fell substantially, it remained high.

While the current surplus of industrial exporters other than the United States changed little, there was a substantial increase in the net outflow of capital. Net official grants and movements of private nonbank and official capital from these countries to the rest of the world increased from about $500 million in 1958 to nearly $2 billion in 1959. For the group as a whole, the change is almost fully accounted for by transactions with the United States. In addition to increases in net repayments to the U.S. Government of about $0.6 billion, the recorded net outflow of private nonbank capital to that country increased by about $0.7 billion. The group’s commercial bank assets in the United States, which had shown little change in 1958, also increased in 1959, by almost $1 billion. These movements of capital resulted in part from the greater freedom permitted in Western Europe for private and bank capital transactions and in part from rising interest rates in the United States.

For the industrial countries of continental Western Europe, the increase of about $700 million in the current surplus was matched by an increase of similar size in the net outflow of official and private nonbank capital, so that the accumulation of reserves and bank assets for the group was about the same in both 1958 and 1959. In 1958 most of the accumulation had been in the form of official reserves, whereas in 1959 bank assets accounted for about one fourth. By far the largest change was in the balance of payments position of France, which had a small deficit in 1958 but accounted for more than a third of the aggregate surplus of the group in 1959. The magnitude of the improvement in the French balance of payments was approximately equal to the size of the deterioration in those of Austria, Belgium, Germany, and the Netherlands. In both years, Italy accounted for about a third of the over-all surplus of the group, and at the end of 1959 Italian reserves were the third highest among Fund members.

The major international balance of payments problem in 1959 was the deficit in the balance of payments of the United States. One of the purposes of U.S. postwar policy has been to rebuild the economies which had been devastated by the war, by means of the European Recovery Program and other foreign aid programs. In addition to providing financial assistance, the U.S. Government has promoted or encouraged U.S. expenditures abroad, including assistance to foreign countries in developing markets in the United States and offshore procurement under programs of economic and military aid. The trend of international payments in recent years may properly be regarded as a measure of the success that has, in general, been achieved in realizing these purposes of U.S. postwar international economic policy.

The U.S. authorities have taken measures to achieve a reasonable equilibrium in the balance of payments, while at the same time maintaining the broad objectives of promoting multilateral trade and providing capital to the less developed areas. Fiscal and monetary policies have kept in view the need to maintain a competitive cost-price structure. Steps have been taken to help U.S. firms increase their exports, and other countries have been pressed to eliminate any remaining restrictions on imports of dollar goods and services.

At the same time, other countries, especially in Europe, have taken steps for the maintenance of international payments equilibrium, including the reduction or elimination of restrictions on dollar imports, prepayment of debts to the U.S. Government, and a relaxation of restrictions on international movements of capital. The main initial effect of the measures taken both in the United States and in the other industrial countries to restore payments equilibrium has been on capital account, and to a considerable extent involves changes of a nonrecurrent character. However, the rapid expansion of economic activity in the other industrial countries, in part permitted by their strong balance of payments positions, has helped since mid-1959 to bring about a progressive strengthening of the U.S. trade position.

The balance of payments movements that have been described above were also reflected in a redistribution of official gold holdings, the total of which increased during the year by $680 million, which was not very different from the increases in 1957 and 1958 (Table 13). These movements are examined in greater detail in Chapter VI. The net outflow of gold from the United States in 1959 was $1,075 million, of which $344 million was its gold subscription to the Fund. The Fund, whose gold holdings increased during the year by $1,075 million, sold $300 million of gold to the United States, so that the net gold outflow from the United States to other countries in 1959 was $1,031 million, compared with $2,275 million in 1958. The decline was in part attributable to the fact that a larger proportion of the total outflow of gold and dollars accrued to nonofficial holders in 1959, and in part to a different pattern of reserve changes. In the rest of the world, the main shift was in the holdings of the United Kingdom, which are estimated to have increased in 1958 by $1,250 million and to have decreased in 1959 by $350 million. The industrial countries of continental Western Europe added more than $1.2 billion to their gold reserves, or some $0.6 billion less than in 1958. Half of the decrease in their accumulation of gold, however, was accounted for by gold subscription payments to the Fund. The gold holdings of all other countries taken together showed virtually no net change in 1959, although gold subscriptions to the Fund totaled $385 million.

Table 13.Changes in Official Gold Holdings, 1957-59 1(In billions of U.S. dollars)
195719581959
International Monetary Institutions
International Monetary Fund–5121521,075
European Payments Union/European Fund–14–128–86
Bank for International Settlements2–35–66–92
Countries2
United States
Transactions with International Monetary Fund600–44 3
Other transactions199–2,275–1,031
United Kingdom–2001,250–350
Other European industrial countries7311,8541,228
All other countries–64–122–20
World official gold holdings705665680
Source: Based on data from International Monetary Fund, International Financial Statistics.

Excluding gold holdings of the U.S.S.R. and countries associated with it. No sign indicates an increase; minus sign indicates a decrease.

For the BIS, the figures cover changes in holdings net of deposits. For most countries, the figures include deposits with the BIS.

Gold subscription payment ($344 million) less gold purchases ($300 million).

Source: Based on data from International Monetary Fund, International Financial Statistics.

Excluding gold holdings of the U.S.S.R. and countries associated with it. No sign indicates an increase; minus sign indicates a decrease.

For the BIS, the figures cover changes in holdings net of deposits. For most countries, the figures include deposits with the BIS.

Gold subscription payment ($344 million) less gold purchases ($300 million).

World reserves in 1959 were increased by $1.0 billion through net transfers of dollars from the United States to foreign official holders. However, despite this increase and the increase in the world’s monetary gold holdings, total gold and foreign exchange reserves held by national monetary authorities (excluding the U.S.S.R. and the countries associated with it) fell by an estimated $0.7 billion, or about 1 per cent (Table 12). They were reduced by more than 1.3 billion through subscriptions and net repayments to the International Monetary Fund, and by a similar amount as a result of the termination of the European Payments Union (EPU).

Although the total of countries’ reserves was thus reduced during 1959, world liquidity actually improved. In evaluating changes in world liquidity, account must also be taken of the large increase in the foreign exchange holdings of commercial banks which in many countries was made possible by the relaxation of restrictions on movements of capital. The increase in the liquid holdings of U.S. dollars of commercial banks outside the United States amounted alone to about $1.4 billion; and there are indications that their holdings of other currencies also increased substantially. Where confidence in currencies is maintained, the increased scope for international movements of private capital should diminish the need for reserve movements to balance international transactions. On the other hand, any greatly increased flow of private short-term capital may at certain times increase the need for compensatory action by national authorities.

With the termination of the EPU, the EPU balances of member countries were converted into bilateral balances, most of which are to be amortized over a period of several years. Since the bilateral claims are not, like the EPU credit balances, directly usable for settlement of international transactions, they are not included in the calculation of world reserves. Any effects that the termination of the EPU had on the liquidity of any of its members were, however, slight; they were, moreover, mitigated by the establishment of the European Fund under the European Monetary Agreement. The reduction in foreign exchange assets affected mainly countries whose balance of payments positions were strong, whose reserves were at a comfortable level, and which had not themselves made much use of their EPU balances in settling deficits. The termination of the EPU did not, therefore, create any need for adjustments in these countries to compensate for a fall in reserves. For several years before the termination of the EPU, settlements had generally been required in gold or U.S. dollars to the extent of 75 per cent, and some countries whose EPU credit facilities were exhausted had to settle 100 per cent in gold or dollars. The termination of the EPU, therefore, did not directly alter the liquidity even of the debtor countries materially, though the repayment of accumulated debit balances may require them, if a drain on reserves is to be avoided, to make adjustments in their balances of payments so that there may be an adequate surplus on other transactions.

Mainly because of the general quota increase that became effective in September 1959, members of the International Monetary Fund made subscription payments of $1.2 billion in gold to the Fund during 1959. In addition, the Fund received $173 million in gold in repayment of drawings, repurchases on subscription account, and payment of charges. With the sale of $300 million of gold to the United States, there was thus a net increase in the Fund’s gold holdings of $1,075 million in 1959, compared with an increase of $152 million in 1958 and a decrease of $512 million in 1957, when it bought $600 million from the United States for gold. The foreign exchange reserves of member countries were also reduced in 1959 by payments of $262 million to the Fund, arising from the excess of repurchases in that year (excluding gold repayments) over new drawings. In contrast, member countries drew currencies from the Fund in the net amounts of $965 million in 1957 and $66 million in 1958.

While transactions with the Fund thus reduced national holdings of gold and convertible foreign exchange by more than $1.3 billion in 1959, the resources that the Fund is able to make available rose much more. Besides gold, almost $3.9 billion was subscribed in the members’ own currencies. One third of this amount was in convertible currencies within the meaning of the Articles of Agreement, principally U.S. and Canadian dollars, and the increase in the Fund’s holdings of gold and such currencies was thus almost twice the amount by which transactions with the Fund reduced national holdings. Furthermore, the introduction of external convertibility by a number of countries at the end of 1958 increased the usability of the Fund’s holdings of their currencies. The currencies of the industrial countries of Western Europe, which are widely used in settlement of international transactions, were thus, in effect, made convertible for current transactions. The Fund’s holdings of these currencies, which amounted to almost $3.2 billion at the end of 1958, were increased by $1.1 billion during 1959, mainly as a result of additional subscriptions. Because of the revolving character of the Fund’s resources, gold and foreign exchange held by the Fund add substantially more to world liquidity than equal amounts held by national authorities; with an increase in the Fund’s holdings of gold and of currencies suitable for international settlements that is several times the decrease in national reserves, the international payments mechanism was substantially strengthened in 1959.

Table 14.Balance of Payments Summaries for Continental European Countries Exporting Manufactures and for Japan, 1958 and 19591(In millions of U.S. dollars)
19581959
Goods, Services.

and Private

Donations
Private

Capital2
Official Grants and

Capital3
Commercial

Bank

Assets
Reserve

Movement4
Goods, Services,

and Private

Donations
Private

Capital2
Official

Grants and

Capital3
Commercial

Bank

Assets
Reserve

Movement4
Austria538121….–1555128–53….–26
Belgium–Luxembourg448–17848….–3185232–226–88….82 5
Denmark12626–15–32–1057801912–118
France, Metropolitan–103 6127–21….98 7742 6512–26692 8–1,138 7
Germany. Federal Republic of91,835–399–724–63–6491,671–459–961–29948
Italy57335715–15–93078921042–104–937
Netherlands427163–53–31–506481–67–93–319–2
Norway–1702225–8–49–82137–322–25
Sweden–52101–32–1758–9436
Switzerland221–56….….–165150–153….….3
Japan4998–1–45–461410209–13–152–454 10
Source: Based on data reported to International Monetary Fund.

No sign indicates credit; minus sign indicates debit.

This item is a residual and includes net errors and omissions.

Excluding reserve movements.

Reserve movements generally cover changes in gross official holdings of gold and foreign exchange assets, as reported in International Financial Statistics, and changes in net IMF and EPU positions. The changes in net EPU positions for 1959 cover only the settlements made before January 15, 1959, the date of the liquidation of the Union. The conversion of EPU balances outstanding on that date into bilateral claims between individual countries is not reflected in the table, and the subsequent payments on these bilateral claims are included with official grants and capital. No sign indicates a decrease in net assets; minus sign indicates an increase in net assets.

Net of liabilities.

Including credit of US$216 million for 1958 and debit of US$8 million for 1959 for gold transactions of the private sector with the monetary authorities.

Including changes in net liabilities under payments agreements amounting to an increase of $221 million in 1958 and a decrease (—) of $214 million in 1959. Reserve movements include settlements by Metropolitan France on behalf of other franc area countries and differ by that amount from the total of transactions with the non-franc area.

Net of liabilities, which increased by $303 million.

The figures are derived from Table 23. Official grants and capital cover advance payments for defense imports, the official portion of donations, government capital, “other Bundesbank assets,” and “Bundesbank liabilities”; commercial bank assets cover “commercial bank foreign exchange”; reserve movement covers changes in official gold holdings and freely usable assets and in net IMF and EPU positions.

Excluding gold holdings not previously counted as reserves.

Source: Based on data reported to International Monetary Fund.

No sign indicates credit; minus sign indicates debit.

This item is a residual and includes net errors and omissions.

Excluding reserve movements.

Reserve movements generally cover changes in gross official holdings of gold and foreign exchange assets, as reported in International Financial Statistics, and changes in net IMF and EPU positions. The changes in net EPU positions for 1959 cover only the settlements made before January 15, 1959, the date of the liquidation of the Union. The conversion of EPU balances outstanding on that date into bilateral claims between individual countries is not reflected in the table, and the subsequent payments on these bilateral claims are included with official grants and capital. No sign indicates a decrease in net assets; minus sign indicates an increase in net assets.

Net of liabilities.

Including credit of US$216 million for 1958 and debit of US$8 million for 1959 for gold transactions of the private sector with the monetary authorities.

Including changes in net liabilities under payments agreements amounting to an increase of $221 million in 1958 and a decrease (—) of $214 million in 1959. Reserve movements include settlements by Metropolitan France on behalf of other franc area countries and differ by that amount from the total of transactions with the non-franc area.

Net of liabilities, which increased by $303 million.

The figures are derived from Table 23. Official grants and capital cover advance payments for defense imports, the official portion of donations, government capital, “other Bundesbank assets,” and “Bundesbank liabilities”; commercial bank assets cover “commercial bank foreign exchange”; reserve movement covers changes in official gold holdings and freely usable assets and in net IMF and EPU positions.

Excluding gold holdings not previously counted as reserves.

Table 15.Balance of Payments Summaries for Latin American Countries, 1958 and 1959(In millions of U.S. dollars)
Goods, Services,

and Private

Donations1
Capital and

Official

Grants1,2
Reserve

Movement Plus

Change in Net

IMF Position3
Official

Reserves,

End of

1959
195819591958195919581959
Exporters of coffee
Brazil–272–3152244308 5487438 6
Colombia6676–56 7–3 7–10–73212
Costa Rica–8–251619–8613
El Salvador1–3–52538
Guatemala–49–30232526540
Haiti21–75–14
Nicaragua–14612–22–49
Exporters of other tropical foods
Cuba–135–5067–66 868116257 9
Dominican Republic–14–413–21638
Ecuador–141155–1–640
Honduras–10–3644–112
Panama–27–846–19840
Exporters of other agricultural products
Argentina–26812111168 10157–180349
Uruguay11–115–35892411261118012
Exporters of minerals
Bolivia–35–163423131–713
Chile–96–4599 14123 14–3–78130
Venezuela–112–29–284 15–327 15396356684
Others
Mexico–183–331029781–64413
Paraguay–12–10137–133
Peru–112–461007812–3252
Total–1,281–633496541785922,965
Source: Based on data reported to International Monetary Fund.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Including drawings of $158 million on special loans from the Export-Import Bank of Washington and U.S. commercial banks, and utilization of $32 million of lines of credit.

Including $114 million for net receipts from swap transactions.

Including $200 million pledged as collateral.

Including drawings of $72 million for 1958 and $65 million for 1959 on special loans from the Export-Import Bank of Washington and other U.S. banks, and repayments of $86 million for 1958 and $20 million for 1959 on import arrears.

Including liquidation of $92 million of official liabilities.

Including $188 million pledged as collateral.

Including drawings of $79 million on special loans from the Export-Import Bank of Washington and other U.S. banks.

Including changes in foreign liabilities.

Gold holdings of the Bank of the Republic.

Repayment of the Government’s contractual foreign obligations of $8 million was postponed.

Including drawings of $36 million for 1958 and $37 million for 1959 on special loans from the Export-Import Bank of Washington and other U.S. banks.

Mainly net errors and omissions. The 1959 entry includes a credit of $100 million from foreign-owned oil companies for taxes due in 1960.

Source: Based on data reported to International Monetary Fund.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Including drawings of $158 million on special loans from the Export-Import Bank of Washington and U.S. commercial banks, and utilization of $32 million of lines of credit.

Including $114 million for net receipts from swap transactions.

Including $200 million pledged as collateral.

Including drawings of $72 million for 1958 and $65 million for 1959 on special loans from the Export-Import Bank of Washington and other U.S. banks, and repayments of $86 million for 1958 and $20 million for 1959 on import arrears.

Including liquidation of $92 million of official liabilities.

Including $188 million pledged as collateral.

Including drawings of $79 million on special loans from the Export-Import Bank of Washington and other U.S. banks.

Including changes in foreign liabilities.

Gold holdings of the Bank of the Republic.

Repayment of the Government’s contractual foreign obligations of $8 million was postponed.

Including drawings of $36 million for 1958 and $37 million for 1959 on special loans from the Export-Import Bank of Washington and other U.S. banks.

Mainly net errors and omissions. The 1959 entry includes a credit of $100 million from foreign-owned oil companies for taxes due in 1960.

Table 16.Trade of Latin American Countries, 1958 and 1959(Value figures in millions of U.S. dollars)
Exports f.o.b.Imports c.i.f.
19581959Percentage

change
19581959Percentage

change
Exporters of coffee
Brazil1,2431,28231,3531,3742
Colombia46147024004154
Costa Rica9280–13991034
El Salvador116112–3108101–6
Guatemala1071081150134–11
Haiti3928–284330–30
Nicaragua646527867–14
Exporters of other tropical foods
Cuba763638 1–20888764 1–14
Dominican Republic137130–5149135–9
Ecuador13314051051083
Honduras70707671–6
Panama333431091166
Exporters of other agricultural
products
Argentina9941,00921,233993–19
Uruguay13998–291511606
Exporters of minerals
Bolivia5059188065–16
Chile38649729415413
Venezuela22,5102,315–81,6951,650–3
Others
Mexico73575321,1291,007–11
Paraguay3431–93831–18
Peru28131211335294–12
Total8,3878,231–28,6348,031–7
Source: Based on data from International Monetary Fund, International Financial Statistics.

Partly estimated.

Based on payments data.

Source: Based on data from International Monetary Fund, International Financial Statistics.

Partly estimated.

Based on payments data.

Table 17.Balance of Payments Summaries for Overseas Sterling Area Countries,1 1958 and 1959(In millions of U.S. dollars)
Goods, Services,

and Private

Donations2
Capital and

Official

Grants2,3
Reserve

Movement Plus

Change in Net

IMF Position4
Official

Reserves,

End of

1959
195819591958195919581959
Australia–591–359390505201 5–146 51,226 5
Burma–14–114337–29–26141
Ceylon–44–5833251133132
Ghana30–17–24–6–623442
Iceland–6–14612214
India–831–421607558224–137814
Ireland–3 6–24 6745–4–21317
Jordan–70–767275–2145
Libya–24–303447–10–1769
Malaya and Singapore–14263138384–101643
New Zealand–94106129–76–35–30217
Pakistan–205–10115618949–88298
Rhodesia and
Nyasaland–176–54170686–14221
Union of South Africa–207204200–417–163431
U.K. Colonial
Territories 7
West Africa–143–10993845025753
East Africa–98–925987395476
West Indies–201–246204218–328386
Borneo territories4556–17–17–28–39330
Hong Kong….….4233–42–33468
Other–31–374223–1114395
Total–2,805–1,2202,3841,904421–6847,818
Sources: Based on data reported to International Monetary Fund.

Excluding independent countries not listed in the table.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions, unless otherwise noted.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Including commercial banks.

Including net errors and omissions.

Reserve figures cover all sterling assets.

Sources: Based on data reported to International Monetary Fund.

Excluding independent countries not listed in the table.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions, unless otherwise noted.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Including commercial banks.

Including net errors and omissions.

Reserve figures cover all sterling assets.

Table 18.Trade of Overseas Sterling Area Countries, 1958 and 1959(Value figures in millions of U.S. dollars)
Exports f.o.b.Imports c.i.f.
19581959Percentage

change
19581959Percentage

change
Exporters of tropical products Ceylon359368336042117
Ghana263286923731633
Nigeria380458214675027
Exporters of other agricultural products
Australia1,6602,008212,0572,1173
Burma194223152042239
Ireland368366–15575957
Kenya93107152162212
New Zealand70082117796647–19
Pakistan3023216396353–11
Uganda130121–74440–9
Exporters of minerals and rubber
Brunei and Sarawak258285 1101681701
Kuwait930850 1–9200200 1
Malaya616807315415685
Rhodesia and Nyasaland38052338497474–5
Trinidad229260142402619
Diversified exporters
Hong Kong523574108048668
India1,2161,30881,8151,8633
Singapore1,0261,124101,2221,2775
Union of South Africa1,0961,201101,7111,505–12
Others1,1981,122–61,6771,611–4
Total11,92113,1331014,20914,230
Source: Based on data from International Monetary Fund, International Financial Statistics.

Partly estimated.

Source: Based on data from International Monetary Fund, International Financial Statistics.

Partly estimated.

Table 19.Balance of Payments Summaries for Other1 Selected Primary Producing Countries, 1958 and 1959(In millions of U.S. dollars)
Goods, Services,

and Private

Donations2
Capital and

Official

Grants2,3
Reserve

Movement Plus

Change in Net

IMF Position4
Official

Reserves,

End of

1959
195819591958195919581959
Exporters of tropical
products
China (Taiwan)–111–113114114–3–1112
Ethiopia–20–2612218551
Philippines–86309928–13 5–58 590
Exporters of other agricultural products
Greece–95–456210033 6–55 6210
Sudan–3732104127–73158
Thailand–80–57596821–11298
Turkey–61–1344412817 66 6143
United Arab Republic
Egyptian Region–59–4223–273669357
Syrian Region–30–4064224–232
Exporters of minerals
and rubber
Belgian Congo–112–76122–58–1013487
Indonesia–651758907–107301
Iran7–170–115122954820213
Iraq4632–19–24–27–8296
Viet–Nam–126–154158167–32–13171
Others
Canada–1,111–1,4161,2231,406–112101,876
Finland792942–79–71316
French Overseas
Franc Area7380–58–2–15–78256
Morocco 893146–78–107–15–39169
Tunisia86960–69–21….–3987
Israel–222–206268236–46–30118
Korea–285–210316212–31–2147
Portugal2213419–26–32808
Spain–163–1013113532–125186
Yugoslavia–132–128121112111660
Sources: Based on data reported to International Monetary Fund.

Other than countries listed in Tables 15 and 17.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Net of official foreign exchange liabilities.

Including changes in EPU debit balance.

Figures refer to solar years ended March 20.

The transactions of Morocco and Tunisia are included in the entries for the French Overseas Franc Area, of which they are part. The separate figures for Morocco and Tunisia have been compiled on a somewhat different basis from the total.

Sources: Based on data reported to International Monetary Fund.

Other than countries listed in Tables 15 and 17.

No sign indicates credit; minus sign indicates debit.

Including net errors and omissions.

Reserve movements are generally the changes in gross official holdings of gold and foreign exchange assets as reported in International Financial Statistics. No sign indicates a decrease in assets and a drawing on the Fund; minus sign indicates an increase in assets, a gold subscription to the Fund, and a repayment of a drawing on the Fund.

Net of official foreign exchange liabilities.

Including changes in EPU debit balance.

Figures refer to solar years ended March 20.

The transactions of Morocco and Tunisia are included in the entries for the French Overseas Franc Area, of which they are part. The separate figures for Morocco and Tunisia have been compiled on a somewhat different basis from the total.

Table 20.Trade of Other1 Selected Primary Producing Countries, 1958 and 1959(Value figures in millions of U.S. dollars)
Exports f.o.b.Imports c.i.f.
19581959Percentage

change
19581959Percentage

change
Exporters of tropical products
Ethiopia6166 2879846
French West Africa3350276–21419354–16
Philippines4935297658601–9
Exporters of other agricultural products
Greece232204–12565565
Sudan12519354170164–4
Thailand309359163934197
Turkey2473554431544341
United Arab Republic
Egyptian Region472443–6664616–7
Syrian Region11698–16191176–8
Exporters of minerals and rubber
Belgian Congo40648920362308–15
Indonesia75587215514459–11
Iran738760 23572600 25
Iraq56760673073266
Saudi Arabia800770 2–4270280 24
Viet-Nam557536232225–3
Others
Algeria488368–251,1391,142
Finland775835872983414
Israel142181274224292
Morocco345332–4401335–16
Portugal289290480473–1
Spain4865033872795–9
Tunisia153142–7155153–1
Total8,4048,74649,9099,781–1
Source: Based on data from International Monetary Fund, International Financial Statistics.

Other than the countries listed in Tables 15 and 17.

Partly estimated.

Including Guinea.

Source: Based on data from International Monetary Fund, International Financial Statistics.

Other than the countries listed in Tables 15 and 17.

Partly estimated.

Including Guinea.

For the analysis of financial policy, countries are classified as “industrial” or “less industrialized”—a classification similar to, but not identical with, that of countries as exporting mainly manufactures or exporting mainly primary products. In relation to financial policy, “industrial countries” is interpreted as including certain countries, e.g., Australia, Canada, New Zealand, and the Union of South Africa, which export mainly primary products, but which have highly developed financial systems and a substantial degree of industrialization.

See page 38, footnote 1.

Balance of payments developments in countries other than the United States and the United Kingdom are summarized in Tables 14, 15, 17, and 19, and are examined in this section in terms of the categories used in those tables, where changes in IMF and EPU positions are included in reserve movements. The trade of (1) Latin American countries, (2) overseas sterling area countries, and (3) other primary producing countries in 1958 and 1959 is summarized in Tables 16, 18, and 20.

    Other Resources Citing This Publication