Chapter 1 The Activities of the Fund
- International Monetary Fund
- Published Date:
- September 1962
This chapter discusses the work of the Fund during the fiscal year 1961–62. The policies underlying these activities, and some examples of the Fund’s experience over longer periods, are reviewed in Chapters 2 and 3.
Membership and Quotas
Five new members joined the Fund during the year, bringing the total membership to 76. Laos became a member on July 5, 1961, with a quota of US$7.5 million; New Zealand on August 31, with a quota of US$125 million; Nepal on September 6, with a quota of US$7.5 million; Cyprus on December 21, with a quota of US$11.25 million; and Liberia on March 28, 1962, with a quota of US$11.25 million. On October 27, 1961, the Executive Directors concluded that the Syrian Arab Republic and the United Arab Republic were separate members of the Fund, with quotas of US$15 million and US$90 million, respectively.
The Board of Governors approved terms and conditions for the admission to membership of Senegal, Sierra Leone, Somalia, and Togo. Applications have also been received from the Federal Republic of Cameroon, the Central African Republic, the Republics of Chad, Congo (Brazzaville), Congo (Leopoldville), Dahomey, Gabon, Guinea, the Ivory Coast, Mali, the Niger, and the Upper Volta, and from Jamaica, Kuwait, and Tanganyika.
The period in which members may consent to increases in their quotas under the Board of Governors’ Resolutions of February 2 and April 6, 1959, on the Enlargement of Fund Resources Through Increases in Quotas,1 has been extended to June 30, 1962. Only three members have not yet availed themselves of increases under these Resolutions. As the result of payments during the year by nine members of annual installments of increases (under these Resolutions) in their quotas, and of the admission of new members, the aggregate of Fund quotas on April 30, 1962 rose to US$15,056.9 million, from $14,850.7 million on April 30, 1961.
The members of the Fund, their quotas, voting powers, Governors, and Alternate Governors on April 30, 1962 are listed in Appendix I, and changes in membership of the Board of Governors in Appendix II. The Executive Directors and Alternate Directors and their voting powers are shown in Appendix III, and changes in membership of the Executive Board in Appendix IV.
Purchases and Repurchases, 1961–62
The period May 1, 1961 to April 30, 1962 was a record year for the Fund in every phase of operational activity. Not only did total sales of currency, and the amount of stand-by arrangements agreed, exceed by far the comparable figures for any financial year in the Fund’s history, but repurchases by members were also substantially above any previous year’s figures. The financial assistance rendered by the Fund in the preceding financial year had been entirely to nonindustrial countries. In 1961–62 two industrial countries, the United Kingdom and Japan, received assistance from the Fund. The drawing by the United Kingdom was the largest ever made in the Fund, and the stand-by arrangements with these two countries were the largest entered into during the year (Tables 1 and 2). Of the 30 members which received financial assistance from the Fund, either through direct purchase transactions or in the form of stand-by arrangements, 16 were in Latin America, 4 in Europe, 3 in the Middle East, 6 in the Far East (including Australia), and 1 in Africa. Repurchases were made by 24 members (Table 3). The greatest number of repurchasing members was also in Latin America, namely 9; 4 were in Europe, 3 in the Middle East, 4 in the Far East (including Australia), and 4 in Africa. As in previous years, improvements in the monetary reserve positions of several members enabled them to make large repurchases, in accordance with Fund policy, before the expiration of the maximum period (three to five years), thus strengthening their secondary line of reserves as represented by potential recourse to the Fund’s resources.
U.S. dollar equivalent of currency purchased
|United Arab Republic||8.75||5.00||11.20||14.95||39.90|
|Date of||Date of||in||Available|
|Member||Inception||Expiration||Amount||1961–62||April 30, 1962|
|Argentina||Dec. 12, 1960||Dec. 11, 1961||100.00||—|
|Dec. 12, 1961||Dec. 11, 1962||100.00||100.00||100.00|
|Australia||May 1, 1961||Apr. 30, 19621||100.00||100.00||—|
|Bolivia||Jul. 27, 1961||Jul. 26, 1962||7.50||7.50||5.50|
|Brazil||May 18, 1961||May 17, 1962||160.00||160.00||100.00|
|Chile||Feb. 16, 1961||Feb. 15, 1962||75.00||—|
|Colombia||Nov. 1, 1960||Oct. 31, 1961||75.00||—|
|Jan. 1, 1962||Dec. 31, 1962||10.00||10.00||5.00|
|Costa Rica||Oct. 4, 1961||Oct. 3, 1962||15.00||15.00||5.00|
|Ecuador||Jun. 8, 1961||Jun. 7, 1962||10.00||10.00||—|
|El Salvador||Jul. 13, 1961||Jul. 12, 1962||11.25||11.25||11.25|
|Guatemala||Jun. 6, 1960||Jun. 5, 1961||15.00||—|
|Aug. 14, 1961||Aug. 13, 1962||15.00||15.00||12.00|
|Haiti||Oct. 1, 1960||Sep. 30, 1961||6.00||—|
|Oct. 1, 1961||Sep. 30, 1962||6.00||6.00||4.50|
|Honduras||May 1, 1961||Apr. 30, 1962||7.50||7.50||—|
|Iceland||Feb. 16, 1961||Dec. 31, 1961||1.63||—|
|Mar. 22, 1962||Mar. 21, 1963||1.63||1.63||1.63|
|Indonesia||Aug. 16, 1961||Aug. 15, 1962||41.25||41.25||—|
|Iran||Oct. 10, 1960||Mar. 20, 1962||35.00||35.00||—|
|Japan||Jan. 19, 1962||Jan. 18, 1963||305.00||305.00||305.00|
|Mexico||Jul. 13, 1961||Jul. 12, 1962||90.00||90.00||45.00|
|Nicaragua||Nov. 3, 1960||Nov. 2, 1961||7.50||—|
|Paraguay||Oct. 10, 1960||Oct. 9, 1961||3.50||—|
|Dec. 11, 1961||Dec. 10, 1962||5.00||5.00||5.00|
|Peru||Mar. 1, 1961||Feb. 28, 1962||30.00||—|
|Mar. 1, 1962||Feb. 28, 1963||30.00||30.00||30.00|
|Philippines||Apr. 12, 1962||Apr. 11, 1963||40.40||40.40||40.40|
|South Africa||Jul. 6, 1961||Jul. 5, 1962||75.00||75.00||75.00|
|Syrian Arab Republic||Mar. 26, 1962||Sep. 30, 1962||6.60||6.60||6.60|
|Turkey||Jan. 1, 1961||Dec. 31, 1961||37.50||—|
|Mar. 30, 1962||Dec. 31, 1962||31.00||31.00||31.00|
|United Kingdom||Aug. 8, 1961||Aug. 7, 1962||500.00||500.00||1,130.002|
|Uruguay||Jun. 6, 1961||Jun. 5, 1962||30.00||30.00||30.00|
|Yugoslavia||Jan. 1, 1961||Dec. 31, 1961||30.00||_____|
U.S. dollar eauivalent of currency repurchased
|Syrian Arab Republic||1.00||1.88||2.88|
|United Arab Republic||7.72||4.99||12.71|
New stand-by arrangements or extensions of existing arrangements were agreed with 24 members, for a total amount equivalent to $1,633 million (Table 2). One of these was a 12-month standby arrangement for $100 million with Australia, but in view of its improved economic position Australia found it possible to cancel this during the course of the year. The stand-by arrangement with the United Kingdom for the equivalent of $500 million was augmented by repurchases by the United Kingdom during the year, to an amount of $1,130 million on April 30 and to $1,200 million from May 1. The total amount available to members under stand-by arrangements at the end of the financial year was $1,942.9 million ($2,012.9 million effective May 1). All these arrangements were for a period of one year, with the exception of that with the Syrian Arab Republic, which was for 6 months, and that with Turkey, which was concluded on March 30, 1962, for the remainder of the calendar year.
The use of the Fund’s resources during the year required in each case a waiver of the provision of Article V, Section 3, of the Fund Agreement, which limits purchases by a member to amounts based on 25 per cent of quota in any 12-month period.
The use of an increasing number of members’ currencies in purchases from the Fund, which was reported in last year’s Annual Report, continued during the financial year just concluded, and for the first time there was also a wide use of member currencies in repurchases. From the beginning of exchange transactions in 1947 through April 30, 1958, purchases of U.S. dollars represented 91.7 per cent of all drawings. During the financial year 1960–61, only 36.4 per cent of total purchases were in U.S. dollars. In 1961–62, when there were exchange transactions in ten different currencies, the amount drawn in U.S. dollars fell to 34.7 per cent. (If the U.S. dollars obtained by the sale of gold are disregarded, this percentage becomes 28. If repurchases are also taken into account, there was no net use of U.S. dollars in 1961–62). Japanese yen and Swedish kronor were used for the first time in Fund exchange transactions. In the course of the financial year, the Fund’s holdings of Italian lire and deutsche mark, expressed as a percentage of members’ quotas, became the lowest of any Fund holdings, falling to 10 per cent and 8 per cent, respectively; by April 30, 1962, repurchases made in these currencies had raised these ratios to 17 per cent and 33 per cent. In connection with the large exchange transaction with the United Kingdom, the Fund replenished its holdings of the various currencies concerned by the sale of an amount of gold equivalent to US$500 million; had it not been for this replenishment, the Fund would not have been able to make available some part of the currencies which in the event were used in transactions during the year, because its holdings of these currencies would have been exhausted.
Before May 1, 1961, repurchases were made in gold or U.S. dollars and to a small extent in Canadian dollars and sterling; in the period under review a number of other currencies were used for the first time, as shown in Table 3. This was made possible through the acceptance, by the countries whose currencies were so used, of the obligations of Article VIII, which makes these currencies eligible for use in repurchases provided that the Fund’s holding of each currency is below 75 per cent of the country’s quota.
Thus in the year under review the Fund has served much more fully than in any other year of its history as the multilateral revolving fund envisaged at Bretton Woods.
Summary of Transactions
From the beginning of Fund operations until April 30, 1962, exchange transactions were consummated with 44 members, many of which used Fund resources on several occasions. Three members received Fund financial assistance in the form of stand-by arrangements without drawing on them. Of this total of 47 members, 19 are in Latin America, 12 in Europe, 5 in the Middle East, 7 in the Far East, and 4 in Africa. Total Fund sales were equivalent to US$6,265.5 million. All Fund transactions are summarized in Table 4 and details are shown in Appendix V. A picture of the total financial assistance accorded by the Fund to members is given by combining the amount of new stand-by arrangements granted in each period with the amount of exchange transactions not effected under stand-by arrangements (thus eliminating the duplication which results from listing drawings under stand-by arrangements in both categories). The total assistance given by the Fund, so measured, has amounted to $9.1 billion, as shown in Chart 1 and Table 5. To the end of April 1962, repayments to the Fund had been made by 38 members, either by repurchases in gold or convertible currencies or by purchases of the drawing members’ currencies by other members. On April 30, 1962, the total amount of purchases still outstanding was equivalent to US$2,015.2 million. On that date, the amounts drawn had been outstanding for the following periods:
|Total Purchases||Arrangements in Force||Total Repurchases|
|by Members||at End of Fiscal Year||by Members|
|in millions of||members|
|12 months or less||1,456.0||21|
|13 to 18 months||180.5||8|
|19 to 24 months||129.4||9|
|25 to 30 months||73.7||6|
|31 to 36 months||19.9||4|
|37 to 48 months||119.6||7|
|Over 48 months||36.1||6|
All purchases made prior to June 1957 have been fully reversed.
Chart 1.Fund Financial Assistance, Fiscal Years Ended April 30, 1948–621
|Costa Rica||1.3||15.0||16.3||Costa Rica|
|Dominican Republic||11.3||11.3||Dominican Republic|
|El Salvador||2.5||7.5||7.5||11.3||11.3||40.0||El Salvador|
|South Africa||10.0||50.0||37.5||75.0||172.5||South Africa|
|Syrian Arab Republic||15.0||6.6||21.6||Syrian Arab Republic|
|United Arab Republic||3.0||30.0||7.5||27.3||39.9||107.7||United Arab Republic|
|United Kingdom||300.0||1,300.0||2,000.0||3,600.0||United Kingdom|
During the past year Czechoslovakia, a former Fund member, completed repayment of a drawing, in fulfillment of a settlement arrangement made at the time of Czechoslovakia’s withdrawal from the Fund. In addition to repurchases in repayment of drawings, repurchases were also made by 22 of the 37 members that had originally paid less than 25 per cent of their quotas in gold.
Currently, 27 members are paying the charges levied by the Fund on holdings of a member’s currency in excess of quota; the amount of such charges incurred during the year under review totaled $21.4 million, compared with $11.0 million during the preceding year. Since the beginning of the Fund’s operations, 39 members have been subject to such charges. At present, part of these charges is paid by 4 members in their own currencies in accordance with the provision in the Fund Agreement that permits such payments if a member’s monetary reserves are less than half of its quota. Service charges on drawings amounted to a total of $11.2 million during the year under review, compared with $2.9 million for the previous financial year. Charges collected on stand-by arrangements, after deduction of the amounts credited against service charges if and when drawings were made under the arrangements, totaled $3.7 million during the financial year ended April 30, 1962; of this amount, $0.5 million represents income for that period.
The present schedule of charges, which has been in effect since January 1, 1954, was reviewed by the Executive Board and extended until April 30, 1963. It is set out in Appendix VI.
Computation of Monetary Reserves
By the end of the financial year, all Fund members with the exception of three had submitted monetary reserves data for April 30, 1961. Of these three members, two could not have incurred a repurchase obligation. The Fund’s holdings of the currency of the third member, Cuba, are above 75 per cent of quota, and an agreement has been reached for certain repurchases, but in the absence of monetary reserves data it is not possible to ascertain whether a repurchase obligation under Article V, Section 7(b), has been incurred.
Consultations with Members
Members of the Fund that maintain exchange restrictions under Article XIV of the Fund Agreement are required to consult with the Fund annually concerning the retention of these restrictions. In accordance with this requirement, consultations were held during the financial year 1961–62 with 36 such member countries; for all but one of them, Fund missions were sent to the countries concerned. As in previous years, these annual consultations continued to provide opportunities for useful collaboration between the Fund and its members. Several of the consultations under Article XIV were combined with discussions of new financial programs or included reviews of such efforts already being made. Some of the discussions also covered the initiation or renewal of stand-by arrangements with the Fund, the simplification of exchange systems, the reduction of restrictions, and other matters of mutual concern to the member and the Fund.
Since May 1961, discussions have also been held with 11 members of the Fund which have accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement: these are, Belgium, Canada, France, the Federal Republic of Germany, Ireland, Italy, Luxembourg, the Netherlands, Peru, the United Kingdom, and the United States. Consultations with Article VIII countries are mandatory only if the countries concerned maintain or introduce exchange measures which require the approval of the Fund under that Article. However, the Executive Board decision of June 1, 19601 stressed the merit of holding periodic discussions between the Fund and its members even if no questions involving action under Article VIII arise. The discussions held in 1961–62 involved visits by staff missions to the capitals of the countries concerned. These discussions provided the opportunity not only for close contacts with the members but also for exchanges of views on monetary and financial developments; they have thus furthered the Fund’s purposes by providing machinery for consultation and collaboration on international, financial, and monetary policies. In accordance with the Executive Board decision referred to above, it is intended, with the cooperation of the countries concerned, to continue holding such discussions at intervals of about one year.
Technical Assistance and Training Programs
The Fund’s activity in helping countries to analyze their financial position, and to resolve problems of policy or of a technical nature, is by no means confined to the annual consultations referred to above, but is a continuous function, carried out by frequent contacts with member countries both at Fund headquarters and in the countries concerned.
At the request of member countries the Fund has continued to provide technical advice and assistance directed toward specific problems and tasks in the monetary and financial field. Fund staff teams have assisted several member countries to formulate appropriate monetary, fiscal, and exchange policies, and stabilization programs. The services of the Fund staff have also been made available to certain member countries to help them in the establishment and reform of central banking arrangements, and of monetary and balance of payments statistics. Assignments have varied from a few weeks to more than a year. A number of nonmember countries, particularly in Africa, have been assisted in the preparatory work leading to membership in the Fund and in matters relating to the organization of new monetary and central banking arrangements.
At headquarters the Management has been host to many visiting delegations, especially from African countries, whose representatives wished to learn more details of the requirements of, and the technical assistance offered by, the Fund. Other senior officials of member countries have also visited the Fund in large numbers, for periods ranging from a few days to several weeks. In addition, groups of graduate students or participants in the technical training programs of other international agencies, exchange programs, etc., have been frequently received at Fund headquarters for seminars on the over-all work of the Fund or on specific technical subjects.
Since 1951, the Fund has operated in Washington training programs for qualified nationals of member countries. These programs, the duration of which has varied from 6 to 12 months, have gradually expanded until they now cover a variety of financial studies—in particular, the operations and policies of the Fund and other international financial organizations; national policies available for meeting the twin objectives of economic development and avoidance of financial instability; and techniques of statistical compilation and analysis. The programs are one of several channels through which the Fund tries to assist central banks and member governments in their financial management by placing at their disposal the experience acquired by the Fund staff. The arrangements by which the nationals of member countries are able to attend the training programs, and for this purpose spend several months of residence in Washington, provide intensive opportunities for participants to gain insight into numerous aspects of financial policy and statistical techniques. In 1961–62, the number of participants in the program was 24; during the past 11 years, a total of 238 persons from central bank and government staffs of member countries have taken part.
With a view to increasing the amount of such training services that can be offered to members, the Fund is shortening its training program in 1962–63 to 5 months, without materially reducing the areas of work covered. This shortening will economize on the time that participants need to be absent from their home responsibilities; also, it will make possible the offering of two programs within each 12 months, thus doubling the number of appointments that can be made.
The Fund’s regular program of publications was maintained in 1961–62. The list includes the Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1961 (Sixteenth Annual Report); the Twelfth Annual Report on Exchange Restrictions; the Summary Proceedings of the Sixteenth Annual Meeting of the Board of Governors; the Balance of Payments Yearbook, Vol. 13, 1956–60; Staff Papers, Vol. VIII, Nos. 2 and 3, and Vol. IX, No. 1; the monthly International Financial Statistics, with a Supplement to 1962/63 Issues containing annual material for 1937 and 1948–52 and quarterly data for 1957, 1958, and 1959; and the weekly International Financial News Survey. There were two issues during the year of the Schedule of Par Values. The monthly Direction of International Trade is published jointly with the International Bank for Reconstruction and Development and the Statistical Office of the United Nations.
In addition to its regular publications, the Fund published Central Banking Legislation: A Collection of Central Bank Monetary and Banking Laws; this volume comprises statutes and related materials selected and annotated by Mr. Hans Aufricht, of the Fund’s Legal Department. The collection makes available, in English, the consolidated texts of central banking and monetary laws of 21 countries, together with summaries of, and selected provisions from, their general banking laws. The laws of these countries constitute a representative cross-section of both the traditional and the most recent legal techniques employed for the purpose of regulating money and credit. The countries covered are Australia, Burma, Canada, Ceylon, Costa Rica, Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, India, Indonesia, Japan, Korea, Mexico, Nicaragua, Pakistan, the Philippines, Rhodesia and Nyasaland, South Africa, and the United Kingdom.
Cooperation With Other International Organizations
The Fund continues to maintain close relations, both on the technical level and on matters of broader scope, with other international organizations in related fields of interest, especially with the United Nations and its regional commissions and technical bodies, the Contracting Parties to the General Agreement on Tariffs and Trade (GATT), the Organization for Economic Cooperation and Development, the International Bank for Reconstruction and Development, the Bank for International Settlements (BIS), and the Inter-American Development Bank.
The Managing Director addressed the 33rd Session of the UN Economic and Social Council (ECOSOC) on the occasion of the presentation of the Fund’s Annual Report for 1961, and attended the Annual Meeting of the BIS. Fund representatives attended also the 32nd Session of the ECOSOC, the 16th Session of the UN General Assembly, the 32nd and 33rd Sessions of the Administrative Committee on Coordination, and the 7th Session of the Governing Council of the Special Fund. As in previous years, Fund staff members participated in meetings of the Economic Commissions for Africa, Asia and the Far East, Europe, and Latin America, the Food and Agriculture Organization, the European and African Statisticians Conferences, and the UN Statistical Commission. Collaboration on the subject of compensatory financing of commodity fluctuations (on which the Fund submitted a study to the UN Commission on International Commodity Trade in 1960) continued in discussions held under the auspices of the United Nations, the Food and Agriculture Organization, and the Organization of American States. The Fund was represented at the Special Meeting of the Inter-American Economic and Social Council at the Ministerial Level held at Punta del Este, Uruguay, and at the inauguration of the Central American Bank for Economic Integration at Tegucigalpa, Honduras. Most of these organizations were represented at the Annual Meeting of the Fund’s Board of Governors in Vienna in September 1961.
The arrangements for cooperation between the Fund and the Organization for European Economic Cooperation were continued with its successor, the Organization for Economic Cooperation and Development. Provision for attendance by Fund staff at meetings of various organs of the Organization has been extended to include the Economic Policy Committee.
Fund missions attended sessions and other meetings of the Contracting Parties to the GATT in Geneva during the period under review, and the Contracting Parties were represented at the Annual Meeting of the Board of Governors of the Fund. The Contracting Parties consulted with the Fund in connection with their consultations with members on import restrictions maintained for balance of payments reasons and on other matters where balance of payments questions or exchange rates were involved. The Fund transmits to the Contracting Parties the results of its Article XIV consultations with governments consulting under the balance of payments provisions of the GATT, together with background material relating to such countries, and Fund missions cooperate with the GATT committee conducting the consultations. These arrangements have been extended to include the Fund’s consultations under Article VIII with countries that are members of both organizations.
At the end of the fiscal year, the Fund staff numbered 491, including 19 temporary employees and 1 on extended leave. During the year there was a net increase of 17. Pursuing its policy of appointing staff members on as wide a geographical basis as possible, the Fund recruited 76 new staff members from 25 member countries. The total number of nationalities included on the staff was 54. For the purpose of rendering technical assistance as described above, staff members on long-term assignments were made available during the past year to 12 countries.
During the financial year, the Fund’s operating income of $33,106,768 exceeded its total expenditure by $24,950,966. This amount was transferred provisionally to a General Reserve pending action by the Board of Governors. The General Reserve now totals $71,812,436.
The Fund continued its program of investing a part of its gold holdings in U.S. Government securities, with the understanding that the same quantity of gold can be reacquired whenever the investment is terminated. The amount currently invested is $800 million. The income from the Fund’s investments, amounting to $22,779,476 for the financial year, was credited to a Special Reserve, which on April 30, 1962 showed a balance of $64,944,366.
The administrative budget approved by the Executive Directors for the period May 1, 1962-April 30, 1963 is presented in Appendix VII. Comparative income and expenditure figures for the fiscal years 1960, 1961, and 1962 are given in Appendix VIII.
The Executive Board requested the Governments of Argentina, Finland, and the United States to nominate members of the Audit Committee for 1962. The following nominations were made and confirmed: Mr. Luis Larrosa, Chief Accountant, Banco Central de la Republica Argentina; Mr. Svante Kihlman, Chairman of the Board of Directors of the Association of Certified Public Accountants of Finland and member of the Board of Auditors, Central Chamber of Commerce; and Mr. Samuel J. Elson, Deputy Commissioner, Central Reports, Bureau of Accounts, U.S. Treasury Department. The report of the Committee is submitted separately. Appendix IX gives the Auditors’ Certificate, together with the audited Balance Sheet for April 30, 1962, the audited Statement of Income and Expenditure with supporting schedules, and audited financial statements of the Staff Retirement Fund.
AnnualReport, 1959, pages 185–89.
Annual Report, 1960, pages 29–31.