Chapter

Chapter 2 The Activities of the Fund

Author(s):
International Monetary Fund
Published Date:
September 1964
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Membership, Quotas, and Executive Directors

EIGHTEEN countries become members of the Fund during the year under review, with quotas aggregating $308 million. The list of new members, with their quotas and dates of membership, is given in Table 1.

Table 1.New Fund Members, Fiscal Year Ended April 30, 1964
MemberDate of

Membership
Quota

(In millions of

U.S. dollars)
AlgeriaSept. 26, 196360.00
BurundiSept. 28, 196311.25
CameroonJuly 10, 196315.00
Central African RepublicJuly 10, 19637.50
ChadJuly 10, 19637.50
Congo (Brazzaville)July 10, 19637.50
Congo (Leopoldville)Sept. 28, 196345.00
DahomeyJuly 10, 19637.50
GabonSept. 10, 19637.50
GuineaSept. 28, 196315.00
KenyaFeb. 3, 196425.00
Malagasy RepublicSept. 25, 196315.00
MaliSept. 27, 196313.00
MauritaniaSept. 10, 19637.50
RwandaSept. 30, 196311.25
Trinidad and TobagoSept. 16, 196320.00
UgandaSept. 27, 196325.00
Upper VoltaMay 2, 19637.50

On April 2, 1964 Cuba notified the Fund of its withdrawal from membership, which became effective on that date. Member countries at the end of the fiscal year numbered 102, representing an increase of 20 per cent in the year.

The quotas of seven members were increased during the year, as shown in Table 2. The Board of Governors also approved requests for increases in quotas submitted by Italy, from $270 million to $500 million, and from Costa Rica, from $15 million to $20 million; these will go into effect upon receipt of formal consents to the increases from the respective members. With the exception of the requests from Israel and Italy, the increases considered during the year came under the terms of the Decision on Compensatory Financing of Export Fluctuations,1 which provided that sympathetic consideration would be given to requests for quota adjustments from countries exporting primary products, especially those with relatively small quotas, in order to make these more adequate in the light of fluctuations in export receipts and other relevant criteria.

Table 2.Increases in Quotas, Fiscal Year Ended April 30, 1964(In millions of U.S. dollars)
MemberEffective

Date
Previous

Quota
New

Quota
Dominican RepublicApr. 2, 196415.0025.00
EcuadorApr. 23, 196415.0020.00
El SalvadorNov. 18, 196311.2520.00
HondurasOct. 10, 196311.2515.00
IsraelMar. 26, 196425.0050.00
Syrian Arab RepublicFeb. 27, 196415.0025.00
United Arab RepublicApr. 23, 196490.00120.00

Further consideration was given during the year to the question of the gold subscription to be required from a member whose quota is increased in connection with the Decision on Compensatory Financing of Export Fluctuations. The Executive Directors decided that they would, if the member so requested for reasons submitted to the Fund, recommend to the Board of Governors that such increases in quota might become effective in five annual installments, with the right to accelerate payment of the additional gold and currency subscriptions and a consequent acceleration of the increase in quota. Provision was also made to give sympathetic consideration to a request for an exchange transaction up to 25 per cent of the increase to assist a member who wished to pay the gold subscription in such circumstances in full. The Decision is reproduced in Appendix I.

Senegal decided to make use of the option granted to it under its terms of membership to increase its quota from $7.5 million to $25 million; the increase became effective on June 17, 1963. In addition, 8 members paid annual installments (5 of which were final installments) on increases in their quotas under the Board of Governors’ Resolutions of February 2, 1959 on Enlargement of Fund Resources Through Increases in Quotas.2 As a result of the foregoing increases, the admission of new members, and the withdrawal of a member, the aggregate of Fund quotas rose to $15,614.75 million on April 30, 1964, from $15,231.2 million at the close of the preceding fiscal year.

With effect from April 1, 1964, Japan joined those countries that have accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement. Members accepting the obligations of Article VIII, who now number 24 (representing over 60 per cent of world trade),3 undertake to obtain the Fund’s agreement before adopting restrictions on payments for current international transactions or engaging in multiple currency practices or discriminatory currency arrangements.

A nineteenth Executive Director was elected on October 3, 1963 by 24 of those countries which had become members of the Fund since the 1958 Regular Election of Executive Directors, when the number of Directors was increased to 18. This interim election was held in accordance with a resolution of the Governors adopted at the time of the 1962 biennial election of Executive Directors, which called for such an election when countries having a stipulated number of votes became members of the Fund. In view of the fact that the number of Fund members has increased by nearly 50 per cent since the 1958 Regular Election of Executive Directors, the Board of Governors has approved provisions for 20 Executive Directors at the next Regular Election of Directors, to be held during the 1964 Annual Meeting. A list of the Executive Directors and Alternate Executive Directors and their voting power on April 30, 1964 is given in Appendix II, and changes in membership of the Executive Board during 1963-64 in Appendix III.

Par Values

Ethiopia consulted the Fund in December 1963 about a change in the par value of its currency to Eth$2.50000 per U.S. dollar, from the initial par value of Eth$2.48447 per U.S. dollar, established with the Fund on December 18, 1946. Since the proposed change did not exceed 10 per cent of the initial par value, the Fund, in accordance with Article IV, Section 5(c), of the Articles of Agreement, noted without objection the new par value, which became effective on December 31, 1963.

Initial par values were established in 1963 by agreement between the Fund and 6 members (Table 3).

Table 3.Initial Par Values Established, 1963
MemberEffective DateUnits of

Member’s

Currency per

U.S. Dollar
JamaicaMarch 80.357143
KuwaitApril 260.357143
LiberiaMarch 131.00000
NigeriaApril 170.357143
SomaliaJune 147.14286
ThailandOctober 2020.8000

General Arrangements to Borrow

On June 11, 1964, Switzerland entered into an agreement with the Fund which associated that country with the Fund’s General Arrangements to Borrow. Under this agreement, which took the form of an exchange of letters between the Swiss Ambassador to the United States and the Managing Director of the Fund, Switzerland undertook to give support, which could be on a reciprocal basis, directly to any participant in the General Borrowing Arrangements for whose benefit the Arrangements are activated, provided that the participant had entered into a bilateral implementing agreement for that purpose with Switzerland. The total of such support to all participants, outstanding at any one time, may not exceed the equivalent of $200 million. The relevant decision of the Executive Directors, and the text of the letters exchanged, are reproduced in Appendix I.

Fund Transactions

Purchases and Stand-By Arrangements, 1963-64

The past year was again an active one for the Fund. Sales of currency exceeded those in the preceding year, and the amount of stand-by arrangements agreed reached a record level Purchases from the Fund amounted to the equivalent of $625.9 million (Table 4), and the stand-by arrangements agreed during the year amounted to the equivalent of $2,159.85 million (Table 5). Of the 27 members which received financial assistance from the Fund, either through direct purchase transactions or in the form of stand-by arrangements, 4 were industrial countries (Italy, Japan, the United Kingdom, and the United States) and 23 were nonindustrial countries. Italy and the United States accounted for more than 55 per cent of the amount of total purchases, and Japan, the United States, and the United Kingdom for more than 83 per cent of the total available under stand-by arrangements. Fifteen of the members receiving financial assistance were in the Western Hemisphere, 4 in Asia, 4 in Europe, 2 in Africa, and 2 in the Middle East.

Table 4.Purchases of Currencies from the Fund, Fiscal Year Ended April 30, 1964(In millions of U.S. dollars)
Members

Purchasing
Total

Purchases
Argentina25.0
Bolivia2.5
Brazil60.0
Chile32.5
Colombia23.5
Costa Rica4.0
Haiti4.5
Honduras5.0
Indonesia20.0
Italy225.0
Liberia4.1
Nicaragua13.3
Sudan5.5
Syrian Arab Republic12.0
Turkey18.0
United Arab Republic16.0
United States125.0
Yugoslavia30.0
Total purchases625.9 1

All purchases except those by Brazil, Italy, Sudan, United Arab Republic, and Yugoslavia were made under stand-by arrangements:

Million U.S. dollars
Total under stand-by arrangements289.4
Not under stand-by arrangements336.5
625.9

All purchases except those by Brazil, Italy, Sudan, United Arab Republic, and Yugoslavia were made under stand-by arrangements:

Million U.S. dollars
Total under stand-by arrangements289.4
Not under stand-by arrangements336.5
625.9

Table 5.Fund Stand-By Arrangements with Members, Fiscal Year Ended April 30, 1964(In millions of U.S. dollars)
MemberDate of

Inception
Date of

Expiration
AmountNew or

Renewed

in 1963-64
Amount

Available

April 30, 1964
ArgentinaJune 7, 1962Oct. 6, 1963 1100.00
BoliviaAug. 8, 1962Aug. 7, 196310.00
Sept. 4, 1963Sept. 3, 196410.0010.007.50
ChileJan. 15, 1963Jan. 14, 196440.00
Feb. 14, 1964Feb. 13, 196525.0025.0015.00
ColombiaJan. 14, 1963Jan. 13, 196452.50
Feb. 14, 1964Feb. 13, 196510.0010.007.50
Costa RicaDec. 24, 1962Dec. 23, 196311.60
EcuadorJune 8, 1962June 7,19635.00
July 1, 1963June 30, 19646.006.006.00
El SalvadorSept. 13, 1962Sept. 12, 196311.25
Sept. 13, 1963Sept. 12, 19645.005.005.00
HaitiOct. 1, 1962Sept. 30, 19636.00
Oct. 1, 1963Sept. 30, 19644.004.004.00
HondurasJune 29, 1962June 28, 19637.50
July 18, 1963July 17, 19647.507.502.50
IndiaJuly 9, 1962July 8, 1963100.00
July 9, 1963July 8, 1964100.00100.00100.00
IndonesiaAug. 1, 1963July 31, 196450.0050.0030.00
JamaicaJune 13, 1963June 12, 196410.0010.0010.00
JapanMar. 11, 1964Mar. 10, 1965305.00305.00305.00
LiberiaJune 1,1963May 31, 19645.705.701.60
NicaraguaMar. 1, 1963Feb. 29, 196411.25
Apr. 1, 1964Mar. 31, 196511.2511.255.65
PeruMar. 1, 1963Feb. 29, 196430.00
Mar. 1, 1964Feb. 28, 196530.0030.0030.00
PhilippinesApr. 12, 1963Apr. 11, 196440.40
Apr. 12, 1964Apr. 11, 196540.4040.4040.40
Syrian Arab RepublicMar. 12, 1964Dec. 31, 196418.5018.506.50
TurkeyFeb. 15. 1963Dec. 31, 196321.50
Feb. 15, 1964Dec. 31, 196421.5021.5018.50
United Arab RepublicMay 7, 1962May 6, 196342.50
United KingdomAug. 8, 1962Aug. 7, 19631,000.00
Aug. 8, 1963Aug. 7, 19641,000.001,000.001,000.00
United StatesJuly 22, 1963July 21, 1964500.00500.00375.00
UruguayOct. 4, 1962Oct. 3, 196330.00
Total2,159.851,970.15

Extended from June 6, 1963.

Extended from June 6, 1963.

For members in need of financial assistance from the Fund, the stand-by arrangement has continued to be a valuable instrument. All except five of the purchases from the Fund during the past fiscal year were made under stand-by arrangements. Two of these—the purchase of the equivalent of $60 million by Brazil and the purchase of the equivalent of $16 million by the United Arab Republic—were made under the Fund’s Decision on Compensatory Financing. On the other hand, as in previous years, some members have found it sufficient to have the Fund’s assurances of financial assistance without actually making use of their stand-by arrangements.

The purchase and stand-by arrangement of the United States constituted the first use by this member of the resources of the Fund. During the first decade of the Fund’s operations, purchases from the Fund had been made overwhelmingly in U.S. dollars, so that the United States was the only member that had extended a large amount of credit to other members through the Fund. Following the adoption in December 1958 of external convertibility by 14 European countries, and the accompanying increase in strength of these members’ currencies relative to the U.S. dollar, a broader use of currencies has been made in Fund operations. In the past few years the Fund has encouraged members using the Fund’s resources to purchase currencies other than the U.S. dollar. At the same time, repurchases by members have been made primarily with U.S. dollars, thereby gradually reducing the creditor position of the United States in the Fund.

In July 1963 the Fund entered into a stand-by arrangement which permitted the United States to purchase currencies from the Fund to a total equivalent to $500 million. Early in February 1964, the Fund’s holdings of U.S. dollars, together with the outstanding repurchase obligations incurred in U.S. dollars by members under Article V, Section 7(b), of the Fund Agreement, reached 75 per cent of the U.S. quota. Under Article V, Section 7(c) (iii), this precluded the Fund from accepting further U.S. dollars in repurchase from members.4 On February 13, 1964 the United States purchased the equivalent of $125 million, mainly in deutsche mark and French francs, under its stand-by arrangement. These currencies, which can be accepted by the Fund in repurchase, were intended for sale for U.S. dollars at par by the United States to those members of the Fund that keep their international reserves mainly in U.S. dollars and that have repurchase commitments to the Fund. Down to April 30, 1964, 8 members had availed themselves of this facility. While this first drawing by the United States was essentially of a technical nature, it nevertheless demonstrated that the resources of the Fund could be called upon by both large and small countries, not only in time of emergency but also in a more or less routine way.

The purchase of the equivalent of $225 million in March 1964 by Italy was also the first use by that member of the Fund’s resources; it was at the same time the largest purchase made during the fiscal year. The drawing was within the gold tranche, corresponding to the amount of Italy’s gold subscription, augmented by the net amount of drawings of lire from the Fund by other members.

Two other members, Jamaica and Liberia, have also used the Fund’s resources for the first time. The stand-by arrangement entered into with Jamaica permits drawings equivalent to $10 million to provide an assured secondary line of reserves against unforeseen short-term balance of payments contingencies, and to assist Jamaica to pursue its development effort with a minimum of interruption should such balance of payments difficulties arise. Jamaica did not find it necessary to make a drawing under the stand-by arrangement during the fiscal year. Under Liberia’s stand-by arrangement, entered into in support of a program of financial reform, the equivalent of $4.1 million was drawn during the year.

In conjunction with Japan’s acceptance of the obligations of Article VIII, Sections 2, 3, and 4, the Fund agreed in March 1964 to a stand-by arrangement which permits Japan to purchase currencies from the Fund equivalent to $305 million. The arrangement was designed to provide additional resources in support of Japan’s reserve position and thus help to defend the convertibility of the yen in the event of temporary balance of payments difficulties. Japan did not find it necessary to draw under the arrangement during the remainder of the fiscal year.

The new stand-by arrangement with Indonesia authorized purchases equivalent to $50 million to give financial support to a program of economic stabilization, which provided for a revision of exchange rates and for steps to prevent undue monetary expansion and to strengthen the balance of payments. The equivalent of $20 million was drawn in August 1963. Later, difficulties were encountered in carrying out the program.

In an effort to transform its balance of payments from deficit to surplus and reverse the drain on its official reserves, the Sudan purchased the equivalent of $5.45 million to provide time for appropriate remedial measures (which include cuts in government expenditure and increases in taxation) to take effect.

The new arrangement with the Syrian Arab Republic for $18.5 million, under which the equivalent of $12 million has been drawn, is to provide support for the efforts being made to overcome a difficult balance of payments position, which has persisted for several years.

The purchase of the equivalent of $30 million in September 1963 by Yugoslavia was agreed by the Fund to assist the member’s efforts to maintain internal stability and to strengthen its external payments position, which had been subjected to new burdens resulting from the earthquake disaster at Skopje.

Stand-by arrangements agreed during the year with Bolivia, Honduras, Nicaragua, and Turkey were in continuation, after a short interruption, of the financial support the Fund had accorded in the preceding year. Those with Chile, Colombia, El Salvador, and Haiti replaced arrangements for larger amounts and the one with Ecuador replaced a smaller one.

The stand-by arrangement with the United Kingdom for $1,000 million expired in August 1963, without having been used, and was renewed for another year. The stand-by arrangements with India, Peru, and the Philippines were also renewed.

All but 2 of the 19 stand-by arrangements agreed during the year were for a period of one year. The exceptions were the arrangement with the Syrian Arab Republic, which was for a period of 9½ months, and that with Turkey, which was for a period of 10½ months. The total amount available to members under stand-by arrangements at the end of the financial year was equivalent to $1,970.15 million.

Any drawing or stand-by arrangement exceeding 25 per cent of a member’s quota within any 12-month period (except to the extent that the Fund holds less of the member’s currency than 75 per cent of its quota) requires a waiver under Article V, Section 4, of the Articles of Agreement. During the year, waivers for this purpose were required for all the stand-by arrangements except those with Colombia, India, Turkey, and the United States, and for all purchases except those by Brazil, Colombia, Italy, Turkey, the United States, and Yugoslavia. A waiver is also required for any drawing or stand-by arrangement which would increase the Fund’s holdings of a member’s currency to more than 200 per cent of its quota. In 1963-64 the first such waiver was granted, in favor of the United Arab Republic, whose drawing of the equivalent of $16 million under the special arrangements for compensatory financing of export fluctuations brought the Fund’s holdings of the member’s currency to 215 per cent of its quota.

A Decision of the Executive Directors on July 1, 1963 (reproduced in Appendix I) set out the conditions under which the Fund was prepared, in exceptional circumstances, to enter into a gold collateral transaction with a member because this would promote the purposes of the Fund and give the member the opportunity of adopting policies consistent with the objectives of the Fund.

In order to extend access to the Fund’s resources to new members, and to encourage the establishment of realistic exchange rates and ultimately realistic par values, the Executive Directors recommended, and the Governors approved on June 1, 1964, an amendment of the terms and conditions prescribed in the membership resolutions of those members that have not yet agreed initial par values with the Fund. This amendment authorizes the Executive Directors to permit exchange transactions with the member prior to the establishment of an initial par value with the Fund, under such conditions and in such amounts as may be prescribed by the Executive Directors. The Directors decided that this provision should be incorporated in future membership resolutions, and agreed on guidelines for implementing the provision. The relevant Executive Board Decisions are reproduced in Appendix I.

Monetary Reserves and Repurchase Obligations

Article V, Section 7(b), of the Fund’s Articles of Agreement provides that a member shall repurchase with its monetary reserves (gold and/or convertible currencies) an amount of the Fund’s holdings of its currency, in excess of 75 per cent of its quota, equivalent to one half of any increase in the Fund’s holdings of its currency that has occurred during the Fund’s financial year, plus or minus one half of any increase or decrease in its monetary reserves during the same period. The media in which any such repurchase obligation is to be discharged are determined in accordance with the provisions of Schedule B of the Fund’s Articles, subject to the limitations imposed by Article V, Section 7(c).

A drawing from the Fund has the effect of increasing the Fund’s holdings of the drawing member’s currency. If the member’s independent monetary reserves do not decrease to the same extent as the amount purchased from the Fund, before the following April 30, the member will incur a repurchase obligation as at that date, provided that the level of its monetary reserves is above its quota and the level of the Fund’s holdings of its currency is above 75 per cent of quota. Usually, however, repurchase obligations are the result of an increase in the member’s independent monetary reserves above its quota. In such circumstances, a repurchase obligation accrues for a member that initially paid in gold an amount less than 25 per cent of its quota, even if the member has not drawn from the Fund.

Under Rule 1-6 of the Fund’s Rules and Regulations, data about each member’s monetary reserves are to be furnished to the Fund within six months of the end of the Fund’s fiscal year, i.e., by October 31. However, in accordance with a decision taken by the Executive Board on May 3, 1963, each member, the amount of whose currency held by the Fund on any April 30 exceeds 75 per cent of its quota, is required to submit provisional (or, if possible, final) monetary reserves data to the Fund not later than the ensuing May 31.5 On April 30, 1963 this decision applied to 37 members. Repurchase obligations for 17 of these members were calculated, and amounted to a total equivalent to $97,052,126.85, payable in gold and nine convertible currencies. This calculation reflected the fact that repurchase obligations that accrued in Canadian dollars, Peruvian soles, sterling, and U.S. dollars were subject to the limitation set out in Article V, Section 7(c) (iii), and could be discharged only to the extent that the Fund’s holdings of these currencies were below 75 per cent of the quotas of the countries issuing them. Amounts of $219 million in U.S. dollars, the equivalent of $2 million in sterling, and small sums in Canadian dollars and Peruvian soles could not be accepted under this provision and were abated.

By the end of October 1963, 25 members had not supplied the requisite data for April 30, 1963; by April 30, 1964, however, only 7 members’ data were outstanding. It is expected that the difficulties in the compilation of data now being experienced will be resolved as members become better acquainted with the Fund’s requirements, and their systems for collection of information improve. Of the countries which failed to report monetary reserves data by April 30, 1964, only one (Cuba) could have incurred a repurchase obligation at April 30, 1963, under Article V, Section 7(b).

Table 6 sets out the total net repurchase obligations incurred by members since the inception of the Fund. It will be noted that the number of members involved has increased from 3 at April 30, 1948 to 17 at April 30, 1963. This increase reflects not only the larger number of members engaging in transactions with the Fund but also increases in members’ monetary reserves, which, in accordance with the provisions of Article V, Section 7(b), have to be shared with the Fund.

Table 6.Repurchase Obligations Under Article V, Section 7(b), of the Fund Agreement, at April 30, 1948-63(In thousands of U.S. dollars)
Number of

Members

Affected
Total

Amount
GoldU.S.

Dollars
Pounds

Sterling
Canadian

Dollars
Deutsche

Mark
French

Francs
Other

Currencies
194837,3369296,407
1949427,2999,43917,861
1950647,59421,15626,438
1951768,60819,12549,483
1952439,18238,340842
1953584,48435,55448,92010
19541080,52534,44046,084
19557195,79468,222127,55418
19561032,58111,11821,45013
19578104,01038,22865,77535
19587238,97590,998147,8481245
19598308,754142,994165,71148
19608201,550124,96876,19237911
1961868,31053,63314,36629813
19621081,64518,85761,34171,33031061
19631797,05227,24262,6157,011731066
1,683,699735,243938,8877,0119001,403109146

Includes the equivalent of $22,000 in Italian lire, $49,000 in Netherlands guilders, and $28,000 in Swedish kronor.

Includes the equivalent of $22,000 in Italian lire, $49,000 in Netherlands guilders, and $28,000 in Swedish kronor.

Since the inception of the Fund, 122 repurchase obligations totaling the equivalent of $1,683.7 million have been incurred by 49 member countries in accordance with the provisions of Article V, Section 7(b), of the Fund Agreement. Of these, 24 were incurred by members who had not used the Fund’s resources but who had originally paid gold subscriptions equivalent to less than 25 per cent of their quotas.

Repurchases, 1963-64

In addition to the repurchase obligations under Article V, Section 7(b), described above, a member drawing from the Fund undertakes to repurchase its own currency equivalent to the amount drawn (except to the extent that other countries draw that member’s currency) within a maximum period of three to five years. If a drawing is made under a stand-by arrangement, the maximum period is three years. In practice, the largest part of repurchases is made under commitments of this kind.

During 1963-64 total repurchases made amounted to the equivalent of $380.41 million (Table 7), the smallest total since 1958. Of the 26 members that made repurchases, 14 were in Latin America, 4 in Asia, 4 in Europe, 2 in the Middle East, and 1 in Africa; the remaining member was Canada. Most repurchases were made on dates when repayments became due in accordance with schedules to which the members had committed themselves, either at the time of their purchase from the Fund or later. Improvements in the monetary reserve position of several members enabled them to make repurchases before the expiration of the maximum period for which their drawings had been made available, thus strengthening their secondary line of reserves in the form of potential recourse to the Fund’s resources.

Table 7.Repurchases of Currencies from the Fund, Fiscal Year Ended April 30, 1964(In millions of U.S. dollars)
Members

Repurchasing
Total

Repurchases
Argentina36.00
Bolivia3.50
Brazil55.50
Burma1
Canada138.50
Chile10.00
Colombia6.00
Costa Rica1.29
Dominican Republic9.00
Ecuador3.27
Guatemala3.90
Haiti2.50
Honduras2.50
Iceland0.02
India50.00
Ireland2.31
Jamaica1.19
Malaysia3.37
Nicaragua12.25
Pakistan12.50
Paraguay0.38
Philippines2.00
Sudan0.33
Syrian Arab Republic5.12
Turkey9.00
Yugoslavia10.00
Total repurchases2380.41

Less than $5,000.

Total does not equal sum of items because of rounding.

Less than $5,000.

Total does not equal sum of items because of rounding.

On the other hand, some members were unable to meet large commitments falling due (particularly in connection with purchases made under stand-by arrangements), and new repurchase schedules were agreed permitting these members to make repurchases by installments within a maximum period of five years. Two members were permitted to postpone payment of repurchase obligations incurred under Article V, Section 7(b), as at April 30, 1963. Cuba failed to observe a commitment to repurchase in connection with an agreed schedule, and withdrew from the Fund.

Currency Composition of Purchases and Repurchases

The currencies to be used in the discharge of repurchase obligations arising under Article V, Section 7(b), are determined by rules specified in the Fund Agreement, as noted above. For other repurchases, and for purchases, the currencies to be used are selected in accordance with the statement on Currencies to Be Drawn and to Be Used in Repurchases approved by the Executive Directors on July 20, 1962.6

Purchases and repurchases during the year ended April 30, 1964 are classified by currency in Table 8, in which the two largest drawings, the equivalent of $225 million by Italy and $125 million by the United States, and the largest repurchase, the equivalent of $138.5 million by Canada, are shown separately. Mainly as a result of these transactions, the Fund’s holdings of U.S. dollars rose to slightly over 75 per cent of quota early in February 1964 and to 78 per cent on April 30, 1964; its holdings of Italian lire rose by the equivalent of $207 million, from 23 per cent at the end of the previous fiscal year to 99.7 per cent; and its holdings of Canadian dollars were reduced by the equivalent of US$158.5 million, from 125.1 per cent to 96.3 per cent. The Fund’s holdings of deutsche mark, expressed as a percentage of the member’s quota, became the lowest Fund holding of any currency, falling by the equivalent of $113.8 million, to 18.9 per cent by April 30, 1964. During the year there was a net use equivalent to $21 million of Austrian schillings, $29.5 million of Belgian francs, $58 million of French francs, $20 million of Netherlands guilders, $26.5 million of Spanish pesetas, and $15 million of Swedish kronor.

Table 8.Drawings and Repurchases by Currency, Fiscal Year Ended April 30, 1964(In millions of U.S. dollars)
DrawingsRepurchases
Under Article V,

Sec. 7(b)1
Other
CurrencyItalyUnited

States
Other

countries
TotalCanadaOther

countries
CanadaOther

countries
Total
Gold21.95.127.0
Austrian schillings10.011.021.0
Belgian francs20.014.534.5225.05.0
Canadian dollars20.020.0
Deutsche mark80.059.854.5194.30.1230.050.480.5
French francs50.059.815.0124.80.130.036.766.94
Italian lire5.523.028.52210.510.5
Netherlands guilders20.05.025.025.05.0
Spanish pesetas315.011.526.5
Swedish kronor10.05.015.022
Pounds sterling5.55.50.26.43.910.5
U.S. dollars130.9130.956.35.4113.4175.1
Total225.0125.04275.9625.9478.5416.960.0225.04380.44

Including discharges in respect of previous years.

Less than $50,000.

The peseta is not formally convertible and cannot be accepted for repurchases.

Total does not equal sum of items because of rounding.

Including discharges in respect of previous years.

Less than $50,000.

The peseta is not formally convertible and cannot be accepted for repurchases.

Total does not equal sum of items because of rounding.

Summary of Transactions

Between the beginning of operations by the Fund and April 30, 1964, 51 members purchased currencies and 3 had stand-by arrangements without drawing under them. Of these 54 members, 19 were in Central and South America, 13 in Europe, 7 in the Middle East, 7 in the Far East and Western Pacific, 5 in Africa, and 3 in North America. Total sales by the Fund were equivalent to $7.47 billion. All Fund transactions are summarized in Table 9. Chart 1 shows the drawings outstanding at April 30 in each year, together with the amounts available (but not used) under stand-by arrangements on the same date.

Table 9.Summary of Fund Transactions, Fiscal Years Ended April 30, 1948-64(In millions of U.S. dollars)
Total

Purchases

by Members
Total

Stand-By

Arrangements

in Force at

End of

Fiscal Year
Total

Repurchases

by Members
1948606.04
1949119.44
195051.8024.21
195128.0019.09
195246.2536.58
195366.1253.00184.96
1954231.2990.00145.11
195548.7590.00276.28
195638.7597.50271.66
19571,114.05968.9075.04
1958665.73884.2886.81
1959263.521,132.84537.32
1960165.53291.88522.41
1961577.00338.62658.60
19622,243.201,942.881,260.00
1963579.971,287.25807.25
1964625.901,970.15380.41
Total17,471.355,285.71 2

Totals do not equal sums of items because of rounding.

Including $279.5 million repurchased in excess of drawings. Of this amount, $255.4 million represents repurchases that reduced the Fund’s holdings of members’ currencies below the amounts originally paid on subscription account, and $24.1 million represents repurchases of members’ currencies paid as charges. Repurchases do not include sales of currencies equivalent to $731.1 million and other adjustments of $27.8 million, totaling $758.9 million, having the effect of repayment.

Totals do not equal sums of items because of rounding.

Including $279.5 million repurchased in excess of drawings. Of this amount, $255.4 million represents repurchases that reduced the Fund’s holdings of members’ currencies below the amounts originally paid on subscription account, and $24.1 million represents repurchases of members’ currencies paid as charges. Repurchases do not include sales of currencies equivalent to $731.1 million and other adjustments of $27.8 million, totaling $758.9 million, having the effect of repayment.

Chart 1.Outstanding Balances of Drawings from the Fund, and Unused Stand-By Arrangements, on April 30, 1948–64

(In millions of U.S. dollars)

1 United States in 1964 only.

2 Belgium, Canada, Denmark, France, Italy, Japan, Netherlands, and Norway.

The drawings made by 44 members have been wholly or partly repaid, either through repurchases in gold or convertible currencies or as a result of purchases of their currencies by other members. On April 30, 1964, the total amount of members’ purchases still outstanding was equivalent to US$1,706.2 million. On that date the amounts drawn had been outstanding for the following periods:

Amount in

millions of

U.S. dollars
Number of

members

involved
12 months or less456.718
13 to 18 months104.910
19 to 24 months284.813
25 to 30 months104.08
31 to 36 months502.910
37 to 48 months241.911
Over 48 months11.01

Except for the drawing by Cuba, all purchases made prior to March 3, 1960 have been fully reversed. However, 11 other members have been in a debtor position to the Fund continuously for more than five years, that is, they have not within that period reduced the Fund’s holdings of their currency to 75 per cent of quota, or to the level corresponding to their currency subscription. This has been the result of new drawings, agreed with the Fund to meet re-emerging payments problems, being made concurrently with the repurchase of earlier drawings.

Fund Charges

Currently, 23 members are paying the charges levied by the Fund on its holdings of members’ currencies in excess of their quotas; the amount of such charges incurred during the year under review totaled $31.5 million, compared with $24.5 million during the preceding year. Since the beginning of the Fund’s operations, 44 members have been subject to such charges. At present, part of these charges is paid by 3 members in their own currencies, in accordance with Article V, Section 8(f), of the Fund Agreement, which permits such payments if a member’s monetary reserves are less than half its quota. The present schedule of charges to be levied on the Fund’s holdings of a member’s currency in excess of quota, which has been in effect from May 1, 1963, was reviewed by the Executive Board and extended until April 30, 1965. The schedule was given in the Annual Report for 1963 (page 200), and is reproduced in each issue of International Financial Statistics. Service charges on drawings amounted to a total of $3.1 million during the year under review, compared with $2.9 million in 1962-63 and $11.2 million in 1961-62. Charges collected on stand-by arrangements, after deduction of the amounts credited against service charges if and when drawings were made under the arrangements, and of refunds resulting from changes in the level of the Fund’s holdings of members’ currencies that re-created or increased the member’s gold tranche, totaled $2.3 million during the year ended April 30, 1964. These charges are not considered as income until the expiration or cancellation of the stand-by arrangement; the income derived from them in the past fiscal year was $1.7 million.

Consultations with Members

Member countries that are availing themselves of the transitional arrangements in Article XIV, Section 2, of the Fund Agreement, rather than accepting the obligations of Article VIII, Sections 2, 3, and 4, are required by Article XIV to consult with the Fund annually on the retention of exchange restrictions. During the fiscal year 1963-64 such consultations were concluded with 45 countries; with others the procedure had been initiated by discussions between representatives of the countries and the Fund staff but had not been completed by the end of the fiscal year. Staff missions visited all except one of the countries concerned. Consultations were also held with 12 members that have accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement. The Executive Board Decision No. 1034–(60/27) of June 1, 19607 stressed the merit of holding periodic discussions between the Fund and its members even if no question involving action under Article VIII should arise.

These periodic exchanges of views are of key importance to the Fund and its members and have proven to be a valuable instrument of international monetary cooperation. On the one hand, they serve to make members’ policies more responsive to the aims of the international community. On the other hand, they equip the Fund to be more fully appreciative of the peculiar problems and needs of its individual members, and supply it both with the information necessary for action to meet those needs and with the experience to formulate realistic general policies for the implementation of the Articles of Agreement.

International Indebtedness

The Fund in its frequent contacts with member governments, both in annual consultations and with regard to the use of the Fund’s resources, is directly concerned with the debt burden of member countries. This is because debt burdens are often important aspects of the balance of payments and financial relations between members, which are the substance of the Fund’s work. An important part of the Fund’s concern is that the flow of capital from the creditor countries to the less developed ones is not of an excessively short-term nature, and that the borrowing country is able to manage the servicing problem.

The Fund has included the nature and extent of the debt burden among the elements which need to be dealt with by countries seeking to work out general financial or stabilization plans of action. In the past few years, problems of debt servicing have been encountered to an increasing extent and the Fund has helped some of its members to reach solutions. As one aspect, the Fund encourages countries to reduce undue reliance on short-term and medium-term debt so as to avoid the quick recurrence of payments difficulties arising from this source.

The Fund will continue to be prepared to assist member countries on an individual basis to work out plans of action which include measures to facilitate debt servicing and to improve the balance of payments position. Where such plans of action have been worked out and are supported by use of the Fund’s resources, such use can contribute to the easing of the payments problem which has in the past arisen from an excessive debt burden.

Cooperation with Other International Organizations

In addition to its special relationship with the International Bank for Reconstruction and Development and its affiliates, the Fund continued its close contacts with the United Nations, the Contracting Parties to the General Agreement on Tariffs and Trade (GATT), the Organization for Economic Cooperation and Development (OECD), the Bank for International Settlements (BIS), and the Inter-American Development Bank (IDB). These organizations were represented, along with other regional and international agencies having similar interests, at the Fund’s Annual Meeting in September 1963. Liaison with the United Nations and its various regional and technical bodies has been maintained, including direct working relationships with their staffs and official participation at meetings. There has been close consultation and cooperation with the United Nations on a variety of technical assistance matters.

Fund representatives attended the UN Conference on Trade and Development as well as the meetings of the Preparatory Committee, and prepared background studies in this connection. The Managing Director addressed the Conference shortly after it convened in Geneva in March 1964. He also addressed the Resumed 36th Session of the Economic and Social Council (ECOSOC) on the occasion of presenting the Fund’s 1963 Annual Report. Fund representatives attended the 18th Session of the UN General Assembly, the 10th and 11th Sessions of the Governing Council of the Special Fund, the 36th Session of the ECOSOC, and meetings of the Economic Commissions for Africa, Asia and the Far East (ECAFE), Europe, and Latin America, the Commission on International Commodity Trade, and the Food and Agriculture Organization. Staff members also participated in meetings of the interagency Administrative Committee on Coordination, its Preparatory Committee, and its subsidiary Consultative Committees.

Reflecting its interest in economic development, the Fund sent representatives to the 5th Conference of the European League for Economic Cooperation in Brussels, the OECD Study Conference on Government Finance and Economic Development in Athens, and the Conference of Experts on an African Payments Union in Tangier.

In the Latin American area, Fund representatives attended the 2nd annual meetings of the Organization of American States’ Inter-American Economic and Social Council at the Expert and Ministerial Levels, the 5th annual meeting of the Board of Governors of the Inter-American Development Bank, the 3rd meeting of the Governors of the Central American Bank for Economic Integration, the 7th meeting of the Central Banking Experts of the American Continent, and the annual meeting of the Inter-American Council for Commerce and Production.

In February 1964, the Fund staff held a meeting, at the Paris Office, of balance of payments experts from OECD countries to study problems of balance of payments statistics, especially those related to international transportation. This meeting followed one convened by the OECD to discuss a common IMF-OECD questionnaire to be used for balance of payments reporting to both organizations. Staff members also attended the 11th Plenary Session of the Conference of European Statisticians in Geneva and participated in a meeting on balance of payments statistics for technicians from African countries, held under the joint auspices of the Fund and the United Nations Economic Commission for Africa, in Rabat, Morocco. A staff member also participated in the Asian Bankers’ seminar arranged in Teheran by the Commission on Asian and Far Eastern Affairs of the International Chamber of Commerce.

Fund missions also attended various meetings of the Contracting Parties to the GATT, including the Ministerial Meeting in May 1963 and the 21st Session in February-March 1964. Among other GATT meetings attended by Fund missions have been those at which the Contracting Parties have consulted with individual countries on import restrictions maintained for balance of payments reasons. The Contracting Parties regularly consult the Fund in this connection and in connection with other matters involving balance of payments considerations. The Fund provides to the GATT the decision which it reaches in its Article XIV consultations, together with background material relating to the consulting country, and its missions cooperate with the GATT committee conducting the consultations. Similar arrangements apply to material arising from the Fund’s Article VIII consultations with countries which are also members of the GATT.

Technical Assistance and Training Program

During the year the Fund substantially increased its capacity to provide technical assistance to member countries. In response to requests from members, it has continued to make available staff officers to give technical advice on problems within its area of competence. The assignments have lasted from a few weeks to more than a year, and have covered such problems as improvement of statistics, banking legislation, exchange reforms, and programs of monetary stabilization. In order to meet an emerging need, the Fund this year established a Central Banking Service, which will provide advice on problems arising in connection with the establishment of new central banks, and through which experts can be made available to assist newer central banking institutions in various specialized fields. The experts may serve either in executive and operational positions or as advisors, and may be assigned for periods from a few months to a year or two. They are recruited with the cooperation of experienced central banks in many member countries. The Fund and the requesting institution together meet the cost of the experts’ services. Experts have already been placed in new central banks in several member countries. In addition, the Fund has undertaken to furnish special assistance to Congo (Leopoldville) and is recruiting officials to fill a number of senior posts in the financial institutions of that country. This special program of the Fund is coordinated with the UN technical assistance activities in Congo. Several experts have already taken up duty in Congo.

During the year the Fund also began to build up a group of experts qualified in the fields of taxation, budgeting, and financial control, to help countries which would like assistance in dealing with their fiscal problems. In the course of the years, the Fund has on many occasions expressed the view that, while monetary stability is a prerequisite for sustained economic development, it must be accompanied by resolute efforts to increase productivity and capital formation. An orderly development program should ensure that total investment plans are within the financial resources available and that all possibilities for expanding these resources are fully explored. It has become increasingly evident that in a number of countries fiscal difficulties which give rise to deficits in the public sector are a substantial element in economic instability. To the extent that the Fund can, by expert analysis and advice, help such countries to deal with their fiscal problems, the principal task of the Fund in the monetary and exchange fields will be eased. The budget for the fiscal year 1964-65 makes provision for a new Fiscal Affairs Department.

Fund officers have also had valuable short discussions on many specific problems with country officials, both in the field and at headquarters. For its part the Fund particularly welcomes these exchanges. On numerous occasions also, groups from universities, participants in the technical training programs of other institutions, and other persons have been received at Fund headquarters for seminars on the general activities of the Fund or on specific technical subjects. The Fund has also made available members of its staff to give series of lectures on subjects related to its area of interest in training programs of ECAFE, CEMLA (Center for Latin American Monetary Studies), the Asian Institute for Economic Development and Planning, and the SEANZA (Southeast Asia, New Zealand, and Australia) Central Banking Course at Karachi, Pakistan.

Training Program

During 1963-64 the Fund continued its training program for middle-rank and junior-rank staff of member governments as a form of technical assistance in the field of financial analysis and policy. The two 5-month programs which were offered included 51 participants from 43 countries. Among these were 3 countries not previously represented. This brought to 339 the total number of participants and to 73 the number of countries which have been represented in the Fund’s training program over the past 14 years.

The Fund has long recognized that its training program plays an important part in the service to its members, and that every effort should be made to strengthen it in the light of emerging requirements. Recently, a broad review of the program has been undertaken, and several changes have been adopted. The program will be gradually expanded over a period of years, in keeping with the growth of the Fund as a whole. Organizationally, the training activities have been regrouped and have now been committed to a new Fund department, known as the IMF Institute.

As the first part of an expanded program, the Fund recognizes the urgent need for a regular program in French, especially for the benefit of the French-speaking countries in Africa, with essentially the same contents as the regular program in English. As a step toward the preparation of such a general French course, the IMF Institute will organize during July-August and during November-December 1964 two special French courses, of six weeks each, for very senior officials from African countries. The broad purpose of these courses is to acquaint such officials with the Fund’s operations and its general approach on financial policy, and to gain their support for the Fund’s future training activities.

In order to give time to develop changes in its curriculum and methods of instruction, and to assemble a larger professional staff, the IMF Institute will omit the program which should normally begin in September 1964, and start its first regular English course early in 1965.

Management and Staff

Mr. Pierre-Paul Schweitzer, who was appointed Managing Director to succeed the late Per Jacobsson, assumed office on September 5, 1963.

At the end of the fiscal year, the Fund staff numbered 595, including 23 temporary employees and 3 on extended leave. This total represents a net increase of 74 over the total at the beginning of the year. During the year, 147 new staff members were appointed from 41 member countries. Nationals of 59 countries are now on the staff. For the purpose of rendering technical assistance as described above, staff members were made available on long-term assignments to 12 countries.

As reported at last year’s meeting of the Board of Governors, an addition to the Fund’s headquarters building is now under construction. Completion is expected in 1965.

Administrative Finance

During the financial year, the Fund’s operating income of $36,352,072 exceeded its total expenditure by $23,231,549. This amount was transferred provisionally to the General Reserve pending action by the Board of Governors. The General Reserve now totals $116,518,698.

The Fund continued to invest 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 so invested was $800 million. The income therefrom amounted to $27,485,414 for the financial year; it was credited to a Special Reserve, which on April 30, 1964 showed a balance of $117,524,012.

The administrative budget approved by the Executive Directors for the period May 1, 1964-April 30, 1965 is presented in Appendix IV. The budget provides for a strengthening of the staff in several departments to deal with the expanded Fund membership and the continuing high level of activities. Comparative income and expenditure figures for the fiscal years ended 1962, 1963, and 1964 are given in Appendix V.

The Executive Board requested the Governments of El Salvador, India, and Sweden to nominate members of the Audit Committee for 1964. The following nominations were made and confirmed: Mr. Juan Samuel Quinteros, Superintendent of Banks and Comptroller of the Currency for El Salvador; Mr. A. K. Mukherji, Additional Deputy Comptroller and Auditor General of India; Mr. Karl Janne Walck, Head of Division at the National Accounting and Audit Bureau of Sweden. The report of the Committee is submitted separately. Appendix VI gives the Auditors’ Certificate, together with the audited Balance Sheet for April 30, 1964 and the audited Statement of Income and Expenditure.

Publications

The Fund’s regular program of publications was continued in 1963-64: Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1963 (Eighteenth Annual Report); Balance of Payments Yearbook, Volume 15, 1958-62; Fourteenth Annual Report on Exchange Restrictions; International Financial News Survey, weekly; International Financial Statistics, monthly and Supplement to 1963/64 Issues; Schedule of Par Values, 36th and 37th issues; Staff Papers, Volume X, Nos. 2 and 3, Volume XI, No. 1, and Index to Volumes I-X; and Summary Proceedings of the Eighteenth Annual Meeting of the Board of Governors.

The second issue of Selected Decisions of the Executive Directors was published in September 1963.

International Monetary Problems, 1957-63, a collection of speeches made by the late Per Jacobsson during his tenure of office as Managing Director of the Fund, was published in March 1964.

The Direction of Trade: Annual 1958-62 was published in April 1964. This is the first issue of a new publication, to be issued monthly in conjunction with the International Bank for Reconstruction and Development, to replace Direction of International Trade, previously published by the Fund, the Bank, and the United Nations.

Preparations were completed for the publication, again jointly with the International Bank for Reconstruction and Development, of a new quarterly periodical, The Fund and Bank Review: Finance and Development, the first issue being that for June 1964.

Annual Report, 1963, pages 196-99; Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), pages 40-43.

Annual Report, 1959, pages 185-88.

Austria, Belgium, Canada, Dominican Republic, El Salvador, France, Federal Republic of Germany, Guatemala, Haiti, Honduras, Ireland, Italy, Jamaica, Japan, Kuwait, Luxembourg, Mexico, Netherlands, Panama, Peru, Saudi Arabia, Sweden, United Kingdom, and United States.

Article V, Section 7(c), reads: “None of the adjustments described in (b) above shall be carried to a point at which

  • (i) the member’s monetary reserves are below its quota, or

  • (ii) the Fund’s holdings of its currency are below seventy-five percent of its quota, or

  • (iii) the Fund’s holdings of any currency required to be used are above seventy-five percent of the quota of the member concerned.”

Annual Report, 1963, pages 22, 195; Selected Decisions of the Executive Directors, op. cit., pages 51-52.

Annual Report, 1962, pages 36-41 and 245; Selected Decisions of the Executive Directors, op. cit, pages 33-39.

Annual Report, 1961, pages 135-37; Selected Decisions of the Executive Directors, op. cit, pages 76-78.

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